References in this report to "we," "us" or the "Company" refer to Cartica
Acquisition Corp. References to our "management" or our "management team" refer
to our officers and directors, and references to the "Sponsor" refer to Cartica
Acquisition Partners, LLC. The following discussion and analysis of the
Company's financial condition and results of operations should be read in
conjunction with the financial statements and the notes thereto contained
elsewhere in this report. Certain capitalized terms used but not defined in the
below discussion and elsewhere in this report have the meanings ascribed to them
in the footnotes to the accompanying financial statements included as part of
this report.
Cautionary Note Regarding Forward-Looking Statements
This report includes "forward-looking statements" within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Exchange Act that are
not historical facts and involve risks and uncertainties that could cause actual
results to differ materially from those expected and projected. All statements,
other than statements of historical fact included in this report including,
without limitation, statements in this "Management's Discussion and Analysis of
Financial Condition and Results of Operations" regarding the completion of the
Business Combination, the Company's financial position, business strategy and
the plans and objectives of management for future operations, are
forward-looking statements. Words such as "expect," "believe," "anticipate,"
"intend," "estimate," "seek" and variations and similar words and expressions
are intended to identify such forward-looking statements. Such forward-looking
statements relate to future events or future performance, but reflect
management's current beliefs, based on information currently available. A number
of factors could cause actual events, performance or results to differ
materially from the events, performance and results discussed in the
forward-looking statements, including that the conditions of the Business
Combination are not satisfied. For information identifying important factors
that could cause actual results to differ materially from those anticipated in
the forward-looking statements, please refer to the Risk Factors sections of
(i) the Company's final prospectus for its IPO filed with the U.S. Securities
and Exchange Commission (the "SEC"), (ii) the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 2021, (iii) the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 2022, and (iii) the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2022. The
Company's securities filings can be accessed on the EDGAR section of the SEC's
website at www.sec.gov. Except as expressly required by applicable securities
law, the Company disclaims any intention or obligation to update or revise any
forward-looking statements whether as a result of new information, future events
or otherwise.
Overview
Cartica Acquisition Corp was incorporated in the Cayman Islands on February 3,
2021. The Company was formed for the purpose of effecting a merger, share
exchange, asset acquisition, share purchase, reorganization or similar business
combination with one or more businesses. Our sponsor is Cartica Acquisition
Partners, LLC, a Delaware limited liability company. The registration statement
for our IPO was declared effective on January 4, 2022. On January 7, 2022, we
consummated our IPO of 23,000,000 units, including 3,000,000 additional units to
cover over-allotments, at $10.00 per unit, generating gross proceeds of $230.0
million.
Simultaneously with the closing of the IPO, the Company completed the private
sale of an aggregate of 15,900,000 warrants ("Private Placement Warrants") to
the sponsor at a purchase price of $1.00 per Private Placement Warrant,
generating gross proceeds to the Company of $15,900,000.
At the closing of the IPO, management has agreed that an amount equal to at
least $10.30 per unit sold in the IPO, including proceeds from the sale of the
Private Placement Warrants, will be held in a Trust Account, located in the
United States and invested in U.S. government securities, within the meaning set
forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185
days or less or in any open-ended investment company that holds itself out as a
money market fund selected by the Company meeting certain conditions of Rule
2a-7 of the Investment Company Act, as determined by the Company, until the
earlier of (i) the completion of a business combination and (ii) the
distribution of the funds held in the Trust Account.
Our management has broad discretion with respect to the specific application of
the net proceeds of our IPO and the sale of the Private Placement Warrants,
although substantially all of the net proceeds are intended to be applied
generally toward consummating our initial business combination.
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We have until 18 months from the closing of our IPO, or July 7, 2023, or during
one of the two three-month periods by which we may extend such deadline, without
holders of Public Shares being entitled to vote or redeem their shares in
connection with such extensions, if our sponsor or any of its affiliates or
designees pays an additional $0.10 per Public Share into the Trust Account in
respect of each such extension period (for a total of up to 24 months to
complete a business combination) or a shareholder vote to amend our amended and
restated memorandum and articles of association, to complete a business
combination (the "Combination Period"). If we have not completed a business
combination within the Combination 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 and not previously released to the Company to pay its tax obligations
(less taxes payable and up to $100,000 of interest to pay dissolution expenses
and which interest shall be net of taxes payable), divided by the number of then
issued and 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
Company's remaining shareholders and the Company's board of directors, dissolve
and liquidate, subject in each case to the Company's obligations under Cayman
Islands law to provide for claims of creditors and the requirements of other
applicable law. There will be no redemption rights or liquidating distributions
with respect to the Company's warrants, which will expire worthless if the
Company fails to complete a business combination within the Combination Period.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities from February 3, 2021 (inception) through September 30, 2022
were organizational activities, those necessary to prepare for the IPO and
identifying a target company for a Business Combination. We do not expect to
generate any operating revenues until after the completion of our Business
Combination. We generate non-operating income in the form of interest income on
marketable securities held in the Trust Account. We incur expenses as a result
of being a public company (for legal, financial reporting, accounting and
auditing compliance), as well as for due diligence expenses.
For the three months ended September 30, 2022, we had a net loss of $29,427,
which consists of change in fair value of warrant liabilities of $981,000 and
operating and formation costs of $437,753, offset by interest income on
marketable securities held in the Trust Account of $1,389,326.
For the nine months ended September 30, 2022, we had a net income of $9,021,357,
which consists of change in fair value of warrant liabilities of $9,546,000 and
interest income on marketable securities held in the Trust Account of
$1,660,883, offset by operating and formation costs of $1,807,183 and
transaction costs of $378,343.
For the three months ended September 30, 2021, we had net loss of $205, which
consisted primarily of operating and formation costs.
For the period from February 3, 2021 (inception) through September 30, 2021, we
had net loss of $5,280, which consisted primarily of operating and formation
costs.
Liquidity and Capital Resources
On January 7, 2022, we completed the sale of 23,000,000 Units at a price of
$10.00 per Unit, generating gross proceeds to the Company of $230,000,000.
Simultaneously with the closing of the IPO, we completed the private sale of an
aggregate of 15,900,000 Private Placement Warrants at a purchase price of $1.00
per Private Placement Warrant, generating gross proceeds to the Company of
$15,900,000.
For the nine months ended September 30, 2022, cash used in operating activities
was $2,388,954. Net income of $9,021,357 was affected by interest earned on
marketable securities held in the Trust Account of $1,660,883, transaction costs
of $378,343 and change in fair value of warrant liabilities of $9,546,000.
Changes in operating assets and liabilities used $581,771 of cash for operating
activities.
For the period from February 3, 2021 (inception) through September 30, 2021,
cash used in operating activities was $490. Net loss of $5,280 was affected by
changes in operating assets and liabilities which provided $4,790 of cash for
operating activities.
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As of September 30, 2022, we had marketable securities held in the Trust Account
of $238,560,883 (including $1,660,883 of interest income) consisting of U.S.
Treasury Bills with a maturity of 185 days or less. We may withdraw interest
from the Trust Account to pay taxes, if any. 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 our 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.
As of September 30, 2022, we had cash of $1,389,691. 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, structure, negotiate
and complete a Business Combination.
In order to fund working capital deficiencies or finance transaction costs in
connection with a Business Combination, the Sponsor, or certain of our officers
and directors or their affiliates may, but are not obligated to, loan us funds
as may be required (the "Working Capital Loans"). If we complete a Business
Combination, we will repay such loaned amounts. 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. Up to $2,000,000 of such loans
may be convertible into warrants at a price of $1.00 per warrant, at the option
of the lender. The warrants would be identical to the Private Placement
Warrants. As of September 30, 2022 and December 31, 2021, we had no outstanding
borrowings under the Working Capital Loans.
Going Concern
We have until July 7, 2023, or at the end of the applicable Extension Period, to
consummate an initial business combination. It is uncertain that we will be able
to consummate an initial business combination by July 7, 2023, or at the end of
the applicable Extension Period. If an initial business combination is not
consummated by the liquidation date, there will be a mandatory liquidation and
subsequent dissolution. Additionally, it is uncertain that we will have
sufficient liquidity to fund the working capital needs of the Company through
July 7, 2023, at the end of the applicable Extension Period, or through twelve
months from the issuance of this report. Management has determined that the
liquidity condition through 12 months from the issuance of this report and
mandatory liquidation, should an initial business combination not occur, and
potential subsequent dissolution raise 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 July
7, 2023, or at the end of the applicable Extension Period.
Off-Balance Sheet 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
On January 4, 2022, we entered into an agreement to pay our Sponsor an aggregate
$930,000 over eighteen months beginning at the closing of the IPO, for the
following administrative support expenses: (i) cash compensation to Mr. Goel,
our Chief Executive Officer, in the form of an annual salary of $312,000; (ii)
cash compensation to Mr. Coad, our Chief Operating Officer and Chief Financial
Officer, in the form of an annual salary of $200,000; and (iii) $9,000 per month
for office space, utilities and research, analytical, secretarial and
administrative support, which the Sponsor is expected to source principally from
Cartica Management, LLC ("Cartica Management"). In addition, at the closing of
the IPO, we paid the Sponsor an aggregate amount of $601,167 of which $549,000
represented compensation and bonuses paid to Mr. Goel and Mr. Coad for their
services through the closing of the IPO and $51,667 represented a prepayment of
administrative support expenses for January 2022, to be amortized over the
service period. Upon completion of a Business Combination or our liquidation, we
will cease paying these amounts (in the case of the officer compensation, after
30 days' notice). As of December 31, 2021 we had accrued $238,000 of officer
compensation payable to the Sponsor under the administrative support agreement.
For the three and nine months ended September 30, 2022, we incurred $155,000 and
$776,500 in fees for these services and paid $155,000 and $1,014,500 of fees for
these services, respectively.
We granted the underwriters a 45-day option from the date of the IPO to purchase
up to 3,000,000 additional Units to cover over-allotments, if any, at the IPO
price less the underwriting discounts and commissions. As of January 7, 2022,
the over-allotment was fully exercised.
The underwriters received a cash underwriting discount of $0.20 per Unit, or
$4,600,000 in the aggregate (which included an additional $600,000 received
pursuant to the full exercise of the over-allotment option), which was paid at
closing of the IPO. In addition, the underwriters are entitled to a deferred fee
of $0.35 per Unit, or $8,050,000 in the aggregate (which included an additional
$1,050,000 received pursuant to the full exercise of the over-allotment option).
The deferred fee will become payable to the underwriters from the amounts held
in the Trust Account solely in the event that the Company completes a Business
Combination, subject to the terms of the underwriting agreement.
We entered into a forward purchase agreement with Cartica Investors, LP and
Cartica Investors II, LP, two private funds that are affiliates of Cartica
Management and the Sponsor (the "Cartica Funds"), pursuant to which the Cartica
Funds agree to subscribe for an aggregate of up to 3,000,000 forward purchase
shares for $10.00 per share, or up to $30,000,000 in the aggregate, in a private
placement to close substantially concurrently with the closing of our initial
Business Combination, subject to approval at such time by the Cartica Management
investment committee. Under the forward purchase agreement, the forward purchase
investors (i) must vote any Class A ordinary shares owned by them at the time of
any shareholder vote to approve a proposed business combination in favor of such
proposed business combination, and (ii) are entitled to registration rights with
respect to the forward purchase shares and any other Class A ordinary shares
acquired by the forward purchase investors, including any acquired subsequent to
the completion of our initial business combination. The proceeds from the sale
of the forward purchase shares may be used as part of the consideration to the
sellers in our initial Business Combination, expenses in connection with our
initial Business Combination or for working capital in the post-business
combination company. These purchases will be required to be made regardless of
whether any Class A ordinary shares are redeemed by our public shareholders. The
forward purchase shares will be issued only in connection with the closing of
the initial business combination (see Item 1. Financial Statements. - Note 9).
Critical Accounting Estimates
The preparation of condensed 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 periods reported. Actual results could materially differ from those
estimates. We have identified the following critical accounting estimates:
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Warrant Liabilities
A critical accounting estimate made in our financial statements is the estimated
fair value of our warrant liabilities. The fair value of our financial assets
and liabilities reflects management's estimate of amounts that we would have
received in connection with the sale of the assets or paid in connection with
the transfer of the liabilities in an orderly transaction between market
participants at the measurement date. In connection with measuring the fair
value of its assets and liabilities, we seek to maximize the use of observable
inputs (market data obtained from independent sources) and to minimize the use
of unobservable inputs (internal assumptions about how market participants would
price assets and liabilities). The following fair value hierarchy is used to
classify assets and liabilities based on the observable inputs and unobservable
inputs used in order to value the assets and liabilities:
Level 1, Valuations based on unadjusted quoted prices in active markets for
identical assets or liabilities that the Company has the ability to access.
? Valuation adjustments and block discounts are not being applied. Since
valuations are based on quoted prices that are readily and regularly available
in an active market, valuation of these securities does not entail a
significant degree of judgment.
Level 2, Valuations based on (i) quoted prices in active markets for similar
assets and liabilities, (ii) quoted prices in markets that are not active for
? identical or similar assets, (iii) inputs other than quoted prices for the
assets or liabilities, or (iv) inputs that are derived principally from or
corroborated by market through correlation or other means.
? Level 3, Valuations based on inputs that are unobservable and significant to
the overall fair value measurement.
As of September 30, 2022, we had 27,400,000 warrants issued and outstanding.
Ordinary Shares Subject to Possible Redemption
We account for our ordinary shares subject to possible redemption in accordance
with the guidance in Accounting Standards Codification ("ASC") Topic 480
"Distinguishing Liabilities from Equity." Ordinary shares subject to mandatory
redemption are classified as a liability instrument and measured at fair value.
Conditionally redeemable ordinary shares (including 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 our
control) are classified as temporary equity. At all other times, ordinary shares
are classified as shareholders' equity. Our ordinary shares feature certain
redemption rights that are considered to be outside of our control and subject
to occurrence of uncertain future events. Accordingly, ordinary shares subject
to possible redemption are presented at redemption value as temporary equity,
outside of the shareholders' equity section of our condensed balance sheet.
Net (Loss) Income Per Ordinary Share
Net (loss) income per ordinary share is computed by dividing net (loss) income
by the weighted average number of ordinary shares outstanding for the period.
The Company applies the two-class method in calculating earnings per share.
Accretion associated with the redeemable shares of Class A ordinary shares is
excluded from earnings per share as the redemption value approximates fair
value.
Recent Accounting Standards
In August 2020, the FASB issued 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 simplifies the diluted earnings per share
calculation in certain areas and 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. ASU 2020-06 is effective for fiscal years beginning
after December 15, 2023, including interim periods within those fiscal years,
with early adoption permitted. 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.
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Management does not believe that any other recently issued, but not yet
effective, accounting standards, if currently adopted, would have a material
effect on our condensed financial statements.
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CARTICA ACQUISITION CORP 