As of June 30, 2022,
the aggregate market value of the Registrant’s ordinary shares held by non-affiliates was $70,311,450, computed on the basis of
the closing sale price of the Registrant’s ordinary shares on that date.
As of March 30, 2023
there were 6,374,089 shares of ordinary shares, par value $0.0001, issued and outstanding.
PART I
Item 1.
Business
Introduction
We
are a Cayman Islands exempted company formed on February 19, 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 except that according to
our amended and restated memorandum and articles of association, we will not effectuate our initial business combination with a company
that is headquartered in the People’s Republic of China (“China”), the Hong Kong Special Administrative Region of China
(“Hong Kong”) or the Macau Special Administrative Region of China (“Macau”) or conducts a majority of its operations
in China, Hong Kong or Macau. We intend to utilize cash derived from the proceeds of the IPO in effecting our initial business combination.
On
March 11, 2022, we consummated an IPO of 6,900,000 units, which includes the full exercise of the over-allotment option by the underwriter
in the IPO, at $10.00 per unit (the “Public Units”), generating total gross proceeds of $69,000,000. Each unit consists of
one ordinary share, one-half of one redeemable warrant and one right. Each whole warrant entitles the holder thereof to purchase one
ordinary share for $11.50 per share, subject to certain adjustment. Each right entitles the holder to receive one-tenth of one ordinary
share upon consummation of our initial business combination.
Simultaneously
with the IPO, we sold to our sponsor 351,500 units at $10.00 per unit (the “Private Units”) in a private placement, generating
total gross proceeds of $ 3,515,000. The Private Units are identical to the units sold in the IPO, as each private unit consists of one
share of ordinary shares, one right to receive one tenth of a share of ordinary shares automatically upon the consummation of our initial
business combination, and one-half of one redeemable warrant, with each whole warrant entitling the holder thereof to purchase one ordinary
share for $11.50 per share.
Upon
the consummation of the IPO and the underwriter’s full exercise of the over-allotment option, and associated private placement,
$70,035,000 of cash was placed in the trust account (the “Trust Account”) with Continental Stock Transfer & Trust
Company acting as trustee. This amount equals 6,900,000 ordinary shares subject to possible redemption multiplied by redemption value
of $10.15 per share. None of the funds held in trust will be released from the Trust Account, other than interest income to pay any tax
obligations, until the earlier of (i) the consummation of our initial business combination and (ii) our failure to consummate
a business combination.
On March 9, 2023, we held an Extraordinary General Meeting (the “General
Meeting”) of shareholders. In the General Meeting, shareholders approved to amend our Amended and Restated Memorandum and Articles
of Association (the “Charter Amendment”), and to extend the time for us to complete a business combination for an additional
three (3) months, from March 11, 2023 to June 11, 2023 (the “Extension”). The amended Charter Amendment was filed with the
Registrar of companies in the Cayman Islands on March 10, 2023 and was effective on that date. In connection with the approval of the
Extension, we deposited into the Trust Account $250,000 in accordance with the terms of the Charter Amendment. In connection with the
General Meeting, shareholders elected to redeem a total of 2,767,411 ordinary shares. An aggregate payment of $28,707,673 was distributed from the Company’s Trust Account because of this redemption.
If we are unable to consummate our initial business combination by the required
period of time, we will, as promptly as reasonably possible but not more than five business days thereafter, redeem the public shares
for a pro rata portion of the funds held in the Trust Account and as promptly as reasonably possible following such redemption, subject
to the approval of our remaining shareholders and our board of directors, liquidate and dissolve, subject to our obligations under Cayman
Islands law to provide for claims of creditors and the requirements of other applicable law. In such event, warrants, rights and the
Private Units will be worthless.
We
are an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, or the
Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As such, we are eligible to 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 auditor internal controls attestation requirements
of Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive
compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote
on executive compensation and shareholder approval of any golden parachute payments not previously approved. If some investors find our
securities less attractive as a result, there may be a less active trading market for our securities and the prices of our securities
may be more volatile.
In
addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended
transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards.
In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards
would otherwise apply to private companies. We intend to take advantage of the benefits of this extended transition period.
We
will remain an “emerging growth company” for up to five years. However, if our non-convertible debt issued within a
three year period or revenues exceeds $1.07 billion, or the market value of our shares that are held by non-affiliates exceeds $700
million on the last day of the second fiscal quarter of any given fiscal year, we would cease to be an emerging growth company as
of the following fiscal year.
Additionally,
we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies
may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited
financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market
value of our common stock held by non-affiliates equals or exceeds $250 million as of the prior June 30, or (2) our annual
revenues equaled or exceeded $100 million during such completed fiscal year and the market value of our common stock held by non-affiliates
equals or exceeds $700 million as of the prior [June 30].
Signing of the Merger Agreement
On
September 9, 2022, we entered into a merger agreement (the “Merger Agreement”) with certain parties aiming to acquire 100%
of the equity securities of Nature’s Miracle, Inc. (“Nature’s Miracle”). These
parties include (i) us (together with our successor, including after the Reincorporation (as defined below), the “Purchaser”),
(ii) LBBB Merger Sub Inc., a Delaware corporation and wholly-owned subsidiary of Purchaser (the “Merger Sub”), (iii) Nature’s
Miracle, (iv) Tie (James) Li, acting as the representative of the stockholders of Nature’s Miracle, and (v) our sponsor, acting
as the representative of the stockholders of Purchaser.
Pursuant
to the Merger Agreement, immediately prior to the proposed business combination, we will reincorporate into the State of Delaware so
as to re-domicile as and become a Delaware corporation by means of merging with and into a newly formed Delaware corporation (the “Reincorporation”),
with us together with our successor (LBBB Merger Corp., a Delaware corporation) being the Purchaser of the proposed business combination.
Pursuant
to the Merger Agreement, Nature’s Miracle will merge with LBBB Merger Sub Inc., a Delaware corporation and wholly owned subsidiary
of Purchaser, with Nature’s Miracle surviving and the Purchaser acquiring 100% of the equity securities of Nature’s Miracle.
In exchange for their equity securities, the stockholders of Nature’s Miracle will receive an aggregate number of shares of common
stock of the Purchaser (the “Merger Consideration”) with an aggregate value equal to: (a) two hundred thirty million U.S.
dollars ($230,000,000), minus (b) any Closing Net Indebtedness (as defined in the Merger Agreement). Under the Merger Agreement, the
aggregate number of shares of common stock of the Purchaser that will be received by the stockholders of Natures Miracle equals to the
aggregate value divided by $10.00.
The
Merger Consideration otherwise payable to Nature’s Miracle stockholders is subject to the withholding of a number of shares of
common stock of Purchaser equal to three percent (3.0%) of the Merger Consideration to be placed in escrow for post-closing adjustments
(if any) to the Merger Consideration, in accordance with the terms of the Merger Agreement following the closing of the proposed business
combination.
The
parties agreed that immediately following the closing of the proposed business combination, Purchaser’s board of directors will
consist of seven (7) individuals, with the identity of six of those individuals and allocation of all individuals among the staggered
tiers of the post-business combination company’s board of directors (and the appointment of such persons to committees of the board)
to be determined by Nature’s Miracle’s current board of directors, and the remaining individual to be appointed by our sponsor,
subject to Nature’s Miracle’s approval (which approval will not be unreasonably withheld).
Status
of Filing of Form S-4 (or S-4/A) with the Securities and Exchange Commission (the “SEC”)
On
November 14, 2022, LBBB Merger Corp., the Company’s wholly owned subsidiary, filed a Form S-4 containing the registration statement
with respect to the proposed business combination with Nature's Miracle.
On
December 28, 2022, LBBB Merger Corp. filed a Form S-4/A containing amendment No. 1 to the registration statement to address comments
LBBB Merger Corp. received from the SEC on December 14, 2022, regarding the registration statement.
On
January 20, 2023, LBBB Merger Corp. filed a Form S-4/A containing amendment No. 2 to the registration statement to address comments LBBB
Merger Corp. received from the SEC on January 12, 2023.
Recent Developments
On February 10, 2023, the Company issued an unsecured
promissory note in the aggregate principal amount of $100,000 to RedOne Investment Limited, the Company’s sponsor. The principal
shall be payable promptly on the earlier date on which either the Company consummates an initial business combination or has received
financing from other parties with no interest accrued, and the amount of $100,000 does not have the conversion feature of converting into
additional Private Units, based on the description of the promissory note.
On March 9, 2023, we held an Extraordinary
General Meeting (the “General Meeting”) of shareholders. In the General Meeting, shareholders approved to amend our
Amended and Restated Memorandum and Articles of Association (the “Charter Amendment”), and to extend the time for us to
complete a business combination for an additional three (3) months, from March 11, 2023 to June 11, 2023 (the
“Extension”). The amended Charter Amendment was filed with the Registrar of companies in the Cayman Islands on March 10,
2023 and was effective on that date. In connection with the approval of the Extension, we deposited into the Trust Account $250,000
in accordance with the terms of the Charter Amendment. In connection with the General Meeting, shareholders elected to redeem a
total of 2,767,411 ordinary shares. An aggregate payment of $28,707,673 was distributed from the Company’s Trust Account
because of this redemption.
On March 10, 2023, we entered into a loan agreement
as the borrower with a third party lender, our sponsor and Nature’s Miracle Inc. (“NMI”) as the guarantors. The principal
amount was $250,000 with no interest bearing and was repayable on or before June 11, 2023 (the “Repayment Date”). We shall
cause to issue 25,000 bonus shares to the lender of the surviving company when completing the proposed business combination with NMI,
no later than the Repayment Date.
On March 28, 2023, the Company issued an unsecured promissory note
in the aggregate principal amount of $100,000 to RedOne Investment Limited, the Company’s sponsor. The principal shall be payable
promptly on the earlier date on which either the Company consummates an initial business combination or has received financing from other
parties with no interest accrued, and the amount of $100,000 does not have the conversion feature of converting into additional Private
Units, based on the description of the promissory note.
Competitive
Strengths
Our
management team is well positioned to identify attractive risk-adjusted returns in the marketplace. We believe that Nature’s Miracle
is an attractive target company and we will be able to close the proposed business combination within required period of time pursuant
to our amended and restated memorandum and articles of association.
Our management team is led by Mr. Deyin (Bill) Chen. We will seek
to capitalize on the significant contacts and experience of our management team, including Bill Chen, our Chairman, Chief Executive Officer
and Chief Financial Officer, and H. David Sherman, Mingyu (Michael) Li and Jon M. Montgomery, each a member of our board of directors.
Bill Chen has a mixed background of engineering, finance, and operation management across industries and continents. He has established
a strong network of investment institutions and business connections. In January 2021, Deyin (Bill) Chen founded Lakeshore Acquisition
I Corp. (“LAAA”), a special purpose acquisition company incorporated for the purposes of effecting a business combination.
Mr. Chen serves as the Chairman and the Chief Executive Officer of LAAA. LAAA completed its initial public offering in June 2021
and completed its initial business combination with ProSomnus Inc. (Nasdaq: OSA) in December 2022. H. David Sherman is a professor at
Northeastern University specializing in financial and management accounting, with experience serving on the board and as audit committee
chair for several public companies, including Dunxin Financial Holdings Ltd. (AMEX: DXF), Kingold Jewelry Inc. (NASDAQ: KGJI),
and China HGS Real Estate Inc. (NASDAQ: HGSH). Professor Sherman was an Academic Fellow at the U.S. Securities and Exchange Commission
in the Division of Corporate Finance’s Office of Chief Accountant. H. David Sherman had also been serving as a member of the board
of directors of LAAA from June 2021 to December 2022. Mingyu (Michael) Li has served in management teams for a number of financial
institutions, and he is experienced in deal sourcing and fund raising. Jon M. Montgomery is managing director at Meredith Financial Group
Inc. located in New York City and has served as an independent director of Nuvve Holding Corp. (NASDAQ: NVVE) since March 2021. He also
has more than 25 years of marketing consulting and market research experience.
Our
management team’s past performance is not an assurance that we are able to identify an appropriate candidate for our initial business
combination or achieve success with respect to the business combination we intend to consummate. However, we believe that the skills
and professional network of our management team will enable us to consummate an appropriate business combination.
Effecting
an Acquisition Transaction
If
the proposed business combination with Nature’s Miracle does not close, our acquisition strategy will be to capitalize on the strengths
of our management team to allow us to identify businesses that have the capacity for cash flow creation, opportunity for operational
improvement, robust company fundamentals, and qualified and driven management teams. Our deal sourcing process will leverage our management
team’s business knowledge, industry expertise and deep network of relationships that we expect will provide us with a pipeline
of acquisition candidates. Moreover, we anticipate introductions to potential acquisition candidates through various unaffiliated sources,
including venture capital funds, private equity funds, leveraged buyout funds, investment bankers, management buyout funds, and other
members of the financial community, as well as attorneys and accountants. We are not prohibited from pursuing an initial business combination
with a company that is affiliated with our sponsor, officers or directors, or completing the business combination through a joint venture
or other form of shared ownership with our sponsor, officers or directors. In the event we seek to complete our initial business combination
with a target that is affiliated with our sponsor, officers or directors, we, or a committee of independent directors, would obtain an
opinion from an independent accounting firm or independent investment-banking firm that our initial business combination is fair to our
company from a financial point of view. We are not required to obtain such an opinion in any other context.
Our
efforts to identify a potential target business will not be limited to a specific industry or geographic region except that according
to our amended and restated memorandum and articles of association, we will not effectuate our initial business combination with a company
that is headquartered in the People’s Republic of China (“China”), the Hong Kong Special Administrative Region of China
(“Hong Kong”) or the Macau Special Administrative Region of China (“Macau”) or conducts a majority of its operations
in China, Hong Kong or Macau.
The
COVID-19 pandemic has resulted in a widespread health crisis that has adversely affected the economies and financial markets worldwide,
and the business of any potential target business with which we consummate a business combination may have been materially and adversely
affected or may be so affected in the future. Furthermore, we may be unable to complete a business combination if continued concerns
relating to COVID-19 restrict travel, limit the ability to have meetings with potential investors or the target company’s personnel,
vendors and services providers are unavailable to negotiate and consummate a transaction in a timely manner. The extent to which COVID-19
impacts our search for a business combination will depend on future developments, which are highly uncertain and cannot be predicted,
including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact,
among others. If the disruptions posed by COVID-19 or other matters of global concern continue for an extended period of time, our ability
to consummate a business combination, or the operations of a target business with which we ultimately consummate a business combination,
may be materially adversely affected.
We
will consummate our initial business combination only if we have net tangible assets of at least $5,000,001 immediately prior to or upon
such consummation and, if we seek shareholder approval, an ordinary resolution under Cayman Islands law, which requires the affirmative
vote of a majority of the shareholders who attend and vote at a general meeting of the company.
We
chose our net tangible asset threshold of $5,000,001 to ensure that we would avoid being subject to Rule 419 promulgated under the
Securities Act. However, if we seek to consummate an initial business combination with a target business that imposes any type of working
capital closing condition or requires us to have a minimum amount of funds available from the Trust Account upon consummation of such
initial business combination, we may need to have more than $5,000,001 in net tangible assets upon consummation and this may force us
to seek third party financing which may not be available on terms acceptable to us or at all. As a result, we may not be able to consummate
such initial business combination and we may not be able to locate another suitable target within the applicable time period, if at all.
Our
initial shareholders and officers and directors have agreed (i) to vote any shares owned by them in favor of any proposed business
combination, (ii) not to redeem any shares in connection with a shareholder vote to approve a proposed initial business combination
or any amendment to our charter prior to the consummation of our initial business combination and (iii) not to sell any shares to
us in a tender offer in connection with any proposed business combination.
None
of our initial shareholders, officers, directors or their affiliates has indicated any intention to any units or ordinary shares from
persons in the open market or in private transactions. However, if we hold a general meeting to approve a proposed business combination
and a significant number of shareholders vote, or indicate an intention to vote, against a proposed business combination, or choose to
convert their shares, our initial shareholders, officers, directors or their affiliates could make purchases in the open market or in
private transactions in order to influence any vote held to approve a proposed initial business combination or to increase the likelihood
of satisfying any closing conditions. Notwithstanding the foregoing, our officers, directors, initial shareholders and their affiliates
will not make purchases of ordinary shares if the purchases would violate Section 9(a)(2) or Rule 10b-5 of the Exchange
Act which are rules designed to stop potential manipulation of a company’s stock, shares or other equity securities.
Redemption
Rights
At
any general meeting called to approve an initial business combination, any public shareholder (whether they are voting for or against
such proposed business combination or not voting at all) will be entitled to demand that his, her or its ordinary shares be redeemed
for a pro rata portion of the amount then in the Trust Account (initially $10.15 per share, plus any pro rata interest earned on the
funds held in the Trust Account less amounts necessary to pay our taxes).
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 redemption rights
with respect to 20% or more of the ordinary shares sold in the IPO without our prior written consent. However, we would not be restricting
our shareholders’ ability to vote all of their shares (including all shares held by those shareholders that hold more than 20%
of the shares sold in the IPO) for or against our initial business combination.
Whether
we elect to effectuate our initial business combination via shareholder vote or tender offer, we will require our public shareholders
seeking to exercise their redemption rights, whether they are record holders or hold their shares in “street name,” to either
tender their certificates to our transfer agent or to deliver their shares to the transfer agent electronically using Depository Trust
Company’s DWAC (Deposit/Withdrawal At Custodian) System, at the holder’s option prior to the expiration of the tender offer,
or in the event we distribute proxy materials, up to two business days prior to the vote on the proposal to approve the business
combination. The requirement for physical or electronic delivery at or prior to the general meeting ensures that a holder’s election
to redeem his shares is irrevocable once the business combination is approved. There is a nominal cost associated with this tendering
process and the act of certificating the shares or delivering them through the DWAC system. The transfer agent will typically charge
the tendering broker a nominal fee and it would be up to the broker whether or not to pass this cost on to the redeeming holder. However,
this fee would be incurred regardless of whether or not we require holders to deliver their shares prior to the vote on the business
combination in order to exercise redemption rights. This is because a holder would need to deliver shares to exercise redemption rights
regardless of the timing of when such delivery must be effectuated. However, in the event the proposed business combination is not consummated,
this may result in an increased cost to shareholders.
Liquidation
if no business combination
If
we are unable to complete our initial business combination within 15 months from the closing 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 which redemption will completely extinguish public shareholders’ rights as shareholders
(including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as
reasonably possible following such redemption, subject to the approval of our remaining holders of ordinary shares and our board of directors,
proceed to commence a voluntary liquidation and thereby a formal dissolution of the company, subject (in the case of (ii) and (iii) above)
to our obligations to provide for claims of creditors and the requirements of applicable law.
In
connection with our redemption of 100% of our issued and outstanding public shares for a portion of the funds held in the Trust Account,
each public shareholder will receive a full pro rata portion of the amount then in the Trust Account, plus any pro rata interest earned
on the funds held in the Trust Account and not previously released to us and less up to $50,000 for liquidation expenses. Holders of
warrants and rights will receive no proceeds in connection with the liquidation with respect to such warrants, which will expire worthless.
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).
If
we are unable to conclude our initial business combination and we expend all of the net proceeds of the IPO not deposited in the Trust
Account, without taking into account any interest earned on the Trust Account, we expect that the initial per-share redemption price
will be approximately $10.15. The proceeds deposited in the Trust Account could, however, become subject to claims of our creditors that
are in preference to the claims of our shareholders. In addition, if we are forced to file a bankruptcy or winding-up petition or an
involuntary bankruptcy or winding-up petition is filed against us that is not dismissed, the proceeds held in the Trust Account could
be subject to applicable bankruptcy or insolvency law, and may be included in our bankruptcy or insolvency estate and subject to the
claims of third parties with priority over the claims of our shareholders. Therefore, the actual per-share redemption price may be less
than approximately $10.15.
We
will pay the costs of liquidating the Trust Account from the up to $50,000 of interest earned on the funds held in the Trust Account
that is available to us for liquidation expenses.
Competition
In
identifying, evaluating and selecting a target business for our initial business combination, we may encounter intense competition from
other entities having a business objective similar to ours, including other blank check companies, private equity groups, venture capital
funds leveraged buyout funds, and operating businesses seeking strategic acquisitions. Many of these entities are well established and
have significant experience identifying and effecting business combinations directly or through affiliates. Moreover, many of these competitors
possess greater financial, technical, human and other resources than us. Our ability to acquire larger target businesses will be limited
by our available financial resources. This inherent limitation gives others an advantage in pursuing the acquisition of a target business.
Furthermore, the requirement that we acquire a target business or businesses having a fair market value equal to at least 80% of the
value of the Trust Account (less any taxes payable on interest earned) at the time of the agreement to enter into the business combination,
our obligation to pay cash in connection with our public shareholders who exercise their redemption rights and the future dilution they
potentially represent, may not be viewed favorably by certain target businesses. Any of these factors may place us at a competitive disadvantage
in successfully negotiating our initial business combination.
Properties
We do not own any real estate or other physical
properties materially important to our operations. We currently maintain our executive offices at 667 Madison Avenue, New York, NY 10065.
Such space, utilities and secretarial and administrative services are provided to us at $10,000 per month by our sponsor. We consider
our current office space adequate for our current operations.
Employees
We
currently have one executive officer, Mr. Deyin (Bill) Chen, which is our Chief Executive Officer and Chief Financial Officer. He is
not obligated to devote any specific number of hours to our matters but he intends to devote as much of his time as they deem necessary
to our affairs until we have completed our initial business combination. The amount of time he will devote in any time period will vary
based on whether a target business has been selected for our initial business combination and the stage of the business combination process
we are in. We do not intend to have any full time employees prior to the consummation of our initial business combination.
Item 1A.
Risk Factors
As
a smaller reporting company, we are not required to make disclosures under this Item. For a complete list of risks relating to our operations,
see the section titled “Risk Factors” contained in our registration statement. In addition to these risk factors, we have
identified the following additional risk factor:
Our
independent registered public accounting firm’s report contains an explanatory paragraph that expresses substantial doubt about
our ability to continue as a “going concern.”
We performed an assessment on the Company’s ability to continue
as a going concern in accordance with Financial Accounting Standard Board’s Accounting Standards Update (“ASU”) 2014-15,
“Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. There is no assurance that
we will be able to consummate the initial business combination within 12 months (or 15 months, as applicable) from the date of the IPO.
In the event that we fails to consummate business combination within the required period, we will face mandatory liquidation and dissolution
subject to certain obligations under applicable laws or regulations. This uncertainty raises substantial doubt about the Company’s
ability as a going concern one year from the date the financial statement is issued. No adjustments have been made to the carrying amounts
of assets or liabilities regarding the possibility of us not continuing as a going concern, as a result of failing to consummate business
combination within 12 months (or 15 months, as applicable) from the date of the IPO. Management plans to continue its efforts to consummate
a business combination within 12 months (or 15 months, as applicable) from the date of the IPO.
Item 1B.
Unresolved Staff Comments
Not
applicable.
Item 2.
Properties
We
do not own any real estate or other physical properties materially important to our operations. We currently maintain our executive offices
at 667 Madison Avenue, New York, NY 10065. Such space, utilities and secretarial and administrative services are provided to us at $10,000
per month by our sponsor. We consider our current office space adequate for our current operations.
Item 3.
Legal Proceedings
We
may be subject to legal proceedings, investigations and claims incidental to the conduct of our business from time to time. We are not
currently a party to any material litigation or other legal proceedings brought against us. We are also not aware of any legal proceeding,
investigation or claim, or other legal exposure that has a more than remote possibility of having a material adverse effect on our business,
financial condition or results of operations.
Item 4.
Mine Safety Disclosures
Not
Applicable.
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
Directors
and Executive Officers
Our
current directors and executive officers are as follows:
Name |
|
Age |
|
Position |
| Bill
Chen |
|
57 |
|
Chief Executive Officer, Chief Financial Officer and
Chairman |
| H.
David Sherman |
|
75 |
|
Independent Director |
| Mingyu
(Michael) Li |
|
39 |
|
Independent Director |
| Jon
M. Montgomery |
|
73 |
|
Independent Director |
Deyin (Bill) Chen has been our Chief
Executive Officer since February 24, 2021 and also served as our Chairman since March 2022. He had also been serving as the Chief
Executive Officer and the Chairman of Lakeshore Acquisition I Corp. (Nasdaq: LAAA) from January 2021 and June 2021, respectively,
to December 6, 2022, the date on which LAAA consummated its initial business combination with ProSomnus Inc. (Nasdaq:OSA). Mr. Chen
has a mixed background of engineering, finance, and operation management across industries and continents. Mr. Chen has been an
independent advisor for merger and acquisition and equity transactions since August 2015. From February 2020 until March 2021,
Mr. Chen has served as a Special Advisor for Newborn Acquisition Corp. (NASDAQ: NBAC), a special purpose acquisition company that
completed a business combination with Nuvve Corporation in March 2021. Since May 2017, Mr. Chen has served as Chief Executive
Officer of Shanghai Renaissance Investment Management Co. Ltd., a licensed private equity firm in China that he founded. From March 2014
to August 2015, Mr. Chen served as Executive Vice President of Sanpower Group, a private conglomerate based in China, where
he was in charge of cross-border merger and acquisition and post-merger integration. From January 2011 to January 2014, Mr. Chen
served as Vice President of Strategy and Global Investment of JA Solar, a vertically integrated solar products manufacturing company
based in China. From February 2005 to October 2010, Mr. Chen served as a Partner of BDO Capital Advisors and its affiliates
in China with a focus on cross-border merger and acquisition and equity transactions. From June 2001 to August 2004, Mr. Chen
served as a Senior Business Advisor to Capgemini, a consulting company based in Toronto Canada. From November 2000 to May 2001,
Mr. Chen served as a Senior Financial Analyst in IBM Global Services in Toronto Canada. From December 1997 to November 2000,
Mr. Chen served as a Staff Accountant in the General Accounting Department of Ashland Inc. Prior to his career in accounting and
finance, Mr. Chen was an engineer and project manager in China from July 1987 to August 1993.
H.
David Sherman, MBA, DBA, CPA has been one of our independent directors since March 2022. He has
also been serving as a member of the board of directors of Lakeshore Acquisition I Corp. (Nasdaq: LAAA) from June 2021 to December
6, 2022, the date on which LAAA consummated its initial business combination with ProSomnus Inc.(Nasdaq: OSA). Since 1985, Dr. Sherman
has been a professor at Northeastern University, specializing in, among other areas, financial and management accounting, global financial
statement analysis and contemporary accounting issues. Since January 2014, Professor Sherman has served as Trustee and Chair of the
Finance Committee for the American Academy of Dramatic Arts, the oldest English language acting school in the world. Since July 2010,
he has also served as a Board member and Treasurer for D-Tree International, a non-profit organization that develops and supports electronic
clinical protocols to enable health care workers worldwide to deliver high quality care. Since September 2019, Dr. Sherman has
served as an independent board member for Newborn Acquisition Corp. (NASDAQ:NBAC). Dr. Sherman previously served on the board and
as audit committee chair for Dunxin Financial Holdings Ltd. (AMEX:DXF), a financial service company, Kingold Jewelry Inc. (NASDAQ: KGJI),
a designer and manufacturer of gold jewelry related products, China HGS Real Estate Inc. (NASDAQ: HGSH), a real estate company, Agfeed
Corporation, a manufacturing company of agricultural products, and China Growth Alliance, Ltd., a business acquisition company formed
to acquire an operating business in China. Dr. Sherman was previously on the faculty of the Sloan School of Management at Massachusetts
Institute of Technology (MIT) and also, among other academic appointments, held an adjunct professorship at Tufts Medical School and was
a visiting professor at Harvard Business School (2015). From 2004 to 2005, Dr. Sherman was an Academic Fellow at the U.S. Securities
and Exchange Commission in the Division of Corporate Finance’s Office of Chief Accountant. Dr. Sherman is a Certified Public
Accountant and previously practiced with Coopers & Lybrand. Dr. Sherman’s research has been published in management
and academic journals including Harvard Business Review, Sloan Management Review, Accounting Review and European Journal of Operations
Research.
Mingyu
(Michael) Li has been one of our independent directors since March 2022. Since August 2019,
Mr. Li has served as Chief Executive Officer of Horizon Capital, a private equity firm focusing renewable and AI-driven manufacturing.
In Horizon Capital, he has led a number of private equity fundraisings, managed advisory business for cross-border M&A. From January 2014
to January 2019, Mr. Li served as a Senior Partner at Hejun Capital, a private equity firm specializing in providing capital
operation system solutions to high-growth enterprises. Hejun Capital was selected as the best private equity institution by Chinaventure
for 2016. During his tenure in Hejun Capital, Mr. Li led two M&A transactions and post-merger integration projects involving
listed companies in the media sector. From January 2012 to January 2013, Mr. Li served as the Director of Investment Banking
in China Minsheng Bank, a leading commercial bank in China, where he was responsible for investment banking and financing needs of large
energy companies. From April 2009 to December 2011, Mr. Li participated a few private equity fundraisings in real estate
sector in China. From February 2007 to March 2009, Mr. Li began his career with Hejun Consulting, the largest comprehensive
consulting company then in China. During his tenure at Hejun Consulting, Mr. Li was responsible for strategic consulting, M&A,
and led or participated in more than 20 consulting projects.
Jon
M. Montgomery has been one of our independent directors since March 2022. Mr. Montgomery is managing director at Meredith
Financial Group Inc., a financial management and advisory firm located in New York City. He has served as an independent director of
Nuvve Holding Corp. (NVVE.NASDAQ) since March 19, 2021. From 2010 to 2014, he was managing partner at project finance advisory firm AGlobal
Partners LLC where he assisted in arranging long-term, limited-recourse financing for private investments in renewable energy, telecommunications,
mining & metals, PPPs, and other infrastructure projects in emerging and other international markets. He also advised clients on
foreign direct investments, including those utilizing development finance institutions, export credit agencies, and political risk insurers.
In addition, Mr. Montgomery has more than 25 years of marketing consulting and market research experience, informing and guiding
clients’ branding, communications, segmentation and innovation challenges across a range of industries, particularly in the information
technology, telecommunications, financial services, CPG, pharmaceutical, and retail sectors. He is experienced in applying model-based quantitative
analysis, particularly choice-based modeling, to solving competitive problems. Previously, from 1996 to 2010, Mr. Montgomery
co-founded Hudson Group Inc. in New York, a research-based marketing consultancy. He also held prior positions as executive
vice president at Marketing Strategy & Planning Inc./Synovate, and vice president at Hase Schannen Research Associates Inc. Mr. Montgomery
holds a M.B.A. from Northeastern University and a B.A. from the University of California, Berkeley. Since 2000 he has been Adjunct Faculty
in Marketing at the University of Georgia. We believe Mr. Montgomery is well-qualified to serve as a member of the board due
to his investment banking, structuring and strategic expertise, his contacts in emerging and other international markets and his extensive
experience in marketing and market research.
Director
Independence
Nasdaq
requires that a majority of our board must be composed of “independent directors,” which is defined generally as a person
other than an officer or employee of the company or its subsidiaries or any other individual having a relationship, which, in the opinion
of the company’s board of directors would interfere with the director’s exercise of independent judgment in carrying out
the responsibilities of a director.
Mingyu
(Michael) Li, David Sherman and Jon M. Montgomery are our independent directors. Our independent directors will have regularly scheduled
meetings at which only independent directors are present. Any affiliated transactions will be on terms no less favorable to us than could
be obtained from independent parties. Any affiliated transactions must be approved by a majority of our independent and disinterested
directors.
Audit
Committee
We
established an audit committee of the board of directors. Mingyu (Michael) Li, David Sherman and Jon M. Montgomery Zhu are the members
of our audit committee. David Sherman is the chairman of the audit committee. Under the Nasdaq listing standards and applicable SEC rules,
we are required to have three members of the audit committee all of whom must be independent. Mingyu (Michael) Li, David Sherman and
Jon M. Montgomery are independent.
Each
member of the audit committee is financially literate and our board of directors has determined that qualifies as an “audit committee
financial expert” as defined in applicable SEC rules.
Responsibilities
of the audit committee include:
| ● | the
appointment, compensation, retention, replacement, and oversight of the work of the independent registered public accounting firm and
any other independent registered public accounting firm engaged by us; |
| ● | pre-approving
all audit and non-audit services to be provided by the independent registered public accounting firm or any other registered public accounting
firm engaged by us, and establishing pre-approval policies and procedures; |
| ● | reviewing
and discussing with the independent registered public accounting firm all relationships the auditors have with us in order to evaluate
their continued independence; |
| ● | setting
clear hiring policies for employees or former employees of the independent registered public accounting firm; |
| ● | setting
clear policies for audit partner rotation in compliance with applicable laws and regulations; |
| ● | obtaining
and reviewing a report, at least annually, from the independent registered public accounting firm describing the independent auditor’s
internal quality-control procedures and (ii) any material issues raised by the most recent internal quality-control review, or peer
review, of the audit firm, or by any inquiry or investigation by governmental or professional authorities, within, the preceding five years
respecting one or more independent audits carried out by the firm and any steps taken to deal with such issues; |
| ● | reviewing
and approving any related party transaction required to be disclosed pursuant to Item 404 of Regulation S-K promulgated by the SEC
prior to us entering into such transaction; and |
| ● | reviewing
with management, the independent registered public accounting firm, and our legal advisors, as appropriate, any legal, regulatory or
compliance matters, including any correspondence with regulators or government agencies and any employee complaints or published reports
that raise material issues regarding our financial statements or accounting policies and any significant changes in accounting standards
or rules promulgated by the Financial Accounting Standards Board, the SEC or other regulatory authorities. |
Compensation
Committee
Subject
to the requirement of law or the Nasdaq market rules, we established a compensation committee of the board of directors. The members
of our Compensation Committee are Mingyu (Michael) Li, David Sherman and Jon M. Montgomery. David Sherman is chair of the compensation
committee. We adopted a compensation committee charter, which details the principal functions of the compensation committee, including:
| ● | reviewing
and approving on an annual basis the corporate goals and objectives relevant to our Chief Executive Officer’s compensation, evaluating
our Chief Executive Officer’s performance in light of such goals and objectives and determining and approving the remuneration
(if any) of our Chief Executive Officer based on such evaluation in executive session at which the Chief Executive Officer is not present; |
| ● | reviewing
and approving the compensation of all of our other officers; |
| ● | reviewing
our executive compensation policies and plans; |
| ● | implementing
and administering our incentive compensation equity-based remuneration plans; |
| ● | assisting
management in complying with our proxy statement and report disclosure requirements; |
| ● | approving
all special perquisites, special cash payments and other special compensation and benefit arrangements for our officers and employees; |
| ● | producing
a report on executive compensation to be included in our annual proxy statement; and |
| ● | reviewing,
evaluating and recommending changes, if appropriate, to the remuneration for directors. |
The
charter provides that the compensation committee may, in its sole discretion, retain or obtain the advice of a compensation consultant,
legal counsel or other adviser and will be directly responsible for the appointment, compensation and oversight of the work of any such
adviser. However, before engaging or receiving advice from a compensation consultant, external legal counsel or any other adviser, the
compensation committee will consider the independence of each such adviser, including the factors required by Nasdaq and the SEC.
Nominating
Committee
We
established a nominating committee of the board of directors, which consists of Mingyu (Michael) Li, David Sherman and Jon M. Montgomery,
each of whom is an independent director under Nasdaq’s listing standards. David Sherman is the chair of the nominating committee.
The nominating committee is responsible for overseeing the selection of persons to be nominated to serve on our board of directors. The
nominating committee considers persons identified by its members, management, shareholders, investment bankers and others.
Guidelines
for Selecting Director Nominees
The
guidelines for selecting nominees, which are specified in the Nominating Committee Charter, generally provide that persons to be nominated:
| ● | should
have demonstrated notable or significant achievements in business, education or public service; |
| ● | should
possess the requisite intelligence, education and experience to make a significant contribution to the board of directors and bring a
range of skills, diverse perspectives and backgrounds to its deliberations; and |
| ● | should
have the highest ethical standards, a strong sense of professionalism and intense dedication to serving the interests of the shareholders. |
The
Nominating Committee will consider a number of qualifications relating to management and leadership experience, background, integrity
and professionalism in evaluating a person’s candidacy for membership on the board of directors. The nominating committee may require
certain skills or attributes, such as financial or accounting experience, to meet specific board needs that arise from time to time and
will also consider the overall experience and makeup of its members to obtain a broad and diverse mix of board members. The nominating
committee does not distinguish among nominees recommended by shareholders and other persons.
Conflicts
of Interest
Potential
investors should be aware of the following potential conflicts of interest:
| ● | None
of our officers or directors is required to commit his or her full time to our affairs and, accordingly, may have conflicts of interest
in allocating his or her time among various business activities. |
| ● | In
the course of their other business activities, our officers and directors may become aware of investment and business opportunities which
may be appropriate for presentation to us as well as the other entities with which they are affiliated. Our management may have conflicts
of interest in determining to which entity a particular business opportunity should be presented. |
| ● | Our
initial shareholders have agreed to waive their right to liquidating distributions with respect to their founder shares if we fail to
consummate our initial business combination within the required time period. However, if our initial shareholders acquire public shares
in the open market, they will be entitled to receive liquidating distributions with respect to such public shares if we fail to consummate
our initial business combination within the required time period. If we do not complete our initial business combination within such
applicable time period, the proceeds of the sale of the private units will be used to fund the redemption of our public shares, and the
private units will expire worthless. |
| ● | Our
officers and directors may have a conflict of interest with respect to evaluating a particular business combination if the retention
or resignation of any such officers and directors was included by a target business as a condition to any agreement with respect to our
initial business combination. |
Under
Cayman Islands law, directors and officers owe the following fiduciary duties:
| (i) | duty
to act in good faith in what the director or officer believes to be in the best interests of the company as a whole; |
| (ii) | duty
to exercise powers for the purposes for which those powers were conferred and not for a collateral purpose; |
| (iii) | directors
should not properly fetter the exercise of future discretion; |
| (iv) | duty
to exercise powers fairly as between different sections of shareholders; |
| (v) | duty
not to put themselves in a position in which there is a conflict between their duty to the company and their personal interests; and |
| (vi) | duty
to exercise independent judgment. |
In
addition to the above, directors also owe a duty of care which is not fiduciary in nature. This duty has been defined as a requirement
to act as a reasonably diligent person having both the general knowledge, skill and experience that may reasonably be expected of a person
carrying out the same functions as are carried out by that director in relation to the company and the general knowledge skill and experience
of that director.
As
set out above, directors have a duty not to put themselves in a position of conflict and this includes a duty not to engage in self-dealing,
or to otherwise benefit as a result of their position. However, in some instances what would otherwise be a breach of this duty can be
forgiven and/or authorized in advance by the shareholders provided that there is full disclosure by the directors. This can be done by
way of permission granted in the amended and restated memorandum and articles of association or alternatively by shareholder approval
at general meetings.
Accordingly,
as a result of multiple business affiliations, our officers and directors may have similar legal obligations relating to presenting business
opportunities to multiple entities. In addition, conflicts of interest may arise when our board evaluates a particular business opportunity.
We cannot assure you that any of the above mentioned conflicts will be resolved in our favor. Furthermore, each of our officers and directors
currently has and may in the future have fiduciary obligations to other businesses, including other blank check companies similar to
our company, of which they are now or may in the future be officers or directors. To the extent they identify business opportunities
which may be suitable for the entities to which they owe fiduciary obligations, our officers and directors will honor those fiduciary
obligations. Accordingly, it is possible they may not present opportunities to us that otherwise may be attractive to us unless the entities
to which they owe fiduciary obligations and any successors to such entities have declined to accept such opportunities.
In
order to minimize potential conflicts of interest which may arise from multiple corporate affiliations, each of our officers and directors
has contractually agreed, pursuant to a written agreement with us, until the earliest of a business combination, our liquidation or such
time as he ceases to be an officer or director, to present to our company for our consideration, prior to presentation to any other entity,
any suitable business opportunity which may reasonably be required to be presented to us, subject to any fiduciary or contractual obligations
he might have.
Below
is a table summarizing the entities to which our officers and directors currently have fiduciary duties or contractual obligations which
will take priority over us.
Individual |
|
Entity |
| Mingyu
(Michael) Li |
|
Horizon Capital |
| |
|
|
| Jon
M. Montgomery |
|
Nuvve Holding Corp. |
To
further minimize conflicts of interest, we have agreed not to consummate an initial business combination with an entity that is affiliated
with any of our initial shareholders, officers or directors unless we have obtained an opinion from an independent investment banking
firm, or another independent entity that commonly renders valuation opinions, and the approval of a majority of our disinterested independent
directors that the business combination is fair to our company (or shareholders) from a financial point of view. Notwithstanding the
foregoing, our amended and restated memorandum and articles of association provides that, subject to fiduciary duties under Cayman Islands
law, we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered
to such person solely in his or her capacity as a director or officer of our company and such opportunity is one we are legally and contractually
permitted to undertake and would otherwise be reasonable for us to pursue.
Our
officers and directors, as well as our initial shareholders, have agreed (i) to vote any shares owned by them in favor of any proposed
business combination and (ii) not to redeem any shares in connection with a shareholder vote to approve a proposed initial business
combination or any amendment to our charter documents prior to the consummation of our initial business combination or sell any shares
to us in a tender offer in connection with a proposed initial business combination.
Code
of Conduct and Ethics
We
have adopted a code of conduct and ethics applicable to our directors, officers and employees in accordance with applicable federal securities
laws. We filed a copy of our form of Code of Ethics and our audit committee charter as exhibits to the registration statement for the
IPO. You will be able to review these documents by accessing our public filings at the SEC’s web site at www.sec.gov. In
addition, a copy of the Code of Ethics will be provided without charge upon request from us. We intend to disclose any amendments to
or waivers of certain provisions of our Code of Ethics in a Current Report on Form 8-K.
Section 16(a) Beneficial
Ownership Reporting Compliance
Section 16(a) of
the Securities Exchange Act of 1934, as amended, or the Exchange Act, requires our executive officers, directors and persons who beneficially
own more than 10% of a registered class of our equity securities to file with the SEC initial reports of ownership and reports of changes
in ownership of our ordinary shares and other equity securities. These executive officers, directors, and greater than 10% beneficial
owners are required by SEC regulation to furnish us with copies of all Section 16(a) forms filed by such reporting persons.
Based
solely on our review of such forms furnished to us and written representations from certain reporting persons, we believe that all filing
requirements applicable to our executive officers, directors and greater than 10% beneficial owners were filed in a timely manner during
2022.
Item 11.
Executive Compensation
Employment
Agreements
We
have not entered into any employment agreements with our executive officers, and have not made any agreements to provide benefits upon
termination of employment.
Executive
Officers and Director Compensation
No
compensation will be paid to our initial shareholders, officers and directors, or any of their respective affiliates, prior to or in
connection with the consummation of our initial business combination. Additionally, these individuals will be reimbursed for any out-of-pocket
expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence
on suitable business combinations. Our independent directors will review on a quarterly basis all payments that were made to our initial
shareholders, officers, directors or our or their affiliates.
After
the completion of our initial business combination, members of our management team who remain with us, may be paid consulting, management
or other fees from the combined company with any and all amounts being fully disclosed to shareholders, to the extent then known, in
the tender offer materials or proxy solicitation materials furnished to our shareholders in connection with a proposed business combination.
It is unlikely the amount of such compensation will be known at the time, as it will be up to the directors of the post-combination business
to determine executive and director compensation. Any compensation to be paid to our officers will be determined, or recommenced, to
the board of directors for determination, either by a committee constituted solely by independent directors or by a majority of the independent
directors on our board of directors.
We
do not intend to take any action to ensure that members of our management team maintain their positions with us after the consummation
of our initial business combination, although it is possible that some or all of our officers and directors may negotiate employment
or consulting arrangements to remain with us after the initial business combination. The existence or terms of any such employment or
consulting arrangements to retain their positions with us may influence our management’s motivation in identifying or selecting
a target business but we do not believe that the ability of our management to remain with us after the consummation of our initial business
combination will be a determining factor in our decision to proceed with any potential business combination. We are not party to any
agreements with our officers and directors that provide for benefits upon termination of employment.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth as of March 30,
2023 the number of Ordinary Shares beneficially owned by (i) each person known by us to be the beneficial owner of more than 5% of
our issued and outstanding ordinary shares; (ii) each of our officers and directors that beneficially owns ordinary shares; and (iii) all
our officers and directors as a group. As of March 30, 2023, we had 6,374,089 ordinary shares issued and outstanding.
Unless
otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all ordinary
shares beneficially owned by them. The following table does not reflect record of beneficial ownership of any ordinary shares issuable
upon exercise of warrants, including the private units, as these warrants are not exercisable within 60 days of the date thereof.
| Name and Address of Beneficial Owner(1) | |
Amount
and Nature
of Beneficial Ownership | | |
Approximate Percentage of Issued and outstanding ordinary shares | |
| Directors and Officers | |
| | |
| |
| Bill Chen(2) | |
| 2,046,500 | | |
| 32.11 | % |
| H. David Sherman | |
| 20,000 | | |
| * | |
| Mingyu (Michael) Li | |
| 5,000 | | |
| * | |
| Jon M. Montgomery | |
| 5,000 | | |
| * | |
| All directors and officers (4 individuals) as a group | |
| 2,076,500 | | |
| 32.58 | % |
| Greater than 5% Holders | |
| | | |
| | |
| RedOne Investment Limited(2) | |
| 2,046,500 | | |
| 32.11 | % |
| Karpus Investment Management(3) | |
| 563,175 | | |
| 8.8 | % |
| First Trust Merger Arbitrage Fund(4) | |
| 662,352 | | |
| 10.39 | % |
| Mizuho Financial Group, Inc.(5) | |
| 509,158 | | |
| 7.99 | % |
| Polar Asset Management Partners Inc.(6) | |
| 676,115 | | |
| 10.61 | % |
| Hudson Bay Capital Management LP(7) | |
| 595,000 | | |
| 9.33 | % |
| (1) | Unless
otherwise indicated, the business address of each of the individuals is c/o Lakeshore Acquisition II Corp., 667 Madison Avenue,
New York, NY 10065. |
| |
(2) |
Represents shares held by our sponsor. Mr. Chen has voting and dispositive power over the shares held of record by our sponsor, RedOne Investment Limited. Mr. Chen disclaims any beneficial ownership of the shares held by our sponsor, except to the extent of his pecuniary interest therein. |
| |
(3) |
Based on a certain Schedule 13G filed on February 14, 2023 by the reporting person. The address for the reporting persons is 183 Sully’s Trail, Pittsford, New York 14534. Karpus Management, Inc., d/b/a Karpus Investment Management (“Karpus”). Karpus is a registered investment adviser under Section 203 of the Investment Advisers Act of 1940. Karpus is controlled by City of London Investment Group plc (“CLIG”), which is listed on the London Stock Exchange. However, in accordance with SEC Release No. 34-39538 (January 12, 1998), effective informational barriers have been established between Karpus and CLIG such that voting and investment power over the subject securities is exercised by Karpus independently of CLIG, and, accordingly, attribution of beneficial ownership is not required between Karpus and CLIG. |
| |
(4) |
Pursuant to a certain Schedule 13G filed on February 14, 2023, which was filed jointly by First Trust Merger Arbitrage Fund (“VARBX”), First Trust Capital Management L.P. (“FTCM”), First Trust Capital Solutions L.P. (“FTCS”) and FTCS Sub GP LLC (“Sub GP”). VARBX is a series of Investment Managers Series Trust II which is an investment company registered under the Investment Company Act of 1940. FTCM is an investment adviser registered with the SEC that provides investment advisory services to, among others, (i) series of Investment Managers Services Trust II, an investment company registered under the Investment Company Act of 1940, specifically VARBX, and (ii) First Trust Alternative Opportunities Fund, an investment company registered under the Investment Company Act of 1940 (collectively, the “Client Accounts”). FTCS is a Delaware limited partnership and control person of FTCM. Sub GP is a Delaware limited liability company and control person of FTCM. As investment adviser to the Client Accounts, FTCM has the authority to invest the funds of the Client Accounts in securities (including Ordinary Shares of the Issuer) as well as the authority to purchase, vote and dispose of securities, and may thus be deemed the beneficial owner of any shares of the Issuer’s Ordinary Shares held in the Client Accounts. As of December 31, 2022, VARBX owned 662,352 shares of the outstanding ordinary shares of LBBB, while FTCM, FTCS and Sub GP collectively owned 718,098 shares of the outstanding ordinary shares of LBBB. FTCS and Sub GP may be deemed to control FTCM and therefore may be deemed to be beneficial owners of the ordinary shares reported in this Schedule 13G. No one individual controls FTCS or Sub GP. FTCS and Sub GP do not own any Ordinary Shares of the Issuer for their own accounts. The principal business address of FTCM, FTCS and Sub GP is 225 W. Wacker Drive, 21st Floor, Chicago, IL 60606. The principal business address of VARBX is 235 West Galena Street, Milwaukee, WI 53212. |
| |
(5) |
Pursuant to a certain Schedule 13G filed on February 14, 2023 by Mizuho Financial Group, Inc. Mizuho Financial Group, Inc. reported sole dispositive and voting power over 509,158 shares of LBBB’s ordinary shares. Mizuho Financial Group, Inc., Mizuho Bank, Ltd. and Mizuho Americas LLC may be deemed to be indirect beneficial owners of said equity securities directly held by Mizuho Securities USA LLC which is their wholly-owned subsidiary. The address of Mizuho Financial Group, Inc. is 1-5-5, Otemachi, Chiyoda-ku, Tokyo 100-8176, Japan. |
| |
(6) |
According to a certain Schedule 13G filed on February 09, 2023, on behalf of Polar Asset Management Partners Inc. (“Polar”). Polar serves as the investment advisor to Polar Multi-Strategy Master Fund (“PMSMF”) with respect to the reported shares directly held by PMSMF. The business address of this stockholder is 16 York Street, Suite 2900, Toronto, ON, Canada M5J 0E6. |
| |
(7) |
According to a certain Schedule 13G filed with the SEC on February 9, 2023 by Hudson Bay Capital Management LP (“Hudson Bay”) and Sander Gerber, Hudson Bay serves as the investment manager to HB Strategies LLC and Hudson Bay SPAC Master Fund LP, in whose name the securities reported herein are held. As such, Hudson Bay may be deemed to be the beneficial owner of all shares of ordinary shares held by HB Strategies LLC and Hudson Bay SPAC Master Fund LP. Mr. Gerber serves as the managing member of Hudson Bay Capital GP LLC, which is the general partner of Hudson Bay Mr. Gerber disclaims beneficial ownership of these securities. The address of each of Hudson Bay and Mr. Gerber is 28 Havemeyer Place, 2nd Floor, Greenwich, Connecticut 06830. |
Our
initial shareholders have agreed not to transfer, assign or sell any of the founder shares and insider units (i.e. the Private Units,
except to certain permitted transferees) until, with respect to 50% of the founder shares and insider units, the earlier of six months
after the date of the consummation of our initial business combination and the date on which the closing price of our ordinary shares
equals or exceeds $12.50 per share for any 20 trading days within a 30-trading day period following the consummation of our initial business
combination and, with respect to the remaining 50% of the founder shares and insider units, six months after the date of the consummation
of our initial business combination, or earlier in each case if, subsequent to our initial business combination, we complete a liquidation,
merger, stock exchange or other similar transaction which results in all of our stockholders having the right to exchange their ordinary
shares for cash, securities or other property.
During
the lock-up period, the holders of these shares will not be able to sell or transfer their securities except (1) to our officers,
directors, shareholders, employees and members of our sponsor and their affiliates, (2) if a holder is an entity, as a distribution
to its partners, shareholders or members upon its liquidation, (3) by bona fide gift to a member of the holder’s immediate
family or to a trust, the beneficiary of which is a holder or a member of a holder’s immediate family, for estate planning purposes,
(4) by virtue of the laws of descent and distribution upon death, (5) pursuant to a qualified domestic relations order, (6) by
certain pledges to secure obligations incurred in connection with purchases of our securities, (7) by private sales at prices no
greater than the price at which the shares were originally purchased or (8) to us for no value for cancellation in connection with
the consummation of our initial business combination, in each case (except for clause 8 or with our prior consent) where the transferee
agrees to the terms of the insider letter. If we are unable to effect a business combination and liquidate, there will be no liquidation
distribution with respect to the founder shares.
Item 13.
Certain Relationships and Related Transactions, and Director Independence
On
February 19, 2021, we issued an aggregate of 1,437,500 founder shares to our initial shareholders for an aggregate purchase price of
$25,000, or approximately $0.017 per share. Our sponsor thereafter transferred certain shares to our independent directors for the same
price paid for such shares. In connection with the increase in the size of the offering, on December 20, 2021, we declared a 20% share
dividend on each founder share thereby increasing the number of issued and outstanding founder shares to 1,725,000 (up to 225,000 of
which are subject to forfeiture) so as to maintain the number of founder shares at 20% of the outstanding shares of our ordinary shares
upon the consummation of this offering, resulting in an effective purchase price per founder share after the share dividend of approximately
$0.014. The per share purchase price of the founder shares was determined by dividing the amount of cash contributed to the company by
the aggregate number of founder shares issued. The number of founder shares issued was determined based on the expectation that the founder
shares would represent 20% of the outstanding shares after this offering (not including the shares to be issued to the underwriter at
closing or the shares underlying the private placement units). Since the over-allotment option had been fully exercised, the 225,000
founder shares were no longer subject to forfeiture on March 11, 2022.
On
March 11, 2022, our sponsor purchased an aggregate of 351,500 Private Units in a private placement at $10.00 per Private Unit (including
$500,000 paid via conversion of then existing related party loan, as described below).
On
May 11, 2021, we issued a $300,000 principal amount unsecured promissory note to our sponsor; On January 31, 2022, we issued
a $100,000 principal amount unsecured promissory note to our sponsor, On March 7, 2022, we issued a $100,000 principal amount unsecured
promissory note to our sponsor, and we had received such amounts as of issuance dates. The notes were non-interest bearing, and
due after the date on which the IPO was consummated or we determined to abandon the IPO. On March 11, 2022, the $500,000 loan was
converted into part of the subscription of $3,515,000 private placement at a price of $10.00 per unit. The promissory notes were canceled
and no amounts were owed under the notes.
In
addition, in order to finance transaction costs in connection with an intended initial business combination, our initial shareholders,
officers and directors and their affiliates may, but are not obligated to, loan us funds as may be required. Such loans would be evidenced
by promissory notes. In the event that we are unable to consummate an initial business combination, we may use a portion of the offering
proceeds held outside the Trust Account to repay such loaned amounts but no proceeds from our Trust Account would be used for such repayment.
If we consummate an initial business combination, the notes 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 notes may be converted upon consummation of our business
combination into additional private units at a price of $10.00 per unit (which, for example, would result in the holders being issued
50,000 units if the full amount of notes are issued and converted). As of December 31, 2022, there were nil working capital loans outstanding.
On
February 10, 2023, we issued an unsecured promissory note in the aggregate principal amount of $100,000 to RedOne Investment Limited,
our sponsor. The principal shall be payable promptly on the earlier date on which either we consummates an initial business combination
or we receive financing from other parties with no interest accrued, and the amount of $100,000 does not have the conversion feature
of converting into additional Private Units, based on the description of the promissory note.
We
agreed, commencing on the signing of the engagement letter with the underwriter on May 6, 2021, to pay the sponsor a monthly
fee of up to $10,000 up to the consummation of business combination, for our use of its personnel and other administrative resources.
Since inception through December 31, 2022, we had paid an aggregate of $198,000 to the sponsor.
On March 10, 2023, we entered into a loan agreement as the borrower
with a third party lender, our sponsor and Nature’s Miracle Inc. (“NMI”)
as the guarantors. The principal amount was $250,000 with no interest bearing and was repayable on or before June 11, 2023 (the “Repayment
Date”). We shall cause to issue 25,000 bonus shares to the lender of the surviving company when completing the proposed business
combination with NMI, no later than the Repayment Date.
On March 28, 2023, the Company issued an unsecured promissory note
in the aggregate principal amount of $100,000 to RedOne Investment Limited, the Company’s sponsor. The principal shall be payable
promptly on the earlier date on which either the Company consummates an initial business combination or has received financing from other
parties with no interest accrued, and the amount of $100,000 does not have the conversion feature of converting into additional Private
Units, based on the description of the promissory note.
We
entered into agreements with our officers and directors to provide contractual indemnification in addition to the indemnification provided
for in our amended and restated memorandum and articles of association.
Other
than reimbursement of any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target
businesses and performing due diligence on suitable business combinations, no compensation or fees of any kind, including finder’s
fees, consulting fees or other similar compensation, will be paid to our sponsor, officers or directors, or to any of their respective
affiliates, prior to or with respect to our initial business combination (regardless of the type of transaction that it is). Our independent
directors will review on a quarterly basis all payments that were made to our sponsor, officers, directors or our or their affiliates
and will be responsible for reviewing and approving all related party transactions as defined under Item 404 of Regulation S-K,
after reviewing each such transaction for potential conflicts of interests and other improprieties. Total reimbursement paid to our sponsor,
officers or directors amounted to $24,243 from February 19, 2021 (Inception) to December 31, 2022. The outstanding balance
amount was $5,323 at December 31, 2022, and this amount was accrued in our balance sheet as indicated in the accompanying consolidated
financial statements.
After
our initial business combination, members of our management team who remain with us may be paid consulting, management or other fees
from the combined company with any and all amounts being fully disclosed to our shareholders, to the extent then known, in the tender
offer or proxy solicitation materials, as applicable, furnished to our shareholders. It is unlikely the amount of such compensation will
be known at the time of distribution of such tender offer materials or at the time of a general meeting held to consider our initial
business combination, as applicable, as it will be up to the directors of the post-combination business to determine executive and director
compensation.
All
ongoing and future transactions between us and any member of our management team or his or her respective affiliates will be on terms
believed by us at that time, based upon other similar arrangements known to us, to be no less favorable to us than are available from
unaffiliated third parties. It is our intention to obtain estimates from unaffiliated third parties for similar goods or services to
ascertain whether such transactions with affiliates are on terms that are no less favorable to us than are otherwise available from such
unaffiliated third parties. If a transaction with an affiliated third party were found to be on terms less favorable to us than with
an unaffiliated third party, we would not engage in such transaction.
We
are not prohibited from pursuing an initial business combination with a company that is affiliated with our initial shareholders, officers
or directors. In the event we seek to complete our initial business combination with a target that is affiliated with our initial shareholders,
officers or directors, we, or a committee of independent directors, would obtain an opinion from an independent investment banking firm
or another independent entity that commonly renders valuation opinions that our initial business combination is fair to our company (or
shareholders) from a financial point of view.
We
have entered into a registration rights agreement with respect to the founder shares and Private Units, among other securities.
Director
Independence
Nasdaq
requires that a majority of our board must be composed of “independent directors,” which is defined generally as a person
other than an officer or employee of the company or its subsidiaries or any other individual having a relationship, which, in the opinion
of the company’s board of directors would interfere with the director’s exercise of independent judgment in carrying out
the responsibilities of a director.
For
a description of the director independence, see above Part III, Item 10 – Directors, Executive Officers and Corporate
Governance.
Item 14.
Principal Accounting Fees and Services
The
following is a summary of fees paid or to be paid to UHY LLP, or UHY, for services rendered.
Audit
Fees. Audit fees consist of fees billed for professional services rendered for the audit of our year-end financial statements
and services that are normally provided by UHY LLP in connection with regulatory filings. The aggregate fees billed by UHY LLP for professional
services rendered for the audit of our annual financial statements, review of the financial information for the respective periods, registration
statements for the IPO and for the proposed business combination and other required filings with the SEC was $153,719 for the fiscal years
ended December 31, 2022. We paid $122,776 and the balance amount to be paid was $30,943 at December 31, 2022. The above
amounts include interim procedures and audit fees, as well as attendance at audit committee meetings.
Audit-Related
Fees. Audit-related services consist of fees billed for assurance and related services that are reasonably related to performance
of the audit or review of our financial statements and are not reported under “Audit Fees.” These services include attest
services that are not required by statute or regulation and consultations concerning financial accounting and reporting standards. We
did not pay UHY LLP for consultations concerning financial accounting and reporting standards for the fiscal years ended December 31,
2022.
Tax
Fees. We did not pay UHY LLP for tax planning and tax advice for the fiscal years ended December 31, 2022.
All
Other Fees. We did not pay UHY LLP any other fees for the fiscal years ended December 31, 2022.
Pre-Approval
Policy
Our
audit committee was formed upon the consummation of our IPO. As a result, the audit committee did not pre-approve all of the foregoing
services, although any services rendered prior to the formation of our audit committee were approved by our board of directors. Since
the formation of our audit committee, and on a going-forward basis, the audit committee has and will pre-approve all auditing services
and permitted non-audit services to be performed for us by our auditors, including the fees and terms thereof (subject to the de minimis
exceptions for non-audit services described in the Exchange Act which are approved by the audit committee prior to the completion of
the audit).
Notes to Consolidated Financial Statements
Note 1 — Organization and Business Operations
Organization and General
Lakeshore Acquisition II Corp. (the “Company”)
was incorporated in the Cayman Islands on February 19, 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 one or
more businesses or entities. The Company’s efforts to identify a prospective target business will not be limited to any particular
industry or geographic region except that according to the Company’s amended and restated memorandum and articles of association,
the Company will not effectuate its initial business combination with a company that is headquartered in the People’s Republic of
China (“China”), the Hong Kong Special Administrative Region of China (“Hong Kong”) or the Macau Special Administrative
Region of China (“Macau”) or conducts a majority of its operations in China, Hong Kong or Macau.
As of December 31, 2022, the Company had not yet
commenced any operations and had not generated revenue. All activity for the period from February 19, 2021 (inception) through December
31, 2022 relates 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”).
On August 1, 2022, LBBB Merger Corp. was incorporated
under Delaware law as a wholly owned subsidiary of the Company, and LBBB Merger Sub Inc. was incorporated under Delaware law as a wholly
owned subsidiary of LBBB Merger Corp. Both of these two companies were incorporated for the purpose of effecting its initial business
combination and will not have any activities before the closing of the business combination (as described below in “Business Combination”
in Note 1).
Financing
The registration statement for the Company’s
IPO (as described in Note 3) was declared effective on March 8, 2022 (the “Effective Date”). On March 11, 2022,
the Company consummated an IPO of 6,900,000 units, which includes the full exercise of the over-allotment option by the underwriter in
the IPO, at $10.00 per unit (the “Public Units”), generating total gross proceeds of $69,000,000.
Simultaneously with the IPO, the Company sold
to its sponsor 351,500 units at $10.00 per unit (the “Private Units”) in a private placement (as described in Note 4),
generating total gross proceeds of $ 3,515,000.
Offering costs amounted to $5,614,686 consisting
of $1,380,000 of underwriting commissions, $2,415,000 of deferred underwriting commissions, and $1,819,686 of other offering costs (which
includes $1,262,250 of representative shares, as described in Note 8). Except for the $25,000 of subscription of founder shares,
the Company received net proceeds of $68,162,564 from the IPO and the private placement.
Trust Account
Upon the closing of the IPO and the private placement,
$70,035,000 was placed in a trust account (the “Trust Account”) with Continental Stock Transfer & Trust Company acting
as trustee.
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 12 months
(or 15 months as applicable) 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 deferred underwriting commissions payable and 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 100% of the equity interests or assets of the target business or businesses. The Company may, however,
structure a business combination where the Company merges directly with the target business or where the Company acquires less than 100%
of such interests or assets of the target business in order to meet certain objectives of the target management team or shareholders or
for other reasons, but the Company will only complete such business combination if the post-transaction company owns 50% or more
of the outstanding voting securities of the target or otherwise owns a controlling interest in the target sufficient for it not to be
required to register as an investment company under the Investment Company Act. If less than 100% of the equity interests or assets of
a target business or businesses are owned or acquired by the post-transaction company, the portion of such business or businesses
that is owned or acquired is what will be valued for purposes of the 80% test.
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 $5,000,001 upon consummation of the business combination and, solely if shareholder
approval is sought, an ordinary resolution under Cayman Islands law, which requires the affirmative vote of a majority of the shareholders
who attend and vote at a general meeting of the Company will be required to approve the business combination.
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.
In connection with any shareholder vote required
to approve any business combination, the 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.
On September 9, 2022, The Company entered into
a merger agreement (the “Merger Agreement”) with certain parties aiming to acquire 100% of the equity securities of Nature’s
Miracle, Inc. “Nature’s Miracle”.
Pursuant to the Merger Agreement, immediately
prior to the proposed business combination, the Company will reincorporate into the State of Delaware so as to re-domicile as and become
a Delaware corporation by means of merging with and into a newly formed Delaware corporation (the “Reincorporation”), with
the Company together with its successor (LBBB Merger Corp., a Delaware corporation) being the purchaser (the “Purchaser”)
of the proposed business combination.
Pursuant to the Merger Agreement, Nature’s
Miracle will merge with LBBB Merger Sub Inc., a Delaware corporation and wholly owned subsidiary of Purchaser, with Nature’s Miracle
surviving and the Purchaser acquiring 100% of the equity securities of Nature’s Miracle. In exchange for their equity securities,
the stockholders of Nature’s Miracle will receive an aggregate number of shares of common stock of the Purchaser with an aggregate
value equal to: (a) two hundred thirty million U.S. dollars ($230,000,000), minus (b) any Closing Net Indebtedness (as defined in the
Merger Agreement). Under the Merger Agreement, the aggregate number of shares of common stock of the Purchaser that will be received by
the stockholders of Natures Miracle equals to the aggregate value divided by $10.00.
On November 14, 2022, LBBB Merger Corp., the Company’s
wholly owned subsidiary, filed a Form S-4 containing the registration statement with respect to the proposed business combination with
Nature's Miracle.
On
December 28, 2022, LBBB Merger Corp. filed a Form S-4/A containing amendment No. 1 to the registration statement to address comments
LBBB Merger Corp. received from the SEC on December 14, 2022, regarding the registration statement.
Liquidation
Pursuant to the amended and restated
memorandum and articles of association, if the Company is unable to complete its initial business combination within 15 months
from the effective 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 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 the Company’s board of directors, liquidate and dissolve.
Liquidity and Capital Resources
As of December 31, 2022, the Company had
$44,918 in cash held outside its Trust Account available for the Company’s working capital purposes.
The Company’s liquidity needs prior to the
consummation of the IPO had been satisfied through a payment from the sponsor of $25,000 (see Note 8) for the founder shares and
the loan under several unsecured promissory notes from the sponsor of $500,000 in total (see Note 5). On March 11, 2022, the
$500,000 loan was converted into part of the subscription of $3,515,000 private placement at a price of $10.00 per unit. The promissory
notes were canceled and no amounts were owed under the notes at December 31, 2022.
Upon the consummation of the IPO and the full
exercise of over-allotment and associated private placements (see Note 3 and Note 4) on March 11, 2022, $70,035,000 of
cash was placed in the Trust Account.
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 whatever 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 certain amount of the working capital loan may be
converted upon consummation of the Company’s business combination into additional private units at a price of $10.00 per unit.
If the Company does 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 (see Note 5). To date, an aggregate principal amount of $200,000 was outstanding and evidenced
by an unsecured promissory note issued to RedOne Investment Limited, the Company’s sponsor. The principal shall be payable promptly
on the earlier date on which either the Company consummates an initial business combination or has received financing from other parties
with no interest accrued, and the amount of $200,000 does not have the conversion feature of converting into additional private units,
based on the description of the promissory note.
In addition, an aggregate principal amount of $250,000 under a loan
agreement with a third party lender was outstanding as of the date this report was issued. The loan is guaranteed by the Company’s
sponsor and Nature’s Miracle Inc. (“NMI”) with no interest bearing and is repayable on or before June 11, 2023 (the
“Repayment Date”). The Company shall cause to issue 25,000 bonus shares to the lender of the surviving company when completing
the proposed business combination with NMI, no later than the Repayment Date. The amount of $250,000 was deposited into the Company’s
Trust Account in accordance with the term of the Company’s Amended and Restated Memorandum and Articles of Association (the “Charter
Amendment”).
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, staying as a public company and consummating the business combination.
Going Concern
The Company performed an assessment on its ability
to continue as a going concern in accordance with Financial Accounting Standard Board’s Accounting Standards Update (“ASU”)
2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. There is no assurance
that the Company will be able to consummate the initial business combination within 12 months (or 15 months, as applicable) from the date
of the IPO. In the event that the Company fails to consummate business combination within the required period, the Company will face mandatory
liquidation and dissolution subject to certain obligations under applicable laws or regulations. This uncertainty raises substantial doubt
about the Company’s ability as a going concern one year from the date the financial statement is issued. No adjustments have been
made to the carrying amounts of assets or liabilities regarding the possibility of the Company not continuing as a going concern, as a
result of failing to consummate business combination within 12 months (or 15 months, as applicable) from the date of the IPO. Management
plans to continue its efforts to consummate a business combination within 12 months (or 15 months, as applicable) from the date of the
IPO.
Note 2 — Significant Accounting Policies
Basis of Presentation
The accompanying consolidated 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”).
Principals of Consolidation
The accompanying consolidated financial statements
included the accounts of the Company and its wholly owned subsidiaries where the Company has the ability to exercise control, namely,
LBBB Merger Corp. and LBBB Merger Sub Inc.. All significant intercompany balances and transactions have been eliminated in consolidation.
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 no cash equivalents as of December
31, 2022 and December 31, 2021.
Marketable Securities Held in the Trust Account
As of December 31, 2022, the Company’s
investments held in the Trust Account are classified as trading securities. Trading securities are presented on the consolidated
balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of
investments held in Trust Account are included in interest earned on marketable securities held in Trust Account in the accompanying
consolidated statements of operations. The estimated fair values of investments held in Trust Account are determined using available
market information. Interest income earned on these investments is fully reinvested into the investments held in Trust Account and
therefore considered as an adjustment to reconcile net loss to net cash used in operating activities in the Statements of Cash Flow.
Such interest income reinvested will be used to redeem all or a portion of the ordinary shares upon the completion of business
combination (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 FASB 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. 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 to zero. Accordingly, as of December 31, 2022, ordinary shares subject to possible redemption are presented at
redemption value of $10.296 per share as temporary equity, outside of the shareholders’ equity section of the Company’s consolidated
balance sheets.
Offering Costs Associated with the IPO
Offering costs consist of underwriting, legal,
accounting, registration and other expenses incurred through the balance sheet date that are directly related to the IPO. As of March 11,
2022, offering costs totaled $5,614,686. The amount was consisted of $1,380,000 of underwriting commissions, $2,415,000 of deferred underwriting
commissions, and $1,819,686 of other offering costs (which includes $1,262,250 of representative shares, as described in Note 8.
The Company complies with the requirements of the ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic
5A – “Expenses of Offering”. Offering costs were charged to shareholders’ equity upon the completion of the
IPO. The Company allocates offering costs between public shares, public warrants and public rights based on the estimated fair values
of them at the date of issuance. Accordingly, $5,109,364 was allocated to public shares and was charged to temporary equity, and a sum
of $505,322 was allocated to public warrants and public rights, and was charged to shareholders’ equity.
Fair Value of Financial Instruments
The fair value of the Company’s assets and
liabilities, which qualify as financial instruments under FASB ASC 825, “Financial Instruments,” approximates the carrying
amounts represented in the consolidated balance sheets, primarily due to their short-term nature.
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 $250,000. The Company has not experienced losses on these accounts
and management believes the Company is not exposed to significant risks on such accounts.
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 interest
income in trust account 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. For the year ended December 31, 2022 and for the period from February 19, 2021 (inception) to December 31, 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
consolidated statements of operations is based on the following:
| | |
For The Year Ended December 31, 2022 | | |
For The Period From February 19,
2021
(Inception)
To
December 31,
2021 | |
| Net income (loss) | |
$ | 253,602 | | |
$ | (85,388 | ) |
| Accretion of temporary equity to initial redemption value ($10.15 per share) (1) | |
| (12,354,364 | ) | |
| — | |
| Interest earned from trust account | |
| (1,008,126 | ) | |
| — | |
| Net loss including accretion of temporary equity to redemption value | |
$ | (13,108,888 | ) | |
$ | (85,388 | ) |
| | |
For The Year Ended
December 31, 2022 | | |
For The Period From
February 19, 2021
(Inception) To
December 31, 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 | |
$ | (9,530,057 | ) | |
$ | (3,578,831 | ) | |
$ | — | | |
$ | (85,388 | ) |
| Accretion of temporary equity to initial redemption value ($10.15 per share) (1) | |
| 12,354,364 | | |
| — | | |
| — | | |
| — | |
| Interest earned from trust account | |
| 1,008,126 | | |
| — | | |
| — | | |
| — | |
| Allocation of net income/(loss) | |
$ | 3,832,433 | | |
$ | (3,578,831 | ) | |
$ | — | | |
$ | (85,388 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Denominators: | |
| | | |
| | | |
| | | |
| | |
| Weighted-average shares outstanding | |
| 5,595,616 | | |
| 2,101,326 | | |
| — | | |
| 1,500,000 | |
Basic and diluted net income/(loss) per share | |
$ | 0.68 | | |
$ | (1.70 | ) | |
$ | N/A | | |
$ | (0.06 | ) |
| (1) | Based on IPO prospectus of the Company, redemption price was initially $10.15 per share, plus any pro
rata interest earned on the fund held in the trust account less amount necessary to pay the Company’s taxes. An aggregate of $12,354,364
was accreted to the redemption value of public shares at the closing of the IPO. |
The number of weighted-average shares outstanding
for the period from February 19, 2021 (Inception) to December 31, 2021 excludes an aggregate of up to 225,000 shares of non-redeemable
shares that are subject to forfeiture if the underwriter does not exercise over-allotment option.
In connection with the closing of the IPO and
the underwriter’s full exercise of over-allotment option on March 11, 2022, the 225,000 founder shares were no longer subject
to forfeiture. These shares were excluded from the calculation of weighted average shares outstanding until they were no longer subject
to forfeiture.
Warrants
The Company evaluates the public and private warrants
as either equity-classified or liability-classified instruments based on an assessment of the warrants’ specific terms and applicable
authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“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, among other conditions for equity classification. Pursuant to such
evaluation, both public and private warrants are classified in shareholders’ equity.
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 February 19, 2021, the evaluation was performed for the period ended December 31, 2021
and for the year ended December 31, 2022. 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. There were no
interest and penalties incurred for the year ended December 31, 2022.
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.
The
Company’s tax provision was nil and it had no deferred tax assets for the period presented. 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. Any interest payable in respect to US debt obligations held by the Trust Account is intended to
qualify for the portfolio interest exemption or otherwise be exempt from U.S. withholding taxes. Furthermore, shareholders of the
Company may be subject to tax in their respective jurisdictions based on applicable laws, for instances, U.S. persons may be subject
to tax on the amounts deemed received depending on whether the Company is a passive foreign investment company and whether U.S.
persons have made any applicable tax elections permitted under applicable law. The Company’s wholly owned subsidiaries, LBBB
Merger Corp. and LBBB Merger Sub Inc. were incorporated under Delaware law, and their tax provisions were nil and they had no
deferred tax assets for the period presented.
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
Pursuant to the IPO on March 11, 2022, the
Company sold 6,900,000 Public Units, which includes the full exercise of the underwriter’s over-allotment option, at a price of
$10.00 per Public Unit. Each unit consists of one ordinary share, one-half of one redeemable warrant and one right. Each whole warrant
entitles the holder thereof to purchase one ordinary share for $11.50 per share, subject to certain adjustment. No fractional warrants
will be issued upon separation of the units and only whole warrants will trade. Each right entitles the holder to receive one-tenth of
one ordinary share upon consummation of the Company’s initial business combination (See Note 8).
All of the 6,900,000 public shares sold as part
of the Public Units in the IPO contain a redemption feature which allows for the redemption of such public shares if there is a stockholder
vote or tender offer in connection with the business combination and in connection with certain amendments to the Company’s amended
and restated certificate of incorporation, or in connection with the Company’s liquidation. In accordance with the Securities and
Exchange Commission (the “SEC”) and its staff’s guidance on redeemable equity instruments, which has been codified in
ASC 480-10-S99, redemption provisions not solely within the control of the Company require ordinary shares subject to redemption
to be classified outside of permanent equity.
As of December 31, 2022, the ordinary shares reflected
on the balance sheet are reconciled in the following table.
| | |
As of December 31,
2022 | |
| Gross proceeds | |
$ | 69,000,000 | |
| Less: | |
| | |
| Proceeds allocated to public warrants and public rights | |
| (6,210,000 | ) |
| Offering costs of public shares | |
| (5,109,364 | ) |
| Plus: | |
| | |
| Accretion of carrying value to redemption value | |
| 13,362,490 | |
| Ordinary share subject to possible redemption | |
$ | 71,043,126 | |
Note 4 — Private Placement
Simultaneously with the closing of the IPO, RedOne
Investment Limited, the Company’s sponsor, purchased an aggregate of 351,500 Private Units in a private placement at $10.00 per
Private Unit. The Private Units are identical to the units sold in the IPO, as each private unit consists of one share of ordinary shares
in the Company, and one right to receive one tenth (1/10) of a share of ordinary shares automatically upon the consummation of an initial
business combination, and one-half of one redeemable warrant, each whole warrant entitling the holder thereof to purchase one ordinary
share for $11.50 per share.
The holders of the private units have agreed (A) to
vote the shares underlying their private units in favor of any proposed business combination, (B) not to propose, or vote in favor
of, an amendment to the Company’s amended and restated certificate of incorporation with respect to the Company’s pre-business
combination activities prior to the consummation of such a business combination unless the Company provides public shareholders with the
opportunity to convert their public shares in connection with any such vote, (C) not to convert any shares underlying the private
units into the right to receive cash from the Trust Account in connection with a shareholder vote to approve an initial business combination
or a vote to amend the provisions of the Company’s amended and restated certificate of incorporation relating to shareholders’
rights or pre-business combination activity or sell their shares to the Company in connection with a tender offer the Company engages
in and (D) that the shares underlying the private units shall not participate in any liquidating distribution upon winding up if
a business combination is not consummated. Subject to certain limited exceptions, the purchasers have also agreed not to transfer, assign
or sell any of the private units or underlying securities (except to transferees that agree to the same terms and restrictions) until
30 days after the completion of an initial business combination.
Note 5 — Related Party Transactions
Founder Shares
On February 19, 2021, 1,437,500 shares
of the Company’s ordinary shares were issued to the sponsor at a price of approximately $0.017 per share for an aggregate amount
of $25,000. In connection with the increase in the size of the offering, on December 20, 2021, the Company declared a 20% share dividend
on each founder share thereby increasing the number of issued and outstanding founder shares to 1,725,000 (up to 225,000 of which are
subject to forfeiture) so as to maintain the number of founder shares at 20% of the outstanding ordinary shares upon the consummation
of this offering, resulting in an effective purchase price per founder share after the share dividend of approximately $0.014. The per
share purchase price of the founder shares was determined by dividing the amount of cash contributed to the company by the aggregate number
of founder shares issued. The number of founder shares issued was determined based on the expectation that the founder shares would represent
20% of the outstanding shares after this offering (not including the shares issued to the underwriter at closing or the shares underlying
the private placement units). Since the over-allotment option has been fully exercised, the 225,000 founder shares were no longer subject
to forfeiture on March 11, 2022.
Administrative Service Fee
The Company has agreed, commencing on the signing
of the engagement letter with the underwriter on May 6, 2021, to pay the sponsor a monthly fee of up to $10,000 up to the consummation
of business combination, for the Company’s use of its personnel and other administrative resources. Since inception through December
31, 2022, the Company had paid an aggregate of $198,000 to the sponsor.
Related Party Loans
On May 11, 2021, the Company issued a $300,000
principal amount unsecured promissory note to the Company’s sponsor, On January 31, 2022, the Company issued a $100,000 principal
amount unsecured promissory note to the Company’s sponsor, On March 7, 2022, the Company issued a $100,000 principal amount
unsecured promissory note to the Company’s sponsor, and the Company had received such amounts as of issuance dates. The notes are
non-interest bearing, and due after the date on which this offering is consummated or the Company determines to abandon this offering.
On March 11, 2022, the $500,000 loan was converted into part of the subscription of $3,515,000 private placement at a price of $10.00
per unit. The promissory notes were canceled and no amounts were owed under the notes.
As mentioned in Note 1, 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 whatever 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 $500,000 of the working
capital loan may be converted upon consummation of the Company’s business combination into additional private units at a price of
$10.00 per unit. If the Company does 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. As of December 31, 2022, there was nil working capital loan outstanding.
Other Related Party Transactions
For the year ended December 31, 2022 and for
the period from February 19, 2021 (Inception) to December 31, 2021, total reimbursement of out-of-pocket expenses paid to our sponsor,
officers or directors were $20,666 and $3,577 respectively. The outstanding balance amount was $5,323 at December 31, 2022, and this
amount was accrued as indicated in the accompanying consolidated financial statements; the balance amount was nil at December 31, 2021.
Note 6 — Fair Value Measurements
The Company follows the guidance in FASB 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.
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 December 31, 2022 and indicates the fair value hierarchy
of the valuation inputs the Company utilized to determine such fair value:
| Description | |
Level | | |
December 31,
2022 | |
| Assets: | |
| | |
| |
| Marketable securities held in Trust Account | |
| 1 | | |
$ | 71,043,126 | |
Except for the foregoing, the Company does not
have any assets measured at fair value on a recurring basis at December 31, 2022 and December 31, 2021.
Transfers to/from Levels 1, 2 and 3 are recognized
at the end of the reporting period in which a change in valuation technique or methodology occurs. No such transfers took place for the
period presented.
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.
On August 16, 2022, the Inflation Reduction Act
of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things, a new U.S. federal 1% excise
tax on certain repurchases (including redemptions) of stock by publicly traded domestic (i.e., U.S.) corporations and certain domestic
subsidiaries of publicly traded foreign corporations. The excise tax is imposed on the repurchasing corporation itself, not its shareholders
from whom shares are repurchased. The amount of the excise tax is generally 1% of the fair market value of the shares repurchased at the
time of the repurchase. However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market
value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. In addition, certain
exceptions apply to the excise tax. The U.S. Department of the Treasury (the “Treasury”) has been given authority to provide
regulations and other guidance to carry out and prevent the abuse or avoidance of the excise tax. The IR Act applies only to repurchases
that occur after December 31, 2022.
Therefore, any redemption or other repurchase
that occurs after December 31, 2022, in connection with a business combination, extension vote or otherwise, may be subject to the excise
tax. Whether and to what extent the Company would be subject to the excise tax in connection with a business combination, extension vote
or otherwise would depend on a number of factors, including (i) the fair market value of the redemptions and repurchases in connection
with the business combination, extension or otherwise, (ii) the structure of a business combination, (iii) the nature and amount of any
“PIPE” or other equity issuances in connection with a business combination (or otherwise issued not in connection with a business
combination but issued within the same taxable year of a business combination) and (iv) the content of regulations and other guidance
from the Treasury. In addition, because the excise tax would be payable by the Company and not by the redeeming shareholders, the mechanics
of any required payments of the excise tax have not been determined. The foregoing could cause a reduction in the cash available on hand
to complete a business combination and in the Company’s ability to complete a business combination.
Underwriting Agreement
A deferred underwriting commission of $0.35 per
Public Unit sold, totaling $2,415,000 will be payable to the underwriters from the amounts held in the Trust Account solely in the event
that the Company completes a business combination, without accrued interest. In the event that the Company does not close a business combination,
the representative underwriter forfeits its right to receive the commission.
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.
Engagement agreement with Legal Counsel
The Company has entered into an engagement agreement
with its legal counsel with respect to the proposed business combination. The fee will be based on the number of hours spent. An aggregate
of $200,000 will be paid before the closing of the business combination and the balance will be due upon the closing of the business combination.
As of December 31, 2022, an aggregate of $250,000 had been accrued into the Company’s consolidated financial statements.
Engagement agreement with Underwriter
The Company has entered into an engagement agreement
with its underwriter with respect to the proposed business combination. A success fee will be paid upon closing of the business combination,
with the amount calculated as the following schedule: (i) 2% of the aggregate value of transaction (as described in Note 1, Business Combination)
for the part up to $200 million; (ii) 1% for the part over $200 million.
Engagement Agreement – Fairness Opinion
An aggregate of $90,000 will be paid upon the
closing of the business combination, based on an engagement agreement entered into by the Company and the provider of fairness opinion
concerning the terms of the business combination.
Note 8 — Shareholder’s Equity
Ordinary shares
The Company is authorized to issue 500,000,000
ordinary shares with a par value of $0.0001 per share.
On February 19, 2021, 1,437,500 shares
of the Company’s ordinary shares were issued to the sponsor at a price of approximately $0.017 per share for an aggregate of $25,000.
In connection with the increase in the size of the offering, on December 20, 2021, the Company declared a 20% share dividend on each
founder share thereby increasing the number of issued and outstanding founder shares to 1,725,000 (up to 225,000 of which are subject
to forfeiture) so as to maintain the number of founder shares at 20% of the outstanding shares of our ordinary shares upon the consummation
of this offering, resulting in an effective purchase price per founder share after the share dividend of approximately $0.014. The per
share purchase price of the founder shares was determined by dividing the amount of cash contributed to the company by the aggregate number
of founder shares issued. The number of founder shares issued was determined based on the expectation that the founder shares would represent
20% of the outstanding shares after this offering (not including the shares issued to the underwriter at closing or the shares underlying
the private placement units). Since the over-allotment option has been fully exercised, the 225,000 founder shares were no longer subject
to forfeiture on March 11, 2022.
On March 11, 2022, the Company sold 6,900,000
units, which includes the full exercise of the over-allotment option by the underwriter at a price of $10.00 per Public Unit in the IPO;
and the Company sold to its sponsor an aggregate of 351,500 Private Units at $10.00 per Private Unit. Each Public Unit and Private Unit
consists of one ordinary share, one-half of one redeemable warrant and one right.
The Company issued to the underwriter 165,000
shares of ordinary shares (the “Representative Shares”) upon the closing of the IPO on March 11, 2022. The Company estimates
the fair value of Representative Shares to be $1,262,250 in total, or $7.65 per Representative Share. The Company accounted for the Representative
Shares as an expense of the IPO, resulting in a charge directly to stockholder’s equity. The underwriter has agreed not to transfer,
assign, sell, pledge, or hypothecate any such Representative Shares, or subject such Representative Shares to hedging, short sale, derivative,
put or call transaction that would result in the economic disposition of the securities by any person until the completion of our initial
business combination. In addition, the underwriter has agreed (i) to waive its redemption rights with respect to such shares in connection
with the completion of our initial business combination and (ii) to waive its rights to liquidating distributions from the trust
account with respect to such shares if we fail to complete our initial business combination within 12 months (or 15 months,
as applicable) from the closing of this offering.
As of December 31, 2022, there were 2,241,500
shares of ordinary shares issued and outstanding excluding 6,900,000 shares subject to possible redemption.
Warrants
Each whole warrant entitles the holder to purchase
one ordinary share at a price of $11.50 per share, subject to adjustment as described below, commencing 30 days after the completion
of its initial business combination, and expiring five years from after the completion of an initial business combination. No fractional
warrant will be issued and only whole warrants will trade.
The Company may redeem the warrants at a price
of $0.01 per warrant upon 30 days’ notice, only in the event that the last sale price of the ordinary shares is at least $18.00
(as adjusted for share sub-divisions, share dividends, reorganizations and recapitalizations) per share for any 20 trading days within
a 30-trading day period ending on the third day prior to the date on which notice of redemption is given, provided there is an
effective registration statement and current prospectus in effect with respect to the ordinary shares underlying such warrants during
the 30 day redemption period. If the Company redeems the warrants as described above, management will have the option to require
all holders that wish to exercise warrants to do so on a “cashless basis.” If a registration statement is not effective within
90 days following the consummation of a business combination, warrant holders may, until such time as there is an effective registration
statement and during any period when the Company shall have failed to maintain an effective registration statement, exercise warrants
on a cashless basis pursuant to an available exemption from registration under the Securities Act. If an exemption from registration is
not available, holders will not be able to exercise their warrants on a cashless basis and in no event (whether in the case of a registration
statement being effective or otherwise) will the Company be required to net cash settle the warrant exercise. If an initial business combination
is not consummated, the warrants will expire and will be worthless.
In addition, if (a) the Company issues additional
ordinary shares or equity-linked securities for capital raising purposes in connection with the closing of its initial business combination
at a newly issued price of less than $9.20 per share (with such issue price or effective issue price to be determined in good faith by
our board of directors and, in the case of any such issuance to our initial shareholders or their affiliates, without taking into account
any founders’ shares held by the Company’s initial shareholders or such affiliates, as applicable, prior to such issuance),
(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 the initial business combination on the date of the consummation of the Company’s initial business
combination (net of redemptions), and (c) the volume weighted average trading price of the Company’s ordinary shares during
the 20 trading day period starting on the trading day prior to the day on which the Company consummates its initial business combination
is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher
of the market value and the newly issued price, and the $18.00 per share redemption trigger price described above will be adjusted (to
the nearest cent) to be equal to 180% of the higher of the market value and the newly issued price.
Rights
Except in cases where the Company is not the surviving
company in a business combination, each holder of a right will automatically receive one-tenth (1/10) of an ordinary share upon consummation
of an initial business combination, even if the holder of a public right converted all ordinary shares held by him, her or it in connection
with the initial business combination or an amendment to our certificate of incorporation with respect to the Company’s pre-business
combination activities. In the event the Company will not be the surviving company upon completion of our initial business combination,
each holder of a right will be required to affirmatively convert his, her or its rights in order to receive the one- tenth (1/10) of a
share underlying each right upon consummation of the business combination. No additional consideration will be required to be paid by
a holder of rights in order to receive his, her or its additional ordinary shares upon consummation of an initial business combination.
The shares issuable upon exchange of the rights will be freely tradable (except to the extent held by affiliates of the Company). If the
Company enters into a definitive agreement for a business combination in which the Company will not be the surviving entity, the definitive
agreement will provide for the holders of rights to receive the same per share consideration the holders of the ordinary shares will receive
in the transaction on an as-converted into ordinary share basis.
The Company will not issue fractional shares in
connection with an exchange of rights. As a result, holders of 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 are unable to complete an initial business combination
within the required time period and liquidate the funds held in the trust account, holders of rights will not receive any of such funds
with respect to their rights, nor will they receive any distribution from our assets held outside of the trust account with respect to
such rights, and the rights will expire worthless. Further, there are no contractual penalties for failure to deliver securities to the
holders of the rights upon consummation of an initial business combination. Additionally, in no event will the Company be required to
net cash settle the rights.
Note 9 — Subsequent Events
The Company evaluated subsequent events and transactions
that occurred after the balance sheet date up to the date the consolidated financial statements were issued and identified the following
subsequent events that shall be disclosed.
On January 20, 2023, LBBB Merger Corp. filed a
Form S-4/A containing amendment No. 2 to the registration statement to address comments LBBB Merger Corp. received from the SEC on January
12, 2023.
On February 10, 2023, the Company issued an unsecured
promissory note in the aggregate principal amount of $100,000 to RedOne Investment Limited, the Company’s sponsor. The principal
shall be payable promptly on the earlier date on which either the Company consummates an initial business combination or has received
financing from other parties with no interest accrued, and the amount of $100,000 does not have the conversion feature of converting into
additional Private Units, based on the description of the promissory note.
On March 9, 2023, the Company held an
Extraordinary General Meeting (the “General Meeting”) of shareholders. In the General Meeting, shareholders approved to
amend our Amended and Restated Memorandum and Articles of Association (the “Charter Amendment”), and to extend the time
for us to complete a business combination for an additional three (3) months, from March 11, 2023 to June 11, 2023 (the
“Extension”). The amended Charter Amendment was filed with the Registrar of companies in the Cayman Islands on March 10,
2023 and was effective on that date. In connection with the approval of the Extension, the Company deposited into the Trust Account
$250,000 in accordance with the terms of the Charter Amendment. In connection with the General Meeting, shareholders elected to
redeem a total of 2,767,411 ordinary shares. An aggregate payment of $28,707,673 was distributed from the Company’s
Trust Account because of this redemption.
On March 10, 2023, the Company entered into a
loan agreement as the borrower with a third party lender, the Company’s sponsor and Nature’s Miracle Inc. (“NMI”)
as the guarantors. The principal amount was $250,000 with no interest bearing and was repayable on or before June 11, 2023 (the “Repayment
Date”). The Company shall cause to issue 25,000 bonus shares to the lender of the surviving company when completing the proposed
business combination with NMI, no later than the Repayment Date.
On March 28, 2023, the Company issued an unsecured promissory note
in the aggregate principal amount of $100,000 to RedOne Investment Limited, the Company’s sponsor. The principal shall be payable
promptly on the earlier date on which either the Company consummates an initial business combination or has received financing from other
parties with no interest accrued, and the amount of $100,000 does not have the conversion feature of converting into additional Private
Units, based on the description of the promissory note.
Except for the foregoing, the Company did not
identify any subsequent events that would have required adjustment or disclosure in the consolidated financial statements.
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