References to the "Company," "Health Sciences Acquisitions Corporation 2,"
"our," "us" or "we" refer to Health Sciences Acquisitions Corporation 2. The
following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with the annual 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.
Cautionary Note Regarding Forward-Looking Statements
This Annual Report on Form 10-K includes forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Exchange Act. We have based these forward-looking statements on our
current expectations and projections about future events. These forward-looking
statements are subject to known and unknown risks, uncertainties and assumptions
about us that may cause our actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by such
forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as "may," "should," "could," "would," "expect,"
"plan," "anticipate," "believe," "estimate," "continue," or the negative of such
terms or other similar expressions. Factors that might cause or contribute to
such a discrepancy include, but are not limited to, those described in our other
U.S. Securities and Exchange Commission ("SEC") filings
Overview
We are a blank check company incorporated as a Cayman Islands exempted company
on May 25, 2020. We were formed for the purpose of effecting a merger, share
exchange, asset acquisition, share purchase, recapitalization, reorganization or
similar business combination with one or more businesses, which we refer to
throughout this annual report as our initial business combination. Although
there is no restriction or limitation on what industry our target operates in,
it is our intention to pursue prospective targets that are focused on healthcare
innovation. We are an emerging growth company and, as such, we are subject to
all of the risks associated with emerging growth companies.
Our sponsor is HSAC 2 Holdings, LLC (the "Sponsor"). The registration statement
for our initial public offering (the "Initial Public Offering") was declared
effective on August 3, 2020. On August 6, 2020, we consummated an Initial Public
Offering of 16,000,000 ordinary shares (the "Public Shares"), including the
2,086,956 Public Shares as a result of the underwriters' full exercise of their
over-allotment option, at an offering price of $10.00 per Public Share,
generating gross proceeds of $160.0 million, and incurring offering costs of
approximately $9.4 million, inclusive of $5.6 million in deferred underwriting
commissions.
Simultaneously with the closing of the Initial Public Offering, we consummated a
private placement (the "Private Placement") with the Sponsor of (i) 450,000
ordinary shares (the "Private Placement Shares") at $10.00 per Private Placement
Share (for a total purchase price of $4.5 million) and (ii) 1,500,000 warrants
(the "Private Placement Warrants") at a price of $1.00 per Private Placement
Warrant (for a total purchase price of $1.5 million), generating gross proceeds
of $6.0 million.
Upon the closing of the Initial Public Offering and the Private Placement
(including the exercise of the over-allotment option), $160.0 million (or $10.00
per Public Share) of the net proceeds of the sale of the Public Shares in the
Initial Public Offering and the Private Placement were placed in a trust account
("Trust Account") located in the United States with Continental Stock Transfer &
Trust Company acting as trustee, and held as cash or invested only 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 money market
funds meeting certain conditions 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 an initial business combination and (ii)
the distribution of the Trust Account.
11
We paid a total of $3.2 million in underwriting discounts and commissions (not
including the $5.6 million deferred underwriting commissions payable at the
consummation of the initial business combination) and approximately $0.6 million
for other costs and expenses related to our formation and the Initial Public
Offering.
We will have until February 6, 2023, or such later time as our shareholders may
approve in accordance with the Company's amended and restated memorandum (the
"Combination Period"), or such later time as our shareholders may approve in
accordance with the Company's amended and restated memorandum and articles of
association, to complete our initial business combination. If we do not complete
an initial business combination by that date, it will trigger the Company's
automatic winding up, liquidation and dissolution and, upon notice from us, the
trustee of the Trust Account will distribute the amount in the Trust Account to
holders of the Public Shares (the "Public Shareholders"). Concurrently, we shall
pay, or reserve for payment, from funds not held in trust, our liabilities and
obligations, although we cannot assure that there will be sufficient funds for
such purpose. If there are insufficient funds held outside the Trust Account for
such purpose, our Sponsor has agreed that it will be liable to ensure that the
proceeds in the Trust Account are not reduced by the claims of target businesses
or claims of vendors or other entities that are owed money by us for services
rendered or contracted for or products sold to us and which have not executed a
waiver agreement. However, we cannot assure that the liquidator will not
determine that he or she requires additional time to evaluate creditors' claims
(particularly if there is uncertainty over the validity or extent of the claims
of any creditors). We also cannot assure that a creditor or shareholder will not
file a petition with the Cayman Islands Court which, if successful, may result
in the Company's liquidation being subject to the supervision of that court.
Such events might delay distribution of some or all of our assets to the Public
Shareholders.
Proposed Business Combination
On July 4, 2022, we entered into an agreement and plan of merger agreement (as
amended on July 21, 2022, the "Merger Agreement") with HSAC Olympus Merger Sub,
Inc., a Delaware corporation and our wholly owned subsidiary ("Merger Sub"), and
Orchestra BioMed, Inc., a Delaware corporation ("Orchestra"). Pursuant to the
terms of the Merger Agreement, a business combination between us and Orchestra
(the "Orchestra Business Combination") will be effected in two steps. First,
before the closing of the Orchestra Business Combination, we will deregister in
the Cayman Islands and domesticate as a Delaware corporation. Second, at the
closing of the Orchestra Business Combination, Merger Sub will merge with and
into Orchestra, with Orchestra surviving such merger as the surviving entity
(the "Merger"). Upon consummation of the Orchestra Business Combination,
Orchestra will become our wholly owned subsidiary. We will then change our name
to "Orchestra BioMed Holdings, Inc.". We refer to the Company, after giving
effect to the Orchestra Business Combination, as "New Orchestra".
The Merger Agreement contains customary representations, warranties and
covenants of the parties thereto. The consummation of the proposed Merger is
subject to certain conditions as further described in the Merger Agreement.
Simultaneously with the execution of the Merger Agreement, we and Orchestra
entered into separate forward purchase agreements (the "Forward Purchase
Agreements") with certain funds managed by RTW Investments, LP (the "RTW Funds")
and Covidien Group S.à.r.l., an affiliate of Medtronic plc ("Medtronic" and the
RTW Funds, each a "Purchasing Party"), pursuant to which each of the Purchasing
Parties agreed to purchase approximately $10.0 million of our ordinary shares,
for a total of approximately $20.0 million, less the dollar amount of our
ordinary shares holding redemption rights that the Purchasing Party acquires and
holds until immediately prior to the domestication.
Simultaneously with the execution of the Merger Agreement and the Forward
Purchase Agreements, we, Orchestra, and the RTW Funds entered into a Backstop
Agreement (the "Backstop Agreement") pursuant to which the RTW Funds, jointly
and severally, agreed to purchase such number of our ordinary shares at a price
of $10.00 per share to the extent that the amount of Parent Closing Cash (as
defined in the Merger Agreement) as of immediately prior to the closing of the
Orchestra Business Combination is less than $60.0 million (inclusive of the
$10.0 million commitment by the RTW Funds pursuant to the Forward Purchase
Agreement described above).
12
On October 21, 2022, the Backstop Agreement and the Forward Purchase Agreement
with the RTW Funds were amended to provide that: (1) the per share purchase
price under each of the Backstop Agreement and the Forward Purchase Agreement
will not exceed the redemption price available to Public Shareholders exercising
redemption rights at the shareholder meeting held to approve the business
combination; (2) any shares purchased pursuant to the Backstop Agreement or the
Forward Purchase Agreement, or otherwise acquired by the RTW Funds outside of
the existing redemption offer, will not be voted in favor of approving the
business combination; and (3) the RTW Funds will waive redemption rights with
respect to such purchases in the vote to approve the business combination. The
amendments have been filed with the SEC on a Current Report on Form 8-K on
October 21, 2022. The Forward Purchase Agreement with Medtronic was not amended.
The closing under the Forward Purchase Agreement with the RTW Funds occurred on
July 22, 2022, pursuant to which the RTW Funds purchased 1,000,000 of our
ordinary shares at a price of $10.01 per share from an accredited investor in a
privately negotiated transaction. The closing under the Forward Purchase
Agreement with Medtronic and the closing under the Backstop Agreement, if any,
will occur immediately prior to the domestication. The Sponsor and the
Purchasing Parties will have registration rights pursuant to the Amended and
Restated Registration Rights and Lock-Up Agreement with respect to our ordinary
shares, received in the domestication.
In addition, the Sponsor has agreed that 25% or 1,000,000 shares of its New
Orchestra common stock received in the domestication will be forfeited to New
Orchestra on the first business day following the fifth anniversary of the
closing unless, as to 500,000 shares, the VWAP (as defined in the Merger
Agreement) of the New Orchestra common stock is greater than or equal to $15.00
per share over any 20 Trading Days (as defined in the Merger Agreement) within
any 30-Trading Day period, and as to the remaining 500,000 shares, the VWAP of
the New Orchestra common stock is greater than or equal to $20.00 per share over
any 20-Trading Days within any 30-Trading Day period. In addition, subject to
the closing of the Orchestra Business Combination, the Sponsor has agreed to
forfeit 50% of its Private Placement Warrants, comprising 750,000 Private
Placement Warrants, for no consideration. Further, the Sponsor and the other
shareholders as of immediately prior to our Initial Public Offering (the
"Initial Stockholders") have agreed to subject the 4,000,000 shares of New
Orchestra common stock to be received in the domestication in exchange for the
4,000,000 ordinary shares held or controlled by the Initial Shareholders prior
to the Initial Public Offering (the "Insider Shares") and 450,000 shares of New
Orchestra common stock to be received in the domestication in exchange for the
450,000 Private Placement Shares, to a lock-up for up to 12 months.
See the proxy statement/prospectus included in the Registration Statement on
Form S-4/A filed by us with the SEC on December 13, 2022 for additional
information.
Extension, Redemptions and Private Purchase
On July 26, 2022, we held an extraordinary general meeting of our shareholders,
where the shareholders approved a special resolution (the "Extension Proposal")
to amend the Company's amended and restated memorandum and articles of
association to (i) extend from August 6, 2022 (the "Original Termination Date")
to November 6, 2022 (the "Extended Date"), the date by which, if we had not
consummated an initial business combination, the Company must liquidate and
dissolve, and (ii) allow us, without another shareholder vote, to elect to
extend the date to consummate a business combination on a monthly basis for up
to three times by an additional one month each time after the Extended Date,
upon five days' advance notice prior to the applicable deadlines, until February
6, 2023 or a total of up to six months after the Original Termination Date,
unless the closing of our initial business combination shall have occurred. On
October 31, 2022, November 15, 2022, and December 15, 2022, our board of
directors of elected to extend the deadline until December 6, 2022, January 6,
2023, and February 6, 2023, respectively.
13
In connection with the vote to approve the Extension Proposal, the holders of
9,237,883 Public Shares properly exercised their right to redeem their shares
for cash at a redemption price of approximately $10.02 per share, for an
aggregate redemption amount of approximately $92.6 million. As such,
approximately 57.7% of the Public Shares were redeemed and approximately 42.3%
of the Public Shares remain outstanding. After the satisfaction of such
redemptions, the balance in our Trust Account was $67.8 million.
See the proxy statement/prospectus included in the Registration Statement on
Form S-4/A filed by us with the SEC on December 13, 2022 for additional
information.
Business Combination Meeting
On January 24, 2023, we held an extraordinary general meeting of shareholders
(the "General Meeting") for the purpose of considering and voting upon, among
other things, the Orchestra Business Combination. Each of the proposals
presented at the General Meeting, as more fully described in the proxy
statement/prospectus dated December 16, 2022, was approved. The submission of
the Orchestra Business Combination to the shareholders entitled holders of
Public Shares to redeem their shares for their pro rata portion of the funds
held in the Trust Account. In connection with the General Meeting, as of January
24, 2023, we received requests for redemption from holders with respect to
1,597,888 Public Shares.
Liquidity and Going Concern
As of December 31, 2022, we had approximately $175,000 of cash in our operating
account and a working capital deficit of approximately $1.8 million.
Prior to the completion of the Initial Public Offering, our liquidity needs had
been satisfied through a payment of $28,750 from our Sponsor to exchange for the
issuance of 3,593,750 ordinary shares to the Sponsor, and a loan of $300,000
pursuant to a promissory note originally issued to our Sponsor on June 11, 2020
(the "Note"), which was repaid in full on August 7, 2020. Subsequent to the
consummation of the Initial Public Offering and Private Placement, our liquidity
needs have been satisfied with the proceeds from the consummation of the Private
Placement not held in the Trust Account. In addition, in order to finance
transaction costs in connection with an initial business combination, the
Sponsor may, but is not obligated to, provide us loans (the "Working Capital
Loans"). As of December 31, 2022 and 2021, there were no Working Capital Loans
available or outstanding.
In connection with our 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 working capital deficit, as well as the
mandatory liquidation and subsequent dissolution raises substantial doubt about
our ability to continue as a going concern. Management intends to complete a
business combination prior to the mandatory liquidation date. No adjustments
have been made to the carrying amounts of assets or liabilities should we be
required to liquidate after February 6, 2023. The consolidated financial
statements do not include any adjustment that might be necessary if we are
unable to continue as a going concern.
Various social and political circumstances in the United States and around the
world (including wars and other forms of conflict, including rising trade
tensions between the United States and China, and other uncertainties regarding
actual and potential shifts in the United States and foreign, trade, economic
and other policies with other countries, terrorist acts, security operations and
catastrophic events such as fires, floods, earthquakes, tornadoes, hurricanes
and global health epidemics), may also contribute to increased market volatility
and economic uncertainties or deterioration in the United States and worldwide.
Specifically, the rising conflict between Russia and Ukraine and resulting
market volatility could adversely affect our ability to complete a business
combination. In response to the conflict between Russia and Ukraine, the United
States and other countries have imposed sanctions or other restrictive actions
against Russia. Any of the above factors, including sanctions, export controls,
tariffs, trade wars and other governmental actions, could have a material
adverse effect on our ability to complete a business combination and the value
of our securities.
Management continues to evaluate the impact of these types of risks on the
industry and has concluded that while it is reasonably possible that these types
of risks could have a negative effect on our financial position, results of our
operations and/or search for a target company, the specific impact is not
readily determinable as of the date of these consolidated financial statements.
The consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Results of Operations
We will not be generating any operating revenues until the closing and
completion of our initial business combination, at the earliest. We generate
non-operating income in the form of interest income on investments held in the
Trust Account. We are incurring expenses as a result of being a public company
(for legal, financial reporting, accounting and auditing compliance) and
expenses related to our search for an initial business combination.
14
For the year ended December 31, 2022, we had a net loss of approximately $2.7
million, which consisted of approximately $3.0 million in general and
administrative expenses and related party administrative fees of $120,000,
partially offset by approximately $345,000 of interest income from investments
held in the Trust Account.
For the year ended December 31, 2021, we had a net loss of approximately
$379,000 which consisted of approximately $275,000 in general and administrative
expenses and related party administrative fees of $120,000, partially offset by
approximately $16,000 of net income on the investments held in the Trust
Account.
Related Party Transactions
Insider Shares
On June 11, 2020, we issued 3,593,750 ordinary shares to the Sponsor for an
aggregate purchase price of $28,750. On August 3, 2020, we effected a share
dividend of 0.113043478 ordinary shares for each outstanding share (an aggregate
of 406,250 ordinary shares), resulting in an aggregate of 4,000,000 ordinary
shares outstanding (the "Insider Shares"). All shares and associated amounts
have been retroactively restated to reflect the share dividend. The holders of
the Insider Shares had agreed to forfeit up to an aggregate of 521,739 Insider
Shares, on a pro rata basis, to the extent that the option to purchase
additional ordinary shares is not exercised in full by the underwriters. On
August 6, 2020, the underwriters fully exercised the over-allotment option;
thus, the 521,739 Insider Shares were no longer subject to forfeiture.
The Initial Shareholders have agreed not to transfer, assign or sell any of
their Insider Shares (except to certain permitted transferees) until, with
respect to 50% of the Insider Shares, the earlier of six months after the date
of the consummation of the initial business combination and the date on which
the closing price of our ordinary shares equals or exceeds $12.50 per ordinary
share for any 20 trading days within a 30-trading day period following the
consummation of the initial business combination, and, with respect to the
remaining 50% of the Insider Shares, six months after the date of the
consummation of the initial business combination, or earlier in each case if,
subsequent to the initial business combination, we complete a liquidation,
merger, stock exchange or other similar transaction which results in all of the
shareholders having the right to exchange their ordinary shares for cash,
securities or other property.
Related Party Loans
On June 11, 2020, our Sponsor agreed to loan us up to $300,000 to be used for
the payment of costs related to the Initial Public Offering pursuant to the
Note. The Note was non-interest bearing, unsecured and due on the date we
consummate the Initial Public Offering. We borrowed $300,000 under the Note and
repaid the Note in full on August 7, 2020. Subsequent to the repayment, the
facility was no longer available to us.
In addition, in order to finance transaction costs in connection with an initial
business combination, the Initial Shareholders or their affiliates may, but are
not obligated to, loan us the Working Capital Loans, from time to time or at any
time, in whatever amount they deem reasonable in their sole discretion. Each
loan would be evidenced by a promissory note. The notes would either be paid
upon consummation of the business combination, without interest, or, at the
lender's discretion, up to $500,000 of such loans may be converted upon
consummation of the business combination into additional private warrants at a
price of $1.00 per warrant. If we do not complete a business combination within
the Combination Period, the Working Capital Loans will be repaid only from
amounts remaining outside the Trust Account, if any. The warrants would be
identical to the Private Placement Warrants. As of December 31, 2022 and 2021,
the Company had no borrowings under the Working Capital Loans.
15
Administrative Services Agreement
Commencing on the date of the prospectus relating to our Initial Public
Offering, we agreed to pay the Sponsor a total of $10,000 per month for office
space and certain office and secretarial services. Upon completion of the
business combination or our liquidation, we will cease paying these monthly
fees. For the years ended December 31, 2022 and 2021, we incurred $120,000 in
expenses for these services. As of December 31, 2022 and 2021, $0 and $150,000
were due to the Sponsor and are included in accrued expenses - related party on
the accompanying consolidated balance sheets, respectively.
Purchase Agreements and Backstop Agreement
On August 3, 2020, in connection with the consummation of the Initial Public
Offering, we entered into a purchase agreement ("FPA") with our Sponsor pursuant
to which the Sponsor agreed that it will purchase an aggregate of 2,500,000
ordinary shares of our Company at a price of $10.00 per share, for an aggregate
purchase price of $25.0 million prior to, currently with, or following the
consummation of a business combination, either in open market transactions (to
the extent permitted by law) or in a private placement with us. This FPA
commitment has been satisfied by the RTW Funds through: (a) an investment of $15
million in Orchestra's Series D Financing, and (b) the Forward Purchase
Agreement described below.
Simultaneously with the execution of the Merger Agreement, our Company and
Orchestra entered into separate Forward Purchase Agreements with the RTW Funds
and Medtronic, pursuant to which each of the Purchasing Parties agreed to
purchase approximately $10.0 million of our ordinary shares, for a total of
approximately $20.0 million, less the dollar amount of the our ordinary shares
holding redemption rights that the Purchasing Party acquires and holds until
immediately prior to the domestication.
Simultaneously with the execution of the Merger Agreement and the Forward
Purchase Agreements, our Company, Orchestra, and the RTW Funds entered into the
Backstop Agreement, pursuant to which the RTW Funds, jointly and severally,
agreed to purchase such number of the our ordinary shares at a price of $10.00
per share to the extent that the amount of Parent Closing Cash (as defined in
the Merger Agreement) as of immediately prior to the closing of the Orchestra
Business Combination is less than $60.0 million (inclusive of the $10.0 million
commitment by the RTW Funds pursuant to the Forward Purchase Agreement described
above).
On October 21, 2022, the Backstop Agreement and the Forward Purchase Agreement
with the RTW Funds were amended to provide that: (1) the per share purchase
price under each of the Backstop Agreement and the Forward Purchase Agreement
will not exceed the redemption price available to Public Shareholders exercising
redemption rights at the shareholder meeting held to approve the business
combination; (2) any shares purchased pursuant to the Backstop Agreement or the
Forward Purchase Agreement, or otherwise acquired by the RTW Funds outside of
the existing redemption offer, will not be voted in favor of approving the
business combination; and (3) the RTW Funds will waive redemption rights with
respect to such purchases in the vote to approve the business combination. The
amendments have been filed with the SEC on a Current Report on Form 8-K on
October 21, 2022. The Forward Purchase Agreement with Medtronic was not amended.
The closing under the Forward Purchase Agreement with the RTW Funds occurred on
July 22, 2022, pursuant to which the RTW Funds purchased 1,000,000 of our
ordinary shares at a price of $10.01 per share from an accredited investor in a
privately negotiated transaction. The closing under the Forward Purchase
Agreement with Medtronic and the closing under the Backstop Agreement, if any,
will occur immediately prior to the domestication. The Sponsor and the
Purchasing Parties will have registration rights pursuant to the Amended and
Restated Registration Rights and Lock-Up Agreement with respect to our ordinary
shares, received in the domestication.
16
Company Shareholder Support Agreement and Forfeiture
Contemporaneously with the execution of the Merger Agreement, we and Orchestra
entered into a support agreement (the "Parent Support Agreement") with the
Sponsor and certain of our other shareholders (each a "Shareholder") pursuant to
which the Shareholders identified therein have agreed (a) to appear at any
shareholder meetings called to approve the Merger or any proposal to extend the
period of time we are afforded under our organizational documents and our
prospectus to consummate an initial business combination (an "Extension
Proposal"), (b) not to redeem their shares or any other of our equity securities
now or in future acquired or beneficially owned, (c) to vote such shares and
equity securities, to the extent permitted by law, (i) in favor of the
domestication, the Merger and related transactions, (ii) in favor of any
Extension Proposal, (iii) against any change in our business, management or
board contrary to the Merger Agreement and against any other proposal reasonably
expected to breach, prevent or impede the Merger, and (d) to waive anti-dilution
and similar rights with respect to such shares, whether under our amended and
restated memorandum and articles of association, applicable law, or a contract
regarding the Merger and related transactions with us. In addition, the Sponsor
has agreed that 25% or 1,000,000 shares of its New Orchestra Common Stock
received in the domestication will be forfeited to New Orchestra on the first
business day following the fifth anniversary of the closing of the Orchestra
Business Combination unless, as to 500,000 shares, the VWAP (as defined in the
Merger Agreement) of the New Orchestra Common Stock is greater than or equal to
$15.00 per share over any 20 Trading Days (as defined in the Merger Agreement)
within any 30-Trading Day period, and as to the remaining 500,000 shares, the
VWAP of the New Orchestra Common Stock is greater than or equal to $20.00 per
share over any 20-Trading Days within any 30-Trading Day period. Further,
subject to the closing of the Orchestra Business Combination, the Sponsor has
agreed to forfeit 50% of its warrants, comprising 750,000 warrants, for no
consideration, immediately prior to the Closing. Pursuant to the terms of the
Merger Agreement, immediately following such forfeiture and prior to the
Closing, the Company will issue 750,000 New Warrants to eleven specified
employees and directors of Orchestra. These New Warrants will have substantially
similar terms to the forfeited Private Warrants, except that they will become
exercisable between 24 and 36 months after the Closing.
Contractual Obligations
Registration Rights
The holders of the Insider Shares, the Private Placement Shares, the Private
Placement Warrants and warrants that may be issued upon conversion of Working
Capital Loans (and any ordinary shares issuable upon the exercise of the Private
Placement Warrants and warrants that may be issued upon conversion of Working
Capital Loans) are entitled to registration rights pursuant to a registration
rights agreement. The holders of a majority of these securities are entitled to
make up to two demands that we register such securities. The holders of the
majority of the Insider Shares can elect to exercise these registration rights
at any time commencing three months prior to the date on which these ordinary
shares are to be released from escrow. The holders of a majority of the Private
Placement Shares, the Private Placement Warrants or warrants that may be issued
upon conversion of Working Capital Loans made to us can elect to exercise these
registration rights at any time after we consummate a business combination. In
addition, the holders have certain "piggy-back" registration rights with respect
to registration statements filed subsequent to our consummation of the initial
business combination. We will bear the expenses incurred in connection with the
filing of any such registration statements.
Underwriting Agreement
The underwriters were entitled to an underwriting discount of $0.20 per share,
or $3.2 million in the aggregate, paid upon the closing of the Initial Public
Offering. In addition, the underwriters will be entitled to a deferred
underwriting commission of $0.35 per share, or $5.6 million in the aggregate
since the underwriters' over-allotment option was exercised in full. 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.
17
Critical Accounting Policies and Estimates
Cash and Investments Held in the Trust Account
Our portfolio of investments held in the Trust Account has been 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 our
investments held in the Trust Account were comprised of U.S. government
securities, the investments are classified as trading securities. When our
investments held in the Trust Account were comprised of money market funds, the
investments were recognized at fair value. Trading securities and investments in
money market funds are presented on the consolidated 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 are included in interest income from
investments held in the Trust Account in the accompanying consolidated
statements of operations. The estimated fair values of investments held in the
Trust Account were determined using available market information. On July 25,
2022, the entire Trust Account balance was transferred into cash following
redemptions in connection with the vote to approve the Extension Proposal. As of
December 31, 2022, only cash is held in the Trust Account.
Ordinary Shares Subject to Possible Redemption
We account for our ordinary shares subject to possible redemption in accordance
with the guidance in ASC Topic 480 "Distinguishing Liabilities from Equity."
Ordinary shares subject to mandatory redemption (if any) are classified as
liability instruments and are 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 Public Shares feature certain redemption rights that
are considered to be outside of our control and subject to the occurrence of
uncertain future events. Accordingly, as of December 31, 2022 and 2021,
6,762,117 and 16,000,000 ordinary shares subject to possible redemption,
respectively, are presented as temporary equity, outside of the shareholders'
deficit section of the accompanying consolidated balance sheets.
Under ASC 480-10-S99, 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 the reporting period. This method would
view the end of the reporting period as if it were also the redemption date of
the security. Effective with the closing of the Initial Public Offering, we
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 Loss Per Ordinary Share
We comply with accounting and disclosure requirements of FASB ASC Topic 260,
"Earnings Per Share." Net loss per ordinary share is calculated by dividing the
net loss by the weighted average number of ordinary shares outstanding for the
respective period.
The calculation of diluted net loss per ordinary share does not consider the
effect of the Private Placement Warrants to purchase 1,500,000 ordinary shares
since their exercise is contingent upon future events and their inclusion would
be anti-dilutive under the treasury stock method. As a result, diluted net loss
per share is the same as basic net loss per share for years ended December 31,
2022 and 2021. Accretion associated with the redeemable ordinary shares is
excluded from earnings per share as the redemption value approximates fair
value.
Off-Balance Sheet Arrangements
As of December 31, 2022 and 2021, 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.
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.
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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 Initial Public Offering or until we are no
longer an "emerging growth company," whichever is earlier.
Recent Accounting Pronouncements
Our management does not believe there are any recently issued, but not yet
effective, accounting pronouncements, if currently adopted, that would have a
material effect on our consolidated financial statements.
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