The following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with our audited financial
statements and the notes thereto which are included in "Item 8. Financial
Statements and Supplementary Data" of this Annual Report. Certain information
contained in the discussion and analysis set forth below includes
forward-looking statements. Our actual results may differ materially from those
anticipated in these forward-looking statements as a result of many factors,
including those set forth under "Special Note Regarding Forward-Looking
Statements," "Item 1A. Risk Factors" and elsewhere in this Annual Report.
Overview
We are a blank check company incorporated on December 29, 2020 as a Cayman
Islands exempted company 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 Disruptive Acquisition
Sponsor I, LLC, a Delaware limited liability company.
The registration statement for our initial public offering was declared
effective on March 23, 2021. On March 26, 2021, we consummated our initial
public offering of 25,000,000 units at $10.00 per unit, generating gross
proceeds of $250,000,000 and incurring offering costs of approximately
$14,750,000, inclusive of $8,750,000 in a deferred underwriting discount.
Substantially concurrently with the closing of our initial public offering, we
completed the private sale of 4,666,667 private placement warrants, at a price
of $1.50 per private placement warrant, to our sponsor, generating gross
proceeds of $7,000,000. On May 5, 2021, the underwriters purchased an additional
2,500,000 units pursuant to the partial exercise of their overallotment option.
The units were sold at an offering price of $10.00 per unit, generating
additional gross proceeds of $25,000,000. In connection with the partial
exercise of the overallotment option, our sponsor purchased an additional
333,333 private placement warrants at $1.50, which generated an additional
$500,000 in gross proceeds.
Following our initial public offering, the partial exercise of the overallotment
option and the related sales of the private placement warrants described above,
a total of $275,000,000 was placed in the trust account and was invested in
permitted U.S. "government securities" within the meaning of Section 2(a)(16) of
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. In total, we incurred $15,712,871 in transaction costs, including
$5,500,000 of an underwriting discount, $9,625,000 of a deferred underwriting
discount and $587,871 of other offering costs.
On February 14, 2023, we held the Extraordinary Meeting. At the Extraordinary
Meeting, our shareholders approved, among other things, an amendment to our
amended and restated memorandum and articles of association to extend the date
that we have to consummate an initial business combination from March 26, 2023
to March 26, 2024 and (iii) such earlier date as shall be determined by our
board of directors and publicly announced by us. In connection with the
shareholders' vote at the Extraordinary Meeting, the holders of 25,790,900 Class
A ordinary shares properly exercised their right to redeem their shares for cash
at a redemption price of approximately $10.20 per share, for an aggregate
redemption amount of $263,071,273.79.
Our management has broad discretion with respect to the specific application of
the net proceeds from our initial public offering and the sale of the private
placement warrants, although substantially all of the net proceeds are intended
to be applied generally toward consummating a business combination.
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We will only have until March 26, 2024 (as such period may be further extended
pursuant to a shareholder vote) to complete our initial business combination. If
we have not completed our initial business combination within this time frame,
we will (i) cease all operations except for the purpose of winding up, (ii) as
promptly as reasonably possible, but not more than 10 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 (less taxes payable and up to $100,000 of
interest to pay dissolution expenses), divided by the number of then-outstanding
public shares, which redemption will completely extinguish public shareholders'
rights as shareholders (including the right to receive further liquidation
distributions, if any), subject to applicable law, and (iii) as promptly as
reasonably possible following such redemption, subject to the approval of our
remaining shareholders and our board of directors, liquidate and dissolve,
subject, in the case of clauses (ii) and (iii), to our obligations under Cayman
Islands law to provide for claims of creditors and in all cases subject to the
other requirements of applicable law. There will be no redemption rights or
liquidating distributions with respect to our warrants, which will expire
worthless if we do not complete our initial business combination within the
allotted period.
We expect to continue to incur significant costs in the pursuit of our
acquisition plans. We cannot assure you that our plans to complete a business
combination will be successful.
Liquidity and Capital Resources
As of December 31, 2022, we had cash outside the trust account of $28,039
available for working capital needs. 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, and structure, negotiate and complete an initial
business combination. All remaining cash held in the trust account is generally
unavailable for its use, prior to an initial business combination, and is
restricted for use either in a business combination or to redeem ordinary
shares. As of December 31, 2022, none of the amount in the trust account was
available to be withdrawn as described above.
Through December 31, 2022, our liquidity needs were satisfied through receipt of
$25,000 from the sale of the founder shares and the remaining net proceeds from
our initial public offering and the sale of the private placement warrants.
On November 15, 2021, we issued an unsecured promissory note in the amount of up
to $250,000 to an affiliate of our sponsor. The proceeds of the note, which may
be drawn down from time to time until we consummate our initial business
combination, will be used for general working capital purposes. The note bears
no interest and is payable in full upon the earlier to occur of (i) twenty-four
(24) months from the closing of our initial public offering (or such later date
as may be extended in accordance with the terms of our amended and restated
memorandum and articles of association) or (ii) the consummation of our initial
business combination. A failure to pay the principal within five business days
of the date specified above or the commencement of a voluntary or involuntary
bankruptcy action shall be deemed an event of default, in which case the note
may be accelerated. On April 12, 2022, we amended and restated the note in its
entirety to increase the note's principal amount to $500,000. On August 18,
2022, we further amended and restated the Note to increase the Note's principal
amount to $750,000. As of December 31, 2022 and 2021, we had $750,000 and
$77,000, respectively, in borrowings outstanding under the Note. On April 17,
2023, we again amended and restated the Note to increase its principal amount to
$1,500,000.
Until consummation of our business combination, we will be using the funds not
held in the trust account, funds available to us under the Note, and any
additional Working Capital Loans (as defined in Note 5 to the financial
statements included herein) from our initial shareholders, officers and
directors, or their respective affiliates (which is described in Note 5 to the
financial statements included herein), for identifying and evaluating
prospective acquisition candidates, performing business due diligence on
prospective target businesses, traveling to and from the offices, plants or
similar locations of prospective target businesses, reviewing corporate
documents and material agreements of prospective target businesses, selecting
the target business to acquire and structuring, negotiating and consummating our
business combination.
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If our estimates of the costs of undertaking in-depth due diligence and
negotiating an initial business combination are less than the actual amounts
necessary to do so, we may have insufficient funds available to operate our
business prior to the consummation of our initial business combination and may
need to raise additional capital, e.g., through loans from our Sponsor,
officers, directors or third parties. If we are unable to raise additional
capital, we may be required to take additional measures to preserve liquidity,
which could include, but not necessarily be limited to, curtailing operations,
suspending the pursuit of our business plan and reducing overhead expenses. We
cannot provide any assurance that new financing will be available to us on
commercially acceptable terms, if at all. We cannot assure you that our plans to
consummate an initial business combination before March 26, 2024 (absent any
further extensions of such period with shareholder approval) will be successful.
In addition, we only have until March 26, 2024 (as such period may be further
extended pursuant to a shareholder vote) to complete our initial business
combination. If we have not completed our initial business combination within
this 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 Class A ordinary 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 (less taxes
payable and up to $100,000 of interest to pay dissolution expenses), divided by
the number of then outstanding public shares, which redemption will completely
extinguish public shareholders' rights as shareholders (including the right to
receive further liquidation distributions, if any), subject to applicable law,
and (iii) as promptly as reasonably possible following such redemption, subject
to the approval of our remaining shareholders and our board of directors,
liquidate and dissolve, and subject to our obligations under Cayman Islands law,
in the case of clauses (ii) and (iii), provide for claims of creditors and in
all cases subject to the other requirements of applicable law. There will be no
redemption rights or liquidating distributions with respect to our warrants,
which will expire worthless if we do not complete our initial business
combination within the period.
Management has determined that we could have insufficient liquidity to meet our
anticipated obligations for at least twelve months after the financial
statements are available to be issued due to recurring operating losses and
negative cash utilized in operating activities. We will need to raise additional
capital through loans or additional investments from our Sponsor, shareholders,
officers, directors or third parties as needed. Our officers, directors and
Sponsor may, but are not obligated to, loan us funds, from time to time or at
any time, in whatever amount they deem reasonable in their sole discretion, to
meet our working capital needs. Accordingly, we may not be able to obtain
additional financing. We cannot provide any assurance that new financing will be
available to us on acceptable terms, if at all. These conditions raise
substantial doubt about our ability to continue as a going concern.
In connection with our assessment of going concern considerations in accordance
with FASB ASC Topic 205-40, "Presentation of Financial Statements-Going
Concern," management has also determined that the mandatory liquidation date and
subsequent dissolution raises substantial doubt about our ability to continue as
a going concern. If we are unable to complete our initial business combination
by March 26, 2024 (unless such a period is further extended as described
herein), then we will cease all operations except for the purpose of
liquidating. No adjustments have been made to the carrying amounts of assets or
liabilities should we be required to liquidate after March 26, 2024.
Risks and Uncertainties
Our management continues to evaluate the impact of the COVID-19 pandemic and has
concluded that while it is reasonably possible that the virus could have a
negative effect on our financial position, results of operations and/or search
for a target company, the specific impact is not readily determinable as of the
date of these financial statements. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Results of Operations
All of our activities since inception through December 31, 2022 related to our
formation, the preparation for our initial public offering and, since the
closing of our initial public offering, the search for a prospective target of
our initial business combination.
We have neither engaged in any operations nor generated any revenues to date. We
will not generate any operating revenues until after completion of our initial
business combination. We will generate nonoperating income in the form of
interest income on cash and cash equivalents held in the trust account. We
expect to continue to incur increased expenses as a result of being a public
company (for legal, financial reporting, accounting and auditing compliance), as
well as for due diligence expenses.
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For the year ended December 31, 2022, we had $13,575,241 in net income. We
incurred $1,559,215 of formation and operating costs consisting mostly of
general and administrative expenses. We had income on the change in fair value
of our warrant liabilities of $11,167,645 and investment income of $3,966,811 on
our amounts held in the trust account. We expect our investment income following
the February 2023 Redemptions to be materially lower than during the year ended
December 31, 2022 given the lower amount held in the trust account.
For the year ended December 31, 2021, we had $4,833,241 in net income. We
incurred $2,011,214 of formation and operating costs consisting mostly of
general and administrative expenses. We had income on the change in fair value
of our warrant liabilities of $7,460,809 and investment income of $18,013 on our
amounts held in the trust account, offset by offering expenses related to
warrants of $634,367 for the year ended December 31, 2021.
Contractual Obligations
We do not have any long-term debt obligations, capital lease obligations,
operating lease obligations, purchase obligations or long-term liabilities,
other than as described below.
We entered into an administrative services agreement to pay our sponsor a
monthly fee of up to $15,000 for office space, utilities, secretarial and
administrative support services provided to us and other expenses and
obligations of our sponsor. We began incurring these fees on March 24, 2021 and
will continue to incur these fees monthly until the earlier of the completion of
a business combination and our liquidation.
On November 15, 2021, we issued an unsecured promissory note in the amount of up
to $250,000 to an affiliate of our sponsor. The proceeds of the note, which may
be drawn down from time to time until we consummate our initial business
combination, will be used for general working capital purposes. The note bears
no interest and is payable in full upon the earlier to occur of (i) twenty-four
(24) months from the closing of our initial public offering (or such later date
as may be extended in accordance with the terms of our amended and restated
memorandum and articles of association) or (ii) the consummation of our initial
business combination. A failure to pay the principal within five business days
of the date specified above or the commencement of a voluntary or involuntary
bankruptcy action shall be deemed an event of default, in which case the note
may be accelerated. As of December 31, 2022 and 2021, we had $750,000 and
$77,000, respectively, in borrowings outstanding under the note. On April 12,
2022, we amended and restated the note in its entirety to increase the note's
principal amount to $500,000. On August 18, 2022, we further amended and
restated the Note to increase the Note's principal amount to $750,000. On April
17, 2023, we again amended and restated the Note to increase its principal
amount to $1,500,000.
The underwriters of our initial public offering are entitled to a deferred
underwriting discount of $0.35 per unit, or $9,625,000 in the aggregate. The
deferred underwriting discount will become payable to the underwriters from the
amounts held in the trust account solely in the event that we complete a
business combination, subject to the terms of the underwriting agreement.
Critical Accounting Policies and Estimates
This management's discussion and analysis of our financial condition and results
of operations is based on our financial statements, which have been prepared in
accordance with GAAP. The preparation of these financial statements requires us
to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses and the disclosure of contingent assets and
liabilities in our financial statements. On an ongoing basis, we evaluate our
estimates and judgments, including those related to fair value of financial
instruments and accrued expenses. We base our estimates on historical
experience, known trends and events and various other factors that we believe to
be reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.
We have identified the following critical accounting policies:
Derivative Warrant Liabilities
We do not use derivative instruments to hedge exposures to cash flow, market or
foreign currency risks. We evaluate all of our financial instruments, including
our warrants, to determine if such instruments are derivatives or contain
features that qualify as embedded derivatives, pursuant to ASC 480 and ASC
815-15. The classification of derivative instruments, including whether such
instruments should be recorded as liabilities or as equity, is reassessed at the
end of each reporting period.
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We issued an aggregate of 13,000,000 warrants in connection with our initial
public offering and the simultaneous private placement, which are recognized as
derivative liabilities in accordance with ASC 815-40. In addition, we issued an
aggregate of 1,166,667 warrants in connection with the partial exercise of the
underwriters' overallotment option. Accordingly, we recognize the warrants as
liabilities at fair value and adjust the instruments to fair value at each
reporting period. The liabilities are subject to remeasurement at each balance
sheet date until exercised and any change in fair value is recognized in our
statements of operations. The fair value of the warrants issued in connection
with our initial public offering, the simultaneous private placement and the
partial exercise of the underwriters' overallotment option has been estimated
using Monte Carlo simulations at each measurement date.
Class A Ordinary Shares Subject to Possible Redemption
We account for our Class A ordinary shares subject to possible redemption in
accordance with the guidance in ASC Topic 480 "Distinguishing Liabilities from
Equity." Class A ordinary shares subject to mandatory redemption (if any) are
classified as a liability instrument and are measured at fair value.
Conditionally redeemable ordinary shares (including ordinary shares that feature
redemption rights that are either within the control of the holder or subject to
redemption upon the occurrence of uncertain events not solely within our
control) are classified as temporary equity. At all other times, Class A
ordinary shares are classified as shareholders' equity. Our Class A ordinary
shares feature certain redemption rights that are considered to be outside of
our control and subject to the occurrence of uncertain future events.
Accordingly, as of December 31, 2022 and 2021, 27,500,000 shares of Class A
ordinary shares subject to possible redemption are presented at redemption value
as temporary equity, outside of the shareholders' deficit section of our balance
sheets. In connection with the shareholders' vote at the Extraordinary Meeting,
the holders of 25,790,900 Class A ordinary shares properly exercised their right
to redeem their shares for cash at a redemption price of approximately $10.20
per share, for an aggregate redemption amount of $263,071,273.79. As a result,
there are currently 1,709,100 Class A ordinary shares outstanding.
Net Income (Loss) per Ordinary Share
We have two classes of shares, which are referred to as Class A ordinary shares
and Class B ordinary shares. Earnings and losses are shared pro rata between the
two classes of shares. The potential ordinary share for outstanding warrants to
purchase our shares were excluded from diluted earnings per share because the
warrants are contingently exercisable and the contingencies have not yet been
met. As a result, diluted net income (loss) per ordinary share is the same as
basic net loss per ordinary share for the periods.
Recent Accounting Pronouncements
In August 2020, FASB issued Accounting Standards Update ("ASU") 2020-06,
Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives
and Hedging-Contracts in Entity's Own Equity (Subtopic 815-40) to simplify
accounting for certain financial instruments. ASU 2020-06 eliminates the current
models that require separation of beneficial conversion and cash conversion
features from convertible instruments, and simplifies the derivative scope
exception guidance pertaining to equity classification of contracts in an
entity's own equity. The new standard also introduces additional disclosures for
convertible debt and freestanding instruments that are indexed to and settled in
an entity's own equity. ASU 2020-06 amends the diluted earnings per share
guidance, including the requirement to use the if-converted method for all
convertible instruments. ASU 2020-06 is effective January 1, 2024 and should be
applied on a full or modified retrospective basis, with early adoption permitted
beginning on January 1, 2021. We are currently assessing the impact, if any, it
would have on our financial position, results of operations or cash flows.
Our management does not believe that any recently issued, but not yet effective,
accounting standards if currently adopted would have a material effect on the
accompanying financial statements.
Off-Balance Sheet Arrangements
As of December 31, 2022 and 2021, we did not have any off-balance sheet
arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
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JOBS Act
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 have elected to delay the adoption of new or
revised accounting standards, and as a result, we may not comply with new or
revised accounting standards on the relevant dates on which adoption of such
standards is required for non-emerging growth companies. As a result, the
financial statements may not be comparable to companies that comply with new or
revised accounting pronouncements as of public company effective dates.
Additionally, we may elect to rely 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 independent
registered public accounting firm's attestation report on our system of internal
control 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 Public Company
Accounting Oversight Board regarding mandatory audit firm rotation or a
supplement to the report of the independent registered public accounting firm
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 our chief executive officer'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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