The accompanying notes are an integral part
of the unaudited condensed financial statements.
The accompanying notes are an integral part
of the unaudited condensed financial statements.
The accompanying notes are an integral part
of the unaudited condensed financial statements.
The accompanying notes are an integral part
of the unaudited condensed financial statements.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Yunhong International (the “Company”)
is a blank check company incorporated in the Cayman Islands on January 10, 2019. The Company was formed for the purpose of acquiring,
engaging in a share exchange, share reconstruction and amalgamation with, purchasing all or substantially all of the assets of,
entering into contractual arrangements with, or engaging in any other 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 businesses that have their primary operations
located in Asia (excluding China). 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.
At September 30, 2020, the Company had
not yet commenced any operations. All activity through September 30, 2020 relates to the Company’s formation, the initial
public offering (the “Initial Public Offering”) (as discussed below) and 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 12, 2020. On February 18, 2020, the Company consummated the Initial
Public Offering of 6,000,000 units (“Units” and, with respect to the Class A ordinary shares included in the Units
sold, the “Public Shares”) at $10.00 per Unit, generating gross proceeds of $60,000,000, which is described in Note
3.
Simultaneously with the closing of the
Initial Public Offering, the Company consummated the sale of 232,500 units (the “Private Units”) at a price of $10.00
per Private Unit in a private placement to the Company’s sponsor, LF International Pte. Ltd. (the “Sponsor”),
generating gross proceeds of $2,325,000, which is described in Note 4.
Following the closing of the Initial Public
Offering on February 18, 2020, an amount of $60,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the
Initial Public Offering and the sale of the Private Units was placed in a trust account (“Trust Account”), until the
earlier of: (i) the completion of a Business Combination or (ii) the distribution of the funds in the Trust Account to the Company’s
shareholders, as described below. The Trust Account is controlled by the terms of the Investment Management Trust Agreement, dated
February 12, 2020, by and between the Company and American Stock Transfer & Trust Company LLC, as the trustee (the “Trust
Agreement”) (see Note 9 for additional information).
On February 24, 2020, in connection with
the underwriters’ election to fully exercise their over-allotment option, the Company consummated the sale of an additional
900,000 Units at $10.00 per Unit and the sale of an additional 18,000 Private Units at $10.00 per Private Unit, generating total
gross proceeds of $9,180,000. Following the closing, an additional $9,000,000 was deposited into the Trust Account, bringing the
aggregate proceeds held in the Trust Account to $69,000,000.
Transaction costs amounted to $4,330,715,
consisting of $1,380,000 of underwriting fees, $2,415,000 of deferred underwriting fees and $535,715 of other offering costs. In
addition, as of September 30, 2020, cash of $519,080 was held outside of the Trust Account and is available for working capital
purposes.
The Company’s management has broad
discretion with respect to the specific application of the net proceeds of the Initial Public Offering and sale of the Private
Units, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination.
NASDAQ rules provide that the Business Combination must be with one or more target businesses that together have a fair market
value equal to at least 80% of the balance in the Trust Account (less any deferred underwriting commissions and taxes payable on
interest earned and less any interest earned thereon that is released for taxes) at the time of signing a definitive agreement
in connection with a Business Combination. The Company will only complete a Business Combination if the post-Business Combination
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 of 1940
(the “Investment Company Act”). There is no assurance that the Company will be able to successfully effect a Business
Combination.
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. In connection
with a proposed Business Combination, the Company may seek shareholder approval of a Business Combination at a meeting called for
such purpose at which shareholders may seek to redeem their shares, regardless of whether they vote for or against a Business Combination.
YUNHONG INTERNATIONAL
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
The Company will proceed with a
Business Combination only if the Company has net tangible assets of at least $5,000,001 upon such consummation of a Business
Combination and, if the Company seeks shareholder approval, a majority of the outstanding shares voted are voted in favor of
the 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, as amended, 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 seeking redemption
rights with respect to 15% or more of the Public Shares without the Company’s prior written consent.
The shareholders will be entitled to redeem
their Public Shares for a pro rata portion of the amount then in the Trust Account ($10.00 per share, plus 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). The per-share
amount to be distributed to shareholders who redeem their Public Shares will not be reduced by the deferred underwriting commissions
the Company will pay to the underwriter. There will be no redemption rights upon the completion of a Business Combination with
respect to the Company’s warrants or rights.
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, as amended, offer such redemption pursuant to the tender offer rules of the
Securities and Exchange Commission (“SEC”), and file tender offer documents with the SEC prior to completing a Business
Combination.
The Sponsor has agreed (a) to vote its
Class B ordinary shares, the Class A ordinary shares included in the Private Units (the “Private Shares”) and any Public
Shares purchased during or after the Initial Public Offering in favor of a Business Combination, (b) not to propose an amendment
to the Company’s Amended and Restated Memorandum and Articles of Association, as amended, with respect to the Company’s
pre-Business Combination activities prior to the consummation of a Business Combination unless the Company provides dissenting
public shareholders with the opportunity to redeem their Public Shares in conjunction with any such amendment; (c) not to redeem
any shares (including the Class B ordinary shares) and Private Units (including underlying securities) into the right to receive
cash from the Trust Account in connection with a shareholder vote to approve a Business Combination (or to sell any shares in a
tender offer in connection with a Business Combination if the Company does not seek shareholder approval in connection therewith)
or a vote to amend the provisions of the Amended and Restated Memorandum and Articles of Association, as amended, relating to shareholders’
rights of pre-Business Combination activity and (d) that the Class B ordinary shares and Private Units (including underlying securities)
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 February 18,
2021 to consummate a Business Combination. However, if the Company anticipates that it may not be able to consummate a Business
Combination by February 18, 2021, the Company may extend the period of time to consummate a Business Combination up to three times,
each by an additional three months (for a total of up to 21 months to complete a Business Combination) (the “Combination
Period”). In order to extend the time available for the Company to consummate a Business Combination, the Sponsor or its
affiliates or designees must deposit into the Trust Account $690,000 ($0.10 per share), on or prior to the applicable deadline
for each three month extension (or up to an aggregate of $2,070,000, or $0.30 per share, if the Company extends for the full nine
months).
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 five 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 (net of taxes payable and less interest to pay dissolution expenses up to $50,000), 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), subject to applicable law, 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, proceed
to commence a voluntary liquidation and thereby a formal dissolution of the Company, subject in each case to its obligations to
provide for claims of creditors and the requirements of applicable law. The underwriter has agreed to waive its rights to the deferred
underwriting commission held in the Trust Account in the event the Company does not complete a Business Combination within the
Combination Period and, in such event, such amounts will be included with the funds held in the Trust Account that will be available
to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the
assets remaining available for distribution will be less than the Initial Public Offering price per Unit ($10.00).
The Sponsor has agreed that it will
be liable to the Company, if and to the extent any claims by a vendor 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
amounts in the Trust Account to below $10.00 per share, 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 (except for the Company’s independent public
registered accounting firm), 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.
YUNHONG INTERNATIONAL
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
Going Concern
In connection with the Company’s
assessment of going concern considerations in accordance with Financial Accounting Standard Board’s Accounting Standards
Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going
Concern,” management has determined that the mandatory liquidation and subsequent dissolution raises substantial doubt about
the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or
liabilities should the Company be required to liquidate after February 18, 2021.
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 comprehensive 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 Annual Report on Form 10-K for the year ended June 30, 2020 as
filed with the SEC on September 28, 2020, which contains the audited financial statements and notes thereto. The financial information
as of June 30, 2020 is derived from the audited financial statements presented in the Company’s Annual Report on Form 10-K
for the year June 30, 2020. The interim results for the three months ended September 30, 2020 are not necessarily indicative of
the results to be expected for the year ending June 30, 2021 or for any future interim 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 independent registered public accounting firm 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.
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 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. 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.
Use of Estimates
The preparation of condensed financial
statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts
of 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 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.
YUNHONG INTERNATIONAL
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
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 September 30, 2020 and June 30, 2020.
Ordinary Shares Subject to Possible
Redemption
The Company accounts for its ordinary shares
subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.”
Ordinary shares subject to mandatory redemption 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 redeemable
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 September 30, 2020 and June 30, 2020, ordinary shares subject
to possible redemption are presented as temporary equity, outside of the shareholders’ equity section of the Company’s
condensed balance sheets.
Offering Costs
Offering costs consisted of legal, accounting,
underwriting fees and other costs incurred through the Initial Public Offering that are directly related to the Initial Public
Offering. Offering costs amounting to $4,330,715 were charged to shareholders’ equity upon the completion of the Initial
Public Offering.
Income Taxes
ASC Topic 740 prescribes a recognition
threshold and a measurement attribute for the financial statement recognition and measurement of tax positions 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. The Company’s management determined that the Cayman Islands is the Company’s only
major tax jurisdiction. The Company recognizes accrued interest and penalties related to unrecognized tax benefits, if any, as
income tax expense. There were no unrecognized tax benefits as of September 30, 2020 and June 30, 2020 and no amounts accrued for
interest and penalties. The Company is currently not aware of any issues under review that could result in significant payments,
accruals or material deviation from its position.
The Company is considered an exempted Cayman
Islands company with no connection to any other taxable jurisdiction and is presently not subject to income taxes or income tax
filing requirements in the Cayman Islands or the United States. As such, the Company’s tax provision is zero for the
periods presented.
Net Loss Per Ordinary Share
Net loss per ordinary share is computed
by dividing net loss by the weighted average number of ordinary shares outstanding for the period. The Company has not considered
the effect of (1) warrants sold in the Initial Public Offering and the private placement to purchase 3,575,250 Class A ordinary
shares, (2) rights sold in the Initial Public Offering and the private placement that convert into 715,050 Class A ordinary shares
and (3) 345,000 Class A ordinary shares, warrants to purchase 172,500 Class A ordinary shares and rights that convert into 34,500
Class A ordinary shares in the unit purchase option sold to the underwriters, in the calculation of diluted loss per share, since
the exercise of the warrants, the conversion of the rights into Class A ordinary shares and the exercise of the unit purchase
option are contingent upon the occurrence of future events and inclusion of such warrants would be anti-dilutive under the treasury
stock method.
The Company’s condensed statements
of operations include a presentation of loss per share for ordinary shares subject to possible redemption in a manner similar
to the two-class method of loss per share. Net loss per share, basic and diluted, for Class A redeemable ordinary shares is calculated
by dividing the interest income earned on the Trust Account of approximately $9,400 for the three months ended September 30, 2020,
by the weighted average number of Class A redeemable ordinary shares outstanding for the period. Net loss per share, basic and
diluted, for Class A and Class B non-redeemable ordinary shares is calculated by dividing the net loss, adjusted for loss attributable
to Class A redeemable ordinary shares, by the weighted average number of Class A and Class B non-redeemable ordinary shares outstanding
for the period. Class A and Class B non-redeemable ordinary shares includes the Private Units, the Representative Shares (as defined
in Note 7) and Founder Shares (as defined in Note 5) as these shares do not have any redemption features and do not participate
in the income or losses of the Trust Account. At September 30, 2019, weighted average shares were reduced for the effect of an
aggregate of 225,000 ordinary shares that were subject to forfeiture if the over-allotment option was not exercised by the underwriters.
YUNHONG INTERNATIONAL
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
Concentration of Credit Risk
Financial instruments that potentially
subject the Company to concentration of credit risk consist of a foreign cash account in a financial institution. The Company has
not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.
Fair Value of Financial Instruments
The fair value of the Company’s assets
and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates
the carrying amounts represented in the accompanying condensed balance sheets, primarily due to their short-term nature.
Recently Issued Accounting Standards
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
condensed financial statements.
NOTE 3. INITIAL PUBLIC OFFERING
Pursuant to the Initial Public Offering,
the Company sold 6,900,000 Units at a purchase price of $10.00 per Unit, which includes the exercise by the underwriters of their
over-allotment option in full of 900,000 Units at $10.00 per Unit. Each Unit consists of one Class A ordinary share, one-half of
one redeemable warrant (“Public Warrant”) and one right (“Public Right”). Each whole Public Warrant entitles
the holder to purchase one Class A ordinary share at an exercise price of $11.50 per whole share (see Note 7). Each Public Right
entitles the holder to receive one-tenth of one Class A ordinary share upon the consummation of a Business Combination (see Note
7).
NOTE 4. PRIVATE PLACEMENT
Simultaneously with the closing of the
Initial Public Offering, the Sponsor purchased an aggregate of 232,500 Private Units at a price of $10.00 per Private Unit, or
$2,325,000 in the aggregate. On February 24, 2020, in connection with the underwriters’ exercise of the over-allotment option
in full, the Sponsor purchased an additional 18,000 Private Units for an aggregate purchase price of $180,000. Each Private Unit
consists of one Private Share, one-half of one redeemable warrant (each, a “Private Warrant”) and one right (each,
a “Private Right”). Each whole Private Warrant is exercisable to purchase one Class A ordinary share at a price of
$11.50 per whole share. Each Private Right entitles the holder to receive one-tenth of one Class A ordinary share upon the consummation
of a Business Combination. The proceeds from the sale of the Private Units 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 Units will be used to fund the redemption of the Public Shares (subject to the requirements
of applicable law) and the Private Warrants (and underlying securities) and Private Rights will expire worthless.
NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
In January 2019, the Company issued one
Class B ordinary share to the Sponsor for no consideration. On May 23, 2019, the Company cancelled the one share and issued to
the Sponsor 1,437,500 Class B ordinary shares (the “Founder Shares”) for an aggregate purchase price of $25,000, or
approximately $0.017 per share. In February 2020, the Company effected a 1.2 for 1 stock dividend for each Founder Share outstanding,
resulting in the Sponsor holding an aggregate of 1,725,000 Founder Shares, of which up to 225,000 shares were subject to forfeiture
to the extent that the underwriters’ over-allotment option was not exercised in full or in part, so that the Sponsor would
own, on an as-converted basis, 20% of the Company’s issued and outstanding shares after the Initial Public Offering. As a
result of the underwriters’ election to fully exercise their over-allotment option, 225,000 Founder Shares are no longer
subject to forfeiture.
The initial shareholders agreed, subject
to limited exceptions, not to transfer, assign or sell any of their Founder Shares until the earlier to occur of: (A) six
months after the completion of the initial Business Combination or (B) subsequent to the initial Business Combination, (x) if
the last sale price of the Class A ordinary shares equal or exceed $12.00 per share (as adjusted for share splits, 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, or (y) the date on which the Company completes a liquidation, merger, capital stock
exchange or other similar transaction that results in all of the Company’s shareholders having the right to exchange their
Class A ordinary shares for cash, securities or other property.
YUNHONG INTERNATIONAL
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
Advances from Related Party
During the year ended June 30, 2020, the
Sponsor advanced the Company funds in the aggregate amount of $232,796 to cover certain working capital expenses. The advances
are non-interest bearing and payable upon demand. The Company repaid $50,000 of such advances during the three months ended September
30, 2020. Advances totaling $182,796 are outstanding as of September 30, 2020.
Promissory Note – Related Party
On May 23, 2019, the Company issued an
unsecured promissory note to the Sponsor, as amended and restated on January 17, 2020 (the “Promissory Note”). Pursuant
to the Promissory Note, the Company may borrow up to an aggregate principal amount of $300,000 to cover expenses related to the
Initial Public Offering (the “Promissory Note”). The Promissory Note was non-interest bearing and payable on the earlier
of June 30, 2020 or the completion of the Initial Public Offering. As of June 30, 2020, there was $210,659 outstanding under the
Promissory Note. The outstanding balance under the Promissory Note of $210,659 was repaid in July 2020.
Administrative Services Agreement
The Company entered into an agreement,
commencing on February 18, 2020 through the earlier of the consummation of a Business Combination or the Company’s liquidation,
to pay the Sponsor a monthly fee of $10,000 for office space, administrative and support services. For the three months ended September
30, 2020, the Company incurred $30,000 in fees for these services. On April 15, 2020, the Company entered into an assignment agreement
with the Sponsor and an affiliate of the Sponsor, pursuant to which all of the Sponsor’s rights and obligations under the
agreement were assigned to the affiliate of the Sponsor.
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 would either be repaid upon consummation of a Business
Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of such Working Capital Loans may be converted
upon consummation of a Business Combination into additional units at a price of $10.00 per Unit. 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. The units would be identical to the Private
Units. As of September 30, 2020 and June 30, 2020, no Working Capital Loans were outstanding.
Related Party Extension Loans
As discussed in Note 1, the Company may
extend the period of time to consummate a Business Combination three times by an additional three months each time (for a total
of 21 months to complete a Business Combination). In order to extend the time available for the Company to consummate a Business
Combination, the Sponsor or its affiliates or designee must deposit into the Trust Account for each three-month extension $690,000
($0.10 per share), on or prior to the date of the applicable deadline. Any such payments would be made in the form of a loan and
will be non-interest bearing and payable upon the consummation of a Business Combination. If the Company completes a Business Combination,
the Company would repay such loaned amounts out of the proceeds of the Trust Account released to the Company. Up to $1,500,000
of such loans may be convertible into units at a price of $10.00 per unit at the option of the lender. If the Company does not
complete a Business Combination, the Company will not repay such loans. The Sponsor and its affiliates or designees are not obligated
to fund the Trust Account to extend the time for the Company to complete a Business Combination.
NOTE 6. COMMITMENTS AND CONTINGENCIES
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 these condensed financial statements. The condensed financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
YUNHONG INTERNATIONAL
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
Registration Rights
Pursuant to a registration rights
agreement entered into on February 12, 2020, the holders of the Founder Shares, the Private Units, securities underlying the
unit purchase option issued to the underwriters and units that may be issued upon conversion of Working Capital Loans (and in
each case holders of their component securities, as applicable), are entitled to registration rights requiring the Company to
register such securities for resale (in the case of the Founder Shares, only after conversion to Class A ordinary shares).
The holders of these securities are entitled to make up to three demands, excluding short form demands, that the Company
register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to
registration statements filed subsequent to the completion of a 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. The Company will bear the expenses incurred in connection with the filing of
any such registration statements.
Underwriting Agreement
The underwriters are entitled to a deferred
fee of 3.5% of the gross proceeds of the Initial Public Offering, or $2,415,000. The deferred fee will be paid in cash upon the
closing of a Business Combination from the amounts held in the Trust Account, subject to the terms of the underwriting agreement.
Right of First Refusal
For a period beginning on the closing of
Initial Public Offering and ending 12 months from the closing of a Business Combination, the Company has granted the underwriters
a right of first refusal to act as lead-left book running manager and lead left manager for any and all future private or public
equity, convertible and debt offerings during such period. In accordance with FINRA Rule 5110(f)(2)(E)(i), such right of first
refusal shall not have a duration of more than three years from the effective date of the registration statements for the Initial
Public Offering.
NOTE 7. SHAREHOLDERS’ EQUITY
Preference Shares —
The Company is authorized to issue 1,000,000 preference shares with a par value of $0.001 per share with such designations, voting
and other rights and preferences as may be determined from time to time by the Company’s board of directors. At September
30, 2020 and June 30, 2020, there were no preference shares issued or outstanding.
Class A Ordinary Shares —
The Company is authorized to issue 47,000,000 Class A ordinary shares with a par value of $0.001 per share. Holders of Class A
ordinary shares are entitled to one vote for each share. At September 30, 2020 and June 30, 2020, there were 1,029,435 and 1,023,245
Class A ordinary shares issued and outstanding, excluding 6,190,065 and 6,196,255 shares subject to possible redemption, respectively.
Class B Ordinary Shares —
The Company is authorized to issue 2,000,000 Class B ordinary shares with a par value of $0.001 per share. At September 30, 2020
and June 30, 2020, there were 1,725,000 Class B ordinary shares issued and outstanding.
The Class B ordinary shares will automatically
convert into Class A ordinary shares at the time of a Business Combination on a one-for-one basis, subject to adjustment for share
splits, share capitalizations, reorganizations, recapitalizations and the like. In the case that additional Class A ordinary shares,
or equity-linked securities, are issued or deemed issued in excess of the amounts sold in Initial Public Offering and related to
the closing of the Business Combination, the ratio at which Class B ordinary shares shall convert into Class A ordinary shares
will be adjusted (unless the holders of a majority of the issued and outstanding Class B ordinary shares agree to waive such anti-dilution
adjustment with respect to any such issuance or deemed issuance) so that the number of Class A ordinary shares issuable upon conversion
of all Class B ordinary shares will equal, in the aggregate, 20% of the sum of all ordinary shares outstanding upon completion
of the Initial Public Offering plus all Class A ordinary shares and equity-linked securities issued or deemed issued in connection
with the Business Combination (excluding any shares or equity-linked securities issued, or to be issued, to any seller in the Business
Combination or any private placement-equivalent units issued to the Sponsor or its affiliates upon conversion of loans made to
the Company). Holders of Founder Shares may also elect to convert their Class B ordinary shares into an equal number of Class A
ordinary shares, subject to adjustment as provided above, at any time.
Warrants — Public
Warrants may only be exercised for a whole number of shares. No fractional shares will be issued upon exercise of the Public Warrants.
The Public Warrants will become exercisable on the later of (a) the consummation of a Business Combination or (b) 12 months from
the effective date of the registration statements for the Initial Public Offering. The Public Warrants will expire five years from
the consummation of a Business Combination 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 with respect to the Class A ordinary shares underlying the warrants is then effective
and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect to registration.
YUNHONG INTERNATIONAL
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
The Company has agreed that as soon
as practicable, but in no event later than 15 business days after the closing of a Business Combination, the Company will use
its best efforts to file, and within 60 business days following a Business Combination to have declared effective, a
registration statement covering the Class A ordinary shares issuable upon exercise of the warrants. The Company will use its
best efforts to cause the same to become effective and to maintain the effectiveness of such registration statement, and a
current prospectus relating thereto, until the expiration of the warrants in accordance with the provisions of the warrant
agreement. No warrants will be exercisable for cash unless the Company has an effective and current registration statement
covering the Class A ordinary shares issuable upon exercise of the warrants and a current prospectus relating to such Class A
ordinary shares. Notwithstanding the foregoing, if a registration statement covering the Class A ordinary shares
issuable upon exercise of the warrants is not effective within a specified period following the consummation of a Business
Combination, warrant holders may, until such time as there is an effective registration statement and during any period when
the Company shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant
to the exemption provided by Section 3(a)(9) of the Securities Act, provided that such exemption is available. If that
exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless
basis.
The Company may call the warrants for redemption
(excluding the Private Warrants but including any outstanding warrants issued upon exercise of the unit purchase option):
|
·
|
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 (the “30-day redemption period”) to each warrant holder; and
|
|
·
|
if, and only if, the reported last sale price of the Class A ordinary shares equal or exceed $16.50 per share (as adjusted for share splits, share capitalizations, rights issuances, subdivisions, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date the Company sends to the notice of redemption to the warrant holders.
|
If and when the warrants become redeemable
by the Company, the Company may not exercise its redemption right if the issuance of shares upon exercise of the warrants is not
exempt from registration or qualification under applicable state blue sky laws or the Company is unable to effect such registration
or qualification.
If the Company calls the Public Warrants
for redemption, management will have the option to require any holder that wishes to exercise the Public Warrants to do so on a
“cashless basis,” as described in the warrant agreement. The exercise price and number of ordinary shares issuable
upon exercise of the warrants may be adjusted in certain circumstances including in the event of a share dividend, or recapitalization,
reorganization, merger or consolidation. However, the warrants will not be adjusted for issuance of ordinary shares at a price
below its exercise price. Additionally, in no event will the Company be required to net cash settle the warrants. If the Company
is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust
Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution
from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants
may expire worthless.
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 a
Business Combination at an issue price or effective issue price of less than $9.20 per 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
Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor 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 a Business Combination on the date
of the consummation of a Business Combination (net of redemptions), and (z) the volume weighted average trading price of the Company’s
Class A ordinary shares during the 20 trading day period starting on the trading day prior to the day on which the Company consummates
a 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
$16.50 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 Warrants are identical
to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Warrants and the Class
A ordinary shares issuable upon the exercise of the Private Warrants will not be transferable, assignable or salable until 30 days
after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Warrants will
be exercisable on a cashless basis and be non-redeemable so long as they are held by the initial purchasers or their permitted
transferees. If the Private Warrants are held by someone other than the initial purchasers or their permitted transferees, the
Private Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
Rights — Each holder
of a right will receive one-tenth (1/10) of one Class A ordinary share upon consummation of a Business Combination, even if the
holder of such right redeemed all Class A ordinary shares held by it in connection with a Business Combination. No additional consideration
will be required to be paid by a holder of rights in order to receive its additional shares upon consummation of a Business Combination
as the consideration related thereto has been included in the unit purchase price paid for by investors in the Initial Public Offering.
If the Company enters into a definitive agreement for a Business Combination in which the Company will not be the surviving entity,
the definitive agreement will provide for the holders of rights to receive the same per share consideration the holders of the
Class A ordinary shares will receive in the transaction on an as-converted into Class A ordinary share basis and each holder of
a right will be required to affirmatively convert its rights in order to receive 1/10 share underlying each right (without paying
additional consideration).
YUNHONG INTERNATIONAL
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
The Company will not issue fractional shares
in connection with an exchange of rights. Fractional shares will either be rounded down to the nearest whole share or otherwise
addressed in accordance with the applicable provisions of Cayman Islands law. As a result, the holders of the rights must hold
rights in multiples of 10 in order to receive shares for all of the holders’ rights upon closing of a Business Combination.
If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds
held in the Trust Account, holders of rights will not receive any of such funds with respect to their rights, nor will they receive
any distribution from the Company’s assets held outside of the Trust Account with respect to such rights, and the rights
will expire worthless. Further, there are no contractual penalties for failure to deliver securities to the holders of the rights
upon consummation of a Business Combination. Additionally, in no event will the Company be required to net cash settle the rights.
Accordingly, the rights may expire worthless.
Representative Shares
On February 18, 2020, the Company issued
to the designees of the underwriters 60,000 Class A ordinary shares (the “Representative Shares”). On February 24,
2020, in connection with the underwriters’ election to exercise the over-allotment option in full, the Company issued an
additional 9,000 Representative Shares to the designees of the underwriters. The Company accounted for the Representative Shares
as an offering cost of the Initial Public Offering, with a corresponding credit to shareholders’ equity. The Company estimated
the fair value of Representative Shares to be $690,000 based upon the price of the Units sold in the Initial Public Offering. The
holders of the Representative Shares have agreed not to transfer, assign or sell any such shares until the completion of a Business
Combination. In addition, the holders have agreed (i) to waive its redemption rights with respect to such shares in connection
with the completion of our initial business combination and (ii) to waive 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.
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 related to the Initial Public Offering pursuant to Rule 5110(g)(1) of FINRA’s NASD Conduct
Rules. Pursuant to FINRA Rule 5110(g)(1), these securities will not 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 statements related to the Initial Public Offering, nor may they be sold, transferred,
assigned, pledged or hypothecated for a period of 180 days immediately following the effective date of the registration statements
related to the Initial Public Offering except to any underwriter and selected dealer participating in the Initial Public Offering
and their bona fide officers or partners.
Unit Purchase Option
On February 18, 2020, the Company sold
to the underwriters (and its designees), for $100, an option to purchase up to 300,000 Units exercisable at $12.25 per Unit (or
an aggregate exercise price of $4,226,250) commencing on the later of February 12, 2021 and the closing of a Business Combination.
On February 24, 2020, in connection with the underwriters’ election to exercise the over-allotment option in full, the Company
issued the underwriters an option to purchase up to an additional 45,000 Units exercisable at $12.25 per Unit for no additional
consideration. The unit purchase option may be exercised for cash or on a cashless basis, at the holder’s option, and expires
February 12, 2025. The Units issuable upon exercise of the option are identical to those offered in the Initial Public Offering.
The Company accounted for the unit purchase option, inclusive of the receipt of $100 cash payment, as an expense of the Initial
Public Offering resulting in a charge directly to shareholders’ equity. The Company estimated the fair value of the unit
purchase option is approximately $893,000, or $2.59 per Unit, using the Black-Scholes option-pricing model . The fair value
of the unit purchase option granted to the underwriters was estimated as of the date of grant using the following assumptions:
(1) expected volatility of 35%, (2) risk-free interest rate of 1.39% and (3) expected life of five years. The option and such units
purchased pursuant to the option, as well as the Class A ordinary shares underlying such units, the rights included in such units,
the Class A ordinary shares that are issuable for the rights included in such units, the warrants included in such units, and the
shares underlying such warrants, have been deemed compensation by FINRA and are therefore subject to a 180-day lock-up pursuant
to Rule 5110(g)(1) of FINRA’s NASDAQ Conduct Rules. Additionally, the option may not be sold, transferred, assigned, pledged
or hypothecated for a one-year period (including the foregoing 180-day period) following the date of Initial Public Offering except
to any underwriter and selected dealer participating in the Initial Public Offering and their bona fide officers or partners. The
option grants to holders demand and “piggy back” rights for periods of five and seven years, respectively, from the
effective date of the registration statements with respect to the registration under the Securities Act of the securities directly
and indirectly issuable upon exercise of the option. The Company will bear all fees and expenses attendant to registering the securities,
other than underwriting commissions which will be paid for by the holders themselves. The exercise price and number of units issuable
upon exercise of the option may be adjusted in certain circumstances including in the event of a stock dividend, or the Company’s
recapitalization, reorganization, merger or consolidation. However, the option will not be adjusted for issuances of Class A ordinary
shares at a price below its exercise price.
YUNHONG INTERNATIONAL
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
NOTE 8. FAIR VALUE MEASUREMENTS
The Company follows the guidance in ASC
820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial
assets and liabilities that are re-measured and reported at fair value at least annually.
The fair value of the Company’s financial
assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with
the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants
at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize
the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal
assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify
assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
|
Level 1:
|
Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
|
|
|
|
|
Level 2:
|
Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.
|
|
|
|
|
Level 3:
|
Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.
|
At September 30, 2020, assets held in the Trust Account were
comprised of $63,851,018 in mutual and money market funds and $5,202,978 in U.S. Treasury Securities. At June 30, 2020, assets
held in the Trust Account were comprised of $63,846,914 in mutual and money market funds and $5,210,594 in U.S. Treasury Securities.
The following table presents information
about the Company’s assets that are measured at fair value on a recurring basis at September 30, 2020 and June 30,2020 and
indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
Description
|
|
Level
|
|
September 30, 2020
|
|
|
June 30,
2020
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
Investments – Mutual and Money Market Fund
|
|
1
|
|
$
|
63,851,018
|
|
|
$
|
63,846,914
|
|
The Company classifies its U.S. Treasury
and equivalent securities as held-to-maturity in accordance with ASC 320 “Investments - Debt and Equity Securities.”
Held-to-maturity securities are those securities which the Company has the ability and intent to hold until maturity. Held-to-maturity
treasury securities are recorded at amortized cost on the accompanying balance sheet and adjusted for the amortization or accretion
of premiums or discounts.
The gross holding gains and fair value
of held-to-maturity securities at September 30, 2020 and June 30, 2020 are as follows:
|
|
Held-To-Maturity
|
|
Amortized Cost
|
|
|
Gross
Holding
(Loss) Gain
|
|
|
Fair Value
|
|
September 30, 2020
|
|
U.S. Treasury Securities (Mature on 1/31/2021)
|
|
$
|
5,202,978
|
|
|
$
|
(13,352
|
)
|
|
$
|
5,189,626
|
|
June 30, 2020
|
|
U.S. Treasury Securities (Matured on 8/15/2020)
|
|
$
|
5,210,594
|
|
|
$
|
1,363
|
|
|
$
|
5,211,957
|
|
NOTE 9. TRUST ACCOUNT
During the preparation of the
quarterly report for the quarter ended March 31, 2020, the Company determined that American Stock Transfer & Trust
Company LLC, as the trustee, and Morgan Stanley, as custodian, had not invested the Trust Account funds in accordance with
the Trust Agreement. Thereafter, the Company immediately took steps to liquidate such investments and to reinvest the funds
only in the types of securities specified under the Trust Agreement (the date of such reinvestment, May 5, 2020, is referred
to herein as the “Reinvestment Date”). As of March 31, 2020, the Company had an unrealized loss on marketable
securities held in the Trust Account of $1,151,591 (including principal and interest). Between March 31, 2020 and the
Reinvestment Date, the Company recouped part of the losses and on the Reinvestment Date the Company had an unrealized loss on
marketable securities held in the Trust Account of $565,000 (the “Shortfall”). The Shortfall represents the
difference between the aggregate amount of the funds in the Trust Account as of the Reinvestment Date and the amount that
would have been in the Trust Account on the Reinvestment Date had the funds in the Trust Account always been invested
pursuant to the requirements set forth in the Trust Agreement. To remedy the issue, and for no additional consideration, on
May 14, 2020 the Sponsor funded the Trust Account in the amount of the Shortfall. Since the amount of the Shortfall funded by
the Sponsor is not required to be repaid by the Company, the Company recorded this amount as a credit to additional paid in
capital during the year ended June 30, 2020.
YUNHONG INTERNATIONAL
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
NOTE 10. SUBSEQUENT EVENTS
The Company evaluated subsequent events
and transactions that occurred after the balance sheet date up to the date that the condensed financial statements were issued.
Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in
the condensed financial statements.