UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
For the transition period from to
Commission file number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) |
(Address of principal executive offices)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Units, consisting of one Class A Ordinary Share, $0.0001 par value, one-half of one redeemable Warrant, each whole warrant to acquire one Class A Ordinary Share, and one Right to acquire one-tenth of one Class A Ordinary Share | BWAQU | The Nasdaq Stock Market LLC | ||
The | ||||
Redeemable Warrants, each whole warrant exercisable for one Class A Ordinary Share at an exercise price of $11.50 per share | BWAQW | The Nasdaq Stock Market LLC | ||
Rights, each to receive one-tenth (1/10) of one ordinary share | BWAQR | The Nasdaq Stock Market LLC | ||
Rights, each whole right to acquire one-tenth of one Class A Ordinary Share |
Indicate by check mark whether the registrant
has (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting company | ||
Emerging Growth Company |
If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of the date hereof, there were
BLUE WORLD ACQUISITION CORPORATION
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2022
TABLE OF CONTENTS
i
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
BLUE WORLD ACQUISITION CORPORATION
CONDENSED BALANCE SHEETS
December 31, 2022 | June 30, 2022 | |||||||
Assets | (Unaudited) | (Audited) | ||||||
Current assets: | ||||||||
Cash | $ | $ | ||||||
Prepaid expenses | ||||||||
Prepaid expenses - related party | - | |||||||
Total Current Assets | ||||||||
Investment held in Trust Account | ||||||||
Cash held in Escrow Account | ||||||||
Total Assets | $ | $ | ||||||
Liabilities, Ordinary Shares Subject to Possible Redemption and Shareholders’ Deficit | ||||||||
Current liabilities | ||||||||
Accounts payable and accrued expenses | $ | $ | ||||||
Due to related party | ||||||||
Promissory note - related party | ||||||||
Total Current Liabilities | ||||||||
Deferred underwriting discounts and commissions | ||||||||
Total Liabilities | ||||||||
Commitments and Contingencies (Note 7) | ||||||||
Class A ordinary shares subject to possible redemption, | ||||||||
Shareholders’ Deficit: | ||||||||
Preference shares, $ | ||||||||
Class A ordinary shares, $ | ||||||||
Class B ordinary shares, $ | ||||||||
Additional paid-in capital | ||||||||
Accumulated deficit | ( | ) | ( | ) | ||||
Total Shareholders’ Deficit | ( | ) | ( | ) | ||||
Total Liabilities, Ordinary Shares Subject to Possible Redemption and Shareholders’ Deficit | $ | $ |
The accompanying notes are an integral part of these unaudited condensed financial statements.
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BLUE WORLD ACQUISITION CORPORATION
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
For the Three Months Ended December 31, 2022 | For the Three Months Ended December 31, 2021 | For the Six Months Ended December 31, 2022 | For the Period from July 19, 2021 (inception) through December 31, 2021 | |||||||||||||
Formation and operating costs | $ | $ | $ | $ | ||||||||||||
Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Other income: | ||||||||||||||||
Dividend earned on investment held in Trust Account | - | |||||||||||||||
Interest income | ||||||||||||||||
Total other income | ||||||||||||||||
Net income (loss) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
$ | $ | $ | $ | |||||||||||||
(1) | (1) | |||||||||||||||
$ | $ | ( | ) | $ | $ | ( | ) |
(1) |
The accompanying notes are an integral part of these unaudited condensed financial statements.
2
BLUE WORLD ACQUISITION CORPORATION
UNAUDITED CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT
For the Six Months Ended December 31, 2022 | ||||||||||||||||||||||||||||
Ordinary Shares | Additional | Total | ||||||||||||||||||||||||||
Class A | Class B | Paid-in | Accumulated | Shareholders' | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
Balance as of June 30, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
Remeasurement of Class A ordinary shares subject to possible redemption | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
Net loss | - | - | ||||||||||||||||||||||||||
Balance as of September 30, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||
Remeasurement of Class A ordinary shares subject to possible redemption | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
Net income | - | - | ||||||||||||||||||||||||||
Balance as of December 31, 2022 | $ | | $ | $ | $ | ( | ) | $ | ( | ) |
For the Period from July 19, 2021 (inception) through December 31, 2021 | ||||||||||||||||||||||||||||
Ordinary Shares | Additional | Total | ||||||||||||||||||||||||||
Class A | Class B | Paid-in | Accumulated | Shareholders' | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
Balance as of July 19, 2021 (inception) | $ | $ | $ | $ | $ | |||||||||||||||||||||||
Founder shares issued to initial shareholder | | |||||||||||||||||||||||||||
Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
Balance as of September 30, 2021 | - | ( | ) | |||||||||||||||||||||||||
Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
Balance as of December 31, 2021 | $ | $ | $ | $ | ( | ) | $ |
The accompanying notes are an integral part of these unaudited condensed financial statements.
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BLUE WORLD ACQUISITION CORPORATION
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
For the Six Months Ended December 31, 2022 | For the Period from July 19, 2021 (inception) through December 31, 2021 | |||||||
Cash Flows from Operating Activities: | ||||||||
Net income (loss) | $ | $ | ( | ) | ||||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Dividend earned on investment held in Trust Account | ( | ) | ||||||
Changes in operating assets and liabilities: | ||||||||
Prepaid expenses | ||||||||
Prepaid expenses - related party | ( | ) | ||||||
Accounts payable and accrued expenses | ||||||||
Net Cash Used in Operating Activities | ( | ) | ( | ) | ||||
Cash Flows from Financing Activities: | ||||||||
Proceeds from issuance of promissory note to related party | ||||||||
Net Cash Provided by Financing Activities | ||||||||
Net Change in Cash | ( | ) | ||||||
Cash, beginning of period | ||||||||
Cash, end of period | $ | $ | ||||||
Supplemental Disclosure of Cash Flow Information: | ||||||||
Offering costs paid by Sponsor in exchange for issuance of Class B ordinary shares | $ | $ | ||||||
Offering costs paid by promissory note – related party | $ | $ | ||||||
Remeasurement of Class A ordinary shares subject to possible redemption | $ | $ |
The accompanying notes are an integral part of these unaudited condensed financial statements.
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NOTE 1 — ORGANIZATION, BUSINESS OPERATIONS, AND GOING CONCERN
Blue World Acquisition Corporation (the “Company”) is a blank check exempted company incorporated on July 19, 2021, under the laws of the Cayman Islands for the purpose of entering into a merger, share exchange, asset acquisition, share purchase, recapitalization, reorganization or similar business combination with one or more businesses or entities (“Business Combination”). The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and is subject to all risks associated with emerging growth companies (See Note 2). The Company’s efforts to identify a prospective target business will primarily in the marine leisure, cruise, marine infrastructure and engineering, general hospitality, travel and tourism, marine services, logistics and supply chain, offshore energy solutions and related industry segments. The Company is not limited to a particular region for purposes of consummating an initial Business Combination, however, the Company may focus on targets that, regardless of geographic location of operations or corporate offices, have viable synergies with the Asia Pacific and the U.S. markets for the above industry segments, either physically or virtually. The Company will not undertake its initial Business Combination with any entity that conducts a majority of its business or is headquartered in China (including Hong Kong and Macau).
As of December 31, 2022, the Company had not commenced any operations. For the period from July 19, 2021 (inception) through December 31, 2022, the Company’s efforts have been limited to organizational activities as well as activities related to its initial public offering (the “Initial Public Offering”) as described below. 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 dividend/interest income from the proceeds derived from the Initial Public Offering. The Company has selected June 30 as its fiscal year end.
The registration statement for the Company’s
Initial Public Offering became effective on January 31, 2022. On February 2, 2022, the Company consummated the Initial Public Offering
of
Simultaneously with the closing of the Initial
Public Offering, the Company completed the private sale of
5
The Company also issued
Transaction costs amounted to $
Following the closing of the Initial Public Offering
and the issuance and the sale of Private Units on February 2, 2022, $
The Company will provide its public shareholders
with the opportunity to redeem all or a portion of their public shares upon the completion of an initial Business Combination at a per-share price,
payable in cash, equal to the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation
of its initial Business Combination, including interest earned on the funds held in the Trust Account and not previously released to the
Company to pay its taxes, divided by the number of then outstanding public shares, subject to certain limitations. The amount in the Trust
Account is initially anticipated to be $
The Company will proceed with a Business Combination
if the Company has net tangible assets of at least $
6
The Company’s founders and Maxim (the “Initial
Shareholders”) have agreed (a) to vote their Founder Shares (as defined below), the Class A Ordinary Shares included in
the Private Units (the “Private Shares”), the Representative Shares and any Class A Ordinary Shares included in the Public
Units (the “Public Shares”) purchased during or after the Initial Public Offering in favor of a Business Combination, (b) not
to propose, or vote in favor of, an amendment to the Company’s Amended and Restated Memorandum and Articles of Association that
would stop the public shareholders from redeeming or selling their shares to the Company in connection with a Business Combination or
affect the substance or timing of the Company’s obligation to redeem
The Company initially had until February 2, 2023
to complete an initial Business Combination. However, if the Company anticipates that it may not be able to consummate a Business Combination
by February 2, 2023, the Company may, but is not obligated to, extend the period of time to consummate a Business Combination three times
by an additional three months each time (for a total of up to November 2, 2023 to complete a Business Combination) (the “Combination
Period”). In order to extend the time available for the Company to consummate a Business Combination, the Sponsor or its affiliates
or designees must deposit into the Trust Account $
If the Company is unable to complete a Business
Combination within the Combination Period, the Company will (i) cease all operations except for the purpose of winding up, (ii) as
promptly as reasonably possible but no more than ten business days thereafter, redeem
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Liquidity and Going Concern
As of December 31, 2022, the Company had cash
of $
Risks and Uncertainties
Management is currently evaluating 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 the Company’s future financial position, results of its operations and/or search for a target company, there has been a significant impact as of the date of these unaudited condensed financial statements. The unaudited condensed financial statements do not include any adjustments that might result from the future outcome of this uncertainty.
Additionally, as a result of the military action commenced in February 2022 by the Russian Federation and Belarus in the country of Ukraine and related economic sanctions, the Company’s ability to consummate a Business Combination, or the operations of a target business with which the Company ultimately consummates a Business Combination, may be materially and adversely affected. In addition, the Company’s ability to consummate a transaction may be dependent on the ability to raise equity and debt financing which may be impacted by these events, including as a result of increased market volatility, or decreased market liquidity in third-party financing being unavailable on terms acceptable to the Company or at all. The impact of this action and related sanctions on the world economy and the specific impact on the Company’s financial position, results of operations and/or ability to consummate a Business Combination are not yet determinable. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES
● | Basis of presentation |
These accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information or footnote disclosures normally included in unaudited condensed financial statements prepared in accordance with US GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.
8
The interim results for the three months and six months ended December 31, 2022 are not necessarily indicative of the results to be expected for the year ending June 30, 2023 or for any future interim periods. These condensed consolidated financial statements and accompanying notes should be read in conjunction with the Company’s annual consolidated financial statements and accompanying notes included in its Annual Report on Form 10-K for the fiscal year ended June 30, 2022.
● | Emerging growth company status |
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act, and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
● | Use of estimates |
In preparing these unaudited condensed financial statements in conformity with U.S. GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements and the reported expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the unaudited condensed financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, actual results may differ from these estimates.
● | Cash and cash equivalents |
The Company considers all short-term investments
with an original maturity of three months or less when purchased to be cash equivalents. The Company had $
9
● | Investment held in Trust Account |
As of December 31, 2022 and June 30, 2022, the
assets held in the Trust Account include $
The Company classifies its U.S. Treasury and equivalent securities as held-to-maturity in accordance with ASC Topic 320 “Investments — Debt and Equity Securities.” Held-to-maturity securities are those securities which the Company has the ability and intent to hold until maturity. Held-to-maturity treasury securities are recorded at amortized cost on the accompanying balance sheet and adjusted for the amortization or accretion of premiums or discounts.
● | Cash held in Escrow Account |
The Company has entered into a certain escrow
agreement with Continental Stock Transfer & Trust Company who acts as the escrow agent pursuant to which the Company agreed to deposit
the aggregated amount of $
As of December 31, 2022 and June 30, 2022, the
Company had $
● | Net income (loss) per ordinary share |
The Company complies with accounting and disclosure requirements of FASB ASC 260, Earnings Per Share. The Company has two classes of shares, which are referred to as redeemable shares and non-redeemable shares. Earnings and losses are shared pro rata between the two classes of shares. In order to determine the net loss attributable to both the redeemable shares and non-redeemable shares, the Company first considered the undistributed income (loss) allocable to both the redeemable ordinary shares and non-redeemable ordinary shares and the undistributed income (loss) is calculated using the total net income (loss) less any dividends paid. The Company then allocated the undistributed income (loss) ratably based on the weighted average number of shares outstanding between the redeemable and non-redeemable ordinary shares. The table below presents a reconciliation of the numerator and denominator used to compute basic and diluted net income (loss) per share for each class of ordinary shares:
For the Three Months Ended | For the Three Months Ended | |||||||||||||||
December 31, 2022 | December 31, 2021 | |||||||||||||||
Redeemable Class A Ordinary Shares | Non-Redeemable Class A and Class B Ordinary Shares | Redeemable Class A Ordinary Shares | Class B Ordinary Shares | |||||||||||||
Basic and diluted net income (loss) per share: | ||||||||||||||||
Numerators: | ||||||||||||||||
Allocation of net income (loss) | $ | $ | $ | $ | ( | ) | ||||||||||
Denominators: | ||||||||||||||||
Weighted-average shares outstanding | (1) | |||||||||||||||
$ | $ | $ | $ | ( | ) |
10
For the Six Months Ended | For the Period from July 19, 2021 (inception) through | |||||||||||||||
December 31, 2022 | December 31, 2021 | |||||||||||||||
Redeemable Class A Ordinary Shares | Non-Redeemable Class A and Class B Ordinary Shares | Redeemable Class A Ordinary Shares | Class B Ordinary Shares | |||||||||||||
Basic and diluted net income (loss) per share: | ||||||||||||||||
Numerators: | ||||||||||||||||
Allocation of net income (loss) | $ | $ | $ | $ | ( | ) | ||||||||||
Denominators: | ||||||||||||||||
Weighted-average shares outstanding | (1) | |||||||||||||||
$ | $ | $ | $ | ( | ) |
(1) | This number excludes an aggregate of up to |
● | Class A ordinary shares subject to possible redemption |
The Company accounts for its ordinary shares subject
to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Ordinary
shares subject to mandatory redemption (if any) are classified as a liability instrument and measured at fair value. Conditionally redeemable
ordinary shares (including 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.
At all other times, ordinary shares are classified as shareholders’ equity. The Company’s Class A Ordinary Shares feature
certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain
future events. Accordingly,
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of Class A Ordinary Shares to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable Class A Ordinary Shares are affected by charges against additional paid in capital and accumulated deficit.
11
As of December 31, 2022 and June 30, 2022, the amount of Class A Ordinary Shares reflected on the balance sheet are reconciled in the following table:
December 31, 2022 | June 30, 2022 | |||||||
Gross proceeds | $ | $ | ||||||
Less: | ||||||||
Proceeds allocated to Public Warrants and Public Rights | ( | ) | ( | ) | ||||
Offering costs of Public Shares | ( | ) | ( | ) | ||||
Plus: | ||||||||
Initial measurement adjustment on redeemable ordinary shares | ||||||||
Re-measurement adjustment on redeemable ordinary shares | ||||||||
Class A ordinary shares subject to possible redemption | $ | $ |
● | Share-based compensation expense |
The Company accounts for share-based compensation expense in accordance with ASC 718, “Compensation - Stock Compensation” (“ASC 718”). Under ASC 718, share-based compensation associated with equity-classified awards is measured at fair value upon the grant date and recognized over the requisite service period. To the extent a share-based award is subject to a performance condition, the amount of expense recorded in a given period, if any, reflects an assessment of the probability of achieving such performance condition, with compensation recognized once the event is deemed probable to occur. Forfeitures are recognized as incurred (see Note 5 for more discussion about the details). For the three months ended December 31, 2022 and 2021, for the six months ended December 31, 2022 and for the period from July 19, 2021 (inception) through December 31, 2021, the Company did not recognize any share-based compensation expense.
● | 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 Financial Accounting Standards Board (“FASB”) ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 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 and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, 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 equity at the time of issuance. The Company determined that upon further review of the warrant agreements, the Company concluded that its warrants qualify for equity accounting treatment.
● | Income taxes |
Income taxes are determined in accordance with the provisions of ASC Topic 740, “Income Taxes” (“ASC 740”). Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis.
Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Any effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
12
ASC 740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. The Company’s management determined that the Cayman Islands is the Company’s major tax jurisdiction. The Company recognizes accrued interest and penalties related to unrecognized tax benefits, if any, as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of December 31, 2022 and June 30, 2022. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
The Company’s tax provision is
The Company is considered to be an exempted Cayman Islands company, and is presently not subject to income taxes or income tax filing requirements in the Cayman Islands or the United States.
● | Concentration of Credit Risk |
Financial instruments that potentially subject
the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed the Federal
Depository Insurance Coverage of $
● | Fair value of financial instrument |
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under FASB ASC 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the balance sheet, primarily due to its short-term nature.
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The Company’s financial instruments are classified as either Level 1, Level 2 or Level 3. These tiers include:
- | Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; |
- | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
- | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
● | Recent accounting pronouncements |
In August 2020, the FASB issued a new standard (ASU 2020-06) to reduce the complexity of accounting for convertible debt and other equity-linked instruments. For certain convertible debt instruments with a cash conversion feature, the changes are a trade-off between simplifications in the accounting model (no separation of an “equity” component to impute a market interest rate, and simpler analysis of embedded equity features) and a potentially adverse impact to diluted earnings per share by requiring the use of the if-converted method. The new standard will also impact other financial instruments commonly issued by both public and private companies. For example, the separation model for beneficial conversion features is eliminated simplifying the analysis for issuers of convertible debt and convertible preferred stock. Also, certain specific requirements to achieve equity classification and/or qualify for the derivative scope exception for contracts indexed to an entity’s own equity are removed, enabling more freestanding instruments and embedded features to avoid mark-to-market accounting. The new standard is effective for companies that are SEC filers (except for smaller reporting companies) for fiscal years beginning after December 15, 2021 and interim periods within that year, and two years later for other companies. Companies can early adopt the standard at the start of a fiscal year beginning after December 15, 2020. The standard can either be adopted on a modified retrospective or a full retrospective basis. The adoption of ASU 2020-06 on July 1, 2022 did not have a material effect on the Company’s unaudited condensed financial statements.
13
Management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s unaudited condensed financial statements.
NOTE 3 — INITIAL PUBLIC OFFERING
On February 2, 2022, the Company consummated the
Initial Public Offering of
NOTE 4 — PRIVATE PLACEMENT
Simultaneously with the closing of the Initial
Public Offering, the Company completed the private sale of
NOTE 5 — RELATED PARTY TRANSACTIONS
Founder Shares
On August 5, 2021, the Sponsor acquired
As of December 31, 2022 and June 30, 2022, there
were
Simultaneously with the effectiveness of the registration
statement and closing of the Initial Public Offering (including the full exercise of over-allotment option), the Sponsor transferred
The transfer of the Founders Shares to the Company’s
independent directors, as described above, is within the scope of FASB ASC Topic 718, “Compensation-Stock Compensation” (“ASC
718”). Under ASC 718, share-based compensation associated with equity-classified awards is measured at fair value upon the grant
date. The Company used a Finnerty put model that values the Founder Shares granted to the directors. The key inputs into the Finnerty
put model were (i) risk- free interest rate of
14
Prepaid Expenses — Related Party
Due the six months ended December 31, 2022, the
Company prepaid $
Promissory Note — Related Party
On August 5, 2021, the Sponsor has agreed
to loan the Company up to an aggregate amount of $
On November
30, 2022, the Company issued an unsecured promissory note (the “Promissory Note”) in the principal amount of $
The Notes bear no interest and is payable in full upon the earlier to occur of (i) the consummation of the Business Combination or (ii) the date of expiry of the term of the Company (the “Maturity Date”). The following shall constitute an event of default: (i) a failure to pay the principal within five business days of the Maturity Date; (ii) the commencement of a voluntary or involuntary bankruptcy action, (iii) the breach of the Company’s obligations thereunder; (iv) any cross defaults; (v) an enforcement proceedings against the Company; and (vi) any unlawfulness and invalidity in connection with the performance of the obligations thereunder, in which case the Notes may be accelerated.
The payee
of the Notes, the Sponsor, has the right, but not the obligation, to convert the Notes, in whole or in part, respectively, into private
units (the “Conversion Units”) of the Company, each consisting of one Class A Ordinary Share, one-half of one warrant, and
one right to receive one-tenth (1/10) of one Class A Ordinary Share upon the consummation of a Business Combination, as described in the
prospectus of the Company (File Number 333-261585), by providing the Company with written notice of the intention to convert at least
two business days prior to the closing of the Business Combination. The number of Conversion Units to be received by the Sponsor in connection
with such conversion shall be an amount determined by dividing (x) the sum of the outstanding principal amount payable to such Payee by
(y) $
As of December 31, 2022 and June 30, 2022, the
Company had borrowings of $
Working Capital Loans
In order to meet the Company’s working capital
needs following the consummation of the Initial Public Offering, the Sponsor, officers and directors or their affiliates may, but are
not obligated to, loan the Company funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion
(the “Working Capital Loans”). Each loan would be evidenced by a promissory note.
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If the Company anticipates that it may not be
able to consummate its initial Business Combination by May 2, 2023, it may, but is not obligated to, extend the period of time to consummate
a Business Combination another two times by an additional three months each time (for a total of up to up to November 2, 2023 to
complete a Business Combination). In order to extend the time available for us to consummate its initial Business Combination, the Sponsor
or its affiliates or designees, upon five days advance notice prior to the applicable deadline, must deposit into the Trust Account
for each three-month extension $
As of December 31, 2022 and June 30, 2022, the Company had no borrowings under the Working Capital Loans.
Administrative Services Agreement
The Company is obligated, commencing from the
effective date of the Initial Public Offering to pay the Sponsor, a monthly fee of $
NOTE 6 — SHAREHOLDERS’ EQUITY
Preference Shares — The Company
is authorized to issue
Class A Ordinary Shares — The
Company is authorized to issue
Class B Ordinary Shares — The
Company is authorized to issue
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Rights
As of December 31, 2022 and June 30, 2022, there
were
The Company will not issue fractional shares in connection with an exchange of Public Rights. Fractional shares will either be rounded down to the nearest whole share or otherwise addressed in accordance with the applicable provisions of the Companies Act and any other applicable. As a result, the holders of the Public Rights must hold rights in multiples of 10 in order to receive shares for all of the holders’ rights upon closing of a Business Combination. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of Public Rights will not receive any of such funds with respect to their Public Rights, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such Public Rights, and the Public Rights will expire worthless. Further, there are no contractual penalties for failure to deliver securities to the holders of the Public Rights upon consummation of a Business Combination. Additionally, in no event will the Company be required to net cash settle the rights. Accordingly, the rights may expire worthless.
Redeemable Warrants
As of December 31, 2022 and June 30, 2022, there
were
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The Company may call the warrants for redemption (excluding the private warrants), in whole and not in part, at a price of $0.01 per warrant:
● | at any time while the warrants are exercisable, |
● | upon not less than 30 days’ prior written notice of redemption to each warrant holder, |
● | if, and only if, the reported last sale price of the Class A Ordinary Shares equals or exceeds $16.50 per share (as adjusted for share dividends, share splits, share aggregation, extraordinary dividends, reorganizations, recapitalizations and the like), for any 20 trading days within any 30-trading day period commencing after the warrant become exercisable and ending one the third trading day prior to the date on which notice of redemption is given to warrant holders (the “Force-Call Provision”), and |
● | if, and only if, there is a current registration statement in effect with respect to the Class A Ordinary Shares underlying such warrants at the time of redemption and for the entire 30-days trading period referred to above and continuing each day thereafter until the date of redemption. |
The right to exercise will be forfeited unless the warrants are exercised prior to the date specified in the notice of redemption. On and after the redemption date, a record holder of a warrant will have no further rights except to receive the redemption price for such holder’s warrant upon surrender of such warrant.
The redemption criteria for the Company’s warrants have been established at a price which is intended to provide warrant holders a reasonable premium to the initial exercise price and provide a sufficient differential between the then-prevailing share price and the warrant exercise price so that if the share price declines as a result of the Company’s redemption call, the redemption will not cause the share price to drop below the exercise price of the warrants.
If the Company call the warrants for redemption as described above, its management will have the option to require all holders that wish to exercise warrants to do so on a “cashless basis.” In such event, each holder would pay the exercise price by surrendering the whole warrants for that number of Class A Ordinary Shares equal to the quotient obtained by dividing (x) the product of the number of Class A Ordinary Shares underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair market value” shall mean the average reported last sale price of the Class Ordinary Shares for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants.
Whether the Company will exercise its option to require all holders to exercise their warrants on a “cashless basis” will depend on a variety of factors including the price of its Class A Ordinary Shares at the time the warrants are called for redemption, its cash needs at such time and concerns regarding dilutive share issuances.
In addition, if the Company (a) issues additional Class A Ordinary Shares or equity-linked securities for capital raising purposes in connection with the closing of its initial Business Combination at an issue price or effective issue price of less than $9.20 per share (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of any such issuance to the Company’s initial shareholders or their affiliates, without taking into account any Class B ordinary shares issued prior to the offering and held by the initial shareholders or their affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (b) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of its initial Business Combination on the date of the consummation of its initial Business Combination (net of redemptions), and (c) the volume weighted average trading price of the Company’s Class A Ordinary Shares during the 20 trading day period starting on the trading day prior to the date of the consummation of the Company’s initial Business Combination (such price, the “Market Value”) is below $9.20 per share, then the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the greater of (i) the Market Value or (ii) the Newly Issued Price, and the $16.50 per share redemption trigger price described below under “Redemption of warrants” will be adjusted (to the nearest cent) to be equal to 180% of the greater of (i) the Market Value or (ii) the Newly Issued Price.
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The warrants may be exercised upon surrender of the warrant certificate on or prior to the expiration date at the offices of the warrant agent, with the exercise form on the reverse side of the warrant certificate completed and executed as indicated, accompanied by full payment of the exercise price, by certified or official bank check payable to the Company, for the number of warrants being exercised. The warrant holders do not have the rights or privileges of holders of Class A Ordinary Shares and any voting rights until they exercise their warrants and receive Class A Ordinary Shares. After the issuance of Class A Ordinary Shares upon exercise of the warrants, each holder will be entitled to one vote for each share held of record on all matters to be voted on by shareholders.
The Private Warrants have terms and provisions that are identical to those of the Public Warrants being sold as part of the Public Units in the Initial Public Offering except that the Private Warrants will be entitled to registration rights. The Private Warrants (including the Class A Ordinary Shares issuable upon exercise of the Private Warrants) will not be transferable, assignable or saleable until the completion of the Company’s initial Business Combination except to permitted transferees, subject to certain exceptions.
NOTE 7 — COMMITMENTS AND CONTINGENCIES
Registration Rights
The holders of the Founder Shares issued and outstanding on the date of the Company’s prospectus, as well as the holders of the Private Units (and all underlying securities) and any securities its initial shareholders, officers, directors or their affiliates may be issued in payment of working capital loans made to the Company, will be entitled to registration rights pursuant to an agreement to be signed prior to or on the effective date of the Initial Public Offering. The holders of the majority of the Founder Shares can elect to exercise these registration rights at any time commencing three months prior to the date on which these ordinary shares are to be released from escrow. The holders of a majority of the Private Units (and underlying securities) and securities issued in payment of Working Capital Loans (or underlying securities) or extension loans can elect to exercise these registration rights at any time after the Company consummates a Business Combination. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the consummation of a Business Combination. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The Representative will be entitled to a deferred
fee of
Representative Shares
The Company issued
The Representative Shares have been deemed compensation by FINRA and are therefore subject to a lock-up for a period of 180 days immediately following the date of the effectiveness of the registration statement of which this prospectus forms a part pursuant to FINRA Rule 5110 (e)(1). Pursuant to FINRA Rule 5110(e)(1), these securities will not be the subject of any hedging, short sale, derivative, put or call transaction that would result in the economic disposition of the securities by any person for a period of 180 days immediately following the effective date of the registration statement of which this prospectus forms a part, nor may they be sold, transferred, assigned, pledged or hypothecated for a period of 180 days immediately following January 31, 2022, the effective date of the Company’s registration statement except to any underwriter and selected dealer participating in the offering and their officers, partners, registered persons or affiliates.
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Right of First Refusal
Subject to certain conditions, the Company granted
Maxim, for a period of 12 months after the date of the consummation of its Business Combination, a right of first refusal to act
as book running manager with at least
NOTE 8 — FAIR VALUE MEASUREMENTS
As of December 31, 2022 and June 30, 2022, investment
securities in the Company’s Trust Account consisted of a treasury securities fund in the amount of $
December 31, 2022 | Carrying Value | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | ||||||||||||
Assets: | ||||||||||||||||
Investments held in Trust Account – Money Market Funds | $ | $ | $ | - | $ | - | ||||||||||
Total | $ | $ | $ | - | $ | - |
June 30, 2022 | Carrying Value | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | ||||||||||||
Assets: | ||||||||||||||||
Investments held in Trust Account – Money Market Funds | $ | $ | $ | $ | ||||||||||||
Total | $ | $ | $ | $ |
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The following table presents information about the Company’s equity instrument that are measured at fair value on a non-recurring basis at February 2, 2022, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
Level | February 2, 2022 | |||||||
Equity instrument: | ||||||||
Representative shares | 3 | $ |
The Company used a Finnerty put model that values
the Representative Shares granted to Maxim Group LLC. The key inputs into the Finnerty put model were (i) risk- free interest rate of
NOTE 9 — SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that these unaudited condensed financial statements were issued. Except as discussed below, the Company did not identify any other subsequent events that would have required adjustment or disclosure in the unaudited condensed financial statements.
On February 2, 2023, in connection with the Extension,
$
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other Securities and Exchange Commission (“SEC”) filings. References to “we”, “us”, “our” or the “Company” are to Blue World Acquisition Corporation, except where the context requires otherwise. The following discussion should be read in conjunction with our condensed financial statements and related notes thereto included elsewhere in this report.
Overview
We are a blank check exempted company incorporated in the Cayman Islands on July 19, 2021 with limited liability (meaning our public shareholders have no liability, as shareholders of the Company, for the liabilities of the Company over and above the amount paid for their shares) to serve as a vehicle to effect a merger, share exchange, asset acquisition, share purchase, recapitalization, reorganization or similar business combination with one or more target businesses (the “Business Combination”). Our efforts to identify a prospective target business will not be limited to a particular industry or geographic location. We intend to utilize cash derived from the proceeds of our initial public offering (the “IPO”), our securities, debt or a combination of cash, securities and debt, in effecting a business combination. We have not selected any target business for our initial Business Combination.
We presently have no revenue, have had losses since inception from incurring formation and operating costs and have had no operations other than identifying and evaluating suitable acquisition transaction candidates. We have relied upon the working capital available to us following the consummation of the IPO and the Private Placement (as defined below) to fund our operations, as well as the funds loaned by the Sponsor (as defined below), our officers, directors or their affiliates.
On February 2, 2022, we consummated the IPO of 9,200,000 units (the “Units”), which included 1,200,000 Units issued upon the full exercise of the underwriter’s over-allotment option. Each Unit consists of one Class A Ordinary Share, $0.0001 par value per share (the “Class A Ordinary Share”), one-half of one redeemable warrant (the “Warrants”), each whole Warrant entitling the holder thereof to purchase one Class A Ordinary Share at an exercise price of $11.50 per share, and one right (the “Right”), each one Right entitling the holder thereof to exchange for one-tenth of one Class A Ordinary Share upon the completion of our initial Business Combination. The Units were sold at an offering price of $10.00 per Unit, generating gross proceeds of $92,000,000.
On February 2, 2022, simultaneously with the consummation of the IPO, we completed the private sale (the “Private Placement”) of 424,480 units (the “Private Units”) including 378,480 Private Units to our sponsor, Blue World Holdings Limited (the “Sponsor”), and 46,000 Private Units to Maxim Group LLC (“Maxim”), the sole underwriter of the IPO, respectively, at a purchase price of $10.00 per Private Unit, generating gross proceeds to us of $4,244,800.
The proceeds of $ 92,920,000 ($10.10 per Unit) in the aggregate from the IPO and the Private Placement, were placed in a trust account (the “Trust Account”) established for the benefit of our public shareholders and the underwriter of the IPO with Continental Stock Transfer & Trust Company acting as trustee.
Our management has broad discretion with respect to the specific application of the net proceeds of IPO and the Private Placements, although substantially all of the net proceeds are intended to be applied generally towards consummating a Business Combination.
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Recent Development
On March 11, 2022, we announced that holders of our Units may elect to separately trade the Class A Ordinary Shares, Warrants, and Rights included in its Units, commencing on or about March 16, 2022.
Class A Ordinary Shares, Warrants, and Rights are traded on the Nasdaq Global Market (“Nasdaq”) under the symbols “BWAQ,” “BWAQW,” and “BWAQR,” respectively. Units not separated are traded on Nasdaq under the symbol “BWAQU”.
As of the date of this report, we have not entered into any definitive agreements, for the purpose of acquiring, engaging in a share exchange, share reconstruction and amalgamation with, purchasing all or substantially all of the assets of, entering into contractual arrangements with, or engaging in any other similar business combination with one or more businesses or entities.
We initially had until February 2, 2023 to consummate our initial Business Combination. Upon the notice of the Sponsor, we extended the period of time to consummate a Business Combination for additional three months till May 2, 2023 (the “First Extension”) and deposited $920,000 into the Trust Account in connection with this First Extension sourced from the loans provided by the Sponsor as evidenced by the Extension Note (as defined below). However, if we anticipate that we may not be able to consummate our initial Business Combination by May 2, 2023, we may, but are not obligated to, further extend the period of time to consummate a Business Combination another two times by an additional three months each time by depositing $920,000 into the Trust Account for each extension and may have until November 2, 2023 to consummate our initial Business Combination.
Results of Operations
We have neither engaged in any operations nor generated any operating revenues to date. Our only activities from inception through December 31, 2022 were organizational activities and those necessary to prepare for the IPO, described below. We do not expect to generate any operating revenues until after the completion of our initial Business Combination. We expect to generate non-operating income in the form of interest income on marketable securities held after the IPO. We expect that we will incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses in connection with searching for, and completing, a Business Combination.
For the three months ended December 31, 2022, we had a net income of $440,377, which consisted of dividend earned on investment held in Trust Account and interest income of $786,027 offset by formation and operations costs of $345,650.
For the three months ended December 31, 2021, we had a net loss of $12,327 resulted from formation and operations costs.
For the six months ended December 31, 2022, we had a net income of $688,702, which consisted of dividend earned on investment held in Trust Account and interest income of $1,205,434 offset by formation and operations costs of $516,732.
For the period from July 19, 2021 (inception) through December 31, 2021, we had a net loss of $19,833 resulted from formation and operations costs.
Liquidity and Capital Resources
For the period from July 19, 2021 (inception) through December 31, 2022, cash used in operating activities was $474,134. As of December 31, 2022, we had cash outside the Trust Account of $57,443 available for working capital needs. All remaining cash is held in the Trust Account and is generally unavailable for our use, prior to an initial Business Combination, and is restricted for use either in a Business Combination or to redeem the ordinary shares. As of December 31, 2022, none of the amount on deposit in the Trust Account was available to be withdrawn as described above.
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Promissory Notes - Related Party
On November 30, 2022, we issued the Promissory Note in the amount of $400,000 to the Sponsor. The proceeds of the Promissory Note, which may be drawn down from time to time until we consummate our initial Business Combination, will be used as general working capital purposes. As of December 31, 2022, the balance of the Promissory Note was amounted to $250,000.
On February 2, 2023, in connection with the First Extension, $920,000 (the “Extension Fee”) was deposited into our Trust Account for the public shareholders, representing $0.10 per public share, which enables us to extend the period of time we have to consummate the initial Business Combination by three months from February 2, 2023 to May 2, 2023. The Extension is the first of the three three-month extensions permitted under our governing documents. Such deposit of the Extension Fee is evidenced by an unsecured promissory note (the “Extension Note”, together with the Promissory Note, the “Notes”) in the principal amount of $920,000 issued to the Sponsor.
The Notes bear no interest and is payable in full upon the earlier to occur of (i) the consummation of the Business Combination or (ii) the date of expiry of the term of the Company (the “Maturity Date”). The following shall constitute an event of default: (i) a failure to pay the principal within five business days of the Maturity Date; (ii) the commencement of a voluntary or involuntary bankruptcy action, (iii) the breach of the Company’s obligations thereunder; (iv) any cross defaults; (v) an enforcement proceedings against the Company; and (vi) any unlawfulness and invalidity in connection with the performance of the obligations thereunder, in which case the Notes may be accelerated.
The payee of the Notes, the Sponsor, has the right, but not the obligation, to convert the Notes, in whole or in part, respectively, into private units (the “Conversion Units”) of the Company, each consisting of one Class A Ordinary Share, one-half of one warrant, and one right to receive one-tenth (1/10) of one Class A Ordinary Share upon the consummation of a Business Combination, as described in the prospectus of the Company (File Number 333-261585), by providing the Company with written notice of the intention to convert at least two business days prior to the closing of the Business Combination. The number of Conversion Units to be received by the Sponsor in connection with such conversion shall be an amount determined by dividing (x) the sum of the outstanding principal amount payable to such Payee by (y) $10.00.
Prepaid Expense to Related Party
Due the six months ended December 31, 2022, the Company prepaid $9,058 to Mr. Liang Shi, the Company’s Director, Chief Executive Officer, Secretary and Chairman, as travel advance to search for targets. As of December 31, 2022, prepaid expenses to Mr. Liang Shi amounted to $5,097. The prepaid expenses is expected to be utilized as travel expenses in the quarter ended March 31, 2023.
Until consummation of the Business Combination, we will be using the funds not held in the Trust Account, and any additional funding that may be loaned to us by the Sponsor, for identifying and evaluating prospective acquisition candidates, performing business due diligence on prospective target businesses, traveling to and from the offices, plants or similar locations of prospective target businesses, reviewing corporate documents and material agreements of prospective target businesses, selecting the target business to acquire and structuring, negotiating and consummating the Business Combination.
If our estimates of the costs of undertaking in-depth due diligence and negotiating Business Combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to the Business Combination and will need to raise additional capital. In this event, our officers, directors or their affiliates may, but are not obligated to, loan us funds as may be required. If we consummate an initial Business Combination, we would repay such loaned amounts out of the proceeds of the Trust Account released to us upon consummation of the Business Combination, or, at the lender’s discretion, up to $1,600,000 of such loans may be convertible into units of the post Business Combination entity at a price of $10.00 per unit. On November 30, 2022, we issued the Promissory Note in the amount of $400,000 to the Sponsor, the proceeds of which will be used as general working capital purposes. In the event that the 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. The terms of such loans by our initial shareholders, officers and directors, if any, have not been determined and no written agreements exist with respect to such loans.
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Moreover, we may need to obtain additional financing either to consummate our initial Business Combination or because we become obligated to redeem a significant number of our public shares upon consummation 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 consummate such financing simultaneously with the consummation of our initial Business Combination. Following our initial Business Combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.
Off-Balance Sheet Financing Arraignments
We have no obligations, assets or liabilities that would be considered off-balance sheet arrangements as of December 31, 2022. 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
As of December 31, 2022, we do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities.
We are obligated to pay Maxim a deferred underwriters’ discount equal to 3.5% of the gross proceeds of the IPO and the underwriter’s full exercise of the over-allotment. The deferred underwriter’s discount of $3,220,000 will become payable to Maxim from the amounts held in the Trust Account solely in the event that we complete a Business Combination.
The founder shares, the Class A Ordinary Shares included in the Private Units, and any Class A Ordinary Shares that may be issued upon conversion of working capital loans (and any underlying securities) will be entitled to registration rights pursuant to a registration and shareholder rights agreement entered into in connection with the IPO. The holders of these securities are entitled to make up to three demands, excluding short form demands, that we register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to our completion of the initial Business Combination. We will bear the expenses incurred in connection with the filing of any such registration statements.
Critical Accounting Policies, Judgements and Estimates
Use of estimates
In preparing the unaudited condensed financial statements in conformity with U.S. GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, Actual results may differ from these estimates.
Investments held in Trust Account
At December 31, 2022, the assets held in the Trust Account were held in money market funds, which are invested in U.S. Treasury securities.
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We classify our U.S. Treasury and equivalent securities as held-to-maturity in accordance with ASC Topic 320 “Investments — Debt and Equity Securities.” Held-to-maturity securities are those securities which we have the ability and intent to hold until maturity. Held-to-maturity treasury securities are recorded at amortized cost on the accompanying unaudited condensed balance sheet and adjusted for the amortization or accretion of premiums or discounts.
Class A ordinary shares subject to possible redemption
We account for our ordinary shares subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Ordinary shares subject to mandatory redemption are classified as a liability instrument and are measured at fair value. Conditionally redeemable ordinary shares (including 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 our control) are classified as temporary equity. At all other times, ordinary shares are classified as shareholders’ equity.
Warrants
We account 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 Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity” (“ASC 480”), and 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 our own ordinary shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of our control, 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 equity at the time of issuance. As our warrants meet all of the criteria for equity classification, so we will classify each warrant as its own equity.
Fair Value of Financial Instruments
The fair value of our assets and liabilities, which qualify as financial instruments under FASB ASC 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the balance sheet, primarily due to its short-term nature.
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Our financial instruments are classified as either Level 1, Level 2 or Level 3. These tiers include:
- | Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; |
- | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
- | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
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Income Taxes
Income taxes are determined in accordance with the provisions of ASC Topic 740, “Income Taxes” (“ASC 740”). Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis.
Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Any effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
ASC 740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Our management determined that the Cayman Islands is our major tax jurisdiction. We recognize accrued interest and penalties related to unrecognized tax benefits, if any, as income tax expense.
We are considered to be an exempted Cayman Islands company, and are presently not subject to income taxes or income tax filing requirements in the Cayman Islands or the United States.
Net Income (Loss) per Share
We have two classes of shares, which are referred to as redeemable ordinary shares and non-redeemable ordinary shares. Earnings and losses are shared pro rata between the two classes of shares.
Recent Accounting Pronouncements
In August 2020, the FASB issued a new standard (ASU 2020-06) to reduce the complexity of accounting for convertible debt and other equity-linked instruments. For certain convertible debt instruments with a cash conversion feature, the changes are a trade-off between simplifications in the accounting model (no separation of an “equity” component to impute a market interest rate, and simpler analysis of embedded equity features) and a potentially adverse impact to diluted earnings per share by requiring the use of the if-converted method. The new standard will also impact other financial instruments commonly issued by both public and private companies. For example, the separation model for beneficial conversion features is eliminated simplifying the analysis for issuers of convertible debt and convertible preferred stock. Also, certain specific requirements to achieve equity classification and/or qualify for the derivative scope exception for contracts indexed to an entity’s own equity are removed, enabling more freestanding instruments and embedded features to avoid mark-to-market accounting. The new standard is effective for companies that are SEC filers (except for smaller reporting companies) for fiscal years beginning after December 15, 2021 and interim periods within that year, and two years later for other companies. Companies can early adopt the standard at the start of a fiscal year beginning after December 15, 2020. The standard can either be adopted on a modified retrospective or a full retrospective basis. We are currently reviewing the newly issued standard and does not believe it will materially impact us.
Management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on our unaudited condensed financial statements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The net proceeds of our IPO and Private Placement held in the Trust Account are invested in U.S. government treasury bills 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. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.
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Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the quarter ended December 31, 2022, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial and accounting officer have concluded that during the period covered by this report, our disclosure controls and procedures were effective.
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial and accounting officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There have been no change in our internal control over financial reporting during the quarter ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings
We are not a party to any material legal proceedings and no material legal proceedings have been threatened by us or, to the best of our knowledge, against us.
Item 1A. Risk Factors
Factors that could cause our actual results to differ materially from those in this Quarterly Report are any of the risks described in our final prospectus for our IPO filed with the SEC on January 31, 2022. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not currently known to us or that we currently deem immaterial may also impair our business or results of operations. As of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in our final prospectus for our IPO filed with the SEC on January 31, 2022. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities
On August 5, 2021, our Sponsor acquired 2,300,000 Class B ordinary shares for an aggregate purchase price of $25,000. Prior to the initial investment in the company of $25,000 by our Sponsor, the Company had no assets, tangible or intangible.
On February 2, 2022, we consummated the IPO of 9,200,000 Units, The Units were sold at an offering price of $10.00 per Unit, generating gross proceeds of $92,000,000.
On February 2, 2022, simultaneously with the consummation of the IPO, we completed the Private Placement of 424,480 Private Units including 378,480 Private Units to the Sponsor, and 46,000 Private Units to Maxim Group LLC (or its designees), respectively, at a purchase price of $10.00 per Private Unit, generating gross proceeds to us of $4,244,800.
A total of $92,920,000, comprised of $92,000,000 of the proceeds from the IPO (which amount includes $3,220,000 of the underwriter’s deferred underwriting fee), and $920,000 of the proceeds from the sale of the Private Units, were placed in the Trust Account.
We paid a total of $1,840,000.00 in underwriting discounts and commissions and $551,390 for other costs and expenses related to the IPO.
The information of the Promissory Note contained under Item 2 of Part I above is incorporated herein by reference in response to this item. The issuance of the Promissory Note was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended.
Item 3. Defaults upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
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Item 6. Exhibits.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
BLUE WORLD ACQUISITION CORPORATION | ||
Date: February 14, 2023 | By: | /s/ Liang Shi |
Liang Shi | ||
Chief Executive Officer (Principal Executive Officer) |
By: | /s/ Tianyong Yan | |
Tianyong Yan | ||
Chief Financial Officer (Principal Financial and Accounting Officer) |
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