References to the "Company," "our," "us" or "we" refer to Northern Revival
Acquisition Corporation. The following discussion and analysis of the Company's
financial condition and results of operations should be read in conjunction with
the audited financial statements and the notes related thereto which are
included in "Item 8. Financial Statements and Supplementary Data" of this Annual
Report on Form 10-K. Certain information contained in the discussion and
analysis set forth below includes forward-looking statements. Our actual results
may differ materially from those anticipated in these forward-looking statements
as a result of many factors. 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 "Cautionary Note
Regarding Forward-Looking Statements and Risk Factor Summary," "Item 1A. Risk
Factors" and elsewhere in this Annual Report on Form 10-K.
Overview
We are a blank check company incorporated as a Cayman Islands exempted company
on November 4, 2020. We were incorporated for the purpose of effecting a merger,
share exchange, asset acquisition, share purchase, reorganization or similar
business combination with one or more businesses that we have not yet identified
("Initial Business Combination").
Our sponsor is Northern Revival Sponsor LLC, a Cayman Island limited liability
company which changed its name from Noble Rock Sponsor LLC (the "Sponsor"). The
registration statement for our Initial Public Offering was declared effective on
February 1, 2021. On February 4, 2021, we consummated the Initial Public
Offering of 24,150,000 units (the "Units" and, with respect to the Class A
ordinary shares included in the Units being offered, the "Public Shares"), which
includes 3,150,000 additional Units to cover over-allotments (the
"Over-Allotment Units"), at $10.00 per Unit, generating gross proceeds of $241.5
million, and incurring offering costs of approximately $14.4 million, net of
reimbursement from the underwriter. Of these offering costs, approximately $9.1
million and approximately $320,000 was for deferred underwriting commissions and
deferred legal fees, respectively.
Simultaneously with the closing of the Initial Public Offering, we consummated
the private placement ("Private Placement") of 4,553,334 warrants (each, a
"Private Placement Warrant" and collectively, the "Private Placement Warrants"),
at a price of $1.50 per Private Placement Warrant with our Sponsor, generating
gross proceeds of approximately $6.8 million.
Upon the closing of the Initial Public Offering and the Private Placement,
$241.5 million ($10.00 per Unit) of the net proceeds of the Initial Public
Offering and certain of the proceeds of the Private Placement were placed in a
trust account ("Trust Account") with Continental Stock Transfer & Trust Company
acting as trustee and invested in United States "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 of 1940, as amended, or
the Investment Company Act, which invest only in direct U.S. government treasury
obligations, as determined by us, until the earlier of: (i) the completion of an
Initial Business Combination and (ii) the distribution of the Trust Account as
described below.
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We intend to complete our Initial Business Combination using cash from the
remaining proceeds of the Initial Public Offering and the Private Placement of
the Private Placement Warrants, our capital stock, debt or a combination of
cash, stock and debt. The issuance of additional shares of our stock in a
business combination:
? may significantly dilute the equity interest of investors in this offering,
which dilution would increase if the anti-dilution provisions in the Class B
ordinary shares resulted in the issuance of Class A shares on a greater than
one-to-one basis upon conversion of the Class B ordinary shares;
? may subordinate the rights of holders of our ordinary shares if preferred stock
is issued with rights senior to those afforded our ordinary shares;
? could cause a change in control if a substantial number of shares of our
ordinary shares is issued, which may affect, among other things, our ability to
use our net operating loss carry forwards, if any, and could result in the
resignation or removal of our present officers and directors;
? may have the effect of delaying or preventing a change of control of us by
diluting the stock ownership or voting rights of a person seeking to obtain
control of us; and
? may adversely affect prevailing market prices for our Class A ordinary shares
and/or warrants.
Similarly, if we issue debt securities or otherwise incur significant debt to
bank or other lenders or owners of a target, it could result in:
? default and foreclosure on our assets if our operating revenues after an
Initial Business Combination are insufficient to repay our debt obligations;
? acceleration of our obligations to repay the indebtedness even if we make all
principal and interest payments when due if we breach certain covenants that
require the maintenance of certain financial ratios or reserves without a
waiver or renegotiation of that covenant;
? our immediate payment of all principal and accrued interest, if any, if the
debt security is payable on demand;
? our inability to obtain necessary additional financing if the debt security
contains covenants restricting our ability to obtain such financing while the
debt security is outstanding;
? our inability to pay dividends on our ordinary shares;
? using a substantial portion of our cash flow to pay principal and interest on
our debt, which will reduce the funds available for dividends on our ordinary
shares if declared, our ability to pay expenses, make capital expenditures and
acquisitions, and fund other general corporate purposes;
? limitations on our flexibility in planning for and reacting to changes in our
business and in the industry in which we operate;
? increased vulnerability to adverse changes in general economic, industry and
competitive conditions and adverse changes in government regulation;
? limitations on our ability to borrow additional amounts for expenses, capital
expenditures, acquisitions, debt service requirements, and execution of our
strategy; and
? other purposes and other disadvantages compared to our competitors who have
less debt.
If we are unable to complete an Initial Business Combination by September 4,
2023, or such earlier date as determined by the Company's Directors, (taking
into account the extension as described below, the "Combination Period"), we
will (1) cease all operations except for the purpose of winding up; (2) 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 (less
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 (3) 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 each case to our
obligations under Cayman Islands law to provide for claims of creditors and the
requirements of other applicable law.
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Recent Developments
Proposed Business Combination
On March 20, 2023, we entered into the Business Combination Agreement with our
Sponsor, Braiin and the Braiin Supporting Shareholders who collectively own 100%
of the outstanding ordinary shares of Braiin. Pursuant to the terms of the
Business Combination Agreement, a business combination between NRAC and Braiin
will be effected as a share exchange in which Braiin shareholders exchange 100%
of their Braiin Shares for a pro rata portion of Class A Ordinary Shares, par
value $0.0001 per share, of NRAC with an aggregate value of $190 million. The
number of shares to be issued will be based upon a per share value of $10.00.
The aggregate value is subject to adjustment up or down based upon certain
indebtedness and cash on hand of Braiin as set forth in its audited financial
statements. Prior to the consummation of the Business Combination, Braiin will
acquire PowerTec, an Australian distributor that supplies connectivity solutions
to individuals and businesses around the world. Following the Share Exchange,
Braiin will continue as a subsidiary of the Company, and the Company will change
its name to "Braiin Holdings." We refer to NRAC after giving effect to the
Business Combination, as "New Braiin."
Simultaneously with the execution of the Business Combination Agreement, NRAC
and Braiin entered into separate support agreements with the Braiin Supporting
Shareholders and the Sponsor pursuant to which the Braiin Supporting
Shareholders and the Sponsor have agreed to vote their Braiin shares and NRAC
shares, respectively, in favor of the Business Combination and against any
competing acquisition proposal, and not to solicit any competing acquisition
proposal. In addition, the Sponsor has agreed to surrender 1,500,000 NRAC
founder shares immediately prior to the closing of the Business Combination (the
"Closing") and to waive: (i) redemption rights with respect to its NRAC shares
in connection with the Business Combination, and (ii) the right to have any
working capital loans extended to NRAC converted into warrants.
Forward Purchase Agreement
On March 16, 2023, in connection with the Business Combination NRAC, Braiin and
Meteora entered into the Forward Purchase Agreement providing for the issue and
sale of up to 2,900,000 NRAC Class A Ordinary Shares. The Class A Ordinary
Shares that may be issued in connection with the Forward Purchase Agreement have
not been registered under the Securities Act in reliance on the exemption from
registration provided by Section 4(a)(2) of the Securities Act and/or Regulation
D promulgated thereunder.
Pursuant to the Forward Purchase Agreement, Meteora has agreed to make purchases
of Class A Ordinary Shares of NRAC: (a) in open-market purchases through a
broker after the date of NRAC's redemption deadline in connection with the vote
of NRAC shareholders to approve the Business Combination from holders of Class A
Ordinary Shares of NRAC, including those who elect to redeem Class A Ordinary
Shares and subsequently revoked their prior elections to redeem (the "Recycled
Shares") and (b) directly from NRAC, newly-issued Class A Ordinary Shares of
NRAC (the "Additional Shares" and, together with the Recycled Shares, the
"Subject Shares"). The aggregate total Subject Shares will be up to 2,900,000
(but not more than 9.9% of NRAC's Class A Ordinary Shares outstanding on a
post-transaction basis) (the "Maximum Number of Shares"). Meteora has agreed to
waive any redemption rights with respect to any Subject Shares in connection
with the Business Combination.
The Forward Purchase Agreement provides that no later than the earlier of (a)
one business day after the closing of the Business Combination and (b) the date
any assets from NRAC's trust account are disbursed in connection with the
Business Combination, the Combined Company will pay to Meteora, out of funds
held in its Trust Account, an amount (the "Prepayment Amount") equal to (x) the
per-share redemption price (the "Initial Price") multiplied by (y) the number of
Recycled Shares on the date of such prepayment less the Prepayment Shortfall.
The Prepayment Shortfall is equal to the lesser of (i) ten percent of the
product of (x) the Number of NRAC Class A Ordinary Shares multiplied by (y) the
Initial Price and (ii) $3,000,000.
Meteora may, at its discretion and at any time following the closing of the
Business Combination, provide an Optional Early Termination notice ("OET
Notice") and pay to the Combined Company the product of the "Reset Price" and
the number of NRAC's Class A Ordinary Shares listed on the OET Notice. The Reset
Price shall initially equal the Initial Price but shall be adjusted on the first
scheduled trading date of each two-week period commencing on the first week
following the 30th day after the closing of the Business Combination to the
lowest of (i) the current Reset Price, (ii) the Initial Price and (iii) the
volume weighted average price ("VWAP") of NRAC's Class A Ordinary Shares of the
prior two week period.
The Forward Purchase Agreement matures on the earlier to occur of (a) three
years after the closing of the Business Combination, (b) the date specified by
Meteora in a written notice delivered at Meteora's discretion if (i) the VWAP of
NRAC's Class A Ordinary Shares during 10 out of 30 consecutive trading days is
at or below $5.00 per Share, or (ii) the Shares are delisted from a national
securities exchange. At maturity, Meteora will be entitled to receive maturity
consideration in cash or shares. The maturity consideration will equal the
product of (1) (a) the Number of NRAC Class A Ordinary Shares less (b) the
number of Terminated Shares, multiplied by (2) $1.50 in the event of cash or, in
the event of NRAC Class A Ordinary Shares, $2.00; and $2.50, solely in the event
of a registration failure.
For further information regarding the Business Combination and the Forward
Purchase Agreement, See "Item 1. Business - Business Combination Agreement" and
"Item 1. Business - Certain Related Agreements - Forward Purchase Agreement."
42
Departure of certain officers and directors; name change and Class B conversion
On February 9, 2023, in accordance with the provisions of a binding agreement
that provides for the withdrawal or significant reduction in investment in the
Sponsor by certain existing investors and the resulting transfer of control of
the Sponsor: (i) Whitney Bower resigned as Chairman and Chief Executive Officer,
(ii) Peter Low resigned as Chief Financial Officer and director and (iii)
Michael Alter and David Lang resigned as independent directors, (iv) the board
appointed Aemish Shah as the Chairman and Chief Executive Officer and Manpreet
Singh as Chief Financial Officer and a director, and also appointed Joseph
Tonnos, David Tanzer and Asad Zafar to serve as directors, determining each of
Messrs. Tonnos, Tanzer and Zafar to be an independent director under the listing
rules of the Nasdaq Stock Market. We agreed to change our name in connection
with these changes. Mr. Tonnos served on the NRAC board of directors from
February 9, 2023 until his resignation on March 15, 2023. Such resignation was
not a result of disagreement with the Company on any matter relating to its
operations, policies or practices.
On March 16, 2023, we held our General Meeting for the purposes of considering
and voting upon: (i) a special resolution, to amend our charter to change the
name of the company from Noble Rock Acquisition Corporation to Northern Revival
Acquisition Corporation; and (ii) a special resolution, to amend the charter to
change certain provisions which restrict our Class B ordinary shares from
converting to Class A ordinary shares prior to the closing of the business
combination. Both the Name Change Proposal and Conversion Proposal were approved
by the shareholders at the General Meeting. The purpose of the Name Change
Proposal was to amend the name of the company as agreed in connection with the
departures of Messrs. Bower, Low, Alter and Lang. The purpose of the Conversion
Proposal was to remove restrictions contained in the charter in order to permit
the Class B ordinary shares to convert into Class A ordinary shares prior to the
closing of the business combination which will enable the company to meet
certain Nasdaq listing requirements. The holders of such shares will continue to
be subject to the same restrictions as the Class B ordinary shares before any
conversion, including, among others, certain transfer restrictions, waiver of
redemption rights and the obligation to vote in favor of a business combination
as described in the prospectus for our initial public offering.
Extension, redemptions and contributions
On January 27, 2023, we held an extraordinary general meeting of shareholders
where the shareholders approved a special resolution to amend our Amended and
Restated Memorandum and Articles of Association (the "Extension Amendment") to
extend the date by which the company may either (i) consummate a merger, share
exchange, asset acquisition, share purchase, reorganisation or similar business
combination, from February 4, 2023 to September 4, 2023 (such later date, the
"extended date") or such earlier date as determined by the board or (ii) cease
its operations, except for the purpose of winding up if it fails to complete an
initial business combination, and (iii) redeem all of the Class A ordinary
shares, par value $0.0001 per share, of the company, included as part of the
units sold in the company's Initial Public Offering that was consummated on
February 4, 2021 from February 4, 2023 to September 4, 2023 or such earlier date
as determined by the board.
In connection with the solicitation of proxies in connection with the Extension
Amendment, holders of 21,240,830 Class A ordinary shares of our then-outstanding
24,150,000 Class A ordinary shares outstanding with redemption rights, elected
to redeem their shares at a per share redemption price of approximately $10.17.
In connection with the solicitation of proxies in connection with the Conversion
Proposal, holders of 433,699 Class A ordinary shares of our then-outstanding
8,946,670 Class A ordinary shares outstanding with redemption rights, elected to
redeem their shares at a per share redemption price of approximately $10.33. On
March 28, 2023, the Company elected to permit one shareholder, at the
shareholder's request, to reverse their redemption as to 5,000 Class A ordinary
shares, resulting in a total of 428,699 redemptions in connection with the
solicitation of proxies in connection with the Conversion Proposal. On April 5,
2023, the Sponsor elected to convert 6,037,499 Class B ordinary shares into
Class A ordinary shares. Following such meetings, the redemptions related
thereto and the Sponsor's conversion of Class B ordinary shares into Class A
ordinary shares, there are a total of 8,517,971 ordinary shares issued and
outstanding, including (i) 8,517,970 Class A ordinary shares and (ii) 1 Class B
ordinary share outstanding. As of April 27, 2023, there was a total of
approximately $25.8 million million held in the trust account.
As previously disclosed in connection with the solicitation of proxies for the
Extension Proposal, the Sponsor has indicated that, it will contribute to the
Company as a loan (each loan being referred to herein as a "contribution") the
lesser of (i) $100,000 and (ii) an aggregate amount equal to $0.055 multiplied
by the number of public shares of the Company that are not redeemed, for each
month commencing on February 4, 2023 and on or prior to the fourth day of each
subsequent month, if applicable (each such month period an "extension period)
until the earlier of (x) the date of the extraordinary general meeting held in
connection with a shareholder vote to approve an Initial Business Combination
(y) the extended date and (z) the date that the board determines in its sole
discretion to no longer seek an Initial Business Combination. Each contribution
will be deposited in the trust account within three business days of the
beginning of the extended period which such contribution is for. The
contributions will be repayable by the company to the Sponsor upon consummation
of an Initial Business Combination. The Company's board of directors will have
the sole discretion whether to continue extending for additional extension
periods, and if the board determines not to continue extending for additional
months, the additional contributions will terminate. If this occurs, the Company
would wind up the Company's affairs and redeem 100% of the outstanding public
shares in accordance with the procedures set forth in the company's Amended and
Restated Memorandum and Articles of Association ("Charter"). The Sponsor
contributed to the Company as a loan the first, second and third deposits of
$100,000 each into the Trust Account on February 4, 2023, March 4, 2023 and
April 4, 2023.
43
Results of Operations
Our entire activity since November 4, 2020 (inception) through December 31, 2022
related to our formation, the preparation for the Public Offering, and since the
closing of the Public Offering, the search for a prospective 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 generate non-operating income
in the form of gains on investment (net), dividends and interest held in trust
account. We will 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.
For the year ended December 31, 2022, we had net income of approximately $8.4
million, which consisted of $6.4 million for a change in the fair value of
derivative warrant liabilities, approximately $3.5 million of income from
investments held in the Trust Account, offset by approximately $1.5 million of
general and administrative expenses.
For the year ended December 31, 2021, we had net income of approximately $9.4
million, which consisted of $11.5 million for a change in the fair value of
derivative warrant liabilities, approximately $26,000 of income from investments
held in the Trust Account, offset by approximately $769,000 of financing costs
and approximately $1.3 million of general and administrative expenses.
Liquidity and Going Concern
As of December 31, 2022, we had approximately $42,000 cash in our operating bank
account and working capital of approximately $2,000.
Through December 31, 2022, our liquidity needs had been satisfied through a
payment of $25,000 from our Sponsor to cover for certain expenses in exchange
for the issuance of the Founder Shares and the loan of $45,000 from our Sponsor
pursuant to the Note. Subsequent to the closing of the Initial Public Offering
and Private Placement, the proceeds from the Private Placement not held in the
Trust Account will be used to satisfy our liquidity. Including amounts borrowed
subsequent to December 31, 2020, we borrowed a total of approximately $195,000
through the Note and we repaid the Note in full on February 5, 2021. In
addition, in order to finance transaction costs in connection with an Initial
Business Combination, our Sponsor or an affiliate of our Sponsor, or certain of
our officers and directors may, but are not obligated to, provide us Working
Capital Loans. As of December 31, 2022 and 2021, there were no amounts
outstanding or any Working Capital Loans. Management intends to utilize Sponsor
support to continue meeting its obligations.
In connection with our assessment of going concern considerations in accordance
with FASB ASC Topic 205-40, "Presentation of Financial Statements - Going
Concern," we have until September 4, 2023, or such earlier date as determined by
our Directors to consummate an Initial Business Combination. It is uncertain
that we will be able to meet its obligations within the next 12 months or
consummate an Initial Business Combination by this time. If an Initial Business
Combination is not consummated by the end of the Combination Period, there will
be a mandatory liquidation and subsequent dissolution of the Company. Management
has determined that the liquidity condition and mandatory liquidation, should an
Initial Business Combination not occur, and potential 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 we be required to liquidate.
44
Related Party Transactions
Founder Shares
On November 11, 2020, the initial shareholders paid an aggregate of $25,000 for
certain expenses on our behalf in exchange for issuance of 5,750,000 Class B
ordinary shares (the "Founder Shares"). On February 1, 2021, we declared a stock
dividend with respect to the Class B ordinary shares such that 0.05 Class B
ordinary shares were issued for each share of Class B ordinary shares, resulting
in an aggregate of 6,037,500 Class B ordinary shares outstanding. The initial
shareholders agreed to forfeit up to an aggregate of 787,500 Founder Shares, on
a pro rata basis, to the extent that the option to purchase additional units was
not exercised in full by the underwriters, so that the Founder Shares would
represent 20% of our issued and outstanding shares after the Initial Public
Offering. On February 4, 2021, the underwriter fully exercised its
over-allotment option; thus, these 787,500 Founder Shares were no longer subject
to forfeiture.
The Initial Shareholders agreed not to transfer, assign or sell any of their
Founder Shares until the earlier to occur of (A) one year after the completion
of the Initial Business Combination or (ii) the date following the completion of
the Initial Business Combination on which we complete a liquidation, merger,
share exchange or other similar transaction that results in all of the
shareholders having the right to exchange their ordinary shares for cash,
securities or other property. Notwithstanding the foregoing, if the closing
price of Class A ordinary shares equals or exceeds $12.00 per share (as adjusted
for share sub-divisions, share capitalizations, reorganizations,
recapitalizations and the like) for any 20 trading days within any 30-trading
day period commencing at least 150 days after the Initial Business Combination,
the Founder Shares will be released from the lockup.
Private Placement Warrants
Simultaneously with the closing of the Initial Public Offering, we consummated
the Private Placement of 4,553,334 Private Placement Warrants, at a price of
$1.50 per Private Placement Warrant with our Sponsor, generating gross proceeds
of approximately $6.8 million.
Each whole Private Placement Warrant is exercisable for one whole share of Class
A ordinary shares at a price of $11.50 per share. A portion of the proceeds from
the sale of the Private Placement Warrants to our Sponsor was added to the
proceeds from the Initial Public Offering held in the Trust Account. If we do
not complete an Initial Business Combination within the Combination Period, the
Private Placement Warrants will expire worthless. The Private Placement Warrants
will be non-redeemable for cash and exercisable on a cashless basis so long as
they are held by our Sponsor or its permitted transferees.
Our Sponsor and our officers and directors agreed, subject to limited
exceptions, not to transfer, assign or sell any of their Private Placement
Warrants until 30 days after the completion of the Initial Business Combination.
Related Party Loans
On November 11, 2020, our Sponsor agreed to loan us up to $300,000 to be used
for the payment of costs related to the Initial Public Offering pursuant to a
promissory note (the "Note"). The Note was non-interest bearing, unsecured and
due upon the closing of the Initial Public Offering. As of December 31, 2020, we
borrowed $45,000 under the Note. As of February 4, 2021, we had a cumulative
borrowing of $195,000. We repaid the Note in full on February 5, 2021.
In addition, in order to finance transaction costs in connection with an Initial
Business Combination, our Sponsor, members of our founding team or any of their
affiliates may, but are not obligated to, loan us funds as may be required
("Working Capital Loans"). If we complete an Initial Business Combination, we
will repay the Working Capital Loans out of the proceeds of the Trust Account
released to us. Otherwise, the Working Capital Loans would be repaid only out of
funds held outside the Trust Account. In the event that an Initial Business
Combination does not close, we may use a portion of proceeds held outside the
Trust Account to repay the Working Capital Loans but no proceeds held in the
Trust Account would be used to repay the Working Capital Loans. The Working
Capital Loans would either be repaid upon consummation of an Initial Business
Combination, without interest, or, at the lenders' discretion, up to $1.5
million of such Working Capital Loans may be convertible into warrants of the
post Initial Business Combination entity at a price of $1.50 per warrant. The
warrants would be identical to the Private Placement Warrants. Except for the
foregoing, the terms of such Working Capital Loans, if any, have not been
determined and no written agreements exist with respect to such loans. As of
December 31, 2022 and 2021, we had no outstanding Working Capital Loans.
45
Administrative Support Agreement
Commencing on the date that our securities were first listed on Nasdaq through
the earlier of consummation of the Initial Business Combination and the
liquidation, we agreed to pay our Sponsor a total of $30,000 per month for
office space, administrative, financial and support services. For the years
ended December 31, 2022 and 2021, we incurred expenses under this agreement of
$360,000 and $330,000, respectively, included as general and administrative
expenses on the statements of operations. As of December 31, 2022 and 2021,
there was no amounts payable for these services.
In addition, our Sponsor, directors and officers, or any of their respective
affiliates, will be reimbursed for any out-of-pocket expenses incurred in
connection with activities on our behalf such as identifying potential target
businesses and performing due diligence on suitable Initial Business
Combinations. Our audit committee will review on a quarterly basis all payments
that were made by us to our Sponsor, directors, officers or any of their
affiliates. For the year ended December 31, 2022, we incurred approximately
$74,000 of reimbursable expenses to related party, included as general and
administrative expenses on the accompanying statement of operations. As of
December 31, 2022, approximately $65,000 of reimbursable expenses was paid to
related party and approximately $59,000 is payable and presented as due to
related party on the balance sheets. No expenses were incurred as of December
31, 2021.
Contractual Obligations
Registration Rights
The initial shareholders and holders of the Private Placement Warrants are
entitled to registration rights pursuant to a registration rights agreement. The
initial shareholders and holders of the Private Placement Warrants are entitled
to make up to three demands, excluding short form registration demands, that we
register such securities for sale under the Securities Act. In addition, these
holders have "piggy-back" registration rights to include their securities in
other registration statements filed by us. We will bear the expenses incurred in
connection with the filing of any such registration statements.
Underwriting Agreement
We granted the underwriters a 45-day option from the date of the prospectus to
purchase up to 3,150,000 additional Units at the Initial Public Offering price
less the underwriting discounts and commissions. On February 4, 2021, the
underwriter fully exercised its over-allotment option.
The underwriters were entitled to an underwriting discount of $0.20 per unit, or
approximately $4.8 million in the aggregate, paid upon the closing of the
Initial Public Offering. In addition, $0.375 per unit, or approximately $9.1
million in the aggregate will be payable to the underwriters for deferred
underwriting commissions. The deferred fee will become payable to the
underwriters from the amounts held in the Trust Account solely in the event that
we complete an Initial Business Combination, subject to the terms of the
underwriting agreement. In addition, the underwriters paid to us an amount equal
to 0.25% of the offering gross proceeds, or $603,750 in the aggregate to
reimburse certain expenses in connection with the Initial Public Offering.
Contingent Fee Arrangement
On August 4, 2022, we entered into an agreement with an independent third party
to provide sourcing and advisory services related to completing a successful
business combination. As consideration for the services to be rendered, we have
agreed to pay them a success fee of $2,415,000, payable only upon the completion
of a business combination. Any related expenses or out-of-pocket costs are borne
solely by the third party.
Deferred Legal Fees
We engaged a legal counsel firm for legal advisory services, and the firm agreed
to defer their fees in excess of $250,000 ("Deferred Legal Fees"). The deferred
fee will become payable in the event that we complete an Initial Business
Combination. As of December 31, 2022 and 2021, we recorded approximately $1.1
million and $605,000 in deferred legal fees, respectively.
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 United States generally accepted accounting principles. 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.
46
Investments held in 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 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 is included in
income on investments held in the Trust Account in the accompanying statement of
operations. The estimated fair values of investments held in the Trust Account
are determined using available market information.
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 Financial Accounting Standards Board ("FASB")
Accounting Standards Codification ("ASC") Topic 480 "Distinguishing Liabilities
from Equity ("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 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, at December 31, 2022 and 2021, 24,150,000 Class A ordinary
shares subject to possible redemption are presented as temporary equity, outside
of the shareholders' equity section of our balance sheets.
The Company recognizes changes in redemption value immediately as they occur and
adjusts the carrying value of the Class A ordinary shares subject to possible
redemption 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. Immediately upon the closing of the Initial
Public Offering, we recognized the remeasurement 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.
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
issued warrants to purchase ordinary shares, to determine if such instruments
are derivatives or contain features that qualify as embedded derivatives,
pursuant to ASC 480 and FASB ASC Topic 815, Derivatives and Hedging ("ASC 815"),
Embedded Derivatives ("ASC 815-15"). The classification of derivative
instruments, including whether such instruments should be recorded as
liabilities or as equity, is re-assessed at the end of each reporting period.
The warrants issued in connection with the Initial Public Offering (the "Public
Warrants") and the Private Placement Warrants are recognized as derivative
liabilities in accordance with ASC 815-40, Contracts in Entity's Own Equity
("ASC 815-40"). Accordingly, we recognize the warrant instruments as liabilities
at fair value and adjusts the instruments to fair value at each reporting
period. The liabilities are subject to re-measurement at each balance sheet date
until exercised, and any change in fair value is recognized in our statement of
operations. The fair value of the Public Warrants issued in connection with the
Initial Public Offering were initially measured at fair value using a Monte
Carlo simulation model. Subsequently, the fair value of the Public Warrants has
been determined based on the observable listed trading price for such warrants.
The fair value of the Private Placement Warrants was initially and subsequently
measured at fair value using a Black-Scholes Merton (BSM) model through
September 30, 2022. As of December 31, 2022, the Company determined the
difference between the Public Warrant and Private Warrant fair value would be de
minimus and therefore measured the Private Warrants by reference to the listed
trading price of the Public Warrants.
Offering Costs Associated with the Initial Public Offering
Offering costs consisted of legal, accounting, underwriting fees and other costs
incurred through the Initial Public Offering that were directly related to the
Initial Public Offering. Offering costs are allocated to the separable financial
instruments issued in the Initial Public Offering based on a relative fair value
basis, compared to total proceeds received. Offering costs associated with
warrant liabilities are expensed as incurred, presented as non-operating
expenses in the statement of operations. Offering costs associated with the
Class A ordinary shares were charged to the carrying value of the Class A
ordinary shares subject to possible redemption. We classify deferred
underwriting commissions as non-current liabilities as their liquidation is not
reasonably expected to require the use of current assets or require the creation
of current liabilities.
47
Net Income 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. Net income per ordinary share
is calculated by dividing the net income by the weighted average ordinary shares
outstanding for the respective period.
The calculation of diluted net income does not consider the effect of the
warrants underlying the Units sold in the Initial Public Offering and the
private placement warrants to purchase an aggregate of 11,775,540 shares of
Class A ordinary shares in the calculation of diluted income per share, because
exercise is contingent upon future events. For the year ended December 31, 2021
the number of weighted average Class B ordinary shares for calculating basic net
income per ordinary share was reduced for the effect of an aggregate of 787,500
Class B ordinary shares that were subject to forfeiture if the over-allotment
option was not exercised in full or part by the underwriters. Since the
contingency was satisfied, we included these shares in the weighted average
number as of the beginning of the period to determine the dilutive impact of
these shares. Remeasurement associated with the redeemable Class A ordinary
shares is excluded from earnings per share as the redemption value approximates
fair value.
Recent Accounting Pronouncements
We do not believe that any recently issued, but not yet effective, accounting
standards if currently adopted would have a material effect on our financial
statements.
Off-Balance Sheet Arrangements and Contractual Obligations
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 and did not have
any commitments or contractual obligations.
JOBS Act
On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains
provisions that, among other things, relax certain reporting requirements for
qualifying public companies. We qualify as an "emerging growth company" under
the JOBS Act and are allowed to comply with new or revised accounting
pronouncements based on the effective date for private (not publicly traded)
companies. We 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, our financial statements may not
be comparable to companies that comply with new or revised accounting
pronouncements as of public company effective dates.
As an "emerging growth company", we are not 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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