The following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with our audited financial
statements and the notes related thereto which are included in "Item 8.
Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.
Certain information contained in the discussion and analysis set forth below
includes forward-looking statements. Our actual results may differ materially
from those anticipated in these forward-looking statements as a result of many
factors, including those set forth under "Special Note Regarding Forward-Looking
Statements," "Item 1A. Risk Factors" and elsewhere in this Annual Report on Form
10-K.
Overview
We were incorporated as a Cayman Islands exempted company on January 21, 2021.
We were incorporated for the purpose of effecting a merger, share exchange,
asset acquisition, share purchase, reorganization or similar business
combination with one or more businesses (the "Business Combination"). While we
may pursue an acquisition opportunity in any business, industry, sector or
geographical location, we intend to focus our search for an initial business
combination on technology-enabled Latin American companies seeking to become
category defining enterprises and those targeting or expected to pursue
cross-border expansion.
As indicated in the accompanying financial statements, as of December 31, 2022,
we had $132,219 in cash and cash equivalents and deferred offering underwriter's
discount of $8,050,000.
On May 6, 2021, we consummated the IPO of 20,000,000 Public Units, at a price of
$10.00 per Public Unit, generating gross proceeds of $200,000,000.
Simultaneously with the closing of the IPO, we consummated the sale of 4,000,000
Private Placement Warrants, at a price of $1.50 per Private Placement Warrant,
in a Private Placement to Valor Latitude LLC (the "Sponsor") and Phoenix SPAC
Holdco LLC ("Phoenix"), generating gross proceeds of $6,000,000. On May 11,
2021, the underwriters purchased 3,000,000 units generating net proceeds to us
of approximately $29,400,000 in the aggregate after deducting the underwriter
discount.
Simultaneously with the issuance and sale of the Units on May 11, 2021, we
consummated the private placement with the Sponsor and Phoenix of an aggregate
of 400,000 warrants to purchase Class A Ordinary Shares for $1.50 per warrant
generating total proceeds of $600,000. Of the net proceeds from the IPO,
exercise of the over-allotment option, and associated private placements,
$230,000,000 of cash was placed in the Trust Account. We cannot assure you that
our plans to complete our Initial Business Combination will be successful.
On March 27, 2023, we filed the Preliminary Schedule 14A relating to a proposed
special meeting of shareholders anticipated to be held to approve the Extension
Amendment Proposal which would, if implemented, allow us to extend the date by
which we have to consummate an initial business combination from May 6, 2023 to
November 6, 2023, subject to an additional six month extension to May 6, 2024,
at the Company's sole discretion. We cannot guarantee that our shareholders will
approve the Extension Amendment Proposal. We intend to effectuate our initial
business combination using cash from the proceeds of our initial public offering
and the private placement, our capital stock, debt or a combination of cash,
stock and debt. We expect to continue to incur significant costs in the pursuit
of our acquisition plans. We cannot assure you that our plans to complete our
initial business combination will be successful.
Results of Operations
Our entire activity since inception up to December 31, 2022 relates to our
formation, the Initial Public Offering and, since the closing of the Initial
Public Offering, a search for a Business Combination candidate. We will not be
generating any operating revenues until the closing and completion of our
initial Business Combination, at the earliest.
For the year ended December 31, 2022, we had a net income of $8,974,318, which
included a gain from the change in fair value of warrant liabilities of
$7,017,122 , a gain from change in fair value of convertible note of $88,161 and
interest income of $3,319,450, partially offset by a loss from operations of
$1,450,415.
For the period from January 21, 2021 (inception) through December 31, 2021, we
had a net income of $7,264,525, which included a gain from the change in fair
value of warrant liabilities of $8,772,479 and interest income of $10,850,
partially offset by a loss from operations of $970,204, and transaction costs of
$548,600.
Liquidity, Capital Resources and Going Concern
On May 6, 2021 we consummated our IPO and Private Placement and on May 11, 2021
the underwriters fully exercised their over-allotment option and substantially
concurrently therewith, we completed the private sale of an aggregate of 400,000
additional Private Placement Warrants. Of the net proceeds from the IPO,
exercise of the over-allotment option, and associated Private Placements,
$230,000,000 of cash was placed in the Trust Account and $1,961,865 of cash was
held outside of the Trust Account and is available for working capital purposes.
Until the consummation of the IPO, our only source of liquidity was an initial
purchase of ordinary shares by the Sponsor and loans from the Sponsor and a
related party.
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Our initial shareholders, officers, directors or their affiliates may, but are
not obligated to, loan us funds as may be required ("Working Capital Loans"). If
we complete a Business Combination, we may repay the Working Capital Loans out
of the proceeds of the Trust Account released to us. Otherwise, the Working
Capital Loans may be repaid only out of funds held outside the Trust Account. In
the event that a Business Combination does not close, we may use a portion of
proceeds held outside the Trust Account to repay the Working Capital Loans but
no proceeds held in the Trust Account would be used to repay the Working Capital
Loans, other than the interest on such proceeds that may be released for working
capital purposes. Our amended and restated memorandum and articles of
association provide that we will have only until May 6, 2023 to complete our
initial business combination. Except for the foregoing, the terms of such
Working Capital Loans, if any, have not been determined and no written
agreements exist with respect to such loans. The Working Capital Loans would
either be repaid upon consummation of a Business Combination, without interest,
or, at the lender's discretion, up to $1,500,000 of such Working Capital Loans
may be convertible into Private Placement Warrants of the post Business
Combination entity at a price of $1.50 per warrant. As of December 31, 2022 and
2021, no Working Capital Loans were outstanding.
On February 28, 2022, we entered into a convertible note with the Sponsor,
pursuant to which the Sponsor agreed to loan us up to an aggregate principal
amount of $300,000 (the "Convertible Note"). The Convertible Note is
non-interest bearing and due on the earlier of: (i) 12 months from the date
thereof or (ii) the date on which we consummate a business combination. If we do
not consummate a business combination, we may use a portion of any funds held
outside the Trust Account to repay the Convertible Note; however, no proceeds
from the Trust Account may be used for such repayment if we do not consummate
the Business Combination. Up to $300,000 of the Convertible Note may be
converted into warrants at a price of $1.50 per warrant at the option of the
Sponsor. The warrants would be identical to the Private Placement Warrants. On
February 28, 2023, we and the Sponsor amended the Convertible Note to extend the
maturity date of the Convertible Note to May 5, 2023.
At December 31, 2022, we had cash and cash equivalents outside the Trust Account
of $132,219 and working capital deficit of $556,736. Over the next 12 months, we
will be using these funds 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 Business Combination. These conditions raise
substantial doubt about our ability to continue as a going concern. Management
plans to address this with the consummation of a proposed Business Combination
in the combination period or with Working Capital Loans. Our Sponsor is
committed and prepared to loan additional working capital to fund operations.
There is no assurance that our plans to consummate a proposed business
combination will occur or we will be able to borrow needed capital. As such,
there is substantial doubt about our ability to continue as a going concern.
In connection with the Company's assessment of going concern considerations in
accordance with Financial Accounting Standard's Board ("FASB") Accounting
Standards Update ("ASU") 2014-15, "Disclosures of Uncertainties about an
Entity's Ability to Continue as a Going Concern," the Company has until May 6,
2023 to consummate a Business Combination. It is uncertain that the Company will
be able to consummate a Business Combination by this time. If a Business
Combination is not consummated by this date, there will be a mandatory
liquidation and subsequent dissolution of the Company. Management has determined
that the liquidity condition and mandatory liquidation, should a Business
Combination not occur, and potential 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 6, 2023.
Off-Balance Sheet Arrangements; Commitments and Contractual Obligations
Registration Rights Agreement
Pursuant to a registration rights agreement entered into on May 3, 2021, the
holders of the Founder Shares (See Item 8, Note 5), and the Private Placement
Warrants and its underlying securities (See Item 8, Note 4) are entitled to
certain registration rights. We will bear the expenses incurred in connection
with the filing of any registration statements pursuant to such registration
rights.
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Underwriting Agreement
Pursuant to the underwriting agreement, the underwriters received a cash
underwriting discount of $4,600,000 following the consummation of the IPO and
the exercise of the over-allotment option.
Additionally, the underwriters will be entitled to a deferred underwriting
discount of 3.5% of the gross proceeds of the IPO and exercise of the
over-allotment option, or $8,050,000, upon the completion of our Initial
Business Combination subject to the terms of the underwriting agreement. On
March 6, 2023, BofA Securities, Inc. delivered a letter to us informing us that
it has waived its entitlements to such deferred underwriting discount in its
entirety. Further, BofA Securities, Inc. has ceased or refused to act in, every
office, capacity and relationship with respect to any potential Business
Combination we may enter into in the future.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and income and expenses
during the periods reported. Actual results could materially differ from those
estimates. We have identified the following critical accounting policies:
Use of Estimates
The preparation of our financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of expenses during
the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
We consider all short-term investments with an original maturity of three months
or less when purchased to be cash equivalents. As of December 31, 2022 and 2021,
we had cash and cash equivalents amounting to $132,219 and $343,519,
respectively.
Offering Costs Associated with IPO
We comply with the requirements of ASC 34-10-S99-1 and SEC Staff Accounting
Bulletin ("SAB") Topic 5A- "Expenses of Offering". Deferred offering costs
consist of underwriting, legal, accounting and other expenses incurred through
the balance sheet date that were directly related to the IPO. Offering costs are
charged to temporary equity or the statements of operations based on the
relative value of the Public Warrants to the proceeds received from the Units
sold upon the completion of the IPO. Accordingly, on May 11, 2021 (upon the
underwriters exercising their overallotment option), offering costs totaling
$13,112,968 (consisting of $4,600,000 of underwriting fee, $8,050,000 of
deferred underwriting fee and $462,968 of other offering costs) were recognized
with $548,600 which was allocated to the Public Warrants and Private Warrants,
included in the statements of operations as a component of other
income/(expense) and $12,564,368 included in temporary equity.
Fair Value of Financial Instruments
The fair value of our assets and liabilities, which qualify as financial
instruments under the Financial Accounting Standards Board ("FASB") ASC 820,
"Fair Value Measurements and Disclosures," approximates the carrying amounts
represented in the balance sheets.
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Convertible Promissory Note
We account for the Convertible Note under ASC 815, "Derivatives and Hedging"
("ASC 815"). Under 815-15-25, an election can made be at the inception of a
financial instrument to account for the instrument under the fair value option
under ASC 825. The Company has made such election for its Convertible Note.
Using the fair value option, the Convertible Note is required to be recorded at
its initial fair value on the date of issuance, and each balance sheet date
thereafter. Changes in the estimated fair value of the Convertible Note is
recognized as a non-cash gain or loss on the statements of operations.
Derivative Financial Instruments
We evaluate our financial instruments to determine if such instruments are
derivatives or contain features that qualify as embedded derivatives in
accordance with ASC Topic 815, "Derivatives and Hedging". Our derivative
instruments are recorded at fair value as of the IPO (May 6, 2021) and re-valued
at each reporting date, with changes in the fair value reported in the
statements of operations. Derivative assets and liabilities are classified on
the balance sheets as current or non-current based on whether or not net-cash
settlement or conversion of the instrument could be required within 12 months of
the balance sheet date. We have determined the warrants are a derivative
instrument. As the warrants meet the definition of a derivative, the warrants
are measured at fair value at issuance and at each reporting date in accordance
with ASC 820, Fair Value Measurement, with changes in fair value recognized in
the statements of operations in the period of change.
Warrant Instruments
We have accounted for the 12,066,667 warrants issued in connection with the IPO,
Private Placement, and the underwriters exercise of the over-allotment option in
accordance with the guidance contained in FASB ASC 815 "Derivatives and Hedging"
whereby under that provision the warrants do not meet the criteria for equity
treatment and must be recorded as a liability. Accordingly, we will classify the
warrant instruments as a liability at fair value and adjust the instruments to
fair value at each reporting period. This liability will be re-measured at each
balance sheet date until the warrants are exercised or expire, and any change in
fair value will be recognized in our statements of operations. The fair value of
warrants will be estimated using an internal valuation model utilizing inputs
such as assumed share prices, volatility, discount factors and other assumptions
and may not be reflective of the price at which they can be settled. Such
warrant classification is also subject to re-evaluation at each reporting
period.
Fair Value Measurements
Fair value is defined as the price that would be received for sale of an asset
or paid to transfer of a liability, in an orderly transaction between market
participants at the measurement date. GAAP establishes a three-tier fair value
hierarchy, which prioritizes the inputs used in measuring fair value. The
hierarchy gives the highest priority to unadjusted quoted prices in active
markets for identical assets or liabilities (Level 1 measurements) and the
lowest priority to unobservable inputs (Level 3 measurements). These tiers
include:
• Level 1, defined as observable inputs such as quoted prices (unadjusted)
for identical instruments in active markets;
• Level 2, defined as inputs other than quoted prices in active markets
that are either directly or indirectly observable such as quoted prices
for similar instruments in active markets or quoted prices for identical
or similar instruments in markets that are not active; and
• Level 3, defined as unobservable inputs in which little or no market data
exists, therefore requiring an entity to develop its own assumptions,
such as valuations derived from valuation techniques in which one or more
significant inputs or significant value drivers are unobservable.
Stock Based Compensation
We comply with ASC 718 Compensation - Stock Compensation regarding founder
shares acquired by our directors at prices below fair value. The acquired shares
shall vest upon our Company consummating an initial Business Combination (the
"Vesting Date"). If prior to the Vesting Date, the director ceases to be a
director, the shares will be forfeited. The founder shares owned by the director
(1) may not be sold or transferred, until one year after the consummation of a
business combination, (2) not be entitled to redemption from the funds held in
the trust account, or any liquidating distributions. We have 24 months from the
date of our initial public offering to consummate a business combination, and if
a business combination is not consummated, our Company will liquidate, and the
shares will become worthless.
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Net Income Per Ordinary Share
We have two classes of shares, which are referred to as Class A ordinary shares
and Class B ordinary shares. Earnings and losses are shared pro rata between the
two classes of shares. We have not considered the effect of the warrants sold in
the Initial Public Offering and the Private Placement to purchase an aggregate
of 12,066,667 of our Class A ordinary shares in the calculation of diluted
income per share, since their exercise is contingent upon future events. As a
result, diluted net income per ordinary share is the same as basic net income
per ordinary share.
Concentration of Credit Risk
Financial instruments that potentially subject us to concentrations of credit
risk consist of a cash account in a financial institution, which, at times, may
exceed the Federal Depository Insurance Corporation limit of $250,000. At
December 31, 2022 and 2021, we have not experienced losses on this account and
our management believes we are not exposed to significant risks on such account.
Class A 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 a
liability instrument and measured at fair value. Conditionally redeemable
ordinary shares (including ordinary shares that feature redemption rights that
are either within the control of the holder or subject to redemption upon the
occurrence of uncertain events not solely within our control) are classified as
temporary equity. At all other times, ordinary shares are classified as
shareholders' deficit. Our ordinary shares feature certain redemption rights
that are considered to be outside of our control and subject to the occurrence
of uncertain future events. Accordingly, ordinary shares subject to possible
redemption are presented at redemption value as temporary equity, outside of the
shareholders' deficit section of our balance sheets.
Income Taxes
We account for income taxes under FASB ASC 740, "Income Taxes" ("ASC 740"). ASC
740 requires the recognition of deferred tax assets and liabilities for both the
expected impact of differences between the financial statement and tax basis of
assets and liabilities and for the expected future tax benefit to be derived
from tax loss and tax credit carry forwards. ASC 740 additionally requires a
valuation allowance to be established when it is more likely than not that all
or a portion of deferred tax assets will not be realized. ASC 740 also clarifies
the accounting for uncertainty in income taxes recognized in an enterprise's
financial statements and prescribes a recognition threshold and measurement
process for financial statement recognition and measurement of a tax position
taken or expected to be taken in a tax return. For those benefits to be
recognized, a tax position must be more-likely-than-not to be sustained upon
examination by taxing authorities. ASC 740 also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
period, disclosure and transition.
We recognize accrued interest and penalties related to unrecognized tax benefits
as income tax expense. There were no unrecognized tax benefits and no amounts
accrued for interest and penalties as of December 31, 2022 and 2021. We are
currently not aware of any issues under review that could result in significant
payments, accruals or material deviation from its position. We are subject to
examination since inception. We are considered to be an exempted Cayman Islands
company with no connection to any other taxable jurisdiction and is presently
not subject to income taxes or income tax filing requirements in the Cayman
Islands or the United States. As such, our tax provision was zero for the period
presented.
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Recent Accounting Standards
In August 2020, the FASB issued Accounting Standards Update ("ASU") 2020-06,
Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives
and Hedging-Contracts in Entity's Own Equity (Subtopic 815-40) ("ASU 2020-06")
to simplify accounting for certain financial instruments. ASU 2020-06 eliminates
the current models that require separation of beneficial conversion and cash
conversion features from convertible instruments and simplifies the derivative
scope exception guidance pertaining to equity classification of contracts in an
entity's own equity. The new standard also introduces additional disclosures for
convertible debt and freestanding instruments that are indexed to and settled in
an entity's own equity. ASU 2020-06 amends the diluted earnings per share
guidance, including the requirement to use the if-converted method for all
convertible instruments. As a smaller reporting company, ASU 2020-06 is
effective January 1, 2024 for fiscal years beginning after December 15, 2023 and
should be applied on a full or modified retrospective basis, with early adoption
permitted beginning on January 1, 2021. We are currently assessing the impact,
if any, that ASU 2020-06 would have on its financial position, results of
operations or cash flows. We have not adopted this guidance as of December 31,
2022.
In May 2021, the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260),
Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock
Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity's Own
Equity (Subtopic 815-40): Issuer's Accounting for Certain Modifications or
Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of
the Emerging Issues Task Force). The standard clarifies an issuer's accounting
for certain modifications or exchanges of freestanding equity-classified written
call options (for example, warrants) that remain equity classified after
modification or exchange, and it provides guidance on how an issuer would
measure and recognize the effect of these transactions. Specifically, the ASU
provides a principles-based framework to determine whether an issuer should
recognize the modification or exchange as an adjustment to equity or an expense.
The amendments in this update are effective for all entities for fiscal years
beginning after December 15, 2021, including interim periods within those fiscal
years. The guidance was adopted starting January 1, 2022. Adoption of the ASU
did not impact our financial position, results of operations or cash flows.
Our management does not believe that any other recently issued, but not yet
effective, accounting standards if currently adopted would have a material
effect on the accompanying financial statements.
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