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 "Cautionary Note Regarding
Forward-Looking Statements and Risk Factor Summary," "Item 1A. Risk Factors" and
elsewhere in this Annual Report on Form 10-K.
Overview
Valuence Merger Corp. I was incorporated in the Cayman Islands on August 27,
2021. The Company was formed for the purpose of entering into a merger, share
exchange, asset acquisition, stock purchase, reorganization or other similar
business transaction with one or more businesses that the Company has not yet
identified (a "Business Combination").
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.
Results of Operations
As of December 31, 2022, the Company had not commenced any operations. All
activity through December 31, 2022 relates to the Company's formation and the
initial public offering (the "IPO"). The Company will not generate any operating
revenues until after the completion of a Business Combination, at the earliest.
The Company will generate non-operating income in the form of interest income
from the proceeds derived from the IPO placed in the Trust Account (defined
below).
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For the year ended December 31, 2022, we had a net income of $630,602, which
consisted of interest earned on investments held in trust account of $3,247,370,
offset by operating costs of $2,616,768.
For the period from August 27, 2021 (inception) through December 31, 2021, we
had net loss of $9,930.
Liquidity and Capital Resources
The registration statement for the Company's IPO (the "Registration Statement")
was declared effective on February 28, 2022. On March 3, 2022, the Company
consummated the sale of 20,000,000 units ("Units"). On March 4, 2022 the
underwriters of the IPO partially exercised their over-allotment option (the
"Over-Allotment Option") and, in connection therewith, on March 8, 2022 the
Company consummated the issuance and sale of an additional 2,009,963 Units. Each
Unit consists of one Class A ordinary shares, par value $0.0001 per share (the
"Public Shares"), and one-half of one redeemable warrant. The Units were sold at
a price of $10.00 per Unit, generating gross proceeds of $220,099,630.
Simultaneously with the closing of the IPO, the Company consummated the sale of
6,666,667 warrants ("Private Placement Warrants"), at a price of $1.50 per
Private Placement Warrant in a private placement, consisting of 2,666,667
Private Placement Warrants to the Company's sponsor, VMCA Sponsor, LLC (f/k/a
Valuence Capital, LLC) (the "Sponsor") and 4,000,000 Private Placement Warrants
to Valuence Partners LP, generating gross proceeds of $10,000,000, which is
described in Note 4.
Simultaneously with the exercise of the over-allotment, the Company consummated
the Private Placement of an additional 267,995 Private Placement Warrants to the
Sponsor, generating gross proceeds of $401,993.
Offering costs for the IPO and the exercise of the underwriters' over-allotment
option amounted to $10,718,994, consisting of $4,000,000 of underwriting fees,
net of $2,200,996 reimbursed from the underwriters, $8,105,480 of deferred
underwriting fees payable (which are held in the Trust Account (defined below))
and $814,510 of other costs. The $8,105,480 of deferred underwriting fee payable
is contingent upon the consummation of a Business Combination by June 3, 2023,
subject to the terms of the underwriting agreement.
Following the closing of the IPO and partial exercise of the over-allotment,
$226,702,619 ($10.30 per Unit) from the net proceeds of the sale of the Units in
the IPO and the Private Placement Warrants was placed in a trust account ("Trust
Account") and was invested in U.S. government securities, within the meaning set
forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the
"Investment Company Act"), with a maturity of 180 days or less or in any
open-ended investment company that holds itself out as a money market fund
selected by the Company meeting the conditions of paragraphs (d)(2), (d)(3) and
(d)(4) of Rule 2a-7 of the Investment Company Act, as determined by the Company,
until the earlier of (i) the completion of a Business Combination and (ii) the
distribution of 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 (less
taxes payable), to complete our Business Combination. To the extent that our
capital stock or debt is used, in whole or in part, as consideration to complete
our 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.
As of December 31, 2022, the Company had cash of $319,201 and a working capital
deficit of $1,416,208. In connection with the Company's assessment of going
concern considerations in accordance with Financial Accounting Standards Board
("FASB") Accounting Standards Update ("ASU") 2014-15, "Disclosures of
Uncertainties about an Entity's Ability to Continue as a Going Concern," the
Company has until June 3, 2023, to consummate a Business Combination. It is
uncertain that the Company 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 of the Company. Management
has determined that the liquidity condition and mandatory liquidation, should a
Business Combination not occur, and potential subsequent dissolution raises
substantial doubt about the Company's ability to continue as a going concern. No
adjustments have been made to the carrying amounts of assets or liabilities
should the Company be required to liquidate after June 3, 2023. Based on the
foregoing, management believes that the Company will not have sufficient working
capital and borrowing capacity from the Sponsor or an affiliate of the Sponsor,
or certain of the Company's officers and directors to meet its needs through the
earlier of the consummation of a Business Combination or one year from this
filing. However, the Working Capital Loans, as defined in Note 5, will provide
additional flexibility to continue our identification and pursuit of potential
business combination targets. Over this time period, the Company will be using
available funds, including those from the Working Capital Loans, for the purpose
of paying existing accounts payable, identifying and evaluating prospective
Initial Business Combination candidates, 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.
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In connection with the Company's assessment of going concern considerations in
accordance with FASB ASU 2014-15, "Disclosures of Uncertainties about an
Entity's Ability to Continue as a Going Concern," the Company has until June 3,
2023, to consummate a Business Combination. It is uncertain that the Company
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 of the Company. Management has determined
that the liquidity condition and mandatory liquidation, should a Business
Combination not occur, and potential subsequent dissolution raises substantial
doubt about the Company's ability to continue as a going concern. No adjustments
have been made to the carrying amounts of assets or liabilities should the
Company be required to liquidate after June 3, 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, 2022 and 2021. We do not
participate in transactions that create relationships with 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. The underwriters are entitled to a
deferred underwriting commissions of $0.35 per unit, or $8,105,480 from the
closing of the IPO. The deferred fee will become payable to the underwriters
from the amounts held in the Trust Account solely if the Company completes a
Business Combination, subject to the terms of the underwriting agreement.
JOBS Act
On April 5, 2012, the Jumpstart Our Business Startups Act of 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.
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Critical Accounting 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. The Company has not identified any critical accounting estimates.
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