NOTES
TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30,
2022
(Unaudited)
Note
1 — Description of Organization and Business Operations
TKB
Critical Technologies 1 (the “Company”) is a blank check company incorporated as a Cayman Islands exempted company
on April 20, 2021. The Company was formed for the purpose of entering into a merger, capital share exchange, asset acquisition,
share purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”).
The
Company is not limited to a particular industry or geographic location for purposes of consummating a Business Combination. The
Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with
early stage and emerging growth companies.
As
of September 30, 2022, the Company had not commenced any operations. All activity for the period from April 20, 2021
(inception) through September 30, 2022 relates to the Company’s formation and its initial public offering (the “IPO”),
which is described below and, subsequent to the IPO, identifying a target company for a Business Combination. The Company will
not generate any operating revenues until after the completion of the Business Combination, at the earliest. The Company generates
non-operating income from the marketable securities held in the Trust Account (defined below).
The
registration statement for the Company’s IPO was declared effective on October 26, 2021 (the “Effective Date”).
On October 29, 2021, the Company consummated the IPO of 23,000,000 units (the “Units”), including 3,000,000 Units
that were issued pursuant to the underwriters’ exercise of their over-allotment option in full, at $10.00 per Unit, generating
gross proceeds of $230,000,000, which is discussed in Note 3. Simultaneously with the closing of the IPO, the Company consummated
the sale of 10,750,000 Private Placement Warrants (the “Private Placement Warrants”) at a price of $1.00 per Private
Warrant in a private placement to TKB Sponsor I, LLC (the “Sponsor”), generating proceeds of $10,750,000.
Transaction
costs of the IPO amounted to $21,140,059, consisting of $3,850,000 of underwriting discount, $8,800,000 of deferred underwriting
discount, $7,748,431 excess fair value of Founder Shares (as defined in Note 5) and $741,628 of offering costs. Of these amounts,
$19,774,814 was recorded to additional paid-in capital and $1,365,245 costs related to the warrant liability was expensed immediately
using the residual allocation method.
Following
the closing of the IPO on October 29, 2021, $234,600,000 ($10.20 per Unit) from the net proceeds of the sale of the Units
in the IPO and the sale of the Private Placement Warrants was placed in a trust account (the “Trust Account”), located
in the United States which is invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of
the Investment Company Act, with a maturity of 185 days or less or in any open-ended investment company that holds itself out
as a money market fund selected by the Company meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined
by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the redemption of any Public Shares
(as defined below) properly submitted in connection with a shareholder vote to amend the Company’s Amended and Restated
Memorandum and Articles of Association, and (iii) the redemption of the Company’s Public Shares if the Company is unable
to complete the initial Business Combination within 15 months from October 29, 2021 (or any extended period of time that
the Company may have to consummate an initial Business Combination as a result of an amendment to its Amended and Restated Memorandum
and Articles of Association) (the “Combination Period”), the closing of the IPO.
The
Company’s management has broad discretion with respect to the specific application of the net proceeds of the IPO and the
sale of the Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward
consummating a Business Combination. There is no assurance that the Company will be able to successfully complete a Business Combination.
The Company must complete a Business Combination with one or more operating businesses or assets that together have an aggregate
fair market value equal to at least 80% of the net assets held in the Trust Account (excluding the deferred underwriting commissions
and taxes payable on the income earned on the Trust Account) at the time of the Company’s signing a definitive agreement
in connection with its initial Business Combination. The Company will only complete a Business Combination if the post-transaction
company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires an interest in the
target business or assets sufficient for it not to be required to register as an investment company under the Investment Company
Act of 1940, as amended (the “Investment Company Act”).
The
Company will provide its holders of the outstanding Public Shares (the “public shareholders”) with the opportunity
to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with
a general meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the
Company will seek shareholder approval of a Business Combination or conduct a tender offer will be made by the Company. The public
shareholder will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account ($10.20
per Public Share initially, plus any pro rata interest earned on the funds held in the Trust Account and not previously released
to the Company to pay its tax obligations and which interest shall be net of taxes payable), calculated as of two business days
prior to the completion of the Business Combination. 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 (as
discussed in Note 8). There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s
warrants.
The
Company will only proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 either prior
to or upon such consummation of a Business Combination and, if the Company seeks shareholder approval. If the Company seeks shareholder
approval, the Company will complete its Business Combination only if the Company receives approval pursuant to an ordinary resolution
under Cayman Islands law, which requires the affirmative vote of a majority of the shareholders who attend and vote at a general
meeting of the Company, or (ii) if so, authorized by the Company’s articles of association, a unanimous written resolution
of the shareholders. If a shareholder vote is not required by applicable law or stock exchange rules and the Company does not
decide to hold a shareholder vote for business or other reasons, the Company will, pursuant to its 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 a Business Combination. If, however, shareholder
approval of the transaction is required by applicable law or stock exchange rules, 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. If the Company seeks shareholder approval in connection with a
Business Combination, the Sponsor has agreed to vote its Founder Shares, and any Public Shares purchased during or after the IPO
in favor of approving a Business Combination. Additionally, each public shareholder may elect to redeem their Public Shares irrespective
of whether they vote for or against the proposed transaction or do not vote at all.
Notwithstanding
the above, if the Company seeks shareholder approval of a Business Combination and it does not conduct redemptions 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 Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be
restricted from redeeming its shares with respect to more than an aggregate of 15% or more of the Public Shares, without the prior
consent of the Company.
The
Amended and Restated Memorandum and Articles of Association of the Company provides that only Public Shares and not any Founder
Shares are entitled to redemption rights. In addition, the Sponsor has agreed (a) to waive its redemption rights with respect
to its Founder Shares and Public Shares held by it in connection with the completion of a Business Combination and (b) not to
propose an amendment to the Amended and Restated Memorandum and Articles of Association (i) to modify the substance or timing
of the Company’s obligation to allow redemption in connection with the Company’s initial Business Combination or to
redeem 100% of its Public Shares if the Company does not complete a Business Combination or (ii) with respect to any other provision
relating to shareholders’ rights or pre-initial business combination activity, unless the Company provides the public shareholders
with the opportunity to redeem their Public Shares in conjunction with any such amendment.
If
the Company is unable to complete a 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 tax obligations
(less up to $100,000 of interest to pay dissolution expenses, which interest shall be net of taxes payable), divided by the number
of then outstanding Public Shares, which redemption will completely extinguish public shareholders rights as shareholders (including
the right to receive further liquidating distributions, if any), and (iii) as promptly as reasonably possible following such redemption,
subject to the approval of the Company’s remaining shareholders and the Company’s board of directors, dissolve and
liquidate, subject in each case to the Company’s obligations under Cayman Islands law to provide for claims of creditors
and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to
the Company’s warrants, which will expire worthless if the Company fails to complete a Business Combination within the Combination
Period.
The
Sponsor has agreed to waive its liquidation rights with respect to the Founder Shares if the Company fails to complete a Business
Combination within the Combination Period. However, if the Sponsor acquires Public Shares in or after the Proposed Public Offering,
such Public Shares will be entitled to liquidating distributions from the Trust Account if the Company fails to complete a Business
Combination within the Combination Period. The underwriter has agreed to waive it right to its deferred underwriting commission
held in the Trust Account in the event the Company does not complete a 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 will be less than the Proposed Public Offering price per Unit ($10.00).
The
Sponsor has agreed to be liable to the Company if and to the extent any claims by a third party for services rendered (other than
its independent registered public accounting firm) 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 (1)
$10.20 per Public Share or (2) such lesser amount per Public Share held in the Trust Account as of the date of the liquidation
of the Trust Account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn
to pay franchise and income taxes. This liability will not apply with respect to claims by a third party who executed a waiver
of any and all rights to seek access to the Trust Account and will not apply as to any claims under the Company’s indemnity
of the underwriter of the Proposed Public Offering 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, the 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 the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring
to have all vendors, service providers (except the Company’s independent registered public accounting firm), prospective
target businesses and 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.
Liquidity
and Going Concern
As
of September 30, 2022, the Company had $286,110 cash and working capital of $40,363. The Company has incurred and expects
to continue to incur significant costs in pursuit of its financing and acquisition plans. The Company expects that it will need
to raise additional capital through loans or additional investments from its Sponsor, shareholders, officers, directors, or third
parties. The Company’s officers, directors and Sponsor may, but are not obligated to, loan the Company funds, from time
to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet the Company’s working
capital needs. Accordingly, the Company may not be able to obtain additional financing. If the Company is unable to raise additional
capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited
to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses. The Company cannot
provide any assurance that new financing will be available to it on commercially acceptable terms, if at all. These conditions
raise substantial doubt about the Company’s ability to continue as a going concern. The condensed financial statements do
not include any adjustments that might result from the outcome of this uncertainty.
The
Company assessed going concern considerations in accordance with Financial Accounting Standard Board’s Accounting Standards
Codification (“ASC”) Topic 205-40. “Basis of Presentation - Going Concern”. The Company has until January 29,
2023 (absent any extensions of such period by the Company’s shareholders) to consummate a Business Combination. While the
Company intends to complete the proposed Business Combination before the mandatory liquidation date, it is uncertain that the
Company will be able to consummate a Business Combination by that time. If a Business Combination is not consummated by that 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 January 29, 2023.
Risks
and Uncertainties
Management
continues to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus
could have a negative effect on the Company’s financial position, results of its operations, and/or search for a target
company, the specific impact is not readily determinable as of the date of these condensed financial statements. The condensed
financial statements do not include any adjustments that might result from the outcome of this uncertainty.
In
February 2022, the Russian Federation and Belarus commenced a military action with the country of Ukraine. As a result of
this action, various nations, including the United States, have instituted economic sanctions against the Russian Federation and
Belarus. Further, the impact of this action and related sanctions on the world economy are not determinable as of the date of
these financial statements. The specific impact on the Company’s financial condition, results of operations, and cash flows
is also not determinable as of the date of these condensed financial statements.
Note
2 — Summary of Significant Accounting Policies
Basis
of Presentation
The
accompanying unaudited condensed financial statements as of September 30, 2022 have been prepared in accordance with U.S.
GAAP for interim financial information and Article 8 of Regulation S-X. Certain information or footnote disclosures normally included
in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations
of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a
complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying
unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary
for a fair presentation of the financial position, operating results and cash flows for the periods presented.
The
accompanying unaudited condensed financial statements should be read in conjunction with the audited financial statements and
notes thereto included in the Company’s Annual Report on Form 10-K filed with the SEC on March 14, 2022. The interim
results for the three and nine months ended September 30, 2022 are not necessarily indicative of the results that may be
expected for the period ending December 31, 2022 or for any future period.
Emerging
Growth Company
The
Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended
(the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”),
and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies
that are not emerging growth companies, including, but not limited to, not being required to comply with the independent registered
public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations
regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding
a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously
approved.
Section 102(b)(1)
of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards
until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not
have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting
standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements
that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt
out of such extended transition period which means that when a standard is issued or revised and it has different application
dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the
time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements
with another public company, which is neither an emerging growth company nor an emerging growth company that has opted out of
using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use
of Estimates
The
preparation of the condensed financial statements in conformity with GAAP requires the Company’s 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 revenues and expenses during the reporting period.
Making
estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect
of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered
in formulating its estimate, could change in the near term due to one or more future confirming events. One of the more significant
accounting estimates included in these condensed financial statements is the determination of the fair value of the warrant liabilities.
Such estimates may be subject to change as more current information becomes available. Accordingly, the actual results could differ
significantly from those estimates.
Cash
and Cash Equivalents
The
Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.
The Company had $286,110 and $750,562 of operating cash as of September 30, 2022 and December 31, 2021, respectively.
As of September 30, 2022, and December 31, 2021, the company had no cash equivalents.
Marketable
Securities Held in Trust Account
Following
the closing of the IPO on October 29, 2021, an amount of $234,600,000 from the net proceeds of the sale of the Units in the
IPO and the sale of the Private Placement Warrants was placed in the Trust Account and may be invested only in U.S. government
securities with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under
the Investment Company Act which invest only in direct U.S. government treasury obligations. The Trust Account is intended as
a holding place for funds pending the earliest to occur of: (i) the completion of the initial Business Combination; (ii) the redemption
of any Public Shares properly submitted in connection with a shareholder vote to amend the Company’s Amended and Restated
Memorandum and Articles of Association (A) to modify the substance or timing of the Company’s obligation to redeem 100%
of the Public Shares if the Company does not complete the initial Business Combination within the Combination Period or (B) with
respect to any other provision relating to shareholders’ rights or pre-initial Business Combination activity; or (iii) absent
an initial Business Combination within the Combination Period, the return of the funds held in the Trust Account to the public
shareholders as part of redemption of the Public Shares. As of September 30, 2022 and December 31, 2021, substantially
all of the assets held in the money market funds were invested primarily in U.S. Treasury securities.
Offering
Costs Associated with IPO
Offering
costs consisted of legal, accounting and other expenses incurred through the IPO that were directly related to the IPO. Offering
costs were allocated to the separable financial instruments issued in the IPO based on a relative fair value basis, compared to
total proceeds received. Offering costs allocated to warrant liabilities were expensed as incurred in the statements of operations.
Offering costs associated with the Class A ordinary shares issued were initially charged to temporary equity and then accreted
to ordinary shares subject to redemption upon the completion of the IPO. Accordingly, on October 29, 2021, offering costs
totaling $21,140,038 (consisting of $3,850,000 of underwriting fees, $8,800,000 of deferred underwriting fees, $7,748,431 excess
fair value of Founder Shares and $741,607 of actual offering costs, with $1,365,245 included in the statement of operations for
the period ending December 31, 2021 as an allocation for the Public Warrants and the Private Placement Warrants, and $19,774,793
included in additional paid-in capital).
Derivative
Financial Instruments
The
Company evaluates its 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”. For derivative financial instruments
that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value on the grant date and
is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. The classification
of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at
the end of each reporting period. Derivative liabilities are classified in the condensed 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.
Warrant
Liabilities
The
Company accounts for the Public Warrants and Private Placement Warrants exercisable for the Company’s ordinary shares that
are not indexed to its own shares as liabilities at fair value on the balance sheets. The Public Warrants and Private Placement
Warrants are subject to remeasurement at each balance sheet date and any change in fair value is recognized as a component of
other income (expense), net on the condensed statements of operations. The Company will continue to adjust the liability for changes
in fair value until the earlier of the exercise or expiration of the Public Warrants and Private Placement Warrants. At that time,
the portion of the warrant liability related to the Public Warrants and Private Placement Warrants will be reclassified to additional
paid-in capital.
Fair
Value of Financial Instruments
The
fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair
Value Measurement” (“ASC 820”), approximates the carrying amounts represented in the condensed balance sheets,
primarily due to their short-term nature, except warrant liabilities.
Fair
value is defined as the price that would be received for sale of an asset or paid for 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. |
In
some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy.
In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest
level input that is significant to the fair value measurement.
Class
A Ordinary Shares Subject to Possible Redemption
The
Company accounts for its Class A ordinary shares subject to possible redemption in accordance with the guidance in ASC 480. Class
A ordinary shares subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally
redeemable ordinary shares (including ordinary shares that features redemption rights that is 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, ordinary shares are classified as shareholders’ deficit. The Company’s Class
A ordinary shares features certain redemption rights that are considered to be outside of the Company’s control and subject
to occurrence of uncertain future events. Accordingly, at September 30, 2022 and December 31, 2021, Class A ordinary
shares subject to possible redemption are presented at redemption value as temporary equity, outside of the shareholders’
deficit section of the Company’s condensed balance sheets.
The
Company recognizes changes in redemption value at the end of each reporting period and adjusts the carrying value of redeemable
ordinary shares to equal the redemption value at the end of each reporting period. Such changes are reflected in additional paid-in
capital, or in the absence of additional capital, in accumulated deficit. On October 29, 2021, the Company recorded an accretion
of $35,299,793, $7,612,755 of which was recorded in additional paid-in capital and $27,687,038 was recorded in accumulated deficit.
As
of September 30, 2022 and December 31, 2021, the Class A ordinary shares, classified as temporary equity in the condensed
balance sheets, are reconciled in the following table:
Schedule of temporary equity balance sheet | |
| | |
Gross proceeds from IPO | |
$ | 230,000,000 | |
Less: | |
| | |
Proceeds allocated to public warrants | |
| (10,925,000 | ) |
Offering costs allocated to Class A ordinary shares subject to possible redemption | |
| (19,774,793 | ) |
Plus: | |
| | |
Re-measurement of carrying value to redemption value | |
| 35,299,793 | |
Class A ordinary shares subject to possible redemption at December 31, 2021 and March 31, 2022 | |
| 234,600,000 | |
Plus: | |
| | |
Re-measurement of carrying value to redemption value | |
| 344,360 | |
Class A ordinary shares subject to possible redemption at June 30, 2022 | |
$ | 234,944,360 | |
Plus: | |
| | |
Re-measurement of carrying value to redemption value | |
| 1,058,906 | |
Class A ordinary shares subject to possible redemption at September 30, 2022 | |
$ | 236,003,266 | |
Income
Taxes
The
Company follows the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes” (“ASC
740”). Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences
between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred
tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary,
to reduce deferred tax assets to the amount expected to be realized.
FASB
ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement
of tax positions 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. The Company recognizes 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 September 30, 2022 and December 31, 2021. The Company is currently not aware of any issues
under review that could result in significant payments, accruals or material deviation from its position.
The
Company is considered an exempted Cayman Islands company and is presently not subject to income taxes or income tax filing requirements
in the Cayman Islands or the United States. As such, the Company’s tax provision was zero for the period presented.
Net
Income (loss) Per Ordinary Share
The
Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. Net income
(loss) per ordinary share is computed by dividing net income (loss) by the weighted average number of ordinary shares outstanding
for the period. The Company has two classes of ordinary 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 ordinary shares. Accretion associated with the redeemable
Class A ordinary shares is excluded from earnings per share as the redemption value approximates fair value. The calculation of
diluted income (loss) per share does not consider the effect of the warrants issued in connection with the (i) IPO and (ii) the
private placement since the exercise of the warrants is contingent upon the occurrence of future events. The warrants are exercisable
to purchase 22,250,000 Class A ordinary shares in the aggregate. As of September 30, 2022, the Company did not have any dilutive
securities or other contracts that could, potentially, be exercised or converted into ordinary shares and then share in the earnings
of the Company.
The
following table reflects the calculation of basic and diluted net income (loss) per ordinary share (in dollars, except per share
amounts):
Schedule of earnings per share, basic and diluted | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
Three Months Ended September 30, 2022 | | |
Three Months Ended September 30, 2021 | | |
Nine Months Ended September 30, 2022 | | |
For the period from April 20, 2021 (inception) through September 30, 2021 | |
| |
Class A | | |
Class B | | |
Class A | | |
Class B | | |
Class A | | |
Class B | | |
Class A | | |
Class B | |
Basic and diluted net income (loss) per common share | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Numerator: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Allocation of net income (loss), as adjusted | |
$ | 2,374,400 | | |
$ | 593,600 | | |
$ | - | | |
$ | (44,168 | ) | |
$ | 7,561,866 | | |
$ | 1,890,466 | | |
$ | - | | |
$ | (52,234 | ) |
Denominator: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Basic and diluted weighted average common shares outstanding | |
| 23,000,000 | | |
| 5,750,000 | | |
| - | | |
| 5,000,000 | | |
| 23,000,000 | | |
| 5,750,000 | | |
| - | | |
| 5,000,000 | |
Basic and diluted net income (loss) per common share | |
$ | 0.10 | | |
$ | 0.10 | | |
$ | - | | |
$ | (0.01 | ) | |
$ | 0.33 | | |
$ | 0.33 | | |
$ | - | | |
$ | (0.01 | ) |
Deferred
Legal Fee
The
Company incurred $60,957 and $242,217 during the three and nine months ended September 30, 2022, respectively, of deferred
legal fees that will be payable upon the consummation of a Business Combination. As of September 30, 2022, the Company had
$455,200 in deferred legal fees, which is included in accounts payable and accrued expenses in the accompanying condensed balance
sheets.
Related
Parties
Parties,
which can be a corporation or an individual, are considered to be related if the Company has the ability, directly or indirectly,
to control the other party or exercise significant influence over the other party in making financial and operational decisions.
Companies are also considered to be related if they are subject to common control or common significant influence.
Concentration
of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution,
which, at times, may exceed the Federal Depository Insurance Corporation coverage of $250,000. The Company has not experienced
losses on this account.
Recent
Accounting Standards
In
August 2020, the FASB issued ASU No. 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20)
and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments
and Contracts in an Entity’s Own Equity” (“ASU 2020-06”), which simplifies accounting for convertible
instruments by removing major separation models required under current GAAP. ASU 2020-06 removes certain settlement conditions
that are required for equity contracts to qualify for the derivative scope exception, and it also simplifies the diluted earnings
per share calculation in certain areas. ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including
interim periods within those fiscal years, with early adoption permitted. The Company is currently assessing the impact, if any,
that ASU 2020-06 would have on its financial position, results of operations or cash flows.
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, including interim periods within those fiscal years, with early adoption permitted. The Company is currently assessing the
impact, if any, that ASU 2022-03 would have on its financial position, results of operations or cash flows.
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 Company’s financial statements.
Note
3 — Initial Public Offering
In
connection with the Company’s IPO, on October 29, 2021, the Company sold 23,000,000 Units at a price of $10.00 per
Unit. Each Unit consists of one Class A ordinary share (“Public Shares”) and one-half of one warrant (“Public
Warrants”). Each whole Public Warrant entitles the holder to purchase one Class A ordinary share at a price of $11.50 per
share, subject to adjustment (see Note 7).
An
aggregate of $10.20 per Unit sold in the IPO was deposited into the Trust Account and invested in U.S. government securities,
within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less or in
any open-ended investment company that holds itself out as a money market fund meeting the conditions of Rule 2a-7 of the
Investment Company Act, as determined by the Company. As of October 29, 2021, an aggregate of $234,600,000 of the IPO proceeds
and proceeds from the sale of the Private Placement Warrants was held in the Trust Account, representing an overfunding of the
trust account of 102.0% of the IPO size.
Transaction
costs as of the IPO date amounted to $21,140,059, consisting of $3,850,000 of underwriting discount, $8,800,000 of deferred underwriting
discount, $7,748,431 excess fair value of Founder Shares and $741,628 of offering costs.
Note
4 — Private Placement
Simultaneously
with the closing of the IPO, the Sponsor purchased an aggregate of 10,750,000 Private Placement Warrants at a price of $1.00 per
Private Placement Warrant ($10,750,000 in the aggregate). Each Private Placement Warrant is exercisable for one Class A ordinary
share at an exercise price of $11.50 per share, subject to adjustment (see Note 7). A portion of the proceeds from the Private
Placement Warrants were added to the proceeds from the IPO to be held in the Trust Account. If the Company does not complete a
Business Combination within the Combination Period, the proceeds from the sale of the Private Placement Warrants held in the Trust
Account will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law), and the Private
Placement Warrants will expire worthless.
Note
5 — Related Party Transactions
Founder
Shares
In
April 2021, the Sponsor purchased shares of the Company’s Class B ordinary shares (the “Founder Shares”)
for an aggregate purchase price of $. The Founder Shares included an aggregate of up to shares subject to forfeiture
by the Sponsor to the extent that the underwriters’ overallotment option was not exercised in full or in part, so that the
number of Founder Shares collectively represents 20% of the Company’s issued and outstanding ordinary shares after the IPO.
Simultaneously with the closing of the IPO, the underwriters exercised the over-allotment option in full. Accordingly,
Founder Shares are no longer subject to forfeiture.
The
Sponsor has agreed, subject to certain limited exceptions, not to transfer, assign or sell any of the Founder Shares until the
earlier of (A) one year after the completion of a Business Combination or (B) subsequent to a Business Combination, (x) if the
last reported sale price of the Class A ordinary shares equals or exceeds $12.00 per share (as adjusted for share sub-divisions,
share reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at
least 150 days after a Business Combination, or (y) the date on which the Company completes a liquidation, merger, share exchange,
reorganization or other similar transaction that results in all of the Company’s shareholders having the right to exchange
their Class A ordinary shares for cash, securities or other property.
On
October 8, 2021, the Sponsor entered into agreements with certain funds managed by Apollo Capital Management, L.P. (collectively,
“Apollo”), certain funds managed by Atalaya Capital Management, LP (“Atalaya”) and Meteora Capital Partners,
L.P. and funds affiliated with Meteora Capital Partners, L.P. (collectively “Meteora) (individually and collectively, the
“anchor investors”). Each of the anchor investors purchased 9.9% of the Units in the IPO (excluding Units issued in
connection with the exercise of the over-allotment option). Each of Apollo and Atalaya agreed to purchase interests in the Sponsor
representing approximately 7% of the Founder Shares and Private Placement Warrants at approximately the cost of such securities
to the Sponsor, with the Sponsor’s obligation to sell some or all of such interests conditioned upon such anchor investor’s
purchase of the Units.
Meteora
entered into a separate agreement with the Sponsor pursuant to which it agreed to purchase interests in the Sponsor representing
approximately 6.4% of the Founder Shares for approximately 3.7% of the cost of the Founder Shares and Private Placement Warrants
to the Sponsor.
The
anchor investors acquired from the Sponsor an indirect economic interest in an aggregate of 1,173,000 Founder Shares at the original
purchase price that the Sponsor paid for the Founder Shares. The Sponsor has agreed to distribute the Founder Shares to the anchor
investors after the completion of a Business Combination. The Company estimates the aggregate fair value of the Founder Shares
attributable to the anchor investors to be approximately $7,753,530, or $6.61 per share.
The
excess of the fair value of the Founder Shares was determined to be an offering cost in accordance with Staff Accounting Bulletin
Topic 5A. Accordingly, the offering cost was allocated to the separable financial instruments issued in the IPO based on a relative
fair value basis, compared to total proceeds received. Offering costs allocated to derivative warrant liabilities were expensed
as incurred in the statement of operations for the period ended December 31, 2021. Offering costs allocated to the Public
Shares were charged to shareholder’s deficit upon the completion of the IPO.
Forward
Purchase Agreements
The
Company entered into separate forward purchase agreements (the “Forward Purchase Agreements”) with Apollo and Atalaya
(“the “Forward Purchasers”) on August 13, 2021 and August 4, 2021, respectively. The Forward Purchase
Agreements provide, at the Company’s option, for the aggregate purchase of up to $9,600,000 Class A ordinary shares and
4,800,000 warrants to purchase Class A ordinary shares for an aggregate price of $96.0 million ($10.00 for one Class A ordinary
share and one-half of one Warrant), in private placements that will close concurrently with the closing of our initial business
combination. The forward purchase shares and forward purchase warrants will be identical to the Class A ordinary shares and Public
Warrants included in the Units sold in the IPO. Each Forward Purchaser’s commitment under its Forward Purchase Agreement
is subject to certain conditions including investment committee approval.
Promissory
Note – Related Party
In
April 2021, the Sponsor issued an unsecured promissory note to the Company (the “Promissory Note”), pursuant
to which the Company may borrow up to an aggregate principal amount of $. The Promissory Note was non-interest bearing
and payable on the earlier of December 31, 2021 or the consummation of the IPO. On October 29, 2021, the Company repaid
the Sponsor $300,000 for amounts outstanding under the Promissory Note. However, the promissory note balance on October 29,
2021 was $279,597 and, as such, the Company recorded a $20,403 related party receivable for the over-payment. As of September 30,
2022 and December 31, 2021, there were no amounts outstanding under the Promissory Note, as all such amounts were paid.
Administrative
Services Agreement
The
Company has entered into an agreement commencing on November 28, 2021 with Tartavull Klein Blatteis Capital, LLC (“TKB
Capital”), an affiliate of the Sponsor, pursuant to which the Company will pay TKB Capital a total of $10,000 per month
for office space, secretarial and administrative services provided to the Company. Upon completion of the initial Business Combination
or the Company’s liquidation, the Company will cease paying these monthly fees. For the three and nine months ended September 30,
2022, the Company incurred $30,000 and $90,000 of fees for these services, of which $30,000 and $80,000 is included in accrued
expenses in the accompanying condensed balance sheets, respectively. For the three months ended September 30, 2021 and for
the period from April 20, 2021 (inception) through September 30, 2021, the Company did not incur any fees for these
services.
Related
Party Loans
In
order to finance transaction costs in connection with a Business Combination, the Sponsor, certain of the Company’s officers
and directors or any of their affiliates may, but are not obligated to, loan the Company funds as may be required (“Working
Capital Loans”). If the Company completes a Business Combination, the Company will repay the Working Capital Loans out of
the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds
held outside the Trust Account. In the event that a Business Combination does not close, the Company 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. 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
warrants of the post Business Combination entity at a price of $1.00 per warrant. The warrants would be identical to the Private
Placement Warrants. As of September 30, 2022 and December 31, 2021, no Working Capital Loans were outstanding.
Note
6 — Shareholders’ Deficit
Preference
Shares — The Company is authorized to issue 1,000,000 preference shares with a par value of $0.0001 per share with such
designation, rights and preferences as may be determined from time to time by the Company’s board of directors. At September 30,
2022 and December 31, 2021, there were no preference shares issued or outstanding.
Class
A Ordinary Shares — The Company is authorized to issue 200,000,000 Class A ordinary shares with a par value of $0.0001
per share. Holders of the Company’s Class A ordinary shares are entitled to one vote for each share. At September 30,
2022 and December 31, 2021, there were no Class A ordinary shares issued and outstanding, excluding 23,000,000 Class A ordinary
shares subject to possible redemption as presented in temporary equity.
Class
B Ordinary Shares — The Company is authorized to issue 20,000,000 Class B ordinary shares with a par value of $0.0001
per share. At September 30, 2022 and December 31, 2021, there were 5,750,000 Class B ordinary shares issued and outstanding.
Ordinary
shareholders of record are entitled to one vote for each share held on all matters to be voted on by shareholders and holders
of Class A ordinary shares and holders of Class B ordinary shares will vote together as a single class on all matters submitted
to a vote of the shareholders except as required by law; provided that only holders of Class B ordinary shares will have the right
to vote on the appointment of directors prior to or in connection with the completion of the initial Business Combination.
The
Class B ordinary shares will automatically convert into Class A ordinary shares at the time of a Business Combination on a one-for-one
basis, subject to adjustment. In the case that additional Class A ordinary shares, or equity-linked securities, are issued or
deemed issued in excess of the amounts offered in the IPO and related to the closing of a Business Combination, the ratio at which
Class B ordinary shares shall convert into Class A ordinary shares will be adjusted (unless the holders of a majority of the outstanding
Class B ordinary shares to waive such adjustment with respect to any such issuance or deemed issuance) so that the number of Class
A ordinary shares issuable upon conversion of all Class B ordinary shares will equal, in the aggregate, on an as-converted basis,
20% of the sum of the total number of all ordinary shares outstanding upon the completion of the IPO plus all Class A ordinary
shares and equity-linked securities issued or deemed issued by the Company in connection with or in relation to the consummation
of the initial Business Combination, excluding any forward purchase securities, any Class A ordinary shares or equity-linked securities
exercisable for or convertible into Class A ordinary shares issued, or to be issued, to any seller in the initial Business Combination
and any private placement warrants issued to the Sponsor upon conversion of Working Capital Loans. In no event will the Class
B ordinary shares convert into Class A ordinary shares at a rate of less than one to one.
Note
7 — Warrant Liabilities
The
Company accounts for the 22,250,000 warrants that were issued in the IPO (representing 11,500,000 Public Warrants and 10,750,000
Private Placement Warrants) in accordance with the guidance contained in ASC 815-40. Such guidance provides that because the warrants
do not meet the criteria for equity treatment thereunder, each warrant must be recorded as a liability. The warrants do not meet
the criteria to be considered indexed to the Company’s ordinary shares due to settlement provisions that result in holders
of warrants receiving variable settlement amounts determined by the reference table. Additionally, an event that is not within
the Company’s control could require net cash settlement, thus precluding equity classification. Accordingly, the Company
will classify each warrant as a liability at its fair value. This liability is subject to re-measurement at each balance sheet
date. With each such re-measurement, the warrant liability will be adjusted to fair value, with the change in fair value recognized
in the Company’s statements of operations.
Warrants
— Public Warrants may only be exercised for a whole number of Class A ordinary shares. No fractional warrants will be
issued upon separation of the Units and only whole warrants will trade. Accordingly, unless holders purchase at least two Units,
they will not be able to receive or trade a whole warrant. The Public Warrants will become exercisable 30 days after the completion
of a Business Combination.
The
Company will not be obligated to deliver any Class A ordinary shares pursuant to the exercise of a Public Warrant and will have
no obligation to settle such Public Warrant exercise unless a registration statement under the Securities Act with respect to
the Class A ordinary shares issuable upon exercise of the Public Warrants is then effective and a prospectus relating thereto
is current, subject to the Company satisfying its obligations with respect to registration, or a valid exemption from registration
is available. No Public Warrant will be exercisable, and the Company will not be obligated to issue any Class A ordinary shares
upon exercise of a Public Warrant unless the Class A ordinary shares issuable upon such Public Warrant exercise has been registered,
qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the Public Warrants.
The
Company has agreed that as soon as practicable, but in no event later than 20 business days after the closing of a Business Combination,
it will use its commercially reasonable efforts to file with the SEC a post-effective amendment to the registration statement
filed in connection with its IPO or a new registration statement covering registration under the Securities Act, of the Class
A ordinary shares issuable upon exercise of the Public Warrants, and the Company will use its commercially reasonable efforts
to cause the same to become effective within 60 business days after the closing of a Business Combination, and to maintain the
effectiveness of such registration statement and a current prospectus relating to those Class A ordinary shares until the Public
Warrants expire or are redeemed, as specified in the warrant agreement; provided that if the Class A ordinary shares is at the
time of any exercise of a Public Warrant not listed on a national securities exchange such that they satisfy the definition of
a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders
of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9)
of the Securities Act and, in the event the Company so elects, the Company will not be required to file or maintain in effect
a registration statement, but it will use its commercially reasonably efforts to register or qualify the shares under applicable
blue sky laws to the extent an exemption is not available. If a registration statement covering the Class A ordinary shares issuable
upon exercise of the Public Warrants is not effective by the 60th day after the closing of a Business Combination, Public Warrant
holders may, until such time as there is an effective registration statement and during any period when the Company will have
failed to maintain an effective registration statement, exercise Public Warrants on a “cashless basis” in accordance
with Section 3(a)(9) of the Securities Act or another exemption, but the Company will use its commercially reasonably efforts
to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
Redemption
of warrants when the price per Class A ordinary share equals or exceeds $18.00. Once the Public Warrants become exercisable,
the Company may redeem the Public Warrants:
|
● |
in whole
and not in part; |
|
● |
at a
price of $0.01 per warrant; |
|
● |
upon
not less than 30 days’ prior written notice of redemption to each warrant holder; and |
|
● |
if,
and only if, the last reported sale price of the Class A ordinary share equals or exceeds $18.00 per share (as adjusted for
share sub-divisions, share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within
a 30-trading day period ending three trading days before the Company sends the notice of redemption to the warrant holders. |
If
and when the Public Warrants become redeemable by the Company, it may exercise its redemption right even if the Company is unable
to register or qualify the underlying securities for sale under all applicable state securities laws.
Redemption
of warrants when the price per Class A ordinary share equals or exceeds $10.00. Once the Public Warrants become exercisable, the
Company may redeem the Public Warrants:
|
● |
in whole
and not in part; |
|
● |
at a
price of $0.10 per warrant; |
|
● |
upon
a minimum of 30 days’ prior written notice of redemption to each warrant holder; provided that holders will be able
to exercise their warrants on a cashless basis prior to redemption and receive that number of shares based on the redemption
date and the fair market value of the Class A ordinary share; |
|
● |
if,
and only if, the last reported sale price of the Class A ordinary share equals or exceeds $10.00 per share (as adjusted per
share sub-divisions, share dividends, reorganizations, reclassifications, recapitalizations and the like) for any 20 trading
days within the 30-trading day period ending three trading days before the Company send the notice of redemption to the warrant
holders; and |
|
● |
if the
last reported sale price of the Class A ordinary share for any 20 trading days within a 30-trading day period ending on the
third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders is less than
$18.00 per share (as adjusted for share sub-divisions, share capitalizations, reorganizations, recapitalizations and the like),
the Private Placement Warrants must also be concurrently called for redemption on the same terms as the outstanding Public
Warrants, as described above. |
In
addition, if (x) the Company issues additional Class A ordinary shares or equity-linked securities (excluding the forward purchase
securities) for capital raising purposes in connection with the closing of a Business Combination at an issue price or effective
issue price of less than $9.20 per Class A ordinary share (with such issue price or effective issue price to be determined in
good faith by the Company’s board of directors and, in the case of any such issuance to the Sponsor or its affiliates, without
taking into account any Founder Shares held by the Sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly
Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds,
and interest thereon, available for the funding of a Business Combination on the date of the consummation of a Business Combination
(net of redemptions), and (z) the volume weighted average trading price of the Class A ordinary shares during the 20 trading day
period starting on the trading day prior to the day on which the Company consummates a Business Combination (such price, the “Market
Value”) is below $9.20 per share, then the exercise price of the warrants will be adjusted (to the nearest cent) to be equal
to 115% of the higher of the Market Value and the Newly Issued Price, the $18.00 per share redemption trigger price described
above under “Redemption of warrants when the price per Class A ordinary share equals or exceeds $18.00” and “Redemption
of warrants when the price per Class A ordinary share equals or exceeds $10.00” will be adjusted (to the nearest cent) to
be equal to 180% of the higher of the Market Value and the Newly Issued Price, and the $10.00 per share redemption trigger price
described above under “Redemption of warrants when the price per Class A ordinary share equals or exceeds $10.00”
will be adjusted (to the nearest cent) to be equal to the higher of the Market Value and the Newly Issued Price.
The
Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the IPO, except that the Private
Placement Warrants and the Class A ordinary shares issuable upon the exercise of the Private Placement Warrants are not transferable,
assignable or saleable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally,
the Private Placement Warrants are exercisable for cash or on a cashless basis, at the holder’s option, and are non-redeemable
so long as they are held by the initial purchasers or their permitted transferees (except for a number of Class A ordinary shares
as described above under “Redemption of warrants when the price per Class A ordinary share equals or exceeds $10.00”).
If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private
Placement Warrants will be redeemable by the Company in all redemption scenarios and exercisable by such holders on the same basis
as the Public Warrants.
Note
8 — Commitments and Contingencies
Registration
Rights
The
holders of the Founder Shares, Private Placement Warrants, warrants that may be issued upon conversion of Working Capital Loans
and forward purchase securities that may be issued pursuant to the forward purchase agreements (and any Class A ordinary shares
issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of the Working Capital
Loans and upon conversion of the Founder Shares) are entitled to registration rights pursuant to a registration rights agreement
that was signed on the effective date of the IPO, requiring the Company to register such securities for resale. The holders of
these securities are entitled to make up to three demands, excluding short form demands, that the Company register such securities.
In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed
subsequent to the completion of a Business Combination and rights to require the Company to register for resale such securities
pursuant to Rule 415 under the Securities Act. 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 date of the IPO to purchase up to 3,000,000 additional Units to cover
over-allotments at the IPO price less the underwriting discount. On October 29, 2021 the underwriters exercised the over-allotment
option in full, generating an additional $30,000,000 in gross proceeds. As a result of the over-allotment being exercised in full,
the Sponsor did not forfeit any Founder Shares back to the Company. The underwriters were paid a cash underwriting discount of
$3,850,000 in the aggregate at the closing of the IPO. In addition, $0.35 per Unit, or $8,050,000, and $750,000 of deferred underwriting
commissions ($8,800,000 in the aggregate) is payable to the underwriters for deferred underwriting commissions. The deferred fee
is payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business
Combination, subject to the terms of the underwriting agreement.
Broker
Dealer Agreements
The
Company entered into seven broker dealer agreements through September 30, 2022, for the purposes of identifying a target
company (“Target”) in connection with the Business Combination.
With respect to five of the seven broker dealer agreements, the broker
dealer (“Finder”) will identify potential Targets that have not already been identified by the Company. In the event that
the Company already knows the Target, the Company will inform the Finder and the agreement will be terminated. However, the Company may
enter into another agreement with the Finder for a known Target if the Company believes the Finder can add substantial value with respect
to the pursuit of the known Target. The Finder will act exclusively for the Company with respect to all activities related to the pursuit
of a Target once identified. If the Company consummates a Business Combination with the Target, the Company will pay the Finder a base
success fee of $350,000
or, in lieu of the base success fee an introduction fee, if,
in addition to first identifying a Target, the Finder also provides the Company an introduction to a pre-existing relationship with a
person that ultimately serves as a member of the Target’s Board of Directors or senior executive management. The introduction fee
will be $1,000,000 if
the Target has initiated a competitive process with respect to a strategic alternative or 0.5% of the pre-money equity value of the Target
if the Target has not initiated a competitive process with respect to a strategic alternative. Payment to the Finder is dependent upon
the closing of a Business Combination.
On
September 9, 2022, the Company entered into its sixth broker dealer agreement, for the purposes of identifying a Target in
connection with the Business Combination, pursuant to which the Finder will identify potential Targets that have not already been
identified by the Company. Upon the closing of a Business Combination between the Company and a Target introduced to the Company
by the Finder, the Finder will be entitled to a commission fee equal to one percent (1.0%) of the pre-money valuation of the Target
as stated in the Agreement and Plan of Merger to entered into by the Company and the Target.
On
September 28, 2022, the Company entered into its seventh broker dealer agreement, for the purposes of identifying a Target in connection
with the Business Combination. The Finder will identify potential Targets that have not already been identified by the Company. In connection
with Business Combination, the Finder will be entitled to a commission fee equal to $1,000,000 or 100,000 Founder Shares currently held
by the Sponsor. Payment to the Finder is dependent upon the closing of a Business Combination.
As
of September 30, 2022, the Company did not accrue any amounts related to any broker dealer agreements.
Consulting
Agreements
The
Company entered into seventeen consulting agreements through September 30, 2022.
With
respect to sixteen of the seventeen consulting agreements, during the term of each agreement, the consultant
(“Consultant”) will advise the Company concerning matters related to qualifying Business Combinations, including
services such as valuation, diligence and general advice with respect to the business, operations and financial conditions of any
such counterparty to a qualifying Business Combination. Upon closing of an initial Business Combination, the Company will pay the
Consultant a base fee of $350,000.
In lieu of, and not in addition to the base fee, the Company will pay a bonus fee of $1,000,000
if the Company and the Consultant mutually determine and agree that the Consultant will provide advice or services that are of a
different kind than those contemplated in the agreement. In lieu of and not in addition to the base fee and bonus fee, the Company
will pay to the Consultant an additional fee equal to 0.5% of the pre-money equity value of the Target if the Company and the
Consultant mutually determine and agree that the Consultant provided, or will provide, material support in connection with the
evaluation, negotiation, execution or marketing of an initial Business Combination that is ultimately consummated by the Company.
Payment to the Consultant is dependent upon the closing of an initial Business Combination.
On
August 3, 2022, the company entered into a consulting agreement. During the term of this agreement, the Consultant
will advise the Company concerning matters related to qualifying Business Combinations, including services such as valuation,
diligence and general advice with respect to the business, operations and financial conditions of any such counterparty to a qualifying
Business Combination. As consideration for the services performed by the Consultant during the term of the agreement, upon the
closing of an initial Business Combination, the Company shall pay to the Consultant a fee equal to one percent (1%) of the pre-money
equity value of the Target, as stated in the Agreement and Plan of Merger executed between the Company and the Target (which such
pre-money equity value shall be determined in a manner consistent with disclosures set forth in the proxy statement/prospectus
filed in connection with such initial Business Combination). Payment to the Consultant is dependent upon the closing of an initial
Business Combination.
As
of September 30, 2022, no work has been performed related to any of the consulting agreements and thus the Company did not
accrue any amounts related to these agreements.
Vendor
Agreement
On August 26, 2021, the Company entered into an agreement with a vendor to provide services and support in connection with finding and completing a successful Business Combination. In connection with these services, the Company agreed to pay the vendor $250,000 per annum. It is also agreed that the vendor could earn up to 45,000 common shares over the term of the agreement.
On August 16, 2022, the Company amended the agreement whereby it agreed to pay the vendor $125 per hour payable upon the completion of a successful Business Combination.
On October 7, 2022, the Company terminated the original agreement and entered into a new agreement with the vendor, pursuant to which the Company agreed to pay the vendor $125 per hour and the Sponsor assigned 23,883 Class B ordinary shares to the vendor, effective upon the completion of a successful Business Combination.
For the three and nine months ended September 30, 2022, the Company incurred $ and $ in fees for these services, of which $37,931 is included in accounts payable and accrued expenses in the accompanying condensed balance sheet as of September 30, 2022.
Note
9 — Fair Value Measurements
The
following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring
basis at September 30, 2022 and December 31, 2021, and indicates the fair value hierarchy of the valuation inputs the
Company utilized to determine such fair value:
Schedule of fair value liabilities measured on recurring basis | |
| | |
| | | |
| | |
Description | |
Level | | |
September 30, 2022 | | |
December 31, 2021 | |
Assets: | |
| | |
| | | |
| | |
Cash and marketable securities held in trust account | |
1 | | |
$ | 236,003,266 | | |
$ | 234,603,942 | |
| |
| | |
| | | |
| | |
Liabilities: | |
| | |
| | | |
| | |
Warrant liability – Public Warrants | |
1 | | |
| 805,000 | | |
| 5,520,000 | |
Warrant liability – Private Placement Warrants | |
2 | | |
| 752,500 | | |
| 5,160,000 | |
The
warrants were accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities in the accompanying
condensed balance sheets. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes
in fair value presented within the condensed statements of operations.
As
of September 30, 2022, the aggregate values of the Public Warrants and Private Placement Warrants were $805,000
and $752,500,
respectively, based on a fair value of $0.07
per warrant. As of December 31, 2021, the aggregate values of the Public Warrants and Private Placement Warrants were $5,520,000
and $5,160,000, respectively, based on a fair value of $0.48
per warrant.
The
following table presents the changes in the fair value of warrant liabilities:
Schedule of changes in the fair value of warrant liabilities | |
| | | |
| | | |
| | |
| |
Private Placement | | |
Public | | |
Warrant Liabilities | |
Fair value as of January 1, 2022 | |
$ | 5,160,000 | | |
$ | 5,520,000 | | |
$ | 10,680,000 | |
Change in fair value | |
| (1,397,500 | ) | |
| (1,495,000 | ) | |
| (2,892,500 | ) |
Fair value as of March 31, 2022 | |
| 3,762,500 | | |
| 4,025,000 | | |
| 7,787,500 | |
Change in fair value | |
| (1,936,075 | ) | |
| (2,071,150 | ) | |
| (4,007,225 | ) |
Fair value as of June 30, 2022 | |
| 1,826,425 | | |
| 1,953,850 | | |
| 3,780,275 | |
Change in fair value | |
| (1,073,925 | ) | |
| (1,148,850 | ) | |
| (2,222,775 | ) |
Fair value as of September 30, 2022 | |
$ | 752,500 | | |
$ | 805,000 | | |
$ | 1,557,500 | |
For
periods subsequent to the detachment of the Public Warrants from the Units, the close price of the Public Warrant will be used
as the fair value as of each relevant date. The subsequent measurements of the Private Placement Warrants are classified as Level
2 due to the use of an observable market quote for a similar asset in an active market under the ticker USCTW. For September 30,
2022 and December 31, 2021, the Public Warrants have detached from the Units, and the closing price is utilized as the fair
value.
Transfers
to/from Levels 1, 2 and 3 are recognized at the end of the reporting period in which a change in valuation technique or methodology
occurs. There were no transfers to/from Levels 1, 2, and 3 during the three and nine months ended September 30, 2022.
Note
10 — Subsequent Events
Management
has evaluated the impact of subsequent events through the date that the unaudited condensed financial statements were issued.
Based upon this review, other than the below, the Company did not identify any subsequent events that would have required adjustment
or disclosure in the unaudited condensed financial statements.
As described in Note 8, on October 7, 2022, the Company terminated the original agreement and entered into a new agreement with the vendor,
pursuant to which the Company agreed to pay the vendor $125 per hour and the Sponsor assigned 23,883 Class B ordinary shares to the vendor,
effective upon the completion of a successful Business Combination.
On October 25, 2022, the Company entered into
a consulting agreement. During the term of this agreement, the consultant (“Consultant”) will advise the Company concerning
matters related to qualifying Business Combinations, including services such as valuation, diligence and general advice with respect to
the business, operations and financial conditions of any such counterparty to a qualifying Business Combination. In consideration for
the services performed by the Consultant during the term, upon the closing of an initial business combination, the Company shall pay to
the Consultant in shares at close, 100,000 shares of the surviving entity.
On October 31, 2022, the company entered into
a consulting agreement. During the term of this agreement, the Consultant will advise the Company concerning matters related to qualifying
Business Combinations, including services such as valuation, diligence and general advice with respect to the business, operations and
financial conditions of any such counterparty to a qualifying Business Combination (the “Services”). In consideration for
the Services performed by the Consultant during the term, upon the closing of a Business Combination, the Company shall pay to the Consultant
either (i) 0.5% of the pre-money equity value of the target company acquired in such Business Combination (which such pre-money equity
value shall be determined in a manner consistent with disclosures set forth in the proxy statement/prospectus for such Business Combination)
or (ii) $1,000,000, whichever is greater.