| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
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References to the “Company,” “Ross Acquisition Corp. II,” “Ross,” “our,” “us” or “we” refer to Ross Acquisition Corp. II. The following discussion and analysis of the Company’s financial
condition and results of operations should be read in conjunction with the unaudited interim condensed financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set
forth below includes forward-looking statements that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. We have
based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual
results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify
forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause or
contribute to such a discrepancy include, but are not limited to, those described in our other SEC filings.
Overview
We are a blank check company incorporated as a Cayman Islands exempted company on January 19, 2021. We were formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase,
reorganization or similar business combination with one or more businesses. We are an emerging growth company and, as such, we are subject to all of the risks associated with emerging growth companies.
Our Sponsor is Ross Holding Company LLC, a Cayman Islands limited liability company. The registration statement for the Initial Public Offering was declared effective on March 11, 2021. On March 16, 2021, we
consummated the Initial Public Offering of 34,500,000 units, including 4,500,000 additional units to cover over-allotments, at $10.00 per unit, generating gross proceeds of $345.0 million, and incurring offering costs of approximately $19.9
million, of which approximately $12.1 million was for deferred underwriting commissions.
Simultaneously with the closing of the Initial Public Offering, we consummated the private placement of 5,933,333 Private Placement Warrants at a price of $1.50 per Private Placement Warrant with our Sponsor,
generating gross proceeds of $8.9 million.
Upon the closing of the Initial Public Offering and the private placement, $345.0 million ($10.00 per unit) of the net proceeds of the Initial Public Offering and certain of the proceeds of the sale of the Private
Placement Warrants were placed in the Trust Account, located in the United States with Continental Stock Transfer & Trust Company acting as trustee, and has been invested only in U.S. “government securities” within the meaning of Section
2(a)(16) of the Investment Company Act, having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government treasury
obligations, as determined by us, until the earlier of: (i) the completion of the Business Combination or another initial business combination and (ii) the distribution of the Trust Account as described below.
Proposed Business Combination
Business Combination Agreement
On January 17, 2023, the Company, entered into an initial business combination Agreement (the “Business Combination Agreement”), with APRINOIA Therapeutics Inc., an exempted company incorporated with limited
liability under the laws of the Cayman Islands ( “APRINOIA”), APRINOIA Therapeutics Holdings Limited, an exempted company incorporated with limited liability under the laws of the Cayman Islands (“PubCo”), APRINOIA Therapeutics
Merger Sub 1, Inc., an exempted company incorporated with limited liability under the laws of the Cayman Islands and a direct wholly-owned subsidiary of PubCo (“Merger Sub 1” and together with PubCo, the “APRINOIA Acquisition Entities”),
APRINOIA Therapeutics Merger Sub 2, Inc., an exempted company incorporated with limited liability under the laws of the Cayman Islands and a direct wholly-owned subsidiary of the Company (“Merger Sub 2”) and APRINOIA Therapeutics Merger
Sub 3, Inc., an exempted company incorporated with limited liability under the laws of the Cayman Islands and a direct wholly-owned subsidiary of the Company (“Merger Sub 3”, together with Merger Sub 1 and Merger Sub 2, the “Merger Subs”,
and Merger Sub 2 and Merger Sub 3, collectively, the “SPAC Acquisition Entities”), pursuant to which, subject to its terms and conditions, the Business Combination Agreement provides that (i) on the business day prior to the date of the
Closing, the Company will merge with and into Merger Sub 1, with Merger Sub 1 being the surviving entity (the “Initial Merger”), (ii) on the date of the Closing, Merger Sub 2 will merge with and into APRINOIA, with APRINOIA being the
surviving entity (the “Second Merger”) and (iii) on the date of the Closing and immediately following the Second Merger, APRINOIA will merge with and into Merger Sub 3, with Merger Sub 3 being the surviving entity (the “Third Merger”
and together with the Initial Merger and the Second Merger, the “Mergers”). As a result of the Mergers, the Company’s successor, Merger Sub 1 will continue to be a direct wholly-owned subsidiary of PubCo and Merger Sub 3 will be a direct
wholly-owned subsidiary of Merger Sub 1, and an indirect wholly-owned subsidiary of PubCo (as a whole, the “Business Combination”).
Transaction Consideration
In accordance with the terms and conditions of the Business Combination Agreement, on the business day prior to the Initial Merger: (i) the Sponsor shall automatically surrender for no consideration 3,018,750
issued and outstanding Founder Shares to the Company and such Founder Shares shall be deemed cancelled and no longer outstanding on the books of the Company and (ii) immediately following such surrender, each remaining issued and outstanding
Founder Share will convert, on a one-for-one basis, into Class A Ordinary Shares.
Subject to, and in accordance with the terms and conditions of the Business Combination Agreement, at the effective time of the Initial Merger: (i) (a) each of our Units, each consisting of one Class A Ordinary
Share and one-third of one Public Warrant, each whole Public Warrant exercisable for one Class A Ordinary Share, will (to the extent not already separated) be automatically severed and the holder thereof will be deemed to hold one Class A
Ordinary Share and one-third of one Public Warrant; then, immediately thereafter, (b) each of the issued and outstanding Class A ordinary shares of the Company will be cancelled in exchange for the right of the holder thereof to receive one
ordinary share, par value $0.0001 per share, of PubCo (the “PubCo Ordinary Shares”); and (c) each of the Warrants of the Company will be assumed by PubCo and converted into a warrant to purchase one PubCo Ordinary Share at the same
exercise price of $11.50 per share as the Warrants of the Company immediately prior to the Initial Merger, (ii) the issued and outstanding share in the capital of Merger Sub 1 will continue existing and constitute the only issued and outstanding
share in the capital of Merger Sub 1, and (iii) the issued and outstanding share in the capital of PubCo shall be surrendered by the holder thereof to PubCo for no consideration and be cancelled by PubCo.
Subject to, and in accordance with the terms and conditions of the Business Combination Agreement, on the date of the Closing and prior to the Second Merger, each Convertible Note (as defined below) will convert
into ordinary shares of APRINOIA pursuant to the terms and conditions thereof.
Subject to, and in accordance with the terms and conditions of the Business Combination Agreement, at the effective time of the Second Merger, (i) each then issued and outstanding ordinary share of APRINOIA,
including the shares issued upon conversion of the Convertible Notes, and each then issued and outstanding preferred share (on an as-converted basis) of APRINOIA (other than any shares that are held by APRINOIA shareholders who have complied with
the requirements of Cayman Islands law to exercise dissenter’s rights (the “APRINOIA Dissenting Shares”), collectively the “APRINOIA Shares”), will automatically be cancelled in exchange for the right to receive such number of newly issued
PubCo Ordinary Shares that is equal to the APRINOIA Exchange Ratio, subject to rounding; (ii) each APRINOIA Dissenting Share shall automatically be cancelled and cease to exist and shall thereafter represent only the right to receive the
applicable payments as set forth in the Business Combination Agreement, being the fair value for such APRINOIA Dissenting Share and such other rights as such holder may be entitled under the Companies Act (As Revised) of the Cayman Islands; (iii)
the issued and outstanding share of Merger Sub 2 shall automatically be converted into one ordinary share of APRINOIA, which ordinary share shall constitute the only issued and outstanding share in the capital of APRINOIA; and (iv) each option to
purchase APRINOIA ordinary shares (the “APRINOIA Options”) will be converted into the right to receive an option, granted in substitution of each such APRINOIA Option under an incentive equity plan to be adopted by PubCo prior to the
Closing, to purchase PubCo Ordinary Shares (each a “PubCo Substitute Option”) upon substantially the same terms and conditions as are in effect with respect to such APRINOIA Option immediately prior to the effective time of the Second
Merger, except that (a) such PubCo Substitute Option shall provide the right to purchase that whole number of PubCo Ordinary Shares (rounded down to the nearest whole share) equal to the number of APRINOIA ordinary shares subject to such APRINOIA
Option, multiplied by the APRINOIA Exchange Ratio, and (b) the exercise price per share for each such PubCo Substitute Option shall be equal to the exercise price per share of such APRINOIA Option in effect immediately prior to the effective time
of the Second Merger, divided by the APRINOIA Exchange Ratio (the exercise price per share, as so determined, being rounded up to the nearest full cent), subject to customary exceptions and adjustments. The “APRINOIA Exchange Ratio” is a number
determined by dividing 28,000,000 PubCo Ordinary Shares by the sum (without duplication) of: (a) the aggregate number of APRINOIA shares outstanding (on an as-converted basis) as of immediately prior to the effective time of the Second Merger
(excluding APRINOIA shares issuable or issued upon conversion of the Convertible Notes) and (b) the aggregate number of APRINOIA shares underlying APRINOIA Options (assuming, for purposes of this calculation, that all such APRINOIA Options are
unexpired, issued, outstanding and vested as of immediately prior to the effective time of the Second Merger, and are exercised on a fully paid basis).
Subject to, and in accordance with, the terms and conditions of the Business Combination Agreement, at the effective time of the Third Merger, (i) the issued and outstanding ordinary share of APRINOIA shall be
cancelled and cease to exist by virtue of the Third Merger, and (ii) the issued and outstanding share in the capital of Merger Sub 3 shall continue existing and constitute the only issued and outstanding share in the capital of Merger Sub 3.
The parties to the Business Combination Agreement have made customary representations, warranties and covenants in the Business Combination Agreement, including, among others, covenants with respect to the conduct
of APRINOIA, the APRINOIA Acquisition Entities, the Company and the SPAC Acquisition Entities. The Closing is subject to certain customary conditions.
Convertible Notes
APRINOIA and certain investors (the “Convertible Note Holders”) have entered, or will enter into those certain convertible note purchase agreements (the “Convertible Note Purchase Agreements”) and
other related ancillaries, pursuant to which such Convertible Note Holders have or will provide to APRINOIA debt financing in the aggregate amount of up to $35,000,000 to meet APRINOIA’s working capital requirements through the Closing
(collectively, the “Convertible Notes”). The notes bear interest on the aggregate outstanding principal amount at a simple interest rate of 5% per annum. All unpaid principal and interest shall be due and payable in full on the first
anniversary of the date of the applicable Convertible Note, unless accelerated upon the occurrence of an event of default as set forth in the Convertible Notes. Each Convertible Notes may be redeemed upon the mutual agreement of the Convertible
Note Holder and APRINOIA, at any time, as a whole or in part from time to time, at a redemption price equal to the amount so redeemed, plus unpaid accrued interest thereon through the date of redemption, subject to the Convertible Note Holder’s
exercise of its right of conversion at the then applicable Conversion Price (as defined below) in lieu of redemption. In connection with the execution of the Business Combination Agreement, APRINOIA received an aggregate of $12.5 million in
exchange for Convertible Notes.
An affiliate of the Company and the Sponsor, R Investments, LLC, a Delaware limited liability company (“R Investments”) entered into a Convertible Note Purchase Agreement on December 22, 2022 to purchase a Convertible Note with an
aggregate principal amount of $7,500,000 (the “R Investments Note”). In accordance with this Convertible Note Purchase Agreement, R Investments funded the R Investments Note and APRINOIA delivered the R Investments Note to R Investments
simultaneously with the execution of the Business Combination Agreement. The R Investment Note is convertible at the option of R Investments in the event of (i) an initial public offering of APRINOIA ordinary shares (a “Qualified IPO”),
(ii) a financing in which APRINOIA issues equity securities with total proceeds to APRINOIA of not less than $15,000,000 (a “Qualified Financing”), (iii) a Qualified Business Combination (as defined in the R Investment Note), (iv) the
Business Combination and (v) if APRINOIA elects to redeem the R Investments Note. “Conversion Price” for the R Investments Note means (i) in the case of a Qualified IPO, a price equal to the per share public offering price stated on the
front cover of the final prospectus for the Qualified IPO (before deduction of any underwriting commissions, expenses or other amounts) multiplied by 0.80, (ii) in the case of a Qualified Financing, a price equal to the cash price paid per
share for equity securities by the investors in the Qualified Financing multiplied by 0.80, (iii) in the case of a Qualified Business Combination or the Business Combination, a price equal to the implied per share price of the ordinary shares
of APRINOIA in such Qualified Business Combination or the Business Combination, as applicable, multiplied by 0.80, and (iv) in the event that the conversion is made pursuant to a redemption, $1.58. R Investments has consent rights over (i)
indebtedness, other than the other Convertible Notes, that would rank senior or pari passu in right of payment to or with the R Investments Note. On January 13, 2023, R Investments agreed to convert the
R Investments Note in connection with the consummation of the Business Combination.
All other Convertible Notes, convert automatically in the event of (i) a Qualified IPO, (ii) a Qualified Financing, and (iii) a Qualified Business Combination (as defined in the other Convertible Notes). Such other
Convertible Notes are also convertible at the option of the Convertible Note Holder, if APRINOIA elects to redeem the Convertible Notes. “Conversion Price” for the other Convertible Notes means (i) in the case of a Qualified IPO, a price
equal to the per share public offering price stated on the front cover of the final prospectus for the Qualified IPO (before deduction of any underwriting commissions, expenses or other amounts) multiplied by 0.80, (ii) in the case of a Qualified
Financing, a price equal to the cash price paid per share for equity securities by the investors in the Qualified Financing multiplied by 0.80, (iii) in the case of a Qualified Business Combination, a price equal to the implied per share price of
the ordinary shares of APRINOIA in such Qualified Business Combination multiplied by 0.80, and (iv) in the event that the conversion is made pursuant to a redemption, $1.58.
Sponsor Support Agreement
Simultaneously with the execution of the Business Combination Agreement, the Company, APRINOIA, PubCo and the Sponsor, entered into a Sponsor Support Agreement (the “Sponsor Support Agreement”) pursuant to which the Sponsor agreed to
support the Business Combination and to vote all of its Founder Shares and any other securities of the Company beneficially owned or acquired by the Sponsor in favor of the Business Combination Agreement and the Business Combination. The
Sponsor also agreed to take certain other actions in support of the Business Combination Agreement and the Business Combination and to refrain from taking such actions that would adversely impede the ability of the parties to perform the
Business Combination Agreement. The Sponsor Support Agreement also prevents transfers of the Company securities held by the Sponsor between the date of the Sponsor Support Agreement and the date of the Closing or earlier termination of the
Business Combination Agreement unless the transferee executes a joinder to the Sponsor Support Agreement.
The Sponsor further agreed that 2,156,250 PubCo Ordinary Shares (the “Sponsor Earn-Out Shares”) to be received by it will be subjected to forfeiture at the Closing and will be earned, released and delivered
upon satisfaction of the following milestones: (i) one half (1/2) of the Sponsor Earn-Out Shares will vest if, during the Earn-Out Period (as defined below), the VWAP (as defined in the Sponsor Support Agreement) of the PubCo Ordinary Shares is
equal to or greater than $12.50 for any 20 trading days within any period of 30 consecutive trading days and (ii) one half (1/2) of the Sponsor Earn-Out Shares will vest if, during the Earn-Out Period, the VWAP of the PubCo Ordinary Shares is
equal to or greater than $15.00 for any 20 trading days within any period of 30 consecutive trading days. If a PubCo Change of Control (as defined in the Sponsor Support Agreement) occurs during the Earn-Out Period, then immediately prior to the
consummation of such PubCo Change of Control, any Sponsor Earn-Out Shares not previously released shall be automatically released and no longer subject to forfeiture. “Earn-Out Period” means the period beginning on the date of Closing and
ending on the fifth anniversary of the Closing (unless earlier terminated due to a PubCo Change of Control). Prior to the expiration of the Earn-Out Period, the Sponsor shall be entitled to vote and receive dividends on the Sponsor Earn-Out
Shares until such Sponsor Earn-Out Shares are forfeited.
In addition, PubCo agreed to indemnify the Sponsor from and against certain liabilities relating to the Business Combination for a period of six years after the Closing.
Shareholder Support Deed
Simultaneously with and following the execution of the Business Combination Agreement, the Company, APRINOIA, PubCo and certain shareholders of APRINOIA entitled to vote on and/or give consent to certain matters to
be approved by the shareholders of APRINOIA in connection with the Business Combination entered into a Shareholder Support Deed, pursuant to which, among other things, each such shareholder agreed (i) to vote in favor of such matters, (ii) to
vote against any proposals that would impede the Business Combination, and (iii) not to transfer any APRINOIA shares held by such shareholder.
Investor Rights Agreement
Simultaneously with the Closing, PubCo, Sponsor, certain affiliates of Sponsor, the Company, and certain shareholders of APRINIOA shall have entered into an investor rights agreement (the “Investor Rights
Agreement”), pursuant to which, among other things, (i) PubCo agreed to register for resale, pursuant to Rule 415 under the Securities Act of 1933, as amended, within certain period after the Closing Date, certain PubCo Ordinary Shares and
other equity securities of PubCo held by certain parties from time to time, (ii) holders of registrable securities will be granted certain takedown, demand, block trade and piggyback registration rights with respect to their registrable
securities, in each case, on the terms and subject to the conditions set forth in the Investor Rights Agreement, (iii) the holders of certain registrable securities will be subject to a six month lock-up, subject to certain exceptions and (iv)
the Registration and Shareholder Rights Agreement, dated as of March 16, 2021, by and between RAC, Sponsor and certain other parties thereto, will be terminated as of the Closing.
Assignment, Assumption and Amendment Agreement
In connection with the Closing, PubCo, RAC and Continental Stock Transfer & Trust Company, a New York limited purpose trust company, as warrant agent (the “Warrant Agent”) will enter into the Assignment,
Assumption and Amendment Agreement (the “Assignment, Assumption and Amendment Agreement”), which will amend that certain Warrant Agreement (the “Existing Warrant Agreement”), dated as of March 16, 2021, by and between the Company
and the Warrant Agent, which Existing Warrant Agreement governs all of the Warrants issued by the Company. Pursuant to the Assignment, Assumption and Amendment Agreement, effective on and from the effective time of the Initial Merger, the Company
will assign to PubCo all of the Company’s right, title and interest in and to the Existing Warrant Agreement and PubCo will assume, and agree to pay, perform, satisfy and discharge in full, as the same become due, all of the Company’s liabilities
and obligations under the Existing Warrant Agreement, as amended, arising on, from and after the effective time of the Initial Merger.
Lock-Up Agreements
No later than immediately prior to the effective time of the Initial Merger, PubCo and certain APRINOIA shareholders will have entered into a lock-up agreement (“Lock-Up Agreement”), pursuant to which, among
other things, (i) each such APRINOIA shareholder agrees not to sell, for the period specified in the Lock-Up Agreement, certain PubCo Ordinary Shares such APRINOIA shareholder (as applicable) will receive in the Mergers, on the terms and subject
to the conditions set forth in the Lock-Up Agreement.
Equity Commitment Letter
In connection with the execution of the Business Combination Agreement, R Investments (the “Forward Purchaser”), PubCo and APRINOIA entered into an equity commitment letter (the “Equity Commitment Letter”)
pursuant to which the Forward Purchaser agreed to subscribe for, directly through PubCo and as a PIPE Investment (as defined in the Business Combination Agreement), that number of PubCo Ordinary Shares at $10 per share equal to the difference
between the actual value of the Trust Account (after giving effect to redemptions of Public Shares) and $12,500,000 (the “Maximum Commitment”), only to the extent that the value of the Trust Account (after giving effect to redemptions of
Public Shares) is less than the Maximum Commitment. Any PubCo Ordinary Shares purchased by the Forward Purchaser pursuant to this Equity Commitment Letter shall be “Registrable Securities” under the Investor Rights Agreement upon the execution of
the Investor Rights Agreement by the Forward Purchaser.
Extension and Redemptions
On March 13, 2023, we held an extraordinary general meeting (the “Extension Meeting”). At the Extension Meeting, our shareholders approved as a special resolution, the amendment of the Company’s amended and
restated memorandum and articles of association to extend the date by which we must complete an Initial Business Combination by up to six months in one month increments subject to deposit of $165,000 into the Trust Account for each month by which
such date is extended (the “Extension”). On March 13, 2023, following the shareholder approval, the Company filed the amendment to the amended and restated memorandum and articles of association with the Registrar of Companies of the
Cayman Islands. In connection with the Extension Meeting, shareholders holding 28,119,098 Public Shares exercised their right to redeem such shares for a pro rata portion of the funds held in our Trust Account as of March 9, 2023, including any
interest earned on the funds held in the Trust Account (net of taxes payable). As a result, approximately $287.7 million (approximately $10.23 per share) was removed from the Trust Account to pay such holders. On March 31, 2023, APRINOIA made a
deposit of $165,000 (the “First Extension Payment”) to the Trust Account. On April 13, 2023, APRINOIA made a second deposit of $165,000 to the Trust Account. On May 12, 2023, APRINOIA made a third deposit of $165,000 to the Trust Account. The
date by which we must complete an Initial Business Combination was extended from March 16, 2023 to June 16, 2023. Following the aforementioned redemptions, we have 15,005,902 ordinary shares outstanding, which includes 6,380,902 Class A Ordinary
Shares and 8,625,000 Founder Shares.
After giving effect to the aforementioned redemptions and the First Extension Payment the amount of funds remaining in the Trust Account was $65,458,680.62 as of March 31, 2023.
Our management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of Private Placement Warrants, although substantially all of the net proceeds are intended to be
applied generally toward consummating the Business Combination or another Initial Business Combination. There is no assurance that we will be able to complete the Business Combination or another Initial Business Combination successfully. We
must complete one 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 signing of the agreement to enter into the Initial Business Combination. Our board of directors determined that the Business Combination with APRINOIA satisfied this requirement. However, we will only complete
an initial business combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target business or otherwise acquires a controlling interest in the target business sufficient for it not
to be required to register as an investment company under the Investment Company Act.
If we are unable to complete the Business Combination or another Initial Business Combination by September 16, 2023, we will (i) cease 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, equal 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 our tax obligations, if any (less up to $100,000 of interest to pay dissolution expenses) divided by the number of the then-outstanding Public Shares, which redemption will completely
extinguish Public shareholders’ rights as shareholders (including the right to receive further liquidation distributions, if any); and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining
shareholders and the board of directors, liquidate and dissolve, subject in the case of clauses (ii) and (iii), to our obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law.
Liquidity and Going Concern
As of March 31, 2023, the Company had approximately $10,000 in its operating bank account and working capital deficit of approximately $6.9 million.
The Company’s liquidity needs prior to the Initial Public Offering were satisfied through a payment of $25,000 from our Sponsor to cover for certain expenses in exchange for the issuance of the Founder Shares, a
loan of approximately $90,000 from our Sponsor pursuant to a promissory note (the “Note”), and the proceeds from the consummation of the private placement not held in the Trust Account. We repaid the Note in full on March 19, 2021. In addition,
in order to finance transaction costs in connection with the Business Combination or another Initial Business Combination, our Sponsor or an affiliate of the Sponsor, or certain of our officers and directors may, but are not obligated to, loan to
the Company funds as may be required (“Working Capital Loans”).
As of March 31, 2023 and December 31, 2022, there were no amounts outstanding under any Working Capital Loans.
In connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standard Board’s Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties
about an Entity’s Ability to Continue as a Going Concern,” the Company has until September 16, 2023 to consummate the proposed Business Combination. It is uncertain that the Company will be able to consummate the proposed Business Combination by
this time. Additionally, the Company may not have sufficient liquidity to fund the working capital needs of the Company until one year from the issuance of these financial statements. If the Business Combination or another Initial Business
Combination is not consummated by this date, there will be a mandatory liquidation and subsequent dissolution of the Company. Management has determined that the liquidity condition and mandatory liquidation, should the Business Combination or
another Initial Business Combination not occur, and potential subsequent dissolution, raises substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or
liabilities should the Company be required to liquidate after September 16, 2023. The Company intends to complete the proposed Business Combination before the mandatory liquidation date.
The outbreak of the COVID-19 coronavirus and the conflict between Russia and Ukraine has adversely affected the economies and financial markets worldwide, and potential target companies may defer or end discussions
for a potential business combination with us whether or not COVID-19 or the Russia/Ukraine conflict affects their business operations. The extent to which COVID-19 or the Russia/Ukraine conflict impacts our completion of the Business Combination
or another Initial Business Combination will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or
treat its impact, the impact of any sanctions enacted in response to the Russia/Ukraine conflict, the effects on global supply chains, inflation, interest rates, among others.
Results of Operations
Our entire activity from inception to March 31, 2023 was in preparation for our formation and the Initial Public Offering, and, subsequent to the Initial Public Offering, identifying a target company for an initial
business combination. We will not be generating any operating revenues until the closing and completion of our Initial Business Combination, at the earliest.
For the three months ended March 31, 2023, we had net loss of approximately $1.4 million, which consisted of approximately a $3.7 million in non-operating loss resulting from the change in fair value of derivative
warrant liabilities and approximately $1.3 million in general and administrative expenses, partially offset by approximately $3.6 million of income from investments held in Trust Account.
For the three months ended March 31, 2022, we had net income of approximately $8.4 million, which consisted of approximately a $8.7 million non-operating gain resulting from the change in fair value of derivative
warrant liabilities and approximately $123,000 of income from investments held in trust account, partially offset by approximately $416,000 in general and administrative expenses.
Contractual Obligations
Administrative Support Agreement
Commencing on the date that the Company’s securities were first listed on the New York Stock Exchange, we agreed to pay our Sponsor a total of $10,000 per month for office space, secretarial and administrative
services. Upon completion of the Initial Business Combination or the Company’s liquidation, we will cease paying these monthly fees. . For the three months ended March 31, 2023 and 2022, the Company incurred expenses of $30,000 and $30,000 under
this agreement, respectively. As of March 31, 2023 and December 31, 2022, the Company had accrued approximately $210,000 and $180,000 for services in connection with such agreement on the accompanying balance sheets, respectively.
Registration and Shareholder Rights
The holders of the founder shares, private placement warrants and warrants that may be issued upon conversion of the Working Capital Loans, if any, were entitled to registration rights pursuant to a registration
and shareholder rights agreement signed upon consummation of the Initial Public Offering. These holders were entitled to certain demand and “piggyback” registration rights. However, the registration and shareholder rights agreement provided that
we would 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. We will bear the expenses incurred in connection with
the filing of any such registration statements.
Underwriting Agreement
An aggregate of $12.1 million will be payable to the underwriters of the Initial Public Offering for deferred underwriting commissions. The deferred fee will become payable to the underwriters from the amounts held
in the Trust Account solely in the event that we complete an Initial Business Combination, subject to the terms of the underwriting agreement. The underwriters have waived their entitlement to the deferred fee with respect to the completion of
the Business Combination.
Critical Accounting Estimates and Policies
Derivative Warrant Liabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. We evaluate all of our financial instruments, including issued stock purchase warrants, to determine if such
instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and FASB ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). The classification of derivative instruments, including whether such
instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.
The Public Warrants and the Private Placement Warrants are recognized as derivative liabilities in accordance with ASC 815. Accordingly, the Company recognizes the warrant instruments as liabilities at fair value
and adjusts the carrying value of the instruments to fair value at each reporting period until they are exercised. The initial fair value of the Public Warrants issued in connection with the Initial Public Offering were estimated using a Lattice
model and the Private Placement Warrants were estimated using Lattice model. The fair value of the Public Warrants as of March 31, 2023 and December 31, 2022 is based on observable listed prices for such Public Warrants. As the transfer of
Private Placement Warrants to anyone who is not a permitted transferee would result in the Private Placement Warrants having substantially the same terms as the Public Warrants, the Company determined that the fair value of each Private Placement
Warrant is equivalent to that of each Public Warrant. The determination of the fair value of the warrant liability may be subject to change as more current information becomes available and accordingly the actual results could differ
significantly. Derivative warrant liabilities are classified as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.
Class A Ordinary Shares Subject to Possible Redemption
The Company accounts for its Class A ordinary shares subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Class A ordinary shares subject to
mandatory redemption (if any) is classified as liability instruments and are measured at fair value. Conditionally redeemable Class A ordinary shares (including Class A 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, Class A ordinary shares is classified as shareholders’ equity.
The Company’s Class A ordinary shares feature certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, as of Initial Public Offering (including the
consummation of the over-allotment), 34,500,000 Class A ordinary shares subject to possible redemption is presented at redemption value as temporary equity, outside of the shareholders’ deficit section of the Company’s condensed consolidated
balance sheets.
We recognize changes in redemption value immediately as they occur and adjusts the carrying value of the Class A ordinary shares subject to possible redemption to equal the redemption value at the end of each
reporting period. This method would view the end of the reporting period as if it were also the redemption date for the security. Effective with the closing of the Initial Public Offering (including the consummation of the over-allotment), the
Company recognized the accretion from initial book value to redemption amount, which resulted in charges against additional paid-in capital (to the extent available) and accumulated deficit.
Net (Loss) Income per Ordinary Share
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” The Company has two classes of shares, which are referred to as Class A ordinary shares and Class B
ordinary shares. Income and losses are shared pro rata between the two classes of shares. This presentation assumes an initial business combination as the most likely outcome. Net (loss) income per ordinary share is calculated by dividing the net
(loss) income by the weighted average shares of ordinary shares outstanding for the respective period.
The calculation of diluted net income (loss) does not consider the effect of the warrants underlying the Units sold in the Initial Public Offering (including the consummation of the over-allotment) and the private
placement warrants to purchase an aggregate of 17,433,333 Class A ordinary shares in the calculation of diluted income (loss) per share, because in the calculation of diluted income (loss) per share, because their exercise is contingent upon
future events and their inclusion would be anti-dilutive under the treasury stock method. As a result, diluted net income (loss) per share is the same as basic net income (loss) per share for the three months ended March 31, 2023 and 2022. The
initial accretion associated with the redeemable Class A ordinary shares was excluded from earnings per share as the redemption value approximated fair value. Changes in redemption value in the subsequent periods is recognized as a deemed
dividend to shareholders in the calculation of net income per ordinary share.
Recent Accounting Pronouncements
In June 2022, the FASB issued ASU 2022-03, ASC Subtopic 820 “Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions”. The ASU amends ASC 820 to clarify that a contractual sales
restriction is not considered in measuring an equity security at fair value and to introduce new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value. The ASU applies to both
holders and issuers of equity and equity-linked securities measured at fair value. The amendments in this ASU are effective for the Company in fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early
adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance. The Company is still evaluating the impact of this pronouncement on the unaudited condensed financial statements.
In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13 – Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on
Financial Instruments (“ASU 2016-13”). This update requires financial assets measured at amortized cost basis to be presented at the net amount expected to be collected. The measurement of expected credit losses is based on relevant
information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amount. Since June 2016, the FASB issued clarifying updates to the new
standard including changing the effective date for smaller reporting companies. The guidance is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years, with early adoption permitted. The
Company adopted ASU 2016-13 on January 1, 2023. The adoption of ASU 2016-13 did not have a material impact on its financial statements.
The Company’s management does not believe that any recently issued, but not yet effective, accounting standards updates, if currently adopted, would have a material effect on the Company’s unaudited condensed
consolidated financial statements.
Off-Balance Sheet Arrangements
As of March 31, 2023 and December 31, 2022, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
JOBS Act
The Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an “emerging
growth company” and under the JOBS Act are 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 a result, the unaudited condensed financial
statements may not be comparable to companies that comply with new or revised accounting pronouncements as of 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, (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 the CEO’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of the
Initial Public Offering or until we are no longer an “emerging growth company,” whichever is earlier.
| Item 3. |
Quantitative and Qualitative Disclosures About Market Risk
|
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.
| Item 4. |
Controls and Procedures
|
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure
controls and procedures as of the end of the fiscal quarter ended March 31, 2023, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial
officer has concluded that during the period covered by this report, our disclosure controls and procedures were effective as of March 31, 2023.
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods
specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate
to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
Other than as disclosed below, there was no change in our internal control over financial reporting that occurred during the fiscal quarter ended March 31, 2023 covered by this Quarterly Report on Form 10-Q that
has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
| Item 1. |
Legal Proceedings.
|
None.
As of the date of this Quarterly Report on Form 10-Q, there have been no material changes to the risk factors disclosed in our Form 10-K filed with the SEC on April 6, 2023. We may disclose changes to such factors
or disclose additional factors from time to time in our future filings with the SEC.
| Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities.
|
None.
| Item 3. |
Defaults upon Senior Securities.
|
None.
| Item 4. |
Mine Safety Disclosures.
|
Not applicable.
| Item 5. |
Other Information.
|
None.
|
Exhibit
Number
|
Description
|
|
|
Certification of Chief Executive Officer (Principal Executive Officer) Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
Certification of Chief Financial Officer (Principal Financial and Accounting Officer) Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
Certification of Chief Executive Officer (Principal Executive Officer) Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
Certification of Chief Financial Officer (Principal Financial and Accounting Officer) Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
|
101.INS
|
Inline XBRL Instance Document- the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
|
|
101.SCH
|
Inline XBRL Taxonomy Extension Schema Document
|
|
101.CAL
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document
|
|
101.DEF
|
Inline XBRL Taxonomy Extension Definition Linkbase Document
|
|
101.LAB
|
Inline XBRL Taxonomy Extension Label Linkbase Document
|
|
101.PRE
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document
|
|
104
|
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
|
| * |
These certifications are furnished to the SEC pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed
incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.
|
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|
Dated: May 22, 2023
|
ROSS ACQUISITION CORP II
|
| |
|
| |
By:
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/s/ Wilbur L. Ross, Jr.
|
| |
Name:
|
Wilbur L. Ross, Jr.
|
| |
Title:
|
Chief Executive Officer
|
| |
|
|
|
Dated: May 22, 2023
|
By:
|
/s/ Stephen J. Toy
|
| |
Name:
|
Stephen J. Toy.
|
| |
Title:
|
Chief Financial Officer
|
29