References to the "Company," "our," "us" or "we" refer to Fifth Wall Acquisition
Corp. III. 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 information contained in the discussion and analysis set forth below
includes forward-looking statements that involve risks and uncertainties.
Overview
Fifth Wall Acquisition Corp. III (the "Company") was incorporated as a Cayman
Islands exempted company on February 19, 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 (the "initial business combination"). The company is an early stage
and emerging growth company and, as such, the Company is subject to all of the
risk associated with early stage and emerging growth companies.
As of December 31, 2022, the Company had not commenced any operations. All
activity for the period from February 19, 2021 (inception) through December 31,
2022 relates to the Company's formation and the initial public offering (the
"IPO") described below and seeking an initial business combination following the
IPO. The Company will not generate any operating revenues until after the
completion of its initial business combination, at the earliest. The Company
will generate non- operating income in the form of interest income from the
proceeds derived from the IPO. The Company has selected December 31 as its
fiscal year end.
The Company's sponsor is Fifth Wall Acquisition Sponsor III LLC, a Cayman
Islands exempted limited company (our "sponsor"). The registration statement for
the Company's IPO was declared effective on May 24, 2021. On May 27, 2021, the
Company consummated its IPO of 27,500,000 Public Shares, including 2,500,000
Public Shares as a result of the underwriters' partial exercise of their
over-allotment option, at an offering price of $10.00 per Public Share,
generating gross proceeds of $275.0 million, and incurring offering costs of
approximately $16.1 million, of which approximately $9.6 million was for
deferred underwriting commissions.
Simultaneously with the closing of the IPO, the Company consummated the private
placement ("Private Placement") of 907,000 Private Placement Shares, at a price
of $10.00 per Private Placement Share to our sponsor, generating gross proceeds
of approximately $9.1 million.
Upon the closing of the IPO, management agreed that an amount equal to at least
$10.00 per Public Share sold in the IPO, including the proceeds from the sale of
the Private Placement Shares, are held in the Trust Account, located in the
United States, with Continental Stock Transfer & Trust Company acting as
trustee, and is invested only in United States "government securities" within
the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as
amended (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, until the earlier of: (i) the completion of an initial
business combination and (ii) the distribution of the Trust Account as described
below.
The Company's management has broad discretion with respect to the specific
application of the net proceeds of the IPO and the sale of Private Placement
Shares, although substantially all of the net proceeds are intended to be
applied generally toward consummating an initial business combination. There is
no assurance that the Company will be able to complete an initial business
combination successfully. The Company must complete one or more initial business
combinations having an aggregate fair market value of at least 80% of the net
assets held in the Trust Account (excluding the amount of deferred underwriting
commissions and taxes payable on the interest earned on the Trust Account) at
the time of the signing of the agreement to enter into an initial business
combination. However, the Company will only complete an initial 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.
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The Company will provide public shareholders, with the opportunity to redeem all
or a portion of their Public Shares upon the completion of an initial business
combination either (i) in connection with a shareholder meeting called to
approve the initial business combination or (ii) by means of a tender offer. The
decision as to whether the Company will seek shareholder approval of an initial
business combination or conduct a tender offer will be made by the Company,
solely in its discretion. The public shareholders will be entitled to redeem
their Public Shares for a pro rata portion of the amount then in the Trust
Account (initially anticipated to be $10.00 per Public Share, plus any pro rata
interest earned on the funds held in the Trust Account and not previously
released to the Company to pay income taxes). The per-share amount to be
distributed to public shareholders who redeem their Public Shares will not be
reduced by the deferred underwriting commissions the Company will pay to the
underwriters.
The Public Shares were classified as temporary equity in accordance with the
Financial Accounting Standards Board's ("FASB") Accounting Standards
Codification ("ASC") Topic 480 "Distinguishing Liabilities from The Company will
proceed with an initial business combination if the Company has net tangible
assets of at least $5,000,001 upon such consummation of an initial business
combination and, only if a majority of the ordinary shares, represented in
person or by proxy and entitled to vote thereon, voted at a shareholder meeting
are voted in favor of the initial business combination. If a shareholder vote is
not required by law and the Company does not decide to hold a shareholder vote
for business or other reasons, the Company will, pursuant to the amended and
restated memorandum and articles of association which the Company adopted upon
the consummation of the IPO (the "Amended and Restated Memorandum and Articles
of Association"), conduct the redemptions pursuant to the tender offer rules of
the U.S. Securities and Exchange Commission ("SEC") and file tender offer
documents with the SEC prior to completing an initial business combination. If,
however, shareholder approval of the transactions is required by law, or the
Company decides to obtain shareholder approval for business or other reasons,
the Company will offer to redeem shares in conjunction with a proxy solicitation
pursuant to the proxy rules and not pursuant to the tender offer rules.
Additionally, each Public Shareholder may elect to redeem their Public Shares
irrespective of whether they vote for or against the proposed transaction or
vote at all. If the Company seeks shareholder approval in connection with an
initial business combination, the Initial Shareholders (as defined below) agreed
to vote their Founder Shares (as defined below) and any Public Shares purchased
during or after the IPO in favor of an initial business combination. In
addition, the Initial Shareholders agreed to waive their redemption rights with
respect to their Founder Shares, Private Placement Shares and Public Shares in
connection with the completion of an initial business combination.
Notwithstanding the foregoing, if the Company seeks shareholder approval of its
initial business combination and does not conduct redemptions in connection with
its initial business combination pursuant to the tender offer rules, the Amended
and Restated Memorandum and Articles of Association provides that a public
shareholder, together with any affiliate of such shareholder or any other person
with whom such shareholder is acting in concert or as a "group" (as defined
under Section 13 of the Exchange Act), will be restricted from redeeming its
shares with respect to more than an aggregate of 15% of the Class A ordinary
shares sold in the IPO, without the prior consent of the Company.
The Company's officers and directors and our sponsor (the "Initial
Shareholders") agreed not to propose an amendment to the Amended and Restated
Memorandum and Articles of Association that would modify the substance or timing
of the Company's obligation to provide holders of its Public Shares the right to
have their shares redeemed in connection with an initial business combination or
to redeem 100% of the Company's Public Shares if the Company does not complete
its initial business combination within 24 months from the closing of the IPO,
or May 27, 2023 (the "Combination Period"), or with respect to any other
provision relating to the rights of public shareholders, unless the Company
provides the public shareholders with the opportunity to redeem their Class A
ordinary shares in conjunction with any such amendment.
If the Company has not completed an initial business combination within the
Combination Period, the Company 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 taxes that were paid by the
Company or are payable by the Company, 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); 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
(i) and (iii) to the Company's obligations under Cayman Islands law to provide
for claims of creditors and the requirements of other applicable law.
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The Initial Shareholders agreed to waive their liquidation rights with respect
to the Founder Shares and Private Placement Shares held by them if the Company
fails to complete an initial business combination within the Combination Period.
However, if the Initial Shareholders acquire Public Shares in or after the IPO,
they will be entitled to liquidating distributions from the Trust Account with
respect to such Public Shares if the Company fails to complete an initial
business combination within the Combination Period. The underwriters agreed to
waive their rights to their deferred underwriting commission held in the Trust
Account in the event the Company does not complete an initial business
combination within the Combination Period and, in such event, such amounts will
be included with the other funds held in the Trust Account that will be
available to fund the redemption of the Public Shares. In the event of such
distribution, it is possible that the per share value of the assets remaining
available for distribution (including Trust Account assets) will be only $10.00
per share initially held in the Trust Account. In order to protect the amounts
held in the Trust Account, our sponsor agreed to be liable to the Company if and
to the extent any claims by a third party for services rendered or products sold
to the Company, or a prospective target business with which the Company has
discussed entering into a transaction agreement, reduce the amount of funds in
the Trust Account to below the lesser of (i) $10.00 per Public Share and
(ii) the actual amount per Public Share held in the Trust Account as of the date
of the liquidation of the Trust Account if less than $10.00 per Public Share due
to reductions in the value of the trust assets. This liability will not apply
with respect to any claims by a third party who executed a waiver of any right,
title, interest or claim of any kind in or to any monies held in the Trust
Account or to any claims under the Company's indemnity of the underwriters of
the IPO against certain liabilities, including liabilities under the Securities
Act of 1933, as amended (the "Securities Act").
Moreover, in the event that an executed waiver is deemed to be unenforceable
against a third party, our sponsor will not be responsible to the extent of any
liability for such third-party claims. The Company will seek to reduce the
possibility that our sponsor will have to indemnify the Trust Account due to
claims of creditors by endeavoring to have all vendors, service providers
(excluding the Company's independent registered public accounting firm),
prospective target businesses or other entities with which the Company does
business, execute agreements with the Company waiving any right, title, interest
or claim of any kind in or to monies held in the Trust Account.
Proposed Merger
On December 13, 2022, the Company (together with its successors, including after
the Domestication (as defined below)), entered into an agreement and plan of
merger (as it may be amended, supplemented or otherwise modified from time to
time, the "Merger Agreement"), by and among the Company, Queen Merger Corp. I, a
Maryland corporation and a wholly-owned subsidiary of the Company ("Merger
Sub"), and Mobile Infrastructure Corporation, a Maryland corporation ("MIC").
The transactions set forth in the Merger Agreement, including the Mergers
(defined below), will constitute an "initial business combination" as
contemplated by the Amended and Restated Memorandum and Articles of Association
and is referred to herein as the "Merger".
On March 23, 2023, the Company, Merger Sub and MIC entered into the First
Amendment to the Agreement and Plan of Merger (the "First Amendment") to, among
other things, clarify the intended tax treatment of the Merger, expand the size
of the post-closing board of directors, and revise certain pre-closing
reorganizational steps of MIC affiliates.
The Mergers
The Merger Agreement provides for, among other things, the following
transactions: (i) the Company will transfer by way of continuation from the
Cayman Islands to the State of Maryland and will domesticate by means of a
corporate conversion (the "Domestication") to a Maryland corporation ("Surviving
Pubco") in accordance with Title 3, Section 9 of the Maryland General
Corporation Law, as amended (the "MGCL"), and Part XII of the Cayman Islands
Companies Act (as revised), and, in connection with the Domestication, (A) each
then issued and outstanding Class A ordinary share, par value $0.0001 per share,
of the Company (the "Class A Shares") will convert automatically, on
a one-for-one basis, into one share of common stock, par value $0.0001, of
Surviving Pubco (the "Surviving Pubco Shares"); and (B) each then issued and
outstanding Class B ordinary share, par value $0.0001 per share, of the
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Company will convert automatically, on a one-for-one basis, into one Surviving
Pubco Share; and (ii) following the Domestication, (A) Merger Sub will merge
with and into MIC in accordance with the MGCL (the "First Merger"), with MIC
continuing as the surviving entity (the "First-Step Surviving Company") and
(B) immediately following the effectiveness of the First Merger, the First-Step
Surviving Company will merge with and into Surviving Pubco in accordance with
the MGCL (the "Second Merger" and, together with the First Merger, the
"Mergers"), with Surviving Pubco continuing as the surviving entity (the
"Second-Step Surviving Company").
Lock-up Agreements
Sponsor Lock-up Agreement
Concurrently with the execution of the Merger Agreement, our sponsor, MIC and
the Company entered into a lock-up agreement ("Sponsor Lock-up Agreement").
Pursuant to the Sponsor Lock-up Agreement, our sponsor agreed, among other
things, that its shares received in exchange for the Class A Shares in the
Mergers, may not be transferred until, subject to certain customary exceptions,
the earlier to occur of (a) six (6) months following the consummation of the
transactions contemplated by the Merger Agreement (the "Closing") and (b) the
date after the Closing on which the Company completes a liquidation, merger,
capital stock exchange, reorganization or other similar transaction that results
in all of the Company's shareholders having the right to exchange their equity
holdings in the Company for cash, securities or other property.
Seller Lock-up Agreement
Concurrently with the execution of the Merger Agreement, certain security
holders of MIC ("MIC Holders"), the Company and MIC entered into
a lock-up agreement ("Seller Lock-up Agreement"). Pursuant to the
Seller Lock-up Agreement, MIC Holders agreed, among other things, that their
shares of Surviving Pubco Shares received in exchange for their shares of MIC
Common Stock may not be transferred until, subject to certain customary
exceptions, the earlier to occur of (a) six (6) months following Closing and
(b) the date after the Closing on which the Company completes a liquidation,
merger, capital stock exchange, reorganization or other similar transaction that
results in all of the Company's shareholders having the right to exchange their
equity holdings in the Company for cash, securities or other property.
Sponsor Agreement
Concurrently with the execution of the Merger Agreement, the Company also
entered into a Sponsor Agreement (the "Sponsor Agreement") with our sponsor, and
certain holders of the Company's Class B ordinary shares, par value $0.0001 per
share (the "Class B Holders"), whereby our sponsor and the Class B Holders, have
agreed to waive certain of their anti-dilution and conversion rights with
respect to their Class B ordinary shares (such shares, together with any Class A
Shares or Surviving Pubco Shares issuable upon conversion thereof, the "Founder
Shares"). Our sponsor also has agreed to certain restrictions with respect to
its Founder Shares, as follows: (a) 1,658,750 Founder Shares will vest at such
time as the aggregate volume-weighted average price per Surviving Pubco Share
for any 5-consecutive trading day period after the date on which the Closing
occurs (the "Closing Date") equals or exceed $16.00 per share (provided that
such Founder Shares will be cancelled if the Founder Shares have not vested
prior to December 31, 2026), (b) 1,658,750 Founder Shares will vest at such time
as the aggregate volume-weighted average price per Surviving Pubco Share for
any 5-consecutive trading day period after the Closing Date equals or exceeds
$20.00 per share (provided that such Founder Shares will be cancelled if the
Founder Shares have not vested prior to December 31, 2028), (c) our sponsor will
deliver to the Company for cancellation and for no consideration 1,375,000
Founder Shares and any portion of 2,062,500 Founder Shares not transferred to
third-party investors in connection with the Closing, and (d) if the aggregate
cash proceeds generated from additional Subscription Agreements (defined below)
entered into with other investors ( the "PIPE Investments") (excluding the
Initial PIPE Investment (defined below) and PIPE Investments by MIC's directors,
officers and affiliates) and any other third-party financing (other than debt
financing) to be funded at the Closing are less than $40,000,000, our sponsor
will deliver to the Company for cancellation and for no consideration 1,375,000
Founder Shares, which number of shares
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shall be reduced to 1,000,000 Founder Shares if such cash proceeds at Closing
equal or exceed $40,000,000 but are less than $50,000,000. If earlier, the
Founder Shares described in the foregoing clauses (a) and (b) shall vest on the
date after the Closing on which Surviving Pubco (or its successors) completes a
liquidation, merger, capital stock exchange, reorganization or other similar
transaction that results in all of Surviving Pubco's (or its successor's)
stockholders having the right to exchange their Surviving Pubco Shares for cash,
securities or other property.
PIPE Investment (Private Placement)
Concurrently with the execution of the Merger Agreement, the Company entered
into a subscription agreement (the "Subscription Agreement") with each of
Harvest Small Cap Partners, L.P. and Harvest Small Cap Partners Master, Ltd.
(collectively, the "Initial PIPE Investor"), pursuant to which, among other
things, the Initial PIPE Investor has agreed to subscribe for and purchase, and
the Company has agreed to issue and sell to the Initial PIPE Investor an
aggregate of 1,200,000 Surviving Pubco Shares for a purchase price of $10.00 per
1.2 shares, on the terms and subject to the conditions set forth therein (the
"Initial PIPE Investment"). The Subscription Agreement contains customary
representations and warranties of the Company, on the one hand, and the Initial
PIPE Investor, on the other hand, and customary conditions to closing, including
the consummation of the transactions contemplated by the Merger Agreement.
Surviving Pubco Shares to be issued and sold to the Initial PIPE Investor
pursuant to the Subscription Agreement will not be registered under the
Securities Act, in reliance on the exemption from registration provided by
Section 4(a)(2) of the Securities Act and/or Regulation D promulgated
thereunder. The Subscription Agreement provides the Initial PIPE Investor with
certain customary registration rights. The Subscription Agreement further
provides that one-sixth of the Surviving Pubco Shares issued to the PIPE
Investors will be subject to certain transfer restrictions.
Support Agreements
Color Up Support Agreement
Concurrently with the execution of the Merger Agreement, the Company and Color
Up, LLC, a Delaware limited liability company ("Color Up"), entered into an
agreement (the "Color Up Support Agreement") pursuant to which Color Up agreed
to vote its shares of MIC Common Stock (i) in favor of the Mergers and the
transactions contemplated by the Merger Agreement, (ii) in favor of any proposal
to adjourn a meeting of the MIC stockholders at which there is a proposal to
adopt the Merger Agreement if there are not sufficient votes to adopt the
proposals described in clause (i) above or if there are not sufficient shares of
MIC's common stock present in person or represented by proxy to constitute a
quorum, (iii) against any merger, purchase of all or substantially all of the
MIC's assets or other business combination transaction (other than the Merger
Agreement), (iv) subject to certain exceptions, in any circumstances upon which
a consent or other approval is required under MIC's Charter or otherwise sought
with respect to the Merger Agreement (including the Mergers), to vote, consent
or approve all of Color Up's MIC Common Stock held at such time in favor
thereof, (v) against and withhold consent with respect to any merger, purchase
of all or substantially all of MIC's assets or other business combination
transaction (other than the Merger Agreement), (vi) against any proposal, action
or agreement that would impede, frustrate, prevent or nullify any provision of
the Color Up Support Agreement, the Merger Agreement, or the Mergers, and
(vii) in favor of any proposal to amend the Third Amended and Restated Limited
Partnership Agreement of Mobile Infra Operating Partnership, L.P. (including the
conversion to a limited liability company, the "LLCA"), as contemplated by the
Merger Agreement. The Color Up Support Agreement also contains customary
termination provisions.
HS3 Support Agreement
Concurrently with the execution of the Merger Agreement, the Company and HSCP
Strategic III, L.P., a Delaware limited partnership ("HS3"), entered into an
agreement (as amended by the First Amendment, the "A&R HS3 Support Agreement")
pursuant to which HS3 agreed to, among other things, enter into the LLCA in
connection with the consummation of the Merger. The A&R HS3 Support Agreement
also contains customary termination provisions.
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Additional information regarding MIC and the Merger is available in the proxy
statement/prospectus most recently filed by the Company with the SEC on
January 13, 2023.
Results of Operations
Our entire activity from February 19, 2021 (inception) through December 31, 2022
was in preparation for our formation and the IPO and, thereafter, seeking an
initial business combination. We will not be generating any operating revenues
until the closing and completion of our initial business combination.
For the year ended December 31, 2022, we had a net income of approximately
$274,559, as a result of income from investments held in Trust Account of
$2,936,654, partially offset by loss from operations of approximately $2,662,095
which consisted of approximately $2,452,095 of general and administrative
expenses, and approximately $210,000 in related party general and administrative
expenses.
For the period from February 19, 2021 (inception) through December 31, 2021, we
had a net loss of approximately $1,101,000, which consisted of approximately
$1,039,000 of general and administrative expenses, and $74,000 in general and
administrative expenses - related party, partially offset by approximately
$12,000 in income from investments held in Trust Account.
Liquidity and Going Concern
As of December 31, 2022, the Company had approximately $443,000 in its operating
bank account and working capital deficit of approximately $1.1 million.
The Company's liquidity needs through December 31, 2022 have been satisfied
through a payment of $25,000 by our sponsor to cover for certain expenses in
exchange for the issuance of the Founder Shares, the loan of approximately
$109,000 from our sponsor pursuant to a promissory note, dated as of
February 24, 2021, between our sponsor and the Company (the "Note"), and the
proceeds from the consummation of the Private Placement not held in the Trust
Account. The Company fully repaid the Note on May 28, 2021. In addition, in
order to finance transaction costs in connection with an initial business
combination, our sponsor or an affiliate of our sponsor, or certain of the
Company's officers and directors may, but are not obligated to, provide the
Company funds as may be required ("Working Capital Loans"). As of December 31,
2022 and 2021, there were no amounts outstanding under any Working Capital Loan.
In connection with the Company's assessment of going concern considerations in
accordance with FASB Accounting Standards Update ("ASU") 2014-15, "Disclosures
of Uncertainties about an Entity's Ability to Continue as a Going Concern,"
management has determined that the liquidity needs, mandatory liquidation and
subsequent dissolution raises substantial doubt about the Company's ability to
continue as a going concern. No adjustments have been made to the carrying
amounts of assets or liabilities should the Company be required to liquidate
after May 27, 2023. The financial statements do not include any adjustment that
might be necessary if the Company is unable to continue as a going concern. The
Company intends to complete an initial business combination before the mandatory
liquidation date. Over this time period, the Company will be using the funds
outside of the Trust Account for paying existing accounts payable, identifying
and evaluating prospective initial business combination candidates, performing
due diligence on prospective target businesses, paying for travel expenditures,
selecting the target business to merge with or acquire, and structuring,
negotiating and consummating the initial business combination.
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Contractual Obligations
Registration and Shareholder Rights
The holders of Founder Shares, Private Placement Shares and Public Shares that
may be issued upon conversion of Working Capital Loans, were entitled to
registration rights pursuant to a registration and shareholder rights agreement
signed upon consummation of the IPO. The holders of these securities were
entitled to make up to three demands, excluding short form demands, that the
Company registered such securities. In addition, the holders have certain
"piggy-back" registration rights with respect to registration statements filed
subsequent to the Company's completion of its initial business combination.
However, the registration and shareholder rights agreement provides that the
Company will not permit any registration statement filed under the Securities
Act to become effective until termination of the applicable lock-up period,
which occurs (i) in the case of the Founder Shares, in accordance with the
letter agreement the Company's Initial Shareholders entered into and (ii) in the
case of the Private Placement Shares, 30 days after the completion of the
Company's initial business combination. The Company will bear the expenses
incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The Company granted the underwriters a 45-day option from the final prospectus
relating to the IPO to purchase up to 3,750,000 additional Public Shares to
cover over-allotments, if any, at the IPO price less the underwriting discounts
and commissions. On May 27, 2021, the underwriters partially exercised the
over-allotment option to purchase an additional 2,500,000 Class A Shares.
The underwriters were entitled to an underwriting discount of $0.20 per Public
Share, or $5.5 million in the aggregate, paid upon the closing of the IPO. In
addition, $0.35 per Public Share, or approximately $9.6 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 the Company completes an initial
business combination, subject to the terms of the underwriting agreement;
however, subsequent to the entry into the underwriting agreement, each of the
underwriters agreed to waive their rights to their deferred underwriting
commission held in the Trust Account regardless of whether Company completes an
initial business combination.
Critical Accounting Policies and Estimates
This management's discussion and analysis of our financial condition and results
of operations is based on our financial statements, which have been prepared in
accordance with U.S. GAAP. The preparation of these financial statements
requires us to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses and the disclosure of contingent
assets and liabilities in our 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 historical
experience, 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 Trust Account
The Company's portfolio of investments is comprised of 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 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 the Company's
investments held in the Trust Account are comprised of U.S. government
securities, the investments are classified as trading securities. When the
Company's investments held in the Trust Account are comprised of money market
funds, the investments are recognized at fair value. Trading securities and
investments in money market funds are presented on the balance sheets at fair
value at the end of each reporting period. Gains and losses resulting from the
change in fair value of these securities is included in income on investments
held in the Trust Account in the accompanying statement of operations. The
estimated fair values of investments held in the Trust Account are determined
using available market information.
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Class A Shares Subject to Possible Redemption
The Company accounts for its Class A Shares are subject to possible redemption
in accordance with the guidance in ASC Topic 480 "Distinguishing Liabilities
from Equity." Class A Shares subject to mandatory redemption (if any) are
classified as liability instruments and are measured at fair value.
Conditionally redeemable Class A Shares (including Class A 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 Shares are classified as shareholders' equity. The Company's redeemable
Class A Shares sold as part of the IPO, feature certain redemption rights that
are considered to be outside of the Company's control and subject to the
occurrence of uncertain future events. Accordingly, 27,500,000 Class A Shares
subject to possible redemption are presented at redemption value as temporary
equity, outside of the shareholders' (deficit) equity section of the Company's
balance sheets.
The Company recognizes 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. This method would view the end of the
reporting period as if it were also the redemption date for the security.
Effective with the closing of the IPO (including the exercise of the
over-allotment option), the Company recognized the accretion from initial book
value to redemption amount, which resulted in charges against additional paid-in
capital (to the extent available) and accumulated deficit.
Net Income (Loss) per Ordinary Share
The Company complies with accounting and disclosure requirements of FASB ASC
Topic 260, "Earnings Per Share." The Company has 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. This
presentation assumes a business combination as the most likely outcome. Net
income (loss) per ordinary share is calculated by dividing the net income (loss)
by the weighted average ordinary shares outstanding for the respective period.
Accretion associated with the redeemable Class A Shares is excluded from
earnings per share as the redemption value approximates fair value.
Recent accounting standards
In June 2022, the FASB issued ASU 2022-03, ASC Subtopic 820 "Fair Value
Measurement of Equity Securities Subject to Contractual Sale Restrictions". The
ASU amends ASC 820 to clarify that a contractual sales restriction is not
considered in measuring an equity security at fair value and to introduce new
disclosure requirements for equity securities subject to contractual sale
restrictions that are measured at fair value. The ASU applies to both holders
and issuers of equity and equity-linked securities measured at fair value. The
amendments in this ASU are effective for the Company in fiscal years beginning
after December 15, 2023, and interim periods within those fiscal years. Early
adoption is permitted for both interim and annual financial statements that have
not yet been issued or made available for issuance. The Company is still
evaluating the impact of this pronouncement on the financial statements.
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 Company's 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 and did not have any commitments
or contractual obligations.
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Table of Contents
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
will qualify as an "emerging growth company" and under the JOBS Act will be
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 such, our financial statements may not be comparable to companies that comply
with 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, (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 IPO or until we are no longer an "emerging
growth company," whichever is earlier.
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