LBBBU Lakeshore Acquisition II Corporation

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                  to                  

Commission File Number: 001-41317

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒  No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒  No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☒   No ☐

As of November 7, 2023 there were 5,729,422 ordinary shares, par value $0.0001, issued and outstanding.

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

LAKESHORE ACQUISITION II CORP.

Condensed Consolidated Balance Sheets

The accompanying notes are an integral part of these unaudited Condensed Consolidated financial statements.

LAKESHORE ACQUISITION II CORP.

Unaudited Condensed Consolidated Statements of Operations.

The accompanying notes are an integral part of these unaudited Condensed Consolidated financial statements.

LAKESHORE ACQUISITION II CORP.

Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Deficit

The accompanying notes are an integral part of these unaudited Condensed Consolidated financial statements.

LAKESHORE ACQUISITION II CORP.

Unaudited Condensed Consolidated Statements of Cash Flows

The accompanying notes are an integral part of these unaudited Condensed Consolidated financial statements.

LAKESHORE ACQUISITION II CORP.

Notes to Unaudited Condensed Consolidated Financial Statements

Item 2. Management’s Discussion and Analysis.

References to “we”, “us”, “our” or the “Company” are to Lakeshore Acquisition II Corp., except where the context requires otherwise. The following discussion should be read in conjunction with our unaudited Condensed Consolidated financial statements and related notes thereto included elsewhere in this report.

Forward-Looking Statements

This quarterly report on Form 10-Q includes forward-looking statements. 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 Securities and Exchange Commission (the “SEC”) filings.

Overview

We were formed on February 19, 2021 for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more target businesses. Our efforts to identify a prospective target business will not be limited to any particular industry or geographic region. We intend to utilize cash derived from the proceeds of our initial public offering (the “IPO”) in effecting our initial business combination.

We are an emerging growth company and, as such, we are subject to all of the risks associated with emerging growth companies.

We presently have no revenue. All activities for the period from February 19, 2021 (inception) through September 30, 2023 relate to the formation and the IPO and seeking of a target business. We will have no operations other than the active solicitation of a target business with which to complete a business combination, and we will not generate any operating revenue until after its initial business combination, at the earliest. We will have non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the IPO.

On March 11, 2022, we consummated the IPO of 6,900,000 Public Units, which includes the full exercise of the over-allotment option by the underwriter in the IPO, at a price of $10.00 per Public Unit, generating gross proceeds of $69,000,000. Simultaneously with the closing of the IPO, we consummated the sale of 351,500 Private Units, at a price of $10.00 per Private Unit, in a private placement to the sponsor, generating gross proceeds of $3,515,000.

Upon the consummation of the IPO and the underwriters’ partial exercise of the over-allotment option, and associated private placements, $70,035,000 of cash was placed in the Trust Account. This amount equals 6,900,000 ordinary shares subject to possible redemption multiplied by redemption value of $10.15 per share.

As indicated in the accompanying unaudited Condensed Consolidated financial statements, as of September 30, 2023, we had $30,050 in cash held outside its Trust Account available for working capital purposes.

Recent Developments

On September 9, 2022, we entered into a merger agreement (the “Merger Agreement”) with certain parties aiming to acquire 100% of the equity securities of Nature’s Miracle, Inc. (“Nature’s Miracle”). These parties include (i) us (together with our successor, including after the Reincorporation (as defined below), the “Purchaser”), (ii) LBBB Merger Sub Inc., a Delaware corporation and wholly-owned subsidiary of Purchaser (the “Merger Sub”), (iii) Nature’s Miracle, (iv) Tie (James) Li, acting as the representative of the stockholders of Nature’s Miracle, and (v) our sponsor, acting as the representative of the stockholders of Purchaser.

Pursuant to the Merger Agreement, immediately prior to the proposed business combination, we will reincorporate into the State of Delaware so as to re-domicile as and become a Delaware corporation by means of merging with and into a newly formed Delaware corporation (the “Reincorporation”), with us together with our successor (LBBB Merger Corp., a Delaware corporation) being the Purchaser of the proposed business combination.

Pursuant to the Merger Agreement, Nature’s Miracle will merge with LBBB Merger Sub Inc., a Delaware corporation and wholly owned subsidiary of Purchaser, with Nature’s Miracle surviving and the Purchaser acquiring 100% of the equity securities of Nature’s Miracle. In exchange for their equity securities, the stockholders of Nature’s Miracle will receive an aggregate number of shares of common stock of the Purchaser (the “Merger Consideration”) with an aggregate value equal to: (a) two hundred thirty million U.S. dollars ($230,000,000), minus (b) any Closing Net Indebtedness (as defined in the Merger Agreement). Under the Merger Agreement, the aggregate number of shares of common stock of the Purchaser that will be received by the stockholders of Natures Miracle equals to the aggregate value divided by $10.00.

The Merger Consideration otherwise payable to Nature’s Miracle stockholders is subject to the withholding of a number of shares of common stock of Purchaser equal to three percent (3.0%) of the Merger Consideration to be placed in escrow for post-closing adjustments (if any) to the Merger Consideration, in accordance with the terms of the Merger Agreement following the closing of the proposed business combination.

The parties agreed that immediately following the closing of the proposed business combination, Purchaser’s board of directors will consist of seven (7) individuals, with the identity of six of those individuals and allocation of all individuals among the staggered tiers of the post-business combination company’s board of directors (and the appointment of such persons to committees of the board) to be determined by Nature’s Miracle’s current board of directors, and the remaining individual to be appointed by our sponsor, subject to Nature’s Miracle’s approval (which approval will not be unreasonably withheld).

On February 10, 2023, we issued an unsecured promissory note in the aggregate principal amount of $100,000 to RedOne Investment Limited, our sponsor. The principal will be payable promptly on the earlier date on which we consummate an initial business combination or has received financing from other parties with no interest accrued.

On March 9, 2023, we held an Extraordinary General Meeting (the “General Meeting”) of shareholders. In the General Meeting, shareholders approved to amend our Amended and Restated Memorandum and Articles of Association (the first “Charter Amendment”), and to extend the time for us to complete a business combination for an additional three (3) months, from March 11, 2023 to June 11, 2023 (the “Extension”). The first Charter Amendment was filed with the Registrar of companies in the Cayman Islands on March 10, 2023 and was effective on that date. In connection with the approval of the Extension, we deposited into the Trust Account $250,000 in accordance with the terms of the Charter Amendment. In connection with the General Meeting, shareholders elected to redeem a total of 2,767,411 ordinary shares. An aggregate payment of $28,707,673 was distributed from our Trust Account because of this redemption.

On March 10, 2023, we entered into a loan agreement as the borrower with a third party lender, our sponsor and Nature’s Miracle Inc. (“NMI”) as the guarantors. The principal amount of the loan was $250,000 and the amount was deposited into the Trust Account in accordance with the term of our Amended and Restated Memorandum and Articles of Association (the “Charter Amendment”). The loan was with no interest bearing until June 11, 2023. Based on the loan agreement and subsequent confirmation among each party, the loan was repayable on July 11, 2023 (the “Repayment Date”) and bears interest for one (1) month with an annualized London Interbank Offering Rate (LIBOR) of 5%. The loan was repaid in full on July 12, 2023 including principal and interest. However, we will cause to issue 25,000 bonus shares to the lender of the surviving company (“PubCo”) when completing the proposed business combination with NMI.

On March 28, 2023, we issued an unsecured promissory note in the aggregate principal amount of $100,000 to RedOne Investment Limited, our sponsor. The principal will be payable promptly on the earlier date on which either we consummate an initial business combination or has received financing from other parties with no interest accrued.

On April 10, 2023, we entered into a Standby Equity Purchase Agreement (the “SEPA”) with YA II PN, Ltd. (“ Yorkville”) and the SEPA will be effective on the sixth trading day following the date of the 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 will 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.

On June 5, 2023, we issued an unsecured promissory note in the aggregate principal amount of $50,000 to RedOne Investment Limited, our sponsor. The principal will be payable promptly on the earlier date on which either we consummate an initial business combination or has received financing from other parties with no interest accrued.

On June 5, 2023, we 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 second “Charter Amendment”), to extend the time for us to complete a business combination for up to an additional six (6) months, from June 11, 2023 to December 11, 2023 (the “Extension”) by means of up to six (6) monthly Extensions. The second Charter Amendment was filed with the Registrar of companies in the Cayman Islands on June 9, 2023 and was effective on that date. In connection with the approval of the Extension, we need to deposit into the Trust Account $80,000 for each monthly Extension and the initial monthly Extension fee of $80,000 was deposited into the Trust Account in accordance with the terms of the second Charter Amendment. In connection with the General Meeting, shareholders elected to redeem a total of 644,667 ordinary shares. An aggregate payment of $6,807,013 was distributed from our Trust Account for the ordinary shares redeemed.

On June 7, 2023, we entered into Amendment No.1 to the Merger Agreement (the “Amendment”) with certain parties thereof. Pursuant to the Amendment, Nature’s Miracle’s common stock was reclassified from a single class to a dual class structure, comprised of Class A common stock and Class B common stock. The Amendment also provides that Nature’s Miracle shall loan us $40,000 for the initial monthly extension and $40,000 for each subsequent extension, and once Nature’s Miracle has secured a loan for working capital purposes, Nature’s Miracle shall loan us $80,000 for each subsequent extension. In addition, the Outside Date (as defined in the Merger Agreement) was extended from June 11, 2023 to December 11, 2023, and we will have the right to extend the Outside Date for an additional period equal to the shortest of (i) six additional months, (ii) the period ending on the last date for us to consummate its business combination pursuant to such extension and (iii) such period as determined by us.

On June 8, 2023, we issued an unsecured promissory note in the aggregate amount of $40,000 to Nature’s Miracle. The amount of $40,000 does not bear interest and matures upon the earlier of (i) the closing of the business combination and (ii) December 11, 2023. In the event that we do not consummate a business combination, the repayment will be only from amounts remaining outside of our trust account, if any. 

On June 12, 2023, we entered into Amendment Number 1 to the SEPA (the “Amendment”), Prior to the Amendment, the SEPA would terminate if the Business Combination did not close by June 30, 2023. The Amendment extended such date by which the Business Combination must close to December 11, 2023.

On June 27, 2023, we issued an unsecured promissory note in the aggregate principal amount of $50,000 to RedOne Investment Limited, our sponsor. The principal will be payable promptly on the earlier date on which either we consummate an initial business combination or has received financing from other parties with no interest accrued.

On July 7, 2023, we issued an unsecured promissory note (the “July Note”) in the aggregate principal amount of $80,000 to Nature’s Miracle. The Note does not bear interest and matures upon the earlier of (i) the closing of our initial business combination and (ii) December 11, 2023. In the event that we do not consummate a business combination, the July Note will be repaid only from amounts remaining outside of our trust account, if any. In connection with the note, we agreed to cause 2,000 shares of Class A common stock of PubCo to be issued to Nature’s Miracle or its designee following the closing of the business combination. The proceeds of the July Note were deposited into our trust account in connection with extending the business combination completion window until August 11, 2023.

On July 11, 2023, we entered into two separate loan agreements for an aggregate principal amount of $250,000, on substantially the same terms. The lender of the first loan agreement is Bill Chen, Chief Executive Officer of us and the lender of the second loan agreement is James Li, the Chief Executive Officer of Nature’s Miracle. Each of them agreed to lend us a principal amount of $125,000, respectively. Pursuant to the loan agreements, the loans are unsecured and do not bear interest; provided that, if the loan is not repaid by the maturity date on November 11, 2023, then the outstanding amount will bear interest at 8% per annum, and will be payable with accrued interest on demand. The loan agreements also provide for the issuance to each lender of 12,500 shares of Class A common stock (or 25,000 shares in the aggregate) of PubCo no later than the earlier of (i) the maturity date and (ii) the closing of the planned business combination. The loan agreements also provide for customary registration rights for such shares.

On July 12, 2023, the loans closed and the proceeds of the loans were then used to repay in full the $250,000 loan and interest for the period from June 11, 2023 to July 11, 2023, pursuant to the loan agreement dated March 10, 2023 and subsequent confirmation among each party of the loan. An aggregate amount of $ 251,027 was paid on July 12, 2023.

On August 10, 2023, we issued an unsecured promissory note (the “August Note”) in the principal amount of $80,000 to Nature’s Miracle. The Note does not bear interest and matures upon the earlier of (i) the closing of the business combination and (ii) December 11, 2023. In the event that we do not consummate a business combination, the August Note will be repaid only from amounts remaining outside of the trust account, if any. In connection with the note, 2,000 shares of Class A common stock of PubCo will be issued to Nature’s Miracle or its designee following the closing of the business combination. The proceeds of the August Note were deposited into our trust account in connection with extending the business combination completion window until September 11, 2023.

On September 11, 2023, we issued an unsecured promissory note (the “September Note”) in the principal amount of $80,000 to Nature’s Miracle. The Note does not bear interest and matures upon the earlier of (i) the closing of the business combination and (ii) December 11, 2023. In the event that we do not consummate a business combination, the September Note will be repaid only from amounts remaining outside of the trust account, if any. In connection with the note, 2,000 shares of Class A common stock of PubCo will be issued to Nature’s Miracle or its designee following the closing of the business combination. The proceeds of the September Note were deposited in our trust account in connection with extending the business combination completion window until October 11, 2023.

On September 22, 2023, we issued an unsecured promissory note (the “Note”) in the principal amount of $40,000 to RedOne Investment Limited, our sponsor. The principal will be payable promptly on the earlier date on which either we consummate an initial business combination or has received financing from other parties with no interest accrued.

On October 11, 2023, we issued an unsecured promissory note (the “October Note”) in the principal amount of $80,000 to Nature’s Miracle. The Note does not bear interest and matures upon the earlier of (i) the closing of the business combination and (ii) December 11, 2023. In the event that we do not consummate a business combination, the October Note will be repaid only from amounts remaining outside of the trust account, if any. In connection with the note, 2,000 shares of Class A common stock of PubCo will be issued to Nature’s Miracle or its designee following the closing of the business combination. The proceeds of the October Note were deposited into our trust account in connection with extending the business combination completion window until November 11, 2023.

We cannot assure you that our plans to complete our Initial Business Combination will be successful. If we are unable to complete our initial business combination before December 11, 2023, we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than five business days thereafter, redeem 100% of the outstanding public shares and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining holders of ordinary shares and our board of directors, liquidate and dissolve. In the event of liquidation, the holders of the founder shares and Private Units will not participate in any redemption distribution with respect to their founder shares or Private Units, until all of the claims of any redeeming shareholders and creditors are fully satisfied (and then only from funds held outside the Trust Account).

Results of Operations

Our entire activity from February 19, 2021 (inception) up to the consummation of the IPO was in preparation for the IPO. Since the IPO, our activity has been limited to the evaluation of business combination candidates, and we will not be generating any operating revenues until the closing and completion of our initial business combination. We expect to generate small amounts of non-operating income in the form of interest income on cash and marketable securities held in Trust Account. We will incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for consummating the proposed business combination.

For the three months ended September 30, 2023, we had a net income of $383,833. We incurred $100,575 of general and administrative expenses, $342 of interest expense and earned $484,750 of interest income from investments in our Trust Account.

For the nine months ended September 30, 2023, we had a net income of $1,215,479. We incurred $482,410 of general and administrative expenses, $1,027 of interest expense and earned $1,698,916 of interest income from investments in our Trust Account.

For the three months ended September 30, 2022, we had a net income of $74,260. We incurred $241,840 in formation, general and administrative expenses and earned $316,100 of interest income from investments in our Trust Account.

For the nine months ended September 30, 2022, we had a net loss of $29,553. We incurred $445,256 in formation, general and administrative expenses and earned $415,703 of interest income from investments in our Trust Account.

Liquidity and Capital Resources

As of September 30, 2023, we had $30,050 in cash held outside our Trust Account available for our working capital purposes.

Prior to the consummation of the IPO, our liquidity needs had been satisfied through a payment from the sponsor of $25,000 for the founder shares, the loan under an unsecured promissory note from the sponsor of $500,000. The promissory note from the sponsor was converted into part of the subscription of $3,515,000 private placement on March 11, 2022.

Upon the consummation of the IPO and underwriter’s full exercise of over-allotment option on March 11, 2022, and associated private placements, $70,035,000 of cash was placed in the Trust Account.

In order to meet our working capital needs following the consummation of the IPO, our initial shareholders, officers and directors or their affiliates may, but are not obligated to, loan us 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 our 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 our business combination into additional private units at a price of $10.00 per unit. If we do 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 of the Notes to the unaudited Condensed Consolidated Financial Statements included in this report). As of September 30, 2023 and to date, an aggregate principal amount of $340,000 was outstanding and evidenced by unsecured promissory notes issued to RedOne Investment Limited, our sponsor. The principal will be payable promptly on the earlier date on which either we consummate an initial business combination or has received financing from other parties with no interest accrued.

On March 10, 2023, we entered into a loan agreement as the borrower with a third party lender, our sponsor and Nature’s Miracle Inc. (“NMI”) as the guarantors. The principal amount of the loan was $250,000 and the amount was deposited into the Trust Account in accordance with the term of our Amended and Restated Memorandum and Articles of Association (the “Charter Amendment”). The loan was with no interest bearing until June 11, 2023. Based on the loan agreement and subsequent confirmation among each party, the loan was repayable on July 11, 2023 (the “Repayment Date”) and bears interest for one (1) month with an annualized London Interbank Offering Rate (LIBOR) of 5%. The loan was repaid in full on July 12, 2023 including principal and interest. However, we will cause to issue 25,000 bonus shares to the lender of the surviving company (“PubCo”) when completing the proposed business combination with NMI.

Pursuant to the Amendment No. 1 to the Merger Agreement, Nature’s Miracle lent $40,000 to us on June 8, 2023 in order to pay half of initial monthly extension fee, as required by the term of our Amended and Restated Memorandum and Articles of Association effective on June 9, 2023 (the second “Charter Amendment”). The amount of $40,000 from Nature’s Miracle was deposited into our Trust Account, with the balance of $40,000 for initial monthly extension paid directly from our operating account. The amount of $40,000 does not bear interest and matures upon the earlier of (i) the closing of the business combination and (ii) December 11, 2023. In the event that we do not consummate a business combination, the repayment will be only from amounts remaining outside of the trust account, if any. 

Pursuant to the Amendment No. 1 to the Merger Agreement, Nature’s Miracle shall loan us $40,000 for each subsequent extension, and once Nature’s Miracle has secured a loan for working capital purposes, Nature’s Miracle shall loan us $80,000 for each subsequent extension.

On July 7, 2023, we issued an unsecured promissory note (the “July Note”) in the principal amount of $80,000 to Nature’s Miracle. The Note does not bear interest and matures upon the earlier of (i) the closing of the business combination and (ii) December 11, 2023. In the event that we do not consummate a business combination, the July Note will be repaid only from amounts remaining outside of the trust account, if any. In connection with the note, 2,000 shares of Class A common stock of PubCo will be issued to Nature’s Miracle or its designee following the closing of the business combination.

On August 10, 2023, we issued an unsecured promissory note (the “August Note”) in the principal amount of $80,000 to Nature’s Miracle. The Note does not bear interest and matures upon the earlier of (i) the closing of the business combination and (ii) December 11, 2023. In the event that we do not consummate a business combination, the August Note will be repaid only from amounts remaining outside of the trust account, if any. In connection with the note, 2,000 shares of Class A common stock of PubCo will be issued to Nature’s Miracle or its designee following the closing of the business combination.

On September 11, 2023, we issued an unsecured promissory note (the “September Note”) in the principal amount of $80,000 to Nature’s Miracle. The Note does not bear interest and matures upon the earlier of (i) the closing of the business combination and (ii) December 11, 2023. In the event that we do not consummate a business combination, the September Note will be repaid only from amounts remaining outside of the trust account, if any. In connection with the note, 2,000 shares of Class A common stock of PubCo will be issued to Nature’s Miracle or its designee following the closing of the business combination.

On October 11, 2023, we issued an unsecured promissory note (the “October Note”) in the principal amount of $80,000 to Nature’s Miracle. The Note does not bear interest and matures upon the earlier of (i) the closing of the business combination and (ii) December 11, 2023. In the event that we do not consummate a business combination, the October Note will be repaid only from amounts remaining outside of the trust account, if any. In connection with the note, 2,000 shares of Class A common stock of PubCo will be issued to Nature’s Miracle or its designee following the closing of the business combination.

To date, an aggregate principal amount of $360,000 was outstanding and evidenced by these unsecured promissory notes issued to Nature’s Miracle. In connection with the notes, an aggregate of 8,000 shares of Class A common stock of PubCo will be issued to Nature’s Miracle or its designee following the closing of the business combination.

If our estimates of the working capital needs are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our initial business combination. Moreover, we may need to obtain additional financing either to consummate our initial business combination or because we become obligated to convert a significant number of our public shares upon consummation of our initial business combination, in which case we may issue additional securities or incur debt in connection with such business combination. Subject to compliance with applicable securities laws, we would only consummate such financing simultaneously with the consummation of our initial business combination. Following our initial business combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.

We performed an assessment on our ability to continue as a going concern in accordance with Financial Accounting Standard Board’s Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. There is no assurance that we will be able to consummate the initial business combination before December 11, 2023. In the event that we fail to consummate business combination within the required period, we will face mandatory liquidation and dissolution subject to certain obligations under applicable laws or regulations. This uncertainty raises substantial doubt about our ability as a going concern one year from the date the financial statement is issued. No adjustments have been made to the carrying amounts of assets or liabilities regarding the possibility of us not continuing as a going concern, as a result of failing to consummate business combination by December 11, 2023. Management plans to continue its efforts to consummate a business combination with the remaining time available.

Critical Accounting Policies

The preparation of these unaudited Condensed Consolidated 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 unaudited Condensed Consolidated financial statements. Actual results could differ from those estimates.

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 of the Notes to the unaudited Condensed Consolidated Financial Statements included in this report). We comply 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. We allocate 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.

Ordinary Shares Subject to Possible Redemption

We account for its ordinary shares subject to possible redemption in accordance with the guidance in 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 our control) are classified as temporary equity. At all other times, ordinary shares are classified as shareholders’ equity. Our public shares feature certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, as of September 30, 2023, ordinary shares subject to possible redemption are presented at redemption value of approximately $10.837 per share as temporary equity, outside of the shareholders’ equity section of our balance sheet. We 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.

Net Income (Loss) per Share

We comply 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, we 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 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 nine months ended September 30, 2023 and September 30, 2022, we 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 us. As a result, diluted loss per share is the same as basic loss per share for the period presented. The calculation of diluted loss per share does not consider the effect of the warrants issued in connection with the IPO and the private placement since the exercise of warrants are contingent on the occurrence of future events.

Warrants

We evaluate 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 our own ordinary shares, among other conditions for equity classification. Pursuant to such evaluation, both public and private warrants are classified in shareholders’ equity.

Recent Accounting Standards

Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our Condensed Consolidated financial statements.

Off-Balance Sheet Arrangements

We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of September 30, 2023. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.

Contractual Obligations

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 we completes a Business Combination, without accrued interest. In the event that we do 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 our initial shareholders, officers, directors or their affiliates in payment of working capital loans or extension loans made to us, 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 we register these securities at any time after we consummates a business combination. In addition, the holders have certain “piggy-back” registration rights on registration statements filed after our consummation of a business combination.

Engagement agreement with Legal Counsel

We have entered into an engagement agreement with our 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 September 30, 2023, an aggregate of $250,000 had been accrued into our condensed consolidated financial statements.

Engagement agreement with Underwriter

We have 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 us and the provider of fairness opinion concerning the terms of the business combination.

Bonus Shares

As of September 30, 2023, we have committed to cause to issue an aggregate of 56,000 bonus shares of PubCo based on the following: (i) 25,000 shares to a third party investor based on the loan agreement entered into on March 10, 2023, and the loan was repaid in full on July 12, 2023; (ii) 12,500 shares to Bill Chen and 12,500 shares to James Li (or 25,000 shares in aggregate) based on the loan agreements entered into on July 11, 2023; (iii) a total of 6,000 shares to Natures Miracle or its designee based on promissory notes issued on July 7, 2023, August 10, 2023 and September 11, 2023, respectively. Since the issuance of the bonus shares is contingent on the consummation of the proposed business combination, and the potential costs of the bonus shares do not qualify as debt discounts or freestanding instruments as of September 30, 2023, they were not booked as expenses and liabilities as of September 30, 2023.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not required for smaller reporting companies.

Item 4. Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Evaluation of Disclosure Controls and Procedures

In our Annual Report on Form 10-K file with the SEC on March 30, 2023, we disclosed material weakness in our internal control over financial reporting. As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2023. Based upon his evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the material weakness had not been remediated as of September 30, 2023, and therefore our disclosure controls and procedures (as defined in Rules 13a-15 (e) and 15d-15 (e) under the Exchange Act) were not effective as of the September 30, 2023. In light of the material weakness identified, we will consider engaging an external SEC Consultant to perform the duties of financial reporting. Management will review the books and records and financial statements prepared by the external consultant. We will also enhance the management review controls for financial reporting. We performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with GAAP. Accordingly, management believes that the financial statements included in this report present fairly in all material respects our financial position, results of operations and cash flows for the period presented.

We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the three months ended September 30, 2023 and September 30, 2022 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.

Item 1A. Risk Factors

Factors that could cause our actual results to differ materially from those in this Quarterly Report are any of the risks described in our Annual Report on Form 10-K filed with the SEC on March 30, 2023. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. As of the date of this Quarterly Report, other than as described below, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K filed with the SEC on March 30, 2023.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities

On March 11, 2022, we consummated its initial public offering (the “IPO”) of 6,900,000 units (the “Units”), which includes full exercise of the underwriter’s over-allotment option. Each Unit consists of one ordinary share of the Company, par value $0.0001 per share (the “Ordinary Shares”), one-half of one redeemable warrant (“Warrant”), with each whole Warrant entitling the holder thereof to purchase one Ordinary Share for $11.50 per share, and one right that entitles the holder thereof to receive one-tenth (1/10) of one Ordinary Share upon consummation of our initial business combination (“Right”). The Units were sold at a price of $10.00 per Unit, generating gross proceeds to the Company of $69,000,000.The securities in the offering were registered under the Securities Act on a registration statement on Form S-1 (No. 333- 262381). The SEC declared the registration statement effective on March 8, 2022.

Simultaneously with the closing of the IPO, we consummated a private placement (the “Private Placement”) in which RedOne Investment Limited (the “Sponsor”), which purchased 351,500 private units (the “Private Placement Units”) at a price of $10.00 per Private Unit, generating total proceeds of $3,515,000.

A total of $70,035,000 of the proceeds from the IPO and the sale of the Private Placement Units was placed in a U.S.-based trust account at Morgan Stanley Wealth Management, maintained by Continental Stock Transfer & Trust Company, acting as trustee.

We paid a total of $1,380,000 underwriting discounts and commissions and $715,000 for other offering costs and expenses related to the Initial Public Offering. In addition, the underwriters agreed to defer $2,415,000 in underwriting discounts and commissions.

For a description of the use of the proceeds generated in our Initial Public Offering, see Part I, Item 2 of this Quarterly Report.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not Applicable.

Item 5. Other Information.

None.

ITEM 6. EXHIBITS

The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

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