UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
For the transition period from to
Commission File No.
(Exact name of registrant as specified in its charter) |
| N/A | |
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
(Address of Principal Executive Offices, including zip code) |
+ |
(Registrant’s telephone number, including area code) |
N/A |
(Former name, former address and former fiscal year, if changed since last report) |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
| Trading Symbol(s) |
| Name of each exchange on which registered |
|
| The | ||
|
| The | ||
|
| The |
Indicate by check mark whether the registrant (1) has 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. Yes ☐
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, 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 |
| ☒ | |
|
|
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 November 15, 2021, there were
LAKESHORE ACQUISITION I CORP.
Quarterly Report on Form 10-Q
Table of Contents
1 | ||
1 | ||
2 | ||
3 | ||
4 | ||
5 | ||
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 16 | |
19 | ||
19 | ||
20 | ||
20 | ||
20 | ||
20 | ||
21 | ||
21 | ||
21 | ||
21 | ||
22 | ||
PART I – FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
LAKESHORE ACQUISITION I CORP.
Unaudited Condensed Balance Sheet
September 30, 2021
ASSETS |
| ||
Current assets | |||
Cash | $ | | |
Prepaid expenses | | ||
Amount due from related party | | ||
Marketable securities held in trust account | | ||
Total Current Assets |
| | |
Total Assets | $ | | |
LIABILITIES AND SHAREHOLDER’S EQUITY |
|
| |
|
| ||
Commitments and contingencies |
|
| |
Redeemable Ordinary Shares | |||
Ordinary share subject to possible redemption: | $ | | |
|
| ||
Shareholders’ Equity |
|
| |
Ordinary share, $ |
| | |
Additional paid-in capital |
| | |
Accumulated deficit |
| ( | |
Total Shareholders’ Equity |
| | |
Total Liabilities and Shareholders’ Equity | $ | |
The accompanying notes are an integral part of these unaudited condensed financial statements.
1
LAKESHORE ACQUISITION I CORP.
Unaudited Condensed Statement of Operations
For the three months ended September 30, 2021 and the period from January 6, 2021 (Inception) to September 30, 2021
For The | ||||||
Period From | ||||||
January 6, | ||||||
2021 | ||||||
For The | (Inception) | |||||
Three Months Ended | To | |||||
September 30, | September 30, | |||||
| 2021 |
| 2021 | |||
Formation, general and administrative expenses | $ | | $ | | ||
Loss from operations | ( | ( | ||||
Other income | ||||||
Interest income on marketable securities held in trust account | | | ||||
Net Loss | ( | ( | ||||
|
|
|
| |||
Basic and diluted weighted average shares outstanding | ||||||
Redeemable ordinary shares-basic and diluted | | | ||||
Ordinary shares-basic and diluted | | | ||||
Basic and diluted net loss per share |
| |||||
Redeemable ordinary shares-basic and diluted | $ | ( | $ | | ||
Ordinary shares-basic and diluted | ( | ( | ||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
2
LAKESHORE ACQUISITION I CORP.
Unaudited Condensed Statement of Changes in Shareholders’ Equity
For the three months ended September 30, 2021 and the period from January 6, 2021 (Inception) to September 30, 2021
Additional | Total | |||||||||||||
Ordinary Shares | Paid-in | Accumulated | Shareholders’ | |||||||||||
| Shares |
| Amount |
| Capital |
| Deficit |
| Equity | |||||
Balances, June 30, 2021 | | $ | | $ | | $ | ( | $ | | |||||
Net loss |
| — |
| — |
| |
| ( |
| ( | ||||
Balances, September 30, 2021 |
| | $ | | $ | | $ | ( | $ | | ||||
Balances, January 6, 2021 (Inception) | | $ | | $ | | $ | | $ | | |||||
Issuance of ordinary shares to the sponsor | | | | | | |||||||||
Issuance of public units | | | | | | |||||||||
Issuance of private units | | | | | | |||||||||
Underwriters’ discount | — | — | ( | | ( | |||||||||
Deduction of other offering costs | — | — | ( | | ( | |||||||||
Forfeiture of shares | ( | ( | | | — | |||||||||
Change in value of ordinary shares subject to redemption | ( | ( | ( | | ( | |||||||||
Allocation of offering costs to ordinary shares subject to redemption | — | — | | | | |||||||||
Deduction for increases of carrying value of redeemable shares | — | — | ( | | ( | |||||||||
Net loss |
| — |
| — |
| |
| ( |
| ( | ||||
Balances, September 30, 2021 | | $ | | $ | | $ | ( | $ | | |||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
3
LAKESHORE ACQUISITION I CORP.
Unaudited Condensed Statement of Cash Flows
For the period from January 6, 2021 (Inception) to September 30, 2021
Cash flow from operating activities |
|
| |
Net loss | $ | ( | |
Adjustments to reconcile net loss to net cash used in operating activities: |
| ||
Interest income earned in trust account | ( | ||
Change in operating assets and liabilities: |
| ||
Change in prepaid expenses |
| ( | |
Change in amount due from related party | ( | ||
Net cash provided by operating activities |
| ( | |
Cash flow from investing activities | |||
Cash deposited in trust account | ( | ||
Net cash used in investing activities | ( | ||
|
| ||
Cash flow from financing activities |
|
| |
Proceeds from note payable to a related party | | ||
Proceeds from advance for private units to be issued |
| | |
Proceeds from issuance of ordinary shares | | ||
Repayment of note payable to a related party | ( | ||
Repayment of advance from private units purchasers | ( | ||
Payment of underwriters’ discount | ( | ||
Payment of offering costs |
| ( | |
Net cash provided by financing activities |
| | |
|
| ||
Net change in cash |
| | |
Cash at beginning of period |
| ||
Cash at end of period | $ | |
The accompanying notes are an integral part of these unaudited condensed financial statements.
4
LAKESHORE ACQUISITION I CORP.
Notes to Unaudited Condensed Financial Statements
Note 1 — Organization and Business Operations
Organization and General
Lakeshore Acquisition I Corp. (the “Company”) was incorporated in Cayman Islands on January 6, 2021 as a blank check company whose objective is to acquire, through a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with
As of September 30, 2021, the Company had not generated revenue. All activities for the period from January 6, 2021 (inception) through September 30, 2021 relate to the Company’s formation and the initial public offering (the “IPO”) described below and its effort in seeking a target business. The Company will not generate any operating revenue until after its initial business combination, at the earliest. The Company will generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the IPO. The Company has selected December 31 as its fiscal year-end.
The Company’s sponsor is RedOne Investment Limited, a BVI limited liability company (the “sponsor”).
Financing
The registration statement for the Company’s IPO (as described in Note 3) was declared effective on June 10, 2021. On June 15, 2021, the Company consummated the IPO of
Simultaneously with the IPO, the Company sold to its sponsor, hedge funds and the representatives of underwriters and certain of their affiliates
The Company granted the underwriters a
Upon the closing of the over-allotment on June 28, 2021, the Company consummated a private sale of an additional
Offering costs amounted to $
Trust Account
Upon the closing of the IPO on June 15, 2021 and the closing of the underwriters’ partial exercise of the over-allotment option on June 28, 2021, an aggregate of $
5
The funds held in the Trust Account can be invested in United States government treasury bills, notes or bonds having a maturity of 185 days or less or in money market funds meeting the applicable conditions under Rule 2a-7 promulgated under the Investment Company Act of 1940, as amended, until the earlier of the consummation of its first business combination and the Company’s failure to consummate a business combination within 15 months from the consummation of the IPO.
Placing funds in the Trust Account may not protect those funds from third party claims against the Company. Although the Company will seek to have all vendors, service providers, prospective target businesses or other entities it engages, execute agreements with the Company waiving any claim of any kind in or to any monies held in the Trust Account, there is no guarantee that such persons will execute such agreements.
In addition, interest income earned on the funds in the Trust Account may be released to the Company to pay its income or other tax obligations. With these exceptions, expenses incurred by the Company may be paid prior to a business combination only from the net proceeds of the IPO and private placement not held in the Trust Account.
Business Combination
Pursuant to Nasdaq listing rules, the Company’s initial business combination must occur with one or more target businesses having an aggregate fair market value equal to at least 80% of the value of the funds in the Trust Account (excluding any taxes payable on the income earned on the Trust Account), which the Company refers to as the 80% test, at the time of the execution of a definitive agreement for its initial business combination, although the Company may structure a business combination with one or more target businesses whose fair market value significantly exceeds 80% of the Trust Account balance. If the Company is no longer listed on Nasdaq, it will not be required to satisfy the 80% test.
The Company currently anticipates structuring a business combination to acquire
The Company will either seek shareholder approval of any business combination at a meeting called for such purpose at which shareholders may seek to convert their shares into their pro rata share of the aggregate amount then on deposit in the Trust Account, less any taxes then due but not yet paid, or provide shareholders with the opportunity to sell their shares to the Company by means of a tender offer for an amount equal to their pro rata share of the aggregate amount then on deposit in the Trust Account, less any taxes then due but not yet paid.
The Company will proceed with a business combination only if it will have net tangible assets of at least $
Notwithstanding the foregoing, a public shareholder, together with any affiliate of his or any other person with whom he is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Exchange Act) will be restricted from seeking conversion rights with respect to 20% or more of the ordinary shares sold in this offering without the Company’s prior written consent.
6
In connection with any shareholder vote required to approve any business combination, the Company’s sponsor, the hedge funds and the representatives of underwriters and certain of their affiliates (collectively, “initial shareholders”) will agree (i) to vote any of their respective shares in favor of the initial business combination and (ii) not to convert such respective shares into a pro rata portion of the Trust Account or seek to sell their shares in connection with any tender offer the Company engages in.
Liquidation
Pursuant to the Company’s amended and restated memorandum and articles of association, if the Company is unable to complete its initial business combination within 15 months from the date of the IPO, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than five business days thereafter, redeem
Liquidity and Capital Resources
As of September 30, 2021, the Company had $
Prior to the IPO, The Company’s liquidity needs had been satisfied through a payment from the sponsor of $
Upon the consummation of the IPO on June 15, 2021 and the closing of the underwriters’ partial exercise of the over-allotment option on June 28, 2021, and associated private placements (see Note 3 and Note 4), $
In order to finance transaction costs in connection with a business combination, the initial shareholders or affiliates of the initial shareholders or certain of the Company’s officers and directors may, but are not obligated to, provide the Company working capital loans, as defined below (see Note 5). To date, there were no amounts outstanding under any working capital loans.
Based on the foregoing, management believes that the Company will have sufficient working capital and borrowing capacity to meet its needs through the earlier of the consummation of a business combination or one year from this filing. Over this time period, the Company will be using these funds for 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.
7
Note 2 — Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements are presented in U.S. Dollars and in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP. In the opinion of management, all adjustments (consisting of normal accruals) considered for a fair presentation have been included. Operating results for the three months ended September 30, 2021 and the period from January 6, 2021 (inception) through September 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021 or any future period.
The accompanying unaudited condensed financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Form 8-K and the final prospectus filed by the Company with the SEC on June 22, 2021 and June 14, 2021, respectively.
Emerging Growth Company
Section 102(b)(1) of the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) permits emerging growth companies to delay complying with new or revised financial accounting standards that do not yet apply to 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). 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 an 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.
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. There were
Marketable Securities Held in the Trust Account
As of September 30, 2021, the assets held in the Trust Account were money market funds that invest in cash, U.S. Treasury bills, notes, and other obligations issued or guaranteed as to principal and interest by the U.S. Treasury (See Note 6).
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 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 the Company’s control) are classified as temporary equity. At all other times, ordinary shares are classified as shareholders’ equity. The Company’s public shares feature certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, as of September 30, 2021, ordinary shares subject to possible redemption are presented at redemption value of $
8
amount of redeemable ordinary shares are affected by charges against additional paid in capital or accumulated deficit if additional paid in capital equals to zero.
Offering Costs Associated with the IPO
Offering costs consist underwriting, legal, accounting, registration and other expenses incurred through the balance sheet date that are directly related to the IPO. As of September 30, 2021, offering costs totaled $
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make 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 amounts of expenses during the reporting period. Actual results could differ from those estimates.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentration of credit risk consist of cash accounts in a financial institution that at times may exceed the federal depository insurance coverage of $
Net Income (Loss) per Share
The Company complies with accounting and disclosure requirements of FASB ASC 260, Earnings Per Share. In order to determine the net income (loss) attributable to both the redeemable shares and non-redeemable shares, the Company first considered the undistributed income (loss) allocable to both the redeemable shares and non-redeemable shares and the undistributed income (loss) is calculated using the total net loss less any dividends paid. We then allocated the undistributed income (loss) ratably based on the weighted average number of shares outstanding between the redeemable and non-redeemable shares. Any remeasurement of the accretion to redemption value of the ordinary shares subject to possible redemption was considered to be dividends paid to the public shareholders. As of September 30, 2021, the Company did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into ordinary shares and then share in the earnings of the Company. As a result, diluted loss per share is the same as basic loss per share for the period presented.
The net income (loss) per share presented in the condensed statement of operations is based on the following:
| For The Period From | |||||
January 6, 2021 | ||||||
For The Three Months | (Inception) To September 30, | |||||
| Ended September 30, 2021 |
| 2021 | |||
Net loss | $ | ( | $ | ( | ||
Accretion of temporary equity to redemption value |
| — |
| ( | ||
Net loss including accretion of temporary equity to redemption value | $ | ( | $ | ( | ||
9
| For The Three Months Ended September 30, |
| For The Period From January 6, 2021 (Inception) To September 30, | |||||||||
2021 | 2021 | |||||||||||
| Redeemable shares |
| Non-redeemable shares |
| Redeemable shares |
| Non-redeemable shares | |||||
Basic and diluted net income/(loss) per share: |
|
|
|
|
|
|
|
| ||||
Numerators: |
|
|
|
|
|
|
|
| ||||
Allocation of net loss including accretion of temporary equity | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Accretion of temporary equity to redemption value | — | — | | — | ||||||||
Allocation of net income/(loss) | $ | ( | $ | ( | $ | | $ | ( | ||||
Denominators: |
|
|
|
|
|
|
|
| ||||
Weighted-average shares outstanding |
| |
| |
| |
| | ||||
Basic and diluted net income/(loss) per share | ( | ( | | ( | ||||||||
In connection with the closing of the underwriters’ partial exercise of their over-allotment option on June 28, 2021,
Income Taxes
The Company accounts for income taxes under ASC 740 Income Taxes (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition. The Company has identified Cayman Islands as its only “major” tax jurisdiction, as defined. Based on the Company’s evaluation, it has been concluded that there are no significant uncertain tax positions requiring recognition in the Company’s financial statements. Since the Company was incorporated on January 6, 2021, the evaluation was performed for upcoming 2021 tax year which will be the only period subject to examination. The Company believes that its income tax positions and deductions would be sustained on audit and does not anticipate any adjustments that would result in a material changes to its financial position. The Company’s policy for recording interest and penalties associated with audits is to record such items as a component of income tax expense.
The Company may be subject to potential examination by foreign taxing authorities in the area of income taxes. These potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with foreign tax laws.
10
The Company’s tax provision was
Recent Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.
Note 3 — Initial Public Offering
Public Unit
Pursuant to the IPO on June 15, 2021, the Company sold
The Company granted the underwriters a
The Company paid an underwriting discount of $
The Company has agreed to pay $
All of the
As of September 30, 2021, the ordinary shares reflected on the balance sheet are reconciled in the following table.
| As of September 30, 2021 | ||
Gross proceeds | $ | | |
Less: |
|
| |
Proceeds allocated to public warrants |
| ( | |
Offering costs of public shares | $ | ( | |
Plus: |
|
| |
Accretion of carrying value to redemption value | $ | | |
Ordinary share subject to possible redemption | $ | | |
11
Note 4 — Private Placement
Concurrently with the closing of the IPO on June 15, 2021, the Company’s sponsor, hedge funds and the representatives of underwriters and certain of their affiliates purchased an aggregate of
Upon the closing of the underwriters’ partial exercise of the over-allotment option on June 28, 2021, the Company consummated a private sale of an additional
Note 5 — Related Party Transactions
Founder Shares
On January 8, 2021,
Related Party Loans
On February 10, 2021, the Company issued a $
In order to meet its working capital needs following the consummation of the IPO, the Company’s initial shareholders, 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 amount they deem reasonable in their sole discretion. Each working capital loan would be evidenced by a promissory note and would either be paid upon consummation of the Company’s initial business combination, without interest, or, at the lender’s discretion, up to $
Amount Due From Related Party
In September 2021, the Company made a temporary payment of $
Note 6 — Fair Value Measurements
The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.
12
The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
Level 1:Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2:Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.
Level 3:Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.
The following table presents information about the Company’s assets that are measured at fair value on a recurring basis at September 30, 2021 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
Description |
| Level |
| September 30, 2021 | |
Assets: |
|
|
|
| |
Marketable securities held in Trust Account |
| 1 | $ | | |
Note 7 — Commitments and Contingencies
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 financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of this financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Business Combination Marketing Agreement
The Company has entered into Business Combination Marketing Agreement with representative of its underwriters, and agreed to pay a fee totaling $
Registration Rights
The initial shareholders will be entitled to registration rights with respect to their initial shares, as well as the holders of the Private Units and holders of any securities issued to the Company’s initial shareholders, officers, directors or their affiliates in payment of working capital loans or extension loans made to the Company, will be entitled to registration rights with respect to the Private Units (and underlying securities), pursuant to an agreement signed on the effective date of the IPO. The holders of such securities are entitled to demand that the Company register these securities at any time after the Company consummates a business combination. In addition, the holders have certain “piggy-back” registration rights on registration statements filed after the Company’s consummation of a business combination.
13
Note 8 — Shareholder’s Equity
Ordinary shares
The Company is authorized to issue
On January 8, 2021,
On June 15, 2021, the Company sold
The Company granted the underwriters a
As of September 30, 2021, there were
Warrants
Each warrant entitles the holder to purchase one ordinary share at a price of $
14
In addition, if (a) the Company issues additional ordinary shares or equity-linked securities for capital raising purposes in connection with the closing of the initial business combination at an issue price or effective issue price of less than $
Note 9 — Revision of Prior Period Financial Statement
Recently, the Staff of the SEC issued comment letters to multiple SPACs and addressed certain accounting and reporting considerations related to redeemable equity instruments. Based on ASC 480-10-S99, redemption provisions not solely within the control of the Company require ordinary share subject to redemption to be classified outside of permanent equity. As a result, the Company re-evaluated its accounting classification of public shares and concluded that all public shares should be reported as temporary equity on the Company’s balance sheet. The Company previously classified
The following summarizes the effect of the revision on each financial statement line item.
| As |
|
| As | |||||
As of June 15, 2021 | Reported | Adjustment | Adjusted | ||||||
Revised Balance Sheet | |||||||||
Ordinary share subject to possible redemption | $ | | $ | | $ | | |||
Shareholders’ Equity |
|
|
|
|
|
| |||
Ordinary share |
| |
| ( |
| | |||
Additional paid in capital | |
| ( |
| | ||||
Total shareholders’ equity | $ | | $ | ( | $ | | |||
Note 10 — Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to November 15, 2021, the date that the unaudited condensed financial statements were issued. The Company did not identify any subsequent events that would have required adjustment or disclosure in the unaudited condensed financial statements.
15
Item 2. Management’s Discussion and Analysis.
References to “we”, “us”, “our” or the “Company” are to Lakeshore Acquisition I Corp., except where the context requires otherwise. The following discussion should be read in conjunction with our unaudited condensed financial statements and related notes thereto included elsewhere in this report.
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 (the “SEC”) filings.
Overview
We were formed on January 6, 2021 for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more target businesses. Our efforts to identify a prospective target business will not be limited to any particular industry or geographic region. We intend to utilize cash derived from the proceeds of our initial public offering (the “IPO”) in effecting our initial business combination.
We are an emerging growth company and, as such, we are subject to all of the risks associated with emerging growth companies.
We presently have no revenue. All activities for the period from January 6, 2021 (inception) through September 30, 2021 relate to the formation and the IPO and seeking of a target business. We will have no operations other than the active solicitation of a target business with which to complete a business combination, and we will not generate any operating revenue until after its initial business combination, at the earliest. We will have non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the IPO.
On June 15, 2021, we consummated the IPO of 5,000,000 Public Units, at a price of $10.00 per Public Unit, generating gross proceeds of $50,000,000. Simultaneously with the closing of the IPO, we consummated the sale of 250,000 Private Units, at a price of $10.00 per Private Unit, in a private placement to the sponsor, hedge funds and the representatives of underwriters and certain of their affiliates, generating gross proceeds of $2,500,000.
On June 28, 2021, the underwriters partially exercised the over-allotment option to purchase an additional 467,000 Public Units at a purchase price of $10.00 per Public Unit, generating gross proceeds of $4,670,000. Simultaneously with the closing of the underwriters’ partial exercise of the over-allotment option, we sold additional 11,675 Private Units at a price of $10.00 per Private Unit to the above-mentioned purchasers in a private placement, generating gross proceeds to us of $116,750.
Upon the consummation of the IPO and the underwriters’ partial exercise of the over-allotment option, and associated private placements, $54,670,000 of cash was placed in the Trust Account.
As indicated in the accompanying unaudited condensed financial statements, as of September 30, 2021, we had $489,316 in cash held outside its Trust Account available for the working capital purposes.
16
We cannot assure you that our plans to complete our Initial Business Combination will be successful. If we are unable to complete its initial business combination within 15 months from the date of the IPO, we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than five business days thereafter, redeem 100% of the outstanding public shares and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining holders of ordinary shares and our board of directors, liquidate and dissolve. In the event of liquidation, the holders of the founder shares and Private Units will not participate in any redemption distribution with respect to their founder shares or Private Units, until all of the claims of any redeeming shareholders and creditors are fully satisfied (and then only from funds held outside the Trust Account).
Results of Operations
Our entire activity from January 6, 2021 (inception) up to the consummation of the IPO was in preparation for the IPO. Since the IPO, our activity has been limited to the evaluation of business combination candidates, and we will not be generating any operating revenues until the closing and completion of our initial business combination. We expect to generate small amounts of non-operating income in the form of interest income on cash and marketable securities held in Trust Account. We will incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.
For the three months ended September 30, 2021, we had a net loss of $100,594. We earned $705 of interest income from investments in our Trust Account and incurred $101,299 of general and administrative expenses.
For the period from January 6, 2021 (inception) to September 30, 2021, we had a net loss of $157,152. We earned $811 of interest income from investments in our Trust Account and incurred $157,963 of formation, general and administrative expenses.
Liquidity and Capital Resources
As of September 30, 2021, we had $489,316 in cash held outside its Trust Account available for our working capital purposes.
Prior to the consummation of the IPO, our liquidity needs had been satisfied through a payment from the sponsor of $25,000 for the founder shares, the loan under an unsecured promissory note from the sponsor of $450,000. The promissory note from the sponsor was repaid in full on June 14, 2021.
Upon the consummation of the IPO on June 15, 2021 and the closing of the underwriters’ partial exercise of the over-allotment option on June 28, 2021, and associated private placements, $54,670,000 of cash was placed in the Trust Account. As of September 30, 2021, an aggregate of $54,670,811 was held in the Trust Account in money market funds that invest in cash, U.S. Treasury bills, notes, and other obligations issued or guaranteed as to principal and interest by the U.S. Treasury.
In order to meet our working capital needs following the consummation of the IPO, our initial shareholders, officers and directors or their affiliates may, but are not obligated to, loan us funds, from time to time or at any time, in amount they deem reasonable in their sole discretion. Each working capital loan would be evidenced by a promissory note and would either be paid upon consummation of our initial business combination, without interest, or, at the lender’s discretion, up to $500,000 of the working capital loan may be converted upon consummation of our business combination into additional Private Units at a price of $10.00 per unit. If we do not complete a business combination, the working capital loan will only be repaid with funds not held in the Trust Account and only to the extent available.
17
Based on the foregoing, management believes that we will have sufficient working capital and borrowing capacity to meet our needs through the earlier of the consummation of a business combination or one year from this filing. Over this time period, we will be using these funds for 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.
If our estimates of the costs of undertaking due diligence and negotiating our initial business combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our initial business combination. Moreover, we may need to obtain additional financing either to consummate our initial business combination or because we become obligated to convert 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.
Critical Accounting Policies
The preparation of these unaudited condensed financial statements in conformity with GAAP requires management to make 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. Actual results could differ from those estimates.
Offering Costs Associated with the IPO
Offering costs consist of underwriting, legal, accounting and other expenses incurred through the balance sheet date that were directly related to the IPO. As of September 30, 2021, offering costs totaled $1,862,538. The amount was consisted of $1,366,750 in underwriters’ fees, plus $495,788 of other expenses. The Company complies with the requirements of the ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A – “Expenses of Offering”. The Company allocates offering costs between public shares and public warrants based on the estimated fair values of public shares and public warrants at the date of issuance. Accordingly, $1,780,148 was allocated to public shares and was charged to temporary equity, and $ 82,390 was allocated to public warrants and was charged to shareholders’ equity.
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 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 the Company’s control) are classified as temporary equity. At all other times, ordinary shares are classified as shareholders’ equity. The Company’s ordinary shares feature certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, as of September 30, 2021, public shares subject to possible redemption are presented at redemption value of $10.00 per share as temporary equity, outside of the shareholders’ equity section of the Company’s balance sheet. The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable ordinary shares to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable ordinary shares are affected by charges against additional paid in capital or accumulated deficit if additional paid in capital equals zero.
Net Income (Loss) per Share
We comply with accounting and disclosure requirements of FASB ASC 260, Earnings Per Share. In order to determine the net income (loss) attributable to both the redeemable shares and non-redeemable shares, the Company first considered
18
the undistributed income (loss) allocable to both the redeemable shares and non-redeemable shares and the undistributed income (loss) is calculated using the total net loss less any dividends paid. We then allocated the undistributed income (loss) ratably based on the weighted average number of shares outstanding between the redeemable and non-redeemable shares. Any remeasurement of the accretion to redemption value of the ordinary shares subject to possible redemption was considered to be dividends paid to the public shareholders.
As of September 30, 2021, the Company did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into ordinary shares and then share in the earnings of the Company. As a result, diluted loss per share is the same as basic loss per share for the period presented.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our condensed financial statements.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of September 30, 2021. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
Contractual Obligations
Business Combination Marketing Agreement
We have entered into Business Combination Marketing Agreement with representative of our underwriters, and agreed to pay a fee totaling $1,640,100, which equals 3% of the gross offering proceeds, payable upon the completion of the business combination. The fee will become payable from the amounts held in the Trust Account solely in the event we complete our initial business combination. In the event that we do not close a business combination, the representative underwriter has agreed to waive its right to receive the fee.
Registration Rights
The initial shareholders will be entitled to registration rights with respect to their initial shares, as well as the holders of the Private Units and holders of any securities issued to our initial shareholders, officers, directors or their affiliates in payment of working capital loans or extension loans made to us, will be entitled to registration rights with respect to the Private Units (and underlying securities), pursuant to an agreement signed on the effective date of the IPO. The holders of such securities are entitled to demand that we register these securities at any time after we consummate a business combination. In addition, the holders have certain “piggy-back” registration rights on registration statements filed after our consummation of a business combination.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting company and are not required to provide the information otherwise required under this item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
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
19
forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
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 fiscal quarter ended September 30, 2021, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our chief executive officer and chief financial officer have concluded that during the period covered by this report, our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the period from January 6, 2021(inception) through September 30, 2021, covered by this quarterly report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. In light of the correction of the previously filed financial statement (See Item 1, Note 9), we are enhancing our processes to appropriately apply applicable accounting requirements to our financial statements. Our plans include providing training to our accounting personnel and increased communication among our accounting personnel and third-party professionals with whom it consults regarding complex accounting applications. We believe our efforts will enhance our controls relating to complex and technical accounting matters, but we can offer no assurance that our controls will not require additional review and modification in the future as industry accounting practices based on the SEC Statement may evolve over time.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
We are a smaller reporting company and are not required to provide the information otherwise required under this item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities
On June 15, 2021, we consummated the IPO of 5,000,000 Public Units at a price of $10.00 per Public Unit. Each Public Unit consists of one ordinary share and three-quarters of one warrant. Upon the closing of the over-allotment on June 28, 2021, the underwriters had partially exercised their over-allotment option, and we sold an additional 467,000 Public Units at a price of $10.00 per Public Unit. The IPO and the over-allotment generated total gross proceeds of $54,670,000. The securities in the offering were registered under the Securities Act on a registration statement on Form S-1 (No. 333- 255174). The SEC declared the registration statement effective on June 10, 2021.
Simultaneously with the IPO, we consummated the private placement of an aggregate of 250,000 Private Units at a price of $10.00 per Private Unit. Simultaneously with the closing of the underwriters’ partial exercise of the over-allotment option, we consummated the private placement of an additional 11,675 Private Units at a price of $10.00 per Private Unit. The private placements generated proceeds of $2,616,750. The issuances were made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act. The Private Units are identical to the Public Units except with respect to certain registration rights and transfer restrictions.
Offering costs amounted to $1,862,538 consisting of $1,366,750 of underwriting discount, and $495,788 of other offering costs.
Upon the consummation of the IPO on June 15, 2021 and the underwriters’ partial exercise of the over-allotment option on June 28, 2021, and associated private placements, $54,670,000 of cash was placed in the Trust Account.
20
As of September 30, 2021, we had $489,316 in cash held outside its Trust Account available for the working capital purposes.
There has been no material change in the planned use of the proceeds from the IPO and private placement as is described in our final prospectus related to the IPO.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not Applicable.
Item 5. Other Information.
None.
ITEM 6. EXHIBITS.
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report.
No. |
| Description of Exhibit |
31.1 |
| |
31.2 |
| |
32.1 |
| |
32.2 |
| |
101.INS |
| XBRL Instance Document |
101.CAL |
| XBRL Taxonomy Extension Calculation Linkbase Document |
101.SCH |
| XBRL Taxonomy Extension Schema Document |
101.DEF |
| XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB |
| XBRL Taxonomy Extension Labels Linkbase Document |
101.PRE |
| XBRL Taxonomy Extension Presentation Linkbase Document |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
21
SIGNATURES
Pursuant to the requirements of Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: November 15, 2021 | LAKESHORE ACQUISITION I CORP. | |
By: | /s/ Laura Li | |
Name: Laura Li | ||
Title: Chief Financial Officer (Principal Financial Officer and Accounting Officer) | ||
22