The following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with our audited financial
statements and the notes related thereto which are included in "Item 8.
Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.
Certain information contained in the discussion and analysis set forth below
includes forward-looking statements. Our actual results may differ materially
from those anticipated in these forward-looking statements as a result of many
factors, including those set forth under "Special Note Regarding Forward-Looking
Statements," "Item 1A. Risk Factors" and elsewhere in this Annual Report on
Form 10-K.
Overview
We are a blank check company incorporated as a Cayman Island exempted company on
March 22, 2021. We were formed for the purpose of effecting a merger, share
exchange, asset acquisition, share purchase, reorganization or other similar
business transaction with one or more businesses that the Company has not yet
identified (a "Business Combination").
As of December 31, 2021, we had not commenced any operations. All activity for
the period from March 22, 2021 (inception) through December 31, 2021, relates
our formation, the initial public offering, and subsequent to the Initial Public
Offering, identifying a target company for a Business Combination. We will not
generate any operating revenues until after the completion of our Business
Combination, at the earliest. We will generate non-operating income in the form
of interest income on cash and cash equivalents from the proceeds derived from
the IPO. We expect to continue to incur significant costs in the pursuit of our
acquisition plans. We cannot assure you that our plans to complete a Business
Combination will be successful.
Our sponsor is Innovative International Sponsor I LLC, a Delaware limited
liability company (the "Sponsor").
Our registration statement for the IPO was declared effective on October 26,
2021 (the "Effective Date"). On October 29, 2021, we consummated our IPO of
23,000,000 units (the "Units" and, with respect to the ordinary shares included
in the Units being offered, the "Public Shares") at $10.00 per Unit (which
included the full exercise of the underwriters' over-allotment option) and the
sale of 1,060,000 shares (the "Private Placement Shares") at a price of $10.00
per Private Placement Share in a private placement to our Sponsor, Cohen &
Company Capital Markets, a division of J.V.B. Financial Group, LLC ("CCM"), and
Cantor Fitzgerald & Co. ("Cantor"), the representative of the underwriters that
closed simultaneously with the Public Offering.
Transaction costs amounted to $15,837,902 consisting of $3,173,059 of
underwriting commissions, $12,100,000 of deferred underwriting commissions and
$1,391,784 of other cash offering costs and were charged to equity.
Our initial Business Combination must occur with one or more operating
businesses or assets with an aggregate fair market value equal to at least 80%
of the assets held in the Trust Account (excluding the deferred underwriting
commissions and taxes payable on the income earned on the Trust Account) at the
time of our signing a definitive agreement in connection with the initial
Business Combination. However, we will only complete such Business Combination
if the post-transaction company owns or acquires 50% or more of the issued and
outstanding voting securities of the target or otherwise acquires a controlling
interest in the target business
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sufficient for it not to be required to register as an investment company under
the Investment Company Act of 1940, (the "Investment Company Act"). There is no
assurance that the Company will be able to complete a Business Combination
successfully.
Upon the closing of the IPO, management deposited an amount equal to at least
$10.20 per Unit sold in the Public Offering, including the proceeds of the
Private Placement Shares, will be held in a Trust Account ("Trust Account") and
will be invested only in U.S. government treasury obligations with a maturity of
185 days or less or in money market funds meeting certain conditions under
Rule 2a-7 under the Investment Company Act that invest only in direct U.S.
government treasury obligations. Except with respect to interest earned on the
funds held in the Trust Account that may be released to the Company to pay its
taxes, if any (less up to $100,000 interest to pay dissolution expenses), the
proceeds from the Public Offering and the sale of the Private Placement Shares
will not be released from the Trust Account until the earliest of (i) the
completion of our initial Business Combination, the redemption of our public
shares properly tendered in connection with a shareholder vote to amend our
amended and restated memorandum and articles of association (A) to modify the
substance or timing of our obligation to allow redemption in connection with the
initial Business Combination or to redeem 100% of the public shares if we do not
complete our initial Business Combination within 15 months from the closing of
the Public Offering or (B) with respect to any other provision relating to
shareholders' rights or pre-Business Combination activity and (iii) the
redemption of all of the public shares if the Company is unable to complete its
initial Business Combination within 15 months from the closing of the Public
Offering, subject to applicable law.
We will have until January 29, 2023 to complete the Business Combination (the
"Combination Period"). If we are unable to consummate our Business Combination
within the Combination Period, we will: (i) cease all operations except for the
purpose of winding up, (ii) as promptly as reasonably possible but not more than
10 business days thereafter, redeem the public shares, at a per-share price,
payable in cash, equal to the aggregate amount then on deposit in the Trust
Account, including interest (which interest shall be net of taxes payable, and
less up to $100,000 of interest to pay dissolution expenses) divided by the
number of then issued and outstanding public shares, which redemption will
completely extinguish public shareholders' rights as shareholders (including the
right to receive further liquidation distributions, if any), subject to
applicable law, and (iii) as promptly as reasonably possible following such
redemption, subject to the approval of the remaining shareholders and our board
of directors, liquidate and dissolve, subject in each case to the Company's
obligations under Cayman Islands law to provide for claims of creditors and the
requirements of other applicable law. There will be no redemption rights or
liquidating distributions with respect to the warrants, which will expire
worthless if we fail to complete our initial Business Combination within the
Combination Period.
Risks and Uncertainties
In February 2022, Russia commenced a military action with the country of
Ukraine. As a result of this action, various nations, including the United
States, have instituted economic sanctions against Russia. The invasion of
Ukraine may result in market volatility that could adversely affect our stock
price and our search for a target company. Further, the impact of this action
and related sanctions on the world economy are not determinable as of the date
of these financial statements and the specific impact on the Company's financial
condition, results of operations, and cash flows is also not determinable as of
the date of these financial statements.
Management continues to evaluate the impact of the COVID-19 pandemic on the
industry and has concluded that while it is reasonably possible that the virus
could have a negative effect on our financial position, results of our
operations and/or search for a target company, the specific impact is not
readily determinable as of the date of the financial statements. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Results of Operations and Known Trends or Future Events
Through December 31, 2021, we have neither engaged in any operations nor
generated any revenues to date. Our only activities since inception have been
organizational activities and those necessary to prepare for the IPO. Following
the IPO, we do not generate any operating revenues until after completion of our
initial business combination. We generate non-operating income in the form of
interest income on cash and cash equivalents after the IPO. There has been no
significant change in our financial or trading position and no material adverse
change has occurred since the date of our audited financial statements.
For the period from March 22, 2021 (inception) through December 31, 2021, we had
a net loss of $229,230, which consists of formation and operating costs of
$233,253, offset by interest income from bank of $17 and interest earned on
marketable securities held in the Trust Account of $4,006.
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Liquidity and Capital Resources
As of December 31, 2021, the Company had cash of $979,634 and a working capital
of $1,036,615. Following the consummation of the IPO on October 29, 2021, the
Company had $2,800,472 of cash available to it, temporarily being held in the
Sponsor's bank account, and working capital of $1,210,696. The Company opened
its operating bank account and the $2,800,472 was transferred to it from the
Sponsor's account on November 1, 2021.
Our liquidity needs were satisfied prior to completion of IPO through advances
on behalf of the company of $25,000 from the sale of the founder shares to our
sponsor and up to $300,000 in loans from our sponsor under an unsecured
promissory note. As of December 31, 2021, we had borrowed $122,292 under the
unsecured promissory note. The balance was repaid on November 5, 2021. We
received net proceeds from (i) the sale of the units in the IPO, after deducting
offering expenses of approximately $550,000 and underwriting commissions of
$4,000,000 (excluding deferred underwriting commissions of $12,100,000 since the
underwriters' over-allotment option was exercised in full), and (ii) the sale of
the private placement shares for a purchase price of $10,600,000 in the
aggregate amount of $236,050,000 since the underwriters' over-allotment option
was exercised in full. Of this amount, $234,600,000, including $12,100,000 in
deferred underwriting commissions, was deposited into a non-interest bearing
trust account. The funds in the trust account was invested only in specified
U.S. government treasury bills or in specified money market funds. The remaining
$1,450,000 is not held in the trust account.
We intend to use substantially all of the funds held in the trust account,
including any amounts representing interest earned on the trust account (which
interest shall be net of taxes payable and excluding deferred underwriting
commissions) to complete our initial business combination. We may withdraw
interest to pay taxes, if any. Our annual income tax obligations will depend on
the amount of interest and other income earned on the amounts held in the trust
account. To the extent that our ordinary shares or debt is used, in whole or in
part, as consideration to complete our initial business combination, the
remaining proceeds held in the trust account will be used as working capital to
finance the operations of the target business or businesses, make other
acquisitions and pursue our growth strategies.
After completion of our IPO, we have available to us $1,450,000 of proceeds held
outside the trust account. We will use these funds primarily to identify and
evaluate target businesses, perform business due diligence on prospective target
businesses, travel to and from the offices, plants or similar locations of
prospective target businesses or their representatives or owners, review
corporate documents and material agreements of prospective target businesses,
structure, negotiate and complete a business combination, and to pay taxes to
the extent the interest earned on the trust account is not sufficient to pay our
taxes.
In order to fund working capital deficiencies or finance transaction costs in
connection with an intended initial business combination, our sponsor or an
affiliate of our sponsor or certain of our officers and directors may, but are
not obligated to, loan us funds as may be required. If we complete our initial
business combination, we would repay such loaned amounts. In the event that our
initial business combination does not close, we may use a portion of the working
capital held outside the trust account to repay such loaned amounts but no
proceeds from our trust account would be used for such repayment. Up to
$1,500,000 of such loans may be convertible into Class A ordinary shares at a
price of $10.00 per share, at the option of the lender. Such shares would be
identical to the private placement shares. The terms of such loans by our
officers and directors, if any, have not been determined and no written
agreements exist with respect to such loans. We do not expect to seek loans from
parties other than our sponsor or an affiliate of our sponsor as we do not
believe third parties will be willing to loan such funds and provide a waiver
against any and all rights to seek access to funds in our trust account.
We expect our primary liquidity requirements during that period to include
approximately: $300,000 for legal, accounting, due diligence, travel and other
expenses associated with structuring, negotiating and documenting any business
combinations; $150,000 for legal and accounting fees related to regulatory
reporting requirements, including certain regulatory fees; $75,000 for Nasdaq
continued listing fees; $650,000 for directors and officers liability insurance;
$150,000 for office space, administrative and support services; and $125,000 for
working capital that will be used for miscellaneous expenses and reserves.
These amounts are estimates and may differ materially from our actual expenses.
In addition, we could use a portion of the funds not being placed in trust to
pay commitment fees for financing, fees to consultants to assist us with our
search for a target business or as a down payment or to fund a "no-shop"
provision (a provision designed to keep target businesses from "shopping" around
for transactions with other companies or investors on terms more favorable to
such target businesses) with respect to a particular proposed business
combination, although we do not have any current intention to do so. If we
entered into an agreement where we paid for the
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right to receive exclusivity from a target business, the amount that would be
used as a down payment or to fund a "no-shop" provision would be determined
based on the terms of the specific business combination and the amount of our
available funds at the time. Our forfeiture of such funds (whether as a result
of our breach or otherwise) could result in our not having sufficient funds to
continue searching for, or conducting due diligence with respect to, prospective
target businesses.
We do not believe we will need to raise additional funds following the IPO in
order to meet the expenditures required for operating our business. However, if
our estimates of the costs of identifying a target business, undertaking
in-depth due diligence and negotiating an initial 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 initial business combination.
Moreover, we may need to obtain additional financing either to complete our
initial business combination or because we become obligated to redeem a
significant number of our public shares upon completion of our initial business
combination, in which case we may issue additional securities or incur debt in
connection with such business combination. Subject to compliance with applicable
securities laws, we would only complete such financing simultaneously with the
completion of our business combination. If we are unable to complete our initial
business combination because we do not have sufficient funds available to us, we
will be forced to cease operations and liquidate the trust account. In addition,
following our initial business combination, if cash on hand is insufficient, we
may need to obtain additional financing in order to meet our obligations.
Going Concern
We have until January 29, 2023 to consummate a Business Combination. It is
uncertain that we will be able to consummate a Business Combination by this
time. If a Business Combination is not consummated by this date, there will be a
mandatory liquidation and subsequent dissolution. Management has determined that
the mandatory liquidation, should a Business Combination not occur, and
potential subsequent dissolution raises substantial doubt about our ability to
continue as a going concern. No adjustments have been made to the carrying
amounts of assets or liabilities should we be required to liquidate after
January 29, 2023.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of December 31, 2021. We do not participate in
transactions that create relationships with unconsolidated entities or financial
partnerships, often referred to as variable interest entities, which would have
been established for the purpose of facilitating off-balance sheet arrangements.
We have not entered into any off-balance sheet financing arrangements,
established any special purpose entities, guaranteed any debt or commitments of
other entities, or purchased any non-financial assets.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than as described below.
On April 17, 2021, our Sponsor agreed to loan us up to $300,000 to be used for a
portion of the expenses of the IPO. These loans are non-interest bearing,
unsecured and are due at the earlier of December 31, 2021, or the closing of the
IPO. A portion of the loan was be repaid upon the closing of the IPO out of the
offering proceeds not held in the Trust Account. As of December 31, 2021, we had
no borrowings under the promissory note.
Certain Relationships and Related Party Transactions
On April 17, 2021, our sponsor paid $25,000 to cover certain of our offering
costs in exchange for 7,187,500 founder shares. On September 20, 2021, we
effected a dividend of 1.12 shares for each outstanding Class B ordinary share,
resulting in an aggregate of 8,050,000 founder shares being held by our sponsor
(up to 1,060,000 shares of which are subject to forfeiture by our sponsor
depending on the extent to which the underwriters' over-allotment option is
exercised), resulting in a purchase price of approximately $0.003 per share. The
purchase price of the founder shares was determined by dividing the amount of
cash contributed to the company by the number of founder shares issued. As such,
our initial shareholders collectively own approximately 25% of our issued and
outstanding shares (excluding any shares underlying any units our initial
shareholders may purchase in the IPO and the private placement shares our
sponsor intends to purchase in the private placement) after the IPO. None of our
sponsor, officers, and directors intends to purchase any units after the IPO.
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Upon the listing of our securities on Nasdaq, we reimburse our sponsor for
office space, secretarial and administrative services provided to members of our
management team, in the amount of $10,000 per month. Upon completion of our
initial business combination or our liquidation, we will cease paying
these monthly fees.
Our sponsor, officers and directors, advisers, and any of their respective
affiliates, will be reimbursed for any bona-fide, documented out-of-pocket
expenses incurred in connection with activities on our behalf such as
identifying potential target businesses and performing due diligence on suitable
business combinations. Our audit committee will review on a quarterly basis all
payments that were made by us to our sponsor, officers, directors, advisers, or
any of their respective affiliates and will determine which expenses and the
amount of expenses that will be reimbursed. There is no cap or ceiling on the
reimbursement of out-of-pocket expenses incurred by such persons in connection
with activities on our behalf.
Prior to the closing of the IPO, our sponsor has agreed to loan us up to
$300,000 to be used for a portion of the expenses of the IPO. As of December 31,
2021, the Company had no borrowings under the promissory note with our sponsor.
In addition, in order to finance transaction costs in connection with an
intended initial business combination, our sponsor or an affiliate of our
sponsor or certain of our officers and directors may, but are not obligated to,
loan us funds as may be required. If we complete our initial business
combination, we would repay such loaned amounts. In the event that our initial
business combination does not close, we may use a portion of the working capital
held outside the trust account to repay such loaned amounts but no proceeds from
our trust account would be used for such repayment. Up to $1,500,000 of such
loans may be convertible into Class A ordinary shares at a price of $10.00 per
share, at the option of the lender. Such shares would be identical to the
private placement shares. The terms of such loans by our officers and directors,
if any, have not been determined and no written agreements exist with respect to
such loans. We do not expect to seek loans from parties other than our sponsor
or an affiliate of our sponsor as we do not believe third parties will be
willing to loan such funds and provide a waiver against any and all rights to
seek access to funds in our trust account.
Our sponsor, Cantor and Cohen & Company Capital Markets ("CCM") have purchased
an aggregate of 1,060,000 Class A ordinary shares at a price of $10.00 per share
($10,600,000 in the aggregate in a private placement that closed simultaneously
with the closing of the IPO. Of those 1,600,000 private placement shares, our
sponsor purchased 960,000 private placement shares, CCM purchased 30,000 private
placement shares, and Cantor purchased 70,000 private placement shares. Our
sponsor, Cantor and CCM are be permitted to transfer the private placement
shares they hold to certain permitted transferees, including their respective
directors, officers, and other persons or entities affiliated with or related to
them, but the transferees receiving such securities will be subject to the same
agreements with respect to such securities. In addition, the private placement
shares will not, subject to certain limited exceptions, be transferable or
salable until 30 days after the completion of our initial business combination.
The private placement shares will not be redeemable by us so long as they are
held by the initial purchasers or their respective permitted transferees. If the
private placement shares are held by holders other than the initial purchasers
or their respective permitted transferees, the private placement shares will be
redeemable by us and exercisable by the holders on the same basis as the shares
and warrants included in the units being sold in the IPO. Otherwise and, except
as described under "Description of Securities -Ordinary Shares - Private
Placement Shares" in the Registration Statement, the private placement shares
have terms and provisions that are identical to those of the public shares being
sold in the IPO.
Pursuant to a registration rights agreement that we entered into with our
sponsor, our directors, our officers Cantor and CCM on or prior to the closing
of the IPO, we may be required to register the offer and sale of certain
securities under the Securities Act. These holders, and holders of shares issued
upon conversion of working capital loans, if any, are entitled under the
registration rights agreement to make up to three demands that we register the
offer and sale of certain of our securities held by them under the Securities
Act and to have the resale of the securities covered thereby registered pursuant
to Rule 415 under the Securities Act. In addition, these holders have the right
to include the offer and sale of their securities in other registration
statements filed by us. However, the registration rights agreement provides that
we will not permit any registration statement filed under the Securities Act to
become effective until the offer and sale of the securities covered thereby are
released from their lock-up restrictions, as described herein. Notwithstanding
the foregoing, Cantor may not exercise their demand and "piggyback" registration
rights after five and seven years after the effective date of the registration
statement of which this prospectus forms a part and may not exercise their
demand rights on more than one occasion. We will bear the costs and expenses of
filing any such registration statements.
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JOBS Act
On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains
provisions that, among other things, relax certain reporting requirements for
qualifying public companies. We will qualify as an "emerging growth company" and
under the JOBS Act will be allowed to comply with new or revised accounting
pronouncements based on the effective date for private (not publicly traded)
companies. We are electing to delay the adoption of new or revised accounting
standards, and as a result, we may not comply with new or revised accounting
standards on the relevant dates on which adoption of such standards is required
for non-emerging growth companies. As such, our financial statements may not be
comparable to companies that comply with public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the
other reduced reporting requirements provided by the JOBS Act. Subject to
certain conditions set forth in the JOBS Act, if, as an "emerging growth
company," we choose to rely on such exemptions we may not be required to, among
other things, (i) provide an auditor's attestation report on our system of
internal control over financial reporting pursuant to Section 404 of the
Sarbanes-Oxley Act, (ii) provide all of the compensation disclosure that may be
required of non-emerging growth public companies under the Dodd-Frank Wall
Street Reform and Consumer Protection Act, (iii) comply with any requirement
that may be adopted by the PCAOB regarding mandatory audit firm rotation or a
supplement to the auditor's report providing additional information about the
audit and the financial statements (auditor discussion and analysis) and
(iv) disclose certain executive compensation related items such as the
correlation between executive compensation and performance and comparisons of
executive compensation to median employee compensation. These exemptions will
apply for a period of five years following the completion of our IPO or until we
are no longer an "emerging growth company," whichever is earlier.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and income and expenses
during the periods reported. Actual results could materially differ from those
estimates. We have identified the following critical accounting policies:
Ordinary Shares Subject to Redemption
We account for our ordinary shares subject to possible redemption in accordance
with the guidance in Accounting Standards Codification ("ASC") Topic 480,
"Distinguishing Liabilities from Equity." Ordinary shares subject to mandatory
redemption is classified as a liability instrument and is measured at fair
value. Conditionally redeemable ordinary shares (including ordinary shares that
features redemption rights that are either within the control of the holder or
subject to redemption upon the occurrence of uncertain events not solely within
our control) is classified as temporary equity. At all other times, ordinary
shares are classified as shareholders' equity. Our ordinary shares feature
certain redemption rights that are considered to be outside of our control and
subject to occurrence of uncertain future events. Accordingly, ordinary shares
subject to possible redemption is presented as temporary equity, outside of the
shareholders' deficit section of our balance sheet. The Company recognizes
changes in redemption value immediately as they occur and adjusts the carrying
value of redeemable ordinary shares to equal the redemption value at the end of
each reporting period. Increases or decreases in the carrying amount of
redeemable ordinary shares are affected by charges against additional paid in
capital and accumulated deficit.
Net Loss Per Ordinary Share
The Company applies the two-class method in calculating earnings per share. Net
loss per ordinary share is computed by dividing the pro rata net loss between
the redeemable ordinary shares and the non-redeemable ordinary shares of by the
weighted average number of ordinary shares outstanding for each of the periods.
The calculation of diluted loss per share does not consider the effect of the
warrants issued in connection with the IPO since the exercise of the warrants
are contingent upon the occurrence of future events and the inclusion of such
warrants would be anti-dilutive.
Recent Accounting Pronouncements
In August 2020, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") 2020-06, Debt - Debt with Conversion and
Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in
Entity's Own Equity
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(Subtopic 815-40) ("ASU 2020-06") to simplify accounting for certain financial
instruments. ASU 2020-06 eliminates the current models that require separation
of beneficial conversion and cash conversion features from convertible
instruments and simplifies the derivative scope exception guidance pertaining to
equity classification of contracts in an entity's own equity. The new standard
also introduces additional disclosures for convertible debt and freestanding
instruments that are indexed to and settled in an entity's own equity. ASU
2020-06 amends the diluted earnings per share guidance, including the
requirement to use the if-converted method for all convertible instruments. ASU
2020-06 is effective January 1, 2024 and should be applied on a full or modified
retrospective basis, with early adoption permitted beginning on January 1, 2021.
The Company is currently assessing the impact, if any, that ASU 2020-06 would
have on its financial position, results of operations or cash flows.
Management does not believe that any other recently issued, but not effective,
accounting standards, if currently adopted, would have a material effect on the
Company's financial statements.
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