References to the "Company," "ALSP Orchid Acquisition Corporation I" "our," "us"
or "we" refer to ALSP Orchid Acquisition Corporation I. 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 Annual Report on Form 10-K. Certain
information contained in the discussion and analysis set forth below includes
forward-looking statements that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
All statements other than statements of historical fact included in this Annual
Report on Form 10-K including, without limitation, statements regarding our
financial position, business strategy and the plans and objectives of management
for future operations, are forward looking statements. When used in this Annual
Report on Form 10-K, words such as "may," "should," "could," "would," "expect,"
"plan," "anticipate," "believe," "estimate," "continue," or the negative of such
terms or other similar expressions, as they relate to us or our management,
identify forward looking statements. Factors that might cause or contribute to
such a discrepancy include, but are not limited to, those described in our other
SEC filings. Such forward looking statements are based on the beliefs of
management, as well as assumptions made by, and information currently available
to, our management. No assurance can be given that results in any
forward-looking statement will be achieved and actual results could be affected
by one or more factors, which could cause them to differ materially. The
cautionary statements made in this Annual Report on Form 10-K should be read as
being applicable to all forward-looking statements whenever they appear in this
Annual Report. For these statements, we claim the protection of the safe harbor
for forward-looking statements contained in the Private Securities Litigation
Reform Act. Actual results could differ materially from those contemplated by
the forward-looking statements as a result of certain factors detailed in our
filings with the SEC. All subsequent written or oral forward-looking statements
attributable to us or persons acting on our behalf are qualified in their
entirety by this paragraph.
Overview
ALSP Orchid Acquisition Corporation I is a blank check company incorporated on
August 31, 2021, as a Cayman Islands exempted company for the purpose of
effecting a merger, share exchange, asset acquisition, share purchase,
reorganization, or similar business combination with one or more businesses or
entities. The Company has generated no operating revenues to date and does not
expect to generate operating revenues until we consummate our initial business
combination. The Company's sponsor is ALSP Orchid Sponsor LLC, a Delaware
limited liability company, which is owned and controlled by Accelerator Life
Sciences Partners II, LP an affiliate of our sponsor.
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The registration statement for the Company's initial public offering was
declared effective by the United States Securities and Exchange Commission on
November 18, 2021. On November 23, 2021, the Company consummated its initial
public offering of 17,250,000 units at $10.00 per unit, generating gross
proceeds of approximately $172.5 million, and incurring offering costs of
approximately $10.0 million, inclusive of approximately $6.0 million in deferred
underwriting commissions. Each unit consists of one Class A ordinary share and
one half warrant to purchase one Class A ordinary share at an exercise price of
$11.50.
Simultaneously with the closing of our initial public offering, the Company
consummated the private placement of 915,000 private placement units at a price
of $10.00 per private placement unit to the sponsor, generating gross proceeds
of approximately $9.2 million. Each private placement unit is identical to the
Units sold in our initial public offering, subject to certain limited
exceptions.
Upon the closing of our initial public offering and private placement,
approximately $176 million of the net proceeds of our initial public offering
and certain of the proceeds of the private placement were placed in a trust
account, located in the United States, with Continental Stock Transfer & Trust
Company acting as trustee. The funds in the Trust Account will be invested only
in U.S. government treasury obligations with a maturity of 185 days or less or
in money market funds meeting certain conditions under Rule 2a-7 under the
Investment Company Act which invest only in direct U.S. government treasury
obligations (collectively "Permitted Investments"), until the earlier of:
(i) the completion of an initial business combination or (ii) the distribution
of the assets held in the trust account. Our management has broad discretion
with respect to the specific application of the net proceeds of our initial
public offering and the private placement, although substantially all of the net
proceeds are intended to be applied toward consummating an initial business
combination.
If the Company is unable to complete an initial business combination within 15
months from the closing of our initial public offering (or during any Extension
Period), under certain circumstances, 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 our income taxes (less
up to $100,000 of interest to pay dissolution expenses), divided by the number
of then outstanding public shares, which redemption will completely extinguish
public shareholders' rights as shareholders (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 our remaining shareholders and our board of directors, proceed
to commence a voluntary liquidation and thereby a formal dissolution of our
Company, subject in each case to our obligations under Cayman Islands law to
provide for claims of creditors and the requirements of other applicable law.
There will be no redemption rights or liquidating distributions with respect to
our warrants, which will expire worthless if we fail to consummate an initial
business combination within 15 months (or during any Extension Period) from the
close of our initial public offering.
Liquidity and Capital Resources
As of December 31, 2021, the Company had approximately $1.3 million in working
capital, including approximately $1.1 million in its operating bank account
For the period from August 31, 2021 (inception) through December 31, 2021, net
cash used in operating activities was $397,674, which was due to changes in
working capital of $247,366, our net loss of $144,643, and interest income on
investments held in the trust account of $5,665.
For the period from August 31, 2021 (inception) through December 31, 2021, net
cash used in investing activities of $176,219,076 was the result of the amount
of net proceeds of $175,950,000 from our Public Offering being deposited to the
trust account and the prepayment of the non-current portion of our Director's &
Officer's insurance.
For the period from August 31, 2021 (inception) through December 31, 2021, net
cash provided by financing activities of $177,700,207 was comprised of
$169,050,000 in proceeds from the issuance of units in our Public Offering net
of underwriter's discount paid and $9,150,000 in proceeds from the issuance of
our private placement units, and $25,000 in proceeds from the issuance of
Class B ordinary shares to our Sponsor, offset in part by the payment of
$524,793 for offering costs associated with the Public Offering, including
repayment of $228,000 advanced from an affiliate of our Sponsor.
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Our liquidity needs up to December 31, 2021, had been satisfied through a
contribution of $25,000 from our sponsor to cover for certain expenses on behalf
of us in exchange for the issuance of the founder shares, an advance of
approximately $228,000 from an affiliate of our sponsor and the proceeds from
the consummation of the private placement not held in the trust account. The
Company fully repaid the advance to the related party on January 27, 2022. In
addition, in order to finance transaction costs in connection with an initial
business combination, our sponsor or an affiliate of our sponsor, or certain of
our officers and directors may, but are not obligated to, provide us working
capital loans. If we complete our initial business combination, we would repay
such loaned amounts out of the proceeds of the trust account released to us.
Otherwise, such loans would be repaid only out of funds held outside the trust
account. In the event that our Business Combination does not close, we may use a
portion of the working capital held outside the trust account to repay such
loaned amounts, but no proceeds from our trust account would be used to repay
such loaned amounts. Up to $1,500,000 of such loans may be convertible into
units of the post business combination entity at a price of $10.00 per unit at
the option of the lender. The units would be identical to the private placement
units. Except as set forth above, the terms of such loans, if any, have not been
determined and no written agreements exist with respect to such loans. To date,
there are no amounts outstanding under any working capital loan.
Based on the foregoing, management believes that it will have sufficient working
capital and borrowing capacity to meet its needs through the earlier of the
consummation of an initial business combination or one year from this filing.
Over this time period, the Company will be using these funds for paying existing
accounts payable, identifying and evaluating prospective candidates for our
initial business combination, performing due diligence on prospective target
businesses, paying for travel expenditures, selecting the target business to
merge with or acquire, and structuring, negotiating and consummating the
business combination.
Management continues to evaluate the impact of the COVID-19 pandemic and has
concluded that the specific impact is not readily determinable as of the date of
the financial statements. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Results of Operations
All activity up to December 31, 2021, was in preparation for our formation, our
initial public offering and, since the closing of our initial public offering, a
search for business combination candidates. We will not be generating any
operating revenues until the closing and completion of our initial business
combination.
For the period from August 31, 2021 (inception) through December 31, 2021, we
had a net loss of $144,643 which consisted of $110,308 in general and
administrative expenses, $40,000 of related party administrative fees, partially
offset by $5,665 of income from our investments held in the trust account.
Critical Accounting Policies
This management's discussion and analysis of our financial condition and results
of operations is based on our audited financial statements, which have been
prepared in accordance with U.S. GAAP. The preparation of these financial
statements requires us to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses and the disclosure of
contingent assets and liabilities in our financial statements. On an ongoing
basis, the Company evaluates our estimates and judgments, including those
related to fair value of financial instruments and accrued expenses. The Company
bases its estimates on historical experience, known trends and events and
various other factors that the Company believes to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions. The Company has identified the following as our
critical accounting policies:
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Investments Held in the Trust Account
Our portfolio of investments held in the trust account is comprised of U.S.
government securities, within the meaning set forth in Section 2(a)(16) of the
Investment Company Act, with a maturity of 185 days or less, or investments in
money market funds that invest in U.S. government securities, or a combination
thereof. The investments held in the trust account are classified as trading
securities, which are presented on the 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 included in gain on marketable
securities, dividends and interest held in trust account in the statement of
operations. The estimated fair values of investments held in trust account are
determined using available market information, other than for investments in
open-ended money market funds with published daily net asset values ("NAV"), in
which case the Company uses NAV as a practical expedient to fair value. The NAV
on these investments is typically held constant at $1.00 per unit.
Class A Ordinary Shares Subject to Possible Redemption
All of the Class A ordinary shares sold as part of the Units in our initial
public offering contain a redemption feature which allows for the redemption of
such shares in connection with the Company's liquidation, if there is a
shareholder vote or tender offer in connection with our initial business
combination and in connection with certain amendments to the Company's amended
and restated memorandum and articles of association. In accordance with FASB ASC
Topic 480 ("ASC 480"), conditionally redeemable Class A ordinary shares
(including Class A ordinary shares that feature redemption rights that are
either within the control of the holder or subject to redemption upon the
occurrence of uncertain events not solely within the Company's control) are
classified as temporary equity. Ordinary liquidation events, which involve the
redemption and liquidation of all of the entity's equity instruments, are
excluded from the provisions of ASC 480. Accordingly, as of December 31, 2021,
17,250,000 Class A ordinary shares, representing the public shares, subject to
possible redemption at the redemption amount were presented at redemption value
as temporary equity, outside of the shareholders' deficit section of the
Company's balance sheet.
Net Income (Loss) Per Share
The Company complies with accounting and disclosure requirements of FASB ASC
Topic 260 ("ASC 260"), "Earnings Per Share." Net loss per ordinary share is
computed by dividing net loss by the weighted average number of ordinary shares
outstanding during the period. The Company has not considered the effect of the
warrants sold in our initial public offering and private placement to purchase
an aggregate of 9,082,500 shares of Class A ordinary shares in the calculation
of diluted earnings per share, since their inclusion would be anti-dilutive
under the treasury stock method. As a result, diluted loss per ordinary share is
the same as basic loss per ordinary share for the periods presented.
In order to determine the net income (loss) attributable to both the redeemable
Class A shares and the non-redeemable Class A and Class B shares
("Non-redeemable shares"), the Company first considered the total income (loss)
allocable to both sets of shares, including the accretion of Class A redeemable
shares to redemption value which represents the difference between the gross
proceeds of the Initial Public Offering, net of offering costs, and the
redemption value of the redeemable shares of $10.20 per share. Subsequent to
calculating the total income (loss) allocable to both sets of shares, the
Company split the amount to be allocated pro rata between redeemable Class A
shares and non-redeemable shares for the period from August 31, 2021 (inception)
through December 31, 2021, reflective of the respective participation rights.
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 ASC 480 and FASB ASC
Topic 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 ordinary shares, 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 additional paid-in capital 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 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. The warrants issued in our initial public offering and
Private Placement are equity classified.
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Recent Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective,
accounting pronouncements, if currently adopted, would have a material impact on
our audited financial statements.
Off-Balance Sheet Arrangements
As of December 31, 2021, the Company did not have any off-balance sheet
arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K and did not have
any commitments or contractual obligations.
Contractual Obligations
Registration and Shareholder Rights
The holders of the Founder Shares, Private Placement Shares and warrants that
may be issued upon conversion of working capital loans, if any, are entitled to
registration rights pursuant to a registration rights agreement signed on the
effective date of our initial public offering. The holders of these securities
are entitled to demand that the Company register such securities. In addition,
the holders have certain registration rights which provides that the Company
will not permit any registration statement filed under the Securities Act to
become effective until termination of the applicable lock-up period, which
occurs (i) in the case of the founder shares, as described in Note 4, and
(ii) in the case of the private placement units and the respective Class A
ordinary shares underlying the private placement warrants, 30 days after the
completion of an initial business combination.
The Company will bear the expenses incurred in connection with the filing of any
such registration statements.
Underwriting Agreement
The Company granted the underwriters a 45-day option from the date of the final
prospectus relating to our initial public offering to purchase up to 2,250,000
additional units to cover over-allotments, if any, at $10.00 per unit, less
underwriting discounts and commissions. The underwriters exercised this option
in full on November 23, 2021.
The underwriters were paid a cash underwriting discount of two percent (2%) of
the gross proceeds of our initial public offering, or $3,450,000. Additionally,
the underwriters will be entitled to a deferred underwriting commission of 3.5%
or $6,037,500 of the gross proceeds of our initial public offering held in the
Trust Account solely upon the completion of the Company's initial business
combination subject to the terms of the underwriting agreement.
JOBS Act
On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains
provisions that, among other things, relax certain reporting requirements for
qualifying public companies. The Company will qualify as an "emerging growth
company" and under the JOBS Act will be allowed to comply with new or revised
accounting pronouncements based on the effective date for private (not publicly
traded) companies. The Company is electing to delay the adoption of new or
revised accounting standards, and as a result, the Company may not comply with
new or revised accounting standards on the relevant dates on which adoption of
such standards is required for non-emerging growth companies. As such, our
financial statements may not be comparable to companies that comply with public
company effective dates.
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