UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the quarterly period ended: June 30, 2023
Or
☐ TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-41415
Acri Capital Acquisition Corporation
(Exact name of registrant as specified in its charter)
Delaware | | 87-4328187 |
(State or other jurisdiction of
incorporation or organization) | | (I.R.S. Employer
Identification No.) |
13284 Pond Springs Rd, Ste 405 Austin, Texas | | 78729 |
(Address of principal executive offices) | | (Zip Code) |
512-666-1277
(Registrant’s telephone number, including
area code)
(Former name, former address and former fiscal year,
if changed since last report)
Securities registered pursuant to Section 12(b) of
the Act:
Title of Each Class: | | Trading Symbol(s) | | Name of Each Exchange on
Which Registered: |
Class A Common Stock, par value $0.0001 per share | | ACAC | | The NASDAQ Stock Market LLC |
| | | | |
Warrants, each whole warrant exercisable for one share of Class A Common Stock for $11.50 per share | | ACACW | | The NASDAQ Stock Market LLC |
| | | | |
Units, each consisting of one share of Class A Common Stock and one-half of one Warrant | | ACACW | | The NASDAQ Stock Market LLC |
Securities registered pursuant to Section 12(g) of
the Act: None
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☑ No ☐
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company.
See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”
and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
Non-accelerated filer | ☑ | Smaller reporting company | ☑ |
| | Emerging growth company | ☑ |
If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☑ No ☐
Indicate the number of shares outstanding of each
of the registrant’s classes of common stock, as of the latest practicable date.
As of August 11, 2023, 3,643,694 shares of Class
A common stock of the registrant, par value $0.0001 per share, and 2,156,250 shares of Class B common stock of the registrant, par value
$0.0001 per share, were issued and outstanding.
TABLE OF CONTENTS
PART I – FINANCIAL INFORMATION
Item 1. Unaudited Financial Statements.
ACRI CAPITAL ACQUISITION CORPORATION
CONDENSED BALANCE SHEETS
| |
June 30,
2023 | | |
December 31,
2022 | |
| |
(Unaudited) | | |
| |
Assets | |
| | |
| |
Cash | |
$ | 201,143 | | |
$ | 547,478 | |
Prepaid expenses | |
| 13,460 | | |
| 159,952 | |
Total Current Assets | |
| 214,603 | | |
| 707,430 | |
| |
| | | |
| | |
Investments held in Trust Account | |
| 39,472,129 | | |
| 89,140,977 | |
Total Assets | |
$ | 39,686,732 | | |
$ | 89,848,407 | |
| |
| | | |
| | |
Liabilities, Temporary Equity, and Stockholders’ Deficit | |
| | | |
| | |
Accrued expenses | |
$ | 53,138 | | |
$ | 76,931 | |
Franchise tax payable | |
| - | | |
| 56,361 | |
Income tax payable | |
| 210,489 | | |
| 173,680 | |
Excise tax payable | |
| 514,569 | | |
| - | |
Promissory note - related party | |
| 910,924 | | |
| - | |
Total Current Liabilities | |
| 1,689,120 | | |
| 306,972 | |
| |
| | | |
| | |
Deferred tax liability | |
| 33,628 | | |
| 60,594 | |
Deferred underwriter’s discount | |
| 2,587,500 | | |
| 2,587,500 | |
Total Liabilities | |
| 4,310,248 | | |
| 2,955,066 | |
| |
| | | |
| | |
Commitments and Contingencies | |
| | | |
| | |
| |
| | | |
| | |
Common stock subject to possible redemption, 3,643,694 shares and 8,625,000 shares at redemption value of $10.77 and $10.30 per share as of June 30, 2023 and December 31, 2022 | |
| 39,228,012 | | |
| 88,850,342 | |
| |
| | | |
| | |
Stockholders’ Deficit: | |
| | | |
| | |
Preferred stock, $0.0001 par value, 500,000 shares authorized, none issued and outstanding | |
| - | | |
| - | |
Class A common stock, $0.0001 par value, 20,000,000 shares authorized, none issued and outstanding (excluding 3,643,694 shares subject to possible redemption) | |
| - | | |
| - | |
Class B common stock, $0.0001 par value, 2,500,000 shares authorized, 2,156,250 shares issued and outstanding | |
| 216 | | |
| 216 | |
Additional paid-in capital | |
| - | | |
| - | |
Accumulated deficit | |
| (3,851,744 | ) | |
| (1,957,217 | ) |
Total Stockholders’ Deficit | |
| (3,851,528 | ) | |
| (1,957,001 | ) |
| |
| | | |
| | |
Total Liabilities, Temporary Equity, and Stockholders’ Deficit | |
$ | 39,686,732 | | |
$ | 89,848,407 | |
The accompanying notes are an integral part of these unaudited condensed
financial statements.
ACRI CAPITAL ACQUISITION CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
| |
| | |
| | |
| | |
For the
Period from | |
| |
For the
three months | | |
For the
three months | | |
For the
six months | | |
January 7, 2022 (inception) | |
| |
ended | | |
ended | | |
ended | | |
through | |
| |
June 30,
2023 | | |
June 30,
2022 | | |
June 30,
2023 | | |
June 30,
2022 | |
Formation and operating costs | |
$ | 258,152 | | |
$ | 156,737 | | |
$ | 446,214 | | |
$ | 157,382 | |
Franchise tax expenses | |
| 14,522 | | |
| 3,200 | | |
| 22,822 | | |
| 3,200 | |
Loss from Operations | |
| (272,674 | ) | |
| (159,937 | ) | |
| (469,036 | ) | |
| (160,582 | ) |
| |
| | | |
| | | |
| | | |
| | |
Other income | |
| | | |
| | | |
| | | |
| | |
Interest earned on investment held in Trust Account | |
| 456,417 | | |
| - | | |
| 1,163,097 | | |
| - | |
| |
| | | |
| | | |
| | | |
| | |
Income (loss) before income taxes | |
| 183,743 | | |
| (159,937 | ) | |
| 694,061 | | |
| (160,582 | ) |
| |
| | | |
| | | |
| | | |
| | |
Income taxes provision | |
| 92,798 | | |
| - | | |
| 239,458 | | |
| - | |
| |
| | | |
| | | |
| | | |
| | |
Net income (loss) | |
$ | 90,945 | | |
$ | (159,937 | ) | |
$ | 454,603 | | |
$ | (160,582 | ) |
| |
| | | |
| | | |
| | | |
| | |
Basic and diluted weighted average shares outstanding, common stock subject to possible redemption | |
| 3,643,694 | | |
| 793,103 | | |
| 5,055,064 | | |
| 793,103 | |
Basic and diluted net income per share, common stock subject to possible redemption | |
$ | 0.12 | | |
$ | 7.01 | | |
$ | 0.17 | | |
$ | 6.98 | |
Basic and diluted weighted average shares outstanding, common stock attributable to Acri Capital Acquisition Corporation | |
| 2,156,250 | | |
| 1,925,000 | | |
| 2,156,250 | | |
| 1,900,862 | |
Basic and diluted net loss per share, common stock attributable to Acri Capital Acquisition Corporation | |
$ | (0.16 | ) | |
$ | (2.97 | ) | |
$ | (0.19 | ) | |
$ | (3.00 | ) |
The accompanying notes are an integral part of these unaudited condensed financial statements.
ACRI CAPITAL ACQUISITION CORPORATION
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’
DEFICIT
(Unaudited)
| |
| | |
Common Stock | | |
Additional | | |
| | |
Total | |
| |
Preferred Stock | | |
Class A | | |
Class B | | |
Paid-in | | |
Accumulated | | |
Stockholders’ | |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Deficit | |
Balance as of January 7, 2022 (inception) | |
| - | | |
$ | - | | |
| - | | |
$ | - | | |
| - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | |
Founder shares issued to initial stockholder | |
| - | | |
| - | | |
| - | | |
| - | | |
| 2,156,250 | | |
| 216 | | |
| 24,784 | | |
| - | | |
| 25,000 | |
Net loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (645 | ) | |
| (645 | ) |
Balance as of March 31, 2022 | |
| - | | |
$ | - | | |
| - | | |
$ | - | | |
| 2,156,250 | | |
$ | 216 | | |
$ | 24,784 | | |
$ | (645 | ) | |
$ | 24,355 | |
Sale of public units through public offering | |
| - | | |
| - | | |
| 8,625,000 | | |
| 863 | | |
| - | | |
| - | | |
| 86,249,137 | | |
| - | | |
| 86,250,000 | |
Sale of private placement warrants | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 5,240,000 | | |
| - | | |
| 5,240,000 | |
Underwriters’ discount | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (4,312,500 | ) | |
| - | | |
| (4,312,500 | ) |
Other offering expenses | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (526,383 | ) | |
| - | | |
| (526,383 | ) |
Reclassification of common stock subject to redemption | |
| - | | |
| - | | |
| (8,625,000 | ) | |
| (863 | ) | |
| - | | |
| - | | |
| (84,899,324 | ) | |
| - | | |
| (84,900,187 | ) |
Allocation of offering costs to common stock subject to redemption | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 4,838,883 | | |
| - | | |
| 4,838,883 | |
Accretion of carrying value to redemption value | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (6,614,597 | ) | |
| (1,299,099 | ) | |
| (7,913,696 | ) |
Net loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (159,937 | ) | |
| (159,937 | ) |
Balance as of June 30, 2022 | |
| - | | |
$ | - | | |
| - | | |
$ | - | | |
| 2,156,250 | | |
$ | 216 | | |
$ | - | | |
$ | (1,459,681 | ) | |
$ | (1,459,465 | ) |
| |
| | |
Common Stock | | |
Additional | | |
| | |
Total | |
| |
Preferred Stock | | |
Class A | | |
Class B | | |
Paid-in | | |
Accumulated | | |
Stockholders’ | |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Deficit | |
Balance as of December 31, 2022 | |
| - | | |
$ | - | | |
| - | | |
$ | - | | |
| 2,156,250 | | |
$ | 216 | | |
$ | - | | |
$ | (1,957,217 | ) | |
$ | (1,957,001 | ) |
Accretion of carrying value to redemption value | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (787,750 | ) | |
| (787,750 | ) |
Excise tax accrual | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (514,569 | ) | |
| (514,569 | ) |
Net income | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 363,658 | | |
| 363,658 | |
Balance as of March 31, 2023 | |
| - | | |
$ | - | | |
| - | | |
$ | - | | |
| 2,156,250 | | |
$ | 216 | | |
$ | - | | |
$ | (2,895,878 | ) | |
$ | (2,895,662 | ) |
Accretion of carrying value to redemption value | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (1,046,811 | ) | |
| (1,046,811 | ) |
Net income | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 90,945 | | |
| 90,945 | |
Balance as of June 30, 2023 | |
| - | | |
$ | - | | |
| - | | |
$ | - | | |
| 2,156,250 | | |
$ | 216 | | |
$ | - | | |
$ | (3,851,744 | ) | |
$ | (3,851,528 | ) |
The accompanying notes are an integral part of
these unaudited condensed financial statements.
ACRI CAPITAL ACQUISITION CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
| |
| | |
For the Period from | |
| |
For the
six months | | |
January 7, 2022 (inception) | |
| |
ended | | |
through | |
| |
June 30,
2023 | | |
June 30,
2022 | |
Cash Flows from Operating Activities: | |
| | |
| |
Net Income (Loss) | |
$ | 454,603 | | |
$ | (160,582 | ) |
Adjustments to reconcile net income to net cash used in operating activities: | |
| | | |
| | |
Interest earned on investment held in Trust Account | |
| (1,163,097 | ) | |
| - | |
Deferred taxes | |
| (26,966 | ) | |
| - | |
Changes in operating assets and liabilities: | |
| | | |
| | |
Prepaid expenses | |
| 146,492 | | |
| (192,667 | ) |
Accrued expenses | |
| (23,792 | ) | |
| 139,765 | |
Franchise tax payable | |
| (56,361 | ) | |
| 3,200 | |
Income taxes payable | |
| 36,809 | | |
| - | |
Net Cash Used in Operating Activities | |
| (632,312 | ) | |
| (210,284 | ) |
| |
| | | |
| | |
Cash Flows from Investing Activities: | |
| | | |
| | |
Purchase of investment held in trust account | |
| - | | |
| (87,975,000 | ) |
Sale of investment held in trust account | |
| 50,831,944 | | |
| - | |
Net Cash Provided by (Used in) Investing Activities | |
| 50,831,944 | | |
| (87,975,000 | ) |
| |
| | | |
| | |
Cash Flows from Financing Activities: | |
| | | |
| | |
Proceeds from issuance of founder shares | |
| - | | |
| 25,000 | |
Proceeds from promissory note to related party | |
| 910,924 | | |
| 316,827 | |
Repayment of promissory note to related party | |
| - | | |
| (316,827 | ) |
Proceeds from public offering | |
| - | | |
| 86,250,000 | |
Proceeds from private placement | |
| - | | |
| 5,240,000 | |
Payment of underwriter discount | |
| - | | |
| (1,725,000 | ) |
Payment of deferred offering costs | |
| - | | |
| (526,383 | ) |
Redemption of Class A Common Stock | |
| (51,456,891 | ) | |
| - | |
Net Cash (Used in) Provided by Financing Activities | |
| (50,545,967 | ) | |
| 89,263,617 | |
| |
| | | |
| | |
Net Change in Cash | |
| (346,335 | ) | |
| 1,078,333 | |
| |
| | | |
| | |
Cash, beginning of period | |
| 547,478 | | |
| - | |
Cash, end of period | |
$ | 201,143 | | |
$ | 1,078,333 | |
| |
| | | |
| | |
Supplemental Disclosure of Cash Flow Information: | |
| | | |
| | |
Deferred underwriters’ marketing fees | |
$ | - | | |
$ | 2,587,500 | |
Change in value of common stock subject to redemption | |
$ | - | | |
$ | 84,899,324 | |
Allocation of offering costs to common stock subject to redemption | |
$ | - | | |
$ | 4,838,883 | |
Accretion of carrying value to redemption value | |
$ | 1,834,561 | | |
$ | 7,913,696 | |
The accompanying notes are an integral part of
these unaudited condensed financial statements.
ACRI CAPITAL ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2023
(Unaudited)
Note 1 — Organization and Business
Operation
Acri Capital Acquisition Corporation (the “Company”)
is a newly organized blank check company incorporated as a Delaware corporation on January 7, 2022. The Company was formed for the
purpose of entering into a merger, capital stock exchange, asset acquisition, stock purchase, recapitalization, reorganization or similar
business combination with one or more businesses (the “Business Combination”). The Company is actively searching and identifying
suitable Business Combination target. The company is not limited to a particular industry or geographic region for purposes of consummating
an initial Business Combination. The Company has selected December 31 as its fiscal year end.
As of June 30, 2023 and December 31, 2022, the
Company had not commenced any operations. For the six months ended June 30, 2023 and the period from January 7, 2022 (inception)
through June 30, 2022, the Company’s efforts have been limited to organizational activities as well as activities related to the
initial public offering (the “IPO”). The Company will not generate any operating revenues until after the completion of a
Business Combination, at the earliest. The Company generates non-operating income in the form of interest income from the proceeds derived
from the IPO.
The registration statement for the Company’s
IPO became effective on June 9, 2022. On June 14, 2022, the Company consummated the IPO of 8,625,000 units (the “Units”) (including
1,125,000 Units issued upon the full 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”), and one-half of one redeemable warrant (the “Public Warrants”),
each whole Warrant entitling 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. The Units were sold at an offering price of $10.00 per Unit, generating gross proceeds of $86,250,000
on June 14, 2022.
Substantially concurrently with the closing of
the IPO, the Company completed the sale of 5,240,000 private placement warrants (the “Private Warrants”, together with the
Public Warrants, the “Warrants”) to the Company’s sponsor, Acri Capital Sponsor LLC (the “Sponsor”) at a
purchase price of $1.00 per Private Warrant, generating gross proceeds to the Company of $5,240,000. The Private Warrants are identical
to the Public Warrants except that the Private Warrants (including the Class A common stock issuable upon exercise of the Private Warrants)
will not be transferable, assignable or salable until 30 days after the completion of the initial Business Combination except to permitted
transferees.
Transaction costs amounted to $4,838,883, consisting
of $4,312,500 of underwriting fees and $526,383 of other offering costs. Following the closing of IPO, cash of $1,283,357 was held outside
of the Trust Account (as defined below) and is available for working capital purposes.
The Company’s initial Business Combination
must occur with one or more target businesses that together have an aggregate fair market value of at least 80% of the assets held in
the Trust Account (as defined below) (excluding the deferred underwriting discounts and commissions and taxes payable on the income earned
on the Trust Account) at the time of the agreement to enter into the initial Business Combination. However, the Company will only complete
a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target
or otherwise acquires a controlling interest in the target sufficient for the post-transaction company not to be required to register
as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”). There
is no assurance that the Company will be able to complete a Business Combination successfully.
Following the closing of the IPO, $87,975,000 ($10.20 per Unit) from
the proceeds of the sale of the Units and the Private Warrants, was held into a U.S.-based trust account (the “Trust Account”)
with Wilmington Trust, National Association, acting as trustee. The funds held in the Trust Account will be invested only in U.S. government
treasury bills, bonds or notes with a maturity of 185 days or less, or in money market funds meeting the applicable conditions of
Rule 2a-7 promulgated under the Investment Company Act which invest solely in direct U.S. government treasury, so that the Company
are not deemed to be an investment company under the Investment Company Act. Except with respect to interest earned on the funds held
in the Trust Account that may be released to the Company to pay the Company’s tax obligation, the proceeds from the IPO and the
sale of the Private Warrants that are deposited and held in the Trust Account will not be released from the Trust Account until the earliest
to occur of (a) the completion of the initial Business Combination, (b) the redemption of any shares of Class A common stock
included in the Units sold in the IPO properly submitted in connection with a stockholder vote to amend then current amended and restated
Company’s certificate of incorporation (i) to modify the substance or timing of its obligation to allow redemption in connection
with its initial Business Combination or to redeem 100% of the Company’s Public Shares if it does not complete the initial Business
Combination within the Combination Period (as defined below) or (ii) with respect to any other provision relating to stockholders’
rights or pre-initial Business Combination activity and (c) the redemption of 100% of the Company’s Public Shares if it is
unable to complete the Business Combination within the Combination Period, subject to applicable law. The proceeds deposited in the Trust
Account could become subject to the claims of the Company’s creditors which could have higher priority than the claims of the Company’s
public stockholders. If the Company anticipate that it may not be able to consummate its initial Business Combination by March 14, 2023
(within nine (9) months from the consummation of the IPO), it may extend the period of time to consummate a Business Combination
up to nine (9) times by an additional one month each time for a total of up to 9 months, affording the Company up to December 14,
2023 (up to eighteen (18) months from the consummation of the IPO) to complete its initial Business Combination. Public stockholders will
not be offered the opportunity to vote on or redeem their shares if the Company chooses to make any such paid extension. Pursuant to the
terms of the Company’s amended and restated certificate of incorporation and the trust agreement entered into between the Company
and Wilmington Trust, National Association acting as trustee, the Sponsor or its affiliates or designees, upon five days advance
notice prior to the applicable deadline, must deposit into the Trust Account for each month extension $287,212 ($0.0333 per share), on
or prior to the date of the applicable deadline. Any such payments would be made in the form of a loan. If the Company complete its initial
Business Combination, the Company would repay such loaned amounts out of the proceeds of the Trust Account. In addition, such extension
funding loans may be convertible into Private Warrants upon the closing of the Company’s initial Business Combination at $1.00 per
warrant at the option of the lender.
On February 8, 2023, the Company held a special
meeting of stockholders (the “Special Meeting”). At the Special Meeting, the stockholders of the Company approved the proposal
to amend Company’s amended and restated certificate of incorporation (“Charter”) to amend the amount of monthly
deposit (each, a “Monthly Extension Payment”) required to be deposited in the trust account (the “Trust Account”)
from $0.0333 for each public share to $0.0625 for each public share for up to nine (9) times if the Company has not consummated its
initial business combination by March 14, 2023 (the nine (9) month anniversary of the closing of its initial public offering)
(the “Extension Amendment Proposal”). Upon the stockholders’ approval, on February 9, 2023, the Company filed a certificate
of amendment to the Charter which became effective upon filing.
In connection with the votes to approve the Extension
Amendment Proposal, 4,981,306 shares of Class A common stock of the Company were redeemed at $10.33 per share in March 2023.
Following the Special Meeting, the Sponsor deposited
four monthly payments to the Trust Account to extend the Business Combination deadline to July 14, 2023 of $227,730.87 for a total of
$910,923.48.
In connection with each of the Monthly Extension
Payment, the Company issued an unsecured promissory note of $227,730.87 (the “Note”) to its Sponsor. The Note is non-interest
bearing and payable (subject to the waiver against trust provisions) on the earlier of (i) consummation of the Company’s initial
business combination and (ii) the date of the liquidation of the Company. The principal balance may be prepaid at any time, at the election
of the Company. The holder of the Note has the right, but not the obligation, to convert the Note, in whole or in part, respectively,
into private placement warrants (the “Warrants”) of the Company, as described in the prospectus of the Company (File Number
333-263477), by providing the Company with written notice of its intention to convert the Note at least two business days prior to the
closing of the Company’s initial business combination. The number of Warrants to be received by the holder in connection with such
conversion shall be an amount determined by dividing (x) the sum of the outstanding principal amount payable to the holder, by (y) $1.00.
Total outstanding notes amounted to $910,923.48 as of June 30, 2023.
On July 11 2023, the Company held another
special meeting of stockholders (the “Special Meeting II”), at which the stockholders of the Company approved, among others,
the proposal to amend the Charter to allow the Company until July 14, 2023 to consummate an initial business combination, and, without
another stockholder vote, to elect to extend Business Combination deadline on a monthly basis for up to nine (9) times, up to April 14,
2024, by depositing $75,000 to the Trust Account. Upon the stockholders’ approval, on July 12, 2023, the Company filed a certificate
of amendment to the Charter which became effective upon filing (the Charter upon the amendment, the “Second Amended Charter”).
In connection with the Special Meeting II, 388,644 shares of Class A common stock of the Company were redeemed and cancelled.
In connection with the Special Meeting II, the
stockholders also approved the proposal to amend the Charter to remove the restriction of Company to undertake an initial business combination
with any entity with its principal business operations or is headquartered in China (including Hong Kong and Macau).
Pursuant to the Second Amended Charter, the Company may extend the
Business Combination deadline on monthly basis from July 14, 2023 to up to nine times by depositing $75,000 each month into the Trust
Account. Following the Special Meeting II, the Sponsor deposited two monthly payments to the Trust Account to extend the Combination Deadline
to September 14, 2023. The two monthly payments were evidenced by two promissory notes issued by the Company to the Sponsor, each
in the principal amount of $75,000.
The shares of Class A common stock subject
to redemption will be recorded at a redemption value and classified as temporary equity upon the completion of the IPO, in accordance
with the Financial Accounting Standard Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 480
“Distinguishing Liabilities from Equity.” In such case, the Company will consummate a Business Combination and, solely if
the Company has net tangible assets of at least $5,000,001 upon such consummation of a Business Combination and, if the Company seeks
stockholder approval, a majority of the issued and outstanding shares voted are voted in favor of the Business Combination. The Company
will have only by March 14, 2023 (nine (9) months from the closing of the IPO) (or up to December 14, 2023 (18 months from the
closing of the IPO) if the Company extends the period of time to complete a Business Combination) from the closing of the IPO to complete
the initial Business Combination (the “Combination Period”).
If the Company is unable to complete the initial
Business Combination within the Combination Period, the Company 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 and not previously released to the Company to pay the Company’s taxes (less up to $50,000 of interest to pay
dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish public stockholders’
rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as
promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and its
board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware 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 Company’s Warrants, which will expire worthless if the Company fails to complete the Business
Combination within the Combination Period. The Sponsor, directors and officers of the Company (the “founders”) have entered
into a letter agreement with the Company, pursuant to which they have agreed (i) to waive their redemption rights with respect to
any Founder Shares (as defined in Note 5) and any Public Shares held by them in connection with the completion of the initial Business
Combination, (ii) waive their redemption rights with respect to their Founder Shares and Public Shares in connection with a stockholder
vote to approve an amendment to the Company’s amended and restated certificate of incorporation (A) to modify the substance
or timing of the Company’s obligation to allow redemption in connection with the initial Business Combination or to redeem 100%
of the Company’s Public Shares if the Company does not complete its initial Business Combination within the Combination Period or
(B) with respect to any other provision relating to stockholders’ rights or pre-initial Business Combination activity and (iii) to
waive their rights to liquidating distributions from the Trust Account with respect to any Founder Shares held by them if the Company
fails to complete the initial Business Combination within the Combination Period, although they will be entitled to liquidating distributions
from the Trust Account with respect to any Public Shares they hold if the Company fails to complete the initial Business Combination within
the Combination Period. If the Company submits it initial Business Combination to its stockholders for a vote, the Company will complete
its initial Business Combination only if a majority of the outstanding shares of common stock voted are voted in favor of the initial
Business Combination. In no event will the Company redeem its Public Shares in an amount that would cause its net tangible assets to be
less than $5,000,001. In such case, the Company would not proceed with the redemption of Public Shares and the related Business Combination,
and instead may search for an alternate Business Combination.
The Sponsor has agreed that it will be liable to the Company if and
to the extent any claims by a third party for services rendered or products sold to the Company, or by a prospective target business with
which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below (i) $10.20
per Public Share or (ii) such lesser amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust
Account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay taxes. This
liability will not apply with respect to any claims by a third party who executed a waiver of any and all rights to seek access to the
Trust Account and except as to any claims under the Company’s indemnity of the underwriters of the IPO against certain liabilities,
including liabilities under the Securities Act (as defined in Note 2). Moreover, in the event that an executed waiver is deemed to
be unenforceable against a third party, then the Company’s Sponsor will not be responsible to the extent of any liability for such
third party claims.
However, the Company has not asked the Sponsor
to reserve for such indemnification obligations, nor has the Company independently verified whether the Sponsor has sufficient funds to
satisfy their indemnity obligations and believe that the Sponsor’s only assets are securities of the Company. Therefore, the Company
cannot assure that its Sponsor would be able to satisfy those obligations. None of the officers or directors will indemnify the Company
for claims by third parties including, without limitation, claims by vendors and prospective target businesses.
Liquidity and Going Concern
As of June 30, 2023, the Company had cash of $201,143
and a working capital deficit of $1,264,028 (excluding income taxes payable which are to be paid from Trust). The Company has incurred
and expects to continue to incur significant professional costs to remain as a publicly traded company and to incur significant transaction
costs in pursuit of the consummation of a Business Combination. In connection with the Company’s assessment of going concern considerations
in accordance with the FASB Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s
Ability to Continue as a Going Concern,” management has determined that these conditions raise substantial doubt about the Company’s
ability to continue as a going concern. The management’s plan in addressing this uncertainty is through the working capital loans
(see Note 6).
In addition, under the Company’s Second
Amended Charter provides that the Company will need to complete initial Business Combination by July 14, 2023, which may be extended up
to nine (9) times by an additional one month each time until April 14, 2024. If the Company is unable to complete a Business
Combination within the Combination Period, the Company may seek approval from its stockholders holding no less than 65% or more of the
votes to approve to extend the completion period, If the Company fails to obtain approval from the stockholders for such extension or
the Company does not seek such extension, the Company will cease all operations.
There is no assurance that the Company’s
plans to consummate a Business Combination will be successful within the Combination Period and that the Company will obtain enough votes
to extend the Combination Period. As a result, management has determined that such additional condition also raise substantial doubt about
the Company’s ability to continue as a going concern. The unaudited condensed financial statement does not include any adjustments
that might result from the outcome of this uncertainty.
Note 2 — Significant 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, and include all normal and recurring adjustments that management of the Company
considers necessary for a fair presentation of its financial position and operation results. Interim results are not necessarily indicative
of results to be expected for any other interim period or for the full year.
Emerging Growth Company Status
The Company is an “emerging growth company,”
as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified
by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions
from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but
not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of
2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from
the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments
not previously approved.
Further, 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 of 1934, as amended (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. The Company has elected not
to 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, the Company, as an emerging growth company, can adopt the new or revised standard at the time private
companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public
company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition
period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of unaudited condensed financial
statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of
expenses during the reporting period. Actual results could differ from those estimates.
Cash
The Company considers all short-term investments
with an original maturity of three months or less when purchased to be cash equivalents. The Company had $201,143 and $547,478 cash
in bank as of June 30, 2023 and December 31, 2022, respectively.
Investments held in Trust Account
At June 30, 2023 and December 31, 2022, we
had $39,472,129 and $89,140,977 of the assets held in the Trust Account were held in money market funds, which are invested in short term
U.S. Treasury securities.
All of the Company’s investments held in
the Trust Account are classified as trading securities. Trading securities are presented on the condensed balance sheet at fair value
at the end of each reporting period. Gains and losses resulting from the change in fair value of investments held in Trust Account are
accounted as interest income in the statement of operations.
Fair Value of Financial Instruments
ASC Topic 820 “Fair Value Measurements
and Disclosures” defines fair value, the methods used to measure fair value and the expanded disclosures about fair value measurements.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between the
buyer and the seller at the measurement date. In determining fair value, the valuation techniques consistent with the market approach,
income approach and cost approach shall be used to measure fair value. ASC Topic 820 establishes a fair value hierarchy for inputs, which
represent the assumptions used by the buyer and seller in pricing the asset or liability. These inputs are further defined as observable
and unobservable inputs. Observable inputs are those that buyer and seller would use in pricing the asset or liability based on market
data obtained from sources independent of the Company. Unobservable inputs reflect the Company’s assumptions about the inputs that
the buyer and seller would use in pricing the asset or liability developed based on the best information available in the circumstances.
The fair value hierarchy is categorized into three
levels based on the inputs as follows:
| ● | Level
1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability
to access. Valuation adjustments and block discounts are not being applied. Since valuations are based on quoted prices that are readily
and regularly available in an active market, valuation of these securities does not entail a significant degree of judgment. |
| ● | Level
2 - Valuations based on (i) quoted prices in active markets for similar assets and liabilities, (ii) quoted prices in markets that
are not active for identical or similar assets, (iii) inputs other than quoted prices for the assets or liabilities, or (iv) inputs that
are derived principally from or corroborated by market through correlation or other means. |
| ● | Level
3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement. |
The fair value of the Company’s assets and
liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurements and Disclosures,” approximates
the carrying amounts represented in the accompanying balance sheet, primarily due to their short-term nature.
Warrants
The Company accounts 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 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, 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 shares of Class A 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.
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 are 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, 2023, common stock subject to possible redemption are presented at redemption value of $10.77 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.
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 were $4,838,883 consisting
principally of underwriting, legal, accounting and other expenses that are directly related to the IPO and charged to stockholders’
equity upon the completion of the IPO.
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. As of June 30, 2023, the Company has not considered the effect
of the Warrants sold in the IPO and private placement in the calculation of diluted net income (loss) per share, since the exercise of
the Warrants is contingent upon the occurrence of future events and the inclusion of such Warrants would be anti-dilutive and the Company
did not have any other dilutive securities and other contracts that could, potentially, be exercised or converted into common stock and
then share in the earnings of the Company. As a result, diluted income (loss) per share is the same as basic income (loss) per share for
the periods presented.
The net income (loss) per share presented in the
statement of operations is based on the following:
| |
For the | | |
For the | |
| |
Three Months | | |
Three Months | |
| |
Ended | | |
Ended | |
| |
June 30, | | |
June 30, | |
| |
2023 | | |
2022 | |
Net income (loss) | |
$ | 90,945 | | |
$ | (159,937 | ) |
Accretion of carrying value to redemption value | |
| (1,046,811 | ) | |
| (7,913,696 | ) |
Net loss including accretion of carrying value to redemption value | |
$ | (955,866 | ) | |
$ | (8,073,633 | ) |
| |
For the | | |
For the | |
| |
Three Months Ended | | |
Three Months Ended | |
| |
June 30, 2023 | | |
June 30, 2022 | |
| |
| | |
Non- | | |
| | |
Non- | |
| |
Redeemable | | |
Redeemable | | |
Redeemable | | |
Redeemable | |
| |
Common | | |
Common | | |
Common | | |
Common | |
| |
Stock | | |
Stock | | |
Stock | | |
Stock | |
Basic and diluted net income/(loss) per share: | |
| | |
| | |
| | |
| |
Numerators: | |
| | |
| | |
| | |
| |
Allocation of net loss including carrying value to redemption value | |
$ | (600,503 | ) | |
$ | (355,363 | ) | |
$ | (2,355,770 | ) | |
$ | (5,717,863 | ) |
Accretion of carrying value to redemption value | |
| 1,046,811 | | |
| — | | |
| 7,913,696 | | |
| — | |
Allocation of net income (loss) | |
$ | 446,308 | | |
$ | (355,363 | ) | |
$ | 5,557,926 | | |
$ | (5,717,863 | ) |
Denominators: | |
| | | |
| | | |
| | | |
| | |
Weighted-average shares outstanding | |
| 3,643,694 | | |
| 2,156,250 | | |
| 793,103 | | |
| 1,925,000 | |
Basic and diluted net income (loss) per share | |
$ | 0.12 | | |
$ | (0.16 | ) | |
$ | 7.01 | | |
$ | (2.97 | ) |
| |
| | |
For the | |
| |
| | |
Period from | |
| |
| | |
January 7, | |
| |
For the | | |
2022 | |
| |
Six Months | | |
(inception) | |
| |
Ended | | |
through | |
| |
June 30, | | |
June 30, | |
| |
2023 | | |
2022 | |
Net income (loss) | |
$ | 454,603 | | |
$ | (160,582 | ) |
Accretion of carrying value to redemption value | |
| (1,834,561 | ) | |
| (7,913,696 | ) |
Net loss including accretion of carrying value to redemption value | |
$ | (1,379,958 | ) | |
$ | (8,074,278 | ) |
| |
| | |
| | |
For the Period From | |
| |
For the | | |
January 7, 2022 | |
| |
Six Months Ended | | |
(inception) through | |
| |
June 30, 2023 | | |
June 30, 2022 | |
| |
| | |
Non- | | |
| | |
Non- | |
| |
Redeemable | | |
Redeemable | | |
Redeemable | | |
Redeemable | |
| |
Common | | |
Common | | |
Common | | |
Common | |
| |
Stock | | |
Stock | | |
Stock | | |
Stock | |
Basic and diluted net income/(loss) per share: | |
| | |
| | |
| | |
| |
Numerators: | |
| | |
| | |
| | |
| |
Allocation of net loss including carrying value to redemption value | |
$ | (967,338 | ) | |
$ | (412,620 | ) | |
$ | (2,377,067 | ) | |
$ | (5,697,211 | ) |
Accretion of carrying value to redemption value | |
| 1,834,561 | | |
| — | | |
| 7,913,696 | | |
| — | |
Allocation of net income (loss) | |
$ | 867,223 | | |
$ | (412,620 | ) | |
$ | 5,536,629 | | |
$ | (5,697,211 | ) |
Denominators: | |
| | | |
| | | |
| | | |
| | |
Weighted-average shares outstanding | |
| 5,055,064 | | |
| 2,156,250 | | |
| 793,103 | | |
| 1,900,862 | |
Basic and diluted net income (loss) per share | |
$ | 0.17 | | |
$ | (0.19 | ) | |
$ | 6.98 | | |
$ | (3.00 | ) |
Concentration of Credit Risk
Financial instruments that potentially subject
the Company to concentration of credit risk consist of a cash account in a financial institution. The Company has not experienced losses
on this account and management believes the Company is not exposed to significant risks on such account. As of June 30, 2023, approximately
$39.4 million was over the Federal Deposit Insurance Corporation (FDIC) limit.
Income Taxes
The Company accounts for income taxes under ASC 740
Income Taxes (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected
impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit
to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established
when it is more likely than not that all or a portion of deferred tax assets will not be realized.
ASC 740 also clarifies the accounting for
uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement
process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those
benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740
also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition.
The Company recognizes accrued interest and penalties
related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest
and penalties as of June 30, 2023 and December 31, 2022. The Company is currently not aware of any issues under review that could result
in significant payments, accruals or material deviation from its position.
The Company has identified the United States
as its only major tax jurisdiction.
The Company may be subject to potential examination
by federal and state taxing authorities in the areas of income taxes. These potential examinations may include questioning the timing
and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. The Company’s
management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
Recent Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06,
“Debt – Debt Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s
Own Equity (Subtopic 815-40)”. The amendment in this ASU is to address issues identified as a result of the complexity associated
with applying generally accepted accounting principles (GAAP) for certain financial instruments with characteristics of liabilities and
equity. For convertible instruments, the Board decided to reduce the number of accounting models for convertible debt instruments and
convertible preferred stock. Limiting the accounting models results in fewer embedded conversion features being separately recognized
from the host contract as compared with current GAAP. Convertible instruments that continue to be subject to separation models are (1) those
with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative,
and that do not qualify for a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial
premiums for which the premiums are recorded as paid-in capital. The amendments in this Update are effective for public business entities
that meet the definition of a Securities and Exchange Commission (SEC) filer, excluding entities eligible to be smaller reporting companies
as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early
adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those
fiscal years. The Board specified that an entity should adopt the guidance as of the beginning of its annual fiscal year. The Company
has early adopted this update and it will become effective on January 1, 2023. The Company adoption of this ASU did not have a material
effect on the Company’s unaudited condensed financial statements.
On August 16, 2022, President Biden signed into
law the Inflation Reduction Act of 2022 (H.R. 5376) (the “IRA”), which, among other things, imposes a 1% excise tax on any
domestic corporation that repurchases its stock after December 31, 2022 (the “Excise Tax”). The Excise Tax is imposed on the
fair market value of the repurchased stock, with certain exceptions.
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.
As a result of the 4,981,306 shares of Class A
common stock redeemed in March, 2023, the Company accrued the 1% excise tax in the amount of $514,569 as a reduction of equity as the
Company is uncertain about the structure of business combination and whether additional shares will be issued within the same taxable
year.
Note 3 — Investments Held in Trust
Account
As of June 30, 2023 and December 31, 2022,
assets held in the Trust Account were comprised of $39,472,129 and $89,140,977 in money market funds which are invested in U.S. Treasury
Securities. Interest income for the three months ended June 30, 2023 and 2022 amounted to $456,417 and nil, respectively. Interest income
for the six months ended June 30, 2023 and the period from January 7, 2022 (inception) through June 30, 2022 amounted to $1,163,097 and
nil, respectively.
The following table presents information about
the Company’s assets that are measured at fair value on a recurring basis and indicates the fair value hierarchy of the valuation
inputs the Company utilized to determine such fair value:
Description | |
Level | | |
June 30, 2023 | |
Assets: | |
| | |
| |
Trust Account - U.S. Treasury Securities Money Market Fund | |
1 | | |
$ | 39,472,129 | |
Description | |
Level | | |
December 31, 2022 | |
Assets: | |
| | |
| |
Trust Account - U.S. Treasury Securities Money Market Fund | |
1 | | |
$ | 89,140,977 | |
Note 4 — Initial Public
Offering
Pursuant to the IPO, the Company sold 8,625,000 Units
including 1,125,000 Units issued upon the full exercise of the over-allotment option. Each Unit has an offering price of $10.00 and consists
of one share of the Company’s Class A Common Stock and one-half of one redeemable Public Warrants. The Company will not issue
fractional shares. As a result, the Public Warrants must be exercised in multiples of two. Each whole redeemable Public Warrant entitles
the holder thereof to purchase one share Class A Common Stock at a price of $11.50 per full share. The Public Warrants will become
exercisable on the later of 30 days after the completion of the Company’s initial Business Combination or 12 months from
the closing of the IPO, and will expire five years after the completion of the Company’s initial Business Combination or earlier
upon redemption or liquidation.
All of the 8,625,000 Public Shares sold
as part of the Units in the IPO contain a redemption feature which allows for the redemption of such Public Shares if there is a stockholder
vote or tender offer in connection with the Business Combination and in connection with certain amendments to the Company’s amended
and restated certificate of incorporation, or in connection with the Company’s liquidation. In accordance with the Securities and
Exchange Commission (the “SEC”) and its staff’s guidance on redeemable equity instruments, which has been codified in
ASC 480-10-S99, redemption provisions not solely within the control of the Company require common stock subject to redemption to be classified
outside of permanent equity.
The Company’s redeemable common stock is
subject to SEC and its staff’s guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99. If it is probable
that the equity instrument will become redeemable, the Company has the option to either accrete changes in the redemption value over the
period from the date of issuance (or from the date that it becomes probable that the instrument will become redeemable, if later) to the
earliest redemption date of the instrument or to recognize changes in the redemption value immediately as they occur and adjust the carrying
amount of the instrument to equal the redemption value at the end of each reporting period. The Company has elected to recognize the changes
immediately. The accretion or remeasurement is treated as a deemed dividend (i.e., a reduction to retained earnings, or in absence of
retained earnings, additional paid-in capital).
As of June 30, 2023 and December 31, 2022, the common stock reflected
on the balance sheet are reconciled in the following table.
| |
As of | | |
As of | |
| |
June 30, | | |
December 31, | |
| |
2023 | | |
2022 | |
Gross proceeds | |
$ | 86,250,000 | | |
$ | 86,250,000 | |
Less: | |
| | | |
| | |
Proceeds allocated to Public Warrants | |
| (1,349,813 | ) | |
| (1,349,813 | ) |
Offering costs of Public Shares | |
| (4,838,883 | ) | |
| (4,838,883 | ) |
Redemption | |
| (51,456,891 | ) | |
| - | |
Plus: | |
| | | |
| | |
Accretion of carrying value to redemption value | |
| 10,623,599 | | |
| 8,789,038 | |
Common stock subject to possible redemption | |
$ | 39,228,012 | | |
$ | 88,850,342 | |
Note 5 — Private Placement
Substantially concurrently with the closing of
the IPO on June 14, 2022, the Company completed the sale of 5,240,000 Private Warrants to the Sponsor at a purchase price of $1.00 per
Private Warrant, generating gross proceeds to the Company of $5,240,000. Private Warrants are identical to the Public Warrants included
in the Units sold in this IPO except that the Private Warrants (including the Class A common stock issuable upon exercise of the Private
Warrants) will not be transferable, assignable or salable until 30 days after the completion of the initial Business Combination except
to permitted transferees.
Note 6 — Related Party
Transactions
Founder Shares
On February 4, 2022, the Sponsor acquired
2,156,250 Class B common stock (“Founder Shares”) of for an aggregate purchase price of $25,000, or approximately $0.01
per share. As of June 30, 2023 and December 31, 2022, there were 2,156,250 Founder Shares issued and outstanding.
The number of Founder Shares issued was determined
based on the expectation that such Founder Shares would represent 20% of the number of Class A common stock and Class B common stock
issued and outstanding upon completion of the IPO.
The Founder Shares are identical to the Public
Shares. However, the founders have agreed (A) to vote their Founder Shares in favor of any proposed Business Combination, (B) not
to propose, or vote in favor of, prior to and unrelated to an initial Business Combination, an amendment to the Company’s certificate
of incorporation that would affect the substance or timing of the Company’s redemption obligation to redeem all Public Shares if
the Company cannot complete an initial Business Combination within the Combination Period, unless the Company provides public stockholders
an opportunity to redeem their Public Shares in conjunction with any such amendment, (C) not to redeem any shares, including Founder
Shares and Public Shares into the right to receive cash from the Trust Account in connection with a stockholder vote to approve the Company’s
proposed initial Business Combination or sell any shares to us in any tender offer in connection with the Company’s proposed initial
Business Combination, and (D) that the Founder Shares shall not participate in any liquidating distribution upon winding up if a
Business Combination is not consummated.
The founder has agreed not to transfer, assign
or sell its Founder Shares until the earlier to occur of: (A) six months after the completion of the Company’s initial
Business Combination, or (B) the date on which the Company completes a liquidation, merger, stock exchange or other similar transaction
that results in all of the public stockholders having the right to exchange their shares of common stock for cash, securities or other
property, and (C) the date on which the last reported sale price of the Company’s Class A common stock equals or exceeds $12.00
per share (as adjusted for share splits, share dividends, reorganizations and recapitalizations) for any 20 trading days within any
30-trading day period commencing after the initial Business Combination, any permitted transferees will be subject to the same restrictions
and other agreements of the Company’s founders with respect to any Founder Shares.
Promissory Note — Related Party
On January 20, 2022, the Sponsor has agreed to
loan the Company up to $500,000 to be used for a portion of the expenses of the IPO. This loan is non-interest bearing, unsecured and
is due at the earlier of (1) January 20, 2023 or (2) the date on which the Company consummates its IPO of its securities.
The Company has an outstanding loan balance of $316,827 on June 14, 2022 after the IPO and the outstanding balance was repaid on June
21, 2022.
In connection with the four Monthly Extension
Payment discussed in Note 1, the Company issued four unsecured promissory note of $227,730.87 (the “Note”) to its Sponsor.
The Note is non-interest bearing and payable (subject to the waiver against trust provisions) on the earlier of (i) consummation of the
Company’s initial business combination and (ii) the date of the liquidation of the Company. The principal balance may be prepaid
at any time, at the election of the Company. The holder of the Note has the right, but not the obligation, to convert the Note, in whole
or in part, respectively, into private placement warrants (the “Warrants”) of the Company, as described in the prospectus
of the Company (File Number 333-263477), by providing the Company with written notice of its intention to convert the Note at least two
business days prior to the closing of the Company’s initial business combination. The number of Warrants to be received by the holder
in connection with such conversion shall be an amount determined by dividing (x) the sum of the outstanding principal amount payable to
the holder, by (y) $1.00.
Balance of Promissory Note – related party
amounted to $910,924 and nil on June 30, 2023 and December 31, 2022, respectively.
Related Party Loans
In addition, in order to finance transaction costs
in connection with an intended initial Business Combination, the Sponsor, or an affiliate of the Sponsor or certain of the Company’s
officers and directors may, but are not obligated to, loan the Company funds as may be required. If the Company completes the initial
Business Combination, it would repay such loaned amounts. In the event that the initial Business Combination does not close, the Company
may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from the Trust Account
would be used for such repayment. Up to $3,000,000 of such loans may be converted upon consummation of the Company’s Business Combination
into Warrants at a price of $1.00 per warrant. If the Company does not complete a Business Combination, the loans would be repaid out
of funds not held in the Trust Account, and only to the extent available. Such Private Warrant converted from loan would be identical
to the Private Warrants sold in the private placement.
As of June 30, 2023 and December 31, 2022, the
Company had no borrowings under the working capital loans.
Administrative Services Fees
The Company has agreed, commencing on the effective
date of the prospectus, to pay the Sponsor the monthly fee of an aggregate of $10,000 for office space, administrative and shared personnel
support services. This arrangement will terminate upon the earlier of (a) completion of a Business Combination or (b) twelve months
after the completion of the IPO. Administrative service fee expenses for the three months ended June 30, 2023 and 2022 amounted to $23,000
and $7,000, respectively. Administrative service fee expenses for the six months ended June 30, 2023 and the period from January 7, 2022
(inception) through June 30, 2022 amounted to $53,000 and $7,000, respectively. Accrued services fees amounted to $3,000 and nil as of
June 30, 2023 and December 31, 2022, respectively.
Note 7 — Commitments &
Contingencies
Risks and Uncertainties
Management is currently evaluating 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 the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily
determinable as of the date of these unaudited condensed financial statements. The unaudited condensed financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
Registration Rights
The holders of the Founder Shares and Private
Warrants and Warrants issuable upon the conversion of certain working capital loans will be entitled to registration rights pursuant to
a registration rights agreement signed on June 9, 2022 requiring the Company to register such securities for resale. The holders 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
completion of the Company’s initial 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.
Underwriting Agreement
The underwriters of the IPO (the “underwriters”)
exercised the option to purchase an additional 1,125,000 Units in the IPO.
The Company paid an underwriting discount of 2.0%
of the gross proceeds of the IPO, or $1,725,000 to the underwriters at the closing of the IPO. In addition, the underwriters will be entitled
to a deferred fee of 3.0% of the gross proceeds of the IPO, or $2,587,500 until the closing of the Business Combination.
Right of First Refusal
For a period of twelve (12) months from the
closing of a Business Combination the Company shall give underwriter a right of first refusal to act as lead left bookrunner and lead
left manager and/or lead left placement agent with at least seventy-five percent (75%) of the economics for a two-handed deal and thirty-five
percent (35%) of the economics for a three-handed deal for any and all future public and private equity and debt offerings during such
period by the Company or any successor to or any subsidiary of the Company. It is understood that if, during the twelve (12) month
period following the consummation of a successful financing, a third party broker-dealer provides the Company with written terms with
respect to a future securities offering (“Written Offering Terms”) that the Company desires to accept, the Company shall promptly
present the Written Offering Terms to EF Hutton, division of Benchmark Investments LLC (“EF Hutton”), the representative of
the underwriters of the IPO. EF Hutton shall have five (5) business days from its receipt of the Written Offering Terms in which
to determine whether or not to accept such offer and, if EF Hutton declines such offer or fail to respond within such five (5) day
period, then the Company shall have the right to proceed with such financing with another placement agent or underwriter upon the same
terms and conditions as the Written Offering Terms.
Note 8 — Stockholders’ Deficit
Preferred Stock — The
Company is authorized to issue 500,000 shares of preferred stock, $0.0001 par value, with such designations, voting and other rights and
preferences as may be determined from time to time by the Company’s board of directors. As of June 30, 2023 and December 31, 2022,
there were no preferred stock issued or outstanding.
Class A Common Stock — The
Company is authorized to issue 20,000,000 shares of Class A common stock with a par value of $0.0001 per share. As of June 30, 2023 and
December 31, 2022, there were no shares of Class A common stock issued or outstanding, excluding 3,643,694 and 8,625,000 shares of Class
A common stock subject to possible redemption.
Class B Common Stock — The
Company is authorized to issue 2,500,000 shares of Class B common stock with a par value of $0.0001 per share. As of June 30, 2023
and December 31, 2022, the Company had 2,156,250 shares of Class B common stock issued and outstanding.
Common stockholders of record are entitled to
one vote for each share held on all matters to be voted on by stockholders. Holders of the Class A common stock and holders of the Class B
common stock will vote together as a single class on all matters submitted to a vote of the Company’s stockholders, except as required
by law.
The Class B common stock will automatically
convert into shares of the Class A common stock at the time of the initial Business Combination, or at any time prior thereto at the option
of the holder, on a one-for-one basis, subject to adjustment pursuant to certain anti-dilution right.
Warrants — On June
14, 2022, the Company issued 4,312,500 Public Warrants in connection with the IPO. Substantially concurrently with the closing of the
IPO, the Company completed the private sale of 5,240,000 Private Warrants to the Company’s Sponsor.
Each whole Warrant entitles the registered holder
to purchase one whole share of the Company’s Class A common stock at a price of $11.50 per share, subject to adjustment as discussed
below, at any time commencing on the later of 12 months from the closing of the IPO or the date of the completion of the initial
Business Combination. Pursuant to the warrant agreement (the “warrant agreement”) signed on June 9, 2022 between the Company
and VStock Transfer, LLC, the warrant agent of the Company, a warrant holder may exercise its Warrants only for a whole number of shares
of Class A common stock. This means that only a whole Warrant may be exercised at any given time by a warrant holder. No fractional Warrants
will be issued upon separation of the Units and only whole Warrants will trade. The Warrants will expire five years after the completion
of the Company’s initial Business Combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.
The Company has agreed that as soon as practicable,
but in no event later than 30 business days, after the closing of the initial Business Combination, it will use its reasonable best
efforts to file, and within 60 business days following its initial Business Combination to have declared effective, a registration
statement for the registration, under the Securities Act, of the shares of Class A common stock issuable upon exercise of the Warrants.
The Company will use its reasonable best efforts to maintain the effectiveness of such registration statement, and a current prospectus
relating thereto, until the expiration of the Warrants in accordance with the provisions of the warrant agreement. No Warrants will be
exercisable for cash unless the Company has an effective and current registration statement covering the Class A common stock issuable
upon exercise of the Warrants and a current prospectus relating to such shares of common stock. Notwithstanding the above, if the Company’s
Class A common stock is at the time of any exercise of a Warrant not listed on a national securities exchange such that it satisfies the
definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option,
require holders of Warrants who exercise their Warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of
the Securities Act and, in the event it so elect, it will not be required to file or maintain in effect a registration statement, but
it will be required to use its reasonable best efforts to register or qualify the shares under applicable blue sky laws to the extent
an exemption is not available.
In addition, if (x) the Company issues additional
shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of the Company’s
initial Business Combination at an issue price or effective issue price (the “Newly Issued Price”) of less than $9.20 per
share (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in
the case of any such issuance to the Company’s founders or their affiliates, without taking into account any founders’ shares
held by the Company’s founders or such affiliates, as applicable, prior to such issuance), (y) the aggregate gross proceeds
from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of the Company’s
initial Business Combination on the date of the consummation of the Company’s initial Business Combination (net of redemptions),
and (z) the volume weighted average reported trading price of Class A Common Stock for the twenty (20) trading days starting on the
trading day prior to the date of the consummation of the Business Combination (the “Fair Market Value”) is below $9.20
per share, the exercise price of the Warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Fair Market
Value and the Newly Issued Price, and the $16.50 per share redemption trigger price described below will be adjusted (to the nearest
cent) to be equal to 165% of the higher of the Fair Market Value and the Newly Issued Price.
The Company may call the Warrants for redemption,
in whole and not in part, at a price of $0.01 per Warrant:
|
● |
in whole and not in part; |
|
● |
upon not less than 30 days’ prior written notice of redemption (the “30-day redemption period”) to each Warrant holder; and |
|
● |
if, and only if, the reported last sale price of the Class A common stock equals or exceeds $16.50 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending three business days before the Company sends the notice of redemption to the warrant holders. |
The Company accounted for the 4,312,500 Public
Warrants issued with the IPO as equity instruments in accordance with ASC 480, “Distinguishing Liabilities from Equity” and
ASC 815-40, “Derivatives and Hedging: Contracts in Entity’s Own Equity”. The Company accounted for the Public
Warrants as an expense of the IPO resulting in a charge directly to stockholders’ equity. The Company estimates that the fair value
of the warrants is approximately $1.4 million, or $0.157 per Unit, using the Monte Carlo Model. The fair value of
the Public Warrants is estimated as of the date of grant using the following assumptions: (1) expected volatility of 0.1%, (2) risk-free
interest rate of 3.08%, (3) expected life of 6.18 years, (4) exercise price of $11.50 and (5) stock price of $9.84.
As of June 30, 2023 and December 31, 2022, 9,552,500
Warrants were outstanding.
Note 9 — Income Taxes
As of June 30, 2023 and December 31, 2022, the
Company’s deferred tax asset had a full valuation allowance recorded against it. The effective tax rate for the three months ended
June 30, 2023 and 2022 were 50.5% and 0%, respectively. The effective tax rate for the six months ended June 30, 2023 and for the period
from January 7, 2022 (inception) through June 30, 2022 were 34.5% and 0%, respectively. The effective tax rate differs from the statutory
tax rate of 21% primarily due to the valuation allowance on the deferred tax assets.
Note 10 — Subsequent Events
The Company evaluated subsequent events and transactions
that occurred after the balance sheet date through the date the financial statement is issued. The Company did not identify any subsequent
events that would have required adjustment or disclosure in the financial statement.
On July 11 2023, the Company held another
special meeting of stockholders (the “Special Meeting II”), at which the stockholders of the Company approved, among others,
the proposal to amend the Charter to allow the Company until July 14, 2023 to consummate an initial business combination, and, without
another stockholder vote, to elect to extend Business Combination deadline on a monthly basis for up to nine (9) times, up to April 14,
2024, by depositing $75,000 to the Trust Account. Upon the stockholders’ approval, on July 12, 2023, the Company filed a certificate
of amendment to the Charter which became effective upon filing (the Charter upon the amendment, the “Second Amended Charter”).
In connection with the Special Meeting II, 388,644 shares of Class A common stock of the Company were redeemed and cancelled.
In connection with the Special Meeting II, the
stockholders also approved the proposal to amend the Charter to remove the restriction of Company to undertake an initial business combination
with any entity with its principal business operations or is headquartered in China (including Hong Kong and Macau).
Pursuant to the Second Amended Charter, the Company
may extend the Business Combination deadline on monthly basis from July 14, 2023 to up to nine times by depositing $75,000 each month
into the Trust Account. Following the Special Meeting II, the Sponsor deposited two monthly payments to the Trust Account to extend the
Combination Deadline to September 14, 2023. The two monthly payments were evidenced by two promissory notes issued by the Company
to the Sponsor, each in the principal amount of $75,000.
CAUTIONARY NOTE CONCERNING FORWARD-LOOKING
STATEMENTS
This Quarterly Report includes “forward-looking
statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities 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 “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 the Company’s
final prospectus for its initial public offering filed with the U.S. Securities and Exchange Commission (the “SEC”). 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.
ITEM 2. MANAGEMENT’S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References in this report (the “Quarterly
Report”) to “we,” “us” or the “Company” refer to Acri Capital Acquisition Corporation. References
to our “management” or our “management team” refer to our officers and directors, references to the “sponsor”
refer to Acri Capital Sponsor LLC. 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 initial public offering filed with the SEC on
June 10, 2022 (dated June 9, 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 January 7, 2022, 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”). We are actively
searching and identifying suitable Business Combination target. We intend to effectuate our Business Combination using cash derived from
the proceeds of our initial public offering (the “IPO”) and the sale of warrants (the “Private Placement Warrants”)
in a private placement (the “Private Placement”) to the Company’s sponsor Acri Capital Sponsor LLC (the “Sponsor”),
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.
On June 14, 2022, the Company consummated the
IPO of 8,625,000 units (the “Units”) (including 1,125,000 Units issued upon the full 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”), and one-half of
one redeemable warrant, each whole Warrant entitling 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. The Units were sold at an offering price of $10.00 per Unit, generating
gross proceeds of $86,250,000 on June 14, 2022.
Special Meeting I, Related Redemption, Extensions, and Extension
Notes
On February 8, 2023, the Company held a special
meeting of stockholders (the “Special Meeting I”), at which the stockholders of the Company approved the proposal to amend
the Company’s then-existing amended and restated certificate of incorporation to amend the amount of monthly deposit required to
be deposited in the trust account (the “Trust Account”) from $0.0333 for each public share to $0.0625 for each public share
for, and the Company may extend up to nine (9) times until December 14, 2023 if the Company has not consummated its Business Combination
by March 14, 2023 (the nine (9) month anniversary of the closing of its IPO). Upon the stockholders’ approval, on February
9, 2023, the Company filed a certificate of amendment to the Charter which became effective upon filing (the Charter upon the amendment,
the “First Amended Charter”). In connection with the Special Meeting I, 4,981,306 shares of Class A common stock of the Company
were redeemed and cancelled.
Pursuant to the First Amended Charter, the Company
may extend the deadline to complete a Business Combination (the “Combination Deadline”) up to nine times on monthly basis
from March 14, 2023 to December 14, 2023, by depositing $227,730.87 each month into the Trust Account, representing $0.0625 per public
share. Following the Special Meeting I, the Sponsor deposited four monthly payments to the Trust Account to extend the Combination Deadline
to July 14, 2023. The four monthly payments were evidenced by four promissory notes issued by the Company to the Sponsor, each in the
principal amount of $227,730.87.
Special Meeting II, Related Redemption, Extension, and Extension
Note
On July 11, 2023, the Company held another
special meeting of stockholders (the “Special Meeting II”), at which the stockholders of the Company approved, among others,
the proposal to amend the First Amended Charter to allow the Company until July 14, 2023 to consummate an initial business combination,
and, without another stockholder vote, to elect to extend Combination Deadline on a monthly basis for up to nine (9) times, up to
April 14, 2024, by depositing $75,000 to the Trust Account. Upon the stockholders’ approval, on July 12, 2023, the Company
filed a certificate of amendment to the Charter which became effective upon filing (the Charter upon the amendment, the “Second
Amended Charter”). In connection with the Special Meeting II, 388,644 shares of Class A common stock of the Company were redeemed
and cancelled.
Pursuant to the Second Amended Charter, the Company may extend the
Combination Deadline on monthly basis from July 14, 2023 to up to nine times by depositing $75,000 each month into the Trust Account.
Following the Special Meeting II, the Sponsor deposited two monthly payments to the Trust Account to extend the Combination Deadline to
September 14, 2023. The two monthly payments were evidenced by two promissory notes issued by the Company to the Sponsor, each in the
principal amount of $75,000.
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 September
14, 2023 to consummate our Business Combination. However, if we anticipate that we may not be able to consummate our Business Combination
by September 14, 2023, we may, but are not obligated to, extend the Combination Deadline
for up to another seven times by an additional one month each time and may have until April 14, 2024 to consummate our Business Combination.
Target Amendment
At the Special Meeting II, the stockholders also
approved the proposal to amend the Charter to remove the restriction of Company to undertake an initial business combination with any
entity with its principal business operations or is headquartered in China (including Hong Kong and Macau) (the “Target Amendment”).
As result of the Target Amendment, the Company may decide to consummate the Business Combination with an entity with its principal business
operations or is headquartered in China (including Hong Kong and Macau), so the combined company may face various legal and operational
risks and uncertainties after the business combination. See “Part II – Other Information – Item 1A – Risk Factors”
for details.
Change of Nasdaq Listing Market
On July 7, 2023, Nasdaq
approved the Company’s application to list its common stock, units, and warrants on the Capital Market. The Company’s common
stock, units, and warrants commenced trading on the Capital Market at the opening of business on July 10, 2023.
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 activities during the six months ended June 30, 2023 involved mainly searching for a suitable target for
our business combination. 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, 2023 and 2022,
we had a net income (loss) of $90,945 and $(159,937), respectively, from interest income less formation and operating costs. For the six
months ended June 30, 2023 and the period from January 7, 2022 (inception) through June 30, 2022, we had a net income (loss) of $454,603
and $(160,582), respectively, from interest income less formation and operating costs.
Liquidity and Capital Resources
The Company’s liquidity needs up to June
30, 2023 had been satisfied through initial payment from the sponsor of $25,000 and proceeds from the Private Placement.
On June 14, 2022, we consummated the IPO of 8,625,000
Units at a price of $10.00 per unit (including 1,125,000 Units issued upon the fully exercise of the over-allotment option), generating
gross proceeds of $86,250,000. Simultaneously with the closing of the IPO and exercise of the over-allotment option in full by the underwriters,
we consummated the sale of 5,240,000 warrants as Private Placement Warrants, at a price of $1.00 per warrant, with each warrant entitling
the registered holder to purchase one share of the Company’s Class A common stock at a price of $11.50 per share, generating
gross proceeds of $5,240,000. Following the closings of the IPO and the sales of the Private Placement Warrants on June 14, 2022, a total
of $87,975,000 (or $10.20 per share) was placed in the 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.
As of June 30, 2023, the Company had cash of $201,143
and a working capital deficit of $1,264,028.
In connection with the votes to approve the Extension
Amendment Proposal, 4,981,306 shares of Class A common stock of the Company were rendered for redemption at $10.33 per share, resulting
in approximately $38.0 million remaining in the Trust Account as of February 28, 2023.
We intend to use substantially all of the funds
held in the Trust Account, including any amounts representing interest earned on the Trust Account, excluding deferred underwriting commissions,
to complete our Business Combination. We may withdraw interest from the Trust Account to pay taxes, if any. To the extent that our share
capital or debt is used, in whole or in part, as consideration to complete a 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.
We intend to use the funds held outside the Trust
Account 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.
In order to fund working capital deficiencies
or finance transaction costs in connection with a 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 the Company completes the Business Combination, it would
repay such loaned amounts. In the event that the 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 the Trust Account would be used for such repayment. Up to
$3,000,000 of such loans may be convertible into warrant, at a price of $1.00 per warrant at the option of the lender.
We do not believe we will need to raise additional
funds in order to meet the expenditures required for operating our business. However, if our estimate of the costs of identifying a target
business, undertaking in-depth due diligence and negotiating a Business Combination are less than the actual amount necessary
to do so, we may have insufficient funds available to operate our business prior to our Business Combination. Moreover, we may need to
obtain additional financing either to complete our Business Combination or because we become obligated to redeem a significant number
of our Public Shares upon completion of our Business Combination, in which case we may issue additional securities or incur debt in connection
with such Business Combination.
In addition, our current charter provides that
we will have until July 14, 2023 to complete the Business Combination, which may be extended up to nine (9) times by an additional
one month each time until April 14, 2024. From February to June 2023, the sponsor deposited four monthly payments to the Trust Account
to extend the Combination Deadline to July 14, 2023. Those payments were evidenced by four promissory notes issued by the Company to the
Sponsor, each in the principal amount of $227,730.87 (each, a “First Recharter Extension Note”). From July to August, 2023,
the Sponsor deposited two monthly payments to the Trust Account to extend the Combination Deadline to September 14, 2023 which were evidenced
by two promissory notes issued by the Company to the Sponsor, each in the principal amount of $75,000 (each, a “Second Recharter
Extension Note”, collectively with First Recharter Extension Note, the “Extension Note(s)”).
The Extension Notes are non-interest bearing and
are each payable (subject to the waiver against trust provisions) on the earlier of (i) consummation of the Company’s Business Combination
and (ii) the date of the liquidation of the Company. The Extension Notes principal balance may be prepaid at any time, at the election
of the Company. The holder of each of the Extension Notes has the right, but not the obligation, to convert each Extension Note, in whole
or in part, respectively, into Private Placement Warrants of the Company, as described in the prospectus of the Company (File Number 333-263477),
by providing the Company with written notice of its intention to convert the Extension Note at least two (2) business days prior to the
closing of the Company’s Business Combination. The number of Warrants to be received by the holder in connection with such conversion
shall be an amount determined by dividing (x) the sum of the outstanding principal amount payable to the holder, by (y) $1.00.
If we are unable to complete a Business Combination
within the Combination Period, we may seek approval from our stockholders holding no less than 65% or more of the votes to approve to
extend the Completion Period, if we fail to obtain approval from our stockholders for such extension or we do not seek such extension,
the Company will cease all operations.
As a result, management has determined that such
additional condition also raise substantial doubt about the Company’s ability to continue as a going concern. The unaudited condensed
financial statement does not include any adjustments that might result from the outcome of this uncertainty.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities
that would be considered off-balance sheet arrangements as of June 30, 2023. 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, 2023 and December 31, 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 Warrants, and any warrants that may be issued upon conversion of working capital loans (and any underlying securities) will
be entitled to registration rights pursuant to a registration 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 to registration statements filed subsequent to our
completion of our Business Combination. We will bear the expenses incurred in connection with the filing of any such registration statements.
Critical Accounting Policies and Estimates
In preparing the unaudited condensed financial
statements in conformity with U.S. GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial statements and the reported expenses during the reporting
period.
Making estimates requires management to exercise
significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances
that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near
term due to one or more future confirming events. Accordingly, actual results may differ from these estimates. We have identified
the following critical accounting policies and estimates:
Investments held in Trust Account
At June 30, 2023 and December 31, 2022, $39,472,129
and $89,140,977 of the assets held in the Trust Account were held in money market funds, which are invested in short term U.S. Treasury
securities.
The Company classifies its U.S. Treasury and equivalent
securities as held-to-maturity in accordance with ASC Topic 320 “Investments — Debt and Equity Securities.” Held-to-maturity
securities are those securities which the Company has the ability and intent to hold until maturity. Held-to-maturity treasury securities
are recorded at amortized cost on the accompanying balance sheet and adjusted for the amortization or accretion of premiums or discounts.
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, 2023, common stock subject to possible redemption are presented at redemption value of $10.77 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.
Income Taxes
The Company accounts for income taxes under ASC
740 Income Taxes (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected
impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit
to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when
it is more likely than not that all or a portion of deferred tax assets will not be realized.
ASC 740 also clarifies the accounting for uncertainty
in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process
for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits
to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740 also provides
guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition.
The Company recognizes accrued interest and penalties
related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest
and penalties as of June 30, 2023. The Company is currently not aware of any issues under review that could result in significant payments,
accruals or material deviation from its position.
The Company has identified the United States
as its only major tax jurisdiction.
The Company may be subject to potential examination
by federal and state taxing authorities in the areas of income taxes. These potential examinations may include questioning the timing
and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. The Company’s
management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
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
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 unaudited
condensed financial statement.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK.
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES.
(a) Evaluation of Disclosure Controls
and Procedures
Disclosure controls are procedures that are designed
with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this Report,
is recorded, processed, summarized, and reported within the time period specified in the SEC’s rules and forms. Disclosure
controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including
the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. Our management
evaluated, with the participation of our current chief executive officer (who also serves as our chief financial officer) (our “Certifying
Officer”), the effectiveness of our disclosure controls and procedures as of June 30, 2023, pursuant to Rule 13a-15(b) under
the Exchange Act. Based upon that evaluation, our chief executive officer and chief financial officer concluded that during the period
covered by this report, our disclosure controls and procedures were not effective due to presence of material weaknesses in internal control
over financial reporting.
A
material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is
a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented
or detected on a timely basis. Management has identified ineffective
controls over period end process to properly accrue excise tax as a result of new legislation as material weaknesses which have caused
management to conclude that, as of March 31, 2023, our disclosure controls and procedures were not effective and the material weakness
has not been fully remediated as of June 30, 2023. Because a material weakness in the Company’s internal controls over financial
reporting existed as of June 30, 2023, the Company’s disclosure controls and procedures were not effective as of June
30, 2023.
In light of this material weakness, we performed
additional research and analyses as deemed necessary to ensure that our financial statements were prepared in accordance with U.S. generally
accepted accounting principles. Accordingly, management believes that the financial statements included in this Report present fairly
in all material respects our financial position, results of operations and cash flows for the period presented. In an effort to remediate
the identified material weaknesses, the Company will seek tax expert advice in the future in connection with new tax legislations.
This Quarterly Report on Form 10-Q does not
include an attestation report of internal controls from our independent registered public accounting firm due to our status as an emerging
growth company under the JOBS Act.
(b) Changes in Internal Control over Financial
Reporting
There were no changes in our internal control
over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal
quarter covered by this report that has materially affected, or are reasonably likely to materially affect, our internal control over
financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are not a party to any material legal proceedings
and no material legal proceedings have been threatened by us or, to the best of our knowledge, against us.
ITEM 1A. RISK FACTORS
Factors that could cause our actual results to
differ materially from those in this Quarterly Report are any of the risks described in our final prospectus dated June 9, 2022 filed
with the SEC (the “Final Prospectus”). Any of these factors could result in a significant or material adverse effect on our
results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may
also impair our business or results of operations. As of the date of this Quarterly Report, other than as set forth below, there have
been no material changes to the risk factors disclosed in our final prospectus dated June 9, 2022, filed with the SEC. We may disclose
changes to such factors or disclose additional factors from time to time in our future filings with the SEC. This Quarterly Report should
be read in conjunction with the risk factors disclosed in our Annual Report and other reports we file with, or furnish to, the SEC.
The risk factor disclosed as below in the proxy
statement dated January 26, 2023 filed with the SEC are hereby incorporated in its entirety into the Final Prospectus:
We may not be able to complete the business
combination if it is subject to U.S. foreign investment regulations and review by a U.S. government entity such as the Committee
on Foreign Investment in the United States (CFIUS), or ultimately prohibited.
CFIUS has authority to review
direct or indirect investments by foreign persons in U.S. businesses. Under the CFIUS regulations, foreign investors may be required
to make mandatory filings and pay filing fees related to such filings. Also, CFIUS has the authority to self-initiate national security
reviews of foreign direct and indirect investments in U.S. businesses if the parties to that investment choose not to file voluntarily
or at the request of CFIUS. If CFIUS determines an investment to be a threat to national security, CFIUS has the power to block or
impose mitigation measures on the investment. Whether CFIUS has jurisdiction to review an acquisition or investment transaction depends
on, among other factors, the nature and structure of the transaction, including the level of beneficial ownership interest and the nature
of any information or governance rights involved. For example, investments that result in “control” of a “U.S. business”
by a “foreign person” (in each case, as such terms are defined in 31 C.F.R. Part 800) that might be considered by
CFIUS to be a covered transaction that CFIUS would have authority to review. Moreover, significant CFIUS reform legislation, which was
fully implemented through regulations that became effective on February 13, 2020, expanded the scope of CFIUS’s jurisdiction
to investments that do not result in control of a U.S. business by a foreign person but afford certain foreign investors certain
information or governance rights in a U.S. business that has a nexus to “critical technologies,” “critical infrastructure”
and/or “sensitive personal data.” The Company may also be subject to review by other U.S. government entities.
Ms. “Joy” Yi Hua,
our Chief Executive Officer, Chief Financial Officer and Chairwoman, is the sole manager and member of the Sponsor and as such is deemed
to have beneficial ownership of our securities held by the Sponsor. As of the Record Date, the Sponsor owned 20.0% of our issued and outstanding
Common Stock. The Sponsor is a Delaware limited liability company, and Ms. “Joy” Yi Hua is a U.S. permanent resident
with Chinese citizenship who has lived in the United States for more than 20 years. Because we may be considered a “foreign
person” under the rules and regulations administered by CFIUS, any proposed business combination between us and a U.S. business
engaged in a regulated industry or which may affect national security, we could be subject to such foreign ownership restrictions and/or
CFIUS review, or ultimately prohibited. The scope of CFIUS was expanded by the Foreign Investment Risk Review Modernization Act of 2018
(“FIRRMA”) to include certain non-passive, non-controlling investments in sensitive U.S. businesses and certain
acquisitions of real estate even with no underlying U.S. business. FIRRMA, and subsequent implementing regulations that are now in
force, also subject certain categories of investments to mandatory filings. If our potential initial business combination with a U.S. business
falls within the scope of foreign ownership restrictions, we may be unable to consummate a business combination with such business. In
addition, if our potential business combination falls within CFIUS’s jurisdiction, we may be required to make a mandatory filing
or determine to submit a voluntary notice to CFIUS, or to proceed with the initial business combination without notifying CFIUS and risk
CFIUS intervention, before or after closing the initial business combination. CFIUS may decide to block or delay our initial business
combination, impose conditions to mitigate national security concerns with respect to such initial business combination or order us to
divest all or a portion of a U.S. business of the combined company if we had proceeded without first obtaining CFIUS clearance.
The foreign ownership limitations,
and the potential impact of CFIUS, may limit the attractiveness of a transaction with us or prevent us from pursuing certain initial business
combination opportunities that we believe would otherwise be beneficial to us and our shareholders. As a result, the pool of potential
targets with which we could complete an initial business combination may be limited and we may be adversely affected in terms of competing
with other special purpose acquisition companies which do not have similar foreign ownership issues.
Moreover, the process of government
review or a decision to delay or prohibit the transaction, whether by CFIUS or otherwise, could be lengthy. Because we have only a limited
time to complete our initial business combination, our failure to obtain any required approvals within the requisite time period may require
us to liquidate. If we liquidate, our public stockholders may only receive $10.20 per share initially, and our warrants will expire worthless.
This will also cause you to lose any potential investment opportunity in a target company and the chance of realizing future gains on
your investment through any price appreciation in the combined company.
The risk factor disclosed as below in the proxy
statement dated July 11, 2023 filed with the SEC are hereby incorporated in its entirety into the Final Prospectus:
Risks Related to Acquiring a China-Based Target
We may consider a business
combination with China-based Target, which may subject the post business combination business to the laws, regulations, and policies
of the PRC. As a result, in the future we may be subject to risks related to the PRC as discussed below.
We may undertake our initial business combination
with an entity or business which is based in a foreign country and the laws and regulations of such foreign countries may not afford U.S. investors
or regulatory agencies access to information normally available to them with respect to U.S. based entities.
In November 2020, the
SEC Staff issued guidance regarding certain risks and considerations that should be considered by investors regarding foreign entities,
specifically the limited ability of U.S. investors and regulatory agencies to rely upon or obtain information from foreign based
entities, specifically China based entities, under the laws and regulations of such foreign countries. As stated by the SEC Staff. “[A]lthough
China-based Issuers that access the U.S. public capital markets generally have the same disclosure obligations and legal responsibilities
as other non-U.S. issuers, the Commission’s ability to promote and enforce high-quality disclosure standards for China-based Issuers
may be materially limited. As a result, there is substantially greater risk that their disclosures may be incomplete or misleading. In
addition, in the event of investor harm, investors generally will have substantially less access to recourse, in comparison to U.S. domestic
companies and foreign issuers in other jurisdictions.” Among other potential issues and risks cited by the SEC Staff, the SEC Staff
identified restrictions in China which restricted the PCAOB’s ability to inspect audit work and practices of PCAOB-registered public
accounting firms in China and on the PCAOB’s ability to inspect audit work with respect to China-based issuer audits by PCAOB-registered public
accounting firms in Hong Kong.
Further, current laws and regulations
in China as well as other potential target countries, can limit or restrict investigations and similar activities by U.S. regulatory
agencies such as the SEC to gather information regarding the securities and other activities of issuers based in the foreign countries
where such laws or regulations exist. According to Article 177 of the newly amended PRC Securities Law which became effective in
March 2020 (the “Article 177”), the securities regulatory authority of the PRC State Council may collaborate with
securities regulatory authorities of other countries or regions in order to monitor and oversee cross border securities activities. Article 177
further provides that overseas securities regulatory authorities are not allowed to carry out investigation and evidence collection directly
within the territory of the PRC, and that any Chinese entities and individuals are not allowed to provide documents or materials related
to securities business activities to overseas agencies without prior consent of the securities regulatory authority of the PRC State Council
and the competent departments of the PRC State Council. Investors should be aware that the U.S. Holding Foreign Companies Accountable
Act, which requires that the PCAOB be permitted to inspect an issuer’s public accounting firm within three years, may result
in the delisting of the operating company in the future if the PCAOB is unable to inspect the firm. Although we have not identified a
potential target business nor any particular country in which a business combination may occur, we intend to consider potential target
business in foreign jurisdictions, including China based entities and businesses, and therefore investors should be aware of risks related
to the ability to obtain information and conduct investigations and be afforded protections by U.S.- based agencies such as the SEC related
to any such business combination with a target business in a foreign country and consider such risks prior to investing in our securities.
If the government of the PRC finds that
the VIE Agreements the China-based Target entered into to allow the post-combination entity to consolidate the financial
results of the China-based Target do not comply with local governmental restrictions on foreign investment, or if these regulations
or the interpretation of existing regulations change in the future, the post-combination entity could be subject to significant
penalties or be forced to relinquish our interests in those operations or the post-combination entity could be unbale to consolidate
the financial results of the VIE, which could cause the value of our securities depreciate significantly or become worthless.
We are a Delaware corporation
with no operations of our own and no subsidiaries except searching for a suitable target to consummate an initial business combination.
We currently do not have any PRC subsidiaries or China operations, do not have any specific business combination under consideration and
have not (nor has anyone on our behalf), directly or indirectly, contacted any prospective target business or had any substantive discussions,
formal or otherwise, with respect to such a transaction. However, because of our significant ties to China, we may pursue a business combination
with a China-based Target which might require a VIE structure. The post-combination entity, through VIE Agreements, can consolidate
the financial results of the VIE in accordance with U.S. GAAP or IFRS as primary beneficial for accounting purposes. In that case,
following the consummation of a business combination with a China-based Target, the securities of the post-combination entity
would be securities of an offshore holding company instead of shares of the VIE in China.
The post-combination entity
will rely on WFOE’s VIE Agreements with the VIE and its shareholders to consolidate the financial results of the VIE. These
VIE Agreements may not be as effective as direct ownership. Under the VIE Agreements, as a legal matter, if the VIE or any of its shareholders
executing the VIE Agreements fails to perform its, his or her respective obligations under the VIE Agreements, the post-combination entity
may have to incur substantial costs and resources to enforce such arrangements, and rely on legal remedies available under PRC laws, including
seeking specific performance or injunctive relief, and claiming damages, which we cannot assure you will be effective. For example, if
shareholders of the VIE were to refuse to transfer their equity interests in such VIE to the post-combination entity or its designated
persons when the post-combination entity exercises the purchase option pursuant to the VIE Agreements, the post-combination entity
may have to take a legal action to compel them to fulfill their contractual obligations.
If (i) the applicable
PRC authorities invalidate the VIE Agreements for violation of PRC laws, rules and regulations, (ii) any VIE or its shareholders
terminate the VIE Agreements, (iii) any VIE or its shareholders fail to perform its/his/her obligations under the VIE Agreements,
or (iv) if these regulations change or are interpreted differently in the future, the China-based Target’s business operations
in China would be materially and adversely affected, and the value of your securities would substantially decrease or even become worthless.
Further, if the post-combination entity fails to renew the VIE Agreements upon their expiration, the post-combination entity
would not be able to continue the business operations unless the then current PRC law allows it to directly operate businesses in China.
In addition, if any VIE or
all or part of its assets become subject to liens or rights of third-party creditors, we may be unable to continue to consolidate
the financial results of the VIE, which could materially and adversely affect the post-combination entity’s business, financial
condition and results of operations. If any of the VIEs undergoes a voluntary or involuntary liquidation proceeding, its shareholders
or unrelated third-party creditors may claim rights to some or all of these assets, thereby materially and adversely affecting the
financial results of the post-combination entity.
All of the VIE Agreements will
be governed by PRC law and provided for the resolution of disputes through arbitration in the PRC. Accordingly, these contracts will
be interpreted in accordance with PRC laws and any disputes will be resolved in accordance with PRC legal procedures. The legal environment
in the PRC is not as developed as in some other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal
system could limit our ability to enforce the VIE Agreements. In the event the post-combination entity is unable to enforce the VIE
Agreements, the post-combination entity may not be able to consolidate the financial results of the VIE in accordance with U.S. GAAP
or IFRS and the post-combination entity may be precluded from operating its business, which would have a material adverse effect
on its financial condition and results of operations.
Although based on industry
practices, VIE Agreements among WFOE, the VIE and its shareholders governed by PRC laws are valid, binding and enforceable, and will not
result in any violation of PRC laws or regulations currently in effect, however, there are substantial uncertainties regarding the interpretation
and application of current and future PRC laws, regulations and rules. Accordingly, the PRC regulatory authorities may ultimately take
a view that is contrary to the accepted industry practices with respect to the VIE Agreements. In addition, it is uncertain whether any
new PRC laws or regulations relating to the VIE structures will be adopted or if adopted, what they would provide. PRC government authorities
may deem that foreign ownership is directly or indirectly involved in the VIE’s shareholding structure. If our potential corporate
structure and VIE Agreements are deemed by the Ministry of Industry and Information Technology, or MIIT, or the Ministry of Commerce,
or MOFCOM, or other regulators having competent authority to be illegal, either in whole or in part, the post-combined company may
lose the ability to consolidate the financial results of the VIE through the VIE Agreements and have to modify such structure to comply
with regulatory requirements. However, there can be no assurance that we can achieve this without material disruption to the China-based Target’s
business. Furthermore, if the post-combined company or the VIE is found to be in violation of any existing or future PRC laws or
regulations, or fail to obtain or maintain any of the required permits or approvals, the relevant PRC regulatory authorities would have
broad discretion to take action in dealing with such violations or failures, including, without limitation:
| ● | revoking the business license and/or operating licenses of
the post-combination entity or the VIE; |
| ● | discontinuing or placing restrictions or onerous conditions
on our operations through any transactions under the VIE agreements; |
| ● | imposing fines, confiscating the income from the post-combination entity,
the VIE or its subsidiaries, or imposing other requirements with which the post-combined company or the VIE may not be able to comply; |
| ● | placing restrictions on our right to collect revenues; |
| ● | requiring the post-combination entity to restructure
its ownership structure or operations, including terminating the VIE Agreements with the VIE and deregistering the equity pledges of
the VIE, which in turn would affect the post-combined company’s ability to consolidate the financial results of the VIE through
the VIE Agreements; or |
| ● | taking other regulatory or enforcement actions against the
post-combination entity that could be harmful to the post-combination entity business. |
The imposition of any of these
penalties will result in a material and adverse effect on our potential ability to conduct the business. In addition, it is unclear what
impact the PRC government actions will have on the post-combined company and on the post-combination entity’s ability
to consolidate the financial results of the VIE in its consolidated financial statements, if the PRC government authorities were to find
our potential corporate structure and VIE Agreements to be in violation of PRC laws and regulations. If the imposition of any of these
government actions causes the post-combination entity to lose the right to direct the activities of the VIE or the right to receive
substantially all the economic benefits and residual returns from the VIE and the post-combination entity is not able to restructure
the ownership structure and operations in a timely and satisfactory manner, the post-combination entity will no longer be able to
consolidate the financial results of the VIE in its consolidated financial statements. Either of these results, or any other significant
penalties that might be imposed on the post-combination entity in this event, it will have a material adverse effect on the post-combination entity’s
financial condition, results of operations and our securities shares may decline in value or be worthless.
The VIE Agreements under a VIE structure
may not be as effective as direct ownership in respect of the relationship of the post-combination entity with the VIE, and
thus, the post-combination entity may incur substantial costs to enforce the terms of the VIE Agreements, which the post-combination entity
may not be able to enforce at all.
The VIE Agreements may not
be as effective as direct ownership in respect of the relationship of the post-combination entity with the VIE. For example,
the VIE and its shareholders could breach the VIE Agreements by, among other things, failing to conduct their operations in an acceptable
manner or taking other actions that are detrimental to the interests of the post-combination entity. If the post-combination entity
had direct ownership of the VIE, the post-combination entity would be able to exercise its rights as a shareholder to effect changes
in the board of directors of the VIE, which in turn could implement changes, subject to any applicable fiduciary obligations, at the management
and operational level. However, under the VIE Agreements, the post-combination entity rely on the performance by the VIE and its
shareholders of their obligations under the contracts to consolidate the financial results of the VIE as primary beneficial. The shareholders
of the VIE may not act in the best interests of the post-combination entity or may not perform their obligations under these VIE
Agreements. Such risks exist throughout the period in which the post-combination entity intends to consolidate the financial results
of the VIE through the VIE Agreements.
If the VIE or its shareholders
fail to perform their respective obligations under the post-combination entity, the post-combination entity may have to incur
substantial costs and expend additional resources to enforce such VIE Agreements. For example, if the shareholders of the VIE refuse to
transfer their equity interest in the VIE to the post-combination entity or its designee if the post-combination entity exercises
the purchase option pursuant to the VIE Agreements, or if they otherwise act in bad faith toward the post-combination entity, then
the post-combination entity may have to take legal actions to compel them to perform their contractual obligations. In addition,
if any third parties claim any interest in such shareholders’ equity interests in the VIE, the post-combination entity’s
ability to foreclose the share pledge according to the VIE Agreements may be impaired. If these or other disputes between the shareholders
of the VIE and third parties were to impair the post-combination entity’s relationship with the VIE, the post-combination entity’s
ability to consolidate the financial results of the VIE as primary beneficiary would be affected, which would in turn result in a material
and adverse effect on the business, operations and financial condition.
Any failure by the VIE or its shareholders
to perform their obligations under the VIE Agreements would have a material and adverse effect on the post-combination entity’s
business.
The shareholders of the VIE
are referred as its nominee shareholders because although they remain the holders of equity interests on record in the VIE, pursuant to
the terms of the relevant power of attorney, such shareholders have irrevocably authorized the individual appointed by the WFOE to exercise
their rights as a shareholder of the relevant VIE. If the VIE, or its shareholders fail to perform their respective obligations under
the VIE Agreements, the post-combination entity may have to incur substantial costs and expend additional resources to enforce such
arrangements. The post-combination entity may also have to rely on legal remedies under PRC laws, including seeking specific performance
or injunctive relief, and claiming damages, which the post-combination entity cannot assure you will be effective under PRC laws.
All of these VIE Agreements
may be governed by and interpreted in accordance with PRC law, and disputes arising from these VIE Agreements may be resolved in court
or through arbitration in China. Accordingly, these contracts will be interpreted in accordance with PRC laws and any disputes will be
resolved in accordance with PRC legal procedures. The legal system in the PRC is not as developed as in some other jurisdictions, such
as the United States. As a result, uncertainties in the PRC legal system could limit our ability to enforce these VIE Agreements.
Meanwhile, there are very few precedents and little formal guidance as to how VIE Agreements in the context of a VIE should be interpreted
or enforced under PRC laws. There remain significant uncertainties regarding the ultimate outcome of such arbitration should legal action
become necessary. In addition, under PRC laws, rulings by arbitrators are final and parties cannot appeal arbitration results in court
unless such rulings are revoked or determined unenforceable by a competent court. If the losing parties fail to carry out the arbitration
awards within a prescribed time limit, the prevailing parties may only enforce the arbitration awards in PRC courts through arbitration
award recognition proceedings, which would require additional expenses and delay. In the event that the post-combination entity is
unable to enforce these VIE Agreements, or if the post-combination entity suffers significant delay or other obstacles in the process
of enforcing these VIE Agreements, the post-combination entity may not be able to consolidate the financial results of the VIE in
its consolidated financial statements in accordance with U.S. GAAP or IFRS as primary beneficial for accounting purposes, and the
post-combination entity’s ability to conduct its business may be negatively affected.
PRC regulations relating to offshore investment
activities by PRC residents may limit the post-combination entity’s ability to inject capital in its Chinese subsidiaries,
if any, and Chinese subsidiaries’ ability to change their registered capital or distribute profits to the post-combination entity
or otherwise expose the post-combination entity or its PRC resident beneficial owners to liability and penalties under PRC laws.
In July 2014, The State
Administration of Foreign Exchange of the PRC, or SAFE, promulgated the Circular on Relevant Issues Concerning Foreign Exchange Control
on Domestic Residents’ Offshore Investment and Financing and Roundtrip Investment Through Special Purpose Vehicles, or SAFE Circular
37. SAFE Circular 37 requires PRC residents (including PRC individuals and PRC corporate entities as well as foreign individuals that
are deemed as PRC residents for foreign exchange administration purpose) to register with SAFE or its local branches in connection with
their direct or indirect offshore investment activities. SAFE Circular 37 is applicable to the shareholders of post-combination entity
who are PRC residents and may be applicable to any offshore acquisitions that we make in the future.
Under SAFE Circular 37,
PRC residents who make, or have prior to the implementation of SAFE Circular 37 made, direct or indirect investments in offshore special
purpose vehicles, or SPVs, will be required to register such investments with SAFE or its local branches. In addition, any PRC resident
who is a direct or indirect shareholder of an SPV, is required to update its filed registration with the local branch of SAFE with respect
to that SPV, to reflect any material change, including, among other things, any major change of a PRC resident shareholder, name or term
of operation of the SPVs, or any increase or reduction of the SPVs’ registered capital, share transfer or swap, merger division.
Moreover, any subsidiary of such SPV in China is required to urge the PRC resident shareholders to update their registration with the
local branch of SAFE. If any PRC shareholder of such SPV fails to make the required registration or to update the previously filed
registration, the subsidiary of such SPV in China may be prohibited from distributing its profits or the proceeds from any capital reduction,
share transfer or liquidation to the SPV, and the SPV may also be prohibited from making additional capital contributions into its subsidiary
in China. On February 13, 2015, SAFE promulgated a Notice on Further Simplifying and Improving Foreign Exchange Administration Policy
on Direct Investment, or SAFE Notice 13, which became effective on June 1, 2015. Under SAFE Notice 13, applications for
foreign exchange registration of inbound foreign direct investments and outbound overseas direct investments, including those required
under SAFE Circular 37, will be filed with qualified banks instead of SAFE or its branches. The qualified banks will directly examine
the applications and accept registrations under the supervision of SAFE.
We cannot provide assurance
that the post-combination entity’s shareholders that are PRC residents comply with all of the requirements under SAFE Circular
37 or other related rules. Failure or inability of our PRC resident shareholders to comply with the registration procedures set forth
in these regulations may subject us to fines and legal sanctions, restrict our cross-border investment activities, limit the ability
of our wholly foreign-owned subsidiary in China to distribute dividends and the proceeds from any reduction in capital, share transfer
or liquidation to us, and we may also be prohibited from injecting additional capital into the subsidiary. Moreover, failure to comply
with the various foreign exchange registration requirements described above could result in liability under PRC law for circumventing
applicable foreign exchange restrictions. As a result, the post-combination entity’s business operations and its ability to
distribute profits to you could be materially and adversely affected.
Furthermore, as these foreign
exchange regulations are still relatively new and their interpretation and implementation has been constantly evolving, it is unclear
how these regulations, and any future regulation concerning offshore or cross-border transactions, will be interpreted, amended and
implemented by the relevant government authorities. For example, the post-combination entity may be subject to a more stringent review
and approval process with respect to the post-combination entity’s foreign exchange activities, such as remittance of dividends
and foreign-currency-denominated borrowings, which may adversely affect our financial condition and results of operations. In addition,
if we decide to acquire a China-based Target, we cannot assure you that we or the owners of such company, as the case may be, will
be able to obtain the necessary approvals or complete the necessary filings and registrations required by the foreign exchange regulations.
This may restrict our ability to implement our acquisition strategy and could adversely affect our business and prospects.
Compliance with the PRC Antitrust law may
limit our ability to effect our initial business combination.
The PRC Antitrust Law became
effective on August 1, 2008. The government authorities in charge of antitrust matters in China are the Antitrust Commission and
other antitrust authorities under the State Council. The PRC Antitrust Law regulates (1) monopoly agreements, including decisions
or actions in concert that preclude or impede competition, entered into by business operators; (2) abuse of dominant market position
by business operators; and (3) concentration of business operators that may have the effect of precluding or impeding competition.
To implement the Antitrust Law, in 2008, the State Council formulated the regulations that require filing of concentration of business
operators, pursuant to which concentration of business operators refers to (1) merger with other business operators; (2) gaining
control over other business operators through acquisition of equity interest or assets of other business operators; and (3) gaining
control over other business operators through exerting influence on other business operators through contracts or other means. In 2009,
the Ministry of Commerce, to which the Antitrust Commission is affiliated, promulgated the Measures for Filing of Concentration of Business
Operators (amended by the Guidelines for Filing of Concentration of Business Operators in 2014), which set forth the criteria of concentration
and the requirement of miscellaneous documents for the purpose of filing. The business combination we contemplate may be considered the
concentration of business operators, and to the extent required by the Antitrust Law and the criteria established by the State Council,
we must file with the antitrust authority under the PRC State Council prior to conducting the contemplated business combination. If the
antitrust authority decides not to further investigate whether the contemplated business combination has the effect of precluding or impeding
competition or fails to make a decision within 30 days from receipt of relevant materials, we may proceed to consummate the contemplated
business combination. If antitrust authority decides to prohibit the contemplated business combination after further investigation, we
must terminate such business combination and would then be forced to either attempt to complete a new business combination or we would
be required to return any amounts which were held in the trust account to our stockholders. When we evaluate a potential business combination,
we will consider the need to comply with the Antitrust Law and other relevant regulations which may limit our ability to effect an acquisition
or may result in our modifying or not pursuing a particular transaction. The approval process may take a period longer than we expect
before we enter into a definitive agreement with a target company, we may be unable to complete a business combination by the Combination
Period.
Exchange controls that exist in the PRC
may restrict or prevent us from using the proceeds of the IPO to acquire a China-based Target and limit our ability to utilize
our cash flow effectively following our initial business combination.
SAFE promulgated the Notice
of the State Administration of Foreign Exchange on Reforming the Administration of Foreign Exchange Settlement of Capital of Foreign-invested Enterprises,
or Circular 19, effective on June 1, 2015, in replacement of the Circular on the Relevant Operating Issues Concerning the Improvement
of the Administration of the Payment and Settlement of Foreign Currency Capital of Foreign-Invested Enterprises, or SAFE Circular
142, the Notice from the State Administration of Foreign Exchange on Relevant Issues Concerning Strengthening the Administration of Foreign
Exchange Businesses, or Circular 59, and the Circular on Further Clarification and Regulation of the Issues Concerning the Administration
of Certain Capital Account Foreign Exchange Businesses, or Circular 45. According to Circular 19, the flow and use of the RMB capital
converted from foreign currency-denominated registered capital of a foreign-invested company is regulated such that RMB capital
may not be used for the issuance of RMB entrusted loans, the repayment of inter-enterprise loans or the repayment of banks loans
that have been transferred to a third party. Although Circular 19 allows RMB capital converted from foreign currency-denominated registered
capital of a foreign-invested enterprise to be used for equity investments within the PRC, it also reiterates the principle that
RMB converted from the foreign currency-denominated capital of a foreign-invested company may not be directly or indirectly
used for purposes beyond its business scope. Thus, it is unclear whether SAFE will permit such capital to be used for equity investments
in the PRC in actual practice. SAFE promulgated the Notice of the State Administration of Foreign Exchange on Reforming and Standardizing
the Foreign Exchange Settlement Management Policy of Capital Account, or Circular 16, effective on June 9, 2016, which reiterates
some of the rules set forth in Circular 19, but changes the prohibition against using RMB capital converted from foreign currency-denominated registered
capital of a foreign-invested company to issue RMB entrusted loans to a prohibition against using such capital to issue loans to
non-associated enterprises. Violations of SAFE Circular 19 and Circular 16 could result in administrative penalties.
As such, Circular 19 and Circular
16 may significantly limit our ability to transfer the proceeds of the IPO to a China-based Target and the use of such proceeds by
a China-based Target.
In addition, following our
initial business combination with a China-based Target, we will be subject to the PRC’s rules and regulations on currency
conversion. In the PRC, the SAFE regulates the conversion of the Renminbi into foreign currencies. Currently, FIEs are required to apply
to the SAFE for “Foreign Exchange Registration Certificates for FIEs.” Following our initial business combination, we will
likely be an FIE as a result of our ownership structure. With such registration certificates, which need to be renewed annually, FIEs
are allowed to open foreign currency accounts including a “basic account” and “capital account.” Currency conversion
within the scope of the “basic account,” such as remittance of foreign currencies for payment of dividends, can be effected
without requiring the approval of the SAFE. However, conversion of currency in the “capital account,” including capital
items such as direct investment, loans and securities, still require approval of the SAFE.
We cannot assure you the PRC
regulatory authorities will not impose further restrictions on the convertibility of the Renminbi. Any future restrictions on currency
exchanges may limit our ability to use the proceeds of the IPO in an initial business combination with a China-based Target and the
use of our cash flow for the distribution of dividends to our stockholders or to fund operations we may have outside of the PRC.
Our initial business combination may be
subject to national security review by the PRC government and we may have to spend additional resources and incur additional time delays
to complete any such business combination or be prevented from pursuing certain investment opportunities.
On February 3, 2011, the
PRC government issued a Notice Concerning the Establishment of Security Review Procedure on Mergers and Acquisitions of Domestic Enterprises
by Foreign Investors, or Security Review Regulations, which became effective on March 5, 2011. The Security Review Regulations cover
acquisitions by foreign investors of a broad range of PRC enterprises if such acquisitions could result in de facto control by foreign
investors and the enterprises are relating to military, national defense, important agriculture products, important energy and natural
resources, important infrastructures, important transportation services, key technologies and important equipment manufacturing. The scope
of the review includes whether the acquisition will impact the national security, economic and social stability, and the research and
development capabilities on key national security related technologies. Foreign investors should submit a security review application
to the Department of Commerce for its initial review for contemplated acquisition. If the acquisition is considered to be within the scope
of the Security Review Regulations, the Department of Commerce will transfer the application to a joint security review committee within
five business days for further review. The joint security review committee, consisting of members from various PRC government agencies,
will conduct a general review and seek comments from relevant government agencies. The joint security review committee may initiate a
further special review and request the termination or restructuring of the contemplated acquisition if it determines that the acquisition
will result in significant national security issue.
The Security Review Regulations
will potentially subject a large number of mergers and acquisitions transactions by foreign investors in China to an additional layer
of regulatory review. Currently, there is significant uncertainty as to the implication of the Security Review Regulations. Neither the
Department of Commerce nor other PRC government agencies have issued any detailed rules for the implementation of the Security Review
Regulations. If, for example, our potential initial business combination is with a China-based Target in any of the sensitive sectors
identified above, the transaction will be subject to the Security Review Regulations, and we may have to spend additional resources and
incur additional time delays to complete any such acquisition. There is no guarantee that we can receive such approval in a timely
manner, and we may also be prevented from pursuing certain investment opportunities if the PRC government considers that the potential
investments will result in a significant national security issue. If obtained, the approval process may take a period longer than
we expect before we enter into a definitive agreement with a target company, we may be unable to complete a business combination by the
Combination Date.
Our initial business combination may be
subject to a variety of PRC laws and other obligations regarding cybersecurity and data protection and we may have to spend additional
resources and incur additional time delays to complete any such business combination or be prevented from pursuing certain investment
opportunities.
Our initial business combination
may be subject to PRC laws relating to the collection, use, sharing, retention, security, and transfer of confidential and private information,
such as personal information and other data. These laws continue to develop, and the PRC government may adopt other rules and restrictions
in the future. Non-compliance could result in penalties or other significant legal liabilities.
Pursuant to the PRC Cybersecurity
Law, which was promulgated by the Standing Committee of the National People’s Congress on November 7, 2016 and took effect
on June 1, 2017, personal information and important data collected and generated by a critical information infrastructure operator
in the course of its operations in China must be stored in China, and if a critical information infrastructure operator purchases internet
products and services that affect or may affect national security, it should be subject to cybersecurity review by the CAC. Due to
the lack of further interpretations, the exact scope of “critical information infrastructure operator” remains unclear.
Recently, the General Office
of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued the Opinions on Severe
and Lawful Crackdown on Illegal Securities Activities, which was available to the public on July 6, 2021. These opinions emphasized
the need to strengthen the administration over illegal securities activities and the supervision on overseas listings by China-based companies.
These opinions proposed to take effective measures, such as promoting the construction of relevant regulatory systems, to deal with the
risks and incidents facing China-based overseas-listed companies and the demand for cybersecurity and data privacy protection.
On December 28, 2021, the CAC, jointly with 12 departments under the State Council, promulgated the Measures for Cybersecurity Review,
which became effective on February 15, 2022. According to the Measures for Cybersecurity Review, operators of critical information
infrastructure purchasing network products and services, and data processors carrying out data processing activities that affect or may
affect national security, shall conduct cyber security review. An operator, including operators of critical information infrastructure
and data processors, who controls more than 1 million users’ personal information must report to the Cyber Security Review
Office for a cybersecurity review if it intends to be listed in a foreign country.
If, for example, our potential
initial business combination is with a China-based Target and if the Measures for Cybersecurity Review mandates clearance of cybersecurity
review and other specific actions to be completed by the target business, we may face uncertainties as to whether such clearance can be
timely obtained, or at all, and incur additional time delays to complete any such acquisition. Cybersecurity review could also result
in negative publicity with respect to our initial business combination and diversion of our managerial and financial resources. There
is no guarantee that we can receive such approval in a timely manner, and we may also be prevented from pursuing certain investment opportunities
if the PRC government considers that the potential investments will result in a significant national security issue. If obtained, the
approval process may take a period longer than we expect before we enter into a definitive agreement with a target company, we may be
unable to complete a business combination by the Combination Date.
In light of recent events indicating greater
oversight by the CAC over data security, particularly for companies seeking to list on a foreign exchange, companies with more than one
million users’ personal information in China, especially some internet and technology companies, may not be willing to list on a
U.S. exchange or enter into a definitive business combination agreement with us.
Companies in China are subject
to various risks and costs associated with the collection, use, sharing, retention, security, and transfer of confidential and private
information, such as personal information and other data. This data is wide ranging and relates to our investors, employees, contractors
and other counterparties and third parties. If we decide to initiate a business combination with a company in China, our compliance obligations
include those relating to the relevant PRC laws in this regard. These PRC laws apply not only to third-party transactions, but also
to transfers of information between a holding company and its subsidiaries. These laws continue to develop, and the PRC government may
adopt other rules and restrictions in the future. Non-compliance could result in penalties or other significant legal liabilities.
Pursuant to the PRC Cybersecurity
Law, which was promulgated by the Standing Committee of the National People’s Congress on November 7, 2016 and took effect
on June 1, 2017, personal information and important data collected and generated by a critical information infrastructure operator
in the course of its operations in China must be stored in China, and if a critical information infrastructure operator purchases internet
products and services that affect or may affect national security, it should be subject to cybersecurity review by the CAC. Due to
the lack of further interpretations, the exact scope of “critical information infrastructure operator” remains unclear. On
July 10, 2021, the CAC publicly issued the Measures for Cybersecurity Censorship (Revised Draft for Comments) aiming to, upon its
enactment, replace the existing Measures for Cybersecurity Censorship. The draft measures extend the scope of cybersecurity reviews to
data processing operators engaging in data processing activities that affect or may affect national security, including listing in a foreign
country. The draft measures require a company holding more than one million personal information to submit its initial public offering
materials prepared for submission for cybersecurity review before listing on a foreign exchange. On December 28, 2021, the CAC, jointly
with 12 departments under the State Council, promulgated the Measures for Cybersecurity Review, which became effective on February 15,
2022. According to the Measures for Cybersecurity Review, operators of critical information infrastructure purchasing network products
and services, and data processors carrying out data processing activities that affect or may affect national security, shall conduct cyber
security review. An operator, including operators of critical information infrastructure and data processors, who controls more than 1 million
users’ personal information must report to the Cyber Security Review Office for a cybersecurity review if it intends to be listed
in a foreign country.
It is unclear whether the Measures
for Cybersecurity Review will apply to a company planning to list on a U.S. exchange by business combination with a special purpose
acquisition corporation like us. If cybersecurity review applies to our business combination with a company holding more than one million
personal information in China, we cannot guarantee that we will receive such approval in a timely manner.
Furthermore, if we were found
to be in violation of applicable laws and regulations in China during such review, we could be subject to administrative penalties, such
as warnings, fines, or service suspension. Therefore, cybersecurity review could materially and adversely affect our business, financial
condition, and results of operations.
In addition, the PRC Data Security
Law, which was promulgated by the Standing Committee of the National People’s Congress on June 10, 2021 and takes effect on
September 1, 2021, requires data collection to be conducted in a legitimate and proper manner, and stipulates that, for the purpose
of data protection, data processing activities must be conducted based on data classification and hierarchical protection system for data
security. After the Data Security Law takes effect, if the post-combination entity’s data processing activities were found
to be not in compliance with this law, our post-combination entity could be ordered to make corrections, and under certain serious
circumstances, such as severe data divulgence, we and the post-combination entity could be subject to penalties, including the revocation
of our business licenses or other permits. As a result, we and the post-combination entity may be required to suspend our relevant
businesses, shut down our website, take down our operating applications, or face other penalties, which may materially and adversely affect
our business, financial condition, and results of operations.
The PRC government may exercise significant
oversight and discretion over the conduct of the post-combination entity’s business and may intervene in or influence
its operations at any time, which could result in a material change in its operations and/or the value of our securities. We are also
currently not required to obtain approval from Chinese authorities to list on U.S. exchanges, however, if the China-based Target
and the VIE were required to obtain approval in the future and were denied permission from Chinese authorities to list on U.S. exchanges,
we will not be able to continue listing on a U.S. exchange, which would materially affect the interest of our investors.
The PRC government has exercised
and continues to exercise substantial control over virtually every sector of the Chinese economy through regulation and state ownership.
Our post-combination entity’s ability to operate in China may be harmed by changes in its laws and regulations, including those
relating to taxation, environmental regulations, land use rights, property and other matters. The central or local governments of these
jurisdictions may impose new, stricter regulations or interpretations of existing regulations that would require additional expenditures
and efforts on our part to ensure our compliance with such regulations or interpretations. Accordingly, government actions in the future,
including any decision not to continue to support recent economic reforms and to return to a more centrally planned economy or regional
or local variations in the implementation of economic policies, could have a significant effect on economic conditions in China or particular
regions thereof, and could require us to divest ourselves of any interest we then hold in Chinese properties.
For example, the Chinese cybersecurity
regulator announced on July 2, 2021, that it had begun an investigation of Didi Global Inc. (NYSE: DIDI) and two days later
ordered that the company’s app be removed from smartphone app stores. On July 24, 2021, the General Office of the Communist
Party of China Central Committee and the General Office of the State Council jointly released the Guidelines for Further Easing the Burden
of Excessive Homework and Off-campus Tutoring for Students at the Stage of Compulsory Education, pursuant to which foreign investment
in such firms via mergers and acquisitions, franchise development, and variable interest entities are banned from this sector.
As such, the post-combination entity’s
business segments may be subject to various government and regulatory interference in the provinces in which they operate. The post-combination entity
could be subject to regulation by various political and regulatory entities, including various local and municipal agencies and government
sub-divisions. We and our post-combination entity may incur increased costs necessary to comply with existing and newly adopted laws
and regulations or penalties for any failure to comply, and such compliance or any associated inquiries or investigations or any other
government actions may:
| ● | delay or impede the post-combination entity’s
development; |
| ● | result in negative publicity or increase the post-combination entity’s
operating costs; |
| ● | require significant management time and attention; and |
| ● | subject the post-combination entity to remedies, administrative
penalties and even criminal liabilities that may harm the post-combination entity’s business, including fines assessed for
its current or historical operations that it modifies or even cease its business practices. |
As we do not have any operations
in China, given that (a) the CSRC, currently has not issued any definitive rule or interpretation concerning our IPO and listing
on Nasdaq are subject to the M&A Rules; and (b) our company is a blank check company incorporated in Delaware rather than in
China and currently our company does not own or control any equity interest in any PRC company or operate any business in China, we believe
that we are not required to obtain any licenses or approvals, under applicable PRC laws and regulations, for our operation or listing
on Nasdaq and while seeking a target for the initial business combination. Further, according to the Measures for Cybersecurity Review,
which was promulgated on December 28, 2021 and became effective on February 15, 2022, online platform operators holding more
than one million users/users’ individual information shall be subject to cybersecurity review before listing abroad. As we are a
blank check company and are not involved in the collection of personal data of at least 1 million users or implicate cybersecurity,
we do not believe that we are a “network platform operator(s)”, or subject to the cybersecurity review of the CAC.
However, applicable PRC laws,
regulations, or interpretations may change, and the relevant PRC government agencies could reach a different conclusion. There is also
possibility that we may not be able to obtain or maintain such approval or that we inadvertently concluded that such approval was not
required. If prior approval was required while we inadvertently concluded that such approval was not required or if applicable laws and
regulations or the interpretation of such were modified to require us to obtain the approval in the future, we may face regulatory actions
or other sanctions from relevant Chinese regulatory authorities. Further, the promulgation of new laws or regulations, or the new
interpretation of existing laws and regulations, in each case that restrict or otherwise may unfavorably impact the ability or way the
post-combination entity may conduct its business and could require it to change certain aspects of its business to ensure compliance,
which could decrease demand for its products or services, reduce revenues, increase costs, require us to obtain more licenses, permits,
approvals or certificates, or subject it to additional liabilities. As such, the post-combination entity’s operations could
be adversely affected, directly or indirectly, by existing or future PRC laws and regulations relating to its business or industry, which
could result in a material and adverse change in the value of our securities, potentially rendering it worthless. As a result, both you
and us face uncertainty about future actions by the PRC government that could significantly affect our ability to offer or continue to
offer securities to investors and cause the value of our securities to significantly decline or be worthless.
PRC laws and regulations governing our post-combination entity’s
business operations are sometimes vague and uncertain and any changes in such laws and regulations may impair our ability to operate profitably.
There are substantial uncertainties
regarding the interpretation and application of PRC laws and regulations including, but not limited to, the laws and regulations governing
our business and the enforcement and performance of our arrangements with customers in certain circumstances. The laws and regulations
are sometimes vague and may be subject to future changes, and their official interpretation and enforcement may involve substantial uncertainty.
The effectiveness and interpretation of newly enacted laws or regulations, including amendments to existing laws and regulations, may
be delayed, and our business may be affected if we rely on laws and regulations which are subsequently adopted or interpreted in a manner
different from our understanding of these laws and regulations. New laws and regulations that affect existing and proposed future businesses
may also be applied retroactively. We cannot predict what effect the interpretation of existing or new PRC laws or regulations may have
on our post-combination entity’s business.
The PRC legal system is a civil
law system based on written statutes. Unlike the common law system, prior court decisions under the civil law system may be cited for
reference but have limited precedential value. Since these laws and regulations are relatively new and the PRC legal system continues
to rapidly evolve, the interpretations of many laws, regulations and rules are not always uniform and the enforcement of these laws,
regulations and rules involves uncertainties.
In 1979, the PRC government
began to promulgate a comprehensive system of laws and regulations governing economic matters in general. The overall effect of legislation
over the past three decades has significantly enhanced the protections afforded to various forms of foreign investments in China. However,
China has not developed a fully integrated legal system, and recently enacted laws and regulations may not sufficiently cover all aspects
of economic activities in China. In particular, the interpretation and enforcement of these laws and regulations involve uncertainties.
Since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory provisions and contractual
terms, it may be difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy.
These uncertainties may affect our judgment on the relevance of legal requirements and our ability to enforce our contractual rights
or tort claims. In addition, the regulatory uncertainties may be exploited through unmerited or frivolous legal actions or threats in
attempts to extract payments or benefits from us.
Furthermore, the PRC legal
system is based in part on government policies and internal rules, some of which are not published on a timely basis or at all and may
have retroactive effect. As a result, we may not be aware of our violation of any of these policies and rules until sometime after
the violation. In addition, any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion
of resources and management attention.
From time to time, our post-combination entity
may have to resort to administrative and court proceedings to enforce our legal rights. However, since PRC administrative and court authorities
have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the
outcome of administrative and court proceedings and the level of legal protection our post-combination entity enjoys than in more
developed legal systems. Furthermore, the PRC legal system is based in part on government policies and internal rules (some of which
are not published in a timely manner or at all) that may have retroactive effect. As a result, we and our post-combination entity
may not be aware of our violation of these policies and rules until sometime after the violation. Such uncertainties, including uncertainty
over the scope and effect of our contractual, property (including intellectual property) and procedural rights, and any failure to respond
to changes in the regulatory environment in China could materially and adversely affect our business and impede our post-combination entity’s
ability to continue its operations.
Changes in the policies, regulations, rules,
and the enforcement of laws of the PRC government may be quick with little advance notice and could have a significant impact upon our
ability to operate profitably in the PRC.
Our post-combination entity
may conduct most of our operations and most of our revenue is generated in the PRC. Accordingly, economic, political and legal developments
in the PRC will significantly affect our post-combination entity’s business, financial condition, results of operations and
prospects. Policies, regulations, rules, and the enforcement of laws of the PRC government can have significant effects on economic conditions
in the PRC and the ability of businesses to operate profitably. Our post-combination entity’s ability to operate profitably
in the PRC may be adversely affected by changes in policies by the PRC government, including changes in laws, regulations or their interpretation,
particularly those dealing with the Internet, including censorship and other restriction on material which can be transmitted over the
Internet, security, intellectual property, money laundering, taxation and other laws that affect our post-combination entity’s
ability to operate its business.
The PRC government may intervene or influence
the China-based Target’s business operations at any time or may exert more control over offerings conducted overseas and/or
foreign investment in China based issuers, which could result in a material change in the China-based Target’s business
operations post business combination and/or the value of our securities. Additionally, the governmental and regulatory interference
could significantly limit or completely hinder our ability to offer or continue to offer securities to investors post business combination
and cause the value of such securities to significantly decline or be worthless.
Statements by the PRC government
in 2021 have indicated an intent to exert more oversight and control over offerings that are conducted overseas and/or foreign investments
in China-based issuers. The PRC has proposed new rules in 2021 that would require companies collecting or holding large amounts of
data to undergo a cybersecurity review prior to listing in foreign countries, a move that would significantly tighten oversight over China
based internet giants. On November 14, 2021, the CAC has publicly solicited opinion on the Regulation on Network Data Security Management
(Consultation Draft), which stipulates that data processor that undertakes data processing activities using Internet networks within China
shall apply for the cybersecurity review if it conducts data processing activities that will or may have an impact on the national security.
The review is mandatory if the data processor controls more than 1 million users’ personal information and intends to be listed
in a foreign country, or if the data processor that will or may impact the national security seeks to be listed in Hong Kong. As
of the date of this proxy statement, the Draft Regulation on Network Data Security Management has not been formally adopted. On December 28,
2021, the CAC, jointly with 12 departments under the State Council, promulgated the Measures for Cybersecurity Review, which became effective
on February 15, 2022. According to the Measures for Cybersecurity Review, operators of critical information infrastructure purchasing
network products and services, and data processors carrying out data processing activities that affect or may affect national security,
shall conduct cyber security review. An operator, including operators of critical information infrastructure and data processors, who
controls more than 1 million users’ personal information must report to the Cyber Security Review Office for a cybersecurity
review if it intends to be listed in a foreign country.
We currently do not have any
PRC subsidiaries or China operations, do not have any specific business combination under consideration and have not (nor has anyone on
our behalf), directly or indirectly, contacted any prospective target business or had any substantive discussions, formal or otherwise,
with respect to such a transaction. However, if the Target Amendment Proposal is approved, we may pursue a business combination with a
China-based Target. Therefore, it is uncertain whether such China-based Target will be involved in the collection of user data,
implicate cybersecurity, or involve any other type of restricted industry. Based on our understanding of currently applicable PRC laws
and regulations, our registered public offering in the U.S. is not subject to the review or prior approval of the CAC or the CSRC. Uncertainties
still exist, however, due to the possibility that laws, regulations, or policies in the PRC could change rapidly in the future. Any future
action by the PRC government expanding the categories of industries and companies whose foreign securities offerings are subject to review
by the CSRC or the CAC could significantly limit or completely hinder our ability to offer or continue to offer securities to investors
and could cause the value of such securities to significantly decline or be worthless.
China Securities Regulatory
Commission and other PRC government agencies may exert more oversight and control over offerings that are conducted overseas and foreign
investment in China-based issuers. If we seek to enter into a business combination with a China-based Target, additional
compliance procedures may be required in connection with future offerings of our securities and our business combination process, and,
if required, we cannot predict whether we will be able to obtain such approval. As a result, both you and us face uncertainty about future
actions by the PRC government that could significantly affect our ability to offer or continue to offer securities to investors and cause
the value of our securities to significantly decline or be worthless.
On July 6, 2021, the General
Office of the Communist Party of China Central Committee and the General Office of the State Council jointly issued a document to crack
down on illegal activities in the securities market and promote the high-quality development of the capital markets, which, among
other things, requires the relevant governmental authorities to strengthen cross-border oversight of law-enforcement and judicial
cooperation, to enhance supervision over China-based companies listed overseas, and to establish and improve the system of extraterritorial
application of the PRC securities laws. Since this document is relatively new, uncertainties still exist in relation to how soon legislative
or administrative regulation making bodies will respond and what existing or new laws or regulations or detailed implementations and interpretations
will be modified or promulgated, if any, and the potential impact such modified or new laws and regulations will have on our future business
combination with a company with major operation in China. Therefore, CSRC and other PRC government agencies may exert more oversight and
control over offerings that are conducted overseas and foreign investment in China-based issuers. Additional compliance procedures
may be required in connection with our listing on Nasdaq and our business combination process, and, if required, we cannot predict whether
we will be able to obtain such approval. As a result, both you and us face uncertainty about future actions by the PRC government that
could significantly affect our ability to offer or continue to offer securities to investors and cause the value of our securities to
significantly decline or be worthless.
We believe that the approval of the China
Securities Regulatory Commission is not required in connection with our listing on Nasdaq under relevant PRC regulations, however, if PRC
governmental authorities revise the relevant PRC regulations, or take the view, now or in the future, that approval from them is required
for an overseas offering by us.
As a blank check company incorporated
in Delaware rather than in China and currently our company does not own or control any equity interest in any PRC company or operate any
business in China, we did not generate any revenue or profit nor have any asset in China or from any operation in China as documented
in our audited consolidated financial statements for the fiscal year ended in December 31, 2022. As a result, we believe that we
do not meet the criteria (a) of a domestic company in the PRC as set forth in New Administrative Rules Regarding Overseas Listings
and accordingly are not required to file with the CSRC for the IPO and listing on Nasdaq. In addition, as we are a blank check company
and are not involved in the collection of personal data of at least 1 million users or implicate cybersecurity, we do not believe
that we are a “network platform operator(s)”, or subject to the cybersecurity review of the CAC, nor subject to Confidentiality
and Archives Administration Provisions for the offering.
Notwithstanding the above,
since the New Administrative Rules Regarding Overseas Listings and the Confidentiality and Archives Administration Provisions are newly
promulgated, and the interpretation and implementation thereof involves uncertainties. If it is determined in the future that the approval
of the CSRC, the CAC or any other regulatory authority is required for the IPO and listing on Nasdaq we may face sanctions by the CSRC,
the CAC or other PRC regulatory agencies, or these regulatory agencies may take other actions that could have a material adverse effect
on our business as well as the trading price of our securities. In addition, if the CSRC, the CAC or other regulatory PRC agencies later
promulgate new rules requiring that we obtain their approvals for the offering, we may be unable to obtain a waiver of such approval requirements,
if and when procedures are established to obtain such a waiver. These governmental authorities may delay a potential business combination,
impose fines and penalties, limit our operations in China, or take other actions that could result in our inability to consummate an initial
business combination with a China-based Target, or materially adversely affect our business, financial condition, results of operations,
reputation and prospects, as well as the trading price of our securities or the continued listing on a U.S. exchange. Any changes
in PRC law, regulations, or interpretations may severely affect our operations and searching for a target to consummate an initial business
combination. The use of the term “operate” and “operations” includes the process of searching for a target business
and conducting related activities. To that extent, we may not be able to conduct the process of searching of a potential target company
in China.
If we decide to consummate
our business combination with a China-based Target through its subsidiaries and VIEs, as applicable, we might be subject to relevant
requirements to obtain applicable licenses from PRC governmental authorities under relevant PRC laws and regulations.
In the event we successfully consummated
business combination with a China-based Target, we will be subject to restrictions on dividend payments following consummation
of our initial business combination.
After we consummate our initial
business combination, we may rely on dividends and other distributions from our operating company to provide us with cash flow and to
meet our other obligations. Current regulations in China would permit our operating company in China to pay dividends to us only out of
its accumulated distributable profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition,
the post-combination entity’s operating company in China will be required to set aside at least 10% (up to an aggregate amount
equal to half of its registered capital) of its accumulated profits each year. Such cash reserve may not be distributed as cash dividends.
In addition, if the post-combination entity’s operating company in China incurs debt on its own behalf in the future, the instruments
governing the debt may restrict its ability to pay dividends or make other payments to us.
If we make equity compensation grants to
persons who are PRC citizens, they may be required to register with the SAFE. We may also face regulatory uncertainties that could
restrict our ability to adopt equity compensation plans for our directors and employees and other parties under PRC laws.
On April 6, 2007, SAFE
issued the “Operating Procedures for Administration of Domestic Individuals Participating in the Employee Stock Ownership Plan or
Stock Option Plan of An Overseas Listed Company, also known as “Circular 78.” It is not clear whether Circular 78 covers all
forms of equity compensation plans or only those which provide for the granting of shares options. For any plans which are so covered
and are adopted by a non-PRC listed company, such as our company, after April 6, 2007, Circular 78 requires all participants
who are PRC citizens to register with and obtain approvals from SAFE prior to their participation in the plan. In addition, Circular 78
also requires PRC citizens to register with SAFE and make the necessary applications and filings if they participated in an overseas listed
company’s covered equity compensation plan prior to April 6, 2007. We believe that the registration and approval requirements
contemplated in Circular 78 will be burdensome and time consuming.
Upon consummation of business
combination with a China-based Target, we may adopt an equity incentive plan and make shares option grants under the plan to our
officers, directors and employees, whom may be PRC citizens and be required to register with SAFE. If it is determined that any of
our equity compensation plans are subject to Circular 78, failure to comply with such provisions may subject us and participants
of our equity incentive plan who are PRC citizens to fines and legal sanctions and prevent us from being able to grant equity compensation
to our PRC employees. In that case, our ability to compensate our employees and directors through equity compensation would be hindered
and our business operations may be adversely affected.
Enhanced scrutiny over acquisition transactions
by the PRC tax authorities may have a negative impact on potential acquisitions we may pursue in the future.
The PRC tax authorities have
enhanced their scrutiny over the direct or indirect transfer of certain taxable assets, including, in particular, equity interests in
a PRC resident enterprise, by a non-resident enterprise by promulgating and implementing SAT Circular 59 and Circular 698, which
became effective in January 2008, and a Circular 7 in replacement of some of the existing rules in Circular 698, which became
effective in February 2015.
Under Circular 698, where a
non-resident enterprise conducts an “indirect transfer” by transferring the equity interests of a PRC “resident
enterprise” indirectly by disposing of the equity interests of an overseas holding company, the non-resident enterprise, being
the transferor, may be subject to PRC corporate income tax, if the indirect transfer is considered to be an abusive use of company structure
without reasonable commercial purposes. As a result, gains derived from such indirect transfer may be subject to PRC tax at a rate of
up to 10%. Circular 698 also provides that, where a non-PRC resident enterprise transfers its equity interests in a PRC resident
enterprise to its related parties at a price lower than the fair market value, the relevant tax authority has the power to make a reasonable
adjustment to the taxable income of the transaction.
In February 2015, the
SAT issued Circular 7 to replace the rules relating to indirect transfers in Circular 698. Circular 7 has introduced a new tax regime
that is significantly different from that under Circular 698. Circular 7 extends its tax jurisdiction to not only indirect transfers set
forth under Circular 698 but also transactions involving transfer of other taxable assets, through the offshore transfer of a foreign
intermediate holding company. In addition, Circular 7 provides clearer criteria than Circular 698 on how to assess reasonable commercial
purposes and has introduced safe harbors for internal group restructurings and the purchase and sale of equity through a public securities
market. Circular 7 also brings challenges to both the foreign transferor and transferee (or other person who is obligated to pay for the
transfer) of the taxable assets. Where a non-resident enterprise conducts an “indirect transfer” by transferring the
taxable assets indirectly by disposing of the equity interests of an overseas holding company, the non-resident enterprise being
the transferor, or the transferee, or the PRC entity which directly owned the taxable assets may report to the relevant tax authority
such indirect transfer. Using a “substance over form” principle, the PRC tax authority may disregard the existence of the
overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose of reducing, avoiding or deferring
PRC tax. As a result, gains derived from such indirect transfer may be subject to PRC corporate income tax, and the transferee or other
person who is obligated to pay for the transfer is obligated to withhold the applicable taxes, currently at a rate of 10% for the transfer
of equity interests in a PRC resident enterprise.
We face uncertainties on the
reporting and consequences on future private equity financing transactions, share exchange or other transactions involving the transfer
of shares in our company by investors that are non-PRC resident enterprises. The PRC tax authorities may pursue such non-resident enterprises
with respect to a filing or the transferees with respect to withholding obligation, and request our PRC subsidiaries to assist in the
filing. As a result, we and non-resident enterprises in such transactions may become at risk of being subject to filing obligations
or being taxed, under Circular 59 or Circular 698 and Circular 7, and may be required to expend valuable resources to comply with
Circular 59, Circular 698 and Circular 7 or to establish that we and our non-resident enterprises should not be taxed under
these circulars, which may have a material adverse effect on our financial condition and results of operations.
The PRC tax authorities have
the discretion under SAT Circular 59, Circular 698 and Circular 7 to make adjustments to the taxable capital gains based on the difference
between the fair value of the taxable assets transferred and the cost of investment. If we are considered a non-resident enterprise
under the PRC corporate income tax law and if the PRC tax authorities make adjustments to the taxable income of the transactions under
SAT Circular 59 or Circular 698 and Circular 7, our income tax costs associated with such potential acquisitions will be increased,
which may have an adverse effect on our financial condition and results of operations.
China’s economic, political and social
conditions, as well as changes in any government policies, laws and regulations, could have a material adverse effect on our business
or business combination.
If we effect our initial business
combination with a China-based Target, a substantial portion of our operations may be conducted in China, and a significant portion
of our net revenues may be derived from customers where the contracting entity is located in China. Accordingly, our business, financial
condition, results of operations, prospects and any potential business combination and certain transactions we may undertake may be subject,
to a significant extent, to economic, political and legal developments in China. For example, as a result of recent proposed changes in
the cybersecurity regulations in China that would require certain Chinese technology firms to undergo a cybersecurity review before being
allowed to list on foreign exchanges, this may have the effect of further narrowing the list of potential businesses in China’s
consumer, technology and mobility sectors that we intend to focus on for our business combination or the ability of the combined entity
to list in the United States.
China’s economy differs
from the economies of most developed countries in many respects, including the amount of government involvement, level of development,
growth rate, control of foreign exchange and allocation of resources. While the PRC economy has experienced significant growth in the
past two to three decades, growth has been uneven, both geographically and among various sectors of the economy. Demand for target services
and products depends, in large part, on economic conditions in China. Any slowdown in China’s economic growth may cause our potential
customers to delay or cancel their plans to purchase our services and products, which in turn could reduce our net revenues.
Although China’s economy
has been transitioning from a planned economy to a more market oriented economy since the late 1970s, the PRC government continues to
play a significant role in regulating industry development by imposing industrial policies. The PRC government also exercises significant
control over China’s economic growth through allocating resources, controlling the incurrence and payment of foreign currency-denominated obligations,
setting monetary policy and providing preferential treatment to particular industries or companies. Changes in any of these policies,
laws and regulations could adversely affect the economy in China and could have a material adverse effect on our business.
The PRC government has implemented
various measures to encourage foreign investment and sustainable economic growth and to guide the allocation of financial and other resources.
However, we cannot assure you that the PRC government will not repeal or alter these measures or introduce new measures that will have
a negative effect on us. China’s social and political conditions may change and become unstable. Any sudden changes to China’s
political system or the occurrence of widespread social unrest could have a material adverse effect on our business and results of operations.
Governmental control of currency conversion
may affect the value of your investment.
If we complete a business combination
with a China-based Target, the PRC government may impose controls on the conversion of RMB into foreign currencies and the remittance
of currencies out of the PRC. Therefore, we may experience difficulties in completing the administrative procedures necessary to
obtain and remit foreign currency for the payment of dividends from our post-combination entity’s profits, if any. If subsidiaries
of our post-combination organization in the PRC incur debt on their own in the future, the instruments governing the debt may restrict
their ability to pay dividends or make other payments. Under the VIE structure, current PRC regulations permit a VIE to pay dividends
to its holding company only out of its accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations.
Furthermore, if we complete
a business combination with a China-based Target via VIE Agreements and we are unable to receive all of the revenues from our operations
through the current VIE Agreements, we may be unable to pay dividends on our common stock. Cash dividends, if any, on our Class A
common stock will be paid in U.S. dollars. If we are considered a PRC tax resident enterprise for tax purposes after the business
combination, any dividends we pay to our overseas stockholders may be regarded as China-sourced income and as a result may be subject
to PRC withholding tax at a rate of up to 10.0%. In order for us to pay dividends to our stockholders, we will rely on payments made from
our post-combination subsidiaries, either directly controlled by us or indirectly controlled by us via VIE Agreements. Under the
VIE structure, a holding company will highly rely on the VIE Agreements between it and the VIE to distribute earnings and settle amounts
owed under the VIE agreements, while we cannot guarantee the PRC governments will allow such arrangement.
We and our initial business combination
may be subject to a variety of PRC laws and other obligations regarding cybersecurity and data protection and we may have to spend additional
resources and incur additional time delays to complete any such business combination or be prevented from pursuing certain investment
opportunities.
We and our initial business
combination, if with a China-based Target, may be subject to PRC laws relating to the collection, use, sharing, retention, security,
and transfer of confidential and private information, such as personal information and other data. These laws continue to develop, and
the PRC government may adopt other rules and restrictions in the future. Non-compliance could result in penalties or other significant
legal liabilities.
For instance, various regulatory
bodies in China, including CAC, the Ministry of Public Security and the State Administration for Market Regulation, have enforced data
privacy and protection laws and regulations with varying and evolving standards and interpretations. In April 2020, the PRC government
promulgated Cybersecurity Review Measures, which came into effect on June 1, 2020. Pursuant to the Cybersecurity Review Measures,
operators of critical information infrastructure must pass a cybersecurity review when purchasing network products and services which
do or may affect national security. On November 14, 2021, the CAC has publicly solicited opinion on the Regulation on Network Data
Security Management (Consultation Draft), which stipulates that data processor that undertakes data processing activities using Internet
networks within China shall apply for the cybersecurity review if it conducts data processing activities that will or may have an impact
on the national security. The review is mandatory if the data processor controls more than 1 million users’ personal information
and intends to be listed in a foreign country, or if the data processor that will or may impact the national security seeks to be listed
in Hong Kong. As of the date of this proxy statement, the Draft Regulation on Network Data Security Management has not been formally
adopted. On December 28, 2021, the CAC, jointly with 12 departments under the State Council, promulgated the Measures for Cybersecurity
Review, which became effective on February 15, 2022. According to the Measures for Cybersecurity Review, operators of critical information
infrastructure purchasing network products and services, and data processors carrying out data processing activities that affect or may
affect national security, shall conduct cyber security review. An operator, including operators of critical information infrastructure
and data processors, who controls more than 1 million users’ personal information must report to the Cyber Security Review
Office for a cybersecurity review if it intends to be listed in a foreign country.
Certain internet platforms
in China have been reportedly subject to heightened regulatory scrutiny in relation to cybersecurity matters. As of the date of this proxy
statement, we have not been informed by any PRC governmental authority of any requirement that we file for a cybersecurity review. As
a result, it will not affect our process of searching for a business combination target until further certainty in the interpretation
and enforcement of relevant PRC cybersecurity laws and regulations. However, if we or the post-combination entity following a business
combination are deemed to be a critical information infrastructure operator or a company that is engaged in data processing and holds
personal information of more than one million users, we could be subject to PRC cybersecurity review.
As there remains significant
uncertainty in the interpretation and enforcement of relevant PRC cybersecurity laws and regulations, we or the post-combination entity
could be subject to cybersecurity review, and if so, it is uncertain whether we can or how long it will take us to obtain such approval
or complete such procedures and any such approval could be rescinded and we may not be able to pass such review in relation to our listing
on Nasdaq, searching for a business combination target, or a business combination. In addition, we could become subject to enhanced cybersecurity
review or investigations launched by PRC regulators in the future. Any failure or delay in the completion of the cybersecurity review
procedures or any other non-compliance with the related laws and regulations may result in fines or other penalties, including suspension
of business, website closure, and revocation of prerequisite licenses, as well as reputational damage or legal proceedings or actions,
which may have material adverse effect on our business, financial condition or results of operations.
On June 10, 2021, the
Standing Committee of the PRC National People’s Congress, or SCNPC, promulgated the PRC Data Security Law, which took effect in
September 2021. The PRC Data Security Law imposes data security and privacy obligations on entities and individuals carrying out
data activities, and introduces a data classification and hierarchical protection system based on the importance of data in economic and
social development, and the degree of harm it will cause to national security, public interests, or legitimate rights and interests of
individuals or organizations when such data is tampered with, destroyed, leaked, illegally acquired or used. The PRC Data Security Law
also provides for a national security review procedure for data activities that may affect national security and imposes export restrictions
on certain data and information. On August 20, 2021, the SCNPC adopted the Personal Information Protection Law, which came into force
as of November 1, 2021. The Personal Information Protection Law includes the basic rules for personal information processing, the
rules for cross-border provision of personal information, the rights of individuals in personal information processing activities,
the obligations of personal information processors, and the legal responsibilities for illegal collection, processing, and use of personal
information.
These rules could result in
us not being able to acquire a potential target in the PRC, or our using time and working capital to pursue a transaction that cannot
be completed because of the actions of regulators. As uncertainties remain regarding the interpretation and implementation of these laws
and regulations, we cannot assure you that we or the combined company following a business combination will comply with such regulations
in all respects and we or the combined company following a business combination may be ordered to rectify or terminate any actions that
are deemed illegal by regulatory authorities. We or the combined company following a business combination may also become subject to fines
and/or other sanctions which may have material adverse effect on our business, operations and financial condition.
If we become directly subject to the recent
scrutiny, criticism and negative publicity involving U.S.-listed Chinese companies, we may have to expend significant resources to investigate
and resolve the matter which could harm our business operations, process of searching for a target to consummate a business combination
and our reputation and could result in a loss of your investment in our securities, especially if such matter cannot be addressed and
resolved favorably.
Recently,
U.S. public companies that have substantially all of their operations in China, have been subject to intense scrutiny,
criticism and negative publicity by investors, financial commentators and regulatory agencies, such as the SEC. Much of the
scrutiny, criticism and negative publicity has centered around financial and accounting irregularities, a lack of effective internal
controls over financial accounting, inadequate corporate governance policies or a lack of adherence thereto and, in many cases,
allegations of fraud. As a result of the scrutiny, criticism and negative publicity, the publicly traded stock of many
U.S. listed Chinese companies has sharply decreased in value and, in some cases, has become virtually worthless. Many of these
companies are now subject to shareholder lawsuits and SEC enforcement actions and are conducting internal and external
investigations into the allegations. It is not clear what effect this sector-wide scrutiny, criticism and negative publicity
will have on us if we target a PRC company with respect to the initial business combination. If we become the subject of any
unfavorable allegations, whether such allegations are proven to be true or untrue, we will have to expend significant resources to
investigate such allegations and/or defend the company. This situation may be a major distraction to our management. If such
allegations are not proven to be groundless, we will be severely hampered and your investment in our securities could be rendered
worthless.
The approval of the CSRC is not required
in connection with our listing on Nasdaq, and, if required, we cannot predict whether we will be able to obtain such approval.
The Regulations on Mergers
and Acquisitions of Domestic Companies by Foreign Investors, or the M&A Rules, adopted by six PRC regulatory agencies requires an
overseas special purpose vehicle formed for listing purposes through acquisitions of PRC domestic companies and controlled by PRC companies
or individuals to obtain the approval of the CSRC, prior to the listing and trading of such special purpose vehicle’s securities
on an overseas stock exchange.
We believe the CSRC’s
approval is not required for the listing and trading of our securities on Nasdaq in the context of the IPO, given that we are a Delaware
company incorporated as a blank check company for the purpose of effecting our initial business combination or our business combination.
However, we cannot assure you
that relevant PRC government agencies, including the CSRC, would reach the same conclusion as we do. If it is determined that CSRC approval
is required for our listing on Nasdaq, we may face sanctions by the CSRC or other PRC regulatory agencies for failure to seek CSRC approval
for our listing on Nasdaq. These sanctions may include fines and penalties on our operations in the PRC, limitations on our operating
privileges in the PRC, delays in or restrictions on the repatriation of the proceeds from the IPO into the PRC, restrictions on or prohibition
of the payments or remittance of dividends by our PRC subsidiary, or other actions that could have a material and adverse effect on our
business, financial condition, results of operations, reputation and prospects, as well as the trading price of our securities. Furthermore,
the CSRC or other PRC regulatory agencies may also take actions requiring us, or making it advisable for us, to halt our listing on Nasdaq.
Consequently, if you engage in market trading or other activities in anticipation of and prior to the settlement and delivery of the securities
we are offering, you would be doing so at the risk that the settlement and delivery may not occur.
Trading in our securities may be prohibited
under the Holding Foreign Companies Accountable Act if the PCAOB determines that it cannot inspect or fully investigate our auditor. In
that case, Nasdaq would delist our securities. The delisting of our securities, or the threat of their being delisted, may materially
and adversely affect the value of your investment. Additionally, the inability of the PCAOB to conduct inspections may deprive our investors
with the benefits of such inspections.
On December 15, 2022,
the PCAOB determined that it has secured complete access to inspect and investigate registered public accounting firms headquartered in
mainland China and Hong Kong and voted to vacate its December 2021 determinations to the contrary. To ensure ongoing access
for inspections and investigations, the PCAOB will determine annually whether it can inspect and investigate completely audit firms in
mainland China and Hong Kong. Notwithstanding, the PCAOB has also identified numerous deficiencies at audit firms in mainland China
and Hong Kong, as has been the case in other jurisdictions in the first year of PCAOB inspection. The PCAOB intends to release inspection
reports in the first half of next year detailing findings from their inspections of these audit firms.
The auditor and its audit work
in the PRC may not be inspected fully by the PCAOB. Inspections of other auditors conducted by the PCAOB outside China have at times
identified deficiencies in those auditors’ audit procedures and quality control procedures, which may be addressed as part of the
inspection process to improve future audit quality. The lack of PCAOB inspections of audit work undertaken in China prevents the PCAOB
from regularly evaluating the PRC auditor’s audits and its quality control procedures.
Further, future developments
in U.S. laws may restrict our ability or willingness to complete certain business combinations with companies. For instance, the
recently enacted Holding Foreign Companies Accountable Act (the “HFCA Act”) would restrict our ability to consummate a business
combination with a target business unless that business met certain standards of the PCAOB and would require delisting of a company from
U.S. national securities exchanges if the PCAOB is unable to inspect its public accounting firm for two consecutive years. The
HFCA Act also requires public companies to disclose, among other things, whether they are owned or controlled by a foreign government,
specifically, those based in China. Furthermore, the documentation we may be required to submit to the SEC proving certain beneficial
ownership requirements and establishing that we are not owned or controlled by a foreign government in the event that we use a foreign
public accounting firm not subject to inspection by the PCAOB or where the PCAOB is unable to completely inspect or investigate our accounting
practices or financial statements because of a position taken by an authority in the foreign jurisdiction could be onerous and time consuming
to prepare.
Furthermore, on June 22,
2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act (“AHFCAA”), which, if signed
into law, would amend the HFCA Act and require the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges
if its auditor is not subject to PCAOB inspections for two consecutive years instead of three consecutive years. On December 29,
2022, the President signed the Consolidated Appropriations Act, 2023, which, among other things, amended the HFCAA to reduce the number
of consecutive years an issuer can be identified as a Commission-Identified Issuer before the Commission must impose an initial
trading prohibition on the issuer’s securities from three years to two years. Therefore, once an issuer is identified
as a Commission-Identified Issuer for two consecutive years, the Commission is required under the HCFAA to prohibit the trading
of the issuer’s securities on a national securities exchange and in the over-the-counter market.
On November 5, 2021, the
SEC approved the PCAOB’s Rule 6100, Board Determinations Under the Holding Foreign Companies Accountable Act. Rule 6100
provides a framework for the PCAOB to use when determining, as contemplated under the HFCA Act, whether it is unable to inspect or investigate
completely registered public accounting firms located in a foreign jurisdiction because of a position taken by one or more authorities
in that jurisdiction.
Pursuant to the HFCA Act, the
PCAOB issued a Determination Report on December 16, 2021 which found that the PCAOB is unable to inspect or investigate completely
registered public accounting firms headquartered in (1) mainland China of the PRC because of a position taken by one or more authorities
in mainland China and (2) Hong Kong, a Special Administrative Region and dependency of the PRC, because of a position taken
by one or more authorities in Hong Kong. In addition, the PCAOB’s report identified the specific registered public accounting
firms which are subject to these determinations. Our auditor, Marcum LLP, is a United States accounting firm based in New York
City and is subject to regular inspection by the PCAOB. Marcum LLP is not headquartered in mainland China or Hong Kong and was
not identified in the Determination Report as a firm subject to the PCAOB’s determinations. As a special purpose acquisition company,
our current business activities only involve searching for targets and consummation of a business combination. Marcum LLP has access to
our books and records which are currently and will be maintained by our bookkeeper residing in U.S.
Notwithstanding the foregoing,
in the event that we decide to consummate our initial business combination with a China-based Target, if there is any regulatory
change which prohibits the independent accountants from providing audit documentations located in mainland China or Hong Kong to
the PCAOB for inspection or investigation or the PCAOB expands the scope of the Determination Report so that the target company or the
combined company is subject to the HFCA Act, as the same may be amended, you may be deprived of the benefits of such inspection which
could result in limitation or restriction to our access to the U.S capital markets and trading of our securities on a national securities
exchange or in the over-the-counter trading market in the U.S. may be prohibited, under the HFCA Act. If our securities are
delisted and prohibited from being traded on a national securities exchange or in the over the counter trading market in the U.S. due
to the PCAOB not being able to conduct inspections or full investigations of our auditor, it would substantially impair your ability to
sell or purchase our securities when you wish to do so, and the risk and uncertainty associated with potential delisting and prohibition
would have a negative impact on the price of our securities. Also, such delisting and prohibition could significantly affect the Company’s
ability to raise capital on acceptable terms, or at all, which would have a material adverse effect on the Company’s business, financial
condition and prospects.
The SEC has adopted final rules
to implement the HFCA Act and may propose additional rules or guidance that could impact us if our auditor is not subject to PCAOB inspection.
For example, on August 6, 2020, the President’s Working Group on Financial Markets, or the PWG, issued the Report on Protecting
United States Investors from Significant Risks from Chinese Companies to the then President of the United States. This report
recommended the SEC implement five recommendations to address companies from jurisdictions that do not provide the PCAOB with sufficient
access to fulfill its statutory mandate. Some of the concepts of these recommendations were implemented with the enactment of the HFCA
Act. However, some of the recommendations were more stringent than the HFCA Act. For example, if a company was not subject to PCAOB inspection,
the report recommended that the transition period before a company would be delisted would end on January 1, 2022.
The SEC’s final rules
to implement the HFCA Act require the SEC to identify registrants having filed an annual report with an audit report issued by a registered
public accounting firm that is located in a foreign jurisdiction that the PCAOB is unable to inspect or investigate and require such issuers
to submit documentation that, if true, it is not owned or controlled by a governmental entity in the public accounting firm’s foreign
jurisdiction. The amendments also require foreign issuers to provide certain additional disclosures in its annual report for itself and
any of its consolidated foreign operating entities and provides notice regarding the procedures the SEC has established to identify issuers
and to impose trading prohibitions on the securities of such issuers as required by the HFCA Act. The SEC has also announced amendments
to various annual report forms to accommodate the certification and disclosure requirements of the HFCA Act. There could be additional
regulatory or legislative requirements or guidance that could impact us if our auditor is not subject to PCAOB inspection. The implications
of these possible regulations in addition to the requirements of the HFCA Act are uncertain, and such uncertainty could cause the market
price of our securities to be materially and adversely affected. If, for whatever reason, the PCAOB is unable to conduct inspections or
full investigations of our auditor, the Company could be delisted or prohibited from being traded over the counter earlier than would
be required by the HFCA Act. If our securities are unable to be listed on another securities exchange by then, such delisting and prohibition
would substantially impair your ability to sell or purchase our securities when you wish to do so, and the risk and uncertainty associated
with potential delisting and prohibition would have a negative impact on the price of our securities. Also, such delisting and prohibition
could significantly affect the Company’s ability to raise capital on acceptable terms, or at all, which would have a material adverse
effect on the Company’s business, financial condition and prospects.
Inspections of audit firms
that the PCAOB has conducted have identified deficiencies in those firms’ audit procedures and quality control procedures, which
may be addressed as part of the inspection process to improve future audit quality. If the PCAOB were unable to conduct inspections or
full investigations of the Company’s auditor, investors in our securities would be deprived of the benefits of such PCAOB inspections.
In addition, the inability of the PCAOB to conduct inspections or full investigations of auditors would may make it more difficult to
evaluate the effectiveness of the Company’s independent registered public accounting firm’s audit procedures or quality control
procedures as compared to auditors that are subject to the PCAOB inspections, which could cause investors and potential investors in our
stock to lose confidence in the audit procedures of our auditor and reported financial information and the quality of our financial statements.
Additionally, other developments
in U.S. laws and regulatory environment, including but not limited to executive orders such as Executive Order (E.O.) 13959, “Addressing
the Threat from Securities Investments That Finance Communist Chinese Military Companies,” may further restrict our ability to complete
a business combination with certain China-based businesses.
The Chinese government may exert substantial
interventions and influences on our combined company’s operations at any time. Any new policies, regulations, rules, actions or
laws by the PRC government may subject our combined company to material changes in operations, may cause the value of our securities significantly
decline or be worthless, and may completely hinder our ability to offer or continue securities to investors.
Though we currently do not
have any RPC subsidiary or China operation and a majority of our management are located outside China, we may pursue a business combination
with a company doing business in China (excluding any target company whose financial statements are audited by an accounting firm that
PCAOB is unable to inspect for two consecutive years beginning in 2021 and any target company that consolidates financial results
of PRC operating entities through a VIE structure in the PRC instead of direct holdings). Notwithstanding the foregoing, the Chinese government
has exercised and continues to exercise substantial control over virtually every sector of the Chinese economy through regulation and
state ownership. Our combined company’s ability to operate in China may be harmed by changes in its laws and regulations, including
those relating to securities, taxation, environmental regulations, land use rights, property and other matters. The central or local governments
of these jurisdictions may impose new, stricter regulations or interpretations of existing regulations that would require additional expenditures
and efforts on our part to ensure our compliance with such regulations or interpretations. Accordingly, government actions in the future,
including any decision not to continue to support recent economic reforms and to return to a more centrally planned economy or regional
or local variations in the implementation of economic policies, could have a significant effect on economic conditions in China or particular
regions thereof, and could require us to divest ourselves of any interest we then hold in Chinese properties.
For example, the Chinese cybersecurity
regulator announced on July 2, 2021, that it had begun an investigation of Didi Global Inc. (NYSE: DIDI) and two days later
ordered that the company’s app be removed from smartphone app stores. On July 24, 2021, the General Office of the Communist
Party of China Central Committee and the General Office of the State Council jointly released the Guidelines for Further Easing the Burden
of Excessive Homework and Off-campus Tutoring for Students at the Stage of Compulsory Education, pursuant to which foreign investment
in such firms via mergers and acquisitions, franchise development, and variable interest entities are banned from this sector.
As such, our combined company’s
business segments may be subject to various government and regulatory interference in the provinces in which they operate at any time.
The combined company could be subject to regulation by various political and regulatory entities, including various local and municipal
agencies and government sub-divisions. Our combined company may incur increased costs necessary to comply with existing and newly adopted
laws and regulations or penalties for any failure to comply. If the PRC government initiates an investigation into us at any time alleging
us violation of cybersecurity laws, anti-monopoly laws, and securities offering rules in China in connection future business combination,
we may have to spend additional resources and incur additional time delays to comply with the applicable rules, and our business operations
will be affected materially and any such action could cause the value of our securities to significantly decline or be worthless.
As the date of this proxy statement,
there are no PRC laws and regulations (including the China Securities Regulatory Commission, or the CSRC, Cyberspace Administration of
China, or the CAC, or any other government entity) in force explicitly requiring that we obtain permission from PRC authorities for business
combination with an entity headquartered in China or with its principal business operation in China, or to issue securities to foreign
investors, and we have not received any inquiry, notice, warning, sanction or any regulatory objection from any relevant PRC authorities.
However, it is uncertain when and whether our combined company will be required to obtain permission from the PRC government to list on
U.S. stock exchanges in the future, and even when such permission is obtained, whether it will be denied or rescinded. Any new policies,
regulations, rules, actions or laws by the PRC government may subject us or our combined company to material changes in operations, may
cause the value of our securities significantly decline or be worthless, and may completely hinder our ability to offer or continue securities
to investors.
Other PRC governmental authorities may take
the view now or in the future that an approval from them is required for an overseas offering by a company affiliated with Chinese businesses
or persons or a business combination with a target business based in and primarily operating in China.
The Regulations on Mergers
and Acquisitions of Domestic Companies by Foreign Investors (the “M&A Rules”), adopted by six PRC regulatory agencies
in 2006, and amended in 2009, require an offshore special purpose vehicle formed for the purpose of an overseas listing of securities
in a PRC company to obtain the approval of the China Securities Regulatory Commission (the “CSRC”) prior to the listing and
trading of such special purpose vehicle’s securities on an overseas stock exchange. The scope of the M&A Rules covers two types
of transactions: (a) equity deals where the acquisition by a foreign investor, i.e., the offshore special purpose vehicle, of equity
in a “PRC domestic company,” and (b) asset deals where the acquisition by an offshore special purpose vehicle of the
assets of a “PRC domestic company.” Neither the equity deals or the asset deals will be involved in our business combination
process with a China-based target for the reason that the offshore special purpose vehicle of such China-based target directly
holds shares through the wholly foreign owned enterprise(s) or WFOE, which are established by means of direct investment rather than
by equity deals or asset deals under the M&A Rules. To date, the CSRC has not issued any definitive rules or interpretations concerning
whether offerings such as the indirect listing of a China-based entity as part of the business combination are subject to the CSRC
approval procedures under the M&A Rules. As a result, based on our management’s understanding of the current PRC laws, rules,
regulations and the local market practices, the CSRC’s approval under the M&A Rules will not be required in the context of our
business combination with a China-based target. However, substantial uncertainty remains regarding the scope and applicability of
the M&A Rules to offshore special purpose vehicles and the above analysis are subject to any new laws, rules and regulations or detailed
implementation and interpretations in any form relating to the M&A Rules. We cannot assure you that relevant PRC governmental agencies,
including the CSRC, would reach the same conclusion as we do. It is possible that we may need to obtain approvals or permissions from
CSRC in order for us to complete a business combination with a China-based target pursuant to the M&A Rules. If we are required
to obtain such approvals, we cannot assure we will be able to receive them in a timely manner, or at all.
Moreover, except for emphasizing
the need to strengthen the administration over illegal securities activities, and the need to strengthen the supervision over overseas
listings by Chinese companies, the Opinions, which was made available to the public on July 6, 2021, also provides that the State
Council will revise provisions regarding the overseas issuance and listing of shares by companies limited by shares and will clarify the
duties of domestic regulatory authorities.
On February 17, 2023,
the CSRC issued the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies (the “Trial
Administrative Measures”) and relevant supporting guidelines (collectively, the “New Administrative Rules Regarding Overseas
Listings”), which came into effect since March 31, 2023. According to the New Administrative Rules Regarding Overseas Listings,
among other things, a domestic company in the PRC that seeks to offer and list securities in overseas markets shall fulfill the filing
procedure with the CSRC as per requirement of the Trial Administrative Measures. On February 24, 2023, the CSRC promulgated the Provisions
on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies (the “Confidentiality
and Archives Administration Provisions”), which also became effective on March 31, 2023. The Confidentiality and Archives Administration
Provisions set out rules, requirements and procedures relating to provision of documents, materials and accounting archives for securities
companies, securities service providers, overseas regulators and other entities and individuals in connection with overseas offering and
listing, including without limitation to, domestic companies that carry out overseas offering and listing (either in direct or indirect
means) and the securities companies and securities service providers (either incorporated domestically or overseas) that undertake relevant
businesses shall not leak any state secret and working secret of government agencies, or harm national security and public interest, and
a domestic company shall first obtain approval from competent authorities according to law, and file with the secrecy administrative department
at the same level, if it plans to, either directly or through its overseas listed entity, publicly disclose or provide any documents and
materials that contain state secrets or working secrets of government agencies. Since the New Administrative Rules Regarding Overseas
Listings and the Confidentiality and Archives Administration Provisions are newly promulgated, and the interpretation and implementation
thereof involves uncertainties, we cannot assure that we will be able to complete the relevant filings in a timely manner or fulfil all
the regulatory requirements thereunder if we acquire a China-based Target, and it is highly uncertain how new laws or regulations
or detailed implementations and interpretations will be modified or promulgated, if any, and the potential impact such modified or new
laws and regulations will have on our capability to acquire or merge with a company with major operations in China, and post-combined company’s
ability to conduct its business, accept foreign investments or list on an U.S. exchange or other foreign exchange.
On December 27, 2021,
the NDRC and the MOFCOM promulgated Special Administrative Measures (Negative List) for the Access of Foreign Investment (2021 Version),
effective as of January 1, 2022 (the “Negative List”). Compared to the previous version, there are no specific industries
added to the list but it for the first time declares China’s jurisdiction over (and detailed regulatory requirements on) overseas
listings made by Chinese businesses in the so-called “Prohibited Industries.” According to Article 6 of the Negative
List, domestic enterprises engaging in businesses in which foreign investment is prohibited shall obtain approval from the relevant authorities
before offering and listing their shares on an overseas stock exchange. In addition, certain foreign investors shall not be involved in
the operation or management of the relevant enterprise, and shareholding percentage restrictions under relevant domestic securities investment
management regulations shall apply to such foreign investors. The intended scope of such jurisdiction was further clarified by NDRC officials
on a press conference held on January 18, 2022.
In the event that we were to
determine to engage in an initial business combination with a China-based or operating business we would be subject to restrictions
on the use of our cash obtained from our business combination with a China-based or operating business as describe under “PRC
regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion
may delay or prevent us from using the proceeds it receives from offshore financing activities to make loans to or make additional capital
contributions to any PRC subsidiaries, which could materially and adversely affect our liquidity and its ability to fund and expand business”.
However, as discussed elsewhere in this proxy statement, we do not believe we are currently subject to PRC law or regulation, including
those PRC laws and regulation which affect our cash flow, including our ability to effect the redemption rights of our shareholders in
connection with a business combination. We note that the funds held in trust to effect any such redemption are held outside of China and,
in any event, we are not aware of any PRC law or regulation that would prevent us from making redemption payments to our shareholders.
Our company is a blank check
company incorporated under the Delaware laws. We currently do not hold any equity interest in any PRC company or operate any business
in China. Therefore, we are not required to obtain any permission from any PRC governmental authorities to operate our business as currently
conducted. If we decide to consummate our business combination with a target business based in and primarily operating in China, the combined
company’s business operations in China through its subsidiaries, as applicable, are subject to relevant requirements to obtain applicable
licenses from PRC governmental authorities under relevant PRC laws and regulations.
Uncertainties in the interpretation and
enforcement of PRC laws and regulations and changes in policies, rules, and regulations in China, which may be quick with little advance
notice, could limit the legal protection available to you and us.
The PRC legal system is based
on written statutes. Unlike common law systems, it is a system in which legal cases have limited value as precedents. In the late 1970s,
the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general. The legislation
over the past three decades has significantly increased the protection afforded to various forms of foreign or private-sector investment
in China. Any future PRC subsidiary and or affiliated VIEs is subject to various PRC laws and regulations generally applicable to companies
in China. Since these laws and regulations are relatively new and the PRC legal system continues to rapidly evolve, however, the interpretations
of many laws, regulations, and rules are not always uniform and enforcement of these laws, regulations, and rules involve uncertainties.
From time to time, we may have
to resort to administrative and court proceedings to enforce our legal rights. Since PRC administrative and court authorities have significant
discretion in interpreting and implementing statutory and contractual terms, however, it may be more difficult to evaluate the outcome
of administrative and court proceedings and the level of legal protection we enjoy in the PRC legal system than in more developed legal
systems. Furthermore, the PRC legal system is based in part on government policies, internal rules, and regulations that may have retroactive
effect and may change quickly with little advance notice. As a result, we may not be aware of our violation of these policies and rules
until sometime after the violation. Such uncertainties, including uncertainties over the scope and effect of our contractual, property
(including intellectual property), and procedural rights, and any failure to respond to changes in the regulatory environment in China
could materially and adversely affect our business and impede our ability to continue our operations.
You may experience difficulties in effecting
service of legal process, enforcing foreign judgments, or bringing actions in China against us or our management based on foreign laws.
It may also be difficult for you or overseas regulators to conduct investigations or collect evidence within China.
The recognition and enforcement
of foreign judgments are provided for under the PRC Civil Procedures Law. PRC courts may recognize and enforce foreign judgments
in accordance with the requirements of the PRC Civil Procedures Law based either on treaties between China and the country
where the judgment is made or on principles of reciprocity between jurisdictions. China does not have any treaties or other forms of written
arrangement with the U.S. that provide for the reciprocal recognition and enforcement of foreign judgments. In addition, according
to the PRC Civil Procedures Law, the PRC courts will not enforce a foreign judgment against us or our directors and officers
if they decide that the judgment violates the basic principles of PRC laws or national sovereignty, security, or public interest. As a
result, it is uncertain whether and on what basis a PRC court would enforce a judgment rendered by a court in the U.S.
It may also be difficult for
you or overseas regulators to conduct investigations or collect evidence within China. For example, in China, there are significant legal
and other obstacles to obtaining information needed for shareholder investigations or litigation outside China or otherwise with respect
to foreign entities. Although the authorities in China may establish a regulatory cooperation mechanism with its counterparts of another
country or region to monitor and oversee cross-border securities activities, such regulatory cooperation with the securities regulatory
authorities in the U.S. may not be efficient in the absence of a practical cooperation mechanism. Furthermore, according to Article 177
of the PRC Securities Law, or “Article 177,” which became effective in March 2020, no overseas securities regulator
is allowed to directly conduct investigations or evidence collection activities within the territory of the PRC. Article 177
further provides that Chinese entities and individuals are not allowed to provide documents or materials related to securities business
activities to foreign agencies without prior consent from the securities regulatory authority of the PRC State Council and the competent
departments of the PRC State Council. While detailed interpretation of or implementing rules under Article 177 have yet to be promulgated,
the inability for an overseas securities regulator to directly conduct investigation or evidence collection activities within China may
further increase difficulties faced by you in protecting your interests.
PRC regulation of loans to and direct investment
in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from using the proceeds
it receives from offshore financing activities to make loans to or make additional capital contributions to any PRC subsidiaries, which
could materially and adversely affect our liquidity and its ability to fund and expand business.
Following a business combination
with one or more PRC based entities, any transfer of funds by us to any PRC subsidiaries, either as a shareholder loan or as an increase
in registered capital, is subject to approval by or registration or filing with relevant governmental authorities in China. According
to the relevant PRC regulations on foreign-invested enterprises in China, capital contributions to PRC subsidiaries are subject to
the approval of or filing with the Ministry of Commerce in its local branches and registration with a local bank authorized by SAFE. In
addition, (i) any foreign loan procured by PRC subsidiaries is required to be registered with SAFE or its local branches or filed
with SAFE in its information system; and (ii) PRC subsidiaries may not procure loans which exceed the difference between their total
investment amount and registered capital or, as an alternative, only procure loans subject to the calculation approach and limitation
as provided in the People’s Bank of China Notice No. 9 (“PBOC Notice No. 9”). Any medium- or long-term loan
to be provided by us or our affiliated entities, if any, to our PRC subsidiary must be registered with the National Development and Reform
Commission and SAFE or its local branches. We may not be able to obtain these government approvals or complete such registrations on a
timely basis, if at all, with respect to future capital contributions or foreign loans by us to our PRC subsidiaries. If we fail to receive
such approvals or complete such registration or filing, our ability to capitalize on PRC operations may be negatively affected, which
could adversely affect our liquidity and ability to fund and expand our businesses.
The Circular on Reforming the
Administration of Foreign Exchange Settlement of Capital of Foreign-Invested Enterprises, or SAFE Circular 19, effective as
of June 1, 2015, as amended by Circular of the State Administration of Foreign Exchange on Reforming and Regulating Policies on the
Control over Foreign Exchange Settlement under the Capital Account, or SAFE Circular 16, effective on June 9, 2016, allows certain
entities to settle their foreign exchange capital at their discretion, but continues to prohibit them from using the Renminbi fund converted
from their foreign exchange capitals for expenditure beyond their business scopes, and also prohibit such PRC based entities from using
such Renminbi fund to provide loans to persons other than affiliates unless otherwise permitted under its business scope. As a result,
SAFE Circular 19 and SAFE Circular 16 may significantly limit our future ability to use Renminbi converted from the net proceeds from
our offshore financing activities to fund the establishment of new entities in China by us or their subsidiaries, to invest in or acquire
any other PRC companies through any future PRC subsidiaries in China, which may adversely affect our business, financial condition and
results of operations.
China’s economic, political, and social
conditions, as well as changes in any government policies, laws and regulations, could have a material adverse effect on our business
or business combination.
If we effect our initial business
combination with a China-based Target, a substantial portion of our operations may be conducted in China, and a significant portion
of our net revenues may be derived from customers where the contracting entity is located in China. Accordingly, our business, financial
condition, results of operations, prospects and any potential business combination and certain transactions we may undertake may be subject,
to a significant extent, to economic, political and legal developments in China. For example, as a result of recent proposed changes in
the cybersecurity regulations in China that would require certain Chinese technology firms to undergo a cybersecurity review before being
allowed to list on foreign exchanges, this may have the effect of further narrowing the list of potential businesses in China’s
consumer, technology and mobility sectors that we intend to focus on for our business combination or the ability of the combined entity
to list in the United States.
China’s economy differs
from the economies of most developed countries in many respects, including the amount of government involvement, level of development,
growth rate, control of foreign exchange and allocation of resources. While the PRC economy has experienced significant growth in the
past two to three decades, growth has been uneven, both geographically and among various sectors of the economy. Demand for target services
and products depends, in large part, on economic conditions in China. Any slowdown in China’s economic growth may cause our potential
customers to delay or cancel their plans to purchase our services and products, which in turn could reduce our net revenues.
Although China’s economy
has been transitioning from a planned economy to a more market oriented economy since the late 1970s, the PRC government continues to
play a significant role in regulating industry development by imposing industrial policies. The PRC government also exercises significant
control over China’s economic growth through allocating resources, controlling the incurrence and payment of foreign currency-denominated obligations,
setting monetary policy and providing preferential treatment to particular industries or companies. Changes in any of these policies,
laws and regulations could adversely affect the economy in China and could have a material adverse effect on our business.
The PRC government has implemented
various measures to encourage foreign investment and sustainable economic growth and to guide the allocation of financial and other resources.
However, we cannot assure you that the PRC government will not repeal or alter these measures or introduce new measures that will have
a negative effect on us. China’s social and political conditions may change and become unstable. Any sudden changes to China’s
political system or the occurrence of widespread social unrest could have a material adverse effect on our business and results of operations.
Uncertainties with respect to the PRC legal
system could adversely affect us.
If we consummate an initial
business combination with a China-based Target, it will be governed by PRC laws and regulations. PRC companies and VIEs are generally
subject to laws and regulations applicable to foreign investments in China and, in particular, laws and regulations applicable to wholly
foreign-owned enterprises. The PRC legal system is based on statutes. Prior court decisions may be cited for reference but have limited
precedential value.
Since 1979, PRC legislation
and regulations have significantly enhanced the protections afforded to various forms of foreign investments in China. However, China
has not developed a fully integrated legal system and recently enacted laws and regulations may not sufficiently cover all aspects of
economic activities in China. In particular, because these laws and regulations are relatively new, and because of the limited volume
of published decisions and their nonbinding nature, the interpretation and enforcement of these laws and regulations involve uncertainties.
In addition, the PRC legal system is based in part on government policies and internal rules (some of which are not published on a timely
basis or at all) that may have a retroactive effect. As a result, we may not be aware of our violation of these policies and rules until
sometime after the violation. In addition, any litigation in China may be protracted and result in substantial costs and diversion of
resources and management attention.
PRC regulation of loans and
direct investment by offshore holding companies to PRC entities may delay or prevent us from using the proceeds of the IPO to make loans
or additional capital contributions to our PRC subsidiaries, which could materially and adversely affect our liquidity and our ability
to fund and expand our business.
Any loans to PRC subsidiaries
are subject to PRC regulations. For example, loans by us to subsidiaries in China, which are foreign invested entities (“FIEs”),
to finance their activities cannot exceed statutory limits and must be registered with SAFE. On March 30, 2015, SAFE promulgated
Hui Fa [2015] No.19, a notice regulating the conversion by a foreign-invested company of foreign currency into RMB. The foreign
exchange capital, for which the monetary contribution has been confirmed by the foreign exchange authorities (or for which the monetary
contribution has been registered for account entry) in the capital account of a foreign-invested enterprise may be settled at a bank
as required by the enterprise’s actual management needs. Foreign-invested enterprises with investment as their main business
(including foreign-oriented companies, foreign-invested venture capital enterprises and foreign-invested equity investment
enterprises) are allowed to, under the premise of authenticity and compliance of their domestic investment projects, carry out based on
their actual investment scales direct settlement of foreign exchange capital or transfer the RMB funds in the foreign exchange settlement
account for pending payment to the invested enterprises’ accounts.
On May 10, 2013, SAFE
released Circular 21, which came into effect on May 13, 2013. According to Circular 21, SAFE has simplified the foreign
exchange administration procedures with respect to the registration, account openings and conversions, settlements of FDI-related foreign
exchange, as well as fund remittances.Circular 21 may significantly limit our ability to convert, transfer and use the net proceeds from
the IPO and any offering of additional equity securities in China, which may adversely affect our liquidity and our ability to fund and
expand our business in the PRC.
We may also decide to finance
the subsidiaries of our post-combination entity by means of capital contributions. These capital contributions must be approved by
MOFCOM or its local counterpart, which usually takes no more than 30 working days to complete. We may not be able to obtain these
government approvals on a timely basis, if at all, with respect to future capital contributions by us to the VIE’s subsidiaries.
If we fail to receive such approvals, we will not be able to capitalize our PRC operations, which could adversely affect our liquidity
and our ability to fund and expand our business.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES
AND USE OF PROCEEDS
Unregistered Sales of Equity Securities
On June 14, 2022, simultaneously with the closing
of the IPO, the Company completed the Private Placement of 5,240,000 Private Placement Warrants to the Company’s sponsor, at a purchase
price of $1.00 per Private Placement Warrant, generating gross proceeds to the Company of $5,240,000.
The above sales were issued pursuant to the exemption
from registration contained in Section 4(a)(2) of the Securities Act. No commissions were paid in connection with such sales.
Use of Proceeds
On June 14, 2022, we consummated the IPO of 8,625,000
Public Units (including 1,125,000 Units issued upon the partial exercise of the over-allotment option), at a price of $10.00 per unit,
generating gross proceeds of $86,250,000. Simultaneously with the closing of the IPO, we consummated the sale of 5,240,000 Private Placement
Warrants, to our sponsor in Private Placement generating gross proceeds of $5,240,000.
The net proceeds of $87,975,000 from the IPO and
the Private Placement, were placed in the 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.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
The following exhibits are filed as part of, or
incorporated by reference into, this Quarterly Report on Form 10-Q.
SIGNATURES
Pursuant to the requirements of Section 13
or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
|
Acri Capital Acquisition Corporation |
|
|
Date: August 11, 2023 |
By: |
/s/ “Joy” Yi Hua |
|
|
“Joy” Yi Hua |
|
|
Chief Executive Officer &
Chief Financial Officer |
|
|
(Principal Executive Officer and
Principal Financial and Accounting Officer) |
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The undersigned hereby certifies,
in her capacity as an officer of Acri Capital Acquisition Corporation (the “Company”), for the purposes of 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of her knowledge:
The foregoing certification is being furnished
solely pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United
States Code) and is not being filed as part of a separate disclosure document.
The undersigned hereby certifies,
in her capacity as an officer of Acri Capital Acquisition Corporation (the “Company”), for the purposes of 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of her knowledge:
The foregoing certification is being furnished
solely pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United
States Code) and is not being filed as part of a separate disclosure document.