References to the "Company," "us," "our" or "we" refer to Cartica Acquisition
Corp. The following discussion and analysis of our financial condition and
results of operations should be read in conjunction with our audited financial
statements and related notes included herein.
Cautionary Note Regarding Forward-Looking Statements
All statements other than statements of historical fact included in this Report
including, without limitation, statements in this section regarding our
financial position, business strategy and the plans and objectives of management
for future operations, are forward- looking statements. When used in this
Report, words such as "anticipate," "believe," "estimate," "expect," "intend"
and similar expressions, as they relate to us or our management, identify
forward-looking statements. Such forward-looking statements are based on the
beliefs of our management, as well as assumptions made by, and information
currently available to, the our management. Actual results could differ
materially from those contemplated by the forward-looking statements as a result
of certain factors detailed in our filings with the SEC. All subsequent written
or oral forward-looking statements attributable to us or persons acting on our
behalf are qualified in their entirety by this paragraph.
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the financial statements and the
notes thereto contained elsewhere in this Report.
Overview
We incorporated in the Cayman Islands on February 3, 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. Our sponsor is Cartica Acquisition Partners, LLC. The registration
statement for our IPO was declared effective on January 4, 2022. On January 7,
2022, we consummated our IPO of 23,000,000 units, including 3,000,000 additional
units to cover over-allotments, at $10.00 per unit, generating gross proceeds of
$230.0 million.
Simultaneously with the closing of the IPO, the Company completed the private
sale of an aggregate of 15,900,000 warrants ("Private Placement Warrants") to
the sponsor at a purchase price of $1.00 per Private Placement Warrant,
generating gross proceeds to the Company of $15,900,000.
At the closing of the IPO, management has agreed that an amount equal to at
least $10.30 per unit sold in the IPO, including proceeds from the sale of the
Private Placement Warrants, will be held in a Trust Account, located in the
United States 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 selected by the Company meeting certain 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
distribution of the funds held in the Trust Account.
Our management has broad discretion with respect to the specific application of
the net proceeds of our IPO and the sale of the Private Placement Warrants,
although substantially all of the net proceeds are intended to be applied
generally toward consummating our initial business combination.
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We have until 18 months from the closing of our IPO, or July 7, 2023, or during
one of the two three-month periods by which we may extend such deadline, without
holders of Public Shares being entitled to vote or redeem their shares in
connection with such extensions, if our sponsor or any of its affiliates or
designees pays an additional $0.10 per Public Share into the Trust Account in
respect of each such extension period (for a total of up to 24 months to
complete a business combination) or a shareholder vote to amend our amended and
restated memorandum and articles of association, to complete a business
combination (the "Combination Period"). If we have not completed a business
combination within the Combination Period, 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 its tax obligations
(less taxes payable and up to $100,000 of interest to pay dissolution expenses
and which interest shall be net of taxes payable), divided by the number of then
issued and 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.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities from February 3, 2021 (inception) through December 31, 2022
were organizational activities, those necessary to prepare for the IPO and
identifying a target company for a Business Combination. We do not expect to
generate any operating revenues until after the completion of our Business
Combination. We generate non-operating income in the form of interest income on
marketable securities held in the Trust Account. We incur expenses as a result
of being a public company (for legal, financial reporting, accounting and
auditing compliance), as well as for due diligence expenses.
For the year ended December 31, 2022, we had a net income of $12,537,322, which
consists of change in fair value of warrant liabilities of $11,897,000 and
interest income on marketable securities held in the Trust Account of
$3,213,631, offset by operating and formation costs of $2,194,966 and
transaction costs of $378,343.
For the period from February 3, 2021 (inception) to December 31, 2021, we had a
net loss of $268,389, which consisted of formation and operating costs.
Liquidity and Capital Resources
On January 7, 2022, we completed the sale of 23,000,000 Units at a price of
$10.00 per Unit, generating gross proceeds to the Company of $230,000,000.
Simultaneously with the closing of the IPO, we completed the private sale of an
aggregate of 15,900,000 Private Placement Warrants at a purchase price of $1.00
per Private Placement Warrant, generating gross proceeds to the Company of
$15,900,000.
For the year ended December 31, 2022, cash used in operating activities was
$2,695,816. Net income of $12,537,322 was affected by a change in the fair value
of warrant liabilities of $11,897,000, interest earned on marketable securities
held in the Trust Account of $3,213,631 and transaction costs of $378,343.
Changes in operating assets and liabilities used $500,850 of cash for operating
activities.
For the period from February 3, 2021 (inception) to December 31, 2021, cash used
in operating activities was $13,149. Net loss of $268,389 was affected by
changes in operating assets and liabilities which provided $255,240 of cash for
operating activities.
As of December 31, 2022, we had marketable securities held in the Trust Account
of $240,113,631 (including $3,213,631 of interest income) consisting of U.S.
Treasury Bills with a maturity of 185 days or less. We may withdraw interest
from the Trust Account to pay taxes, if any. We intend to use substantially all
of the funds held in the Trust Account, including any amounts representing
interest earned on the Trust Account (less income taxes payable), to complete
our Business Combination. To the extent that our share capital or debt is used,
in whole or in part, as consideration to complete our Business Combination, the
remaining proceeds held in the Trust Account will be used as working capital to
finance the operations of the target business or businesses, make other
acquisitions and pursue our growth strategies.
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As of December 31, 2022, we had cash of $1,081,479. We intend to use the funds
held outside the Trust Account primarily to identify and evaluate target
businesses, perform business due diligence on prospective target businesses,
travel to and from the offices, plants or similar locations of prospective
target businesses or their representatives or owners, review corporate documents
and material agreements of prospective target businesses, structure, negotiate
and complete a Business Combination.
In order to fund working capital deficiencies or finance transaction costs in
connection with a Business Combination, the Sponsor, or certain of our officers
and directors or their affiliates may, but are not obligated to, loan us funds
as may be required (the "Working Capital Loans"). If we complete a Business
Combination, we will repay such loaned amounts. In the event that a Business
Combination does not close, we may use a portion of the working capital held
outside the Trust Account to repay such loaned amounts but no proceeds from our
Trust Account would be used for such repayment. Up to $2,000,000 of such loans
may be convertible into warrants at a price of $1.00 per warrant, at the option
of the lender. The warrants would be identical to the Private Placement
Warrants. As of December 31, 2022 and 2021, we had no outstanding borrowings
under the Working Capital Loans.
Going Concern
We have until July 7, 2023, or at the end of the applicable Extension Period, to
consummate an initial business combination. It is uncertain that we will be able
to consummate an initial business combination by July 7, 2023, or at the end of
the applicable Extension Period. If an initial business combination is not
consummated by the liquidation date, there will be a mandatory liquidation and
subsequent dissolution. Additionally, it is uncertain that we will have
sufficient liquidity to fund the working capital needs of the Company through
July 7, 2023, at the end of the applicable Extension Period, or through
twelve months from the issuance of this report. Management has determined that
the liquidity condition through 12 months from the issuance of this report and
mandatory liquidation, should an initial business combination not occur, and
potential subsequent dissolution raise 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 we be required to liquidate after
July 7, 2023, or at the end of the applicable Extension Period.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of December 31, 2022. We do not participate in
transactions that create relationships with unconsolidated entities or financial
partnerships, often referred to as variable interest entities, which would have
been established for the purpose of facilitating off-balance sheet arrangements.
We have not entered into any off-balance sheet financing arrangements,
established any special purpose entities, guaranteed any debt or commitments of
other entities, or purchased any non-financial assets.
Contractual Obligations
On January 4, 2022, we entered into an agreement to pay our Sponsor an aggregate
$930,000 over eighteen months beginning at the closing of the IPO, for the
following administrative support expenses: (i) cash compensation to Mr. Goel,
our Chief Executive Officer, in the form of an annual salary of $312,000;
(ii) cash compensation to Mr. Coad, our Chief Operating Officer and Chief
Financial Officer, in the form of an annual salary of $200,000; and (iii) $9,000
per month for office space, utilities and research, analytical, secretarial and
administrative support, which the Sponsor is expected to source principally from
Cartica Management, LLC ("Cartica Management"). In addition, at the closing of
the IPO, we paid the Sponsor an aggregate amount of $601,167 of which $549,000
represented compensation and bonuses paid to Mr. Goel and Mr. Coad for their
services through the closing of the IPO and $51,667 represented a prepayment of
administrative support expenses for January 2022, to be amortized over the
service period. Upon completion of a Business Combination or our liquidation, we
will cease paying these amounts (in the case of the officer compensation, after
30 days' notice). As of December 31, 2021 we had accrued $238,000 of officer
compensation payable to the Sponsor under the administrative support agreement.
For the year ended December 31, 2022, we incurred $931,500 in fees for these
services and paid $1,169,500 of fees for these services.
We 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, if any, at the IPO
price less the underwriting discounts and commissions. As of January 7, 2022,
the over-allotment was fully exercised.
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The underwriters received a cash underwriting discount of $0.20 per Unit, or
$4,600,000 in the aggregate (which included an additional $600,000 received
pursuant to the full exercise of the over-allotment option), which was paid at
closing of the IPO. In addition, the underwriters are entitled to a deferred fee
of $0.35 per Unit, or $8,050,000 in the aggregate (which included an additional
$1,050,000 received pursuant to the full exercise of the over-allotment option).
The deferred fee will become payable to the underwriters from the amounts held
in the Trust Account solely in the event that the Company completes a Business
Combination, subject to the terms of the underwriting agreement.
We entered into a forward purchase agreement with Cartica Investors, LP and
Cartica Investors II, LP, two private funds that are affiliates of Cartica
Management and the Sponsor (the "Cartica Funds"), pursuant to which the Cartica
Funds agreed to subscribe for an aggregate of up to 3,000,000 forward purchase
shares for $10.00 per share, or up to $30,000,000 in the aggregate, in a private
placement to close substantially concurrently with the closing of our initial
Business Combination, subject to approval at such time by the Cartica Management
investment committee. On October 13, 2022, we were advised by Cartica Management
that the Cartica Funds will be liquidated in the first half of 2023. On March
14, 2023, we received a written notice from Cartica Management advising us that
the investment committee of Cartica Management has determined that it will not
approve the purchase of any forward purchase shares and therefore the Cartica
Funds will not purchase any of the forward purchase shares in connection with
the initial business combination or otherwise. As a result, we may lack
sufficient funds to consummate the initial business combination.
Critical Accounting Estimates
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and income and expenses
during the periods reported. Actual results could materially differ from those
estimates. We have identified the following critical accounting estimates:
Warrant Liabilities
A critical accounting estimate made in our financial statements is the estimated
fair value of our warrant liabilities. The fair value of our financial assets
and liabilities reflects management's estimate of amounts that we would have
received in connection with the sale of the assets or paid in connection with
the transfer of the liabilities in an orderly transaction between market
participants at the measurement date. In connection with measuring the fair
value of its assets and liabilities, we seek to maximize the use of observable
inputs (market data obtained from independent sources) and to minimize the use
of unobservable inputs (internal assumptions about how market participants would
price assets and liabilities). The following fair value hierarchy is used to
classify assets and liabilities based on the observable inputs and unobservable
inputs used in order to value the assets and liabilities:
Level 1, Valuations based on unadjusted quoted prices in active markets for
identical assets or liabilities that the Company has the ability to access.
? Valuation adjustments and block discounts are not being applied. Since
valuations are based on quoted prices that are readily and regularly available
in an active market, valuation of these securities does not entail a
significant degree of judgment.
Level 2, Valuations based on (i) quoted prices in active markets for similar
assets and liabilities, (ii) quoted prices in markets that are not active for
? identical or similar assets, (iii) inputs other than quoted prices for the
assets or liabilities, or (iv) inputs that are derived principally from or
corroborated by market through correlation or other means.
? Level 3, Valuations based on inputs that are unobservable and significant to
the overall fair value measurement.
As of December 31, 2022, we had 27,400,000 warrants issued and outstanding.
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Ordinary Shares Subject to Possible Redemption
We account for our ordinary shares subject to possible redemption in accordance
with the guidance in Accounting Standards Codification ("ASC") Topic 480
"Distinguishing Liabilities from Equity." Ordinary shares subject to mandatory
redemption are classified as a liability instrument and measured at fair value.
Conditionally redeemable ordinary shares (including ordinary shares that feature
redemption rights that are either within the control of the holder or subject to
redemption upon the occurrence of uncertain events not solely within our
control) are classified as temporary equity. At all other times, ordinary shares
are classified as shareholders' equity. Our ordinary shares feature certain
redemption rights that are considered to be outside of our control and subject
to occurrence of uncertain future events. Accordingly, ordinary shares subject
to possible redemption are presented at redemption value as temporary equity,
outside of the shareholders' deficit section of our balance sheets.
Net Income (Loss) Per Ordinary 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. We
apply the two-class method in calculating earnings per share. Accretion
associated with the redeemable shares of Class A ordinary shares is excluded
from earnings per share as the redemption value approximates fair value. We
calculate our earnings per share to allocate net income (loss) pro rata to Class
A and Class B ordinary shares. This presentation contemplates a Business
Combination as the most likely outcome, in which case, both classes of ordinary
shares share pro rata in the income (losses) of our company.
Recent Accounting Standards
In August 2020, the FASB issued ASU 2020-06, Debt - "Debt with Conversion and
Other Options" (Subtopic 470-20) and "Derivatives and Hedging - Contracts in
Entity's Own Equity" (Subtopic 815-40) ("ASU 2020-06") to simplify accounting
for certain financial instruments. ASU 2020-06 eliminates the current models
that require separation of beneficial conversion and cash conversion features
from convertible instruments and simplifies the derivative scope exception
guidance pertaining to equity classification of contracts in an entity's own
equity. The new standard also simplifies the diluted earnings per share
calculation in certain areas and introduces additional disclosures for
convertible debt and freestanding instruments that are indexed to and settled in
an entity's own equity. ASU 2020-06 amends the diluted earnings per share
guidance, including the requirement to use the if-converted method for all
convertible instruments. 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 adoption of ASU 2020-06 is not expected to
have an impact on our 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 our financial statements.
Emerging Growth Company Status
The Company is an "emerging growth company," as defined in Section 2(a) of 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.
Further, 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 statement with
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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.
Factors That May Adversely Affect our Results of Operations
Our results of operations and our ability to complete an initial business
combination may be adversely affected by various factors that could cause
economic uncertainty and volatility in the financial markets, many of which are
beyond our control. Our business could be impacted by, among other things,
downturns in the financial markets or in economic conditions, increases in oil
prices, inflation, increases in interest rates, supply chain disruptions,
declines in consumer confidence and spending, the ongoing effects of the
COVID-19 pandemic, including resurgences and the emergence of new variants, and
geopolitical instability, such as the military conflict in Ukraine. We cannot at
this time fully predict the likelihood of one or more of the above events, their
duration or magnitude or the extent to which they may negatively impact our
business and our ability to complete an initial business combination.
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CARTICA ACQUISITION CORP 
