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 Quarterly Report on Form 10-Q. 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
Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q, 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 Quarterly Report on Form 10-Q should be
read as being applicable to all forward-looking statements whenever they appear
in this Quarterly 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 ("initial business combination"). 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.
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 ("Initial Public Offering"), 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 (the "Private Placement"),
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 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 ("Trust Account").
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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 the Initial Public Offering (the "Initial Period,"
which may be extended in up to two separate instances by an additional three
months each, for a total of up to 18 months or 21 months, as applicable (each
period as so extended, an "Extension Period"), by depositing into the Trust
Account for each three month extension in an amount of $0.10 per unit; provided
that the Initial Period will automatically be extended to 18 months, and any
Extended Period will automatically be extended to 21 or 24 months, as applicable
(any such automatically extended period, the "Automatically Extended Period"),
if the Company has filed (a) a Form 8-K including a definitive merger or
acquisition agreement or (b) a proxy statement, registration statement or
similar filing for an initial business combination but have not completed the
initial business combination during the applicable period (any such Extended
Period or Automatically Extended Period, an "Extension 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 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 September 30, 2022, the Company had approximately $710,000 in working
capital, including approximately $432,000 in its operating bank account.
Our liquidity needs up to September 30, 2022, have been satisfied through a
contribution of $25,000 from our sponsor to cover certain expenses on our behalf
in exchange for the issuance of Class B ordinary shares, (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 initial business
combination does not close, we may use a portion of the working capital held
outside the Trust Account to repay such loaned amounts, but no proceeds from our
Trust Account would be used 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.
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In connection with the Company's assessment of going concern considerations in
accordance with Accounting Standards Codification 205-40, Presentation of
Financial Statements - Going Concern, we have evaluated the Company's liquidity
and financial condition and determined that it is probable the Company will not
be able to meet its obligations over the period of one year from the issuance
date of the financial statements. In addition, while the Company plans to seek
additional funding or to consummate an initial business combination, there is no
guarantee the Company will be able to borrow such funds from its Sponsor, an
affiliate of the Sponsor, or certain of the Company's officers and directors in
order to meet its obligations through the earlier of the consummation of an
initial business combination or one year from this filing. We have determined
that the uncertainty surrounding the Company's liquidity condition raises
substantial doubt about its ability to continue as a going concern. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
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 since inception up to September 30, 2022, was in preparation for
our formation, our Initial Public Offering and, since the closing of our Initial
Public Offering, our activity has been limited to a search for initial business
combination candidates. We will not be generating any operating revenues until
the closing and completion of our initial business combination, at the earliest.
For the three and nine months ended September 30, 2022, we had net income (loss)
of $269,144 and $(277,036), respectively, which consisted of $151,209 and
$661,077, respectively, in general and administrative expenses, $60,000 and
$180,000, respectively, of related party administrative fees which were offset
by income from our investments held in the Trust Account of $686,219 and
$805,774, less provision for income taxes of $205,866 and $241,733,
respectively.
Critical Accounting Policies
This management's discussion and analysis of our financial condition and results
of operations is based on our condensed financial statements, which have been
prepared in accordance with GAAP. The preparation of our unaudited condensed
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 unaudited condensed
financial statements. On an ongoing basis, we evaluate our estimates and
judgments, including those related to fair value of financial instruments and
accrued expenses. We base our estimates on historical experience, known trends
and events and various other factors that we believe 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. We have identified the following as our critical
accounting policies:
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.
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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 September 30, 2022,
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 condensed unaudited balance sheet.
Net income (loss) per ordinary share
The Company complies with accounting and disclosure requirements of FASB ASC
Topic 260, "Earnings Per Share." Net income (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 the 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 ordinary share, since the exercise of warrants is
contingent upon the occurrence of future events and their inclusion would be
anti-dilutive under the treasury stock method.
The Company's unaudited condensed statement of operations includes a
presentation of income (loss) per share for ordinary shares subject to
redemption in a manner similar to the two-class method of income (loss) per
share. In order to determine net income (loss) attributable to both the Class A
and Class B ordinary shares the Company first considered the total income (loss)
allocable to both set of shares, split pro rata between the Class A and Class B
ordinary shares. Net income (loss) per share, basic and diluted, for Class A
ordinary shares is calculated by dividing the net income (loss) allocated to the
Class A ordinary shares during the reporting period by the weighted average
number of Class A ordinary shares outstanding since original issuance. Net
income (loss) per share, basic and diluted, for Class B non-redeemable ordinary
shares is calculated by dividing the net income (loss) allocated to the Class B
non-redeemable ordinary shares by the weighted average number of Class B
non-redeemable ordinary shares outstanding for the period. At September 30,
2022, the Company did not have any dilutive securities and other contracts that
could, potentially, be exercised or converted into ordinary shares and then
participate in the earnings. As a result, diluted income (loss) per ordinary
share is the same as basic net income (loss) per ordinary share for the three
and nine months ended September 30, 2022.
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
the accompanying unaudited condensed financial statements.
Off-Balance Sheet Arrangements
As of September 30, 2022, the Company did not have any off-balance sheet
arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
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
unaudited condensed financial statements may not be comparable to companies that
comply with public company effective dates.
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ALSP ORCHID ACQUISITION CORPORATION I 
