Business Context and Reporting Period
The filing is a Form 10-K for Venus Acquisition Corporation, a Cayman Islands blank-check company, for the fiscal year ended December 31, 2021. The request identifies MicroAlgo Inc. and “2021 Q4,” but the filing itself is issued by Venus Acquisition Corporation and covers the full fiscal year, not a standalone quarter. Venus had no operating business or revenue and was formed to complete a business combination, with an intended focus on businesses connected to Asian markets.
On June 10, 2021, Venus entered into a merger agreement with VIYI Algorithm Inc., Venus Merger Sub Corp. and WiMi Hologram Cloud Inc. If completed, Venus would change its name to MicroAlgo Inc. and VIYI would become a wholly owned subsidiary.
Financial Metrics
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | $0 | $0 |
| Formation, general and administrative expenses | $785,096 | $117,787 |
| Net loss | $812,413 | $117,787 |
| Cash used in operating activities | $748,227 | $77,815 |
| Cash outside trust account at year-end | $32,090 | $239 |
| Cash and investments held in trust at year-end | $46,469,183 | $0 |
| Total assets | $46,518,212 | $191,543 |
| Total liabilities | $2,026,979 | $295,205 |
| Warrant liabilities | $410,000 | $0 |
| Deferred underwriting compensation | $1,150,000 | $0 |
The filing does not provide meaningful operating margins because the Company had no revenue. The trust account consisted primarily of U.S. Treasury securities. The Company had no long-term debt, capital lease obligations or operating lease obligations, although it had $373,421 of interest-free advances from a related party at December 31, 2021.
FY2021 loss per share was $0.81 for non-redeemable ordinary shares and $0.08 of allocated income per redeemable ordinary share after the accounting allocation of redemption-value accretion. The filing reports $3,641,991 of accretion of redeemable shares to redemption value, which was a non-cash accounting item.
Material Changes Versus the Prior Comparable Period
- The Company completed its IPO on February 11, 2021, selling 4.6 million units at $10.00 per unit for gross proceeds of $46.0 million.
- The sponsor purchased 225,000 private units for $2.25 million. Approximately $46.46 million was placed into the trust account.
- Net loss increased to $812,413 from $117,787, primarily because of public-company compliance, transaction and business-combination expenses.
- Operating cash use increased to $748,227 from $77,815, while cash outside the trust account declined to $32,090.
- The balance sheet was restated to classify public warrants as equity rather than derivative liabilities and to classify all public shares subject to redemption as temporary equity. The restatement did not affect cash, operating expenses or the trust-account balance.
- Management identified material weaknesses in internal control over financial reporting related to warrant classification, redeemable-share classification and the allocation and treatment of IPO transaction costs.
Outlook, Risks and Unusual Items
The proposed VIYI transaction values VIYI and its subsidiaries at approximately $400 million. VIYI shareholders were expected to receive approximately 39.6 million Venus ordinary shares, representing approximately 85% of the combined company assuming no redemptions and conversion of outstanding rights. Completion remained subject to shareholder approval, minimum net tangible assets and other customary conditions.
On January 24, 2022, the merger agreement was amended to extend the outside termination date to June 30, 2022, terminate the original backstop agreement and acknowledge possible additional Chinese governmental approvals. WiMi entered into a replacement backstop agreement covering up to $15 million of purchases of shares subject to redemptions or private placement.
Venus extended its business-combination deadline to March 11, 2022 and then to April 11, 2022, depositing $153,333 into the trust account for each extension. Additional monthly extensions could require further sponsor funding, subject to the governing documents. If no business combination is completed within the permitted period, public shares are to be redeemed from the trust account and the rights and warrants are expected to expire worthless.
- The auditor included a going-concern explanatory paragraph because cash and working capital were insufficient to fund planned activities for a reasonable period without completing a business combination or obtaining additional financing.
- Key risks include failure to complete the merger, high shareholder redemptions, limited liquidity outside the trust account, dilution from shares, rights and warrants, and possible liquidation.
- The proposed transaction carries material PRC-related risks, including VIE enforceability, foreign-investment restrictions, cybersecurity and data-security review, potential CSRC or other governmental approvals, changing regulations and HFCAA-related listing risks.
- The Company may rely on sponsor or related-party loans, but such parties are not obligated to provide additional funding. Up to $1.5 million of certain working-capital loans could be converted into private units.
- The filing reports no material litigation and no off-balance-sheet financing arrangements.
Investor Verification Checklist
- Confirm the correct issuer and ticker: the filing is for Venus Acquisition Corporation, while the request names MicroAlgo Inc.
- Verify the current status and final terms of the VIYI merger, including shareholder approval, required Chinese governmental approvals, the termination date and the $15 million WiMi backstop.
- Review the amended filings and restatement disclosures to confirm the classification of public warrants, private warrants and redeemable public shares.
- Assess the going-concern disclosure against cash outside the trust account, related-party advances and the availability of sponsor financing.
- Confirm the amount remaining in the trust account, the number of shares redeemed, and the applicable liquidation or redemption value per public share.
- Evaluate dilution from the approximately 39.6 million merger shares, outstanding rights and warrants, private units and any convertible working-capital loans.
- Review remediation of the material weaknesses in internal control over financial reporting and any subsequent auditor or SEC developments.