NOTES
TO CONDENSED FINANCIAL STATEMENTS
JUNE
30, 2022
(Unaudited)
NOTE
1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
LIV
Capital Acquisition Corp. II (the “Company”) is a blank check company incorporated in the Cayman Islands on February 11,
2021. The Company was formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, recapitalization,
reorganization or similar business combination with one or more businesses or entities (“Business Combination”).
Although
the Company is not limited to a particular industry or geographic region for purposes of consummating a Business Combination, the Company
intends to focus on Mexican target businesses (or non-Mexican target businesses with a significant presence in Mexico). The Company is
an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging
growth companies.
As of June 30, 2022, the
Company had not commenced any operations. All activity for the period from February 11, 2021 (inception) through June 30, 2022, relates
to the Company’s formation, the initial public offering (“Initial Public Offering”), which is described below, and subsequent
to the Initial Public Offering, identifying a target company for a Business Combination. The Company will not generate any operating revenues
until after the completion of a Business Combination, at the earliest. The Company generates non-operating income in the form of interest
income from the proceeds derived from the Initial Public Offering.
The
registration statement for the Company’s Initial Public Offering was declared effective on February 7, 2022. On February 10, 2022,
the Company consummated the Initial Public Offering of 10,000,000 units (the “Units” and, with respect to the Class A ordinary
shares included in the Units sold, the “Public Shares” or the “Class A Ordinary Shares”), generating gross proceeds
of $100,000,000, which is described in Note 3.
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the sale of 5,500,000 warrants (each, a “Private Placement
Warrant” and, collectively, the “Private Placement Warrants”) at a price of $1.00 per Private Placement Warrant in
a private placement to LIV Capital Acquisition Sponsor II, L.P. (the “Sponsor”) and EarlyBirdCapital, Inc. (and/or their
designees), generating gross proceeds of $5,500,000, which is described in Note 4.
Following
the closing of the Initial Public Offering on February 10, 2022, an amount of $102,000,000 ($10.20 per Unit) from the net proceeds of
the sale of the Units in the Initial Public Offering and the sale of the Private Placement Warrants was placed in a trust account (the
“Trust Account”), will be held in cash items or invested in U.S. government securities, within the meaning set forth in Section
2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 180 days or
less, or in any open-ended investment company that holds itself out as a money market fund meeting the conditions of Rule 2a-7 of the
Investment Company Act, as determined by the Company, until the earlier of: (i) the consummation of a Business Combination or (ii) the
distribution of the funds in the Trust Account to the Company’s shareholders, as described below.
On
February 15, 2022, the underwriters partially exercised their over-allotment option, resulting in an additional 1,450,000 Public Shares
issued for an aggregate amount of $14,500,000. A total of $14,790,000 was deposited into the Trust Account, bringing the aggregate proceeds
held in the Trust Account to $116,790,000.
Transaction
costs amounted to $3,888,278, consisting of $2,290,000 of underwriting fees, and $1,598,278 of other offering costs.
LIV
CAPITAL ACQUISITION CORP. II
NOTES
TO CONDENSED FINANCIAL STATEMENTS
JUNE
30, 2022
(Unaudited)
While
the Company’s management has broad discretion with respect to the specific application of the cash held outside of the Trust Account,
substantially all of the net proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, which are placed
in the Trust Account are intended to be applied generally toward consummating a Business Combination. There is no assurance that the
Company will be able to complete a Business Combination successfully. The Company must complete a Business Combination with one or more
target businesses that together have an aggregate fair market value of at least 80% of the value of the Trust Account (as defined below)
(excluding the deferred underwriting commissions and taxes payable on income earned on the Trust Account) at the time of the agreement
to enter into an initial Business Combination. The Company will only complete a Business Combination if the post-transaction company
owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target
sufficient for it not to be required to register as an investment company under the Investment Company Act.
The
Company will provide its shareholders with the opportunity to redeem all or a portion of their Public Shares upon the completion of a
Business Combination either (i) in connection with a shareholder meeting called to approve the Business Combination or (ii) by
means of a tender offer. The decision as to whether the Company will seek shareholder approval of a Business Combination or conduct a
tender offer will be made by the Company, solely in its discretion. The shareholders will be entitled to redeem their shares for a pro
rata portion of the amount held in the Trust Account (initially $10.20 per share) as of two business days prior to the completion
of a Business Combination, including any pro rata interest earned on the funds held in the Trust Account and not previously released
to the Company to pay its tax obligations. There will be no redemption rights upon the completion of a Business Combination with respect
to the Company’s warrants.
The
Company will proceed with a Business Combination only if the Company has net tangible assets of at least $5,000,001 upon such completion
of a Business Combination and, if the Company seeks shareholder approval, it receives an ordinary resolution under Cayman Islands law
approving a Business Combination, which requires the affirmative vote of a majority of the shareholders who attend and vote and a general
meeting of the Company. If a shareholder vote is not required and the Company does not decide to hold a shareholder vote for business
or other legal reasons, the Company will, pursuant to its Amended and Restated Memorandum and Articles of Association, conduct the redemptions
pursuant to the tender offer rules of the Securities and Exchange Commission (“SEC”), and file tender offer documents containing
substantially the same information as would be included in a proxy statement with the SEC prior to completing a Business Combination.
If the Company seeks shareholder approval in connection with a Business Combination, the Sponsor has agreed to vote its Founder Shares
and any Public Shares purchased in or after the Initial Public Offering in favor of approving a Business Combination and to waive its
redemption rights with respect to any such shares in connection with a shareholder vote to approve a Business Combination or seek to
sell any shares to the Company in a tender offer in connection with a Business Combination. Additionally, subject to the immediately
succeeding paragraph, each public shareholder may elect to redeem their Public Shares, without voting, and if they do vote, irrespective
of whether they vote for or against a proposed Business Combination.
If
the Company seeks shareholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules,
the Company’s Amended and Restated Memorandum and Articles of Association provides that a public shareholder, together with any
affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a “group” (as defined
under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will
be restricted from redeeming its shares with respect to 15% or more of the Public Shares without the Company’s prior written consent.
LIV
CAPITAL ACQUISITION CORP. II
NOTES
TO CONDENSED FINANCIAL STATEMENTS
JUNE
30, 2022
(Unaudited)
The
Sponsor has agreed (a) to waive its redemption rights with respect to any Founder Shares and Public Shares held by it in connection
with the completion of a Business Combination (and not seek to sell its shares to the Company in any tender offer the Company undertakes
in connection with its initial Business Combination) and (b) not to propose an amendment to the Amended and Restated Memorandum
and Articles of Association (i) that would affect the ability of holders of Public Shares to convert or sell their shares to the
Company in connection with a Business Combination or to modify the substance or timing of the Company’s obligation to redeem 100%
of the Public Shares if the Company does not complete a Business Combination within 15 months from the closing of the Public Offering
(extendable at the sponsor’s option to up to 18 months) or (ii) with respect to any other provision relating to shareholders’
rights or pre-initial Business Combination activity, unless the Company provides the public shareholders with the opportunity to redeem
their Public Shares in conjunction with any such amendment and (c) that the Founder Shares shall not participate in any liquidating
distributions upon winding up if a Business Combination is not consummated. However, the Sponsor will be entitled to liquidating distributions
from the Trust Account with respect to any Public Shares purchased during or after the Initial Public Offering if the Company fails to
complete its Business Combination.
The
Company will have until May 10, 2023 (15 months (extendable at the sponsor’s option to up to August 10, 2023 (18 months))
from the closing of the Initial Public Offering) (the “Combination Period”) to consummate a Business Combination. However,
if the Company anticipates that it may not be able to consummate the initial business combination within 15 months, the Company may,
by resolution of the board of directors at the option of the sponsor, extend the period of time to consummate an initial business combination
by an additional three months, for a total of up 18 months from the closing of the Initial public offering (such period as extended,
the “Extension Period”), subject to the sponsor contributing $0.10 to the trust account for each unit sold in the Initial
public offering in the form of a non-interest bearing loan which would be repaid upon consummation of an initial business combination.
The Company intends to issue a press release prior to the expiration of the initial 15-month period announcing whether the Company is
extending the time period to consummate a business combination. The shareholders will not be entitled to vote on, or redeem their shares
in connection with, such an extension. Pursuant to the terms of the amended and restated memorandum and articles of association, in order
to extend the period of time to consummate an initial business combination in such a manner, the sponsor must deposit $1,000,000, or
up to $1,150,000 depending on the extent to which the underwriters’ over-allotment option is exercised, into the trust account
on or prior to the date of the deadline, for the three-month extension. This feature is different than many other special purpose acquisition
companies, in which any extension of the company’s period to consummate an initial business combination would require a vote of
the company’s shareholders and in connection with such vote shareholders would have the right to redeem their public shares. If
the Company is unable to complete a Business Combination within the Combination Period, the Company will (i) cease all operations
except for the purpose of winding up, (ii) as promptly as reasonably possible but no more than 10 business days thereafter,
redeem 100% of the outstanding Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in
the Trust Account, including interest earned (less up to $100,000 of interest to pay dissolution expenses and which interest shall be
net of taxes payable), divided by the number of then outstanding Public Shares, which redemption will completely extinguish public shareholders’
rights as shareholders (including the right to receive further liquidation distributions, if any), and (iii) as promptly as reasonably
possible following such redemption, subject to the approval of the remaining shareholders and the Company’s board of directors,
dissolve and liquidate, subject in each case to its obligations under Cayman Islands law to provide for claims of creditors and the requirements
of other applicable law.
LIV
CAPITAL ACQUISITION CORP. II
NOTES
TO CONDENSED FINANCIAL STATEMENTS
JUNE
30, 2022
(Unaudited)
The
Sponsor has agreed that it will be liable to the Company, if and to the extent any claims by a third party (other than the Company’s
independent auditors) for services rendered or products sold to the Company, or a prospective target business with which the Company
has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below (1) $10.20 per Public
Share or (2) such lesser amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account
due to reductions in the value of trust assets, in each case net of the interest which may be withdrawn to pay taxes, except as to any
claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims under
the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities
under the Securities Act of 1933, as amended (the “Securities Act”). In the event that an executed waiver is deemed
to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims.
The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors
by endeavoring to have all vendors, service providers (other than the Company’s independent auditors), prospective target businesses
or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim
of any kind in or to monies held in the Trust Account.
Risks
and Uncertainties
Management
continues to evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that
the virus could have a negative effect on the Company’s financial position, results of its operations, and/or search for a target
company, the specific impact is not readily determinable as of the date of the unaudited condensed financial statements. The unaudited
condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Going
Concern
As
of June 30, 2022, the Company had $11,398 in its operating bank accounts, $116,943,151 in marketable securities held in the Trust Account
to be used for a Business Combination or to repurchase or redeem stock in connection therewith and a working capital deficit of $895,814.
Until
the consummation of a Business Combination, the Company will be using the funds not held in the Trust Account for identifying and evaluating
prospective acquisition candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting
the target business to acquire, and structuring, negotiating and consummating the Business Combination.
In
addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor,
or certain of the Company’s officers and directors may, but are not obligated to, loan the Company Working Capital Loans (Note
5). Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist
with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest,
or, at the lender’s discretion, up to $1.5 million of such Working Capital Loans may be convertible into warrants at a price of
$1.00 per warrant. The warrants would be identical to the Private Placement Warrants. As of June 30, 2022 and December 31, 2021, the
Company has no borrowings under the Working Capital Loans.
In
connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standard Board’s
(“FASB”) Accounting Standards Codification (“ASC”) Subtopic 205-40, “Presentation of Financial Statements
– Going Concern,” management has determined that the liquidity condition and date for mandatory liquidation and dissolution
raise substantial doubt about the Company’s ability to continue as a going concern through approximately one year from the date
these condensed financial statements were issued. No adjustments have been made to the carrying amounts of assets or liabilities should
the Company be required to liquidate after May 10, 2023.
LIV
CAPITAL ACQUISITION CORP. II
NOTES
TO CONDENSED FINANCIAL STATEMENTS
JUNE
30, 2022
(Unaudited)
NOTE
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted
in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form
10-Q and Article 8 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements
prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial
reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position,
results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include
all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating
results and cash flows for the periods presented.
The
accompanying unaudited condensed financial statements should be read in conjunction with the Company’s prospectus for its Initial
Public Offering as filed with the SEC on February 9, 2022, as well as the Company’s Current Report on Form 8-K, as filed with the
SEC on February 16, 2022. The interim results for the three and six months ended June 30, 2022 are not necessarily indicative of the
results to be expected for the year ending December 31, 2022 or for any future periods.
Emerging
Growth Company
The Company is an “emerging
growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups
Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements
that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required
to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding
executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory
vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. If some investors find
the Company’s securities less attractive as a result, there may be a less active trading market for the Company’s securities
and the prices of the Company’s securities may be more volatile.
Further,
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 an emerging growth 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. 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.
LIV
CAPITAL ACQUISITION CORP. II
NOTES
TO CONDENSED FINANCIAL STATEMENTS
JUNE
30, 2022
(Unaudited)
Use
of Estimates
The
preparation of the unaudited condensed financial statements in conformity with GAAP requires the Company’s 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 financial statements and the reported amounts of revenues and expenses during the reporting period.
Making
estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of
a condition, situation or set of circumstances that existed at the date of the unaudited condensed financial statements, which management
considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual
results could differ significantly from those estimates.
Cash
and Cash Equivalents
The
Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.
The Company did not have any cash equivalents as of June 30, 2022 and December 31, 2021.
Marketable
Securities Held in Trust Account
At
June 30, 2022, substantially all of the assets held in the Trust Account were held U.S. Treasury securities. All of the Company’s
investments held in the Trust Account are classified as trading securities. Trading securities are presented on the balance sheet at
fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of investments held in Trust
Account are included in interest earned on marketable securities held in Trust Account in the accompanying unaudited condensed statements
of operations. The estimated fair values of investments held in Trust Account are determined using available market information. At December
31, 2021, no assets were held in the Trust Account.
Offering
Costs
The
Company complies with the requirements of ASC 340-10-S99-1 and SEC Staff Accounting Bulletin Topic 5A – “Expenses of Offering”.
Offering costs consist of underwriting, legal, accounting and other expenses incurred through the Initial Public Offering that are directly
related to the Initial Public Offering. Offering costs are allocated to the separable financial instruments issued in the Initial Public
Offering based on a relative fair value basis, compared to total proceeds received. Offering costs amounted to $3,888,278 which were
charged to shareholders’ equity upon the completion of the Initial Public Offering and the partial exercise of the over-allotment
option.
Income
Taxes
The
Company accounts for income taxes under ASC 740, Income Taxes (“ASC 740”). ASC 740 requires the recognition
of deferred tax assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets
and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally
requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not
be realized.
ASC 740
also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes
a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected
to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination
by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition.
The
Company is considered an exempted Cayman Islands Company and is presently not subject to income taxes or income tax filing requirements
in the Cayman Islands, Mexico or the United States.
LIV
CAPITAL ACQUISITION CORP. II
NOTES
TO CONDENSED FINANCIAL STATEMENTS
JUNE
30, 2022
(Unaudited)
Net
Loss per Ordinary Share
The
Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. Net loss per ordinary
share is computed by dividing net loss by the weighted average number of ordinary shares outstanding for the period. Subsequent measurement
of the redeemable shares of Class A ordinary shares is excluded from net loss per ordinary share as the redemption value approximates
fair value.
The
calculation of diluted net loss per ordinary share does not consider the effect of the warrants underlying the units issued in connection
with the (i) Initial Public Offering, (ii) over-allotment option and (iii) the private placement, since the exercise of the warrants
is contingent upon the occurrence of future events. The outstanding warrants are exercisable to purchase 14,087,500 Class A ordinary
shares in the aggregate. As of June 30, 2022 and 2021, the Company did not have any dilutive securities or other contracts that could,
potentially, be exercised or converted into ordinary shares and then share in the earnings of the Company. As a result, diluted net loss
per ordinary share is the same as basic net loss per ordinary share for the periods presented.
The
following table reflects the calculation of basic and diluted net loss per ordinary share (in dollars, except share amounts):
| |
Three Months Ended June 30, | |
| |
2022 | | |
2021 | |
| |
Class A | | |
Class B | | |
Class A | | |
Class B | |
Basic and diluted net loss per ordinary share | |
| | | |
| | | |
| | | |
| | |
Numerator: | |
| | | |
| | | |
| | | |
| | |
Allocation of net loss | |
$ | (667,250 | ) | |
$ | (176,136 | ) | |
$ | — | | |
$ | — | |
Denominator: | |
| | | |
| | | |
| | | |
| | |
Basic and diluted weighted average shares outstanding | |
| 11,450,000 | | |
| 3,022,500 | | |
| — | | |
| 63,187 | |
Basic and diluted net loss per ordinary share | |
$ | (0.06 | ) | |
$ | (0.06 | ) | |
$ | — | | |
$ | — | |
| |
Six Months Ended
June 30, | | |
For the period from
February 11, 2021
(inception)
through June 30, | |
| |
2022 | | |
2021 | |
| |
Class A | | |
Class B | | |
Class A | | |
Class B | |
Basic and diluted net loss per ordinary share | |
| | | |
| | | |
| | | |
| | |
Numerator: | |
| | | |
| | | |
| | | |
| | |
Allocation of net loss | |
$ | (645,939 | ) | |
$ | (213,945 | ) | |
$ | — | | |
$ | (7,393 | ) |
Denominator: | |
| | | |
| | | |
| | | |
| | |
Basic and diluted weighted average shares outstanding | |
| 8,816,298 | | |
| 2,920,097 | | |
| — | | |
| 31,768 | |
Basic and diluted net loss per ordinary share | |
$ | (0.07 | ) | |
$ | (0.07 | ) | |
$ | — | | |
$ | (0.23 | ) |
LIV
CAPITAL ACQUISITION CORP. II
NOTES
TO CONDENSED FINANCIAL STATEMENTS
JUNE
30, 2022
(Unaudited)
Concentration
of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution,
which, at times may exceed the Federal Depository Insurance Coverage of $250,000. The Company has not experienced losses on these accounts
and management believes the Company is not exposed to significant risks on such accounts.
Fair
Value of Financial Instruments
The
fair value of the Company’s assets and liabilities, which qualify as financial instruments under FASB ASC Topic 820, Fair
Value Measurement (“ASC 820”), approximates the carrying amounts represented in the accompanying balance sheet,
primarily due to their short-term nature.
The
Company applies ASC 820, which establishes a framework for measuring fair value and clarifies the definition of fair value within
that framework. ASC 820 defines fair value as an exit price, which is the price that would be received for an asset or paid to transfer
a liability in the Company’s principal or most advantageous market in an orderly transaction between market participants on the
measurement date. The fair value hierarchy established in ASC 820 generally requires an entity to maximize the use of observable
inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs reflect the assumptions that market participants
would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the reporting
entity. Unobservable inputs reflect the entity’s own assumptions based on market data and the entity’s judgments about the
assumptions that market participants would use in pricing the asset or liability and are to be developed based on the best information
available in the circumstances.
Level
1 — Assets and liabilities with unadjusted, quoted prices listed on active market exchanges. Inputs to the fair value measurement
are observable inputs, such as quoted prices in active markets for identical assets or liabilities.
Level
2 — Inputs to the fair value measurement are determined using prices for recently traded assets and liabilities with similar
underlying terms, as well as direct or indirect observable inputs, such as interest rates and yield curves that are observable at commonly
quoted intervals.
Level
3 — Inputs to the fair value measurement are unobservable inputs, such as estimates, assumptions, and valuation techniques
when little or no market data exists for the assets or liabilities.
The
Company valued the representative shares issued to EarlyBirdCapital and the over-allotment liability based on Level 3 inputs, see Note
8.
Derivative
Financial Instruments
The
Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded
derivatives in accordance with ASC Topic 815, Derivatives and Hedging. For derivative financial instruments that are accounted
for as liabilities, the derivative instrument is initially recorded at its fair value on the grant date and is then re-valued at each
reporting date, with changes in the fair value reported in the statement of operations. The classification of derivative instruments,
including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period.
Derivative liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion
of the instrument could be required within 12 months of the balance sheet date.
The
Company granted the underwriters a 45-day option at the Initial Public Offering date to purchase up to 1,500,000 additional Units to
cover over-allotments. The over-allotment option was evaluated under ASC 480 “Distinguishing Liabilities from Equity.”
The Company concluded that the underlying transaction (Units which include redeemable shares and warrants) of the over-allotment option embodies
an obligation to repurchase the issuer’s equity shares. Accordingly, the option was fair valued and recorded as a liability at
issuance date and applied to the offering cost of the Class A redeemable shares. On February 15, 2022, the underwriters partially exercised
their over-allotment option resulting in the forfeiture of 12,500 founder shares subject to redemption and the de-recognition of the
over-allotment option liability on the balance sheets. See Note 8 for the fair value of the over-allotment option liability.
LIV
CAPITAL ACQUISITION CORP. II
NOTES
TO CONDENSED FINANCIAL STATEMENTS
JUNE
30, 2022
(Unaudited)
Class
A Ordinary Shares Subject to Possible Redemption
The
Company accounts for its Class A ordinary shares subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing
Liabilities from Equity.” Class A ordinary shares subject to mandatory redemption are classified as a liability instrument and
are measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares that feature redemption rights that are
either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s
control) are classified as temporary equity. At all other times, ordinary shares are classified as shareholders’ equity. The Company’s
Class A ordinary shares feature certain redemption rights that are considered to be outside of the Company’s control and subject
to occurrence of uncertain future events. Accordingly, at June 30, 2022, Class A ordinary shares subject to possible redemption are presented
at redemption value as temporary equity, outside of the shareholders’ equity section of the Company’s balance sheet.
The
Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable ordinary shares
to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable ordinary
shares are affected by charges against additional paid-in capital and accumulated deficit.
At
June 30, 2022, the Class A ordinary shares reflected in the balance sheet are reconciled in the following table:
Gross proceeds | |
$ | 114,500,000 | |
Less: | |
| | |
Proceeds allocated to Public Warrants | |
$ | (2,490,375 | ) |
Allocated value of transaction costs to Class A ordinary shares | |
$ | (3,732,130 | ) |
Plus: | |
| | |
Remeasurement of carrying value to redemption value | |
$ | 8,665,656 | |
Class A ordinary shares subject to possible redemption | |
$ | 116,943,151 | |
New
Accounting Pronouncements
In
August 2020, the FASB issued ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s
Own Equity. The update simplifies the accounting for convertible instruments by removing certain separation models in Subtopic 470-20,
Debt — Debt with Conversion and Other Options for convertible instruments and introducing other changes. As a result
of ASU No. 2020-06, more convertible debt instruments will be accounted for as a single liability measured at its amortized cost
and more convertible preferred stock will be accounted for as a single equity instrument measured at its historical cost, as long as
no features require bifurcation and recognition as derivatives. The amendments are effective for smaller reporting companies for fiscal years
beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no
earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The
Company adopted ASU No. 2020-06 upon its incorporation. The impact to our balance sheet, statement of operations and cash flows
was not material.
Management
does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a
material effect on the Company’s financial statement.
NOTE
3. INITIAL PUBLIC OFFERING
Pursuant
to the Initial Public Offering, the Company sold 10,000,000 Units at a purchase price of $10.00 per Unit. Each Unit consist of one
Class A ordinary share and three-quarters of one redeemable warrant (“Public Warrant”). Each whole Public Warrant entitles
the holder to purchase one Class A ordinary share at an exercise price of $11.50 per share (See Note 7). On February 15, 2022,
the underwriters partially exercised its over-allotment option, resulting in the sale of an additional 1,450,000 Units for an aggregate
amount of $14,500,000.
LIV
CAPITAL ACQUISITION CORP. II
NOTES
TO CONDENSED FINANCIAL STATEMENTS
JUNE
30, 2022
(Unaudited)
NOTE
4. PRIVATE PLACEMENT
Simultaneously
with the closing of the Initial Public Offering, the Sponsor and EarlyBirdCapital, Inc. purchased an aggregate of 5,500,000 Private Placement
Warrants (representing 5,000,000 private warrants by our sponsor and 500,000 private warrants by EarlyBirdCapital, Inc.) at a price of
$1.00 per Private Placement Warrant, from the Company in a private placement. Each Private Placement Warrant is exercisable for one Class A
ordinary share at a price of $11.50 per share, subject to adjustment (see Note 7). The proceeds from the sale of the Private Placement
Warrants were added to the net proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete
a Business Combination within the Combination Period, the proceeds from the sale of the Private Placement Warrants held in the Trust
Account will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Private Placement
Warrants will expire worthless.
NOTE
5. RELATED PARTY TRANSACTIONS
Founder
Shares
On
June 28, 2021, the Sponsor was issued 2,875,000 Class B ordinary shares (the “Founder Shares”) for an aggregate
of $25,000 paid to cover certain expenses on behalf of the Company. The Founder Shares will automatically convert into Class A ordinary
shares on the first business day following the completion of a Business Combination on a one-for-one basis, subject to certain adjustments,
as described in Note 7. The Founder Shares include an aggregate of up to 375,000 Class B ordinary shares subject to forfeiture
by the Sponsor to the extent that the underwriters’ over-allotment option is not exercised in full or in part, so that the
Sponsor will own, on an as-converted basis, 20% of the Company’s issued and outstanding shares after the Initial Public Offering
(assuming the Sponsor does not purchase any Public Shares in the Initial Public Offering). On February 15, 2022, 12,500 Class B ordinary
shares were forfeited as a result of the underwriters’ election to partially exercise their remaining over-allotment option. As
a result of the underwriters’ election to partially exercise their over-allotment option, a total of 362,500 Founder Shares are
no longer subject to forfeiture.
The
Sponsor has agreed that, subject to certain limited exceptions, the Founder Shares are not transferable, assignable or salable (except
to the officers and directors and other persons or entities affiliated with the Sponsor, each of whom will be subject to the same transfer
restrictions) until the earlier of (A) one year after the completion of the initial Business Combination or earlier if, subsequent
to the initial Business Combination, the closing price of the Class A ordinary shares equals or exceeds $12.00 per share (as adjusted
for share divisions, share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any
30-trading day period commencing at least 150 days after the initial Business Combination, and (B) the date following
the completion of the initial Business Combination on which the Company completes a liquidation, merger, capital stock exchange or other
similar transaction that results in all of the shareholders having the right to exchange their Class A ordinary shares for cash,
securities or other property.
Promissory
Note — Related Party
On March 22, 2021, the Sponsor
agreed to loan the Company an aggregate of up to $300,000 to cover expenses related to the Initial Public Offering pursuant to a promissory
note (the “Promissory Note”). The Promissory Note is non-interest bearing, initially amended and restated in its entirety
on December 30, 2021, to extend the maturity date to the earlier of June 30, 2022 or the consummation of the Initial Public Offering,
and subsequently amended and restated in its entirety on January 31, 2022 to extend its maturity to December 30, 2023. As
of June 30, 2022 and December 31, 2021, $125,000 and $100,000, respectively, was outstanding under the Promissory Note.
Administrative Services Agreement
The Company entered into
an agreement on February 7, 2022, pursuant to which it will pay the Sponsor up to $10,000 per month for office space, administrative and
support services. Upon completion of a Business Combination or its liquidation, the Company will cease paying these monthly fees. For
the three and six months ended June 30, 2022, the Company incurred $30,000 and $50,000 for these services, of which such amounts are recorded
as accrued expenses in the balance sheet as of June 30, 2022. For the three months ended June 30, 2021 and for the period
from February 11, 2021 (inception) through June 30, 2021, the Company did not incur any fees for these services.
LIV
CAPITAL ACQUISITION CORP. II
NOTES
TO CONDENSED FINANCIAL STATEMENTS
JUNE
30, 2022
(Unaudited)
Related
Party Loans
In
order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain
of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working
Capital Loans”). Such Working Capital Loans would be evidenced by promissory notes. The notes may be repaid upon completion of
a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of notes may be converted upon completion
of a Business Combination into warrants at a price of $1.00 per warrant. Such warrants would be identical to the Private Placement Warrants.
In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to
repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. As of June
30, 2022 and December 31, 2021, there were no Working Capital Loan outstanding.
NOTE
6. COMMITMENTS AND CONTINGENCIES
Registration
and Shareholder Rights Agreement
Pursuant
to a registration and shareholder rights agreement entered into on February 7, 2022, the holders of the Founder Shares, representative
shares, private warrants and any warrants that may be issued on conversion of Working Capital Loans (and any ordinary shares issuable
upon the exercise of the private warrants or warrants issued upon conversion of the Working Capital Loans and upon conversion of the
Founder Shares) are entitled to registration rights. The holders of these securities will be entitled to make up to three demands, excluding
short form registration demands, that the Company registers such securities. In addition, the holders have certain “piggy-back”
registration rights with respect to registration statements filed subsequent to the completion of the Company’s initial Business
Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act.
However, the registration rights agreement provides that the Company will not permit any registration statement filed under the Securities
Act to become effective until termination of the applicable lock-up period, which occurs (1) in the case of the Founder Shares,
on the earlier of (A) one year after the completion of the initial Business Combination or (B) subsequent to the initial Business
Combination, (x) if the last reported sale price of Class A ordinary shares equals or exceeds $12.00 per share (as adjusted
for share splits, share dividends, rights issuances, subdivisions, reorganizations, recapitalizations and the like) for any 20 trading
days within any 30-trading day period commencing at least 150 days after the initial Business Combination, or (y) the
date following the completion of the initial Business Combination on which the Company completes a liquidation, merger, amalgamation,
share exchange, reorganization or other similar transaction that results in all of the public shareholders having the right to exchange
their Class A ordinary shares for cash, securities or other property, and (2) in the case of the representative shares, Private
Placement Warrants and the respective Class A ordinary shares underlying such warrants, 30 days after the completion of the
initial Business Combination. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting
Agreement
The
Company granted the underwriters a 45-day option from the date of the Initial Public Offering to purchase up to 1,500,000 additional
Units to cover over-allotments, if any, at the Initial Public Offering price less the underwriting discounts and commissions. On
February 15, 2022, the underwriters elected to partially exercise the over-allotment option to purchase an additional 1,450,000 Public
Shares at a price of $10.00 per Public Share.
The
underwriters were entitled to a cash underwriting discount of $0.20 per Unit, or $2,290,000 in the aggregate which was paid upon the
closing of the Initial Public Offering and exercise of over-allotment options.
Business
Combination Marketing Agreement
The
Company engaged EarlyBirdCapital, Inc. (“EBC”) as an advisor in connection with the Business Combination to assist the Company
in holding meetings with the Company’s shareholders to discuss the potential Business Combination and the target business’
attributes, introduce the Company to potential investors that are interested in purchasing the Company’s securities in connection
with the initial Business Combination, assist the Company in obtaining shareholder approval for the Business Combination and assist the
Company with press releases and public filings in connection with the Business Combination. The Company will pay EBC a cash fee for such
services upon the consummation of the initial Business Combination in an amount equal to 3.5% of the gross proceeds of the Initial Public
Offering (exclusive of any applicable finders’ fees which might become payable); provided that up to 25% of the fee may be allocated
at the Company’s sole discretion to other FINRA members that assist the Company in identifying and consummating an initial Business
Combination.
LIV
CAPITAL ACQUISITION CORP. II
NOTES
TO CONDENSED FINANCIAL STATEMENTS
JUNE
30, 2022
(Unaudited)
Finders
Fee Agreement
On
March 15, 2022, the Company entered into a finders fee agreement with a consultant to assist the Company in facilitating a Business Combination
with one or more targets, subject to certain conditions. The finder will only be compensated in the event that the Business Combination
is consummated with a target sourced by the finder. The Company shall pay the finder a fee of $300,000, plus applicable tax. In connection
with the Business Combination, the Company shall pay a financing fee to the finder cash fee equal to 2% of all PIPE funds received and
accepted by the Company from investors sourced by the finder, subject to certain conditions.
NOTE
7. SHAREHOLDERS’ EQUITY
Preference
shares — The Company is authorized to issue 5,000,000 preference shares with a par value of $0.0001. The Company’s
board of directors will be authorized to fix the voting rights, if any, designations, powers, preferences, the relative, participating,
optional or other special rights and any qualifications, limitations and restrictions thereof, applicable to the shares of each series.
The board of directors will be able to, without shareholder approval, issue preferred shares with voting and other rights that could
adversely affect the voting power and other rights of the holders of the ordinary shares and could have anti-takeover effects. As of
June 30, 2022 and December 31, 2021, there were no preference shares issued or outstanding.
Class A
ordinary shares — The Company is authorized to issue 500,000,000 Class A ordinary shares with a par value
of $0.0001 per share. Holders of Class A ordinary shares are entitled to one vote for each share. On July 9, 2021, the Company
issued to EBC and its designees, 50,000 Class A ordinary shares, for a total consideration of $5. On October 14, 2021, the Company
issued to EBC and its designees, an additional 50,000 Class A ordinary shares, for a total consideration of $5. On January 31, 2022,
the Company issued an additional 60,000 EBC Founder Shares, for a total consideration of $6. As of June 30, 2022 and December 31, 2021,
there were 160,000 and 100,000 Class A ordinary shares issued and outstanding, excluding 11,450,000 and no Class A ordinary shares
subject to possible redemption, respectively.
Class B
ordinary shares — The Company is authorized to issue 50,000,000 Class B ordinary shares with a par value
of $0.0001 per share. Holders of the Class B ordinary shares are entitled to one vote for each share. As of June 30, 2022, there
were 2,862,500 Class B ordinary shares issued and outstanding. At December 31, 2021, there were 2,875,000 Class B ordinary shares
issued and outstanding, of which an aggregate of up to 375,000 shares were subject to forfeiture to the extent that the underwriter’s
over-allotment option was not exercised in full or in part so that the Sponsor will own 20% of the Company’s issued and outstanding
ordinary shares after the Initial Public Offering (assuming the Sponsor does not purchase any Public Shares in the Initial Public Offering).
Due to the underwriters’ option to partially exercise its over-allotment option on February 15, 2022, 12,500 shares were forfeited.
Only
holders of the Class B ordinary shares will have the right to vote on the election of directors prior to the Business Combination.
Holders of Class A ordinary shares and holders of Class B ordinary shares will vote together as a single class on all matters
submitted to a vote of the Company’s shareholders except as otherwise required by law.
The
Class B Shares will automatically convert into Class A ordinary shares on the first business day following the completion
of the Business Combination, on a one-for-one basis, subject to adjustment. In the case that additional Class A ordinary shares,
or equity-linked securities, are issued or deemed issued in excess of the amounts issued in the Initial Public Offering and related to
the closing of a Business Combination, the ratio at which Founder Shares will convert into Class A ordinary shares will be adjusted
(subject to waiver by holders of a majority of the Class B ordinary shares) so that the number of Class A ordinary shares issuable
upon conversion of all Founder Shares will equal, in the aggregate, on an as-converted basis, 20% of the sum of the ordinary shares issued
and outstanding upon completion of the Initial Public Offering plus the number of Class A ordinary shares and equity-linked securities
issued or deemed issued in connection with a Business Combination (net of redemptions), excluding any Class A ordinary shares or
equity-linked securities issued, or to be issued, to any seller in a Business Combination and any Private Warrants issued to the Sponsor.
LIV
CAPITAL ACQUISITION CORP. II
NOTES
TO CONDENSED FINANCIAL STATEMENTS
JUNE
30, 2022
(Unaudited)
Warrants — As
of June 30, 2022 and December 31, 2021, there were 14,087,500 and 0 warrants outstanding, respectively. Each whole Public Warrant entitles
the registered holder to purchase one Class A ordinary share at a price of $11.50 per share, subject to adjustment as discussed
below, at any time commencing 30 days after the completion of the initial Business Combination, provided that the Company has an
effective registration statement under the Securities Act covering the issuance of the Class A ordinary shares issuable upon exercise
of the warrants and a current prospectus relating to them is available and such shares are registered, qualified or exempt from registration
under the securities, or blue sky, laws of the state of residence of the holder (or the Company permits holders to exercise their warrants
on a cashless basis under the circumstances specified in the warrant agreement). Pursuant to the warrant agreement, a warrant holder
may exercise its warrants only for a whole number of Class A ordinary shares. This means only a whole warrant may be exercised at
a given time by a warrant holder. No fractional warrants will be issued upon separation of the units and only whole warrants will trade.
Accordingly, unless you purchase at least four units, you will not be able to receive or trade a whole warrant. The warrants will expire
five years after the completion of the initial Business Combination, at 5:00 p.m., New York City time, or earlier upon
redemption or liquidation.
The
Company will not be obligated to deliver any Class A ordinary shares pursuant to the exercise of a warrant and will have no obligation
to settle such warrant exercise unless a registration statement under the Securities Act covering the issuance of the Class A ordinary
shares issuable upon exercise of the warrants is then effective and a prospectus relating thereto is current, subject to the Company
satisfying the obligations described below with respect to registration. No public warrant will be exercisable for cash or on a cashless
basis, and the Company will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of
the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder, or an exemption
is available. In the event that the conditions in the two immediately preceding sentences are not satisfied with respect to a warrant,
the holder of such warrant will not be entitled to exercise such warrant and such warrant may have no value and expire worthless. In
the event that a registration statement is not effective for the exercised warrants, the purchaser of a unit containing such warrant
will have paid the full purchase price for the unit solely for the Class A ordinary share underlying such unit.
The
Company has agreed that as soon as practicable, but in no event later than fifteen (15) business days after the closing of the initial
Business Combination, it will use commercially reasonable efforts to file with the SEC a post-effective amendment to the registration
statement of which the Company’s prospectus forms a part or a new registration statement for the registration, under the Securities
Act, of the Class A ordinary shares issuable upon exercise of the warrants. The Company will use commercially reasonable efforts
to cause the same to become effective within 60 business days after the closing of the initial Business Combination and to maintain
the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration or redemption of the
warrants in accordance with the provisions of the warrant agreement.
Once
the warrants become exercisable, the Company may redeem the outstanding warrants (except as described herein with respect to the private
placement warrants):
| ● | in
whole and not in part; |
| ● | at a price of $0.01 per warrant; |
|
● |
upon
not less than 30 days’ prior written notice of redemption to each warrant holder; and |
| ● | if, and only if, the last reported sale price of the Class A ordinary shares for any 20 trading days within a 30-trading day period ending three business days before the Company sends to the notice of redemption to the warrant holders equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations). |
If
and when the warrants become redeemable by the Company, the Company may exercise the Company’s redemption right even if it is unable
to register or qualify the underlying securities for sale under all applicable state securities laws. However, the Company will not redeem
the warrants unless an effective registration statement under the Securities Act covering the Class A ordinary shares issuable upon
exercise of the warrants is effective and a current prospectus relating to those Class A ordinary shares is available throughout
the 30-day redemption period.
LIV
CAPITAL ACQUISITION CORP. II
NOTES
TO CONDENSED FINANCIAL STATEMENTS
JUNE
30, 2022
(Unaudited)
No
fractional Class A ordinary shares will be issued upon exercise. If, upon exercise, a holder would be entitled to receive a fractional
interest in a share, the Company will round down to the nearest whole number of the number of Class A ordinary shares to be issued
to the holder. If, at the time of redemption, the warrants are exercisable for a security other than the Class A ordinary shares
pursuant to the warrant agreement (for instance, if the Company is not the surviving company in the initial Business Combination), the
warrants may be exercised for such security. At such time as the warrants become exercisable for a security other than the Class A
ordinary shares, the company (or surviving company) will use its commercially reasonable efforts to register under the Securities Act
the security issuable upon the exercise of the warrants.
In addition, if (x) the
Company issues additional Class A ordinary shares or equity-linked securities for capital raising purposes in connection with the
closing of the initial Business Combination at an issue price or effective issue price of less than $9.20 per ordinary share (with such
issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of any
such issuance to the sponsors or their affiliates, without taking into account any Founder Shares held by the Company’s sponsors
or such affiliates, as applicable, prior to such issuance (the “Newly Issued Price”), (y) the aggregate gross proceeds
from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of the initial
Business Combination on the date of the completion of the initial Business Combination (net of redemptions), and (z) the volume-weighted
average trading price of the Class A ordinary shares during the 20 trading day period starting on the trading day prior
to the day on which the Company completes the initial Business Combination (such price, the “Market Value”) is below
$9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market
Value and the Newly Issued Price, and the $18.00 per share redemption trigger price will be adjusted (to the nearest cent) to be equal
to 180% of the higher of the Market Value and the Newly Issued Price.
The
private placement warrants (including the warrants included in units that may be issued upon conversion of Working Capital Loans and
the Class A ordinary shares issuable upon exercise of such warrants) will not be transferable, assignable or salable to the Company’s
officers, directors and other persons or entities affiliated with or by the Company. Otherwise, the private placement warrants have terms
and provisions that are identical to those of the warrants sold as part of the units in the Initial Public Offering, including as to
exercise price, exercisability and exercise period; however, they are not transferrable by the sponsor or the direct anchor investors
except to permitted transferees. Each of the warrants that may be issued upon conversion of Working Capital Loans shall be identical
to the private placement warrants.
The
Company has accounted for the 14,087,500 warrants issued in connection with the Initial Public Offering and proposed Business Combination
(including 8,587,500 Public Warrants and 5,500,000 Private Placement Warrants) in accordance with the guidance contained in ASC 815-40.
Such guidance provides that the warrants described above are not precluded from equity classification. Equity-classified contracts are
initially measured at fair value (or allocated value). Subsequent changes in fair value are not recognized as long as the contracts continue
to be classified in equity.
EBC
Founder Shares
On
July 9, 2021, the Company issued to an underwriter an aggregate of 50,000 Class A ordinary shares (the “EBC Founder
Shares”) for a total of $5 of consideration. On October 14, 2021, the Company issued an additional 50,000 EBC Founder Shares, for
a total consideration of $5. On January 31, 2022, the Company issued an additional 60,000 EBC Founder Shares, for a total consideration
of $6. The Company accounts for the fair value of the EBC Founder Shares over consideration paid as a deferred offering cost of the Initial
Public Offering. Accordingly, the offering costs were allocated to the separable financial instruments issued in the Initial Public Offering
based on a relative fair value basis, compared to total proceeds received. Offering costs allocated to the Warrants were charged to permanent
shareholders’ equity upon the completion of the Initial Public Offering, while offering costs allocated to the redeemable Public
Shares were charged to temporary shareholders’ equity upon the completion of the Initial Public Offering. The Company estimated
the total fair value of the EBC Founder Shares to be $888,855. The Company established the initial fair value for the EBC Founder Shares
on the date of the issuances, using a probability weighted model for the EBC Founder Shares. The EBC Founder Shares are classified as
Level 3 at the measurement date due to the use of unobservable inputs including the probability of a business combination, the probability
of the initial public offering, and other risk factors (see Note 8).
The
holders of the EBC Founder Shares have agreed not to transfer, assign or sell any such shares until the completion of a Business Combination.
In addition, the holders of the EBC Founder Shares have agreed (i) to waive their conversion rights (or right to participate in
any tender offer) with respect to such shares in connection with the completion of a Business Combination and (ii) to waive their
rights to liquidating distributions from the Trust Account with respect to such shares if the Company fails to complete a Business Combination
within the Combination Period.
In
addition, the representative shares have been deemed compensation by FINRA and are therefore subject to a lock-up for a period of 180 days
immediately following the date of the effectiveness of the registration statement of which the Company’s prospectus forms a part
pursuant to Rule 5110(g)(1) of the FINRA Manual. Pursuant to FINRA Rule 5110(g)(1), these securities will not be sold
during the offering, or sold, transferred, assigned, pledged, or hypothecated, or be the subject of any hedging, short sale, derivative,
put or call transaction that would result in the economic disposition of the securities by any person for a period of 180 days immediately
following the effective date of the registration statement of which the Company’s prospectus forms a part or commencement of sales
of the public offering, except to the underwriters and selected dealer participating in the offering and their bona fide officers
or partners, provided that all securities so transferred remain subject to the lockup restriction above for the remainder of the time
period.
LIV
CAPITAL ACQUISITION CORP. II
NOTES
TO CONDENSED FINANCIAL STATEMENTS
JUNE
30, 2022
(Unaudited)
NOTE
8. FAIR VALUE MEASUREMENTS
The following table presents
information about the Company’s financial instruments that are measured at fair value on a non-recurring basis at June 30, 2022
and December 31, 2021, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair
value:
Description |
|
Level |
|
June
30,
2022 |
|
|
December 31,
2021 |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
Marketable
securities held in Trust Account |
|
1 |
|
$ |
116,943,151 |
|
|
$ |
— |
|
Fair
value of EBC Founder Shares (included within deferred offering costs) |
|
3 |
|
$ |
N/A |
|
|
$ |
538,234 |
|
The
EBC Founder Shares were accounted at fair value in accordance with ASC 718-10. The EBC Founder Shares are measured at fair value
at the time of issuance only, therefore on a non-recurring basis.
The
EBC Founder Shares were valued using a probability weighted model, which is considered to be a Level 3 fair value measurement. The probability
weighted model’s primary unobservable inputs utilized in determining the fair value of the EBC Founder Shares is the probability
of the Initial Public Offering not occurring, the probability of the Business Combination not occurring, and estimated concession. The
probability of the Initial Public Offering and Business Combination not occurring were derived from observable public research vehicles
utilized by the Company as well as background and historical data.
The
following table provides quantitative information regarding Level 3 fair value measurements:
|
|
Initial
Measurements
inputs on
July 9,
2021,
October 14,
2021
and
January 31,
2022 |
|
Value
of Public Offering share |
|
$ |
9.25 |
|
Probability
of Public Offering not happening |
|
|
5.0 - 13.0 |
% |
Probability
of Business Combination not happening |
|
|
5 |
% |
Estimated
concessions |
|
|
12.5 - 13.0 |
% |
Discount
for lack of marketability |
|
|
20.0 |
% |
The
following table presents the changes in the fair value of Level 3 EBC Founder Shares included in offering costs:
| |
Total EBC Founder Shares | |
Fair value as of February 11, 2021 (inception) | |
$ | — | |
Initial measurement for shares issued on July 9,
2021 | |
| 269,117 | |
Initial measurement for shares issued
on October 14, 2021 | |
| 269,117 | |
Fair value as of December 31, 2021 | |
| 538,234 | |
Initial measurement for shares issued
on January 31, 2022 | |
| 350,621 | |
Fair value as of February 10, 2022 (Initial Public Offering
date) | |
$ | 888,855 | |
The
over-allotment liability was accounted at fair value in accordance with ASC 480 and is presented as a currently liability in the
accompanying balance sheet. The over-allotment liability is measured at fair value at the time of issuance, remeasured at a reporting
period, and remeasured at the time of an exercise.
The
over-allotment liability was valued using a Black-Scholes model, which is considered to be a Level 3 fair value measurement. The Black-Scholes
model’s primary unobservable inputs utilized in determining the fair value of the over-allotment liability is the volatility probability.
The volatility probability was derived from observable public Companies historical data.
LIV
CAPITAL ACQUISITION CORP. II
NOTES
TO CONDENSED FINANCIAL STATEMENTS
JUNE
30, 2022
(Unaudited)
The
following table provides quantitative information regarding Level 3 fair value measurements:
|
|
February 10,
2022 |
|
|
February 15,
2022 |
|
Value
of Public Offering share |
|
$ |
10.00 |
|
|
$ |
10.01 |
|
Expected
term |
|
|
0.12 |
|
|
|
0.11 |
|
Volatility |
|
|
2.48 |
% |
|
|
2.48 |
% |
Yield
Curve |
|
|
0.223 |
% |
|
|
0.133 |
% |
The
following table presents the changes in the fair value of over-allotment liability:
Fair value as of December 31, 2021 | |
$ | — | |
Initial measurement at February 10, 2022 (IPO
date) | |
| 54,192 | |
Change in fair value on February 15, 2022 (over-allotment
exercise date) | |
| (1,862 | ) |
Elimination of over-allotment liability on February
15, 2022 | |
| (52,330 | ) |
Fair value as of June 30, 2022 | |
$ | — | |
Transfers
to/from Levels 1, 2 and 3 are recognized at the end of the reporting period in which a change in valuation technique or methodology occurs.
There were no transfers in or out of Level 3 from other levels in the fair value hierarchy for the three and six months ended June 30,
2022.
NOTE
9. SUBSEQUENT EVENTS
The
Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the unaudited condensed
financial statements were issued. Based upon this review, other than noted below, the Company did not identify any subsequent events
that would have required adjustment or disclosure in the unaudited condensed financial statements.
On
July 1, 2022, the Company appointed three directors to the Company’s Board of Directors. Each of the directors will receive equity
interests in the Sponsor, equivalent to 20,000 founder shares, concurrently with or following the closing of a business combination.
As
of the date of this filing, the Sponsor loaned the Company an additional $55,000 for working capital purposes, resulting in an aggregate
of $180,000 outstanding under the Promissory Note (see Note 5).