Business Context and Reporting Period
Venus Acquisition Corporation, identified in the request as Microalgo Inc., filed this unaudited Form 10-Q for the quarter ended June 30, 2021. Venus was a Cayman Islands blank-check company formed to pursue a business combination, with an intended focus on businesses connected to the Asian market. It had not commenced operating activities and had no operating revenue as of June 30, 2021.
On June 10, 2021, Venus entered into a merger agreement with VIYI Algorithm Inc. and related parties. The proposed transaction would result in VIYI becoming a wholly owned subsidiary and the combined company being renamed MicroAlgo Inc. The transaction was subject to shareholder approval and was expected to close in the fourth quarter of 2021.
Financial Metrics and Liquidity
| Metric | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2021 |
|---|---|---|
| Revenue | $0 | $0 |
| Net loss attributable to Venus | $218,748 | $307,400 |
| Basic and diluted loss per share | $0.08 | $0.13 |
| Net cash used in operating activities | Not separately reported | $374,148 |
- Operating expenses were $218,846 for the quarter and $297,551 for the six months, primarily consisting of formation, general and administrative costs.
- Six-month other expense was $8,912, including a $10,000 increase in the fair value of warrant liabilities, partially offset by $1,088 of interest income.
- Cash was $33,668 at June 30, 2021, compared with $239 at December 31, 2020.
- Cash and investments held in the trust account were $46.47 million, consisting of U.S. Treasury securities.
- Total assets were $46.57 million; total liabilities were $1.57 million, including $1.15 million of deferred underwriting compensation and $390,000 of warrant liabilities.
- Ordinary shares subject to possible redemption totaled $40.0 million, representing 3,959,470 shares at approximately $10.10 per share.
- Shareholders’ equity was $5.00 million. The filing reports no long-term debt or capital lease obligations.
- Liquidity outside the trust account was limited. Management stated that it did not expect to need additional funding, but additional capital could be required if transaction and due-diligence costs exceed estimates or trust-account interest is insufficient.
Material Changes Versus the Prior Comparable Period
- Quarterly net loss increased to $218,748 from $6,100, and six-month net loss increased to $307,400 from $13,455, primarily because the 2021 periods included public-company and transaction-related expenses following the February 2021 IPO.
- The company completed an IPO of 4.6 million units for gross proceeds of $46.0 million and a private placement of 225,000 units for $2.25 million. Approximately $46.46 million was deposited into the trust account.
- Cash increased from $239 at December 31, 2020 to $33,668, while trust-account investments increased from zero to $46.47 million.
- The company repaid a related-party promissory note of $228,483 at the IPO closing. Related-party advances declined to $920 from $26,750.
- The company revised its warrant accounting after SEC staff guidance. Public warrants were classified as equity, while private warrants were classified as derivative liabilities. The filing states that prior financial statements and balances required revision; the revisions did not affect cash or total assets.
- Disclosure controls and procedures were determined to be ineffective because of the warrant-accounting revisions.
Guidance, Outlook, Risks, Contingencies, and Unusual Items
- Venus had until February 11, 2022 to complete a business combination, with up to nine one-month extensions if the sponsor deposits $153,333 per month into the trust account, subject to an aggregate maximum of $1.38 million.
- If no business combination is completed within the permitted period, the company must redeem the public shares and liquidate. Public rights and warrants could expire worthless, and the redemption value could be below the original $10.00 unit price.
- The proposed VIYI transaction contemplated a $400 million valuation and issuance of approximately 39.6 million Venus ordinary shares to VIYI stockholders, representing approximately 85% of the combined company assuming no redemptions and conversion of rights. These terms remained subject to closing conditions and shareholder approval.
- The company pays its sponsor affiliate $10,000 per month for administrative services through the earlier of the business combination or liquidation.
- The sponsor agreed to limited indemnification if third-party claims reduce trust-account funds below specified levels, subject to stated exceptions.
- Management identified COVID-19 as a potential source of adverse effects on the company’s search for a target and future financial position, although no significant impact had occurred as of the filing.
- The filing identified increased cost and reduced availability of directors’ and officers’ liability insurance as an additional risk to completing the transaction.
- No legal proceedings, defaults upon senior securities, or off-balance-sheet financing arrangements were reported.
Important Facts for Investors to Verify
- Confirm the subsequent status, shareholder approval, closing, and final terms of the proposed VIYI Algorithm business combination and the planned name change to MicroAlgo Inc.
- Review the warrant-accounting revisions, related restatements, and the remediation of ineffective disclosure controls.
- Verify the amount available for shareholder redemptions, the deferred underwriting fee, and the potential dilution from founder shares, rights, warrants, and transaction consideration.
- Assess the company’s limited cash outside the trust account and whether additional working-capital or extension loans were required.
- Confirm the applicable liquidation deadline and any extensions, sponsor deposits, redemption terms, and risks that public rights and warrants may become worthless.
- Reconcile the filing’s issuer name with the requested company name: the submitted filing is for Venus Acquisition Corporation, while MicroAlgo Inc. was the proposed post-combination name.