The accompanying notes are an integral part of
these unaudited Condensed Consolidated financial statements.
The accompanying notes are an integral part of
these unaudited Condensed Consolidated financial statements.
The accompanying notes are an integral part of
these unaudited Condensed Consolidated financial statements.
The accompanying notes are an integral part of
these unaudited Condensed Consolidated financial statements.
Notes to Unaudited Condensed Consolidated
Financial Statements
Note 1 — Organization and Business Operations
Organization and General
Lakeshore Acquisition II Corp. (the “Company”)
was incorporated in the Cayman Islands on February 19, 2021 as a blank check company whose objective is to acquire, through a merger,
share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or
more businesses or entities. The Company’s efforts to identify a prospective target business will not be limited to any particular
industry or geographic region except that according to the Company’s amended and restated memorandum and articles of association,
the Company will not effectuate its initial Business Combination with a company that is headquartered in the People’s Republic of
China (“China”), the Hong Kong Special Administrative Region of China (“Hong Kong”) or the Macau Special Administrative
Region of China (“Macau”) or conducts a majority of its operations in China, Hong Kong or Macau.
As of March 31, 2023, the Company had not yet
commenced any operations and had not generated revenue. All activity for the period from February 19, 2021 (inception) through March
31, 2023 relates to the Company’s formation and the initial public offering (the “IPO”) described below and its effort
in seeking a target business. The Company will not generate any operating revenue until after its initial business combination, at the
earliest. The Company will generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds
derived from the IPO. The Company has selected December 31 as its fiscal year-end.
The Company’s sponsor is RedOne Investment
Limited, a BVI limited liability company (the “sponsor”).
On August 1, 2022, LBBB Merger Corp. was incorporated
under Delaware law as a wholly owned subsidiary of the Company, and LBBB Merger Sub Inc. was incorporated under Delaware law as a wholly
owned subsidiary of LBBB Merger Corp. Both of these two companies were incorporated for the purpose of effecting its initial business
combination and will not have any activities before the closing of the business combination (as described below in “Business Combination”
in Note 1).
Financing
The registration statement for the Company’s
IPO (as described in Note 3) was declared effective on March 8, 2022 (the “Effective Date”). On March 11, 2022,
the Company consummated an IPO of 6,900,000 units, which includes the full exercise of the over-allotment option by the underwriter in
the IPO, at $10.00 per unit (the “Public Units”), generating total gross proceeds of $69,000,000.
Simultaneously with the IPO, the Company sold
to its sponsor 351,500 units at $10.00 per unit (the “Private Units”) in a private placement (as described in Note 4),
generating total gross proceeds of $ 3,515,000.
Offering costs amounted to $5,614,686 consisting
of $1,380,000 of underwriting commissions, $2,415,000 of deferred underwriting commissions, and $1,819,686 of other offering costs (which
includes $1,262,250 of representative shares, as described in Note 8). Except for the $25,000 of subscription of founder shares,
the Company received net proceeds of $68,162,564 from the IPO and the private placement.
On March 9, 2023, the Company held an
Extraordinary General Meeting (the “General Meeting”) of shareholders. In the General Meeting, shareholders approved an
amendment to our Amended and Restated Memorandum and Articles of Association (the “Charter Amendment”), to extend the time
for us to complete a business combination for an additional three (3) months, from March 11, 2023 to June 11, 2023 (the
“Extension”). The amended Charter Amendment was filed with the Registrar of companies in the Cayman Islands on March 10,
2023 and was effective on that date. In connection with the approval of the Extension, the Company deposited into the Trust Account
$250,000 in accordance with the terms of the Charter Amendment. In connection with the General Meeting, shareholders elected to
redeem a total of 2,767,411 ordinary shares. An aggregate payment of $28,707,673 was distributed from the Company’s Trust
Account for the ordinary shares redeemed.
Trust Account
Upon the closing of the IPO and the private placement,
$70,035,000 was placed in a trust account (the “Trust Account”) with Continental Stock Transfer & Trust Company acting
as trustee.
The funds held in the trust account can be invested
in United States government treasury bills, notes or bonds having a maturity of 185 days or less or in money market funds meeting
the applicable conditions under Rule 2a-7 promulgated under the Investment Company Act of 1940, as amended, until the earlier of
the consummation of its first business combination and the Company’s failure to consummate a business combination within 12 months
(or 15 months as applicable) from the consummation of the IPO.
Placing funds in the trust account may not protect
those funds from third party claims against the Company. Although the Company will seek to have all vendors, service providers, prospective
target businesses or other entities it engages, execute agreements with the Company waiving any claim of any kind in or to any monies
held in the Trust Account, there is no guarantee that such persons will execute such agreements.
In addition, interest income earned on the funds
in the Trust account may be released to the Company to pay its income or other tax obligations. With these exceptions, expenses incurred
by the Company may be paid prior to a business combination only from the net proceeds of the IPO and private placement not held in the
Trust account.
In connection with the General Meeting held on
March 9, 2023, an aggregate payment of $28,707,673 was distributed from the Company’s Trust Account for the 2,767,411 ordinary shares
redeemed.
As of March 31, 2023, an aggregate of $43,300,983
was held in the Trust Account in money market funds that invest in cash, U.S. Treasury bills, notes, and other obligations issued or guaranteed
as to principal and interest by the U.S. Treasury.
Business Combination
Pursuant to Nasdaq listing rules, the Company’s
initial business combination must occur with one or more target businesses having an aggregate fair market value equal to at least 80%
of the value of the funds in the Trust account (excluding any deferred underwriting commissions payable and any taxes payable on the income
earned on the Trust account), which the Company refers to as the 80% test, at the time of the execution of a definitive agreement for
its initial business combination, although the Company may structure a business combination with one or more target businesses whose fair
market value significantly exceeds 80% of the trust account balance. If the Company is no longer listed on Nasdaq, it will not be required
to satisfy the 80% test.
The Company currently anticipates structuring
a business combination to acquire 100% of the equity interests or assets of the target business or businesses. The Company may, however,
structure a business combination where the Company merges directly with the target business or where the Company acquires less than 100%
of such interests or assets of the target business in order to meet certain objectives of the target management team or shareholders or
for other reasons, but the Company will only complete such business combination if the post-transaction company owns 50% or more
of the outstanding voting securities of the target or otherwise owns a controlling interest in the target sufficient for it not to be
required to register as an investment company under the Investment Company Act. If less than 100% of the equity interests or assets of
a target business or businesses are owned or acquired by the post-transaction company, the portion of such business or businesses
that is owned or acquired is what will be valued for purposes of the 80% test.
The Company will either seek shareholder approval
of any business combination at a meeting called for such purpose at which shareholders may seek to convert their shares into their pro
rata share of the aggregate amount then on deposit in the Trust account, less any taxes then due but not yet paid, or provide shareholders
with the opportunity to sell their shares to the Company by means of a tender offer for an amount equal to their pro rata share of the
aggregate amount then on deposit in the trust account, less any taxes then due but not yet paid.
The Company will proceed with a business combination
only if it will have net tangible assets of at least $5,000,001 upon consummation of the business combination and, solely if shareholder
approval is sought, an ordinary resolution under Cayman Islands law, which requires the affirmative vote of a majority of the shareholders
who attend and vote at a general meeting of the Company will be required to approve the business combination.
Notwithstanding the foregoing, a public shareholder,
together with any affiliate of his or any other person with whom he is acting in concert or as a “group” (as defined in Section 13(d)(3) of
the Exchange Act) will be restricted from seeking conversion rights with respect to 20% or more of the ordinary shares sold in this offering
without the Company’s prior written consent.
In connection with any shareholder vote required
to approve any business combination, the initial shareholders will agree (i) to vote any of their respective shares in favor of the
initial business combination and (ii) not to convert such respective shares into a pro rata portion of the trust account or seek
to sell their shares in connection with any tender offer the Company engages in.
On September 9, 2022, The Company entered into
a merger agreement (the “Merger Agreement”) with certain parties aiming to acquire 100% of the equity securities of Nature’s
Miracle, Inc. “Nature’s Miracle”.
Pursuant to the Merger Agreement, immediately
prior to the proposed business combination, the Company will reincorporate into the State of Delaware so as to re-domicile as and become
a Delaware corporation by means of merging with and into a newly formed Delaware corporation (the “Reincorporation”), with
the Company together with its successor (LBBB Merger Corp., a Delaware corporation) being the purchaser (the “Purchaser”)
of the proposed business combination.
Pursuant to the Merger Agreement, Nature’s
Miracle will merge with LBBB Merger Sub Inc., a Delaware corporation and wholly owned subsidiary of Purchaser, with Nature’s Miracle
surviving and the Purchaser acquiring 100% of the equity securities of Nature’s Miracle. In exchange for their equity securities,
the stockholders of Nature’s Miracle will receive an aggregate number of shares of common stock of the Purchaser with an aggregate
value equal to: (a) two hundred thirty million U.S. dollars ($230,000,000), minus (b) any Closing Net Indebtedness (as defined in the
Merger Agreement). Under the Merger Agreement, the aggregate number of shares of common stock of the Purchaser that will be received by
the stockholders of Natures Miracle equals to the aggregate value divided by $10.00.
On November 14, 2022, LBBB Merger Corp., the Company’s
wholly owned subsidiary, filed a Form S-4 containing the registration statement with respect to the proposed business combination with
Nature's Miracle.
On December 28, 2022, LBBB Merger Corp. filed
a Form S-4/A containing amendment No. 1 to the registration statement to address comments LBBB Merger Corp. received from the SEC on December
14, 2022, regarding the registration statement.
On January 20, 2023, LBBB Merger Corp. filed a
Form S-4/A containing amendment No. 2 to the registration statement to address comments LBBB Merger Corp. received from the SEC on January
12, 2023.
Liquidation
Pursuant to the amended and restated memorandum
and articles of association, if the Company is unable to complete its initial business combination within 15 months from the effective
date of the IPO, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible
but not more than five business days thereafter, redeem 100% of the outstanding public shares and (iii) as promptly as reasonably possible
following such redemption, subject to the approval of the remaining holders of ordinary shares and the Company’s board of directors,
liquidate and dissolve.
Liquidity and Capital Resources
As of March 31, 2023, the Company had
$73,728 in cash held outside its Trust Account available for the Company’s working capital purposes.
The Company’s liquidity needs prior to the
consummation of the IPO had been satisfied through a payment from the sponsor of $25,000 (see Note 8) for the founder shares and
the loan under several unsecured promissory notes from the sponsor of $500,000 in total (see Note 5). On March 11, 2022, the
$500,000 loan was converted into part of the subscription of $3,515,000 private placement at a price of $10.00 per unit. The promissory
notes were canceled and no amounts were owed under these notes upon the consummation of the IPO and associated private placements.
Upon the consummation of the IPO and the full
exercise of over-allotment and associated private placements (see Note 3 and Note 4) on March 11, 2022, $70,035,000 of
cash was placed in the Trust Account.
In
order to meet its working capital needs following the consummation of the IPO, the Company’s initial shareholders, officers and
directors or their affiliates may, but are not obligated to, loan the Company funds, from time to time or at any time, in whatever amount
they deem reasonable in their sole discretion. Each working capital loan would be evidenced by a promissory note and would either be paid
upon consummation of the Company’s initial business combination, without interest, or, at the lender’s discretion, up to certain
amount of the working capital loan may be converted upon consummation of the Company’s business combination into additional private
units at a price of $10.00 per unit. If the Company does not complete a business combination, the working capital loan will only be repaid
with funds not held in the trust account and only to the extent available (see Note 5). To date, an aggregate principal amount
of $200,000 was outstanding and evidenced by unsecured promissory notes issued to RedOne Investment Limited, the Company’s sponsor.
The principal shall be payable promptly on the earlier date on which either the Company consummates an initial business combination or
has received financing from other parties with no interest accrued, and the amount of $200,000 does not have the conversion feature of
converting into additional private units, based on the description of the promissory note.
In addition, an aggregate principal amount of
$250,000 under a loan agreement with a third party lender was outstanding as of March 31, 2023. The loan is guaranteed by the Company’s
sponsor and Nature’s Miracle Inc. (“NMI”) with no interest bearing and is repayable on or before June 11, 2023 (the
“Repayment Date”). The Company shall cause to issue 25,000 bonus shares to the lender of the surviving company when completing
the proposed business combination with NMI, no later than the Repayment Date. If the loan is not repaid by the Repayment date, the unpaid
principal amount of the loan shall bear interest at the Applicable Interest Rate and be payable with accrued interest on demand. The amount
of $250,000 was deposited into the Company’s Trust Account in accordance with the term of the Company’s Amended and Restated
Memorandum and Articles of Association (the “Charter Amendment”).
Based on the foregoing, management believes that
the Company will have sufficient working capital and borrowing capacity to meet its needs through the earlier of the consummation of a
business combination or one year from this filing. Over this time period, the Company will be using these funds for paying existing accounts
payable, staying as a public company and consummating the business combination.
Going Concern
The Company performed an assessment on its ability
to continue as a going concern in accordance with Financial Accounting Standard Board’s Accounting Standards Update (“ASU”)
2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. There is no assurance
that the Company will be able to consummate the initial business combination within 15 months from the date of the IPO. In the event that
the Company fails to consummate business combination within the required period, the Company will face mandatory liquidation and dissolution
subject to certain obligations under applicable laws or regulations. This uncertainty raises substantial doubt about the Company’s
ability as a going concern one year from the date the financial statement is issued. No adjustments have been made to the carrying amounts
of assets or liabilities regarding the possibility of the Company not continuing as a going concern, as a result of failing to consummate
business combination within 15 months from the date of the IPO. Management plans to continue its efforts to consummate a business combination
within 15 months from the date of the IPO.
Note 2 — Significant Accounting Policies
Basis of Presentation
The accompanying unaudited Condensed Consolidated
financial statements are presented in U.S. Dollars and in conformity with accounting principles generally accepted in the United States
of America (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).
Accordingly, they do not include all of the information and footnotes required by GAAP. In the opinion of management, all adjustments
(consisting of normal accruals) considered for a fair presentation have been included. Operating results for the three months ended
March 31, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023
or any future period.
The accompanying unaudited Condensed Consolidated financial statements
should be read in conjunction with audited financial statements and notes thereto included in the Form 10-K filed by the Company with
the SEC on March 30, 2023.
Emerging Growth Company
Section 102(b)(1) of the Jumpstart Our
Business Startups Act of 2012 (the “JOBS Act”) permits emerging growth companies to delay complying with new or revised financial
accounting standards that do not yet apply to private companies (that is, those that have not had a Securities Act registration statement
declared effective or do not have a class of securities registered under the Exchange Act). The JOBS Act provides that a company can elect
to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such
an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when
a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth
company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison
of the Company’s financial statements with another public company, which is neither an emerging growth company nor an emerging growth
company, which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting
standards used.
Cash and Cash Equivalents
The Company considers all short-term investments
with an original maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents as of March 31,
2023 and December 31, 2022.
Marketable Securities Held in the Trust Account
As
of March 31, 2023 and December 31, 2022, The Company’s investments held in the Trust Account are classified as trading
securities. Trading securities are presented on the balance sheet at fair value at the end of each reporting period. Gains and losses
resulting from the change in fair value of investments held in Trust Account are included in interest earned on marketable securities
held in Trust Account in the accompanying condensed consolidated statements of operations. The estimated fair values of investments held
in Trust Account are determined using available market information. Interest income earned on these investments is fully reinvested
into the investments held in Trust Account and therefore considered as an adjustment to reconcile net loss to net cash used in operating
activities in the Statements of Cash Flow. Such interest income reinvested will be used to redeem all or a portion of the ordinary shares
upon the completion of business combination (See Note 6).
Ordinary Shares Subject to Possible Redemption
The Company accounts for its ordinary shares subject
to possible redemption in accordance with the guidance in FASB ASC Topic 480 “Distinguishing Liabilities from Equity.” Ordinary
shares subject to mandatory redemption (if any) are classified as a liability instrument and are measured at fair value. Conditionally
redeemable ordinary shares (including ordinary shares that feature redemption rights that are either within the control of the holder
or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary
equity. At all other times, ordinary shares are classified as shareholders’ equity. The Company’s public shares feature certain
redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events.
Accordingly, as of March 31, 2023, ordinary shares subject to possible redemption are presented at redemption value of approximately
$10.478 per share as temporary equity, outside of the shareholders’ equity section of the Company’s balance sheet. The Company
recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable ordinary shares to equal
the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable ordinary shares
are affected by charges against additional paid in capital or accumulated deficit if additional paid in capital equals to zero.
Offering Costs Associated with the IPO
Offering costs consist of underwriting, legal,
accounting, registration and other expenses incurred through the balance sheet date that are directly related to the IPO. As of March 11,
2022, offering costs totaled $5,614,686. The amount was consisted of $1,380,000 of underwriting commissions, $2,415,000 of deferred underwriting
commissions, and $1,819,686 of other offering costs (which includes $1,262,250 of representative shares, as described in Note 8.
The Company complies with the requirements of the ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A –
“Expenses of Offering”. Offering costs were charged to shareholders’ equity upon the completion of the IPO. The Company
allocates offering costs between public shares, public warrants and public rights based on the estimated fair values of them at the date
of issuance. Accordingly, $5,109,364 was allocated to public shares and was charged to temporary equity, and a sum of $505,322 was allocated
to public warrants and public rights, and was charged to shareholders’ equity.
Fair Value of Financial Instruments
The fair value of the Company’s assets and
liabilities, which qualify as financial instruments under FASB ASC 825, “Financial Instruments,” approximates the carrying
amounts represented in the balance sheet, primarily due to their short-term nature.
Use of Estimates
The preparation of financial statements in conformity
with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting
period. Actual results could differ from those estimates.
Concentration of Credit Risk
Financial
instruments that potentially subject the Company to concentration of credit risk consist of cash accounts in a financial institution
that at times may exceed the federal depository insurance coverage of $250,000. The Company has not experienced losses on these accounts
and management believes the Company is not exposed to significant risks on such accounts.
Net Income (Loss) per Share
The Company complies with accounting and disclosure
requirements of FASB ASC 260, Earnings Per Share. In order to determine the net income (loss) attributable to both the redeemable shares
and non-redeemable shares, the Company first considered the undistributed income (loss) allocable to both the redeemable shares and non-redeemable
shares and the undistributed income (loss) is calculated using the total net loss less interest income in trust account less any dividends
paid. We then allocated the undistributed income (loss) ratably based on the weighted average number of shares outstanding between the
redeemable and non-redeemable shares. Any remeasurement of the accretion to redemption value of the ordinary shares subject to possible
redemption was considered to be dividends paid to the public shareholders. For the three months ended March 31, 2023 and March 31,
2022, the Company did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into ordinary
shares and then share in the earnings of the Company. As a result, diluted income (loss) per share is the same as basic income (loss)
per share for the period presented.
The net income (loss) per share presented in the
Condensed Consolidated statement of operations is based on the following:
| | |
For The
Three Months | | |
For The
Three Months | |
| | |
Ended
March 31,
2023 | | |
Ended
March 31,
2022 | |
| Net income (loss) | |
$ | 575,885 | | |
$ | (47,382 | ) |
| Accretion of temporary equity to initial redemption value (1) | |
| (250,000 | ) | |
| (12,354,364 | ) |
| Interest earned from trust account | |
| (715,531 | ) | |
| (5,016 | ) |
| Net loss including accretion of temporary equity to redemption value | |
$ | (389,646 | ) | |
$ | (12,406,762 | ) |
| | |
For The Three Months Ended | | |
For The Three Months Ended | |
| | |
March 31, 2023 | | |
March 31, 2022 | |
| | |
Redeemable
shares | | |
Non-redeemable
shares | | |
Redeemable
shares | | |
Non-redeemable
shares | |
| Basic and diluted net income/(loss) per share: | |
| | | |
| | | |
| | | |
| | |
| Numerators: | |
| | | |
| | | |
| | | |
| | |
| Allocation of net loss including accretion of temporary equity | |
$ | (286,093 | ) | |
$ | (103,553 | ) | |
$ | (5,780,583 | ) | |
$ | (6,626,179 | ) |
| Accretion of temporary equity to redemption value | |
| 965,531 | | |
| — | | |
| 12,359,380 | | |
| — | |
| Allocation of net income/(loss) | |
$ | 679,438 | | |
$ | (103,553 | ) | |
$ | 6,578,797 | | |
$ | (6,626,179 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Denominators: | |
| | | |
| | | |
| | | |
| | |
Weighted-average shares outstanding | |
| 6,192,773 | | |
| 2,241,500 | | |
| 1,610,000 | | |
| 1,845,517 | |
Basic and diluted net income/(loss) per share | |
$ | 0.11 | | |
$ | (0.05 | ) | |
$ | 4.09 | | |
$ | (3.59 | ) |
| (1) | Based
on IPO prospectus of the Company, redemption price was initially $10.15 per share, plus any pro rata interest earned on the fund held
in the trust account less amount necessary to pay the Company’s taxes. An aggregate of $12,354,364 was accreted to the redemption
value of public shares at the closing of the IPO. Based on the terms of the amended and restated memorandum and articles of association
amended on March 10, 2023, an aggregate of $250,000 was accreted to the redemption value of the 4,132,589 shares of redeemable shares
that remained. |
Warrants
The Company evaluates the public and private warrants
as either equity-classified or liability-classified instruments based on an assessment of the warrants’ specific terms and applicable
authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)
480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The
assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability
pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether
the warrants are indexed to the Company’s own ordinary shares, among other conditions for equity classification. Pursuant to such
evaluation, both public and private warrants are classified in shareholders’ equity.
Income Taxes
The Company accounts for income taxes under ASC
740 Income Taxes (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected
impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit
to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when
it is more likely than not that all or a portion of deferred tax assets will not be realized.
ASC
740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes
a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected
to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination
by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim
period, disclosure and transition. The Company has identified Cayman Islands as its only “major” tax jurisdiction, as defined.
Based on the Company’s evaluation, it has been concluded that there are no significant uncertain tax positions requiring recognition
in the Company’s financial statements. The evaluation was performed for the period ended December 31, 2022 and the upcoming
2023 tax year. The Company believes that its income tax positions and deductions would be sustained on audit and does not anticipate
any adjustments that would result in a material changes to its financial position. The Company’s policy for recording interest and
penalties associated with audits is to record such items as a component of income tax expense. There were no interest and penalties
incurred since the Company was incorporated on February 19, 2021.
The Company may be subject to potential examination
by foreign taxing authorities in the area of income taxes. These potential examinations may include questioning the timing and amount
of deductions, the nexus of income among various tax jurisdictions and compliance with foreign tax laws.
The
Company’s tax provision was nil and it had no deferred tax assets for the period presented. The Company is considered to be an exempted
Cayman Islands Company, and is presently not subject to income taxes or income tax filing requirements in the Cayman Islands or the United
States. Any interest payable in respect to US debt obligations held by the Trust Account is intended to qualify for the portfolio
interest exemption or otherwise be exempt from U.S. withholding taxes. Furthermore, shareholders of the Company may be subject to tax
in their respective jurisdictions based on applicable laws, for instances, U.S. persons may be subject to tax on the amounts deemed received
depending on whether the Company is a passive foreign investment company and whether U.S. persons have made any applicable tax elections
permitted under applicable law. The Company’s wholly owned subsidiaries, LBBB Merger Corp. and LBBB Merger Sub Inc. were incorporated
under Delaware law, and their tax provisions were nil and they had no deferred tax assets for the period presented.
Recent Accounting Pronouncements
Management does not believe that any recently
issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.
Note 3 — Initial Public Offering
Pursuant to the IPO on March 11, 2022, the
Company sold 6,900,000 Public Units, which includes the full exercise of the underwriter’s over-allotment option, at a price of
$10.00 per Public Unit. Each unit consists of one ordinary share, one-half of one redeemable warrant and one right. Each whole warrant
entitles the holder thereof to purchase one ordinary share for $11.50 per share, subject to certain adjustment. No fractional warrants
will be issued upon separation of the units and only whole warrants will trade. Each right entitles the holder to receive one-tenth of
one ordinary share upon consummation of the Company’s initial business combination (See Note 8).
All of the 6,900,000 public shares sold as part
of the Public Units in the IPO contain a redemption feature which allows for the redemption of such public shares if there is a stockholder
vote or tender offer in connection with the Business Combination and in connection with certain amendments to the Company’s amended
and restated certificate of incorporation, or in connection with the Company’s liquidation. In accordance with the Securities and
Exchange Commission (the “SEC”) and its staff’s guidance on redeemable equity instruments, which has been codified in
ASC 480-10-S99, redemption provisions not solely within the control of the Company require ordinary shares subject to redemption to be
classified outside of permanent equity.
As of March 31, 2023, the ordinary shares
reflected on the balance sheet are reconciled in the following table.
| | |
As of
March 31,
2023 | |
| Gross proceeds | |
$ | 69,000,000 | |
| Less: | |
| | |
| Proceeds allocated to public warrants and public rights | |
| (6,210,000 | ) |
| Offering costs of public shares | |
| (5,109,364 | ) |
| Redemption payment for 2,767,411 shares redeemed | |
| (28,707,673 | ) |
| Plus: | |
| | |
| Accretion of carrying value to redemption value | |
| 14,328,020 | |
| Ordinary share subject to possible redemption | |
$ | 43,300,983 | |
Note 4 — Private Placement
Simultaneously with the closing of the IPO, RedOne
Investment Limited, the Company’s sponsor, purchased an aggregate of 351,500 Private Units in a private placement at $10.00 per
Private Unit. The Private Units are identical to the units sold in the IPO, as each private unit consists of one share of ordinary shares
in the Company, and one right to receive one tenth (1/10) of a share of ordinary shares automatically upon the consummation of an initial
business combination, and one-half of one redeemable warrant, each whole warrant entitling the holder thereof to purchase one ordinary
share for $11.50 per share.
The holders of the private units have agreed (A) to
vote the shares underlying their private units in favor of any proposed business combination, (B) not to propose, or vote in favor
of, an amendment to the Company’s amended and restated certificate of incorporation with respect to the Company’s pre-business
combination activities prior to the consummation of such a business combination unless the Company provides public shareholders with the
opportunity to convert their public shares in connection with any such vote, (C) not to convert any shares underlying the private
units into the right to receive cash from the trust account in connection with a shareholder vote to approve an initial business combination
or a vote to amend the provisions of the Company’s amended and restated certificate of incorporation relating to shareholders’
rights or pre-business combination activity or sell their shares to the Company in connection with a tender offer the Company engages
in and (D) that the shares underlying the private units shall not participate in any liquidating distribution upon winding up if
a business combination is not consummated. Subject to certain limited exceptions, the purchasers have also agreed not to transfer, assign
or sell any of the private units or underlying securities (except to transferees that agree to the same terms and restrictions) until
30 days after the completion of an initial business combination.
Note 5 — Related Party Transactions
Founder Shares
On February 19, 2021, 1,437,500 shares
of the Company’s ordinary shares were issued to the sponsor at a price of approximately $0.017 per share for an aggregate amount
of $25,000. In connection with the increase in the size of the offering, on December 20, 2021, the Company declared a 20% share dividend
on each founder share thereby increasing the number of issued and outstanding founder shares to 1,725,000 (up to 225,000 of which are
subject to forfeiture) so as to maintain the number of founder shares at 20% of the outstanding ordinary shares upon the consummation
of this offering, resulting in an effective purchase price per founder share after the share dividend of approximately $0.014. The per
share purchase price of the founder shares was determined by dividing the amount of cash contributed to the company by the aggregate number
of founder shares issued. The number of founder shares issued was determined based on the expectation that the founder shares would represent
20% of the outstanding shares after this offering (not including the shares issued to the underwriter at closing or the shares underlying
the private placement units). Since the over-allotment option has been fully exercised, the 225,000 founder shares were no longer subject
to forfeiture on March 11, 2022.
Administrative Service Fee
The Company has agreed, commencing on the signing
of the engagement letter with the underwriter on May 6, 2021, to pay the sponsor a monthly fee of up to $10,000 up to the consummation
of business combination, for the Company’s use of its personnel and other administrative resources. From May 6, 2021 to March 31,
2023, the Company had paid an aggregate of $228,000 to the sponsor. For the three months ended March 31, 2023 and March 31, 2022, the
Company incurred and paid $30,000 in the fees for each period.
Related Party Loans
On May 11, 2021, the Company issued a $300,000
principal amount unsecured promissory note to the Company’s sponsor, On January 31, 2022, the Company issued a $100,000 principal
amount unsecured promissory note to the Company’s sponsor, On March 7, 2022, the Company issued a $100,000 principal amount
unsecured promissory note to the Company’s sponsor, and the Company had received such amounts as of issuance dates. The notes are
non-interest bearing, and due after the date on which this offering is consummated or the Company determines to abandon this offering.
On March 11, 2022, the $500,000 loan was converted into part of the subscription of $3,515,000 private placement at a price of $10.00
per unit. The promissory notes were canceled and no amounts were owed under the notes.
As
mentioned in Note 1, in order to meet its working capital needs following the consummation of the IPO, the Company’s initial
shareholders, officers and directors or their affiliates may, but are not obligated to, loan the Company funds, from time to time or at
any time, in whatever amount they deem reasonable in their sole discretion. Each working capital loan would be evidenced by a promissory
note and would either be paid upon consummation of the Company’s initial business combination, without interest, or, at the lender’s
discretion, up to $500,000 of the working capital loan may be converted upon consummation of the Company’s business combination
into additional private units at a price of $10.00 per unit. If the Company does not complete a business combination, the working capital
loan will only be repaid with funds not held in the trust account and only to the extent available. As of March 31, 2023, an aggregate
principal amount of $200,000 was outstanding and evidenced by unsecured promissory notes issued to RedOne Investment Limited, the Company’s
sponsor. The principal shall be payable promptly on the earlier date on which either the Company consummates an initial business combination
or has received financing from other parties with no interest accrued, and the amount of $200,000 does not have the conversion feature
of converting into additional private units, based on the description of the promissory note.
Other Related Party Transactions
For the three months ended March 31, 2023 and
March 31, 2022, total reimbursement of out-of-pocket expenses paid to our sponsor, officers or directors were $6,957 and nil respectively.
The outstanding balance amount was nil at March 31, 2023. The outstanding balance amount was $5,323 at December 31, 2022, and this amount
was paid off as of March 31, 2023.
Note 6 — Fair Value Measurements
The Company follows the guidance in FASB ASC 820
for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets
and liabilities that are re-measured and reported at fair value at least annually.
The fair value of the Company’s financial
assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale
of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the
measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of
observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions
about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities
based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
Level 1: Quoted prices
in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for
the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2: Observable
inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or
liabilities and quoted prices for identical assets or liabilities in markets that are not active.
Level 3: Unobservable
inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.
The following table presents information about
the Company’s assets that are measured at fair value on a recurring basis at March 31, 2023 and indicates the fair value hierarchy
of the valuation inputs the Company utilized to determine such fair value:
| Description | |
Level | | |
March 31,
2023 | | |
December 31,
2022 | |
| Assets: | |
| | |
| | |
| |
| Marketable securities held in Trust Account | |
| 1 | | |
$ | 43,300,983 | | |
$ | 71,043,126 | |
Except for the foregoing, the Company does not
have any assets measured at fair value on a recurring basis at March 31, 2023 and December 31, 2022.
Transfers to/from Levels 1, 2 and 3 are recognized
at the end of the reporting period in which a change in valuation technique or methodology occurs. No such transfers took place for the
period presented.
Note 7 — Commitments and Contingencies
Risks and Uncertainties
Management is currently evaluating the impact
of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect
on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily
determinable as of the date of this financial statements. The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
On August 16, 2022, the Inflation Reduction Act
of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things, a new U.S. federal 1% excise
tax on certain repurchases (including redemptions) of stock by publicly traded domestic (i.e., U.S.) corporations and certain domestic
subsidiaries of publicly traded foreign corporations. The excise tax is imposed on the repurchasing corporation itself, not its shareholders
from whom shares are repurchased. The amount of the excise tax is generally 1% of the fair market value of the shares repurchased at the
time of the repurchase. However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market
value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. In addition, certain
exceptions apply to the excise tax. The U.S. Department of the Treasury (the “Treasury”) has been given authority to provide
regulations and other guidance to carry out and prevent the abuse or avoidance of the excise tax. The IR Act applies only to repurchases
that occur after December 31, 2022.
Therefore, any redemption or other repurchase
that occurs after December 31, 2022, in connection with a business combination, extension vote or otherwise, may be subject to the excise
tax. Whether and to what extent the Company would be subject to the excise tax in connection with a business combination, extension vote
or otherwise would depend on a number of factors, including (i) the fair market value of the redemptions and repurchases in connection
with the business combination, extension or otherwise, (ii) the structure of a business combination, (iii) the nature and amount of any
“PIPE” or other equity issuances in connection with a business combination (or otherwise issued not in connection with a business
combination but issued within the same taxable year of a business combination) and (iv) the content of regulations and other guidance
from the Treasury. In addition, because the excise tax would be payable by the Company and not by the redeeming shareholders, the mechanics
of any required payments of the excise tax have not been determined. The foregoing could cause a reduction in the cash available on hand
to complete a business combination and in the Company’s ability to complete a business combination.
Underwriting Agreement
A deferred underwriting commission of $0.35 per
Public Unit sold, totaling $2,415,000 will be payable to the underwriters from the amounts held in the Trust Account solely in the event
that the Company completes a Business Combination, without accrued interest. In the event that the Company does not close a Business Combination,
the representative underwriter forfeits its right to receive the commission.
Registration
Rights
The
initial shareholders will be entitled to registration rights with respect to their initial shares, as well as the holders of the
Private Units and holders of any securities issued to the Company’s initial shareholders, officers, directors or their affiliates
in payment of working capital loans or extension loans made to the Company, will be entitled to registration rights with respect to the
Private Units (and underlying securities), pursuant to an agreement signed on the effective date of the IPO. The holders of such securities
are entitled to demand that the Company register these securities at any time after the Company consummates a business combination. In
addition, the holders have certain “piggy-back” registration rights on registration statements filed after the Company’s
consummation of a business combination.
Engagement agreement with Legal Counsel
The Company has entered into an engagement agreement
with its legal counsel with respect to the proposed business combination. The fee will be based on the number of hours spent. An aggregate
of $250,000 will be paid before the closing of the business combination and the balance will be due upon the closing of the business combination.
As of March 31, 2023, an aggregate of $250,000 had been accrued into the Company’s condensed consolidated financial statements.
Engagement agreement with Underwriter
The Company has entered into an engagement agreement
with its underwriter with respect to the proposed business combination. A success fee will be paid upon closing of the business combination,
with the amount calculated as the following schedule: (i) 2% of the aggregate value of transaction (as described in Note 1, Business Combination)
for the part up to $200 million; (ii) 1% for the part over $200 million.
Engagement Agreement – Fairness Opinion
An aggregate of $90,000 will be paid upon the
closing of the business combination, based on an engagement agreement entered into by the Company and the provider of fairness opinion
concerning the terms of the business combination.
Note 8 — Shareholder’s
Equity
Ordinary shares
The Company is authorized to issue 500,000,000
ordinary shares with a par value of $0.0001 per share.
On February 19, 2021, 1,437,500 shares
of the Company’s ordinary shares were issued to the sponsor at a price of approximately $0.017 per share for an aggregate of $25,000.
In connection with the increase in the size of the offering, on December 20, 2021, the Company declared a 20% share dividend on each
founder share thereby increasing the number of issued and outstanding founder shares to 1,725,000 (up to 225,000 of which are subject
to forfeiture) so as to maintain the number of founder shares at 20% of the outstanding shares of our ordinary shares upon the consummation
of this offering, resulting in an effective purchase price per founder share after the share dividend of approximately $0.014. The per
share purchase price of the founder shares was determined by dividing the amount of cash contributed to the company by the aggregate number
of founder shares issued. The number of founder shares issued was determined based on the expectation that the founder shares would represent
20% of the outstanding shares after this offering (not including the shares issued to the underwriter at closing or the shares underlying
the private placement units). Since the over-allotment option has been fully exercised, the 225,000 founder shares were no longer subject
to forfeiture on March 11, 2022.
On March 11, 2022, the Company sold 6,900,000
units, which includes the full exercise of the over-allotment option by the underwriter of in the IPO at a price of $10.00 per Public
Unit in the IPO; and the Company sold to its sponsor an aggregate of 351,500 Private Units at $10.00 per Private Unit. Each Public Unit
and Private Unit consists of one ordinary share, one-half of one redeemable warrant and one right.
The Company issued to the underwriter 165,000
shares of ordinary shares (the “Representative Shares”) upon the closing of the IPO on March 11, 2022. The Company estimates
the fair value of Representative Shares to be $1,262,250 in total, or $7.65 per Representative Share. The Company accounted for the Representative
Shares as an expense of the IPO, resulting in a charge directly to stockholder’s equity. The underwriter has agreed not to transfer,
assign, sell, pledge, or hypothecate any such Representative Shares, or subject such Representative Shares to hedging, short sale, derivative,
put or call transaction that would result in the economic disposition of the securities by any person until the completion of our initial
business combination. In addition, the underwriter has agreed (i) to waive its redemption rights with respect to such shares in connection
with the completion of our initial business combination and (ii) to waive its rights to liquidating distributions from the trust
account with respect to such shares if we fail to complete our initial business combination within 12 months (or 15 months,
as applicable) from the closing of this offering.
On March 9, 2023, the Company held an
Extraordinary General Meeting (the “General Meeting”) of shareholders. In the General Meeting, shareholders approved an
amendment to our Amended and Restated Memorandum and Articles of Association (the “Charter Amendment”), to extend the time
for us to complete a business combination for an additional three (3) months, from March 11, 2023 to June 11, 2023 (the
“Extension”). The amended Charter Amendment was filed with the Registrar of companies in the Cayman Islands on March 10,
2023 and was effective on that date. In connection with the General Meeting, shareholders elected to redeem a total of 2,767,411
ordinary shares.
As of March 31, 2023, there were 2,241,500
shares of ordinary shares issued and outstanding excluding 4,132,589 shares subject to possible redemption.
Warrants
Each whole warrant entitles the holder to purchase
one ordinary share at a price of $11.50 per share, subject to adjustment as described below, commencing 30 days after the completion
of its initial business combination, and expiring five years from after the completion of an initial business combination. No fractional
warrant will be issued and only whole warrants will trade.
The Company may redeem the warrants at a price
of $0.01 per warrant upon 30 days’ notice, only in the event that the last sale price of the ordinary shares is at least $18.00
(as adjusted for share sub-divisions, share dividends, reorganizations and recapitalizations) per share for any 20 trading days within
a 30-trading day period ending on the third day prior to the date on which notice of redemption is given, provided there is an effective
registration statement and current prospectus in effect with respect to the ordinary shares underlying such warrants during the 30 day
redemption period. If the Company redeems the warrants as described above, management will have the option to require all holders that
wish to exercise warrants to do so on a “cashless basis.” If a registration statement is not effective within 90 days
following the consummation of a business combination, warrant holders may, until such time as there is an effective registration statement
and during any period when the Company shall have failed to maintain an effective registration statement, exercise warrants on a cashless
basis pursuant to an available exemption from registration under the Securities Act. If an exemption from registration is not available,
holders will not be able to exercise their warrants on a cashless basis and in no event (whether in the case of a registration statement
being effective or otherwise) will the Company be required to net cash settle the warrant exercise. If an initial business combination
is not consummated, the warrants will expire and will be worthless.
In addition, if (a) the Company issues additional
ordinary shares or equity-linked securities for capital raising purposes in connection with the closing of its initial business combination
at a newly issued price of less than $9.20 per share (with such issue price or effective issue price to be determined in good faith by
our board of directors and, in the case of any such issuance to our initial shareholders or their affiliates, without taking into account
any founders’ shares held by the Company’s initial shareholders or such affiliates, as applicable, prior to such issuance),
(b) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon,
available for the funding of the initial business combination on the date of the consummation of the Company’s initial business
combination (net of redemptions), and (c) the volume weighted average trading price of the Company’s ordinary shares during
the 20 trading day period starting on the trading day prior to the day on which the Company consummates its initial business combination
is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher
of the market value and the newly issued price, and the $18.00 per share redemption trigger price described above will be adjusted (to
the nearest cent) to be equal to 180% of the higher of the market value and the newly issued price.
Rights
Except in cases where the Company is not the surviving
company in a business combination, each holder of a right will automatically receive one-tenth (1/10) of an ordinary share upon consummation
of an initial business combination, even if the holder of a public right converted all ordinary shares held by him, her or it in connection
with the initial business combination or an amendment to our certificate of incorporation with respect to the Company’s pre-business
combination activities. In the event the Company will not be the surviving company upon completion of our initial business combination,
each holder of a right will be required to affirmatively convert his, her or its rights in order to receive the one- tenth (1/10) of a
share underlying each right upon consummation of the business combination. No additional consideration will be required to be paid by
a holder of rights in order to receive his, her or its additional ordinary shares upon consummation of an initial business combination.
The shares issuable upon exchange of the rights will be freely tradable (except to the extent held by affiliates of the Company). If the
Company enters into a definitive agreement for a business combination in which the Company will not be the surviving entity, the definitive
agreement will provide for the holders of rights to receive the same per share consideration the holders of the ordinary shares will receive
in the transaction on an as-converted into ordinary share basis.
The Company will not issue fractional shares in
connection with an exchange of rights. As a result, holders of rights must hold rights in multiples of 10 in order to receive shares for
all of the holders’ rights upon closing of a business combination. If the Company are unable to complete an initial business combination
within the required time period and liquidate the funds held in the trust account, holders of rights will not receive any of such funds
with respect to their rights, nor will they receive any distribution from our assets held outside of the trust account with respect to
such rights, and the rights will expire worthless. Further, there are no contractual penalties for failure to deliver securities to the
holders of the rights upon consummation of an initial business combination. Additionally, in no event will the Company be required to
net cash settle the rights.
Note 9 — Subsequent Events
The Company evaluated subsequent events and transactions
that occurred after the balance sheet date up to the date the consolidated financial statements were issued and identified the following
subsequent events that shall be disclosed.
On April 10, 2023, the Company entered into a Standby Equity Purchase
Agreement (the “SEPA”) with YA II PN, Ltd. (“ Yorkville”) and the SEPA shall be effective on the sixth trading
day following the date of the Company’s closing of the proposed Business Combination with Nature’s Miracle Inc. (“NMI”)
(the “Effective Date”). Pursuant to the SEPA, the resulting listing company of the proposed Business Combination shall have
the right, but not the obligation to issue its common shares to Yorkville from time to time with certain volume and price limitations,
and the aggregate amount of gross proceeds is up to $60,000,000. The commitment period commences on the Effective Date and terminates
on the earlier of (i) the first day of the month following the 36-month anniversary of the Effective Date and (ii) the committed amount
of $60,000,000 is paid up.