UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from __________ to __________
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(Commission File Number) |
(IRS Employer Identification No.) |
| (Address Of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code
Not Applicable
(Former name or former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol(s) | Name of each exchange on which registered | ||
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes ☐
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |
| ☒ | Smaller reporting company | |||
| Emerging growth company |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
As of August 11, 2023, Class A ordinary shares, par value $0.0001 per share, and Class B ordinary shares, par value $0.0001 per share, were issued and outstanding, respectively.
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Form 10-Q
Table of Contents
| i |
PART I. FINANCIAL INFORMATION
Item 1. Interim Condensed Financial Statements
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CONDENSED BALANCE SHEETS
| JUNE 30, 2023 | DECEMBER 31, 2022 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Marketable securities held in Trust Account | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES, ORDINARY SHARES SUBJECT TO POSSIBLE REDEMPTION, AND SHAREHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Note payable-related party | ||||||||
| Total current liabilities | ||||||||
| Deferred underwriting commissions | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Class A ordinary shares subject to possible redemption, $ par value; and shares at $ and $ per share at June 30, 2023 and December 31, 2022, respectively | ||||||||
| Shareholders’ deficit | ||||||||
| Preference shares, $ par value; shares authorized; issued or outstanding | ||||||||
| Class A ordinary shares, $ par value; shares authorized; issued or outstanding (excluding and shares subject to possible redemption at June 30, 2023 and December 31, 2022, respectively) | ||||||||
| Class B ordinary shares, $par value; shares authorized; shares issued and outstanding | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total shareholders’ deficit | ( | ) | ( | ) | ||||
| Total Liabilities, Ordinary Shares Subject to Possible Redemption, and Shareholders’ Deficit | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
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UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
| For The Three Months Ended June 30, 2023 | For The Three Months Ended June 30, 2022 | For The Six Months Ended June 30, 2023 | For The Six Months Ended June 30, 2022 | |||||||||||||
| General and administrative expenses | $ | $ | $ | $ | ||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gain on marketable securities (net), dividends and interest, held in Trust Account | ||||||||||||||||
| Income (loss) before taxes | ( | ) | ||||||||||||||
| Income tax expense | ||||||||||||||||
| Net income (loss) | $ | $ | $ | $ | ( | ) | ||||||||||
| Weighted average shares outstanding of Class A ordinary shares subject to possible redemption, basic and diluted | ||||||||||||||||
| Basic and diluted net income (loss) per share, Class A ordinary shares subject to possible redemption | $ | $ | $ | $ | ) | |||||||||||
| Weighted average shares outstanding of Class B non-redeemable ordinary shares, basic and diluted | ||||||||||||||||
| Basic and diluted net income (loss) per share, Class B non-redeemable ordinary shares | $ | $ | $ | $ | ) | |||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
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UNAUDITED CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
For the Three and Six Months Ended June 30, 2023
| Ordinary Shares | Additional | Total | ||||||||||||||||||||||||||
| Class A | Class B | Paid-In | Accumulated | Shareholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance as of January 1, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Remeasurement of Class A ordinary shares to redemption value | - | - | ||||||||||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||
| Balance as of March 31, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Remeasurement of Class A ordinary shares to redemption value | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||
| Balance as of June 30, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
For the Three and Six Months Ended June 30, 2022
| Ordinary Shares | Additional | Total | ||||||||||||||||||||||||||
| Class A | Class B | Paid-In | Accumulated | Shareholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance as of January 1, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance as of March 31, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Remeasurement of Class A ordinary shares to redemption value | - | |||||||||||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||
| Balance as of June 30, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
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UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
| For The Six Months Ended June 30, 2023 | For The Six Months Ended June 30, 2022 | |||||||
| Cash Flows from Operating Activities | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Gain on marketable securities (net), dividends and interest, held in Trust Account | ( | ) | ( | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid and other assets | ( | ) | ||||||
| Accounts payable | ( | ) | ( | ) | ||||
| Accrued expenses | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities | ||||||||
| Trust Account Withdrawal - redemption | ||||||||
| Net cash provided by investing activities | 168,236,768 | - | ||||||
| Cash Flows from Financing Activities | ||||||||
| Redemption of 16,437,487 Class A shares | ( | ) | ||||||
| Proceeds from note payable - related party | ||||||||
| Offering costs paid, net of reimbursement from underwriter | ( | ) | ||||||
| Net cash used in financing activities | ( | ) | ( | ) | ||||
| Net decrease in cash | ( | ) | ( | ) | ||||
| Cash - beginning of period | ||||||||
| Cash - end of period | $ | $ | ||||||
| Supplemental disclosure of noncash investing and financing activities: | ||||||||
| Deferred underwriting fees payable | $ | ( | ) | $ | ||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
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NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 1-Description of Organization and Business Operations
two
(the “Company”) was incorporated as a Cayman Islands exempted company on
As of June 30, 2023, the Company had not commenced any operations. All activity for the period from January 15, 2021 (inception) through June 30, 2023 relates to the Company’s formation and the initial public offering (the “Initial Public Offering”) described below, and since the Initial Public Offering, the search for a Business Combination. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company generates non-operating income from investments in the Trust Account derived from the proceeds of the Initial Public Offering.
The
Company’s sponsor was originally two sponsor, a Cayman Islands exempted limited company (the “Original Sponsor”), until
March 31, 2023 and has been HC Proptech Partners III, LLC (the “New Sponsor”) since March 31, 2023. The registration statement
for the Company’s Initial Public Offering was declared effective March 29, 2021. On April 1, 2021, the Company consummated its
Initial Public Offering of Class A ordinary shares (the “Public Shares”), at an offering price of $ per Public
Share, generating gross proceeds of $
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the private placement (“Private Placement”) of
Class A ordinary shares (the “Private Placement Shares”), at a price of $ per Private Placement Share to the Original
Sponsor, generating gross proceeds of approximately $
Upon
the closing of the Initial Public Offering, the Over-Allotment and the Private Placements, $
The
Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering
and the sale of Private Placement Shares, 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 complete a Business Combination successfully.
The Company must complete one or more initial Business Combinations having an aggregate fair market value of at least
| 5 |
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NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The
Company will provide its holders of its 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 shareholder 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, solely in its discretion. The Public Shareholders
will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially at $ per
Public Share). 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 to the underwriter, as such commissions were waived by the underwriters on February 14,
2023 (as discussed in Note 5). These Public Shares have been classified as temporary equity in accordance with the Financial Accounting
Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 480, “Distinguishing Liabilities
from Equity.” In such case, the Company will proceed with a Business Combination if the Company has net tangible assets of at least
$
Notwithstanding the foregoing, the Amended and Restated Memorandum and Articles of Association provide 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 % or more of the Class A ordinary shares sold in the Initial Public Offering, without the prior consent of the Company.
The Company’s Sponsor, officers and directors (the “initial shareholders”) agreed not to propose an amendment to the Amended and Restated Memorandum and Articles of Association (A) that would 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 % of its Public Shares if the Company does not complete a Business Combination by January 1, 2024 (the “Combination Period”) or (B) with respect to any shareholders’ rights prior to the initial Business Combination, unless the Company provides the Public Shareholders with the opportunity to redeem their Class A ordinary shares in conjunction with any such amendment.
If
the Company 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 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 the Company’s income taxes, if
any (less up to $
| 6 |
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NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The Original Sponsor, the New Sponsor, officers and directors agreed to waive their liquidation rights with respect to the Founder Shares and any Private Placement Shares they hold if the Company fails to complete a Business Combination within the Combination Period. However, if the initial shareholders or members of the Company’s management team acquire Public Shares in or after the Initial Public Offering, they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if the Company fails to complete a Business Combination within the Combination Period. The underwriter agreed to waive their rights to its deferred underwriting commission (see Note 5) held in the Trust Account and 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 residual assets remaining available for distribution (including Trust Account assets) will be only $ per share initially held in the Trust Account. In order to protect the amounts held in the Trust Account, the Original Sponsor and New Sponsor agreed to be liable to the Company if and to the extent any claims by a vendor for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account. This liability will not apply with respect to any claims by a third party who executed a waiver of any right, title, interest or claim of any kind in or to any monies held in the Trust Account or to any claims under the Company’s indemnity of the underwriter of the Initial 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 New 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 New Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (except for the Company’s independent registered public accounting firm), prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
On March 31, 2023, the Company held its extraordinary general meeting of shareholders at which the shareholders approved an amendment to the Company’s Amended and Restated Memorandum and Articles of Association to extend the date by which the Company must consummate a Business Combination from April 1, 2023 (the date which was 24 months from the closing date of the Company’s Initial Public Offering) to January 1, 2024 (the date which is 33 months from the closing date of the Initial Public Offering).
In
connection with the extraordinary general meeting of shareholders, on March 31, 2023 shareholders
holding
Class A ordinary shares exercised their right to redeem their shares for a pro rata
portion of the funds in the Trust Account. As a result, approximately $
On March 31, 2023, the Original Sponsor sold up to Class B ordinary shares of the Company to the New Sponsor, which became the Company’s sponsor by assuming the rights and obligations of the Original Sponsor to the Company.
Liquidity and Going Concern
As
of June 30, 2023, the Company had $
The
Company’s liquidity needs to date have been satisfied through $
On August 7, 2023 the Company entered into a promissory note with the Sponsor of an amount up to $
Management has determined that the Company may not have sufficient liquidity to meet its anticipated obligations through the earlier of its consummation of an initial business combination or its liquidation date. Over this time period, the Company 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.
In connection with the Company’s assessment of going concern considerations in accordance with FASB ASC Topic 205-40, “Presentation of Financial Statements—Going Concern,” management has determined that the liquidity issue, timing of the mandatory liquidation and subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after January 1, 2024. The unaudited condensed financial statements do not include any adjustment that might be necessary if the Company is unable to continue as a going concern. The Company plans to complete a business combination prior to the mandatory liquidation date.
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NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 2-Summary of Significant Accounting Policies and Basis of Presentation
Basis of Presentation
The accompanying unaudited condensed financial statements are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for financial information and pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP. In the opinion of management, the unaudited condensed financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented. Operating results for the three and six months ended June 30, 2023 are not necessarily indicative of the results that may be expected through December 31, 2023 or any future periods.
The accompanying unaudited condensed financial statements should be read in conjunction with the audited financial statements included in the amended Annual Report on Form 10-K filed by the Company with the SEC on March 27, 2023, which contains the audited financial statements and notes thereto. The financial information as of December 31, 2022, is derived from the audited financial statements presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
Emerging Growth Company
As an emerging growth company, the Company 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 auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, 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.
Further, Section 102(b)(1) of the Jumpstart Our Business Startups Act of 2012 (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 an emerging growth 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 that 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 unaudited condensed 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 unaudited condensed 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 unaudited condensed financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. 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
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NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Investments Held in Trust Account
The
Company’s portfolio of investments was originally comprised of U.S. government securities, within the meaning set forth in Section 2(a)(16)
of the Investment Company Act, with a maturity of
In March 2023, the Company instructed the trustee of the Trust Account to liquidate the investments held in the Trust Account and instead to hold the funds in the Trust Account in an interest-bearing demand deposit account until the earlier of consummation of a Business Combination and liquidation of the Company. The funds are still held in this account as of June 30, 2023.
Concentration of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution,
which, at times, may exceed the Federal Deposit Insurance Corporation coverage limit of $
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under the FASB ASC 820, “Fair Value Measurements and Disclosures,” equals or approximates the carrying amounts represented in the condensed balance sheets, primarily due to their short-term nature.
Fair Value Measurements
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.
Offering Costs Associated with the Initial Public Offering
Offering costs consist of legal, accounting, and other costs incurred that were directly related to the Initial Public Offering and were charged against the carrying value of the Class A ordinary shares subject to possible redemption upon the completion of the Initial Public Offering.
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NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
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 (if any) are classified as liability instruments and are measured at fair value. Conditionally redeemable Class A ordinary shares (including Class A ordinary shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, Class A ordinary shares are classified as shareholders’ equity. As part of the Private Placement, the Company issued Private Placement Shares to the Original Sponsor. These Private Placement Shares will not be transferable, assignable or salable until 30 days after the completion of our initial Business Combination. They are also considered non-redeemable and are presented as permanent equity in the Company’s condensed balance sheets. On December 30, 2022, the Sponsor unconditionally and irrevocably forfeited all Private Placement Shares to the Company for no value and the Company cancelled the Private Placement Shares effective as of the same date. The Company’s Class A ordinary shares sold in the Initial Public Offering feature certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, as of June 30, 2023 and December 31, 2022, and Class A ordinary shares, respectively, subject to possible redemption are presented as temporary equity, outside of the shareholders’ deficit section of the Company’s condensed balance sheets.
Under ASC 480-10S99, the Company has elected to recognize changes in the redemption value immediately as they occur and adjust the carrying value of the security to equal the redemption value at the end of each reporting period. This method would view the end of the reporting period as if it were also the redemption date for the security. Effective with the closing of the Initial Public Offering (including the exercise of the over-allotment option), the Company recognized the accretion from initial book value to redemption amount which resulted in charges against additional paid-in capital (to the extent available) and accumulated deficit. Subsequently, the Company recognized changes in the redemption value as an increase in redemption value of Class A ordinary shares subject to possible redemption as reflected on the accompanying unaudited condensed statements of changes in shareholders’ deficit.
Income Taxes
The
Company follows accounting for income taxes under FASB ASC 740, “Income Taxes,” which 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. There were
There is currently no taxation imposed on income by the Government of the Cayman Islands. In accordance with Cayman federal income tax regulations, income taxes are not levied on the Company. Consequently, income taxes are not reflected in the Company’s unaudited condensed financial statements. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” The Company has two classes of shares, which are referred to as Class A ordinary shares and Class B ordinary shares. Income and losses are shared pro rata between the two classes of shares, which assumes a business combination as the most likely outcome. Net income (loss) per ordinary share is calculated by dividing the net income (loss) by the weighted average shares of ordinary shares outstanding for the respective period.
At June 30, 2023 and 2022, the Company did not have any dilutive securities and other contracts that could potentially be exercised or converted into ordinary shares and then share in the earnings of the Company. As a result, diluted net income (loss) per ordinary share is the same as basic net income (loss) per ordinary share for the three and six months ended June 30, 2023 and 2022. Accretion associated with the redeemable Class A ordinary shares is excluded from earnings per share as the redemption value approximates fair value.
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NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
| For The Three Months Ended June, | For The Six Months Ended June, | |||||||||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||||||||
| Class A | Class B | Class A | Class B | Class A | Class B | Class A | Class B | |||||||||||||||||||||||||
| Basic and diluted net income (loss) per ordinary share: | ||||||||||||||||||||||||||||||||
| Numerator: | ||||||||||||||||||||||||||||||||
| Allocation of net income (loss) | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
| Denominator: | ||||||||||||||||||||||||||||||||
| Basic and diluted weighted average ordinary shares outstanding | ||||||||||||||||||||||||||||||||
| Basic and diluted net income (loss) per ordinary share | $ | $ | $ | $ | $ | $ | $ | ) | $ | ) | ||||||||||||||||||||||
Recent Accounting Pronouncements
The Company’s management does not believe that any recently issued, but not yet effective, accounting standards updates, if currently adopted, would have a material effect on the accompanying unaudited condensed financial statements.
Note 3-Initial Public Offering
On
April 1, 2021, the Company consummated its Initial Public Offering of Public Shares, at an offering price of $ per Public
Share, generating gross proceeds of $
The
Company granted the underwriter a
Note 4-Related Party Transactions
Founder Shares
On
January 21, 2021, the Original Sponsor paid $,
or approximately $per
share, to cover expenses in consideration for
Class B ordinary shares, par value $
(the “Founder Shares”). Up to
Founder Shares were subject to forfeiture to the extent that the over-allotment option was not exercised in full by the underwriter,
so that the Founder Shares would represent %
of the Company’s issued and outstanding shares after the Initial Public Offering. On March 8, 2021, the Original Sponsor
transferred
Founder Shares to each of Michelle Gill, Ryan Petersen and Laura de Petra, and
Founder Shares to Pierre Lamond. Such shares were subject to forfeiture in the event the underwriter’s over-allotment
was not exercised in full. The underwriters partially exercised their over-allotment option on April 13, 2021 and on April 19, 2021, the
Original Sponsor surrendered
| 11 |
TWO
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The
initial shareholders agreed, subject to limited exceptions, not to transfer, assign or sell any of their Founder Shares until the earlier
to occur of (A)
Private Placement Shares
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the Private Placement of
The
Original Sponsor, the New Sponsor and the Company’s officers and directors agreed, subject to limited exceptions, not to transfer,
assign or sell any of their Private Placement Shares until
Sponsor Loan
On
January 21, 2021, the Original Sponsor agreed to loan the Company up to $
Working Capital Loans
In
addition, in order to finance transaction costs in connection with a Business Combination, the Original Sponsor, the New Sponsor,
any of their affiliates, or certain of the Company’s officers and directors 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 would
repay the Working Capital Loans. 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 $
Note Payable – Related Party
On August 7, 2023, the Company issued a promissory note to the Sponsor
in an amount up to $
As of June 30, 2023 and December 31, 2023 the Company had $
Administrative Services Agreement
On
March 29, 2021, the Company entered into that certain administrative services agreement (the “Administrative Services Agreement”)
with the Original Sponsor pursuant to which, commencing on the date the Company’s securities were first listed on the New York
Stock Exchange, the Company agreed to pay the Original Sponsor a total of $
| 12 |
TWO
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 5-Commitments and Contingencies
Registration Rights
The holders of Founder Shares, Private Placement Shares, and Class A ordinary shares that may be issued upon conversion of Working Capital Loans were entitled to registration rights pursuant to a registration rights agreement signed upon consummation of the Initial Public Offering. These holders were entitled to make up to three demands, excluding short form demands, that the Company registers such securities. In addition, these holders will have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of the initial Business Combination. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The
underwriter was entitled to an underwriting discount of $
The
underwriter partially exercised the over-allotment option and was entitled to an additional fee of approximately $
On
February 14, 2023, the representative of the underwriters executed a waiver agreement to forfeit any rights or claims they have, or may
in the future have, to the deferred underwriting commissions. The Company reduced the deferred underwriting fee payable on the unaudited
condensed balance sheets by the full amount of $
Risks and Uncertainties
Various social and political circumstances in the United States and around the world (including wars and other forms of conflict, including rising trade tensions between the United States and China, and other uncertainties regarding actual and potential shifts in the United States and foreign, trade, economic and other policies with other countries, terrorist acts, security operations and catastrophic events such as fires, floods, earthquakes, tornadoes, hurricanes and global health epidemics), may also contribute to increased market volatility and economic uncertainties or deterioration in the United States and worldwide. Specifically, the rising conflict between Russia and Ukraine, and resulting market volatility could adversely affect the Company’s ability to complete a business combination. In response to the conflict between Russia and Ukraine, the United States and other countries have imposed sanctions or other restrictive actions against Russia. Any of the above factors, including sanctions, export controls, tariffs, trade wars and other governmental actions, could have a material adverse effect on the Company’s ability to complete a business combination and the value of the Company’s securities.
Management continues to evaluate the impact of these types of risks on the industry and has concluded that while it is reasonably possible that these types of risks could have a negative effect on 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 unaudited condensed financial statements. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
The
Company’s Class A ordinary shares feature certain redemption rights that are considered to be outside of the Company’s control
and subject to the occurrence of future events. The Company is authorized to issue Class A ordinary shares with a par value
of $ per share. Holders of the Company’s Class A ordinary shares are entitled to
On March 31, 2023 stockholders holding Class A ordinary shares exercised their right to redeem their
shares for a pro rata portion of the funds in the Trust Account. As a result, approximately $
| 13 |
TWO
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Class A ordinary shares subject to possible redemption reflected on the condensed balance sheets are reconciled on the following table:
| Class A ordinary shares subject to possible redemption, December 31, 2022 | $ | |||
| Class A ordinary shares tendered for redemption | ( | ) | ||
| Plus: | ||||
| Waiver of Class A shares issuance costs | ||||
| Less: | ||||
| Change in redemption value of Class A ordinary shares subject to possible redemption amount | ( | ) | ||
| Class A ordinary shares subject to possible redemption, June 30, 2023 | $ |
Note 7-Shareholders’ Deficit
Preference Shares - The Company is authorized to issue preference shares with a par value $ per share with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. As of June 30, 2023 and December 31, 2022, there were preference shares issued or outstanding.
Class A Ordinary Shares - The Company is authorized to issue Class A ordinary shares with a par value of $ per share. As of June 30, 2023 and December 31, 2022, there were and Class A ordinary shares outstanding, respectively, all of which shares were subject to possible redemption and have been classified as temporary equity, respectively (see Note 6).
Class B Ordinary Shares - The Company is authorized to issue Class B ordinary shares with a par value of $ per share. Holders are entitled to one vote for each share of Class B ordinary shares. On January 21, 2021, Class B ordinary shares were issued to the Company’s Sponsor. Of the Class B ordinary shares, an aggregate of up to shares were subject to forfeiture to the Company for no consideration to the extent that the underwriter’s over-allotment option was not exercised in full or in part, so that the initial shareholders will collectively own % of the Company’s issued and outstanding ordinary shares (excluding the Private Placement Shares) after the Initial Public Offering. The underwriters partially exercised their over-allotment option on April 13, 2021, Class B ordinary shares were forfeited for no consideration resulting in Class B ordinary shares issued and outstanding with no shares subject to forfeiture. On June 30, 2023, Class B ordinary shares were purchased from the Original Sponsor by the New Sponsor, and were transferred in connection with the non-redemption agreements.
Holders of the Class A ordinary shares and holders of the Class B ordinary shares will vote together as a single class on all matters submitted to a vote of the Company’s shareholders, except as required by law or stock exchange rule; provided that only holders of the Class B ordinary shares have the right to vote on the election of the Company’s directors prior to the initial Business Combination.
The
Class B ordinary shares will automatically convert into Class A ordinary shares on the first business day following the consummation
of the initial Business Combination at a ratio such that the number of Class A ordinary shares issuable upon conversion of all Founder
Shares will equal, in the aggregate, on an as-converted basis, % of the sum of (i) the total number of ordinary shares issued and outstanding
upon completion of the Initial Public Offering (excluding the Private Placement Shares), plus (ii) the sum of the total number of Class
A ordinary shares issued or deemed issued or issuable upon conversion or exercise of any equity-linked securities or rights issued or
deemed issued, by the Company in connection with or in relation to the consummation of the initial Business Combination, excluding any
Class A ordinary shares or equity-linked securities exercisable for or convertible into Class A ordinary shares issued, deemed issued,
or to be issued, to any seller in the initial Business Combination and any Private Placement Shares that may be issued upon conversion
of Working Capital Loans.
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TWO
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 8-Fair Value Measurements
The following tables present information about the Company’s assets that are measured at fair value on a recurring basis as of June 30, 2023 and December 31, 2022 and indicate the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value:
June 30, 2023
| Quoted | Significant | Significant | ||||||||||
| Prices | Other | Other | ||||||||||
| in Active | Observable | Unobservable | ||||||||||
| Markets | Inputs | Inputs | ||||||||||
| Description | (Level 1) | (Level 2) | (Level 3) | |||||||||
| Marketable securities held in Trust Account: | ||||||||||||
| U.S. Treasury Trust Funds | $ | $ | $ | |||||||||
December 31, 2022
| Quoted | Significant | Significant | ||||||||||
| Prices | Other | Other | ||||||||||
| in Active | Observable | Unobservable | ||||||||||
| Markets | Inputs | Inputs | ||||||||||
| Description | (Level 1) | (Level 2) | (Level 3) | |||||||||
| Marketable securities held in Trust Account: | ||||||||||||
| U.S. Treasury Securities (1) | $ | $ | $ | |||||||||
| (1) |
Transfers to/from Levels 1, 2, and 3 are recognized at the beginning of the reporting period. There were no transfers between levels of the hierarchy for the three and six months ended June 30, 2023 and 2022.
Level 1 assets include investments in Treasury Bills and treasury focused treasury trust funds. The Company uses inputs such as actual trade data, quoted market prices from dealers or brokers, and other similar sources to determine the fair value of its investments.
Note 9-Subsequent Events
Management has evaluated subsequent events and transactions that occurred up to the date the unaudited condensed financial statements were issued. Based upon this review, the Company did not identify any subsequent events, other than the items discussed below, that would have required adjustment or disclosure in the unaudited condensed financial statements.
On August 7, 2023, the Company issued a promissory note to the Sponsor
in an amount up to $
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
References to the “Company,” “two” “our,” “us” or “we” refer to two. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the condensed financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other SEC filings.
Overview
We are a blank check company incorporated as a Cayman Islands exempted company on January 15, 2021. We were formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). We are an emerging growth company and, as such, we are subject to all of the risks associated with emerging growth companies.
Our sponsor was originally two sponsor, a Cayman Islands exempted limited company (the “Original Sponsor”), until March 31, 2023 and has been HC Proptech Partners III, LLC (the “New Sponsor”) since March 31, 2023. The registration statement for our initial public offering (the “Initial Public Offering”) was declared effective March 29, 2021. On April 1, 2021, we consummated our Initial Public Offering of 20,000,000 Class A ordinary shares (the “Public Shares”), at an offering price of $10.00 per Public Share, generating gross proceeds of $200.0 million, and incurring offering costs of approximately $11.1 million (net of a required reimbursement from the underwriter), of which $7.0 million was for deferred underwriting commissions. The underwriter was granted a 45-day option from the date of the final prospectus relating to the Initial Public Offering to purchase up to 3,000,000 additional shares to cover over-allotments, if any, at $10.00 per share. The underwriter partially exercised the over-allotment option and on April 13, 2021 purchased an additional 1,437,500 Class A ordinary shares (the “Additional Shares”), generating gross proceeds of approximately $14.4 million (the “Over-Allotment”), and we incurred additional offering costs of approximately $755,000 (net of a required reimbursement from the underwriter), of which approximately $503,000 was for deferred underwriting fees.
Simultaneously with the closing of the Initial Public Offering, we consummated the private placement (“Private Placement”) of 600,000 Class A ordinary shares (the “Private Placement Shares”), at a price of $10.00 per Private Placement Share to the Original Sponsor, generating gross proceeds of approximately $6.0 million. Simultaneously with the closing of the Over-Allotment on April 13, 2021, we consummated the second closing of the Private Placement, resulting in the purchase of an aggregate of an additional 28,750 Private Placement Shares by the Original Sponsor, generating gross proceeds to the Company of $287,500.
Upon the closing of the Initial Public Offering, the Over-Allotment, and the Private Placements, $214.4 million ($10.00 per share) of the net proceeds of the sale of the Public Shares in the Initial Public Offering and of the Private Placement Shares in the Private Placement were placed in a trust account (“Trust Account”), located in the United States with Continental Stock Transfer & Trust Company acting as trustee, and were originally invested in United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act that invest only in direct U.S. government treasury obligations and later moved to cash demand accounts, until the earlier of (i) the completion of a Business Combination and (ii) the distribution of the Trust Account as described below.
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Our management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of Private Placement Shares, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that we will be able to complete a Business Combination successfully. We must complete one or more initial Business Combinations having an aggregate fair market value of at least 80% of the assets held in the Trust Account (excluding the deferred underwriting commissions and taxes payable on income earned on the Trust Account) at the time of the agreement to enter into the initial Business Combination. However, we 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 a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act.
If we are unable to complete a Business Combination by January 1, 2024, we 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 our income taxes, if any (less up to $100,000 of interest to pay dissolution expenses), divided by the number of the then-outstanding Public Shares, which redemption will completely extinguish Public Shareholders’ rights as shareholders (including the right to receive further liquidation distributions, if any); and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining shareholders and the board of directors, liquidate and dissolve, subject in the case of clauses (ii) and (iii) to the Company’s obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law.
On March 31, 2023, the Company held its extraordinary general meeting of shareholders at which the shareholders approved an amendment to the Company’s Amended and Restated Memorandum and Articles of Association to extend the date by which the Company must consummate a Business Combination from April 1, 2023 (the date which was 24 months from the closing date of the Company’s Initial Public Offering) to January 1, 2024 (the date which is 33 months from the closing date of the Initial Public Offering).
On March 31, 2023, the Original Sponsor sold up to 4,854,375 Class B ordinary shares of the Company to the New Sponsor, which became the Company’s sponsor by assuming the rights and obligations of the Original Sponsor to the Company.
Liquidity and Going Concern
As of June 30, 2023, we had approximately $25,000 in cash and a working capital deficit of approximately $1,020,000.
The Company’s liquidity needs to date have been satisfied through $25,000 paid by the Original Sponsor to cover certain expenses in exchange for the issuance of the Founder Shares, a loan of approximately $81,000 from the Original Sponsor pursuant to the Note (as defined in Note 4), and the proceeds from the consummation of the Private Placement not held in the Trust Account of $2.5 million (net of a required reimbursement from the underwriter). The Company repaid the Note in full on April 5, 2021. No additional borrowing is available under the Note. In addition, in order to finance transaction costs in connection with a Business Combination, the Original Sponsor, the New Sponsor, any of their affiliates, or certain of the Company’s officers and directors may, but are not obligated to, provide the Company Working Capital Loans (as defined in Note 4). As of June 30, 2023 and December 31, 2022, there was $0 and $0 advanced by the Sponsor on a non-convertible Working Capital Loans, respectively.
On August 7, 2023, the Company issued a promissory note to the Sponsor in an amount up to $1,500,000, of $668,000 had previously been advanced by the Sponsor, and is recorded in the unaudited condensed financial statements. The note accrues no interest and is payable upon the consummation of the initial business combination or the date of the liquidation of the Company.
Our management has determined that we may not have sufficient liquidity to meet our anticipated obligations through the earlier of our consummation of an initial Business Combination or our liquidation date. Over this time period, 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.
In connection with our assessment of going concern considerations in accordance with FASB Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” our management has determined that the liquidity issue and the mandatory liquidation and subsequent dissolution raises substantial doubt about our 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 1, 2024. The unaudited condensed financial statements do not include any adjustment that might be necessary if we are unable to continue as a going concern. We plan to complete a Business Combination prior to the mandatory liquidation date.
Various social and political circumstances in the United States and around the world (including wars and other forms of conflict, including rising trade tensions between the United States and China, and other uncertainties regarding actual and potential shifts in the United States and foreign, trade, economic and other policies with other countries, terrorist acts, security operations and catastrophic events such as fires, floods, earthquakes, tornadoes, hurricanes and global health epidemics), may also contribute to increased market volatility and economic uncertainties or deterioration in the United States and worldwide. Specifically, the rising conflict between Russia and Ukraine, and resulting market volatility could adversely affect our ability to complete a Business Combination. In response to the conflict between Russia and Ukraine, the United States and other countries have imposed sanctions or other restrictive actions against Russia. Any of the above factors, including sanctions, export controls, tariffs, trade wars and other governmental actions, could have a material adverse effect on our ability to complete a Business Combination and the value of our securities.
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Management continues to evaluate the impact of these types of risks on the industry and has concluded that while it is reasonably possible that these types of risks could have a negative effect on our financial position, results of our operations and/or search for a target company, the specific impact is not readily determinable as of the date of these unaudited condensed financial statements. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Results of Operations
Our entire activity from inception to June 30, 2023 was for our formation and the Initial Public Offering, and subsequent to the Initial Public Offering, the search for a target for our initial Business Combination. We will not be generating any operating revenues until the closing and completion of our initial Business Combination.
For the three months ended June 30, 2023, we had net income of approximately $857,000, which consisted of approximately $1,291,000 in gain on marketable securities (net), dividends and interest, held in Trust Account, partially offset by approximately $434,000 in general and administrative expenses.
For the six months ended June 30, 2023, we had net income of approximately $2,095,000, which consisted of approximately $2,926,000 in gain on marketable securities (net), dividends and interest, held in Trust Account, partially offset by approximately $831,000 in general and administrative expenses.
For the three months ended June 30, 2022, we had net income of approximately $135,000, which consisted of approximately $170,000 in general and administrative expenses, and $305,000 in gain (loss) on marketable securities (net), dividends and interest, held in Trust Account.
For the six months ended June 30, 2022, we had a net loss of approximately $265,000, which consisted of approximately $179,000 in gain on marketable securities (net), dividends and interest, held in Trust Account, partially offset by approximately $444,000 in general and administrative expenses.
Contractual Obligations
Registration Rights
The holders of Founder Shares, Private Placement Shares, and Class A ordinary shares that may be issued upon conversion of Working Capital Loans were entitled to registration rights pursuant to a registration rights agreement signed upon consummation of the Initial Public Offering. These holders were entitled to make up to three demands, excluding short form demands, that we register such securities. In addition, these holders will have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of the initial Business Combination. We will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The underwriter was entitled to an underwriting discount of $0.20 per share, or $4.0 million in the aggregate, paid upon the closing of the Initial Public Offering. In addition, $0.35 per share, or approximately $7.0 million in the aggregate was deferred underwriting commissions to the underwriter.
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The underwriter partially exercised the over-allotment option and was entitled to an additional fee of approximately $755,000 (net of a required reimbursement from the underwriter), of which approximately $503,000 was for deferred underwriting commissions.
On February 14, 2023, the representative of the underwriters waived any rights to receive the deferred underwriting commissions.
Administrative Services Agreement
On March 29, 2021, we entered into that certain administrative services agreement (the “Administrative Services Agreement”) with the Original Sponsor pursuant to which, commencing on the date our securities were first listed on the New York Stock Exchange, we agreed to pay the Original Sponsor a total of $10,000 per month for office space, secretarial and administrative services. On March 31, 2023, pursuant to an assignment and assumption agreement, the Original Sponsor assigned the Administrative Services Agreement to the New Sponsor. Upon completion of the initial Business Combination or our liquidation, we will cease paying these monthly fees. During the three and six months ended June 30, 2023 and 2022, we incurred $30,000 and $60,000 in expenses for these services, respectively, which are included in administrative expenses-related party on the accompanying unaudited condensed statements of operations. No amount was due as of June 30, 2023 and December 31, 2022.
Critical Accounting Policies and Estimates
The preparation of unaudited condensed financial statements and related disclosures in conformity with accounting principles generally accepted in the United States 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 unaudited condensed financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following as our critical accounting policies:
Class A Ordinary Shares Subject to Possible Redemption
We account for our Class A ordinary shares subject to possible redemption (our Public Shares) in accordance with the guidance in ASC 480. Class A ordinary shares subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Conditionally redeemable Class A ordinary shares (including Class A ordinary shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, Class A ordinary shares are classified as shareholders’ equity. As part of the Private Placement, the Company issued 628,750 Private Placement Shares to the Original Sponsor. These Private Placement Shares will not be transferable, assignable or salable until 30 days after the completion of our initial Business Combination. They are also considered non-redeemable and are presented as permanent equity in the Company’s condensed balance sheets. On December 30, 2022, the Sponsor unconditionally and irrevocably forfeited all 628,750 Private Placement Shares to the Company for no value and the Company cancelled the Private Placement Shares effective as of the same date. Our Class A ordinary shares sold in the Initial Public Offering feature certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, as of June 30, 2023 and December 31, 2022, 5,000,013 and 21,437,500 Class A ordinary shares, respectively, subject to possible redemption are presented as temporary equity, outside of the shareholders’ deficit section of the Company’s condensed balance sheets.
Under ASC 480-10S99, we have elected to recognize changes in the redemption value immediately as they occur and adjust the carrying value of the security to equal the redemption value at the end of each reporting period. This method would view the end of the reporting period as if it were also the redemption date for the security. Effective upon the closing of the Initial Public Offering, the Company recognized the accretion from initial book value to redemption amount value. The change in the carrying value of redeemable Class A ordinary shares resulted in charges against additional paid-in capital and accumulated deficit. Subsequently, we recognized changes in the redemption value as an increase in redemption value of Class A ordinary shares subject to possible redemption as reflected on the accompanying unaudited condensed statements of changes in shareholders’ deficit.
Investments Held in the Trust Account
Our portfolio of investments is comprised of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or investments in money market funds that invest in U.S. government securities and generally have a readily determinable fair value, or a combination thereof. When our investments held in the Trust Account are comprised of U.S. government securities, the investments are classified as trading securities. When our investments held in the Trust Account are comprised of money market funds, the investments are recognized at fair value. Trading securities and investments in money market funds are presented on the condensed balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these securities are included in gain on marketable securities (net), dividends and interest, held in Trust Account in the accompanying unaudited condensed statements of operations. The estimated fair values of investments held in the Trust Account are determined using available market information.
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Offering Costs Associated with the Initial Public Offering
Offering costs consisted of legal, accounting, underwriting fees and other costs incurred through the balance sheet date that were directly related to the Initial Public Offering and that were charged against the carrying value of the Class A ordinary shares subject to possible redemption upon the completion of the Initial Public Offering in April 2021.
Net Income (Loss) Per Ordinary Share
We comply with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” We have two classes of shares, which are referred to as Class A ordinary shares and Class B ordinary shares. Income and losses are shared pro rata between the two classes of shares, which assumes a Business Combination as the most likely outcome. Net income (loss) per ordinary share is calculated by dividing the net income (loss) by the weighted average shares of ordinary shares outstanding for the respective period.
At June 30, 2023 and December 31, 2022, we did not have any dilutive securities and other contracts that could potentially be exercised or converted into ordinary shares and then share in our earnings. As a result, diluted net income (loss) per ordinary share is the same as basic net income (loss) per ordinary share for the three and six months ended June 30, 2023 and 2022. Accretion associated with the redeemable Class A ordinary shares is excluded from earnings per share as the redemption value approximates fair value.
Recent Accounting Pronouncements
Our management does not believe that any recently issued, but not yet effective, accounting standards updates, if currently adopted, would have a material effect on the accompanying unaudited condensed financial statements.
JOBS Act
The Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an “emerging growth company” and under the JOBS Act are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, the unaudited condensed financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis) and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our Initial Public Offering or until we are no longer an “emerging growth company,” whichever is earlier.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were effective at June 30, 2023.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities.
(a) Sales of Unregistered Securities – Not Applicable.
(b) Use of Proceeds - Not Applicable.
(c) Issuer Purchases of Securities
On March 31, 2023, the Company held its extraordinary general meeting of shareholders at which the shareholders approved an amendment to the Company’s Amended and Restated Memorandum and Articles of Association to extend the date by which the Company must consummate a Business Combination from April 1, 2023 (the date which was 24 months from the closing date of the Company’s Initial Public Offering) to January 1, 2024 (the date which is 33 months from the closing date of the Initial Public Offering) (the “Charter Amendment”). In connection with the shareholder vote to approve the Charter Amendment, 16,437,487 Public Shares were redeemed at approximately $10.23 per share, resulting in a reduction of approximately $168,236,768 in the amount held in the Trust Account.
The following table contains monthly information about the repurchases of our equity securities for the three months ended June 30, 2023:
| Period | (a) Total number of shares (or units) purchased | (b) Average price paid per share (or unit) | (c) Total number of shares (or units) purchased as part of publicly announced plans or programs | (d) Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs | ||||||||||||
| April 1 – April 30, 2023 | 16,437,487 | $ | 10.23 | — | — | |||||||||||
| May 1 – May 31, 2023 | — | — | — | — | ||||||||||||
| June 1 – June 30, 2023 | — | — | — | — | ||||||||||||
Item 3. Defaults upon Senior Securities
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
On August 7, 2023, the Company issued a promissory note to the Sponsor in an amount up to $1,500,000, of which $668,000 had previously been advanced by the Sponsor, and is recorded in the unaudited condensed financial statements. The note accrues no interest and is payable upon the consummation of the initial business combination or the date of the liquidation of the Company.
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Item 6. Exhibits.
| * | Furnished herewith. |
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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| Date: August 11, 2023 | By: | /s/ Thomas Hennessy |
| Name: | Thomas Hennessy | |
| Title: | Chief Executive Officer | |
| (Principal Executive Officer) | ||
| Date: August 11, 2023 | By: | /s/ Nicholas Geeza |
| Name: | Nicholas Geeza | |
| Title: | Chief Financial Officer | |
| (Principal Financial and Accounting Officer) | ||
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