2023
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(State or other jurisdiction of
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| 94133 | ||||
(Address of principal executive | (Zip Code) |
(707) 324-4219 (Registrant’s telephone number, including area code) Not applicable (Former name, former address and former fiscal year, if changed since last report)
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Securities registered pursuant to Section 12(b) of the Act:
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Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
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| The Nasdaq | ||||||||||||
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| The Nasdaq |
Large accelerated filer | ☐ | Accelerated filer | ☐ | ||||||||
Non-accelerated filer | ☒ | Smaller reporting company | ☒ | ||||||||
Emerging growth company | ☒ |
As☒
1, 2023.
Page Number | |||||||||
PART I. FINANCIAL INFORMATION | |||||||||
Item 1. |
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| Notes to Unaudited Condensed Consolidated Financial Statements | ||||||||
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i
CHW Acquisition Corporation
CONDENSED BALANCE SHEET (UNAUDITED)
| | | |
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| September 30, 2021 | |
| | | |
ASSETS | | | |
CURRENT ASSETS | | | |
Cash | | $ | 897,818 |
Due from related party | | | 68,591 |
Prepaid expenses and other current assets | |
| 287,500 |
| | | |
Total current assets | | | 1,253,909 |
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OTHER ASSETS | | | |
Prepaid expense – non-current portion | | | 263,542 |
Investments held in trust account | | | 125,000,000 |
| | | |
TOTAL ASSETS | | $ | 126,517,451 |
| | | |
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT) | |
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| | | |
CURRENT LIABILITIES | | | |
Accounts payable | | $ | 111,054 |
Promissory note – related party | | | 43,000 |
| | | |
Total current liabilities | | | 154,054 |
| | | |
LONG-TERM LIABILITIES | | | |
Deferred underwriting fee payable | |
| 4,375,000 |
Total long-term liabilities | |
| 4,375,000 |
| | | |
Total liabilities | |
| 4,529,054 |
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COMMITMENTS AND CONTINGENCIES | |
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Ordinary shares subject to possible redemption, $0.0001 par value, 12,500,000 shares at redemption value of $10.00 per share. | | | 125,000,000 |
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SHAREHOLDERS’ EQUITY (DEFICIT) | |
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Preference shares, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding | |
| — |
Ordinary Shares; $0.0001 par value; 110,000,000 shares authorized; 3,187,500 shares issued and outstanding (excluding 12,500,000 shares subject to possible redemption), as of September 30, 2021. | |
| 318 |
Additional paid-in capital | |
| — |
Accumulated deficit | |
| (3,011,921) |
| | | |
Total shareholders’ equity (deficit) | |
| (3,011,603) |
| | | |
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT) | | $ | 126,517,451 |
The accompanying notes are an integral part of these unaudited condensed financial statements.
1
CHW Acquisition Corporation
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
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| | | | | For the period | |
| | | | January 12, 2021 | ||
| | For the three months ended | | (inception) through | ||
| | September 30, | | September 30, | ||
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| 2021 |
| 2021 | ||
OPERATING EXPENSES | | | | | | |
General and administrative | | $ | 104,249 | | $ | 120,121 |
Total operating expenses | | | 104,249 | | | 120,121 |
NET LOSS | | $ | (104,249) | | $ | (120,121) |
| | | | | | |
Weighted average shares outstanding of redeemable ordinary shares | |
| 3,983,516 | |
| 1,388,889 |
Basic and diluted net income per share, redeemable ordinary shares | | $ | (0.01) | | $ | (0.03) |
| | | | | | |
Weighted average shares outstanding of non-redeemable ordinary shares | |
| 3,170,467 | |
| 3,165,278 |
Basic and diluted net income per share, non-redeemable ordinary shares | | $ | (0.01) | | $ | (0.03) |
The accompanying notes are an integral partFinancial Condition and Results of these unaudited condensed financial statements.
2
CHW Acquisition Corporation
CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT) (UNAUDITED)
For the period January 12, 2021 (inception) through September 30, 2021
| | | | | | | | | | | | | | |
For the period January 12, 2021 (inception) through September 30, 2021 (unaudited) | | | | | | | Additional | | | | | Total | ||
| | Ordinary Shares | | paid-in | | Accumulated | | shareholders’ | ||||||
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| Shares |
| Amount |
| capital |
| deficit |
| equity (deficit) | ||||
Balance, January 12, 2021 (inception) | | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 |
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Issuance of Ordinary shares to Sponsor |
| 3,162,500 | |
| 316 | |
| 24,684 | |
| — | |
| 25,000 |
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Sale of private placement warrants |
| — | |
| — | |
| 4,238,636 | |
| — | |
| 4,238,636 |
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Issuance of representative shares |
| 62,500 | |
| 6 | |
| 460,119 | |
| — | |
| 460,125 |
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Accretion to Redeemable Ordinary shares to redemption value |
| — | |
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| (4,723,443) | |
| (2,891,800) | |
| (7,615,243) |
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Net loss |
| — | |
| — | |
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| (120,121) | |
| (120,121) |
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Forfeiture of founder shares |
| (37,500) | |
| (4) | |
| 4 | |
| — | |
| — |
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Balance, September 30,2021 |
| 3,187,500 | | $ | 318 | | $ | — | | $ | (3,011,921) | | $ | (3,011,603) |
For the period Three Months Ended September 30, 2021
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| | | | Additional | | | | | Total | |||||
| | Ordinary shares | | paid-in | | Accumulated | | shareholders’ | ||||||
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| Shares |
| Amount |
| capital |
| deficit |
| equity (deficit) | ||||
Balance, July 1, 2021 | | 3,162,500 | | $ | 316 | | $ | 24,684 | | $ | (15,872) | |
| 9,128 |
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Sale of private warrants under fair value | | — | | | — | | | 4,238,636 | | | — | | | 4,238,636 |
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Issuance of representative shares | | 62,500 | | | 6 | | | 460,119 | | | — | | | 460,125 |
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Accretion to Redeemable Ordinary shares to redemption value | | — | | | — | | | (4,723,443) | | | (2,891,800) | | | (7,615,243) |
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Forfeiture of founder shares | | (37,500) | | | (4) | | | 4 | | | — | | | — |
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Net loss | | — | | | — | | | — | | | (104,249) | | | (104,249) |
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Balance, September 30, 2021 |
| 3,187,500 | | $ | 318 | | $ | — | | $ | (3,011,921) | | $ | (3,011,603) |
The accompanying notes are an integral part of these unaudited condensed financial statements.
3
CHW Acquisition Corporation
CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED)
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| | For the period | |
| | January 12, 2021 | |
| | (inception) through | |
| | September 30, | |
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| 2021 | |
CASH FLOWS FROM OPERATING ACTIVITIES |
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Net loss | | $ | (120,121) |
Adjustments to reconcile net income to net cash used in operating activities: | |
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Changes in operating assets and liabilities: | | | |
Due from related party | | | (68,591) |
Prepaid expenses and other assets-current and non current | | | (551,042) |
Accounts payable | | | 111,054 |
Net cash flows used in operating activities | |
| (628,700) |
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CASH FLOWS FROM INVESTING ACTIVITIES | | | |
Cash deposited to Trust Account | | | (125,000,000) |
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Net cash flows used in investing activities | | | (125,000,000) |
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CASH FLOWS FROM FINANCING ACTIVITIES | |
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Proceeds from sale of private placement warrants | |
| 4,238,636 |
Sale of Units, net of underwriting discounts paid of $2,187,500 | | | 122,812,500 |
Proceeds from issuance of ordinary shares to Sponsor | | | 25,000 |
Payment of offering costs | | | (592,618) |
Proceeds from note payable – related party | |
| 132,296 |
Repayment of note payable – related party | |
| (89,296) |
Net cash flows provided by financing activities | |
| 126,526,518 |
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NET INCREASE (DECREASE) IN CASH | |
| 897,818 |
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CASH, BEGINNING OF PERIOD | |
| 0 |
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CASH, END OF PERIOD | | $ | 897,818 |
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Supplemental disclosure of noncash activities: | | | |
Initial classification of Ordinary shares subject to redemption | | $ | 125,000,000 |
Deferred underwriting fee payable | | $ | 4,375,000 |
The accompanying notes are an integral part of these unaudited condensed financial statements.
4
CHW Acquisition Corporation
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 1 — Description of Organization and Business Operations,
CHW Acquisition Corporation (the “Company”) was incorporated in the Cayman Islands on January 12, 2021. The Company was formed for the purpose of effecting a merger, capital share exchange, asset acquisition, share purchase, reorganization or similar Business Combination with 1 or more businesses (the “Business Combination”).
The Company is not limited to a particular industry or geographic region for purposes of consummating a Business Combination. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of September 30, 2021, the Company had not commenced any operations. All activity from January 12, 2021 (inception) through September 30, 2021 relates to the Company’s formation and initial public offering (the “Initial Public Offering”), which is described below, and, since the offering, the search for a prospective initial Business Combination. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income earned on investments from the proceeds derived from the Initial Public Offering. The registration statement for the Company’s Initial Public Offering was declared effective on August 30, 2021. On September 1, 2021, the Company consummated the Initial Public Offering of 11,000,000 units (the “Units”) with respect to the Ordinary shares (the “Ordinary Shares”) included in the Units being offered (the “Public Shares”) at $10.00 per Unit generating gross proceeds of $110,000,000, which is discussed in Note 4.
Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 4,000,000 warrants (“Private Placement Warrants”) at a price of $1.00 per Private Placement Warrant in a private placement to the Company’s sponsor, CHW Acquisition Sponsor, LLC and underwriters generating gross proceeds of $4,000,000, which is described in Note 5.
On August 30, 2021, the underwriters notified the Company of their intention to partially exercise their over-allotment option and will forfeit the remaining balance on September 1, 2021. On September 1, 2021, the Company consummated the sale of an additional 1,500,000 Units, at $10.00 per Unit, and the sale of an additional 238,686 Private Placement Warrants, at $1.00 per Private Placement Warrants, generating total gross proceeds of $15,238,636.
Offering costs for the Initial Public Offering and underwriters’ partial exercise of the over-allotment option amounted to $13,130,743, consisting of $2,187,500 of underwriting fees, $4,375,000 of deferred underwriting fees payable (which are held in the Trust Account (defined below)), $5,975,625 for the fair value of shares issued to the anchor investors and representative shares (see Note 4 and Note 7) and $592,618 of other costs. As described in Note 7, the $4,375,000 of deferred underwriting fee payable is contingent upon the consummation of a Business Combination by October 20, 2022, subject to the terms of the underwriting agreement.
Following the closing of the Initial Public Offering on September 1, 2021, an amount of $125,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering and the Private Placement Warrants was placed in a trust account (“Trust Account”) and will be invested in U.S. government securities,” contains certain forward-looking statements within the meaning set forthof the Private Securities Litigation Reform Act of 1995. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 2(a)(16)27A of the Investment CompanySecurities Act of 1940,1933, as amended (the “Investment Company“Securities Act”), with a maturity of 180 days or less or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting the conditions of paragraphs (d)(2), (d)(3) and (d)(4) of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account, as described below.
5
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete 1 or more initial Business Combinations having an aggregate fair market value of at least 80% of the assets held in the Trust Account (excluding the deferred underwriting commissions and taxes payable on income earned on the Trust Account) at the time of the agreement to enter into the initial Business Combination. However, the Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act.
The Company will provide the holders of the outstanding Public Shares (the “Public Shareholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a shareholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek shareholder approval of a Business Combination or conduct a tender offer will be made by the Company. The Public Shareholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially anticipated to be $10.00 per Public Share, plus any pro rata interest then in the Trust Account, net of taxes payable). There will be no redemption rights with respect to the Company’s warrants.
All of the Public Shares contain a redemption feature which allows for the redemption of such Public Shares in connection with the Company’s liquidation, if there is a shareholder vote or tender offer in connection with the Company’s Business Combination and in connection with certain amendments to the Company’s amended and restated certificate of incorporation (the “Certificate of Incorporation”). In accordance with the rules of the U.S. Securities and Exchange Commission (the “SEC”) and its guidance on redeemable equity instruments, which has been codified in Accounting Standards Codification (“ASC”) 480-10-S99, redemption provisions not solely within the control of a company require ordinary shares subject to redemption to be classified outside of permanent equity. Given that the Public Shares will be issued with other freestanding instruments (i.e., public warrants), the initial carrying value of the Public Shares classified as temporary equity will be the allocated proceeds determined in accordance with ASC 470-20. The Public Shares are subject to ASC 480-10-S99. If it is probable that the equity instrument will become redeemable, the Company has the option to either (i) accrete changes in the redemption value over the period from the date of issuance (or from the date that it becomes probable that the instrument will become redeemable, if later) to the earliest redemption date of the instrument or (ii) recognize changes in the redemption value immediately as they occur and adjust the carrying amount of the instrument to equal the redemption value at the end of each reporting period. The Company has elected to recognize the changes immediately. The accretion or remeasurement will be treated as a deemed dividend (i.e., a reduction to retained earnings, or in absence of retained earnings, additional paid-in capital). While redemptions cannot cause the Company’s net tangible assets to fall below $5,000,001, the Public Shares are redeemable and will be classified as such on the balance sheet until such date that a redemption event takes place.
Redemptions of the Company’s Public Shares may be subject to the satisfaction of conditions, including minimum cash conditions, pursuant to an agreement relating to the Company’s Business Combination. If the Company seeks shareholder approval of the Business Combination, the Company will proceed with a Business Combination if a majority of the shares voted are voted in favor of the Business Combination, or such other vote as required by law or share exchange rule. If a shareholder vote is not required by applicable law or share exchange listing requirements and the Company does not decide to hold a shareholder vote for business or other reasons, the Company will, pursuant to its Certificate of Incorporation, conduct the redemptions pursuant to the tender offer rules of the SEC and file tender offer documents with the SEC prior to completing a Business Combination. If, however, shareholder approval of the transaction is required by applicable law or share exchange listing requirements, or the Company decides to obtain shareholder approval for business or other reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks shareholder approval in connection with a Business Combination, the Sponsor has agreed to vote its Founder Shares (as defined in Note 6) and any Public Shares purchased during or after the Initial Public Offering in favor of approving a Business Combination. Additionally, each Public Stockholder may elect to redeem their Public Shares without voting, and if they do vote, irrespective of whether they vote for or against the proposed transaction.
Subsequent to the consummation of the Initial Public Offering, the Company will adopt an insider trading policy which will require insiders to: (i) refrain from purchasing shares during certain blackout periods and when they are in possession of any material non-public information and (ii) to clear all trades with the Company’s legal counsel prior to execution. In addition, the initial shareholders have agreed to waive their redemption rights with respect to their Founder Shares and Public Shares in connection with the completion of a Business Combination.
6
Notwithstanding the foregoing, the Certificate of Incorporation provides that a Public Stockholder, together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a “group” (as defined under Section 1321E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of 15% or more. Some of the Ordinary shares soldforward-looking statements can be identified by the use of forward-looking words. Statements that are not historical in nature, including the Initial Public Offering, without the prior consent of the Company.
The Company’s Sponsor, officerswords “anticipate,” “expect,” “suggests,” “plan,” “believe,” “intend,” “estimates,” “targets,” “projects,” “should,” “could,” “would,” “may,” “will,” “forecast,” and directors (the “Initial Shareholders”) have agreed notother similar expressions are intended to propose an amendmentidentify forward-looking statements. These statements include those related to the Certificate of IncorporationCompany’s ability to further develop and advance its pet service offerings and achieve scale; ability to attract personnel; and market opportunity, anticipated growth, and future financial performance, including management’s financial outlook for the future. Forward-looking statements are predictions, projections, and other statements about future events that would affectare based on current expectations and assumptions and, as a result, are subject to risks and uncertainties. Many factors could cause actual future events to differ materially from the substance or timingforward-looking statements in this Quarterly Report on Form 10-Q, including but not limited to: market adoption of the Company’s pet service offerings and solutions; the ability of the Company to protect its intellectual property; changes in the competitive industries in which the Company operates; changes in laws and regulations affecting the Company’s business; the Company’s ability to implement its business plans, forecasts, and other expectations, and identify and realize additional partnerships and opportunities; and the risk of downturns in the market and the technology industry. The foregoing list of factors is not exhaustive. You should carefully consider the foregoing factors and the other risks and uncertainties, including information described under Part II, Item 1A, Risk Factors, of this Quarterly Report on Form 10-Q and other documents filed by the Company from time to time with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2022. These filings identify and address other important risks and uncertainties that could cause actual events and results to differ materially from those contained in the forward-looking statements. Forward-looking statements speak only as of the date they are made. Readers are cautioned not to put undue reliance on forward-looking statements, and except as required by law, the Company assumes no obligation and does not intend to redeem 100%update or revise these forward-looking statements, whether as a result of its Public Shares if thenew information, future events, or otherwise. The Company does not completegive any assurance that it will achieve its expectations.
September 30, 2023 | December 31, 2022 | |||||||||||||
(in thousands, except par value amounts) | ||||||||||||||
ASSETS | ||||||||||||||
Current assets: | ||||||||||||||
Cash and cash equivalents | $ | 22,304 | $ | 38,966 | ||||||||||
Accounts receivable, net | 8,485 | 5,872 | ||||||||||||
Prepaid expenses and other current assets | 3,496 | 2,585 | ||||||||||||
Total current assets | 34,285 | 47,423 | ||||||||||||
Property and equipment, net | 71 | 88 | ||||||||||||
Operating lease right-of-use assets | 1,119 | 695 | ||||||||||||
Intangible assets, net | 8,036 | 2,590 | ||||||||||||
Goodwill | 4,646 | 1,451 | ||||||||||||
Other assets | 63 | 64 | ||||||||||||
Total assets | $ | 48,220 | $ | 52,311 | ||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||
Current liabilities: | ||||||||||||||
Accounts payable | $ | 8,686 | $ | 7,174 | ||||||||||
Accrued expenses and other current liabilities | 4,404 | 4,765 | ||||||||||||
Deferred revenue | 1,768 | 2,232 | ||||||||||||
Deferred purchase consideration – current portion | 724 | 750 | ||||||||||||
Operating lease liabilities – current portion | 300 | 306 | ||||||||||||
Notes payable – current portion | 1,589 | 1,264 | ||||||||||||
Total current liabilities | 17,471 | 16,491 | ||||||||||||
Operating lease liabilities – non-current portion | 899 | 435 | ||||||||||||
Notes payable – non-current portion, net of debt discount and warrant allocation of $5,037 and $7,008 as of September 30, 2023 and December 31, 2022, respectively | 25,709 | 24,970 | ||||||||||||
Deferred purchase consideration – non-current portion | — | 493 | ||||||||||||
Other non-current liabilities | 218 | — | ||||||||||||
Total liabilities | 44,297 | 42,389 | ||||||||||||
Commitments and contingencies (Note 9) | ||||||||||||||
Stockholders’ equity: | ||||||||||||||
Common stock, $0.0001 par value; 110,000 shares authorized as of both September 30, 2023 and December 31, 2022; 39,238 and 36,849 issued and outstanding as of September 30, 2023 and December 31, 2022, respectively | 4 | 4 | ||||||||||||
Additional paid-in capital | 162,188 | 158,335 | ||||||||||||
Accumulated deficit | (158,269) | (148,417) | ||||||||||||
Total stockholders’ equity | 3,923 | 9,922 | ||||||||||||
Total liabilities and stockholders’ equity | $ | 48,220 | $ | 52,311 |
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
September 30, 2023 | September 30, 2022 | September 30, 2023 | September 30, 2022 | |||||||||||||||||||||||
(in thousands, except per share amounts) | ||||||||||||||||||||||||||
Revenues | $ | 21,800 | $ | 15,379 | $ | 62,243 | $ | 37,829 | ||||||||||||||||||
Costs and expenses: | ||||||||||||||||||||||||||
Cost of revenues (exclusive of depreciation and amortization shown separately below) | 1,441 | 1,021 | 3,710 | 3,027 | ||||||||||||||||||||||
Platform operations and support | 2,968 | 5,641 | 9,630 | 11,035 | ||||||||||||||||||||||
Sales and marketing | 12,755 | 11,290 | 36,788 | 24,656 | ||||||||||||||||||||||
Royalty | — | — | 1,791 | — | ||||||||||||||||||||||
General and administrative | 4,682 | 23,781 | 14,487 | 28,546 | ||||||||||||||||||||||
Depreciation and amortization | 414 | 134 | 1,170 | 431 | ||||||||||||||||||||||
Total costs and expenses | 22,260 | 41,867 | 67,576 | 67,695 | ||||||||||||||||||||||
Interest expense, net | 1,683 | 735 | 4,972 | 784 | ||||||||||||||||||||||
Other expense, net | 12 | 13,708 | 21 | 13,708 | ||||||||||||||||||||||
Loss before income taxes and equity in net earnings of affiliate | (2,155) | (40,931) | (10,326) | (44,358) | ||||||||||||||||||||||
Income taxes | 41 | — | 79 | 13 | ||||||||||||||||||||||
Equity in net earnings of equity method investments | — | — | 553 | — | ||||||||||||||||||||||
Net loss | $ | (2,196) | $ | (40,931) | $ | (9,852) | $ | (44,371) | ||||||||||||||||||
Loss per share, basic and diluted | $ | (0.06) | $ | (1.67) | $ | (0.26) | $ | (3.60) | ||||||||||||||||||
Weighted-average common shares outstanding used in computing loss per share, basic and diluted | 38,987 | 24,534 | 38,061 | 12,322 |
Redeemable Preferred Stock | Common Stock | ||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Additional Paid-in Capital | Accumulated Deficit | Total Stockholders' Equity | |||||||||||||||||||||||||||||||||||||||||
(in thousands) | (in thousands) | ||||||||||||||||||||||||||||||||||||||||||||||
Balance as of December 31, 2022 | — | $ | — | 36,849 | $ | 4 | $ | 158,335 | $ | (148,417) | $ | 9,922 | |||||||||||||||||||||||||||||||||||
Issuance of common stock from exercise of stock options and restricted stock units | 580 | — | 54 | 54 | |||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | 1,342 | 1,342 | |||||||||||||||||||||||||||||||||||||||||||||
Net loss | (3,787) | (3,787) | |||||||||||||||||||||||||||||||||||||||||||||
Balance as of March 31, 2023 | — | — | 37,429 | 4 | 159,731 | (152,204) | 7,531 | ||||||||||||||||||||||||||||||||||||||||
Issuance of common stock from exercise of stock options and restricted stock units | 1,298 | — | 36 | 36 | |||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | 1,121 | 1,121 | |||||||||||||||||||||||||||||||||||||||||||||
Shares issued for acquisition | 49 | — | 225 | 225 | |||||||||||||||||||||||||||||||||||||||||||
Net loss | (3,869) | (3,869) | |||||||||||||||||||||||||||||||||||||||||||||
Balance as of June 30, 2023 | — | $ | — | 38,776 | $ | 4 | $ | 161,113 | $ | (156,073) | $ | 5,044 | |||||||||||||||||||||||||||||||||||
Issuance of common stock from exercise of stock options and restricted stock units | 462 | — | 10 | 10 | |||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | 1,065 | 1,065 | |||||||||||||||||||||||||||||||||||||||||||||
Net loss | (2,196) | (2,196) | |||||||||||||||||||||||||||||||||||||||||||||
Balance as of September 30, 2023 | — | $ | — | 39,238 | $ | 4 | $ | 162,188 | $ | (158,269) | $ | 3,923 |
Redeemable Preferred Stock | Common Stock | ||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Additional Paid-in Capital | Accumulated Deficit | Total Stockholders' Equity (Deficit) | |||||||||||||||||||||||||||||||||||||||||
(in thousands) | (in thousands) | ||||||||||||||||||||||||||||||||||||||||||||||
Balance as of December 31, 2021 | 24,545 | $ | 110,265 | 6,297 | $ | 1 | $ | 3,736 | $ | (109,850) | $ | (106,113) | |||||||||||||||||||||||||||||||||||
Reverse recapitalization | (686) | — | (176) | — | — | ||||||||||||||||||||||||||||||||||||||||||
As adjusted, beginning of period | 23,859 | 110,265 | 6,121 | 1 | 3,736 | (109,850) | (106,113) | ||||||||||||||||||||||||||||||||||||||||
Issuance of Series P preferred stock, net of issuance costs | 1,100 | 10,925 | — | ||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | 54 | 54 | |||||||||||||||||||||||||||||||||||||||||||||
Net loss | (2,350) | (2,350) | |||||||||||||||||||||||||||||||||||||||||||||
Balance as of March 31, 2022 | 24,959 | 121,190 | 6,121 | 1 | 3,790 | (112,200) | (108,409) | ||||||||||||||||||||||||||||||||||||||||
Issuance of common stock from exercise of stock options | 20 | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | 40 | 40 | |||||||||||||||||||||||||||||||||||||||||||||
Net loss | (1,090) | (1,090) | |||||||||||||||||||||||||||||||||||||||||||||
Balance as of June 30, 2022 | 24,959 | 121,190 | 6,141 | 1 | 3,830 | (113,290) | (109,459) | ||||||||||||||||||||||||||||||||||||||||
Issuance of common stock from exercise of stock options and restricted stock units | 49 | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | 23,922 | 23,922 | |||||||||||||||||||||||||||||||||||||||||||||
Conversion of preferred stock to common stock | (24,959) | (121,190) | 24,959 | 2 | 121,188 | 121,190 | |||||||||||||||||||||||||||||||||||||||||
Business Combination with CHW, net of transaction costs and other related shares | 6,646 | 1 | 10,543 | 10,544 | |||||||||||||||||||||||||||||||||||||||||||
Issuance of Community Shares | 300 | — | 1,971 | 1,971 | |||||||||||||||||||||||||||||||||||||||||||
Net loss | (40,931) | (40,931) | |||||||||||||||||||||||||||||||||||||||||||||
Balance as of September 30, 2022 | — | $ | — | 38,095 | $ | 4 | $ | 161,454 | $ | (154,221) | $ | 7,237 |
Nine Months Ended | ||||||||||||||
September 30, 2023 | September 30, 2022 | |||||||||||||
(in thousands) | ||||||||||||||
Cash flow from operating activities: | ||||||||||||||
Net loss | $ | (9,852) | $ | (44,371) | ||||||||||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||||
Stock-based compensation | 3,528 | 24,016 | ||||||||||||
Non-cash interest expense | 2,021 | 224 | ||||||||||||
Depreciation and amortization | 1,170 | 431 | ||||||||||||
Change in fair value of derivative liability | — | 13,708 | ||||||||||||
Issuance of Community Shares | — | 1,971 | ||||||||||||
Equity in net earnings of equity method investments | (553) | — | ||||||||||||
Other | 12 | — | ||||||||||||
Changes in operating assets and liabilities, net of effect of acquired business: | ||||||||||||||
Accounts receivable | (2,573) | (3,698) | ||||||||||||
Prepaid expenses and other current assets | (463) | (512) | ||||||||||||
Operating lease right-of-use assets and liabilities | 48 | 19 | ||||||||||||
Other assets | 1 | — | ||||||||||||
Accounts payable | 2,762 | 2,662 | ||||||||||||
Accrued expenses and other current liabilities | (452) | 1,674 | ||||||||||||
Deferred revenue | (491) | 298 | ||||||||||||
Other non-current liabilities | 218 | — | ||||||||||||
Net cash used in operating activities | (4,624) | (3,578) | ||||||||||||
Cash flows from investing activities: | ||||||||||||||
Proceeds from sale and maturity of short-term investments | — | 2,550 | ||||||||||||
Cash paid for acquisitions, net of cash acquired | (9,152) | — | ||||||||||||
Cash paid for equity method investment | (1,470) | — | ||||||||||||
Purchase of property and equipment | (40) | (36) | ||||||||||||
Other | — | (562) | ||||||||||||
Net cash provided by (used in) investing activities | (10,662) | 1,952 | ||||||||||||
Cash flows from financing activities: | ||||||||||||||
Proceeds from exercises of stock options | 100 | — | ||||||||||||
Proceeds from debt, net of discount | — | 29,445 | ||||||||||||
Repayment of debt | (907) | (331) | ||||||||||||
Proceeds from issuance of Series P preferred stock, net of issuance costs | — | 10,925 | ||||||||||||
Proceeds from Business Combination with CHW, net of transaction costs | — | 11,485 | ||||||||||||
Other | (569) | — | ||||||||||||
Net cash provided by (used in) financing activities | (1,376) | 51,524 | ||||||||||||
Net change in cash, cash equivalents, and restricted cash | (16,662) | 49,898 | ||||||||||||
Cash, cash equivalents, and restricted cash, beginning of period | 38,966 | 2,845 | ||||||||||||
Cash, cash equivalents, and restricted cash, end of period | $ | 22,304 | $ | 52,743 | ||||||||||
Supplemental disclosures of cash flow information: | ||||||||||||||
Interest paid | $ | 3,724 | $ | 784 | ||||||||||
Income taxes paid | $ | 23 | $ | 14 | ||||||||||
Noncash investing and financing activities: | ||||||||||||||
Conversion of preferred stock to common stock | $ | — | $ | 121,188 | ||||||||||
Forward Share Purchase Agreements | $ | — | $ | 5,242 |
Ifother transactions contemplated by the Company is unable to complete aCHW Business Combination by November 1, 2022, 15 months fromAgreement, the closing“CHW Business Combination”). Upon completion of the Initial Public OfferingMerger on August 9, 2022, following the approval at the extraordinary general meeting of the stockholders of CHW held on July 28, 2022 (the “Combination Period”“Special Meeting”), the Company will (i) ceasechanged its name to Wag! Group Co. (“Post-Combination Company”) and effectively assumed all operations except for the purpose of winding up, (ii) as promptly as reasonably possible, but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equalCHW’s material operations. Refer to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the Trust Account and not previously released to us to pay the Company’s franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then-outstanding Public Shares, which redemption will completely extinguish Public Shareholders’ rights as shareholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining shareholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
The Initial Shareholders have agreed to waive their liquidation rights with respect to the Founder Shares if the Company fails to complete a Note 3,
Emerging Growth Company
The Company is an emerging growth company as defined in Section 102 (b)(1) of the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), which exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth 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.
7
This may make comparison of the Company’sThe unaudited condensed consolidated interim financial statement with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Note 2 — Restatement of Prior Period Financial Statements
In further consideration of the guidance in ASC 480-10-S99 - Distinguishing Liabilities from. Equity, the Company concluded that amounts previously accounted for as permanent equity should have been treated as temporary equity on the Company’s balance sheet. Specifically, redemption provisions not solely within the control of a company require ordinary shares subject to redemption to be classified outside of permanent equity. As the Company’s Class A ordinary shares have a feature whereby the shareholder can redeem the shares which is not in controlinformation of the Company it was concluded that these Class A ordinary shares are subject to ASC 480-10-S99.
The Company’s management and the audit committee of the Company’s Board of Directors concluded that it is appropriate to restate certain items on the Company’s previously issued balance sheet dated as of July 20, 2020, the date that the Initial Public Offering closed, that were previously reported on a Current Report on Form 8-K filed with the SEC on July 26, 2021. The restated classification and reported values of ordinary shares subject to redemption as accounted for under ASC 480-10-S99 are included in the financial statements herein.
The following tables summarize the effect of the restatement on each financial statement line item as of the dates, and for the period, indicated:
| | | | | | | | | |
|
| As Reported |
| Adjustment |
| As Restated | |||
Balance Sheet |
| |
|
| |
|
| |
|
Ordinary shares subject to redemption | | $ | 117,092,620 | | $ | 7,907,380 | | $ | 125,000,000 |
Ordinary shares, $0.0001 par value | |
| 397 | |
| (85) | |
| 312 |
Additional paid-in-capital | |
| 5,015,501 | |
| (5,015,501) | |
| — |
Retained earnings | |
| (15,897) | |
| (2,891,794) | |
| (2,907,691) |
Total liabilities and shareholders’ equity | | $ | 122,092,621 | | $ | — | | $ | 122,092,621 |
Note 3 — Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the SEC.
The Company has sufficient liquidity to meet its anticipated obligations over the next year from the date of issuance of these financial statements. In connection with the Company’s assessment of going concern considerations in accordance with Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern”, management has determined that the Company has access to funds from the closing of Initial Public Offering that are sufficient to fund the working capital needs of the Company until the earlier of the consummation of a Business Combination and one year from the date of the issuance of these financial statements.
The accompanying unaudited condensed financial statements have been prepared in accordance with U.S. GAAP for interim financial informationArticle 10 of the Securities and in accordance with the instructions to Form 10-Q andExchange Commission’s (“SEC”) Regulation S-X. Accordingly, as permitted by Article 810 of Regulation S-X, it does not include all of the SEC. Certain information or footnote disclosures normally includedrequired by generally accepted accounting principles in the U.S. (“U.S. GAAP”) for complete financial statements. The condensed consolidated balance sheet as of December 31, 2022 was derived from the audited financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rulesat that date and regulations of the SEC for interim financial reporting. Accordingly, they dodoes not include all the informationdisclosures required by U.S. GAAP, as permitted by Article 10 of Regulation S-X. The Company’s unaudited condensed consolidated financial statements as of September 30, 2023 and footnotes necessary for a comprehensive presentationthe three and nine months ended September 30, 2023 and 2022 include Wag! Group Co. and all of financial position, results of operations or cash flows.its subsidiaries. In the opinion of management, the accompanying unaudited condensed financial statements includeinformation contains all adjustments, consisting of a normal and recurring nature, which areadjustments, necessary for a fair presentationto state fairly the Company’s unaudited condensed consolidated financial statements as of the financial position, operating resultsSeptember 30, 2023 and cash flows for the periods presented. Interimthree and nine months ended September 30, 2023 and 2022. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, or the 2022 10-K. Operating results for the three and nine months ended September 30, 2023 and 2022 are not necessarily indicative of the results that may be expected for a full year.
8
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchasedbases its estimates on various factors, including historical experience, and on various other assumptions that are believed to be cash equivalents. The Company did 0t have any cash equivalents as of September 30, 2021.
Investments Held in Trust Account
The Company’s portfolio of investments held inreasonable under the Trust Account is comprised of investments in money market funds that invest in U.S. government securities. The Company’s investments held in the Trust Accountcircumstances, when these carrying values are classified as trading securities. Trading securitiesnot readily available from other sources.
Ordinary Shares Subject to Possible Redemption
The Company accountsvaluation allowance for its Ordinary shares subject to possible redemption in accordance with the guidance in ASC Topic 480, “Distinguishing Liabilitiesdeferred income taxes. Actual results may differ from Equity.”. Ordinary shares subject to mandatory redemption, if any, are classified as a liability instrument and is measured at fair value. Conditionally redeemable Ordinary shares (including Ordinary shares that features 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 features certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, at September 30, 2021, 12,500,000 shares of Ordinary shares subject to possible redemption are presented as temporary equity, outside of the shareholders’ equity section of the Company’s condensed balance sheet.
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable ordinary shares to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of the redeemable ordinary shares are affected by charges against additional paid-in capital and accumulated deficit.
At September 30, 2021, the Class A ordinary shares reflected in the condensed balance sheet is reconciled in the following table:
| | | |
Gross proceeds |
| $ | 125,000,000 |
Less: | |
|
|
Fair value of Public Warrants at issuance | |
| (16,548,464) |
Redeemable shares issuance costs | |
| (6,187,584) |
Plus: | |
|
|
Accretion of carrying value to redemption value | |
| 22,736,048 |
Class A ordinary shares subject to possible redemption | | $ | 125,000,000 |
Warrant Instruments
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the instruments’ 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 instruments are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the instruments meet all of the requirements for equity classification under ASC 815, including whether the instruments are indexed to the Company’s own ordinary shares and whether the instrument holders
9
could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the instruments are outstanding. As discussed in Note 9, the Company determined that upon further review of the warrant agreement, management concluded that the Public Warrants and Private Placement Warrants issued pursuant to the warrant agreement qualify for equity accounting treatment.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed the federal depository insurance coverage of $250,000. At September 30, 2021, the Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such account.
Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under the FASB ASC 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the accompanying condensed balance sheet, primarily due to their short-term nature.
Net Income (Loss) Per Share
The Company has 2 classes of shares, which are referred to as Redeemable Ordinary Shares (the “Ordinary Shares”) and Non-Redeemable Ordinary Shares (the “Founder Shares”). Earnings and losses are shared pro rata between the 2 classes of shares. Public and private warrants to purchase 15,625,000 Ordinary Shares at $11.50 per share were issued on September 1, 2021. At September 30, 2021, 0 warrants have been exercised. The 15,625,000 potential Ordinary shares for outstanding warrants to purchase the Company’s stock were excluded from diluted earnings per share for the period ended September 30, 2021 because the warrants are contingently exercisable, and the contingencies have not yet been met. Specifically, the warrants have traded below $16.50 per shares since they were issued through September 30, 2021. As a result, diluted net income/(loss) per common share is the same as basic net income/(loss) per common share for the period. The table below presents a reconciliation of the numerator and denominator used to compute basic and diluted net loss per share for each class of common stock:
| | | | | | | | | | | | |
| | | | | | | | | For the period January 12, | |||
| | For the three months ended | | | 2021 (inception) through | |||||||
| | September 30, | | | September 30, | |||||||
| | 2021 | | | 2021 | |||||||
Basic and diluted net income per share: |
| | |
| | |
| | |
| | |
Numerator: | |
| | |
| | |
| | |
| |
Allocation of net income, including accretion of temporary equity | | $ | (58,048) | | $ | (46,201) | | $ | (36,633) | | $ | (83,488) |
| | | | | | | | | | | | |
Denominator: | |
| | |
| | |
| | |
| |
Weighted average shares outstanding | | | 3,983,516 | | | 3,170,467 | | | 1,388,889 | | | 3,165,278 |
| | | | | | | | | | | | |
Basic and dilution net income per share | | $ | (0.01) | | $ | (0.01) | | $ | (0.03) | | $ | (0.03) |
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under FASB ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. Deferred tax assets and liabilities were deemed to be de minimis as of September 30, 2021.
FASB ASC 740, “Income Taxes”, prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions 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. There were 0 unrecognized tax benefits
10
as of September 30, 2021. The Company’s management determined that the Cayman Islands is the Company’s only major tax jurisdiction. The Company is not currently aware of any issues under review that could result in significant payments, accruals, or material deviation from its position. The Company is subject to tax examinations by major taxing authorities since inception. There is currently no taxation imposed by the Government of the Cayman Islands. In accordance with Cayman income tax regulations, income taxes are not levied on the Company. Consequently, income taxes are not reflected in the Company’s financial statements. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
There is currently no taxation imposed by the Government of the Cayman Islands. The Company has no connection to any other taxable jurisdiction and is presently not subject to income taxes or income tax filing requirements in the Cayman Islands or the United States. Consequently, income taxes are not reflected in the Company’s financial statements.
RecentRecently Adopted Accounting Pronouncements
Reverse Recapitalization | ||||||||
(in thousands) | ||||||||
Cash – CHW’s trust (net of redemptions) | $ | 28,330 | ||||||
Cash – PIPE and Backstop Investor | 5,202 | |||||||
Payment of transaction costs and other related expenses | (12,488) | |||||||
Payment of deferred transaction costs | (9,318) | |||||||
Proceeds from merger with CHW, net of issuance costs as of the Merger Date | 11,726 | |||||||
Reversal of APIC impact recorded upon issuance of Forward Share Purchase Agreements (“FPAs”) in August 2022 | (23,203) | |||||||
Cash received from FPA at Put Date | 9,837 | |||||||
APIC impact of FPA at Put Date, net of cash received | 4,229 | |||||||
Proceeds from merger with CHW, net of issuance costs as of December 31, 2022 | $ | 2,589 |
Number of Shares | ||||||||
(in thousands) | ||||||||
CHW public shares, prior to redemptions(1) | 12,500 | |||||||
Less redemption of CHW shares | (9,594) | |||||||
CHW public shares, net of redemptions | 2,906 | |||||||
Sponsor Shares | 3,118 | |||||||
PIPE and Backstop Shares | 500 | |||||||
CHW Business Combination and Financing Shares | 6,524 | |||||||
Other share activity (Analyst Shares(2), Warrant Exercises) | 122 | |||||||
CHW Business Combination, Financing Shares and Other Related Shares | 6,646 | |||||||
Legacy Wag! Shares(3) | 31,100 | |||||||
Total shares of common stock immediately after CHW Business Combination | 37,746 |
Stock Price | Dividend Yield | Volatility | Risk-Free Interest Rate | Expected Term | |||||||||||||||||||||||||
Earnout Shares | $ | 8.28 | — | % | 44.00 | % | 3.20 | % | 3 years |
September 30, 2023 | ||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||
Cash equivalents: | ||||||||||||||||||||||||||
Money market funds | $ | 13,797 | $ | — | $ | — | $ | 13,797 | ||||||||||||||||||
Total cash equivalents | 13,797 | — | — | 13,797 | ||||||||||||||||||||||
Total assets at fair value | $ | 13,797 | $ | — | $ | — | $ | 13,797 |
December 31, 2022 | ||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||
Cash equivalents: | ||||||||||||||||||||||||||
Money market funds | $ | 31,690 | $ | — | $ | — | $ | 31,690 | ||||||||||||||||||
Total cash equivalents | 31,690 | — | — | 31,690 | ||||||||||||||||||||||
Total assets at fair value | $ | 31,690 | $ | — | $ | — | $ | 31,690 |
Amount | ||||||||
(in thousands) | ||||||||
2023 | $ | 20 | ||||||
2024 | 414 | |||||||
2025 | 424 | |||||||
2026 | 216 | |||||||
2027 | 175 | |||||||
2028 | 163 | |||||||
Total lease payments | 1,412 | |||||||
Less: imputed interest | (213) | |||||||
Present value of lease liabilities | $ | 1,199 |
September 30, 2023 | December 31, 2022 | |||||||||||||
Weighted-average remaining lease term | 4.0 years | 2.3 years | ||||||||||||
Weighted-average discount rate | 7.8 | % | 8.6 | % |
September 30, 2023 | ||||||||||||||||||||
Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||||||||||
(in thousands) | ||||||||||||||||||||
Finite-lived intangible assets: | ||||||||||||||||||||
Customer relationships and licenses | $ | 7,686 | $ | (1,268) | $ | 6,418 | ||||||||||||||
Developed technology | 1,073 | (415) | 658 | |||||||||||||||||
Trademarks | 1,052 | (141) | 911 | |||||||||||||||||
Pharmacy board licenses | 5 | (5) | — | |||||||||||||||||
Total finite-lived intangible assets | 9,816 | (1,829) | 7,987 | |||||||||||||||||
Indefinite-lived intangible assets | 49 | — | 49 | |||||||||||||||||
Total intangible assets | $ | 9,865 | $ | (1,829) | $ | 8,036 |
December 31, 2022 | ||||||||||||||||||||
Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||||||||||
(in thousands) | ||||||||||||||||||||
Finite-lived intangible assets: | ||||||||||||||||||||
Customer relationships and licenses | $ | 2,166 | $ | (422) | $ | 1,744 | ||||||||||||||
Developed technology | 783 | (226) | 557 | |||||||||||||||||
Trademarks | 291 | (56) | 235 | |||||||||||||||||
Pharmacy board licenses | 5 | — | 5 | |||||||||||||||||
Total finite-lived intangible assets | 3,245 | (704) | 2,541 | |||||||||||||||||
Indefinite-lived intangible assets | 49 | — | 49 | |||||||||||||||||
Total intangible assets | $ | 3,294 | $ | (704) | $ | 2,590 |
Amount | ||||||||
(in thousands) | ||||||||
2023 | $ | 357 | ||||||
2024 | 1,751 | |||||||
2025 | 30,227 | |||||||
Total principal payments | $ | 32,335 |
Management doesbusiness. In addition, the Company may be subject to greater risk of legal claims or regulatory actions as it increases and continues its operations in jurisdictions where the laws and regulations governing online marketplaces or the employment classification of service providers who use online marketplaces are uncertain or unfavorable.
position, results of operations, or cash flows.
NaN qualified institutional buyers or institutional accredited investors which are not affiliated with the Company, the Sponsor, the Company’s directors, orat any member of the Company’s management (the “anchor investors”), have each purchased units in the Initial Public Offering at varying amounts not exceeding 9.9% of the units subject to the Initial Public Offering. Upon each anchor investor purchasing the full amount of Units it had expressed an interest in, the anchor investors collectively own approximately 11% of the outstanding shares following the Initial Public Offering, which includes the Founder Shares purchased by the anchor investors, and the Sponsor owns approximately 19% of the outstanding shares following the Initial Public Offering (see Note 6).
On August 30, 2021, the underwriters notified the Company of their intention to partially exercise their over-allotment option and will forfeit the remaining balancetime commencing on September 1, 2021. On September 1, 2021,8, 2022, which was the Company consummated the salelater of an additional 1,500,000 Units to the public, at $10.00 per Unit for an aggregate purchase price of $15,000,000.
Note 5 — Private Placement
Concurrently with the closing of the Initial Public Offering, the Sponsor and underwriter purchased an aggregate of 4,000,000 Private Placement Warrants at a price of $1.00 per Private Placement Warrant for an aggregate purchase price of $4,000,000. Each whole Private Placement Warrant is exercisable for 1 whole share of Ordinary shares at a price of $11.50 per share, subject to adjustment (see Note 8). The proceeds from the Private Placement Warrants at the Initial Public Offering are held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the Private Placement Warrants will expire worthless.
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On August 30 2021, the underwriters notified the Company of their intention to partially exercise their over-allotment option and will forfeit the remaining balance on September 1, 2021. On September 1, 2021, the Company consummated the sale of an additional 238,686 Private Placement Warrants, at $1.00 per Private Placement Warrant for an aggregate purchase price of $238,686.
Note 6 — Related Party Transactions
Founder Shares
On January 18, 2021, the Sponsor paid $25,000 to cover certain of the Company’s offering costs in exchange for 2,875,000 ordinary shares (the “Founder Shares”). On August 30, 2021, the Company effectuated a 1.1-for-1 share split, resulting in an aggregate of 3,162,500 Founder Shares outstanding. The Founder Shares included an aggregate of up to 412,500 ordinary shares subject to forfeiture by the Sponsor to the extent that the underwriters’ overallotment is not exercised in full or in part, so that the Sponsor will own, on an as-converted basis, 20% of the Company’s issued and outstanding shares after the Initial Public Offering.
On August 30, 2021, the underwriters notified the Company of their intention to partially exercise their over-allotment option and will forfeit the remaining balance on September 1, 2021. As such, on September 1, 2021, the Sponsor forfeited 37,500 ordinary shares for 0 consideration.
The Sponsor has agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earliest of: (A) six monthsdays after the completion of a Business Combination and (B) subsequent to a Business Combination, (x) if the closing price of the shares of Ordinary shares equals or exceeds $12.50 per share (as adjusted) for any 20 trading days within any 30-trading day period commencing at least 150 days after aCHW Business Combination or (y) the date on which the Company completes a liquidation, merger, share exchange or other similar transaction that results in all of the Public Stockholders having the right to exchange their shares of Ordinary shares for cash, securities or other property.
In conjunction with each anchor investor purchasing 100% of the Units allocated to it, in connection with the closing of the Initial Public Offering the Sponsor sold 60,000 Founder Shares (or 30,000 Founder Shares, as applicable) to each anchor investor (750,000 founder shares in the aggregate) at their original purchase price; provided, however, that in the event that an anchor investor sells any of Units or Ordinary Shares purchased in the Initial Public Offering within 30 days following the closing of the Initial Public Offering, the number of Founder Shares transferred to such anchor investor would be reduced to 50,000 Founder Shares (or 25,000 Founder Shares, as applicable). The Company estimated the excess aggregate fair value over the amount paid by the anchor investors of the Founder Shares attributable to the Anchor Investors to be $5,515,500, or $7.362 per share. The excess of the fair value of the Founder Shares over the purchase price of $6,750 was determined to be a contribution to the Company from the founders in accordance with Staff Accounting Bulletin (SAB)Topic 5T and an offering cost in accordance with SAB Topic 5A. Accordingly, the offering cost were recorded against additional paid in capital in accordance with the accounting of other offering costs.
Promissory Note — Related Party
On January 18, 2021, the Company issued an unsecured promissory note (the “Promissory Note”) to the Sponsor, pursuant to which the Company may borrow up to an aggregate principal amount of $300,000. As of September 30, 2021, there was $43,000 outstanding under the Promissory Note. The Promissory Note will be repaid from the funds deposited into the operating account.
Related Party Loans
In order to finance transaction costs in connection with a Business Combination, the Sponsor, or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company may repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans may be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans, but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of such Working Capital Loans may be convertible into warrants of the post-Business Combination entity at a price of $1.00 per warrant. The warrants would be identical to the Private Placement Warrants. As of September 30, 2021, the Company had 0 outstanding borrowings under the Working Capital Loans.
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Due from related party
As of September 30, 2021, the Sponsor held $68,591 from the closing of the Initial Public Offering that will be deposited as soon as practical from the Company’s operating account.
Administrative Services Fee
The Company entered into an agreement, commencing on the effective date of the Initial Public Offering through the earlier of the consummation of a Business Combination and the Company’s liquidation, to pay an affiliate of the Sponsor a monthly fee of $10,000 for office space, secretarial and administrative services. As of September 30, 2021, $10,000 has been paid under this arrangement.
Note 7 — Commitments and Contingencies
Registration Rights
The holders of Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of working capital loans, if any, are entitled to registration rights (in the case of the Founder Shares, only after conversion of such shares to shares of Ordinary shares) pursuant to a registration rights agreement dated September 1, 2021. These holders are entitled to certain demand and “piggyback” registration rights. However, the registration rights agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective until the termination of the applicable lock-up period for the securities to be registered. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The Company granted the underwriters a 45-day option from the final prospectus relating to the Initial Public Offering to purchase up to 1,650,000 additional Units to cover over-allotments, if any, at the Initial Public Offering price less the underwriting discounts and commissions.
On August 30, 2021, the underwriters notified the Company of their intention to partially exercise their over-allotment option and will forfeit the remaining balance on September 1, 2021. On September 1, 2021, the Company consummated the sale of an additional 1,500,000 Units, at $10.00 per Unit.
The underwriters were paid a cash underwriting discount of $0.175 per unit, or $2,187,500 in the aggregate at the closing of the Initial Public Offering (which includes amounts related to the partial exercise of the over-allotment option). In addition, the underwriters are entitled to a deferred underwriting commissions of $0.35 per unit, or $4,375,000 in the aggregate from the closing of the Initial Public Offering ((which includes amounts related to the partial exercise of the over-allotment option). The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.
Representative Shares
In September 2021, the Company issued to the designees of the underwriter 62,500 ordinary shares (the “Representative Shares”). The Company accounted for the Representative Shares as an offering cost of the Initial Public Offering, with a corresponding credit to shareholders’ equity. The Company estimated the fair value of the Representative Shares to be $7.362 per share ($460,125 in the aggregate) based upon the price of the Founder Shares issued to the anchor investors (see Note 6). The holders of the Representative Shares have agreed not to transfer, assign, or sell any such shares until the completion of a Business Combination. In addition, the holders have agreed (i) to waive their conversion rights (or right to participate in any tender offer) with respect to such shares in connection with the completion of a Business Combination and (ii) to waive their rights to liquidating distributions from the Trust Account with respect to such shares if the Company fails to complete a Business Combination within the Combination Period.
The Representative Shares have been deemed compensation by FINRA and are therefore subject to a lock-up for a period of 180 days immediately following the effective date of the registration statement related to the Initial Public Offering pursuant to FINRA Rule 5110(e)(1). Pursuant to FINRA Rule 5110(e)(1), these securities will not be the subject of any hedging, short sale, derivative, put or call transaction that would result in the economic disposition of the securities by any person for a period of 180 days immediately following the effective date of the registration statements related to the Initial Public Offering, nor may they be sold, transferred, assigned, pledged
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or hypothecated for a period of 180 days immediately following the effective date of the registration statements related to the Initial Public Offering except to any underwriter and selected dealer participating in the Initial Public Offering and their officers or partners, associated persons or affiliates.
Note 8 - Shareholders’ Equity
Preference Shares—The Company is authorized to issue 1,000,000 preference shares with a par value of $0.0001 per share with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. At September 30, 2021, there were 0 preference shares issued or outstanding.
Ordinary shares - The Company is authorized to issue 110,000,000 shares of Class B Ordinary shares with a par value of $0.0001 per share. As of September 30, 2021, there were 3,187,500 shares of Ordinary shares outstanding (excluding 12,500,000 shares subject to redemption) and after giving affect to the forfeiture of 37,500 Ordinary shares since the underwriters’ did not exercise of the over-allotment option.
Note 9 - Warrants
Public Warrants may only be exercised for a whole number of shares. NaN fractional shares will be issued upon exercise of the Public Warrants. The Public Warrants will become exercisable on the later of (a) the completion of a Business Combination and (b) 12 months from theCHW's IPO closing of the Initial Public Offering.date. The Public Warrants will expire five years fromon the completionfifth anniversary of athe CHW Business Combination, or earlier upon redemption or liquidation.
The Company will not be obligated to deliver any ordinary shares
Share Price | Exercise Price | Dividend Yield | Volatility | Risk-Free Interest Rate | Expected Term | |||||||||||||||||||||||||||||||||
CHW Warrants | $ | 10.00 | $ | 11.50 | — | % | 22.00 | % | 1.31 | % | 5 years |
The Company has agreed that as soon as practicable, but in no event later than 15 business days, after the closing of a Business Combination, it will use its best efforts to file, and within 60 business days following a Business Combination to have declared effective, a registration statement covering the offer and sale of the ordinary shares issuable upon exercise of the warrants. The Company will use its best efforts to cause the same to become effective and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the warrants in accordance with the provisions of the warrant agreement. NaN warrants will be exercisable for cash unless the Company has an effective and current registration statement covering the offer and sale of the ordinary shares issuable upon exercise of the warrants and a current prospectus relating to such ordinary shares. Notwithstanding the foregoing, if a registration statement covering the offer and sale of the ordinary shares issuable upon exercise of the warrants is not effective within a specified period 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 the exemption provided by Section 3(a)(9) of the Securities Act, provided that such exemption is available. If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis.
Once the warrants become exercisable, the Company may redeem the warrants:
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If and when the warrants become redeemable by the Company, the Company may not exercise its redemption right if the issuance of shares upon exercise of the warrants is not exempt from registration or qualification under applicable state blue sky laws or the Company is unable to effect such registration or qualification.
If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrantspublic warrants to do so on a “cashless basis,” as described in the warrant agreement.
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
September 30, 2023 | September 30, 2022 | September 30, 2023 | September 30, 2022 | |||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||
Services revenue | $ | 6,551 | $ | 5,866 | $ | 18,159 | $ | 15,973 | ||||||||||||||||||
Wellness revenue | 13,546 | 9,513 | 39,426 | 21,856 | ||||||||||||||||||||||
Pet food & treats revenue | 1,703 | — | 4,658 | — | ||||||||||||||||||||||
Total revenues | $ | 21,800 | $ | 15,379 | $ | 62,243 | $ | 37,829 |
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
September 30, 2023 | September 30, 2022 | September 30, 2023 | September 30, 2022 | |||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||
Platform operations and support | $ | 209 | $ | 2,856 | $ | 815 | $ | 2,874 | ||||||||||||||||||
Sales and marketing | 174 | 2,068 | 533 | 2,073 | ||||||||||||||||||||||
General and administrative | 682 | 18,998 | 2,180 | 19,069 | ||||||||||||||||||||||
Total stock-based compensation expense | $ | 1,065 | $ | 23,922 | $ | 3,528 | $ | 24,016 |
Number of Options Outstanding | Weighted-Average Exercise Price | Weighted-Average Remaining Contractual Life | Aggregate Intrinsic Value(1) | |||||||||||||||||||||||
(in thousands) | (in thousands) | |||||||||||||||||||||||||
Outstanding as of December 31, 2022 | 7,194 | $ | 0.40 | 7.19 years | $ | 19,292 | ||||||||||||||||||||
Granted | — | $ | — | |||||||||||||||||||||||
Exercised | (986) | $ | 0.10 | |||||||||||||||||||||||
Forfeited or expired | (22) | $ | 2.75 | |||||||||||||||||||||||
Outstanding as of September 30, 2023 | 6,186 | $ | 0.45 | 6.43 years | $ | 10,051 |
In addition, if (x) 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 an issue price or effective issue price of less than $9.50 per Public Share (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) 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 Company’s initial Business Combination on the date of the consummation of such initial Business Combination (net of redemptions), and (z) 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 (such price, the “Market Value”) is below $9.50 per share,underlying stock exceeds the exercise price of the warrants will be adjusted (tostock awards.
Number of Shares | Weighted-Average Grant Date Fair Value Per Share | |||||||||||||
(in thousands) | ||||||||||||||
Outstanding and nonvested as of December 31, 2022 | 4,195 | $ | 2.44 | |||||||||||
Granted | 1,999 | $ | 2.34 | |||||||||||
Vested | (1,354) | $ | 2.45 | |||||||||||
Forfeited | (130) | $ | 2.36 | |||||||||||
Outstanding and nonvested as of September 30, 2023 | 4,710 | $ | 2.39 |
The Private Placement Warrants are identical to the Public Warrants underlying the Units being soldcorresponding quarter’s state taxes in the Initial Public Offering, except thatUnited States. The provision for income tax expense for the Private Placement Warrantsthree and the ordinary shares issuablenine months ended September 30, 2023 and 2022 was determined based upon the exercise of the Private Placement Warrants will not be transferable, assignable, or saleable until 30 days after the completion of a Business Combination, subject to certain limited exceptions.
Note 10 — Fair Value Measurements
The fair valueestimates of the Company’s financial assetsannual effective tax rate for the years ending December 31, 2023 and liabilities reflects management’s estimate of amounts that2022, respectively. Since the Company would have receivedis in a full valuation allowance position due to losses incurred since inception, the provision for taxes consists solely of certain state income taxes.
January 5, 2023 | ||||||||
(in thousands) | ||||||||
Intangible assets | $ | 5,950 | ||||||
Goodwill | 3,050 | |||||||
Total purchase consideration | $ | 9,000 |
January 5, 2023 | Estimated Useful Life | |||||||||||||
(in thousands) | ||||||||||||||
Developed technology and website content | $ | 1,950 | 5 years | |||||||||||
Strategic customer relationships and subscriber lists | 3,600 | 8 years | ||||||||||||
Trademarks | 400 | 10 years | ||||||||||||
Total intangible assets | $ | 5,950 |
15. Loss Per Share The following participating securities have been excluded from the computation of diluted loss per share for the periods presented because including them would have been anti-dilutive:
All unvested Earnout Shares are excluded from basic and diluted loss per share as such shares are contingently issuable only when the share price of the Company’s common stock exceeds specified thresholds, which had not been achieved as of |
At September 30, 2021, assets held in the Trust Account were comprised of $125,000,000 in U.S. Treasury Securities mutual funds.
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The following table presents information about the Company’s assets that are measured at fair value on a recurring basis at September 30, 2021 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.
| | | | | | | | | | | | |
|
| | | | Quoted Prices in |
| Significant Other | | Significant Other | |||
| | | | | Active Markets | | Observable Inputs | | Unobservable Inputs | |||
Assets: | | Level |
| (Level 1) | | (Level 2) |
| (Level 3) | ||||
| | | | | | | | | | | | |
Investments held in Trust Account | | | 1 | | $ | 125,000,000 | | | — | | | — |
Note 11 — Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the condensed balance sheet date up to the date that the unaudited condensed financial statements were available to be issued and determined that there have been no events that have occurred that would require adjustments to the disclosures of the unaudited condensed financial statements.
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ITEM
References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to CHW Acquisition Corporation. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to CHW Acquisition Sponsor, LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Exchange Act, that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form 10-Q including, without limitation, statements in this “Management’sManagement’s Discussion and Analysis of Financial Condition and Results of Operations” regardingOperations
Overview
We are a blank check company incorporatedrevenue transactions that take place on January 12, 2021 as a Cayman Islands corporationour platform, excluding depreciation and formed for the purposeamortization.
We expect to continue to incur significantAdministrative
Results of Operations
Our entire activity through September 30, 2021 was in preparation for an initial public offering, and since our initial public offering, our activity has been limited to the search for a prospective initial Business Combination. We will not generate any operating revenues until after completion of our initial Business Combination at the earliest. We expect to incur increased expensesemployees on corporate functions, such as a result of being a public company (for legal, financial reporting,management, accounting, and auditing compliance),legal as well as insurance and other expenses used to run the business, together with outside party service costs of related items such as auditors and lawyers.
the periods presented:
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
September 30, 2023 | September 30, 2022 | September 30, 2023 | September 30, 2022 | |||||||||||||||||||||||
(in thousands, except percentages) | ||||||||||||||||||||||||||
U.S. GAAP measures: | ||||||||||||||||||||||||||
Revenues | $ | 21,800 | $ | 15,379 | $ | 62,243 | $ | 37,829 | ||||||||||||||||||
Net loss | $ | (2,196) | $ | (40,931) | $ | (9,852) | $ | (44,371) | ||||||||||||||||||
Net loss margin | (10.1) | % | (266.1) | % | (15.8) | % | (117.3) | % | ||||||||||||||||||
Net cash provided by (used in) operating activities | $ | (2,297) | $ | 568 | $ | (4,624) | $ | (3,578) | ||||||||||||||||||
Non-GAAP measures: | ||||||||||||||||||||||||||
Adjusted EBITDA (loss)(1) | $ | 1,007 | $ | (461) | $ | 717 | $ | (3,448) | ||||||||||||||||||
Adjusted EBITDA (loss) margin(1) | 4.6 | % | (3.0) | % | 1.2 | % | (9.1) | % |
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
September 30, 2023 | September 30, 2022 | September 30, 2023 | September 30, 2022 | |||||||||||||||||||||||
(in thousands, except percentages) | ||||||||||||||||||||||||||
Net loss | $ | (2,196) | $ | (40,931) | $ | (9,852) | $ | (44,371) | ||||||||||||||||||
Interest expense, net | 1,683 | 735 | 4,972 | 784 | ||||||||||||||||||||||
Income taxes | 41 | — | 79 | 13 | ||||||||||||||||||||||
Depreciation and amortization | 414 | 134 | 1,170 | 431 | ||||||||||||||||||||||
Stock-based compensation | 1,065 | 23,922 | 3,528 | 24,016 | ||||||||||||||||||||||
Integration and transaction costs associated with acquired business | — | — | 189 | — | ||||||||||||||||||||||
Severance costs | — | — | 131 | — | ||||||||||||||||||||||
Legal settlement | — | — | 500 | — | ||||||||||||||||||||||
Change in fair value of derivative liability | — | 13,708 | — | 13,708 | ||||||||||||||||||||||
Issuance of Community Shares | — | 1,971 | — | 1,971 | ||||||||||||||||||||||
Adjusted EBITDA (loss) | $ | 1,007 | $ | (461) | $ | 717 | $ | (3,448) | ||||||||||||||||||
Revenues | $ | 21,800 | $ | 15,379 | $ | 62,243 | $ | 37,829 | ||||||||||||||||||
Adjusted EBITDA (loss) margin | 4.6 | % | (3.0) | % | 1.2 | % | (9.1) | % |
Three Months Ended | Change | Nine Months Ended | Change | |||||||||||||||||||||||||||||||||||||||||||||||
September 30, 2023 | September 30, 2022 | $ | % | September 30, 2023 | September 30, 2022 | $ | % | |||||||||||||||||||||||||||||||||||||||||||
(in thousands, except percentages) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Revenues | $ | 21,800 | $ | 15,379 | 6,421 | 41.8 | % | $ | 62,243 | $ | 37,829 | 24,414 | 64.5 | % | ||||||||||||||||||||||||||||||||||||
Costs and expenses: | ||||||||||||||||||||||||||||||||||||||||||||||||||
Cost of revenues (exclusive of depreciation and amortization shown separately below) | 1,441 | 1,021 | 420 | 41.1 | % | 3,710 | 3,027 | 683 | 22.6 | % | ||||||||||||||||||||||||||||||||||||||||
Platform operations and support | 2,968 | 5,641 | (2,673) | (47.4) | % | 9,630 | 11,035 | (1,405) | (12.7) | % | ||||||||||||||||||||||||||||||||||||||||
Sales and marketing | 12,755 | 11,290 | 1,465 | 13.0 | % | 36,788 | 24,656 | 12,132 | 49.2 | % | ||||||||||||||||||||||||||||||||||||||||
Royalty | — | — | — | 100.0 | % | 1,791 | — | 1,791 | 100.0 | % | ||||||||||||||||||||||||||||||||||||||||
General and administrative | 4,682 | 23,781 | (19,099) | (80.3) | % | 14,487 | 28,546 | (14,059) | (49.3) | % | ||||||||||||||||||||||||||||||||||||||||
Depreciation and amortization | 414 | 134 | 280 | 209.0 | % | 1,170 | 431 | 739 | 171.5 | % | ||||||||||||||||||||||||||||||||||||||||
Total costs and expenses | 22,260 | 41,867 | (19,607) | (46.8) | % | 67,576 | 67,695 | (119) | (0.2) | % | ||||||||||||||||||||||||||||||||||||||||
Interest expense, net | 1,683 | 735 | 948 | 129.0 | % | 4,972 | 784 | 4,188 | 534.2 | % | ||||||||||||||||||||||||||||||||||||||||
Other expense, net | 12 | 13,708 | (13,696) | (99.9) | % | 21 | 13,708 | (13,687) | (99.8) | % | ||||||||||||||||||||||||||||||||||||||||
Loss before income taxes and equity in net earnings of affiliate | (2,155) | (40,931) | 38,776 | (94.7) | % | (10,326) | (44,358) | 34,032 | (76.7) | % | ||||||||||||||||||||||||||||||||||||||||
Income taxes | 41 | — | 41 | 100.0 | % | 79 | 13 | 66 | 507.7 | % | ||||||||||||||||||||||||||||||||||||||||
Equity in net earnings of equity method investments | — | — | — | 100.0 | % | 553 | — | 553 | 100.0 | % | ||||||||||||||||||||||||||||||||||||||||
Net loss | $ | (2,196) | $ | (40,931) | 38,735 | (94.6) | % | $ | (9,852) | $ | (44,371) | 34,519 | (77.8) | % |
For2022 to $21.8 million for the period January 12, 2021 (inception) throughthree months ended September 30, 2021, we had2023. The increase was primarily attributable to a net loss$4.0 million increase in Wellness revenue as a result of $120,121, which consistedincreased activity and a $1.7 million increase in Pet Food & Treats revenue as a result of operating expensesour acquisition of $120,121.
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LiquidityRevenues increased by $24.4 million, or approximately 64.5%, from $37.8 million for the nine months ended September 30, 2022 to $62.2 million for the nine months ended September 30, 2023. The increase was primarily attributable to a $17.6 million increase in Wellness revenue as a result of increased activity and Capital Resources
Until the consummationa $4.7 million increase in Pet Food & Treats revenue as a result of our Initial Public Offering,acquisition of Dog Food Advisor in the first quarter of 2023 and launch of Cat Food Advisor in the third quarter of 2023. The increase also includes a $2.2 million increase in Services revenue from increased Pet Parents’ engagement of PCGs to provide pet care services as a result of increased return-to-office, and growth in ancillary services such as Wag! Premium subscriptions and Wag! Store.
On$0.1 million for the three months ended September 1, 2021, we consummated our Initial Public Offering30, 2022 to $0.4 million for the three months ended September 30, 2023. The increase was primarily attributable to the acquisitions of 12,500,000 Units, which includes 1,500,000 UnitsDog Food Advisor and Maxbone in 2023 and the related amortization of acquired intangible assets.
factors described in Part I, Item 1A,
Risk Factors, of our Annual Report on Form 10-K for the year ended December 31, 2022 (“2022 10-K”). We may seek additional equity or debt financing. See the section titled “Risk Factors—Risks Related to Our Operations—We may require additional capital to support business growth and this capital might not be available on acceptable terms, or at all” within the 2022 10-K.Nine Months Ended | ||||||||||||||
September 30, 2023 | September 30, 2022 | |||||||||||||
(in thousands) | ||||||||||||||
Net cash provided by (used in): | ||||||||||||||
Operating activities | $ | (4,624) | $ | (3,578) | ||||||||||
Investing activities | (10,662) | 1,952 | ||||||||||||
Financing activities | (1,376) | 51,524 | ||||||||||||
Net change in cash, cash equivalents, and restricted cash | $ | (16,662) | $ | 49,898 |
We intendSeptember 30, 2023, the amount outstanding under the PPP Loan was $0.9 million.
At September 30, 2021, we had cash of $897,818 held outside of the Trust Account. We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, properties or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete a Business Combination.
We do not believe we will need to raise additional funds following this offering in order to meet the expenditures required for operating our business prior to our initial Business Combination, other than funds available from loans from our Sponsor, its affiliates or members of our management team. However, if our estimates of the costs of identifying a target business, undertaking in-depth due diligence and negotiating an initial Business Combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our initial Business Combination. In order to fund working capital deficiencies or finance transaction costs in connection with an intended initial Business Combination, our Sponsor or an affiliate of our Sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete our initial Business Combination, we may repay such loaned amounts out of the proceeds of the trust account released to us. In the event that our initial Business Combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts but no proceeds from our trust account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into warrants of the post-Business Combination entity at a price of $1.00 per warrant at the option of the lender. The warrants would be identical to the Private Placement Warrants. The terms of such loans, if any, have not been determined and no written agreements exist with respect to such loans. Prior to the completion of our initial Business Combination, we do not expect to seek loans from parties other than our Sponsor, its affiliates or our management team as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our trust account.
Moreover, we may need to obtain additional financing to complete our initial Business Combination, either because the transaction requires more cash than is available from the proceeds held in our trust account, or because we become obligated to redeem a significant number of our public shares upon completion of the Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination. If we have not consummated our initial Business Combination within the required time period because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the trust account.
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Related Party Transactions
Founder Shares
On January 18, 2021, the Sponsor paid $25,000 for 2,875,000 shares of Ordinary shares (the “Founder Shares”). The Founder Shares included an aggregate of up to 412,500 shares that were subject to forfeiture depending on the extent to which the underwriters’ over-allotment option was exercised, so that the number of Founder Shares will equal, on an as-converted basis, 20% of the Company’s issued and outstanding shares of ordinary shares after the Initial Public Offering. On September 1, 2021, the underwriters partially exercised the over-allotment option and 37,500 Founder Shares were forfeited for no consideration by the Sponsor.
The Sponsor has agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earliest of: (A) six months after the completion of a Business Combination and (B) subsequent to a Business Combination, (x) if the closing price of the shares of Ordinary shares equals or exceeds $12.50/share (as adjusted) for any 20 trading days within any 30-trading day period commencing at least 150 days after a Business Combination, or (y) the date on which the Company completes a liquidation, merger, share exchange or other similar transaction that results in all of the Public Stockholders having the right to exchange their shares of Ordinary shares for cash, securities or other property.
Private Placement
Simultaneously with the closing of the Initial Public Offering and underwriters’ partial exercise of their over-allotment option, the Sponsor purchased 4,238,686 Private Placement Warrants at a price of $1.00 per Private Placement Warrant, for an aggregate purchase price of $4,238,686. Each Private Placement Warrant is exercisable to purchase one share Ordinary shares at a price of $11.50 per share, subject to adjustment. A portion of the proceeds from the Private Placement Warrants were added to the proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private Placement Warrants will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law), and the Private Placement Warrants and all underlying securities will expire worthless.
Related Party Loans
On January 18, 2021, the Company issued an unsecured promissory note (the “Promissory Note”) to the Sponsor, pursuant to which the Company may borrow up to an aggregate principal amount of $300,000. As of September 30, 2021, there was $43,000 outstanding under the Promissory Note. The Promissory Note will be repaid from the funds deposited into the operating account.
In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If we complete a Business Combination, we would repay the Working Capital Loans out of the proceeds of the trust account released to us. In the event that a Business Combination does not close, we may use a portion of proceeds held outside the trust account to repay the Working Capital Loans but no proceeds held in the trust account would be used to repay the Working Capital Loans. Up to $1.5 million of such Working Capital Loans may be convertible into warrants of the post-Business Combination entity at a price of $1.00 per warrant at the option of the lender. The warrants would be identical to the Private Placement Warrants. Notwithstanding the foregoing, the Business Combination Agreement does not permit Working Capital Loans to convert into warrants. Except as set forth above, to date, the terms of the Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. As of September 30, 2021, there were no Working Capital Loans outstanding.
Administrative Services Fee
We agreed, commencing on the effective date of the Initial Public Offering through the earlier of our consummation of a Business Combination or our liquidation, to pay an affiliate of the Sponsor a monthly fee of $10,000 for office space, secretarial and administrative services. As of September 30, 2021, we incurred and paid $10,000 in fees for these services.
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Registration Rights
The holders of Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of working capital loans, if any, are entitled to registration rights (in the case of the Founder Shares, only after conversion of such shares to shares of Ordinary shares) pursuant to a registration rights agreement dated September 1, 2021. These holders are entitled to certain demand and “piggyback” registration rights. However, the registration rights agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective until the termination of the applicable lock-up period for the securities to be registered. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Deferred Underwriting Fees
The underwriter was paid a cash underwriting discount of 1.75% of the gross proceeds of the Initial Public Offering, or $2,187,500. The underwriter is entitled to a deferred fee of $0.35 per unit, or $4,375,000 in the aggregate. The deferred fee will become payable to the underwriter from the amounts held in the trust account solely in the event that we complete a Business Combination, subject to the terms of the underwriting agreement.
Off-Balance Sheet Arrangements
As of September 30, 2021, we did
future material effect on our financial condition, results of operations, liquidity, capital expenditures, or capital resources.
The preparation of condensed financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of AmericaEstimates
Warrant Instruments
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessmentpolicies since the 2022 10-K. For a description of critical accounting policies that affect our significant judgments and estimates used in the instruments’ 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 instruments are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the instruments meet all of the requirements for equity classification under ASC 815, including whether the instruments are indexed to the Company’s own ordinary shares and whether the instrument holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the instruments are outstanding. The Company determined that upon further review of the warrant agreement, management concluded that the Public Warrants and Private Placement Warrants issued pursuant to the warrant agreement qualify for equity accounting treatment.
Ordinary shares Subject to Possible Redemption
We account for our ordinary shares subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Ordinary shares subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares that features redemption rights that is either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) is classified as temporary equity. At all other times, ordinary shares are classified as shareholders’ equity. Our ordinary shares feature certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, ordinary shares subject to possible redemption is presented as temporary equity, outside of the shareholders’ equity sectionpreparation of our condensed balance sheets.
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Net Income (Loss) Per ShareFinancial Condition and Results of Ordinary shares
We apply the two-class method in calculating earnings per share. Net income per shareOperations, of the redeemable shares, basic and diluted is calculated by dividing the interest income earned on the Trust Account by the weighted average number of shares of redeemable ordinary shares outstanding since original issuance. Net loss per share of ordinary shares, basic and diluted, for non-redeemable ordinary shares is calculated by dividing the net income (loss), less income attributable to shares of redeemable ordinary shares, by the weighted average number of shares of non-redeemable ordinary shares outstanding for the periods presented.
Recently Adopted2022 10-K.
RecentPronouncements
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is for fiscal years beginning after December 15, 2021, and should be applied on a full or modified retrospective basis. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company adopted ASU 2020-06 effective January 1, 2021. The adoption of ASU 2020-06 did not have a material impact on the Company’s financial statement.
Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial statement.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay an affiliate of the Sponsor a monthly fee of $10,000 for office space, utilities and secretarial, and administrative support services providedPolicies
The underwriters are entitled to a deferred fee of $0.35 per Unit, or $4,375,000 in the aggregate. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that we complete a Business Combination, subject to the terms of the underwriting agreement.
Pursuant to a registration and shareholder rights agreement entered intoForm 10-Q for information on September 1, 2021, the holders of the Founder Shares, Private Placement Warrants and any warrants that may be issued upon conversion of Working Capital Loans (and any shares of Ordinary shares issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of the Working Capital Loans) will be entitled to registration rights pursuant to a registration and shareholder rights agreement. The holders of these securities are entitled to make up to three demands, excluding short form demands, that we register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of a Business Combination. However, the registration and shareholder rights agreement provides that we will not permit any registration statement filed under the Securities Act to become effective until termination of the applicable lockup period. We will bear the expenses incurred in connection with the filing of any such registration statements.
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JOBS Act
On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We will qualify as an “emerging growth company” and under the JOBS Act will be allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As such, our financial statements may not be comparable to companies that comply with public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis) and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of executive compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our Initial Public Offering or until we are no longer an “emerging growth company,” whichever is earlier.
ITEM
Quantitative and Qualitative Disclosures About Market Risk
Contents
ITEM
Controls and Procedures
Disclosure
Under Because there are inherent limitations in all control systems, a control system, no matter how well conceived and operated, can provide only reasonable, as opposed to absolute, assurance that the supervisionobjectives of the control system are met. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.
year ended December 31, 2022. Additionally, these material weaknesses could result in a misstatement of the account balances or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.
During the fiscal quarter ended September 30, 2021,
reference.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM
Risk Factors that could cause our actual results to differ materially from those in this Quarterly Report include the risk factors described in our final prospectus for our Initial Public Offering filed with the SEC. Any of those factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair
2022 10-K.
ITEM
The registration statement for the Company’s Initial Public Offering was declared effective on August 30, 2021. On September 1, 2021, the Company consummated the Initial Public OfferingUnregistered Sales of 11,000,000 units (the “Units”) with respect to the Ordinary shares (the “Ordinary Shares”) included in the Units being offered (the “Public Shares”) at $10.00 per Unit generating gross proceedsEquity Securities and Use of $110,000,000.
Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 4,000,000 warrants (“Private Placement Warrants”) at a price of $1.00 per Private Placement Warrant in a private placement to the Company’s sponsor, CHW Acquisition Sponsor, LLC and underwriters generating gross proceeds of $4,000,000.
On August 30, 2021, the underwriters notified the Company of their intention to partially exercise their over-allotment option and will forfeit the remaining balance on September 1, 2021. On September 1, 2021, the Company consummated the sale of an additional 1,500,000 Units, at $10.00 per Unit, and the sale of an additional 238,686 Private Placement Warrants, at $1.00 per Private Placement Warrants, generating total gross proceeds of $15,238,636.
Offering costs for the Initial Public Offering and underwriters’ partial exercise of the over-allotment option amounted to $13,130,743, consisting of $2,187,500 of underwriting fees, $4,375,000 of deferred underwriting fees payable (which are held in the Trust Account (defined below)), $5,975,625 for the fair value of shares issued to the anchor investors and representative shares and $592,618 of other costs. The $4,375,000 of deferred underwriting fee payable is contingent upon the consummation of a Business Combination by October 20, 2022, subject to the terms of the underwriting agreement.
Following the closing of the Initial Public Offering on September 1, 2021, an amount of $125,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering and the Private Placement Warrants was placed in a trust account (“Trust Account”) and will be invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 180 days or less or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting the conditions of paragraphs (d)(2), (d)(3) and (d)(4) of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account, as described below.
We paid a total of $2,187,500 underwriting discounts and commissions and $8,755,743 for other offering costs and expenses related to the Initial Public Offering. In addition, the underwriters agreed to defer $4,375,000 in underwriting discounts and commissions.
For a description of the use of the proceeds generated in our Initial Public Offering, see Part I, Item 2 of this Quarterly Report.
Proceeds
ITEM
None.
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ITEM
Mine Safety Disclosures
ITEM
None.
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