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 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 "Cautionary Note Regarding Forward-Looking
Statements," "Item 1A. Risk Factors" and elsewhere in this Form 10-K.
Overview
We are a blank check company incorporated as a Cayman Islands exempted company
on February 11, 2021. We were incorporated for the purpose of effecting a
merger, share exchange, asset acquisition, share purchase, reorganization or
similar business combination with one or more businesses that we have not yet
identified.
The registration statement for the Company's Initial Public Offering was
declared effective on November 17, 2021. On November 22, 2021, we consummated
the Initial Public Offering of 27,600,000 Units, including the issuance of
3,600,000 Units as a result of the underwriters' full exercise of their
over-allotment option, at $10.00 per Unit, generating gross proceeds of $276.0
million, and incurring offering costs of approximately $16.3 million, of which
approximately $9.7 million was for deferred underwriting commissions.
Simultaneously with the closing of the Initial Public Offering, we consummated
the Private Placement of 7,520,000 Private Placement Warrants at a price of
$1.00 per Private Placement Warrant to the sponsor, generating proceeds of
approximately $7.5 million.
Upon the closing of the Initial Public Offering and the Private Placement,
$276.0 million ($10.00 per Unit) of net proceeds, including the net proceeds of
the Initial Public Offering and certain of the proceeds of the Private
Placement, were placed in a trust account with Continental Stock Transfer &
Trust Company acting as trustee and invested in United States "government
securities" within the meaning of Section 2(a)(16) of the Investment Company Act
of 1940, as amended, or the Investment Company Act, having a maturity of 185
days or less or in money market funds meeting certain conditions under Rule 2a-7
promulgated under the Investment Company Act which invest only in direct U.S.
government treasury obligations, as determined by us, until the earlier of: (i)
the completion of a business combination and (ii) the distribution of the trust
account as described below.
Our management has broad discretion with respect to the specific application of
the net proceeds of its Initial Public Offering and the sale of Private
Placement Warrants, although substantially all of the net proceeds are intended
to be applied generally toward consummating a business combination. Our initial
business combination must be with one or more operating businesses or assets
with a fair market value equal to at least 80% of the net assets held in the
trust account (excluding any deferred underwriters fees and taxes payable on the
income earned on the trust account) at the time we signed a definitive agreement
in connection with the initial business combination. However, we will only
complete a business combination if the post-transaction 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.
If we are unable to complete a business combination within 18 months from the
closing of the Initial Public Offering, or May 22, 2023, or during any Extension
Period, we will (i) cease all operations except for the purpose of winding up,
(ii) as promptly as reasonably possible but not more than ten business days
thereafter, redeem the 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 on the funds held in the trust account (less taxes payable and
up to $100,000 of interest to pay dissolution expenses), 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 liquidating distributions, if any) and (iii) as promptly as reasonably
possible following such redemption, subject to the approval of the remaining
shareholders and the board of directors, liquidate and dissolve, subject, in the
case of clauses (ii) and (iii), to our obligations under Cayman Islands law to
provide for claims of creditors and in all cases subject to the other
requirements of applicable law. In such event, the Rights and warrants will
expire and be worthless.
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Liquidity and Going Concern
As of December 31, 2022, we had approximately $61,000 in cash and working
capital of approximately $89,000 and the ability to borrow up to an aggregate of
$1,200,000 under the 2022 Note (as defined below).
Our liquidity needs prior to the consummation of the Initial Public Offering
were satisfied through the payment of $25,000 from the sponsor to cover certain
expenses on our behalf in exchange for issuance of our Class B ordinary shares,
and loan proceeds from the sponsor of approximately $167,000 under a promissory
note (the "2021 Note"). We partially repaid approximately $166,000 of the 2021
Note upon closing of the Initial Public Offering and repaid the remaining
balance of approximately $1,000 on November 24, 2021. Subsequent to the
consummation of the Initial Public Offering, our liquidity has been satisfied
through the net proceeds from the consummation of the Initial Public Offering
and the Private Placement held outside of the trust account and from the 2022
Note.
On April 1, 2022, we entered into a convertible promissory note with our sponsor
the ("2022 Note"). Pursuant to the 2022 Note, we may borrow from the sponsor,
from time to time, up to an aggregate of $1,500,000. Borrowings under the 2022
Note do not bear interest. The 2022 Note will mature on the earlier to occur of
(i) 18 months from the closing of the Initial Public Offering (or up to any
Extension Period, if applicable) or (ii) the effective date of the Company's
initial Business Combination. If the Company completes a Business Combination,
the Company will repay the 2022 Note out of the proceeds of the trust account
released to the Company. Otherwise, the 2022 Note will be repaid only out of
funds held outside the trust account. Up to $1,500,000 of such loans may be
converted into Private Placement Warrants of the post-Business Combination
entity at a price of $1.00 per warrant at the option of the sponsor. The 2022
Note contains customary events of default, including those relating to the
Company's failure to repay the principal amount due upon maturity of the 2022
Note and certain bankruptcy events. In July 2022, we borrowed $300,000 under the
2022 Note. As of December 31, 2022, $300,000 was outstanding under the 2022
Note.
In connection with our assessment of going concern considerations in accordance
with the Financial Accounting Standards Board's ("FASB") Accounting Standards
Codification ("ASC") Topic 205-40, Presentation of Financial Statements - Going
Concern," we have determined that the liquidity issue, mandatory liquidation and
subsequent dissolution raises substantial doubt about our ability to continue as
a going concern. No adjustments have been made to the carrying amounts of assets
or liabilities should we be required to liquidate after May 22, 2023. The
financial statements do not include any adjustments that might be necessary if
we are unable to continue as a going concern.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our entire activity since inception up to December 31, 2022 related to our
formation, the preparation for the Initial Public Offering, and since the
closing of the Initial Public Offering, the search for a prospective initial
business combination. We do not expect to generate any operating revenues until
after the completion of our initial business combination. We generate
non-operating income in the form of investment income from the trust account. We
will continue to 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. Additionally, we recognize non-cash gains and losses
within other income (expense) related to changes in recurring fair value
measurement of our derivative liabilities at each reporting period.
For the year ended December 31, 2022, we had net income of approximately $2.5
million, which consisted of approximately $3.4 million of net gains from
investments held in the trust account, partially offset by approximately
$760,000 in general and administrative expenses and approximately $120,000 in
related party general and administrative expenses.
For the period from February 11, 2021 (inception) through December 31, 2021, we
had a net loss of approximately $276,000, which consisted of approximately
$235,000 in general and administrative expense, approximately $15,000 in related
party general and related party expenses, and approximately $27,000 of loss from
investments held in the trust account.
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Commitments and Contingencies
Registration and Shareholder Rights
The holders of the Founder Shares, Private Placement Warrants, and warrants that
may be issued upon conversion of working capital loans (and any Class A ordinary
shares issuable upon the exercise of the Private Placement Warrants and warrants
that may be issued upon conversion of working capital loans and upon conversion
of the Founder Shares) are entitled to registration rights pursuant to a
registration rights agreement dated November 17, 2021 requiring us 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 we
registered such securities. In addition, the holders have certain "piggy-back"
registration rights with respect to registration statements filed subsequent to
the completion of the initial Business Combination. We will bear the expenses
incurred in connection with the filing of any such registration statements.
Underwriting Agreement
We granted the underwriters a 45-day option from November 17, 2021 to purchase
up to 3,600,000 additional Units at the Initial Public Offering price less the
underwriting discounts and commissions. On November 22, 2021, the underwriters
consummated the exercise in full of the over-allotment option.
The underwriters were entitled to an underwriting discount of $0.20 per unit, or
approximately $5.5 million in the aggregate, paid upon the closing of the
Initial Public Offering. In addition, $0.35 per unit, or approximately $9.7
million in the aggregate, will be payable to the underwriters for deferred
underwriting commissions. 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.
Related Party Loans
Our sponsor agreed to loan us up to $300,000 pursuant to a promissory note,
dated February 12, 2021 which was later amended and restated on July 30, 2021
(the "2021 Note"). The 2021 Note was non-interest bearing, unsecured and due
upon the closing of the Initial Public Offering. We borrowed approximately
$167,000 under the 2021 Note. We repaid $166,000 of the 2021 Note upon closing
of the Initial Public Offering and repaid the remaining balance of approximately
$1,000 on November 24, 2021.
On April 1, 2022, we entered into a convertible promissory note (the "2022
Note") with our sponsor. Pursuant to the 2022 Note, we may borrow from the
sponsor, from time to time, up to an aggregate of $1,500,000. Borrowings under
the 2022 Note do not bear interest. The 2022 Note will mature on the earlier to
occur of (i) 18 months from the closing of our initial public offering (or up to
any extension period, if applicable) or (ii) the effective date of an initial
business combination. If we complete a business combination, we will repay the
2022 Note out of the proceeds of the trust account released to us. Otherwise,
the 2022 Note will be repaid only out of funds held outside the trust account.
Up to $1,500,000 of such loans may be converted into Private Placement Warrants
of the post-business combination entity at a price of $1.00 per warrant at the
sponsor's option. The 2022 Note contains customary events of default, including
those relating to the Company's failure to repay the principal amount due upon
maturity of the 2022 Note and certain bankruptcy events. In July 2022, we
borrowed $300,000 under the 2022 Note. As of December 31, 2022, $300,000 was
outstanding under the 2022 Note.
Administrative Services Agreement
On November 17, 2021, the Company agreed to pay an affiliate of the sponsor
$10,000 per month for office space, secretarial and administrative support
services provided to members of the management team through the earlier of
consummation of the initial Business Combination and the liquidation. For the
year ended December 31, 2022 and for the period from February 11, 2021
(inception) through December 31, 2021, the Company incurred expenses of
approximately $120,000 and $15,000, respectively, under this agreement.
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In addition, the sponsor, officers and directors, or their respective
affiliates, will be reimbursed for any out-of-pocket expenses incurred in
connection with activities on the Company's behalf such as identifying potential
target businesses and performing due diligence on suitable Business
Combinations. The Company's audit committee will review on a quarterly basis all
payments that were made by the Company to the sponsor, executive officers or
directors, or their affiliates. Any such payments prior to an initial Business
Combination will be made using funds held outside the trust account.
Critical Accounting Policies and Estimates
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 the reported
amounts of income and expenses during the periods reported. Actual results could
materially differ from those estimates. We have identified the following as our
critical accounting policies and estimates:
Derivative Liabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or
foreign currency risks. We evaluate all of our financial instruments, including
issued stock purchase warrants, to determine if such instruments are derivatives
or contain features that qualify as embedded derivatives, pursuant to FASB ASC
Topic 480 "Distinguishing Liabilities from Equity" and FASB ASC Topic 815,
"Derivatives and Hedging" ("ASC 815"). The classification of derivative
instruments, including whether such instruments should be recorded as
liabilities or as equity, is re-assessed at the end of each reporting period.
We accounted for the Rights as equity-classified instruments based on an
assessment of the Rights' specific terms and applicable authoritative guidance
in ASC 480 and ASC 815. The assessment considered whether the Rights were
freestanding financial instruments pursuant to ASC 480, met the definition of a
liability pursuant to ASC 480, and whether the Rights met all the requirements
for equity classification under ASC 815, including whether the Rights were
indexed to our own ordinary shares, among other conditions for the equity
classification.
We classify the warrants issued in connection with its Initial Public Offering
(the "Public Warrants") and the Private Placement Warrants in accordance with
the guidance contained in ASC 480 and ASC 815. Such guidance provides that the
warrants are not precluded from equity classification. Equity-classified
contracts were initially measured at fair value (or allocated value). Subsequent
changes in fair value will not be recognized as long as the contracts continue
to be classified in equity in accordance with ASC 480 and ASC 815.
Class A Ordinary Shares Subject to Possible Redemption
Class A ordinary shares subject to mandatory redemption (if any) are classified
as liability instruments and are measured at fair value. Conditionally
redeemable Class A ordinary shares (including Class A 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,
Class A ordinary shares are classified as shareholders' equity. The Company's
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, all outstanding Class A ordinary shares subject to
possible redemption are presented at redemption value as temporary equity,
outside of the shareholders' deficit section of the Company's balance sheets.
Under ASC 480, we have elected to recognize changes in the redemption value
immediately as they occur and adjust the carrying value of the security to equal
the redemption value at the end of each reporting period. This method would view
the end of the reporting period as if it were also the redemption date for the
security. Immediately upon the closing of the Initial Public Offering, we
recognized the remeasurement from initial book value to redemption amount value.
The change in the carrying value of the redeemable Class A ordinary shares
resulted in charges against additional paid-in capital (to the extent available)
and accumulated deficit.
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Net Income (Loss) Per Ordinary Share
We comply with accounting and disclosure requirements of FASB ASC Topic 260,
"Earnings Per Share." We have two classes of shares, which are referred to as
Class A ordinary shares and Class B ordinary shares. Income and losses are
shared pro rata between the two classes of shares. Net income (loss) per
ordinary share is calculated by dividing the net loss by the weighted average
shares of ordinary shares outstanding for the respective period.
The calculation of diluted net income (loss) per ordinary shares does not
consider the effect of the Public Warrants, the Private Placement Warrants and
the Rights to purchase an aggregate of 23,045,000 Class A ordinary shares since
their inclusion would be anti-dilutive under the treasury stock method. As a
result, diluted net income (loss) per share is the same as basic net income
(loss) per share for the year ended December 31, 2022 and for the period from
February 11, 2021 (inception) through December 31, 2021. Remeasurement
associated with the redeemable Class A ordinary shares is excluded from earnings
per share as the redemption value approximates fair value.
Recent Accounting Standards
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.
Off-Balance Sheet Arrangements
As of December 31, 2022, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K.
JOBS Act
On April 5, 2012, the Jumpstart Our Business Startups Act of 2012 (the "JOBS
Act") was signed into law. The JOBS Act contains provisions that, among other
things, relax certain reporting requirements for qualifying public companies. We
qualify as an "emerging growth company" under the JOBS Act and are allowed to
comply with new or revised accounting pronouncements based on the effective date
for private (not publicly traded) companies. We elected to delay the adoption of
new or revised accounting standards, and as a result, we may not comply with new
or revised accounting standards on the relevant dates on which adoption of such
standards is required for non-emerging growth companies. As a result, our
financial statements may not be comparable to companies that comply with new or
revised accounting pronouncements as of public company effective dates.
As an "emerging growth company", we are not required to, among other things, (i)
provide an auditor's attestation report on our system of internal control over
financial reporting pursuant to Section 404, (ii) provide all of the
compensation disclosure that may be required of non-emerging growth public
companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act,
(iii) comply with any requirement that may be adopted by the PCAOB regarding
mandatory audit firm rotation or a supplement to the auditor's report providing
additional information about the audit and the financial statements (auditor
discussion and analysis), and (iv) disclose certain executive compensation
related items such as the correlation between executive compensation and
performance and comparisons of the CEO's compensation to median employee
compensation. These exemptions will apply for a period of five years following
the completion of our initial public offering or until we are no longer an
"emerging growth company," whichever is earlier.
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