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Horizon Space Acquisition I (HSPO) - 2023 Q4 - Annual Report
HSPOHorizon Space Acquisition I (HSPO)2024-03-29 23:30

IPO and Financial Proceeds - The company completed its IPO on December 27, 2022, raising gross proceeds of 69.0millionfromthesaleof6,900,000PublicUnitsatanofferingpriceof69.0 million from the sale of 6,900,000 Public Units at an offering price of 10.00 per unit[20]. - The total proceeds from the IPO and Private Placement amounted to 70,207,500,whichwereplacedinaTrustAccountforthebenefitofpublicshareholders[22].−Atotalof70,207,500, which were placed in a Trust Account for the benefit of public shareholders[22]. - A total of 70,207,500 from the IPO and Private Placement was placed in a Trust Account, with 10.175perPublicUnit[107].−ThecompanyhasbroaddiscretionregardingtheuseofproceedsfromtheIPOandPrivatePlacement,primarilyforbusinesscombinationandworkingcapital[117].−ThecompanyintendstousesubstantiallyallnetproceedsfromtheIPO,including10.175 per Public Unit[107]. - The company has broad discretion regarding the use of proceeds from the IPO and Private Placement, primarily for business combination and working capital[117]. - The company intends to use substantially all net proceeds from the IPO, including 2,415,000 for deferred underwriting commissions, to acquire target businesses and cover related expenses[136]. Business Combination and Strategy - The company has the option to extend the deadline for consummating a business combination up to March 27, 2024, with a Monthly Extension Fee of 70,000foreachextension[27].−Anon−bindingLetterofIntent(LOI)wassignedwithShenzhenSquirrelforapotentialbusinesscombination,althoughnodefinitiveagreementshavebeenmadeyet[38].−ThecompanyestablishedaSpecialCommitteetoevaluatetheproposedbusinesscombinationwithShenzhenSquirrel,consistingofindependentdirectors[39].−Thecompanyintendstofocusonacquiringemerginggrowthcompaniesthatareeithercash−generativeorhavethepotentialtogeneratecash[45].−Thecompanyaimstoacquiretargetbusinessesthatareclosetoananticipatedinflectionpoint,focusingonthosethatrequiremanagementexpertiseorcaninnovatethroughnewproductsorservices[46].−Theevaluationcriteriaforpotentialacquisitionsincludeorganicgrowthpotentialincashflows,costsavings,acceleratedgrowthopportunities,andprospectsforvaluecreationinitiatives[47].−ThecompanyhasuntilApril27,2024,tocompleteitsinitialbusinesscombination;failuretodosowillresultintheredemptionof10070,000 for each extension[27]. - A non-binding Letter of Intent (LOI) was signed with Shenzhen Squirrel for a potential business combination, although no definitive agreements have been made yet[38]. - The company established a Special Committee to evaluate the proposed business combination with Shenzhen Squirrel, consisting of independent directors[39]. - The company intends to focus on acquiring emerging growth companies that are either cash-generative or have the potential to generate cash[45]. - The company aims to acquire target businesses that are close to an anticipated inflection point, focusing on those that require management expertise or can innovate through new products or services[46]. - The evaluation criteria for potential acquisitions include organic growth potential in cash flows, cost savings, accelerated growth opportunities, and prospects for value creation initiatives[47]. - The company has until April 27, 2024, to complete its initial business combination; failure to do so will result in the redemption of 100% of public shares for a pro rata portion of the Trust Account funds[53]. - The initial business combination must involve target businesses with a collective fair market value of at least 80% of the Trust Account balance at the time of the definitive agreement[55]. - The company anticipates structuring its initial business combination to acquire 100% of the equity interests or assets of the target business[57]. Financial Performance and Condition - The Company reported a net income of 2,911,033, primarily from interest and dividend income of 3,471,188,offsetbyoperatingcostsof3,471,188, offset by operating costs of 560,155[133]. - The Company incurred a net loss of 123,960fortheperiodfromJune14,2022,throughDecember31,2022,duetoformationandoperatingcostsandshare−basedcompensationexpenses[134].−TheCompanyhasaworkingcapitaldeficiencyof123,960 for the period from June 14, 2022, through December 31, 2022, due to formation and operating costs and share-based compensation expenses[134]. - The Company has a working capital deficiency of 114,810 as of December 31, 2023, raising substantial doubt about its ability to continue as a going concern[139]. - The Trust Account held assets valued at 67,946,855asofDecember31,2023,primarilyinvestedinmutualfundswithunderlyingU.S.Treasurysecurities[145].RegulatoryandComplianceIssues−IfthecompanyacquiresaPRCtargetcompany,itmayneedtoobtainapprovalfromChineseauthoritiestolistonU.S.exchanges,whichcouldmateriallyaffectinvestorinterests[60].−TheHoldingForeignCompaniesAccountableActmayrestrictthecompany’sabilitytocompletebusinesscombinationswithcertaintargetbusinessesunlesstheymeetPCAOBstandards[68].−ThecompanyissubjecttotheHoldingForeignCompaniesAccountableAct(HFCAA),whichmayimpactitsabilitytomaintainalistingonU.S.exchangesifitsauditorcannotbeinspectedfortwoconsecutiveyears[77].−ThePCAOBhasdetermineditcannowfullyinspectregisteredpublicaccountingfirmsinmainlandChinaandHongKong,whichmayalleviatepreviouscomplianceconcerns[76].−ThecompanymayfacechallengesinenforcinglegalrightsinthePRCduetothelackofreciprocalrecognitionofjudgmentsbetweentheU.S.andChina[64].−Thecompany’sauditor,UHYLLP,isregisteredwiththePCAOBandsubjecttoregularinspections,ensuringcompliancewithapplicableprofessionalstandards[67].CorporateGovernance−Theboardofdirectorsconsistsoffourmembers,dividedintothreeclasses,witheachclassservingathree−yearterm[182].−Theauditcommitteeiscomposedofthreeindependentdirectors,meetingNasdaqstandards,withMr.ColonservingastheChairman[185].−Thecompensationcommittee,alsoconsistingofindependentdirectors,isresponsibleforreviewingexecutivecompensationarrangements[189].−AclawbackpolicywasadoptedonNovember28,2023,requiringexecutiveofficerstoreimburseanyerroneouslyawardedcompensationduetomisconduct[196].−Allongoingtransactionswithofficersanddirectorswillbeontermsnolessfavorablethanthoseavailablefromunaffiliatedthirdparties,requiringpriorapprovalfromtheauditcommittee[204].−Thecompanywillnotconsummateabusinesscombinationwithanentityaffiliatedwithanyofficersordirectorswithoutindependentfairnessopinionsanddisinteresteddirectorapproval[205].−AllrequiredownershipreportsunderSection16(a)oftheExchangeActweretimelyfiledbytherelevantofficersanddirectorsduringthefiscalyearendedDecember31,2023[207].ShareholderInformation−Asofthedateofthereport,thereare8,647,971OrdinarySharesissuedandoutstanding[212].−Mingyu(Michael)Liholds2,092,750OrdinaryShares,representing24.2067,946,855 as of December 31, 2023, primarily invested in mutual funds with underlying U.S. Treasury securities[145]. Regulatory and Compliance Issues - If the company acquires a PRC target company, it may need to obtain approval from Chinese authorities to list on U.S. exchanges, which could materially affect investor interests[60]. - The Holding Foreign Companies Accountable Act may restrict the company’s ability to complete business combinations with certain target businesses unless they meet PCAOB standards[68]. - The company is subject to the Holding Foreign Companies Accountable Act (HFCAA), which may impact its ability to maintain a listing on U.S. exchanges if its auditor cannot be inspected for two consecutive years[77]. - The PCAOB has determined it can now fully inspect registered public accounting firms in mainland China and Hong Kong, which may alleviate previous compliance concerns[76]. - The company may face challenges in enforcing legal rights in the PRC due to the lack of reciprocal recognition of judgments between the U.S. and China[64]. - The company’s auditor, UHY LLP, is registered with the PCAOB and subject to regular inspections, ensuring compliance with applicable professional standards[67]. Corporate Governance - The board of directors consists of four members, divided into three classes, with each class serving a three-year term[182]. - The audit committee is composed of three independent directors, meeting Nasdaq standards, with Mr. Colon serving as the Chairman[185]. - The compensation committee, also consisting of independent directors, is responsible for reviewing executive compensation arrangements[189]. - A clawback policy was adopted on November 28, 2023, requiring executive officers to reimburse any erroneously awarded compensation due to misconduct[196]. - All ongoing transactions with officers and directors will be on terms no less favorable than those available from unaffiliated third parties, requiring prior approval from the audit committee[204]. - The company will not consummate a business combination with an entity affiliated with any officers or directors without independent fairness opinions and disinterested director approval[205]. - All required ownership reports under Section 16(a) of the Exchange Act were timely filed by the relevant officers and directors during the fiscal year ended December 31, 2023[207]. Shareholder Information - As of the date of the report, there are 8,647,971 Ordinary Shares issued and outstanding[212]. - Mingyu (Michael) Li holds 2,092,750 Ordinary Shares, representing 24.20% of the total[213]. - The total beneficial ownership of all officers and directors as a group is 2,110,750 Ordinary Shares, or 24.41%[213]. - The Sponsor issued 1,725,000 Ordinary Shares at a purchase price of 25,000, approximately 0.0145pershare[216].−AsofDecember31,2023,thereare1,725,000FounderSharesissuedandoutstanding[217].−TheCompanycompletedthePrivatePlacementof385,750PrivateUnitsatapurchasepriceof0.0145 per share[216]. - As of December 31, 2023, there are 1,725,000 Founder Shares issued and outstanding[217]. - The Company completed the Private Placement of 385,750 Private Units at a purchase price of 10.00 per Private Unit[218]. - First Trust Merger Arbitrage Fund holds 509,580 Ordinary Shares, representing 5.89% of the total[213]. - Karpus Management, Inc. holds 602,900 Ordinary Shares, representing 6.97% of the total[213]. - Independent directors received a total of 18,000 Ordinary Shares from the Sponsor prior to the IPO[216]. Operational and Risk Management - The company has not generated any revenue since its inception and has incurred losses due to formation and operating costs[24]. - The company has no full-time employees and relies on its CEO to devote necessary time until a business combination is completed[85]. - The company pays $1,000 per month for office space and administrative support services[84]. - The company has not encountered any cybersecurity incidents since its IPO, indicating a low cybersecurity risk profile[93]. - The company has not adopted any formal cybersecurity risk management program, relying on management to assess threats[92]. - The company’s ability to complete a business combination may be limited by foreign investment regulations and CFIUS review processes[82]. - The company will incur significant professional costs to remain publicly traded and pursue a business combination[139].