The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our audited financial statements
and the notes related thereto which are included in "Item 8. Financial
Statements and Supplementary Data" of this Annual Report on Form 10-K. Certain
information contained in the discussion and analysis set forth below includes
forward-looking statements. Our actual results may differ materially from those
anticipated in these forward-looking statements as a result of many factors,
including those set forth under "Special Note Regarding Forward-Looking
Statements," "Item 1A. Risk Factors" and elsewhere in this Annual Report on Form
10-K.
Overview
We are a blank check company formed under the laws of the State of Delaware on
July 21, 2021. We were formed for the purpose of entering into a merger, share
exchange, asset acquisition, stock purchase, recapitalization, reorganization or
other similar business combination.
On January 21, 2022, Arisz entered into that certain Agreement and Plan of
Merger (as may be amended, supplemented or otherwise modified from time to time,
the "Merger Agreement"), by and between Arisz and Finfront Holding Company, a
Cayman Islands exempted company ("BitFuFu"), pursuant to which (a) Arisz will
form BitFuFu Inc., a Cayman Islands exempted company, as its wholly owned
subsidiary ("Purchaser"), (b) Purchaser will form Boundary Holding Company, a
Cayman Islands exempted company, as its wholly owned subsidiary ("Merger Sub"),
(c) Arisz will be merged with and into Purchaser (the "Redomestication Merger"),
with Purchaser surviving the Redomestication Merger, and (d) Merger Sub will be
merged with and into BitFuFu (the "Acquisition Merger"), with BitFuFu surviving
the Acquisition Merger as a direct wholly owned subsidiary of Purchaser
(collectively, the "Business Combination"). Following the Business Combination,
Purchaser will be a publicly traded company listed on a stock exchange in the
United States. On April 4, 2022, each of Arisz and the Company entered into that
certain Amendment to the Merger Agreement pursuant to which, among other things,
the parties clarified certain Cayman Island corporate law matters by mutual
agreement.
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In consideration of the Acquisition Merger, Purchaser will issue 150,000,000
ordinary shares (the "Closing Payment Shares") with a deemed price per share
US$10.00 ("Aggregate Stock Consideration") to the shareholders of BitFuFu. The
Aggregate Stock Consideration consists of 7,500,000 Class A ordinary shares and
142,500,000 Class B ordinary shares of Purchaser.
The Merger Agreement provides that the closing of the Business Combination shall
occur no later than July 31, 2022 (the "Outside Date") and that the Outside Date
may be extended upon the written agreement of Arisz and BitFuFu.
On July 14, 2022, each of Arisz, BitFuFu, the Purchaser and Arisz's Sponsor
(along with any assignee of Arisz's Sponsor, the "Buyer") entered into a
backstop agreement (the "Backstop Agreement") whereby, in connection with the
Business Combination, the Buyer has agreed to subscribe for and purchase no less
than US$1.25 million worth of shares of Arisz common stock par value $0.0001 per
share or Purchaser's Class A ordinary shares.
On October 10, 2022, Arisz and BitFuFu entered into an amendment to the Merger
Agreement to provide, among other things: 1) for a loan from BitFuFu to Arisz in
the amount of $2,220,000 (the "Loan") for the purpose of funding Arisz's
extension of the time to consummate a business combination and for working
capital purposes, and 2) remove all existing restrictions on 400,000 Insider
Shares that are currently subject to transfer restrictions, so that such shares
are freely tradeable upon the Closing. The Loan will be funded in three equal
installments of $740,000 on each of October 26, 2022, January 26, 2023 and April
26, 2023.
On October 10, 2022, Arisz issued an unsecured promissory note to BitFuFu for
the amount of the Loan at an interest rate of 3.5% per annum and is due on
October 26, 2023. Arisz may elect to issue a number of unregistered shares of
its common stock, valued for these purposes at $10.00 per share, the aggregate
value of which shall be equal to the outstanding principal amount of the Loan.
On October 13, 2022, the parties to the Backstop Agreement entered into a new
backstop agreement substantially on the same terms as the Backstop Agreement
with the only substantive additional terms being that: 1) the subscription
amount is $2.0 million worth of shares and 2) the termination date is the
earlier of: (i) the date agreed by the parties thereto in writing and (ii) the
date that the Merger Agreement is terminated, on its terms.
On October 24, 2022, Arisz received $740,000, the first installment of the Loan,
from BitFuFu.
On November 9, 2022, Arisz deposited $690,000 into the Trust Account
(representing $0.10 per each share of redeemable common stock) to extend the
time for Arisz to complete the Business Combination by three months until
February 17, 2023.
We expect to continue to incur significant costs in the pursuit of our
acquisition plans. We cannot assure you that our plans to complete the Business
Combination will be successful.
Results of Operations
We have neither engaged in any operations nor generated any operating revenues
to date. Our only activities from inception through September 30, 2022 were
organizational activities and those necessary to prepare for our initial public
offering ("IPO"), and, after our IPO, searching for a target business to
acquire. We do not expect to generate any operating revenues until after the
completion of our initial Business Combination. We expect to generate
non-operating income in the form of interest income on marketable securities
held after the IPO. We expect that we will incur increased expenses as a result
of being a public company (for legal, financial reporting, accounting and
auditing compliance), as well as for due diligence expenses in connection with
searching for, and completing, a Business Combination.
For the year ended September 30, 2022, we had a net loss of $359,608, which
consists of loss of approximately $597,351 derived from general and
administrative expenses of approximately $544,157, franchise tax expense of
$53,194 and income tax expense of $49,057, offset by interest earned on
marketable securities of approximately $286,800.
For the period from July 21, 2021 (inception) through September 30, 2021, we had
a net loss of $490, all of which derived from general and administrative
expenses.
Liquidity and Going Concern
On November 22, 2021 the Company consummated the IPO of 6,000,000 units (which
does not include the exercise of the over-allotment option by the underwriters
in the IPO) at an offering price of $10.00 per unit (the "Public Units"),
generating gross proceeds of $60,000,000. Simultaneously with the IPO, the
Company sold to its Sponsor and Chardan Capital Markets LLC ("Chardan") (and/or
their designees) 253,889 units at $10.00 per unit (the "Private Units") in a
private placement generating total gross proceeds of $2,538,886. Concurrently,
the Company repaid $105,000 to the Sponsor, under related party loan evidenced
by promissory note issued on August 5, 2021.
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On November 24, 2021, the underwriters fully exercised its over-allotment option
and purchased 900,000 units (the "Over-allotment Units") at a price of $10.00
per Unit, generating gross proceeds of $9,000,000. Upon the closing of the
Over-allotment on November 24, 2021, the Company consummated the sale of
additional 22,500 Private Units (the "Additional Private Units") with the
Sponsor and Chardan at a price of $10.00 per Private Unit, generating total
proceeds of $225,000.
A total of $69,000,000 of the net proceeds from the sale of Public Units in the
IPO (including the over-allotment option units) and the Private Placements on
November 22, 2021 and November 24, 2021, were placed in a trust account
established for the benefit of the Company's public shareholders.
Following the IPO, the full exercise of the over-allotment option, and the sale
of the Private Placement Units, we had $655,286 of cash held outside of the
Trust Account, after payment of costs related to the IPO, available for working
capital purposes. We incurred a total of $5,587,733 in transaction costs,
including $1,725,000 of underwriting fees, $2,587,500 of deferred underwriting
fees and $1,275,233 of other offering costs. For the year ended September 30,
2022, cash used in operating activities was $484,814 and none for the period
from July 21, 2021 (inception) through September 30, 2021.
As of September 30, 2022, we had marketable securities held in the Trust Account
of $69,286,800 consisting of securities held in a treasury trust fund that
invests in United States government treasury bills, bonds or notes with a
maturity of 180 days or less. Interest income on the balance in the Trust
Account may be used by us to pay taxes. Through September 30, 2022, we did not
withdraw any interest earned on the Trust Account to pay our taxes. We intend
to use substantially all of the funds held in the Trust Account, to acquire a
target business and to pay our expenses relating thereto. To the extent that our
capital stock is used in whole or in part as consideration to effect a Business
Combination, the remaining funds held in the Trust Account will be used as
working capital to finance the operations of the target business. Such working
capital funds could be used in a variety of ways including continuing or
expanding the target business' operations, for strategic acquisitions and for
marketing, research and development of existing or new products. Such funds
could also be used to repay any operating expenses or finders' fees which we had
incurred prior to the completion of our Business Combination if the funds
available to us outside of the Trust Account were insufficient to cover such
expenses.
As of September 30, 2022, we had cash of $173,789 outside of the Trust Account
and working capital of $87,562 (excluding income tax and franchise tax payable).
The Company has 15 months from the closing of the IPO to consummate a Business
Combination (unless further extended as described herein). It is uncertain that
we will be able to consummate a Business Combination by this time. If a Business
Combination is not consummated by this date, there will be a mandatory
liquidation and subsequent dissolution.
Until consummation of the Business Combination, we intend to use the funds held
outside the Trust Account for identifying and evaluating prospective acquisition
candidates, performing business due diligence on prospective target businesses,
traveling to and from the offices, plants or similar locations of prospective
target businesses, reviewing corporate documents and material agreements of
prospective target businesses, selecting the target business to acquire and
structuring, negotiating and consummating the Business Combination. If our
estimate of the costs of identifying a target business, undertaking in-depth due
diligence and negotiating a Business Combination are less than the actual amount
necessary to do so, we may have insufficient funds available to operate our
business prior to our Business Combination. In this event, our officers,
directors or their affiliates may, but are not obligated to, loan us funds as
may be required. If we consummate an initial Business Combination, we would
repay such loaned amounts out of the proceeds of the Trust Account released to
us upon consummation of the Business Combination. In the event that a Business
Combination does not close, we may use a portion of the working capital held
outside the Trust Account to repay such loaned amounts, but no proceeds from our
Trust Account would be used for such repayment. The terms of such loans by our
initial shareholders, officers and directors, if any, have not been determined
and no written agreements exist with respect to such loans.
We expect to continue to incur significant professional costs to remain as a
publicly traded company and to incur significant transaction costs in pursuit of
the consummation of a Business Combination. 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 these conditions raise substantial
doubt about the Company's ability to continue as a going concern. In addition,
if the Company is unable to complete a Business Combination within the
Combination Period, the Company's board of directors would proceed to commence a
voluntary liquidation and thereby a formal dissolution of the Company. There is
no assurance that the Company's plans to consummate a Business Combination
(within 15 months from the closing of IPO) will be successful within the
Combination Period. As a result, management has determined that such additional
condition also raise substantial doubt about the Company's ability to continue
as a going concern. The financial statement does not include any adjustments
that might result from the outcome of this uncertainty.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of September 30, 2022. We do not participate
in transactions that create relationships with unconsolidated entities or
financial partnerships, often referred to as variable interest entities, which
would have been established for the purpose of facilitating off-balance sheet
arrangements. We have not entered into any off-balance sheet financing
arrangements, established any special purpose entities, guaranteed any debt or
commitments of other entities, or purchased any non-financial assets.
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Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than described below.
Upon closing of a Business Combination, the underwriters will be entitled to a
deferred fee of $0.375 per public share, or $2,587,500 in the aggregate. The
deferred fee will become payable to the underwriters from the amounts held in
the Trust Account solely in the event that we complete a Business Combination,
subject to the terms of the underwriting agreement. The underwriters will also
be entitled to 51,750 common shares, to be issued if the Company closes a
Business Combination.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and income and expenses
during the period reported. Actual results could materially differ from those
estimates. We have identified the following critical accounting policies:
Common stock Subject to Possible Redemption
We account for our common stock subject to possible redemption in accordance
with the guidance in Accounting Standards Codification ("ASC") Topic 480
"Distinguishing Liabilities from Equity." Common stock subject to mandatory
redemption is classified as a liability instrument and is measured at fair
value. Conditionally redeemable common stock (including common stock that
feature redemption rights that is either within the control of the holder or
subject to redemption upon the occurrence of uncertain events not solely within
the Company's control) is classified as temporary equity. At all other times,
common stock is classified as stockholders' equity. The Company's common stock
features certain redemption rights that are considered to be outside of the
Company's control and subject to occurrence of uncertain future events.
Accordingly, common stock subject to possible redemption is presented at
redemption value as temporary equity, outside of the stockholders' 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 common stock to equal the redemption value at the end of each
reporting period. Increases or decreases in the carrying amount of shares of
redeemable common stock are affected by charges against additional paid in
capital or accumulated deficit if additional paid in capital equals to zero.
Net Income (Loss) per Share
The Company complies with accounting and disclosure requirements of FASB ASC
260, Earnings Per Share. The statements of operations include a presentation of
income (loss) per redeemable share and income (loss) per non-redeemable share
following the two-class method of income per share. In order to determine the
net income (loss) attributable to both the redeemable shares and non-redeemable
shares, the Company first considered the undistributed income (loss) allocable
to both the redeemable shares and non-redeemable shares and the undistributed
income (loss) is calculated using the total net loss less any dividends paid.
The Company then allocated the undistributed income (loss) ratably based on the
weighted average number of shares outstanding between the redeemable and
non-redeemable shares. Any remeasurement of the accretion to redemption value of
the common shares subject to possible redemption was considered to be dividends
paid to the public shareholders.
Warrants
The Company accounts for warrants as either equity-classified or
liability-classified instruments based on an assessment of the warrant's
specific terms and applicable authoritative guidance in Financial Accounting
Standards Board ("FASB") ASC 480 "Distinguishing Liabilities from Equity" ("ASC
480") and ASC 815, Derivatives and Hedging ("ASC 815"). The assessment considers
whether the warrants are freestanding financial instruments pursuant to ASC 480,
whether they meet the definition of a liability pursuant to ASC 480, and whether
the warrants meet all of the requirements for equity classification under ASC
815, including whether the warrants are indexed to the Company's own common
stock and whether the warrant holders could potentially require "net cash
settlement" in a circumstance outside of the Company's control, among other
conditions for equity classification. This assessment, which requires the use of
professional judgment, is conducted at the time of warrant issuance and as of
each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity
classification, the warrants are required to be recorded as a component of
equity at the time of issuance. For issued or modified warrants that do not meet
all the criteria for equity classification, the warrants are required to be
recorded as liabilities at their initial fair value on the date of issuance, and
each balance sheet date thereafter. Changes in the estimated fair value of the
warrants are recognized as a non-cash gain or loss on the statements of
operations.
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Offering Costs
Offering costs consist of underwriting, legal, accounting, registration and
other expenses incurred through the balance sheet date that are directly related
to the IPO. The Company complies with the requirements of ASC 340-10-S99-1 and
SEC Staff Accounting Bulletin Topic 5A - "Expenses of Offering". Offering costs
are allocated between public shares and public rights based on the estimated
fair values of public shares and public rights at the date of issuance.
Recent Accounting Standards
In August 2020, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") 2020-06, Debt-Debt with Conversion and Other
Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity's Own
Equity (Subtopic 815-40) ("ASU 2020-06") to simplify accounting for certain
financial instruments. ASU 2020-06 eliminates the current models that require
separation of beneficial conversion and cash conversion features from
convertible instruments and simplifies the derivative scope exception guidance
pertaining to equity classification of contracts in an entity's own equity. The
new standard also introduces additional disclosures for convertible debt and
freestanding instruments that are indexed to and settled in an entity's own
equity. ASU 2020-06 amends the diluted earnings per share guidance, including
the requirement to use the if-converted method for all convertible instruments.
The amendments are effective for smaller reporting companies for fiscal years
beginning after December 15, 2023, including interim periods within those fiscal
years. The Company is currently assessing the impact, if any, that ASU 2020-06
would have on its financial position, results of operations or cash flows.
Management does not believe that any recently issued, but not yet effective,
accounting standards, if currently adopted, would have a material effect on our
financial statements.
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