References to the “Company,” “our,” “us” or “we” refer to Denali Capital
Acquisition Corp.
The following discussion and analysis of the Company’s
financial condition and results of operations should be read in conjunction with
the 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. 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 “Cautionary 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 incorporated as a Cayman Islands exempted company
on January 5, 2022, for the purpose of effecting an initial business
combination. While we will not be limited to a particular industry or geographic
region in our identification and acquisition of a target company, we intend to
focus on technology, consumer and hospitality and will not complete our initial
business combination with a target that is headquartered in China (including
Hong Kong and Macau) or conducts a majority of its business in China (including
Hong Kong and Macau). We intend to effectuate our initial business combination
using cash from the proceeds of our IPO and the sale of units in the Private
Placement to the sponsor, additional shares, debt or a combination of cash,
equity and debt.

We expect to continue to incur significant costs in the pursuit of our
acquisition plans. We cannot assure you that our plans to complete a business
combination will be successful.

Recent Developments

On January 25, 2023, we entered into a Merger Agreement, by and among Longevity,
New PubCo, Denali Merger Sub, Longevity Merger Sub, and Bradford A. Zakes,
solely in the capacity as seller representative.

Pursuant to the Merger Agreement, the parties thereto will enter into the
Transactions, pursuant to which, among other things, immediately following the
consummation of the acquisitions by Longevity of each of Cerevast Medical,
Inc.
, Aegeria Soft Tissue LLC, and Novokera LLC, (i) Denali Merger Sub will
merge with and into Denali, with Denali as the surviving entity of the Denali
Merger, and (ii) Longevity Merger Sub will merge with and into Longevity, with
Longevity as the surviving company of the Longevity Merger. Following the
Mergers, each of Longevity and Denali will be a subsidiary of New PubCo, and New
PubCo will become a publicly traded company. At Closing, New PubCo will change
its name to Longevity Biomedical, Inc., and its common stock is expected to list
on the Nasdaq Capital Market under the ticker symbol “LBIO.”

The consummation of the proposed Longevity Business Combination is subject to
certain conditions as further described in the Merger Agreement.

For more information about the Merger Agreement and the proposed Longevity
Business Combination, see our Current Report on Form 8-K/A filed with the SEC on
January 26, 2023 and the Longevity Disclosure Statement that we will file with
the SEC. Unless specifically stated, this Annual Report on Form 10-K does not
give effect to the proposed Transactions and does not contain the risks
associated with the proposed Transactions. Such risks and effects relating to
the proposed Transactions will be included in a Registration Statement on Form
S-4 that we will file with the SEC relating to our proposed business combination
with Longevity.

Results of Operations


We have neither engaged in any operations nor generated any operating revenues
to date. Our only activities from January 5, 2022 (inception) through December
31, 2022, were organizational activities, those necessary to prepare for and
complete the IPO,
and, subsequent to the IPO, identifying a target company for a business
combination and activities in connection with the proposed Longevity Business
Combination
. 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 period from January 5, 2022 (inception) through December 31, 2022, we
had a net loss of $
419,390
, which primarily consists of formation and operating expenses of
$1,640,990, partially offset by income earned on marketable securities held in
the Trust Account of $1,221,600.



 51



For the period from January 5, 2022 (inception) through December 31, 2022, we
had an increase in cash of $819,747 resulting from net cash used in operating
activities of $426,095, net cash used in investing activities of $84,150,000 and
net cash provided by financing activities of $85,395,842.

Cash Flows from Operating Activities

For the period from January 5, 2022 (inception) through December 31, 2022, net
cash used in operations was $426,095, primarily due to net loss of $419,390 for
the period and the changes in current assets and liabilities of $1,203,552 due
to prepaid expenses of $(88,089) and accounts payable and accrued expenses of
$1,291,641. In addition, net cash used in operating activities includes
adjustments to reconcile net loss from formation costs paid by the related party
of $11,343 and income on the Trust Account of $1,221,600.

Cash Flows from Investing Activities

For the period from January 5, 2022 (inception) through December 31, 2022, net
cash used in investing activities was $84,150,000, primarily due to investment
held in the Trust Account of $84,150,000.

Cash Flows from Financing Activities

For the period from January 5, 2022 (inception) through December 31, 2022, net
cash provided by financing activities was $85,395,842, primarily due to proceeds
from issuance of the Promissory Note (as defined below) to the related party of
$80,000, proceeds from the related party of $25,000, proceeds from the Private
Placement of $5,100,000, proceeds from our IPO of $82,500,000, partially offset
by payment of the Promissory Note to the related party of $80,000, payment to
the related party of $240,020, payment of offering costs of $339,138 and payment
of underwriting discount of $1,650,000.

Liquidity and Capital Resources

Our liquidity needs prior to the consummation of the IPO were satisfied through
a payment from the sponsor and the loan under an unsecured promissory note from
the sponsor of up to $400,000 (the “Promissory Note”).


On April 11, 2022, we consummated the IPO of 8,250,000 Units, inclusive of
750,000 Units
issued pursuant to the partial exercise by the underwriters of their
over-allotment option
. The Units were sold at a price of $10.00 per Unit, generating gross proceeds
of $82,500,000. Simultaneously with the closing of the IPO, we consummated the
sale of 510,000 Private Placement Units, inclusive of 30,000 Private Placement
Units sold to the sponsor pursuant to the underwriters' partial exercise of
their over-allotment option. Each whole Private Placement Unit consists of one
Class A ordinary share and one warrant, each whole warrant entitling the holder
thereof to purchase one Class A ordinary share at an exercise price of $11.50
per share. The Private Placement Units were sold at a price of $10.00 per
Private Placement Unit, generating gross proceeds of $5,100,000.

Following the closing of the IPO and sale of the Private Placement Units on
April 11, 2022, a total of $84,150,000 was placed in the Trust Account, and we
had $1,515,795 of cash held outside of the Trust Account, after payment of costs
related to the IPO, and available for working capital purposes. In connection
with the IPO, we incurred $5,105,315 in transaction costs, consisting of
$1,650,000 of underwriting fees, $2,887,500 of deferred underwriting fees and
$567,815 of other offering costs.

As of December 31, 2022, we had cash and marketable securities held in the Trust
Account of $85,371,600. We intend to use substantially all of the funds held in
the Trust Account, including any amounts representing interest earned on the
Trust Account (less income taxes payable), to complete our business combination.
To the extent that our share capital or debt is used, in whole or in part, as
consideration to complete a business combination, the remaining proceeds held in
the Trust Account will be used as working capital to finance the operations of
the target business or businesses, make other acquisitions and pursue our growth
strategies.


 52



As of December 31, 2022, we had cash of $819,747 outside of the Trust Account.
If we do not complete the Longevity Business Combination, we intend to use the
funds held outside the Trust Account primarily to identify and evaluate target
businesses, perform business due diligence on prospective target businesses,
travel to and from the offices, plants or similar locations of prospective
target businesses or their representatives or owners, review corporate documents
and material agreements of prospective target businesses, and structure,
negotiate and complete a business combination.

On January 25, 2023, we entered into the Merger Agreement, by and among
Longevity, New PubCo, Denali Merger Sub, Longevity Merger Sub, and Bradford A.
Zakes
, solely in the capacity as seller representative.


As of December 31, 2022, we had a working
capital
deficit of $383,805. In order to fund working capital deficiencies or finance
transaction costs in connection with a business combination, our sponsor or an
affiliate of our sponsor or certain of our officers and directors may, but are
not obligated to, loan us funds as may be required (the "Working Capital
Loans"). If we complete the initial business combination, we would repay such
loaned amounts
or convert them into equity securities as described below.
In the event that the initial business combination does not close, we may use a
portion of the working capital held outside of the Trust Account to repay such
loaned amounts, but no proceeds from the Trust Account would be used for such
repayment. Up to $1,500,000 of such loans may be convertible into units of the
post-business combination entity, at a price of $10.00 per unit at the option of
the lender. The units would be identical to the Private Placement Units. As of
December 31, 2022, there were no amounts outstanding under any Working Capital
Loans.


Based on the foregoing, management believes that we will not have sufficient
working capital and borrowing capacity to meet our needs through the
consummation of the initial business combination. If we are unable to raise
additional capital, we may be required to take additional measures to conserve
liquidity, which could include, but not necessarily be limited to, curtailing
operations, suspending the pursuit of a potential transaction, and reducing
overhead expenses. We cannot provide any assurance that new financing will be
available to us on commercially acceptable terms, if at all.

In accordance with Accounting Standards Codification (“ASC”) Subtopic 205-40,
“Presentation of Financial Statement – Going Concern”, the Company has evaluated
that there are certain conditions and events, considered in the aggregate, that
raise substantial doubt about the Company’s ability to continue as a going
concern through April 11, 2023 (or by October 11, 2023, if the Company extends
the period of time to consummate a business combination), the date that the
Company will be required to cease all operations, except for the purpose of
winding up, if a business combination is not consummated. These financial
statements do not include any adjustments relating to the recovery of the
recorded assets or the classification of the liabilities that might be necessary
should the Company be unable to continue as a going concern.

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 initial business combination. Moreover, we may
need to obtain additional financing either to complete our business combination
or because we become obligated to redeem a significant number of our public
shares upon completion of our business combination, in which case we may issue
additional securities or incur debt in connection with such business
combination.

Off-Balance Sheet Arrangements

We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of December 31, 2022. We do not participate in
transactions that create relationships with 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.


 53




Other Contractual Obligations

Registration Rights

The holders of our founder shares, Private Placement Shares and Private
Placement Warrants, including any of those issued upon conversion of any Working
Capital Loans (and any Private Placement Shares issuable upon the exercise of
the Private Placement Warrants that may be issued upon conversion of any Working
Capital Loans) will be entitled to registration rights pursuant to a
registration and shareholder rights agreement signed on April 6, 2022. The
holders of these securities are entitled to make up to three demands, excluding
short form demands, that we register such securities. In addition, the holders
have certain “piggy-back” registration rights with respect to registration
statements filed after the completion of our initial business combination and
rights to require us to register for resale such securities pursuant to Rule 415
under the Securities Act. We will bear the costs and expenses of filing any such
registration statements.

Underwriting Agreement

We granted the underwriters a 45-day option from the date of the IPO to purchase
up to 1,125,000 additional Units to cover over-allotments, if any, at the IPO
price less the underwriting discounts and commissions. The underwriters
exercised their over-allotment option in part for 750,000 Units on April 11,
2022
. On May 23, 2022, the underwriters decided not to exercise their
over-allotment option on the remaining 375,000 Units and the remaining option
expired. There are no pending contractual obligations as of December 31, 2022.

The underwriters received a cash underwriting discount of $0.20 per Unit, or
$1,650,000 in the aggregate, paid upon the closing of the IPO. In addition, the
underwriters will be entitled to a deferred fee of $0.35 per Unit, or $2,887,500
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.

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity
with U.S. GAAP 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 periods reported. Actual results could materially differ from those
estimates. We have identified the following critical accounting policies:

Basis of Presentation

The accompanying financial statements are presented in conformity with U.S. GAAP
and pursuant to the rules and regulations of the SEC.

Emerging Growth Company Status


We are an "emerging growth company," as defined in Section 2(a) of the
Securities Act, as modified by the
JOBS Act
. As such, we may take advantage of certain exemptions from various reporting
requirements that are applicable to other public companies that are not emerging
growth companies, including, but not limited to, not being required to comply
with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley
Act, reduced disclosure obligations regarding executive compensation in our
periodic reports and proxy statements, and exemptions from the requirements of
holding a non-binding advisory vote on executive compensation and shareholder
approval of any golden parachute payments not previously approved.


 54



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. We have 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, we, 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
our 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.

Class A Ordinary Shares Subject to Possible Redemption


We account for our Class A ordinary shares subject to possible redemption in
accordance with the guidance in the Financial Accounting Standards Board
("FASB") ASC 480
,
"Distinguishing Liabilities from Equity" ("ASC 480"). Class A ordinary shares
subject to mandatory redemption (if any) are classified as a liability
instrument and measured at fair value. Conditionally redeemable ordinary shares
(including 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 our control) are classified as temporary equity. At all
other times, ordinary shares are classified as shareholders' equity. Our
ordinary shares will feature certain redemption rights that are considered to be
outside of our control and will be subject to the occurrence of uncertain future
events. Accordingly, as of December 31, 2022, 8,250,000 Class A ordinary shares
subject to possible redemption are presented at redemption value as temporary
equity, outside of the shareholders' deficit section of our audited balance
sheet.


We recognize changes in redemption value immediately as they occur and adjust
the carrying value of redeemable ordinary shares to equal the redemption value
at the end of each reporting period. Increases or decreases in the carrying
amount of redeemable ordinary shares are affected by charges against additional
paid in capital or accumulated deficit if additional paid in capital equals to
zero.

Warrants

We account 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 FASB ASC 480 and FASB ASC 815, “Derivatives
and Hedging” (“ASC 815”). The assessment considers whether the warrants are
freestanding financial instruments pursuant to ASC 480, meet the definition of a
liability pursuant to ASC 480, and meet all of the requirements for equity
classification under FASB ASC 815, including whether the warrants are indexed to
our own ordinary shares and whether the warrant holders could potentially
require “net cash settlement” in a circumstance outside of our control, among
other conditions for equity classification. This assessment 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
additional paid-in capital at the time of issuance. For issued or modified
warrants that do not meet all of the criteria for equity classification, the
warrants are required to be recorded at their initial fair value on the date of
issuance, and each balance sheet date thereafter. We account for the 8,250,000
Public Warrants and 510,000 Private Placement Warrants as equity-classified
instruments.

Net Income/(Loss) Per Ordinary Share

We comply with the accounting and disclosure requirements of FASB ASC 260,
“Earnings Per Share.” Net loss per redeemable and non-redeemable ordinary share
is computed by dividing net loss by the weighted average number of ordinary
shares outstanding between the redeemable and non-redeemable shares during the
period, excluding ordinary shares subject to forfeiture. Weighted average shares
were reduced for the effect of an aggregate of 93,750 founder shares that were
forfeited due to the underwriters’ partial exercise of the over-allotment
option. In order to determine the net income (loss) attributable to both the
redeemable shares and non-redeemable shares, we 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
dividends paid. We then allocated the undistributed income (loss) based on the
weighted average number of shares outstanding between the redeemable and
non-redeemable shares.


Subsequent measurement adjustments recorded pursuant to ASC 480-10-S99-3A
related to redeemable shares are treated in the same manner as dividends on
non-redeemable shares. Class A ordinary shares are redeemable at a price
determined by the
Trust Account
held by us. This redemption price is not considered a redemption at fair value.
Accordingly, the adjustments to the carrying amount are reflected in the
Earnings Per Share ("EPS") using the two-class method.
We have elected to apply the two-class method by treating the entire periodic
adjustment to the carrying amount of the Class A ordinary shares subject to
possible redemption like a dividend.

Based on above, any remeasurement of redemption value of the Class A ordinary
shares subject to possible redemption is considered to be dividends paid to the
public shareholders. Warrants issued are contingently exercisable (i.e.,
on the later of 30 days after the completion of the initial business combination
or 12 months from the closing of the IPO
). For EPS purpose, the warrants are anti-dilutive since they would generally
not be reflected in basic or diluted EPS until the contingency is resolved. As
of December 31, 2022, we did not have any other dilutive securities and other
contracts that could, potentially, be exercised or converted into ordinary
shares and then share in our earnings. As a result, diluted income (loss) per
ordinary share is the same as basic earnings per ordinary share for the period
presented.


 55




Recent Accounting Pronouncements

In August 2020, the FASB issued Accounting Standards Update (“ASU”) No. 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): Accounting for
Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU
2020-06″)”, which simplifies accounting for convertible instruments by removing
major separation models required under current U.S. GAAP. The ASU also removes
certain settlement conditions that are required for equity-linked contracts to
qualify for the derivative scope exception, and it simplifies the diluted
earnings per share calculation in certain areas. ASU 2020-06 is effective
January 1, 2024 and should be applied on a full or modified retrospective basis,
with early adoption permitted beginning on January 1, 2021. The Company has not
adopted ASU 2020-06 yet and has not determined how applying it will impact the
financial statements.

Management does not believe that any other recently issued, but not effective,
accounting standards, if currently adopted, would have a material effect on our
financial statements.

Item 7A.

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