References in this Quarterly Report on Form 10-Q (the "Quarterly Report") to
"we," "us" or the "Company" refer to DP Cap Acquisition Corp I. References to
our "management" or our "management team" refer to our officers and directors
and references to the "Sponsor" refer to DP Investment Management Sponsor I LLC.
The following discussion and analysis of the Company's condensed financial
condition and results of operations should be read in conjunction with the
condensed financial statements and the notes thereto contained elsewhere in this
Quarterly Report (the "Financial Statements"). Capitalized terms used but not
otherwise defined herein have the meaning set forth in the Financial Statements.
Certain information contained in the discussion and analysis set forth below
includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended (the "Securities Act")
and Section 21E of the Securities Exchange Act of 1934, as amended (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 Quarterly Report including, without limitation, statements in
this "Management's Discussion and Analysis of Financial Condition and Results of
Operations" regarding 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. 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 the
Company's Annual Report on Form 10-K filed with the U.S. Securities and Exchange
Commission (the "SEC") on April 11, 2022 and this Quarterly Report. 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
We are a blank check company incorporated on April 8, 2021 as a Cayman Islands
exempted company and formed for the purpose of effecting a merger, share
exchange, asset acquisition, share purchase, reorganization or similar business
combination with one or more businesses or entities (the "Business Combination")
that we have not yet identified. We are an emerging growth company and, as such,
we are subject to all of the risks associated with emerging growth companies. We
completed our Public Offering on November 12, 2021. As of September 30, 2022, we
had not identified any Business Combination target.
We presently have no operating revenues and have had no operations other than
the active solicitation of a target business with which to complete a Business
Combination.
We expect to continue to incur significant costs in the pursuit of our Business
Combination. We cannot assure you that our plans to complete a Business
Combination will be successful.
Our registration statement for our Public Offering was declared effective on
November 8, 2021. On November 12, 2021, we consummated our Public Offering of
23,000,000 units (the "Units"), which included the exercise in full of the
underwriter's option to purchase an additional 3,000,000 Units at the Public
Offering price to cover over-allotments. Each Unit consists of one Class A
ordinary share, par value $0.0001 per share (the "Class A ordinary shares"), and
one-half of one redeemable warrant (the "Public Warrants"), each whole Public
Warrant entitling the holder thereof to purchase one Class A ordinary share at
an exercise price of $11.50 per share, subject to adjustment. The Units were
sold at a price of $10.00 per Unit, generating gross proceeds of $230.0 million.
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Simultaneously with the closing of the Public Offering, we consummated the
private sale (the "Private Placement") of 4,733,333 warrants (the "Private
Placement Warrants") to DP Investment Management Sponsor I LLC (the "Sponsor"),
each exercisable to purchase one Class A ordinary share at $11.50 per share, at
a price of $1.50 per Private Placement Warrant, generating total gross proceeds
of $7.1 million.
Simultaneously with the closing of the Public Offering, pursuant to the
Sponsor's promissory note (the "Sponsor Note"), the Sponsor loaned $4,600,000 to
the Company (the "Sponsor Loan"). The Sponsor Loan is interest free. The Sponsor
Loan shall be repaid or converted into warrants (the "Sponsor Loan Warrants") at
a purchase price of $1.50 per Sponsor Loan Warrant, at the Sponsor's discretion
and at any time until the consummation of our initial Business Combination. Any
Sponsor Loan Warrants issued will be identical to the Private Placement
Warrants.
Upon the closing of our Public Offering, a total of $234.6 million ($10.20 per
unit), comprised of $225.4 million of the proceeds from the Public Offering
(which amount includes $8.05 million of the underwriter's deferred discount),
$4.6 million of the proceeds of the sale of the Private Placement Warrants and
$4.6 million of the proceeds from the Sponsor Loan, were placed in a U.S.-based
trust account ("Trust Account") maintained by Continental Stock Transfer & Trust
Company acting as trustee. The funds held in the Trust Account may be invested
in U.S. government securities, within the meaning set forth in Section 2(a)(16)
of the Investment Company Act of 1940, as amended (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 us meeting the
conditions of Rule 2a-7 of the Investment Company Act, 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 our Public Offering and the sale of the Private Placement
Warrants, although substantially all of the net proceeds are intended to be
applied generally toward consummating a Business Combination. There is no
assurance that we will be able to complete a Business Combination successfully.
We must complete one or more Business Combinations having an aggregate fair
market value of at least 80% of the net assets held in the Trust Account (net of
amounts disbursed to management for working capital purposes, if permitted, and
excluding the amount of deferred underwriting discounts held in trust) at the
time of our signing a definitive agreement in connection with our Business
Combination. However, we only intend to 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 Public Offering, or May 12, 2023, (the "Combination Period"), and
our shareholders have not amended our amended and restated memorandum and
articles of association to extend such Combination Period, we will (i) cease all
operations except for the purpose of winding up; (ii) as promptly as reasonably
possible but no more than ten business days thereafter subject to lawfully
available funds therefor, 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 us to pay our taxes (if any) (less up to $100,000 of
interest to pay dissolution expenses) divided by the number of the then
outstanding Public Shares, which redemption will completely extinguish public
shareholders' rights as shareholders (including the right to receive further
liquidation distributions, if any), subject to applicable law; and (iii) as
promptly as reasonably possible following such redemption, subject to the
approval of the remaining shareholders and our board of directors, liquidate and
dissolve, subject in each case to our obligations under Cayman Islands law to
provide for claims of creditors and the requirements of other applicable law.
We cannot assure you that our plans to complete a Business Combination will be
successful.
Results of Operations
For the three and nine months ended September 30, 2022, we had a net income of
$806,946 and $673,102, respectively, which consisted of formation and general
and administrative expenses of $251,938 and $725,241, respectively and earnings
on investments held in the Trust Account of $1,058,884 and $1,398,343,
respectively.
All activity from April 8, 2021 (inception) through September 30, 2022, relates
to our formation and our Public Offering and subsequent to our Public Offering,
the search for a target for our Business Combination. We will not generate any
operating revenues until after the completion of our Business Combination, at
the earliest.
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Liquidity and Capital Resources
As of September 30, 2022, we had cash and investments in the Trust Account of
$235,998,343. We may withdraw interest to pay our income 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 (which
interest shall be net of taxes payable and excluding deferred underwriting
commissions) to complete our Business Combination. To the extent that our share
capital 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.
As of September 30, 2022, we had $1,133,877 of cash held outside of the Trust
Account and a working capital of $1,018,209.
The registration statement for our Public Offering was declared effective by the
SEC on November 8, 2021. On November 12, 2021, we consummated our Public
Offering of 23,000,000 Units, inclusive of the underwriters' election to
exercise their option to purchase an additional 3,000,000 Units, at a price of
$10.00 per Unit, generating gross proceeds of $230,000,000. Simultaneously with
the closing of the Public Offering, we consummated the sale of 4,733,333 Private
Placement Warrants to our Sponsor at a price of $1.50 per Private Placement
Warrant, generating gross proceeds of $7,100,000. Simultaneously with the
closing of the Public Offering and Private Placement, our Sponsor loaned us
$4,600,000 under the Sponsor Loan.
Following the Public Offering, the sale of the Private Placement Warrants and
the issuance of the proceeds under the Sponsor Loan, a total of $234,600,000 was
placed in the Trust Account, comprised of $225,400,000 from the proceeds of the
Public Offering, $4,600,000 from the proceeds of the sale of the Private
Placement Warrants and $4,600,000 from the proceeds of the Sponsor Loan. We
incurred $13,148,152 in transaction costs, including $4,600,000 of underwriting
fees, $8,050,000 of deferred underwriting fees and $498,152 of other costs.
Our liquidity needs up to September 30, 2022 had been satisfied through (i) a
payment from the Sponsor along with certain funds controlled by Data Point
Capital of $25,000 to cover certain offering and formation costs in exchange for
the issuance of the Founder Shares to the Sponsor and (ii) the receipt of loans
to us of up to $300,000 by the Sponsor under an unsecured promissory note. The
unsecured promissory note was non-interest bearing and was due at the earlier of
December 31, 2021 and the closing of the Public Offering. As of September 30,
2022, no amounts were outstanding under the unsecured promissory note. We
borrowed an aggregate of $159,025 under an unsecured promissory note and the
loan was subsequently paid in full in connection with the consummation of the
Public Offering and the unsecured promissory note is no longer available to us.
In addition, in order to finance transaction costs in connection with a Business
Combination, the Sponsor or an affiliate of the Sponsor or certain of our
officers and directors may, but are not obligated to, provide us working capital
loans. As of September 30, 2022, there were no amounts outstanding under any
working capital loans.
We may need to raise additional funds from our Sponsor and/or third parties in
order to meet the expenditures required for operating our business. If our
estimate of the costs of undertaking in-depth due diligence and negotiating the
initial Business Combination is less than the actual amount necessary to do so,
we may have insufficient funds available to operate our business prior to a
Business Combination. The Sponsor is not under any obligation to advance funds
to, or to invest in, us. If we are unable to raise additional funds, 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 our business plan, and reducing overhead expenses. We cannot provide any
assurance that new financing will be available to us on commercially acceptable
terms, if at all. If a Business Combination is not consummated by May 12, 2023
and our shareholders have not amended our amended and restated memorandum and
articles of association to extend such Combination Period, there will be a
mandatory liquidation and subsequent dissolution of us. These conditions raise
substantial doubt about our ability to continue as a going concern through one
year from the date of Financial Statements if a Business Combination is not
consummated. The 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 we be unable to continue as a going concern.
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Commitments and Contingencies
Registration Rights
The holders of Founder Shares, Private Placement Warrants and any 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 the working capital loans) will be
entitled to registration rights pursuant to a registration rights agreement. The
holders of these securities will be entitled to make up to three demands,
excluding short form demands, that we register such securities. In addition, the
holders will have certain "piggy-back" registration rights with respect to
registration statements filed subsequent to our completion of our initial
Business Combination. However, the registration rights agreement provides that
we will not permit any registration statement filed under the Securities Act to
become effective until termination of the applicable lockup period, which occurs
(i) in the case of the Founder Shares, until the earliest of (A) one year after
the completion of our initial business combination and (B) subsequent to our
initial business combination, (x) if the closing price of our Class A ordinary
shares equals or exceeds $12.00 per share (as adjusted for share subdivisions,
share capitalizations, reorganizations, recapitalizations and the like) for any
20 trading days within any 30-trading day period commencing at least 120 days
after our initial business combination, or (y) the date on which we complete a
liquidation, merger, share exchange or other similar transaction that results in
all of our public shareholders having the right to exchange their ordinary
shares for cash, securities or other property, and (ii) in the case of the
Private Placement Warrants and the respective Class A ordinary shares underlying
such warrants, 30 days after the completion of our initial Business Combination.
We will bear the expenses incurred in connection with the filing of any such
registration statements.
Underwriting Agreement
We granted the underwriter a 45-day option from the date of the Public Offering
to purchase on a pro rata basis up to 3,000,000 additional Units to cover
over-allotments, if any, at the Public Offering price, less the underwriting
discounts and commissions. The over-allotment option was exercised in full on
November 12, 2021.
The underwriter was entitled to an underwriting discount of $0.20 per unit, or
$4.6 million in the aggregate, paid upon the closing of the Public Offering. An
additional fee of $0.35 per Unit, or $8.05 million in the aggregate will be
payable to the underwriter for deferred underwriting commissions. The deferred
fee will become payable to the underwriter 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
This management's discussion and analysis of our financial condition and results
of operations is based on our condensed financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of our condensed financial statements
requires us to make estimates and judgments that affect the reported amounts of
assets, liabilities and expenses and the disclosure of contingent assets and
liabilities in our condensed financial statements. On an ongoing basis, we
evaluate our estimates and judgments, including those related to fair value of
financial instruments and accrued expenses. We base our estimates on known
trends and events and various other factors that we believe to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. We have identified the
following as our critical accounting policies:
Investments Held in the Trust Account
Our investments consist of a portfolio of U.S. government securities, within the
meaning set forth in Section 2(a)(16) of the Investment Company Act, each with a
maturity of 185 days or less, or investments in money market funds that invest
in U.S. government securities and generally have a readily determinable fair
value, or a combination thereof. When our investments held in the Trust Account
are comprised of U.S. government securities, the investments are classified as
trading securities and are recognized at fair value. When our investments held
in the Trust Account are comprised of money market funds, the investments are
recognized at fair value. Gains and losses resulting from the change in fair
value of these securities are included in interest earned on investments held in
the Trust Account in the condensed statements of operations. The estimated fair
values of investments held in the Trust Account are determined using available
market information.
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Warrant Classification
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 Financial Accounting Standards Board
("FASB") Accounting Standards Codification ("ASC"), "Distinguishing Liabilities
from Equity ("ASC 480"), and 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 whether
the warrants meet all of the requirements for equity classification under ASC
815, including whether the warrants are indexed to our own ordinary shares,
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 reporting period date while the warrants are
outstanding. The warrants are recorded as a component of equity.
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. There have been no changes
in classification of the warrants from the Public Offering through September 30,
2022.
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 ASC 480. Class A ordinary shares subject to
mandatory redemption 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 possible redemption upon the occurrence of
uncertain events not solely within our control) are classified as temporary
equity in the commitments and contingencies section of the condensed balance
sheet. At all other times, Class A ordinary shares are classified as
shareholders'(deficit) equity. Our Class A ordinary shares feature certain
redemption rights that are considered to be outside of our control and subject
to the occurrence of uncertain future events.
Net Income (Loss) Per Ordinary Share
We follow the accounting and disclosure requirements of FASB ASC Topic 260,
"Earnings Per Share." Net income (loss) per share is computed by dividing net
income (loss) by the weighted-average number of Class A ordinary shares
outstanding during the period. We have not considered the effect of the warrants
sold as part of the Units in the Public Offering or the private placement to
purchase an aggregate of 16,233,333 shares in the calculation of diluted loss
per share, since the inclusion of such warrants would be anti-dilutive. The
Sponsor Loan Warrants to be granted upon conversion of the Sponsor Loan, if any,
would also be anti-dilutive and would therefore also be excluded from the
calculation.
The Company's condensed statements of operations include a presentation of net
income (loss) per share for ordinary shares subject to possible redemption in a
manner similar to the two-class method of income (loss) per share. Net income
(loss) per ordinary share, basic and diluted, for ordinary shares subject to
possible redemption is calculated by dividing the proportionate share of net
income (loss), by the weighted average number of ordinary shares subject to
possible redemption outstanding over the period. Net income (loss) is allocated
evenly on a pro rata basis between Class A Ordinary Shares and Class B Ordinary
Shares based on weighted average number of ordinary shares outstanding over the
period.
Recent Accounting Pronouncements
In August 2020, the FASB issued Accounting Standards Update No. 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): 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 GAAP. ASU 2020-06 also removes
certain settlement conditions that are required for equity-linked contracts to
qualify for the derivative scope exception, and it also simplifies the diluted
earnings per share calculation in certain areas. We early adopted ASU 2020-06 on
our inception date. Adoption of ASU 2020-06 did not impact our financial
position, results of operations or cash flows.
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Our management does not believe that any other recently issued, but not yet
effective, accounting pronouncements, if currently adopted, would have a
material effect on the accompanying condensed Financial Statements.
Inflation
We do not believe that inflation had a material impact on our business or
operating results during the period presented.
JOBS Act
The Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") contains
provisions that, among other things, relax certain reporting requirements for
qualifying public companies. We qualify as an "emerging growth company" and
under the JOBS Act are allowed to comply with new or revised accounting
pronouncements based on the effective date for private (not publicly traded)
companies. We are electing 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, the Financial Statements may not
be comparable to companies that comply with new or revised accounting
pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the
other reduced reporting requirements provided by the JOBS Act. Subject to
certain conditions set forth in the JOBS Act, if, as an "emerging growth
company," we choose to rely on such exemptions we may not be required to, among
other things, (i) provide an auditor's attestation report on our system of
internal controls over financial reporting pursuant to Section 404 of the
Sarbanes-Oxley Act, (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 Public Company Accounting Oversight Board 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 chief executive officer's compensation to
median employee compensation. These exemptions will apply for a period of five
years from the completion of our Public Offering or until we are no longer an
"emerging growth company," whichever is earlier.
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