References to the "company," "our," "us" or "we" refer to Swiftmerge Acquisition
Corp. 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 Report. Certain
information contained in the discussion and analysis set forth below includes
forward-looking statements that involve risks and uncertainties.
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This Report includes "forward-looking statements" 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 Report, 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 "Cautionary Note Regarding
Forward-Looking Statements and Risk Factor Summary," "Item 1A. Risk Factors" and
elsewhere in this Annual Report on Form 10-K. 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 on February 3, 2021 as a Cayman
Islands exempted company and formed for the purpose of effectuating a merger,
capital stock exchange, asset acquisition, stock purchase, reorganization or
similar business combination with one or more businesses (our "initial business
combination"). We intend to effectuate our initial business combination using
cash from the proceeds of the initial public offering and the private placement
of the private placement warrants, the proceeds of the sale of our shares in
connection with our initial business combination (pursuant to forward purchase
agreements or backstop agreements we may enter into following the consummation
of the initial public offering or otherwise), shares issued to the owners of the
target, debt issued to bank or other lenders or the owners of the target, or a
combination of the foregoing.
Our registration statement for our initial public offering was declared
effective on December 14, 2021. On December 17, 2021, we consummated our initial
public offering of 20,000,000 units (the "units" and, with respect to the
Class A ordinary shares included in the units being offered, the "public
shares") at $10.00 per unit, generating gross proceeds of approximately
$200 million, and incurring offering costs of approximately $12.6 million, of
which approximately $7 million was for deferred underwriting commissions. On
January 18, 2022, the underwriter partially exercised its Over-Allotment Option,
resulting in 2,500,000 additional units being sold at $10.00 per unit,
generating gross proceeds of approximately $25 million. Simultaneously with the
closing of the initial public offering, we consummated the private placement of
8,600,000 private placement warrants, at a price of $1.00 per private placement
warrant with the sponsor and the anchor investors, generating gross proceeds of
approximately $8.6 million. On January 18, 2022, following the underwriter's
exercise of the Over-Allotment Option, the sponsor purchased from the company an
additional 750,000 private placement warrants at a price of $1.00 per private
placement warrant. Upon the closing of the initial public offering, the private
placement and the Over-Allotment Option, approximately $227.2 million of the net
proceeds of the initial public offering and certain of the proceeds of the
private placement were placed in the Trust Account with Continental Stock
Transfer & Trust Company acting as trustee and invested in United States
"government securities" within the meaning of Section 2(a)(16) of the Investment
Company Act of 1940, as amended, or the Investment Company Act, having a
maturity of 185 days or less or in money market funds meeting certain conditions
under Rule 2a-7 promulgated under the Investment Company Act which invest only
in direct U.S. government treasury obligations, as determined by the company,
until the earlier of: (i) the completion of an initial business combination and
(ii) the distribution of the Trust Account as described below. If we are unable
to complete an initial business combination within 18 months from the closing of
our initial public offering, or June 17, 2023, we 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 us to pay our taxes, if any (less up to
$100,000 of interest to pay dissolution expenses) divided by the number of the
then-outstanding public shares, which redemption will completely extinguish
public shareholders' rights as shareholders (including the right to receive
further liquidation distributions, if any); and (iii) as promptly as reasonably
possible following such redemption, subject to the approval of our remaining
shareholders and our board of directors, liquidate and dissolve, subject in each
case to our obligations under Cayman Islands law to provide for claims of
creditors and the requirements of other applicable law.
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Results of Operations
We have neither engaged in any operations nor generated any operating revenues
to date. Our only activities for the period from February 3, 2021 (inception)
through December 31, 2021 and for the year ended December 31, 2022 were
organizational activities, those necessary to prepare for the initial public
offering, as described below, and since the closing of the initial public
offering, the search for a prospective initial business combination. We will not
be generating any operating revenues until the closing and completion of our
initial business combination, at the earliest. We generate non-operating income
in the form of interest income on cash and cash equivalents held after the
initial public offering. We incur expenses as a result of being a public company
(for legal, financial reporting, accounting and auditing compliance), as well as
due diligence expenses.
For the year ended December 31, 2022, we had a net income of $1,059,800 which
resulted from a gain on investments held in the Trust Account of $2,542,494,
offset by formation and operating costs of $1,452,694 and a loss on sale of
private placement warrants of $30,000.
For the period from February 3, 2021 (inception) through December 31, 2021, we
had a net loss of $482,997, which resulted from formation and operating costs of
$139,479, loss on sale of private placement warrants of $343,999, offset in part
by unrealized gain on investments held in Trust Account in the amount of $311
and realized gain on investments held in Trust Account of $170.
Liquidity, Capital Resources and Going Concern
As of December 31, 2022, the company had cash held outside of the Trust Account
of $461,914 and a working capital surplus of $63,250.
Our liquidity needs up to December 31, 2022 had been satisfied through a payment
of $25,000 from the sponsor to cover certain expenses on behalf of the company
in exchange for the issuance of the founder shares, a loan under the promissory
note from our sponsor of approximately $149,172, and the net proceeds from the
consummation of the private placement not held in the Trust Account. The
promissory note was repaid in full on December 21, 2021. In addition, in order
to finance transaction costs in connection with an initial business combination,
our officers, directors and initial shareholders may, but are not obligated to,
provide the company with working capital loans. To date, there are no amounts
outstanding under any working capital loans.
For the year ended December 31, 2022, net cash used in operating activities was
$413,917, which was due to our net income of $1,059,800 and a gain on
investments held in the Trust Account of $2,542,494, offset in part by changes
in working capital of $938,585 and a loss on the sale of private placement
warrants to our sponsor of $30,000.
For the period from February 3, 2021 (inception) through December 31, 2021, net
cash used in operating activities was $1,099,296, which was due to net loss of
$482,997, realized gain on investments held in the Trust Account of $311,
unrealized gain on investments held in the Trust Account of $170 and changes in
working capital of $959,817, offset in part by a non-cash loss on the sale of
private placement warrants of $343,999.
For the year ended December 31, 2022, net cash used in investing activities of
$25,250,000 was the result of the amount of net proceeds from the exercise of
the Over-Allotment Option being deposited to the Trust Account.
For the period from February 3, 2021 (inception) through December 31, 2021, net
cash used in investing activities of $202,000,000 was the result of the amount
of net proceeds from the closing of our initial public offering being deposited
to the Trust Account.
For the year ended December 31, 2022, net cash provided by financing activities
of $25,250,0000 was comprised of $24,500,000 in proceeds from the initial public
offering net of underwriting discount paid and $750,000 in proceeds from the
sale of private placement warrants.
For the period from February 3, 2021 (inception) through December 31, 2021, net
cash provided by financing activities of $203,975,127 was comprised of
$196,000,000 in proceeds from the initial public offering net of underwriting
discount paid, $8,600,000 in proceeds from the sale of private placement
warrants, $25,000 in proceeds from the issuance of Class B ordinary shares to
sponsor and $6,750 in proceeds from the issuance of Class B ordinary shares to
anchor investors, partially offset by the payment of $656,623 for offering costs
associated with the initial public offering.
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As of December 31, 2022, we had cash of $461,914 held outside the Trust Account.
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,
and structure, negotiate and complete an initial business combination.
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 an initial business
combination, the company may repay such loaned amounts out of the proceeds of
the Trust Account released to the company. Otherwise, such loans may be repaid
only out of funds held outside the Trust Account. In the event that we do not
consummate an initial business combination, 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 to repay such loaned amounts.
Up to $1,500,000 of such loans may be convertible into warrants of the
post-business-combination entity at a price of $1.00 per warrant at the option
of the lender. The warrants would be identical to the private placement
warrants. To date, there were no amounts outstanding under any of these loans.
Prior to the completion of the initial public offering, substantial doubt about
the company's ability to continue as a going concern existed as the company
lacked the liquidity it needed to sustain operations for a reasonable period of
time, which is considered to be one year from the issuance date of the financial
statements. The company has since completed its initial public offering at which
time capital in excess of the funds deposited in the Trust Account and/or used
to fund offering expenses was released to the company for general working
capital purposes.
Based on the cash forecast we prepared as of December 31, 2022, the amounts held
in the operating account will not provide the company with sufficient funds to
meet its operational and liquidity obligations up to the expiration date of
June 17, 2023.
Unless extended, the company will have until June 17, 2023 to complete an
initial business combination. If an initial business combination is not
consummated by June 17, 2023 and an extension has not been effected, there will
be a mandatory liquidation and subsequent dissolution of the company.
Based on the liquidity condition and the mandatory liquidation, we have
determined that there is substantial doubt about the company's ability to
continue as a going concern for a period of time within one year after the date
that the financial statements are issued. Although the company intends to
consummate a business combination on or before June 17, 2023, it is uncertain
whether the company will be able to do so by this time. While we expect to have
sufficient access to additional sources of capital if necessary, there is no
current confirmed financing commitment, and no assurance can be provided that
such additional financing will become available to the company. The accompanying
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of December 31, 2022 or
December 31, 2021.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than an agreement to pay an
affiliate of our sponsor a monthly fee of up to $1,000 for office space and
administrative support to the company. We began incurring service fees on
December 17, 2021 and will continue to incur such fees monthly until the earlier
of the completion of the initial business combination and the company's
liquidation.
Registration and Shareholder Rights Agreement
The holders of the founder shares, private placement warrants and warrants that
may be issued upon conversion of working capital loans (and any Class A ordinary
shares issuable upon the exercise of the private placement warrants and warrants
issued upon conversion of the working capital loans) have registration and
shareholder rights to require the company to register a sale of any of its
securities held by them pursuant to a registration and shareholder rights
agreement entered into on the date of the initial public offering. 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 an initial
business combination. The company will bear the expenses incurred in connection
with the filing of any such registration statements.
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Underwriting Agreement
The company granted the underwriter a 45-day option from the date of the initial
public offering to purchase up to 3,000,000 additional units to cover
over-allotments, if any, at the initial public offering price less the
underwriting discounts and commissions. On January 18, 2022, the company
announced the closing of its sale of an additional 2,500,000 units pursuant to
the partial exercise by the underwriter of its Over-Allotment Option. The units
were sold at an offering price of $10.00 per unit, generating gross proceeds of
$25,000,000.
The underwriter was paid a cash underwriting discount of $0.20 per unit, or
$4,500,000 in the aggregate, upon the closing of the initial public offering and
including the units sold pursuant to the over-allotment. In addition, $0.35 per
unit, or $7,875,000 in the aggregate will be payable to the underwriter for
deferred underwriting commissions. The underwriter has waived all rights to the
deferred underwriting commissions payable upon completion of any initial
business combination.
Critical Accounting Policies and Estimates
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:
Warrant Classification
The company accounts for the warrants issued in connection with the initial
public offering and the private placement in accordance with the guidance
contained in ASC 815-40 under which the warrants meet the criteria for equity
treatment and are recorded as equity.
Ordinary Shares Subject to Possible Redemption
All of the 22,500,000 Class A ordinary shares sold as part of the units in the
initial public offering (and including the units sold in connection with the
underwriters' partial exercise of the Over-Allotment Option) contain a
redemption feature which allows for the redemption of such public shares in
connection with the company's liquidation, if there is a shareholder vote or
tender offer in connection with the initial business combination and in
connection with certain amendments to the amended and restated memorandum and
articles of association. In accordance with ASC 480-10-S99, redemption
provisions not solely within the control of the company require ordinary shares
subject to redemption to be classified outside of permanent equity. Therefore,
all Class A ordinary shares have been classified outside of permanent equity.
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. The redemption value of the
redeemable ordinary shares as of December 31, 2022 increased as the income
earned on the Trust Account exceeds the company's expected dissolution expenses
(up to $100,000). As such, the company recorded an increase in the carrying
amount of the redeemable ordinary shares of $2,442,494 as of December 31, 2022.
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Net Income (Loss) Per Ordinary Share
Net income (loss) per ordinary share is computed by dividing net income (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 as part of the units and the private placement warrants in the
calculation of diluted loss per share, because 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 Standards
In August 2020, the FASB issued ASU 2020-06 to simplify accounting for certain
financial instruments. ASU 2020-06 eliminates the current models that require
separation of beneficial conversion and cash conversion features from
convertible instruments and simplifies the derivative scope exception guidance
pertaining to equity classification of contracts in an entity's own equity. The
new standard also introduces additional disclosures for convertible debt and
freestanding instruments that are indexed to and settled in an entity's own
equity. ASU 2020-06 amends the diluted earnings per share guidance, including
the requirement to use the if-converted method for all convertible instruments.
ASU 2020-06 is effective January 1, 2024 for emerging growth companies and
should be applied on a full or modified retrospective basis, with early adoption
permitted beginning on January 1, 2021. The company early adopted ASU 2020-06
effective January 1, 2021 using the modified retrospective method of transition.
The adoption of ASU 2020-06 did not have a material impact on the financial
statements for the year ended December 31, 2022 and for the period from
February 3, 2021 (inception) through December 31, 2021.
Management does not believe that any other recently issued, but not yet
effective, accounting standards, if currently adopted, would have a material
effect on the company's financial statements.
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SWIFTMERGE ACQUISITION CORP. 
