UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For
the quarterly period ended
For the transition period from to
Commission
File No.
| (Exact name of registrant as specified in its charter) |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| (Address of Principal Executive Offices, including zip code) |
| (Registrant’s telephone number, including area code) |
| N/A |
| (Former name, former address and former fiscal year, if changed since last report) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| The | ||||
| Redeemable warrants, each warrant exercisable for one Class A ordinary share at an exercise price of $11.50 | MACAW | The Nasdaq Stock Market LLC | ||
| Units, each consisting of one Class A ordinary share and one-half of a redeemable warrant | MACAU | The Nasdaq Stock Market LLC |
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.
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).
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.
| ☐ Large accelerated filer | ☐ Accelerated filer | |
| ☒ | ||
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
As
of November 10, 2022,
MORINGA ACQUISITION CORP
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
| Page | ||
| CERTAIN TERMS | ii | |
| SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS | iv | |
| PART I - FINANCIAL INFORMATION | 1 | |
| Item 1. | Financial Statements | F-1 |
| Condensed Balance Sheets | F-2 | |
| Condensed Statements of Operations | F-3 | |
| Condensed Statements of Changes in Capital Deficiency | F-4 | |
| Condensed Statements of Cash Flows | F-5 | |
| Notes to Condensed Financial Statements (unaudited) | F-6 | |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 2 |
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 9 |
| Item 4. | Control and Procedures | 9 |
| PART II - OTHER INFORMATION | 10 | |
| Item 1. | Legal Proceedings | 10 |
| Item 1A. | Risk Factors | 10 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 10 |
| Item 3. | Defaults Upon Senior Securities | 10 |
| Item 4. | Mine Safety Disclosures | 10 |
| Item 5. | Other Information | 10 |
| Item 6. | Exhibits | 11 |
| SIGNATURES | 12 | |
i
CERTAIN TERMS
Unless otherwise stated in this Quarterly Report on Form 10-Q (this “Quarterly Report” or “Form 10-Q”), references to:
| ● | “we,” “us,” “our,” “Moringa,” the “Company” or “our company” are to Moringa Acquisition Corp, a Cayman Islands exempted company; |
| ● | “amended and restated memorandum and articles of association” are to our Amended and Restated Memorandum and Articles of Association; |
| ● | “Class A ordinary shares” are to our Class A ordinary shares, par value $0.0001 per share; |
| ● | “Class B ordinary shares” are to our Class B ordinary shares, par value $0.0001 per share; |
| ● | “Companies Law” are to the Companies Law (2021 Revision) of the Cayman Islands, as the same may be amended from time to time; |
| ● | “Exchange Act” are to the U.S. Securities Exchange Act of 1934, as amended, |
| ● | “founders shares” are to our 2,875,000 Class B ordinary shares initially purchased by our sponsor in a private placement prior to our initial public offering and the Class A ordinary shares that will be issued upon the automatic conversion of the founders shares at the time of our initial business combination (for the avoidance of doubt, such Class A ordinary shares will not be “public shares”); |
| ● | “initial public offering” or “IPO” are to the initial public offering of our Class A ordinary shares, which was consummated in two closings, on February 19, 2021 and March 3, 2021; |
| ● | “private shares” are to the Class A ordinary shares included in the private units issued and sold to our sponsor and EarlyBirdCapital (the lead underwriter for our IPO) in private placements simultaneously with the closings of our initial public offering; |
| ● | “private units” are to the 380,000 units (consisting of 380,000 private shares and 190,000 private warrants) issued and sold to our sponsor and EarlyBirdCapital, in the aggregate, in private placements simultaneously with the closings of our initial public offering; |
| ● | “private warrants” are to the 190,000 warrants contained within the private units issued and sold to our sponsor and EarlyBirdCapital, in the aggregate, in private placements simultaneously with the closings of our initial public offering, as well as any warrants that may be issued upon conversion of working capital loans; |
| ● | “public shareholders” are to the holders of our public shares, including our sponsor, officers and directors to the extent our sponsor, officers or directors purchase public shares, provided their status as a “public shareholder” shall only exist with respect to such public shares; |
| ● | “public shares” are to our Class A ordinary shares sold as part of the units in our initial public offering (whether they were purchased in our initial public offering or thereafter in the open market); |
ii
| ● | “public units” are to the units (consisting of public shares and warrants) sold in our initial public offering (whether they were purchased in our initial public offering or thereafter in the open market); |
| ● | “sponsor” are to Moringa Sponsor, LP, a Cayman Islands exempted limited partnership, including, where applicable, its affiliates (including our initial shareholder, Moringa Sponsor US L.P., a Delaware limited partnership, which is a wholly-owned subsidiary of our sponsor); |
| ● | “units” are to the public units that we sold in our IPO and private units that we sold to our sponsor and EarlyBirdCapital, in each case at a price of $10.00 per unit, and which consist of one Class A ordinary share and one-half (1/2) of one warrant per unit; |
| ● | “warrants” are to our redeemable warrants sold as part of the public units in our initial public offering (whether they were purchased in our initial public offering or thereafter in the open market) and the private warrants; and |
| ● | “$,” “US$” and “U.S. dollar” each refer to the United States dollar. |
| ● | “2021 Annual Report” are to our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the U.S. Securities and Exchange Commission on March 31, 2022. |
iii
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act, that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements other than statements of historical fact included in this Quarterly Report, including statements in “Part I- Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to “Part I- Item 1A. Risk Factors” in the 2021 Annual Report, as supplemented by “Part II- Item 1A. Risk Factors” in this Quarterly Report. The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.report. Except as expressly required by applicable securities laws, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
iv
PART I - FINANCIAL INFORMATION
MORINGA ACQUISITION CORP
UNAUDITED CONDENSED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2022 AND FOR THE THREE AND NINE MONTHS ENDED ON THAT DATE
U.S. DOLLARS
1
ITEM 1. FINANCIAL STATEMENTS
MORINGA ACQUISITION CORP
UNAUDITED CONDENSED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2022 AND FOR THE THREE AND NINE MONTHS ENDED ON THAT DATE
U.S. DOLLARS
INDEX
| F-1 |
MORINGA ACQUISITION CORP
UNAUDITED CONDENSED BALANCE SHEETS
| September 30 | December 31 | |||||||||
| Note | 2022 | 2021 | ||||||||
| U.S. Dollars | ||||||||||
| A s s e t s | ||||||||||
| CURRENT ASSETS: | ||||||||||
| Cash and cash equivalents | ||||||||||
| Investments held in Trust Account | ||||||||||
| Prepaid expenses | ||||||||||
| TOTAL ASSETS | ||||||||||
| Liabilities and shares subject to possible redemption net of capital deficiency | ||||||||||
| CURRENT LIABILITIES: | ||||||||||
| Accrued expenses | ||||||||||
| Related party | 4 | |||||||||
| Private warrant liability | ||||||||||
| TOTAL LIABILITIES | ||||||||||
| COMMITMENTS AND CONTINGENCIES | 5 | |||||||||
| CLASS A ORDINARY SHARES SUBJECT TO POSSIBLE REDEMPTION: | ||||||||||
| CAPITAL DEFICIENCY: | 7 | |||||||||
| Class A Ordinary Shares, $ | ||||||||||
| Class B Ordinary Shares, $ | ||||||||||
| Preferred Shares, $ | ||||||||||
| Additional paid-in capital | ||||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||||
| TOTAL CAPITAL DEFICIENCY | ( | ) | ( | ) | ||||||
| TOTAL LIABILITIES AND SHARES SUBJECT TO POSSIBLE REDEMPTION NET OF CAPITAL DEFICIENCY | ||||||||||
The accompanying notes are an integral part of these condensed financial statements.
| F-2 |
MORINGA ACQUISITION CORP
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
| Nine months ended September 30, | Three months ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| U.S. Dollars | U.S. Dollars | |||||||||||||||
| Except share data | Except share data | |||||||||||||||
| INTEREST EARNED ON INVESTMENTS HELD IN TRUST ACCOUNT | ||||||||||||||||
| GENERAL AND ADMINISTRATIVE | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| CHANGE IN FAIR VALUE OF PRIVATE WARRANT LIABILITY | ( | ) | ( | ) | ||||||||||||
| NET PROFIT (LOSS) FOR THE PERIOD | ( | ) | ( | ) | ||||||||||||
| $ | $ | ( | ) | $ | $ | ( | ) | |||||||||
| $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
| F-3 |
MORINGA ACQUISITION CORP
UNAUDITED CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (CAPITAL DEFICIENCY)
| Class A ordinary shares | Class B ordinary shares | Additional | ||||||||||||||||||||||||||
| Number of shares | Par value | Number of shares | Par value | paid-in capital | Accumulated deficit | Total | ||||||||||||||||||||||
| U.S. dollars (except share data) | ||||||||||||||||||||||||||||
| BALANCE AT December 31, 2020 | ( | ) | ( | ) | ||||||||||||||||||||||||
| CHANGES DURING THE THREE MONTHS ENDED March 31, 2021: | ||||||||||||||||||||||||||||
| Issuance of Class B Ordinary Shares to the Sponsor | ||||||||||||||||||||||||||||
| Accretion for public Class A ordinary shares to redemption amount | ( | ) | ( | ) | ||||||||||||||||||||||||
| Net loss for the period | ( | ) | ( | ) | ||||||||||||||||||||||||
| BALANCE AT March 31, 2021 | ( | ) | ||||||||||||||||||||||||||
| CHANGES DURING THE THREE MONTHS ENDED JUNE 30, 2021: | ||||||||||||||||||||||||||||
| Net loss for the period | ( | ) | ( | ) | ||||||||||||||||||||||||
| BALANCE AT June 30, 2021 | ( | ) | ||||||||||||||||||||||||||
| CHANGES DURING THE THREE MONTHS ENDED SEPTEMBER 30, 2021: | ||||||||||||||||||||||||||||
| Net loss for the period | ( | ) | ( | ) | ||||||||||||||||||||||||
| BALANCE AT September 30, 2021 | ( | ) | ||||||||||||||||||||||||||
MORINGA ACQUISITION CORP
UNAUDITED CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (CAPITAL DEFICIENCY)
| Class A ordinary shares | Class B ordinary shares | Additional | ||||||||||||||||||||||||||
| Number of shares | Par value | Number of shares | Par value | paid-in capital | Accumulated deficit | Total | ||||||||||||||||||||||
| U.S. dollars (except share data) | ||||||||||||||||||||||||||||
| BALANCE AT December 31, 2021 | ( | ) | ( | ) | ||||||||||||||||||||||||
| CHANGES DURING THE THREE MONTHS ENDED March 31, 2022: | ||||||||||||||||||||||||||||
| Net loss for the period | ( | ) | ( | ) | ||||||||||||||||||||||||
| BALANCE AT March 31, 2021 | ( | ) | ( | ) | ||||||||||||||||||||||||
| CHANGES DURING THE THREE MONTHS ENDED JUNE 30, 2022: | ||||||||||||||||||||||||||||
| Subsequent accretion of Class A Ordinary Shares subject to possible redemption to amount as of June 30, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Net profit for the period | ||||||||||||||||||||||||||||
| BALANCE AT June 30, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||
| CHANGES DURING THE THREE MONTHS ENDED SEPTEMBER 30, 2022: | ||||||||||||||||||||||||||||
| Subsequent accretion of Class A Ordinary Shares subject to possible redemption to amount as of September 30, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Net profit for the period | ||||||||||||||||||||||||||||
| BALANCE AT September 30, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
| F-4 |
MORINGA ACQUISITION CORP
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
| Nine months ended September 30, | Nine months ended September 30, | |||||||
| 2022 | 2021 | |||||||
| U.S. Dollars | ||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net profit (loss) for the period | ( | ) | ||||||
| Adjustments to reconcile net profit (loss) to net cash provided by (used in) operating activities: | ||||||||
| Changes in the fair value of the private warrant liability | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Decrease (increase) in prepaid expenses | ( | ) | ||||||
| Decrease in related party | ( | ) | ||||||
| Increase (decrease) in accrued expenses | ( | ) | ||||||
| Net cash provided by (used in) operating activities | ( | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Sale of Public Units | ||||||||
| Payment of underwriting commissions and offering expenses | ( | ) | ||||||
| Sale of Private Units, refer to note 3 | ||||||||
| Proceeds from a promissory note – related party | ||||||||
| Repayment of promissory note – related party | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| INCREASE IN CASH, CASH EQUIVALENTS AND INVESTMENTS HELD IN A TRUST ACCOUNT | ||||||||
| CASH, CASH EQUIVALENTS AND INVESTMENTS HELD IN A TRUST ACCOUNT AT BEGINNING OF THE PERIOD | ||||||||
| CASH, CASH EQUIVALENTS AND INVESTMENTS HELD IN A TRUST ACCOUNT AT END OF THE PERIOD | ||||||||
| RECONCILIATION OF CASH, CASH EQUIVALENTS AND INVESTMENTS HELD IN A TRUST ACCOUNT: | ||||||||
| Cash and cash equivalents | ||||||||
| Investments held in trust account | ||||||||
| Total cash, cash equivalents and investments held in trust account | ||||||||
| SUPPLEMENTARY INFORMATION REGARDING NON-CASH ACTIVITIES: | ||||||||
| Deferred offering costs | ||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
| F-5 |
MORINGA ACQUISITION CORP
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 – Description of Organization and Business Operations:
| a. | Organization and General |
Moringa Acquisition Corp (hereafter – the Company) is a blank check company, incorporated on September 24, 2020 as a Cayman Islands exempted company, formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination (hereafter – the Business Combination). The Company is an emerging growth company, as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).
All activity for the nine months ended September 30, 2022, relates to the Company’s search for a target company, as well as attempts to consummate the Proposed Business Combination, as detailed in Note 1(f).
The Company has selected December 31 as its fiscal year end.
| b. | Sponsor and Financing |
The Company’s sponsor is Moringa Sponsor, L.P., a Cayman exempted limited partnership (which is referred to herein, together with its wholly-owned subsidiary, Moringa Sponsor (US) LP, a Delaware limited partnership, as the “Sponsor”).
The registration statement relating to
the Company’s Public Offering was declared effective by the United States Securities and Exchange Commission (the “SEC”)
on February 16, 2021. The initial stage of the Company’s Public Offering— the sale of
| c. | The Trust Account |
The proceeds held in the Trust Account
are invested in money market funds registered under the Investment Company Act and compliant with Rule 2a-7 thereof that maintain a stable
net asset value of $
The Company complies with the provisions of ASU 2016-18, under which changes in proceeds held in the Trust Account are accounted for as Changes in Cash, Cash Equivalents and Investments Held in a Trust Account in the Company’s Statements of Cash Flows.
| F-6 |
MORINGA ACQUISITION CORP
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 – Description of Organization and Business Operations (continued):
| d. | Initial Business Combination |
The Company’s management has broad
discretion with respect to the specific application of the net proceeds of the Public Offering, although substantially all of the net
proceeds of the Public Offering and the Private Placement are intended to be generally applied toward consummating an initial Business
Combination. The initial Business Combination must occur with one or more operating businesses or assets with a fair market value equal
to at least
The Company, after signing a definitive
agreement for an Initial Business Combination, will provide its public shareholders the opportunity to redeem all or a portion of their
shares upon the completion of the initial Business Combination, either (i) in connection with a shareholder meeting called to approve
the business combination or (ii) by means of a tender offer. However, in no event will the Company redeem its public shares in an amount
that would cause its net tangible assets to be less than $
If the Company holds a shareholder vote or there is a tender offer for shares in connection with an initial Business Combination, a public shareholder will have the right to redeem its shares for an amount in cash equal to its pro rata share of the aggregate amount then on deposit in the Trust Account, calculated as of two days prior to the general meeting or commencement of the Company’s tender offer, including interest but less taxes payable. As a result, the Company’s Public Class A ordinary shares are classified as temporary equity upon the completion of the Public Offering, in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, “Distinguishing Liabilities from Equity.”
Pursuant to the Company’s amended
and restated memorandum and articles of association, if the Company is unable to complete the initial Business Combination within 24 months
from the Closing of the Public Offering, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly
as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash,
equal to the aggregate amount then on deposit in the Trust Account, including interest (which interest shall be net of taxes payable,
and less up to $
| F-7 |
MORINGA ACQUISITION CORP
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 – Description of Organization and Business Operations (continued):
The Sponsor and the Company’s officers and directors have entered into a letter agreement with the Company, pursuant to which they have waived their rights to liquidating distributions from the Trust Account with respect to any Class B ordinary shares (as described in Note 7) held by them if the Company fails to complete the initial Business Combination within 24 months of the Closing of the Public Offering or during any extended time that the Company has to consummate an initial Business Combination beyond 24 months as a result of a shareholder vote to amend its amended and restated memorandum and articles of association. However, if the Sponsor or any of the Company’s directors or officers acquire any Class A ordinary shares, they will be entitled to liquidating distributions from the Trust Account with respect to such shares if the Company fails to complete the Initial Business Combination within the prescribed time period.
In the event of a liquidation, dissolution or winding up of the Company after an initial Business Combination, the Company’s shareholders are entitled to share ratably in all assets remaining available for distribution to them after payment of liabilities and after provision is made for each class of stock, if any, having preference over the ordinary shares. The Company’s shareholders have no preemptive or other subscription rights. There are no sinking fund provisions applicable to the ordinary shares, except that the Company will provide its shareholders with the opportunity to redeem their public shares for cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account, under the circumstances, and, subject to the limitations, described herein
| e. | Substantial Doubt about the Company’s Ability to Continue as a Going Concern |
As of September 30, 2022, the Company
had approximately $
Since its inception date and through the issuance date of these financial statements, the Company’s liquidity needs were satisfied through an initial capital injection from the Sponsor, followed by net Private Placement proceeds, as well as several withdrawals of the Sponsor promissory notes. Management has determined that it will need to continue to rely and is significantly dependent on future promissory notes or other forms of financial support (of which the Sponsor is not obligated to provide). Moreover, the Company has until February 19, 2023 (hereafter – the Mandatory Liquidation Date) to consummate an Initial Business Combination, whether the Proposed Business Combination or a different one. If a business combination is not consummated by this date, there will be a mandatory liquidation and subsequent dissolution of the Company. The Company intends to complete an Initial Business Combination before the Mandatory Liquidation Date. However, there can be no assurance that the Company will be able to consummate any business combination ahead of the Mandatory Liquidation Date, nor will it be able to raise sufficient funds to complete an Initial Business Combination. These matters raise substantial doubt about the Company’s ability to continue as a going concern, for the subsequent twelve months following the issuance date of these financial statements.
| F-8 |
MORINGA ACQUISITION CORP
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 – Description of Organization and Business Operations (continued):
No adjustments have been made to the carrying amounts of assets or liabilities should the Company fail to obtain financial support in its pursuit to consummate an Initial Business Combination, nor if it is required to liquidate after the Mandatory Liquidation Date.
| f. | Proposed Business Combination |
On June 9, 2022, the Company entered into a Business Combination Agreement (hereafter – the Proposed Business Combination) with Holisto Ltd., a company organized under the laws of the State of Israel (hereafter – Holisto) and Holisto MergerSub, Inc., a Cayman Islands exempted company and wholly-owned subsidiary of Holisto.
Holisto is an Israeli company and a tech-powered online travel agency, which aims to make hotel booking affordable and personalized for consumers.
The Business Combination Agreement and the transactions contemplated thereby have been unanimously approved by the boards of directors of Moringa and Holisto, and by the shareholders of Holisto.
The foregoing description of the Proposed Business Combination does not purport to be complete. For further information and access to the full agreement and all other related agreements, refer to the Company’s Current Report on Form 8-K filed with the SEC on June 13, 2022.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES:
| a. | Basis of Presentation |
The Company’s unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the rules and regulations of the SEC for interim financial information and the instructions to Form 10-Q.
| b. | Emerging Growth Company |
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards.
The JOBS Act provides that 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 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.
| F-9 |
MORINGA ACQUISITION CORP
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (continued):
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.
| c. | Cash and cash equivalents |
The Company considers as cash equivalents all short-term, highly liquid investments, which include short-term bank deposits with original maturities of three months or less from the date of purchase that are not restricted as to withdrawal or use and are readily convertible to known amounts of cash.
As of September 30, 2022, the Company held its cash and cash equivalents in an SVB bank account, and its Investments Held in Trust Account in Goldman Sachs money market funds. Money market funds are characterized as Level I investments within the fair value hierarchy under ASC 820.
| d. | Class A Ordinary Shares subject to possible redemption |
As discussed in Note 1, all of the
Immediately upon the Closing of the Public
Offering, the Company recognized the accretion from the offering costs allocated to the Class A Ordinary Shares subject to possible redemption,
in an amount of $
| e. | Net profit (loss) per share |
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, Earnings Per Share. Net profit (loss) per share is computed by dividing net profit (loss) by the weighted average number of shares outstanding during the period. The Company applies the two-class method in calculating net profit (loss) per each class of shares: the non-redeemable shares, which include the Private Class A Ordinary Shares, as defined in Note 7, and the Class B ordinary shares (hereafter and collectively – Non-Redeemable class A and B ordinary shares; and the Class A ordinary shares subject to possible redemption.
In order to determine the net profit (loss) attributable to each class, the Company first considered the total profit (loss) allocable to both sets of shares. This is calculated using the total net profit (loss) less any Interest Earned on Investments Held in Trust Account. Then, the Interest Earned on Investments Held in Trust Account for the period (being the accretion to redemption value of the Class A ordinary shares subject to possible redemption) is fully allocated to the Class A ordinary shares subject to redemption.
| F-10 |
MORINGA ACQUISITION CORP
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (continued):
For each of the three and nine months
ended September 30, 2022 and 2021, the Company did not have any dilutive securities or other contracts that could, potentially, be exercised
or converted into shares and then share in the earnings of the Company. The Company has not considered the effect of the warrants sold
in the Initial Public Offering and Private Placements to purchase an aggregate of
| f. | Concentration of credit risk |
Financial instruments that potentially
subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed
the Federal Depository Insurance Coverage of $
| g. | Public Warrants |
The Company applied the provisions of ASC 815-40 and classified its public warrants, issued as part of the Public Units as detailed in Note 3, as equity securities.
| h. | Private Warrant liability |
The Company accounts for the warrants in accordance with the guidance contained in Accounting Standards Codification 815 (“ASC 815”), “Derivatives and Hedging”, under which the warrants do not meet the criteria for equity treatment and must be recorded as derivative liabilities. Accordingly, the Company classifies the warrants as liabilities at their fair value and adjusts the warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until the warrants are exercised or expire, and any change in fair value is recognized in the Company’s statement of operations. Refer to Note 6 for information regarding the model used to estimate the faie value of the Private Warrants (as defined in Note 3).
| i. | Financial instruments |
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under the FASB ASC 820, “Fair Value Measurements and Disclosures”, approximates the carrying amounts represented in the balance sheet, primarily due to their short-term nature.
| j. | Use of estimates in the preparation of financial statements |
The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the 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 may differ from those estimates and such differences may have a material impact on the Company’s financial statements.
| F-11 |
MORINGA ACQUISITION CORP
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (continued):
| k. | Income tax |
The Company accounts for income taxes in accordance with ASC 740, “Income Taxes (hereafter – ASC 740). ASC 740 prescribes the use of the liability method whereby deferred tax asset and liability account balances are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance, if necessary, to reduce deferred tax assets to their estimated realizable value if it is more likely than not that a portion or all of the deferred tax assets will not be realized, based on the weight of available positive and negative evidence. Deferred tax liabilities and assets are classified as non-current in accordance with ASU 2015-17.
The Company accounts for uncertain tax
positions in accordance with ASC 740-10. ASC 740-10 contains a two-step approach to recognizing and measuring uncertain tax positions.
The first step is to evaluate the tax position taken or expected to be taken in a tax return by determining if the weight of available
evidence indicates that it is more likely than not that, on an evaluation of the technical merits, the tax position will be sustained
on audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest
amount that is more than
| l. | Recent accounting pronouncements |
Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted would have a material effect on the Company’s financial statements.
NOTE 3 – PUBLIC OFFERING AND PRIVATE PLACEMENTS:
In the Initial Public Offering, the Company
issued and sold
| F-12 |
MORINGA ACQUISITION CORP
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 3 – PUBLIC OFFERING AND PRIVATE PLACEMENTS (continued):
Each Unit (both those sold in the initial
Public Offering and in the Private Placement) consists of one Class A ordinary share, $
Once the Public Warrants become exercisable,
the Company may redeem them in whole and not in part at a price of $
The Warrants included in the Units sold in the Private Placement (the “Private Warrants”) are identical to the Public Warrants except that the Private Warrants, for so long as they are held by the Sponsor, EarlyBirdCapital, Inc. or their respective affiliates: (1) will not be redeemable by the Company; (2) may not (including the Class A ordinary shares issuable upon exercise of those warrants), subject to certain limited exceptions, be transferred, assigned or sold by the holders thereof until 30 days after the completion of the Company’s initial Business Combination; (3) may be exercised by the holders thereof on a cashless basis; and (4) they (including the Class A ordinary shares issuable upon exercise thereof) are entitled to registration rights.
The Company paid an underwriting commission of
NOTE 4 – RELATED PARTY TRANSACTIONS:
| a. | Promissory Note |
On December 9, 2020, the Company signed
a promissory note, under which it could borrow up to a $
The entire unpaid balance was payable on the earlier of (i) March 31, 2021, or (ii) the date of a capital raise (i.e., the closing of the initial Public Offering). Any drawn amounts could be prepaid at any time. The promissory note did not bear any interest on the principal amount outstanding thereunder.
| F-13 |
MORINGA ACQUISITION CORP
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 4 – RELATED PARTY TRANSACTIONS (continued):
The Company borrowed $
On August 9, 2021 the Company and the
Sponsor have entered into an additional Promissory Note agreement (hereafter – the Second Promissory Note), according to which the
Company may withdraw up to $
The entire unpaid balance shall be payable on the earlier of (i) February 19, 2023, or (ii) the date on which the Company consummates its Initial Business Combination. Any drawn amounts could be prepaid at any time. The promissory note does not bear any interest on the principal amount outstanding thereunder.
On December 23, 2021, the Company borrowed
$
During the nine months ended September
30, 2022 the Company borrowed an additional $
| b. | Administrative Services Agreement |
On December 16, 2020, the Company signed
an agreement with the Sponsor, under which the Company shall pay the Sponsor a fixed $
The composition of the Related Party balance as of September 30, 2022 and December 31, 2021 is as follows:
| September 30, 2022 | December 31, 2021 | |||||||
| In U.S. dollars | ||||||||
| Promissory note | ||||||||
| Accrual for Administrative Services Agreement | ||||||||
| F-14 |
MORINGA ACQUISITION CORP
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 5 – COMMITMENTS AND CONTINGENCIES:
Underwriters’ Deferred Commission
Under the Business Combination Marketing
Agreement, the Company shall pay an additional fee (hereafter – the Deferred Commission) of
NOTE 6 – FAIR VALUE MEASUREMENTS:
The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price).
The fair value hierarchy under ASC 820 prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:
Basis for Fair Value Measurement
Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2: Quoted prices in markets that are not active or financial instruments for which significant inputs to models are observable (including but not limited to quoted prices for similar securities, interest rates, foreign exchange rates, volatility and credit risk), either directly or indirectly;
Level 3: Prices or valuations that require significant unobservable inputs (including the Management’s assumptions in determining fair value measurement).
The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at September 30, 2022 by level within the fair value hierarchy:
| Level | September 30, 2022 | December 31, 2021 | ||||||||
| Assets: | ||||||||||
| Money market funds held in Trust Account | 1 | |||||||||
| Liabilities: | ||||||||||
| Private Warrant Liability | 3 | |||||||||
| F-15 |
MORINGA ACQUISITION CORP
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 6 – FAIR VALUE MEASUREMENTS (continued):
The estimated fair value of the Private Placement Warrants was determined using a binomial model to extract the market’s implied probability for an Initial Business Combination, using the Public Warrant’s market price. Once probability was extracted, a Black-Scholes-Merton model with Level 3 inputs was used to calculate the Private Warrants’ fair value. Inherent in a Black-Scholes-Merton model are assumptions related to expected life (term), expected stock price, volatility, risk-free interest rate and dividend yield. The Company estimates the volatility of its warrants based on implied volatility from the Company’s traded warrants and from historical volatility of selected peer companies’ Class A ordinary shares that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates remaining at zero.
The following table provides quantitative information regarding Level 3 fair value measurements inputs:
| September 30, 2022 | December 31, 2021 | |||||||
| Share price | $ | |||||||
| Strike price | $ | |||||||
| Volatility | % | % | ||||||
| Risk-free interest rate | % | % | ||||||
| Dividend yield | % | % | ||||||
NOTE 7 – CAPITAL DEFICIENCY:
| a. | Ordinary Shares |
Class A Ordinary Shares
On November 20, 2020 the Company issued
The Company accounted for the issuance
of the Representative Shares as compensation expenses amounting to $
Pursuant to the initial Public Offering
and the concurrent Private Placement that were each effected in two closings— on February 19, 2021 and March 3, 2021— the
Company issued and sold an aggregate of
| F-16 |
MORINGA ACQUISITION CORP
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 7 – CAPITAL DEFICIENCY (continued):
The Company classified its
Class B Ordinary Shares
On November 20, 2020 the Company issued
Class B ordinary shares are convertible into non-redeemable Class A ordinary shares, on a one-for-one basis, at any time and from time to time at the option of the holder, or automatically on the day of the Business Combination. Class B ordinary shares also possess the sole right to vote for the election or removal of directors, until the consummation of an initial Business Combination.
| b. | Preferred shares |
The Company is authorized to issue up
to
| F-17 |
MORINGA ACQUISITION CORP
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 8 – NET PROFIT (LOSS) PER SHARE:
The following table reflects the calculation of basic and diluted net profit (loss) per share (in dollars, except share amounts):
| Nine months ended September 30, | Three months ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Net profit (loss) for the period | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Accretion to Class A ordinary shares subject to possible redemption to redemption amount (“Accretion”) | ( | ) | ( | ) | ||||||||||||
| Net loss including Accretion | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Class A ordinary shares subject to possible redemption: | ||||||||||||||||
| Numerator: | ||||||||||||||||
| Net loss including Accretion | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Accretion | ||||||||||||||||
| $ | $ | ( | ) | $ | $ | ( | ) | |||||||||
| Denominator: | ||||||||||||||||
| weighted average number of shares | ||||||||||||||||
| Basic and diluted net profit (loss) per Class A ordinary share subject to possible redemption | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Non-redeemable Class A and B ordinary shares: | ||||||||||||||||
| Numerator: | ||||||||||||||||
| Net loss including Accretion | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Denominator: | ||||||||||||||||
| weighted average number of shares | ||||||||||||||||
| Basic and diluted net loss per non-redeemable Class A and B ordinary share | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
NOTE 9 – SUBSEQUENT EVENTS:
The Company evaluated subsequent events and transactions that occurred after the balance sheet date and through the issuance date of these financial statements. The Company did not identify any subsequent events that would have required any adjustments or disclosures in the financial statements.
| F-18 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited condensed financial statements and related notes appearing elsewhere in this Quarterly Report, and our audited financial statements and related notes thereto as of, and for the year ended, December 31, 2021, included in the 2021 Annual Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our initial business combination, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in “Part I, Item 1A. Risk Factors” in the 2021 Annual Report, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Overview
We are a blank check company incorporated as a Cayman Islands exempted company and incorporated for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses. We completed our initial public offering in February 2021, and since that time, we have engaged in discussions with potential business combination target companies, and, in June 2022, entered into a business combination agreement with Holisto Ltd., as described in “Recent Developments” below. We intend to effectuate our prospective initial business combination using (i) cash from the proceeds of our initial public offering and the private placements of the private units, (ii) cash from a new financing involving the sale of our shares and/or other equity, and/or (iii) cash from one or more debt financings.
The issuance of additional ordinary shares in a business combination (whether by our company or by the target company that will serve as the new public company following a business combination):
| ● | may significantly dilute the equity interest of investors in our initial public offering, which dilution would increase if the anti-dilution provisions of the Class B ordinary shares resulted in the issuance of Class A ordinary shares on a greater than one-to-one basis upon conversion of the Class B ordinary shares; |
| ● | may subordinate the rights of holders of Class A ordinary shares if preferred shares are issued with rights senior to those afforded our Class A ordinary shares; |
| ● | could cause a change of control if a substantial number of ordinary shares are issued, which may affect, among other things, our (or the new public company’s) ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of the officers and directors of the public company following the business combination; |
| ● | may have the effect of delaying or preventing a change of control of the new public company by diluting the share ownership or voting rights of a person seeking to obtain control of it; and |
| ● | may adversely affect prevailing market prices for the ordinary shares or warrants of the new public company following the business combination. |
2
Similarly, if the new public company (following a business combination) issue(s) debt securities or otherwise incur(s) significant indebtedness in connection with the business combination transaction, that could result in:
| ● | default and foreclosure on the public company’s assets if its operating revenues after an initial business combination are insufficient to repay its debt obligations; |
| ● | acceleration of the new public company’s obligations to repay the indebtedness even if it makes all principal and interest payments when due if it breaches certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant; |
| ● | immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand; |
| ● | the public company’s inability to obtain necessary additional financing if the debt security contains covenants restricting its ability to obtain such financing while the debt security is issued and outstanding; |
| ● | the public company’s inability to pay dividends on its shares; |
| ● | using a substantial portion of the public company’s cash flow to pay principal and interest on its debt, which will reduce the funds available for dividends on ordinary shares if declared, expenses, capital expenditures, acquisitions and other general corporate purposes; |
| ● | limitations on the public company’s flexibility in planning for and reacting to changes in its business and in the industry in which it operates; |
| ● | increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; and |
| ● | limitations on the public company’s ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, execution of its strategy and other purposes and other disadvantages compared to its competitors that have less debt. |
As indicated in the accompanying financial statements, at September 30, 2022 we had approximately $202 thousand of cash and cash equivalents and an accumulated deficit of approximately $861 thousand. Although we raised $115 million of gross proceeds, in the aggregate, from our initial public offering in February and March 2021, and an additional $3.8 million of gross proceeds, in the aggregate, from our private placements consummated concurrently with the closings of our initial public offering, we expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete our prospective initial business combination or a related capital-raise will be successful.
Recent Developments
On June 9, 2022, we entered into a business combination agreement (the “Business Combination Agreement”), by and among our company, Holisto Ltd., a company organized under the laws of the State of Israel (“Holisto”), and Holisto MergerSub, Inc., a Cayman Islands exempted company and wholly-owned subsidiary of Holisto (“Merger Sub”). The prospective transactions set forth in the Business Combination Agreement (the “Transactions”) will constitute a “Business Combination” as contemplated by our amended and restated memorandum and articles of association. The Business Combination Agreement and the Transactions contemplated thereby have been unanimously approved by the boards of directors of Moringa and Holisto, and by the shareholders of Holisto.
3
The following description of the Business Combination Agreement does not purport to be complete and is qualified in its entirety by reference to the Business Combination Agreement, a copy of which is included as Exhibit 2.1 to our Current Report on Form 8-K, filed with the Securities and Exchange Commission (the “SEC”) on June 13, 2022. Capitalized terms used in this Form 10-Q and not otherwise defined herein have the meanings assigned to them in the Business Combination Agreement.
Pursuant to the Business Combination Agreement, at the closing (the “Closing”) of the prospective Transactions contemplated thereunder, and following the Capital Restructuring (as each such term is defined and described below): (i) Merger Sub will merge with and into our company, with our company continuing as the surviving entity and a wholly-owned subsidiary of Holisto (the “Merger”); (ii) our units, to the extent not previously separated, will be separated into Class A ordinary shares and warrants; (iii) Class B ordinary shares will be converted into Moringa Class A Ordinary Shares; (iv) the Class A ordinary shares will be converted into ordinary shares of Holisto (“Holisto Ordinary Shares”) in accordance with the ratio described below; (v) each Moringa warrant will be converted into one Holisto warrant (on the same terms contained in the Moringa warrants, except that each Holisto warrant will represent the right to acquire Holisto ordinary shares in lieu of Moringa Class A ordinary shares); (vi) Moringa will become a wholly-owned subsidiary of Holisto; and (vii) Moringa, as a wholly-owned subsidiary of Holisto, will change its corporate name to Holisto Inc. and will amend and restate its amended and restated memorandum and articles of association so as to be appropriate for a private company.
The number of Holisto Ordinary Shares to be received in exchange for each Moringa Class A ordinary share in the prospective Merger will depend on whether the share was issued to the public pursuant to the registration statement relating to Moringa’s initial public offering (a “Moringa Public Share”) or whether the share was issued other than as part of Holisto’s initial public offering:
| (i) | each Moringa Class A ordinary share issued to our sponsor and the underwriters for our IPO, including Class A ordinary shares issued upon conversion of Class B ordinary shares, which represent all of Moringa’s ordinary shares that were not issued to the public in the IPO, will automatically be exchanged for one Holisto Ordinary Share; and |
| (ii) | each Moringa Public Share that is not redeemed for cash pursuant to our amended and restated memorandum and articles of association shall automatically become and be converted into the right to receive a number of Holisto Ordinary Shares that is equal to the lower of: (A) 1.6 or (B) the number yielded by the following calculations: (1) first, calculating the sum of (a) the Post-Redemption SPAC Share Number (as defined below) plus (b) 1,725,000 (which may be increased by mutual written consent of Moringa and Holisto), and (2) second, dividing the result of the immediately preceding sub-clause (1) by the Post-Redemption SPAC Share Number (the “Bonus Plan Adjustment”). The Post-Redemption SPAC Share Number is the aggregate number of Moringa Public Shares outstanding after giving effect to all redemptions of Moringa Public Shares. Under this formula, the more Moringa shares that are redeemed, the greater the number of Holisto Ordinary Shares that will be issued in respect of one Moringa Public Share. The maximum ratio will be 1.6 Holisto Ordinary Shares for each Moringa Public Share exchanged in the Merger, which is the ratio if 75% or more of Moringa Public Shares are redeemed, and the minimum ratio will be 1.15 Holisto Ordinary Shares for each Moringa Public Share exchanged in the Merger. |
Prior to the Closing, but subject to the completion of the Closing, Holisto will effect a capital restructuring of its outstanding equity securities (the “Capital Restructuring”) so that the only class of outstanding equity of Holisto will be Holisto Ordinary Shares (along with certain options and warrants to be rolled over in connection with the Transactions). To effect the Capital Restructuring, (i) warrants to purchase Holisto Ordinary Shares, Ordinary A Shares and Preferred Shares (with certain exceptions) will be automatically exercised in accordance with their terms; (ii) each existing Simple Agreement for Future Equity (“SAFE”) that is outstanding for Holisto securities as of the date of the Business Combination Agreement (excluding any New SAFE Agreement, for a total of $4.75 million) will be converted automatically into Holisto Ordinary Shares in accordance with the terms of the SAFE agreements; (iii) the preferred shares and ordinary A shares of Holisto (including preferred shares and ordinary A shares issuable upon exercise of warrants that are exercised as part of the Capital Restructuring) will be converted into Holisto Ordinary Shares in accordance with their terms with the result that only Holisto Ordinary Shares will be outstanding. Holisto will then effect a share split, to become effective immediately prior to the Closing, and subject to the effectiveness of the Merger, pursuant to which each Holisto Ordinary Share outstanding as of immediately prior to the effective time of the Merger (but after the exercises and conversions described above, and excluding and prior to the issuance of any shares pursuant to a New SAFE Agreement) will be converted into the number of Holisto Ordinary Shares computed by (A) multiplying each such Holisto Ordinary Share by (B) the conversion ratio described below (the “Conversion Ratio”); and (iv) with respect to outstanding options and warrants to purchase Holisto Ordinary Shares that are not exercised as part of the Capital Restructuring, the number of Holisto Ordinary Shares issuable upon exercise of those securities, as well as the exercise price of those securities, will be adjusted in accordance with the Conversion Ratio. The Conversion Ratio is based on a Holisto valuation of $400 million plus the amount actually invested pursuant to the New SAFE Agreements, and a share price of $10.00 per Holisto Ordinary Share. The Business Combination Agreement does not provide for any purchase price adjustments to the Conversion Ratio as part of the pre-Closing Capital Restructuring.
4
Contemporaneously with the execution of the Business Combination Agreement, Holisto, Moringa and an institutional investor (the “Investor”) entered into a securities purchase agreement (the “Securities Purchase Agreement”) pursuant to which Holisto agreed to issue to the Investor and the Investor agreed to purchase from Holisto contemporaneously with the prospective Closing under the Business Combination Agreement, on and subject to the terms and conditions of the Securities Purchase Agreement, for a total consideration of $30 million, Holisto’s secured senior convertible note in a principal amount of $30 million, which was to be due two years from the date of issuance (the “Investor Note”), and a warrant to purchase an aggregate of 1,363,636 Holisto Ordinary Shares (the “Financing Warrant”) at an exercise price of $11.50. The Securities Purchase Agreement was terminated as of September 5, 2022 pursuant to Holisto’s termination right, with no liability on the part of any party, other than Holisto’s obligation to reimburse the Investor in an agreed amount of $305,000 for its legal counsel’s fees, of which $50,000 was paid. The Securities Purchase Agreement, and the termination thereof are described in our Current Reports on Form 8-K, filed with the SEC on June 13, 2022 and September 6, 2022, respectively.
The consummation of the prospective Business Combination is subject to certain conditions as further described in the Business Combination Agreement.
Unless specifically stated, this Form 10-Q does not give effect to the prospective Business Combination and does not contain a description of the risks associated with the prospective Business Combination. Such risks and effects relating to the prospective Business Combination are described in a registration statement on Form F-4, filed by Holisto with the SEC on September 7, 2022. The registration statement on Form F-4 also contains a description of the business, operations, financial condition, management, governance, capitalization and other materials terms related to the combined company following the Business Combination, as well as information regarding the redemption process and the shareholders’ meeting of Moringa at which the Transactions will be brought for approval.
Results of Operations and Known Trends or Future Events
We have not engaged in any revenue-generating operations to date. Our only activities since inception have been organizational activities, preparations for our initial public offering and, subsequent to our initial public offering, searching for, and due diligence related to, potential target companies with which to consummate a business combination transaction. We have not and will not generate any operating revenues until after completion of our initial business combination. We generate non-operating income in the form of interest income on investments held in our trust account after our initial public offering. There has been no significant change in our financial or trading position and no material adverse change has occurred since the December 31, 2021 date of our audited financial statements contained in our 2021 Annual Report. After our initial public offering, which was consummated in February and March 2021, we have been incurring increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses related to our search for a target company.
For the three months and nine months ended September 30, 2022, we had net profit of $292.5 thousand and $89.6 thousand respectively, which were attributable to the following factors:
| (i) | for the three months ended September 30, 2022, gain of (x) $9.6 thousand due to the change in fair value of our private placement warrants, and (y) $520.0 thousand attributable to interest earned on investments held in our trust account (held for the benefit of the public holders of our Class A ordinary shares), offset, in part, by $237.0 thousand of administrative operating expenses; and |
| (ii) | for the nine months ended September 30, 2021, gain of (a) $141.1 thousand due to the change in fair value of our private placement warrants, and (b) $692.7 thousand attributable to interest earned on investments held in our trust account (held for the benefit of the public holders of our Class A ordinary shares), offset, in part, by $744.2 thousand of administrative operating expenses. |
5
Liquidity and Capital Resources
We have incurred and expect to continue to incur significant costs in pursuit of our financing and acquisition plans.
In early 2021, prior to the completion of our IPO, our liquidity needs were satisfied from the availability of up to $300,000 in loans from our sponsor under an unsecured promissory note, under which we had initially borrowed $150,000 prior to December 31, 2020 and an additional $20,000 in February 2021. The total $170,000 balance owed under the note was repaid in March 2021 following the closings of our initial public offering.
At the time of our IPO in February and March 2021, we raised $116,200,000 of net proceeds from (i) the sale of units to the public in the offering, after deducting offering expenses of approximately $300,000 and underwriting commissions of $2,300,000 (but excluding an advisory fee of $4,025,000) that have been or will be payable to the representative of the underwriters for services to be performed for us in connection with (and subject to the consummation of) our initial business combination transaction, and (ii) the sale of private units for a purchase price of $3,800,000 in the aggregate. Of that $116,200,000 amount, $115,000,000 (including $4,025,000 in potential advisory fees to be payable to the representative of the underwriters for advisory services in connection with our initial business combination transaction) was deposited into a non-interest bearing trust account. The funds in the trust account are invested only in specified U.S. government treasury bills or in specified money market funds. The remaining $1.2 million was not placed in the trust account. As of June 30, 2022, we had approximately $115.2 million of investments held in that trust account, all of which was invested in Goldman Sachs money market funds.
We intend to use substantially all of the investments held in the trust account (after reduction for payments to redeeming shareholders) including any amounts representing interest earned on the trust account (which interest shall be net of taxes payable, and excluding potential fees to be payable to the underwriters for advisory services in connection with our initial business combination transaction), to fund our post- business combination company. We may withdraw from the trust interest to pay taxes, if any. Our annual income tax obligations depend on the amount of interest and other income earned on the amounts held in the trust account. To the extent we are acquired as part of our initial business combination (as is the case in the prospective Business Combination with Holisto), the remaining proceeds held in the trust account (less any amounts paid out to redeeming shareholders) will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
Subsequent to our initial public offering, our working capital needs were initially satisfied primarily by the $1.2 million available to us initially outside our trust account. Subsequently, in August 2021, our sponsor agreed to make available to us up to $1,000,000, which is evidenced by a promissory note that we issued to our sponsor, and which is repayable upon the earlier of February 19, 2023 (the 24-month, liquidation deadline for our company) or our consummation of our initial business combination. Of the amounts available under that promissory note, we borrowed $300,000 in December 2021, an additional $300,000 in January 2022, $50,000 more in June 2022 and the remaining $350,000 that was available in July 2022. No amounts remain available to us under that note as of the current time.
As of September 30, 2022, we had $202 thousand of cash deposited in our bank account held outside of the trust account. We intend to use those funds and any additional funding that we receive and that we hold outside of the trust account primarily towards activities related to our prospective Business Combination (or any other business combination). Those activities include, in primary part, structuring, negotiating and completing a business combination, securing financing (including commitment fees) for the post-business combination company, paying for administrative and support services, and paying taxes to the extent the interest earned on the trust account is not sufficient to pay our taxes. In addition, we use those funds outside of the trust account for payment of legal and accounting fees related to regulatory reporting requirements, including Nasdaq and other regulatory fees, and funds for working capital to cover miscellaneous expenses and reserves.
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In order to fund working capital deficiencies or finance transaction costs in connection with the prospective Business Combination or any other initial business combination, our sponsor or an affiliate of our sponsor may, but are not obligated to, loan us additional funds as may be required. If we complete our initial business combination, we would repay such loaned amounts. In the event that our initial business combination does not close, we may use a portion of the working capital held outside of the trust account to repay such loaned amounts, but no proceeds from our trust account would be used for such repayment. Up to $1,500,000 of such loans (including the $1,000,000 of loans committed to by our sponsor under the August 2021 promissory note) may be converted into warrants at a price of $1.00 per warrant at the option of the lender. The warrants would be identical to the private warrants (that are part of the private units) issued to our sponsor. We do not expect to seek loans from parties other than our sponsor or an affiliate of our sponsor, as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our trust account.
We believe that we will need to obtain additional funds in order to satisfy our liquidity needs in our pursuit of an initial business combination, as we have exhausted all remaining available amounts under the foregoing $1,000,000 promissory note. Our actual working capital needs will depend on when our business combination is consummated.
We cannot assure you that we will be able to successfully consummate the prospective Business Combination or any other initial business combination.
It is likely that we will be obligated to redeem a significant number of our public shares upon completion of our initial business combination, which will reduce the funds from the trust that become available to the surviving company of the business combination. In that case, Holisto (or any other company with which we combine) will likely need to issue additional securities or incur debt in connection with the business combination. Subject to compliance with applicable securities laws, the surviving public company would only complete such financing simultaneously with the completion of our business combination. In addition, following our initial business combination, if cash on hand is insufficient, the new public company surviving from the business combination may need to obtain additional financing in order to meet its obligations.
If we are unable to complete our initial business combination, we will be forced to cease operations and liquidate our trust account, which liquidation would be less than 12 months after the date of this Quarterly Report. That factor, together with our need for additional funds in order to fund operations until our initial business combination, raise substantial doubt about our ability to continue as a “going concern”. Please see the explanatory paragraph under the heading “Substantial Doubt about the Company’s Ability to Continue as a Going Concern” in the opinion of our independent auditor on our audited financial statements, which appears in Item 15 of our 2021 Annual Report.
Cash provided by operating activities
For the nine months ended September 30, 2022, net cash provided by operating activities was $156.1 thousand. That cash provided by operating activities reflected our net profit of $89.6 thousand for the period, as adjusted to reflect the following matters:
| ● | an increase in cash due to a decrease by $243,750 in prepaid expenses that were not included in our net profit, as offset, in part, by a decrease in cash due to a $36.1 thousand decrease in accrued expenses that were not included in our net profit; and |
| ● | a decrease in cash in order to eliminate a non-cash gain of $141.1 thousand attributable to the change in fair value of our private placement warrants that was included in our net profit. |
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Cash provided by financing activities
For the nine months ended September 30, 2022, net cash provided by financing activities was $700,000, reflecting funds that we borrowed from our sponsor under the promissory note that we had issued to our sponsor.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of September 30, 2022. 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
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay the Sponsor a monthly fee of $10,000 for office space, and administrative and support services, provided to the Company. We began incurring those fees on February 19, 2021 and will continue to incur those fees monthly until the earlier of the completion of a Business Combination and the Company’s liquidation.
We engaged EarlyBirdCapital as an advisor in connection with our initial business combination to assist in holding meetings with our shareholders to discuss the potential business combination and the target business’ attributes, introduce us to potential investors that are interested in purchasing the surviving public company’s securities in connection with our initial business combination, assist in obtaining shareholder approval for the business combination and assist with press releases and public filings in connection with the business combination. We will pay EarlyBirdCapital a cash fee for such services upon the consummation of our initial business combination in an amount equal to 3.5% of the gross proceeds of the IPO, or $4,025,000 (exclusive of any applicable finders’ fees which might become payable).
Critical Accounting Estimates
Private Warrant Liability
Please refer to Note 6 - Fair Value Measurements to our condensed financial statements included in Item 1 for the method and level 3 inputs used for the measurement of the Private Warrant Liability.
No sensitivity analysis was provided, as the range of reasonably possible inputs would not have a material impact on our condensed financial statements taken as a whole.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The net proceeds of our initial public offering and the sale of the private units held in the trust account will be invested in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act that maintain a stable net asset value of $1.00, which invest only in direct U.S. government treasury obligations. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure 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.
Our management evaluated, with the participation of our chief executive officer and chief financial officer, the effectiveness of our disclosure controls and procedures as of September 30, 2022, pursuant to Rule 13a-15(b) or Rule 15d-15(b) under the Exchange Act. Based upon their evaluation, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures were not effective as of September 30, 2022 because of the material weakness in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Specifically, our management has concluded that our control around the interpretation and accounting for certain complex features of our Class A ordinary shares and private placement warrants was not effectively designed or maintained. This material weakness resulted in the restatement of our audited financial statement as of March 3, 2021. Additionally, this material weakness could result in a misstatement of the warrant liability (for our private placement warrants), Class A ordinary shares and related accounts and disclosures that would result in a material misstatement of the financial statements that would not be prevented or detected on a timely basis. We are diligently working to improve our internal control over financial reporting and to thereby remedy this material weakness.
Changes in Internal Control Over Financial Reporting
During the most recently completed fiscal quarter, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 1A. RISK FACTORS.
Factors that could cause our actual results to differ materially from our expectations, as described in this Quarterly Report, include the risk factors described in Part I, Item 1A, of our 2021 Annual Report. As of the date of this Quarterly Report, there have been no material changes to those risk factors, except as described below:
Our completion of our proposed business combination, and Holisto, which we endeavor to consummate a business combination with, may be materially adversely affected by current unfavorable macro-economic trends.
Certain global macro-economic trends that developed in the aftermath of the COVID-19 pandemic have been adversely impacting the global economic environment. Supply chain delays, initially caused by closures during the pandemic, and rising shipping costs, which have been exacerbated by the ongoing Russian invasion of the Ukraine, have contributed towards inflationary pressures on many goods and commodities globally. The infusion of money into circulation as part of a “loose” monetary policy during the pandemic to encourage consumer spending, along with historically low interest rates for an extended period of time, which were designed to ease economic conditions, further triggered upwards pressure on prices of goods and services. The high rates of inflation globally have caused governments and central banks to act to curb inflation, including by raising interest rates, which has been inhibiting economic activity and access to capital markets, and may cause a recession, whether in individual countries or regions, or globally.
These deteriorating economic conditions may adversely impact our access to financing for the combined company upon the consummation of our proposed Business Combination, thereby frustrating our ability to effect that combination.
If the disruptions posed by unfavorable macro-economic conditions continue for a further extensive period of time, our ability to consummate our proposed Business Combination, or the operations of Holisto, with which we endeavor to consummate the Business Combination, may be materially adversely affected.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
On February 16, 2021, the Registration Statement on Form S-1 (File No. 333-252615) relating to our IPO was declared effective by the SEC. For a description of the use of the proceeds generated in our IPO, see Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations- Liquidity and Capital Resources” of this Form 10-Q. The use of net proceeds from our IPO described herein does not reflect a material change in the expected use of such proceeds as described in our final prospectus for the IPO.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
None.
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ITEM 6. EXHIBITS.
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
| * | Filed herewith. |
| ** | Furnished herewith. |
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SIGNATURES
Pursuant to the requirements of Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| MORINGA ACQUISITION CORP | ||
| Date: November 14, 2022 | /s/ Ilan Levin | |
| Name: | Ilan Levin | |
| Title: | Chief Executive Officer and Chairman | |
| (Principal Executive Officer) | ||
| Date: November 14, 2022 | /s/ Gil Maman | |
| Name: | Gil Maman | |
| Title: | Chief Financial Officer | |
| (Principal Financial and Accounting Officer) | ||
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