The following discussion and analysis of TKB's financial condition and results
of operations should be read in conjunction with the audited financial
statements, including the related notes, contained in this Annual Report.
Certain information contained in the discussion and analysis set forth below
includes forward-looking statements that involve risks and uncertainties,
including, but not limited to, the risks and uncertainties described in "Risk
Factors" and "Cautionary Note Regarding Forward-Looking Statements." Our actual
results may differ materially from those anticipated in these forward-looking
statements as a result of many factors.
Overview
We are a blank check company incorporated in the Cayman Islands for the purpose
of effecting a merger, capital stock exchange, asset acquisition, stock
purchase, reorganization or similar business combination with one or more
businesses, which we refer to throughout this Annual Report as our initial
business combination. While we may pursue an initial business combination target
in any industry, we currently intend to concentrate our efforts in identifying
businesses that provide critical technologies in the industrial base supply
chain recognized by the United States Government to maintain technological
leadership, national security, and supply chain independence. Such vital
technologies include, but are not limited to, advanced manufacturing, artificial
intelligence, automation, data security, energy storage and power management,
financial technology (payment solution), industrial software, internet of things
("IoT"), microelectronics, robotics, and wireless communications equipment.
The issuance of additional shares in connection with a business combination to
the owners of the target or other investors, including pursuant to the forward
purchase agreements:
· may significantly dilute the equity interest of investors in our initial public
offering, which dilution would increase if the anti-dilution provisions in the
TKB Class B Shares resulted in the issuance of TKB Class A Shares on a greater
than one-to-one basis upon conversion of the TKB Class B Shares;
· may subordinate the rights of holders of TKB Class A Shares if preference
shares are issued with rights senior to those afforded our TKB Class A Shares;
· could cause a change in control if a substantial number of TKB Class A Shares
are 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 share ownership or voting rights of a person seeking to obtain
control of us; and
· may adversely affect prevailing market prices for our TKB Class A Shares and/or
warrants.
Similarly, if we issue debt securities or otherwise incur significant debt to
banks or other lenders or the 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 is payable on demand;
· our inability to obtain necessary additional financing if the debt contains
covenants restricting our ability to obtain such financing while the debt is
outstanding;
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· our inability to pay dividends on our TKB Class A 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 TKB Class
A Shares if declared, expenses, capital expenditures, acquisitions and 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; and
· limitations on our ability to borrow additional amounts for expenses, capital
expenditures, acquisitions, debt service requirements, execution of our
strategy and other purposes and other disadvantages compared to our competitors
who have less debt.
We expect to incur significant costs in the pursuit of our initial business
combination. We cannot assure you that our plans to raise capital or to complete
our initial business combination will be successful. These factors, among
others, raise substantial doubt about our ability to continue as a going
concern.
Proposed Business Combination
On January 10, 2023, TKB entered into the Business Combination Agreement with
Wejo, Holdco and the Merger Subs. Pursuant to the Business Combination Agreement
and subject to the satisfaction or waiver of the terms and conditions specified
therein, (i) Merger Sub 1 will merge with and into TKB, with TKB continuing as
the surviving company, and (ii) Merger Sub 2 will merge with Wejo, with Wejo
continuing as the surviving company, so that, immediately following the Closing,
each of Wejo and TKB will be a wholly owned subsidiary of Holdco. The Closing is
expected to occur in the second quarter of 2023, following receipt of required
approval by shareholders of TKB and Wejo and the fulfillment or waiver of the
other conditions set forth in the Business Combination Agreement. On March 27,
2023, TKB and Wejo entered into Amendment No. 1 to the Business Combination
Agreement.
For more information about the Business Combination Agreement and the Business
Combination, see our Registration Statement. Unless specifically stated, this
Annual Report does not give effect to the Business Combination and does not
contain the risks associated with the Business Combination. The Business
Combination is expected to close in the second quarter of 2023, following
receipt of required approval by shareholders of TKB and Wejo and the fulfillment
or waiver of the other conditions set forth in the Business Combination
Agreement.
Extension
On January 27, 2023, the Company received shareholder approval to amend its
Articles to extend the date by which it must complete an initial business
combination from January 29, 2023 to June 29, 2023. Shareholders also approved
an amendment to the Trust Agreement to make a corresponding extension to the
date the Company must commence liquidation of the Trust Account from January 29,
2023 to June 29, 2023. In connection with the vote to approve the Extension, the
holders of 17,533,296 TKB Class A Shares properly exercised their right to
redeem their shares for cash at a redemption price of approximately $10.38 per
share, for an aggregate redemption amount of approximately $181.9 million. After
the satisfaction of such redemptions, the balance in the Company's Trust Account
is approximately $56.7 million.
Wejo Assignment and Assumption Agreement
On January 5, 2023, the Sponsor entered into the Wejo Assignment, which was
subsequently amended and restated on March 2, 2023, pursuant to which Wejo
agreed to pay the Sponsor an aggregate of $295,000 to fund TKB's working capital
requirements and the Sponsor agreed to assign to Wejo, effective as of the
Closing Date or the earlier termination of the Business Combination Agreement in
accordance with its terms or otherwise, an aggregate of 83,250 Founder Shares
and 250,000 Private Warrants. Wejo paid $250,000 to the Sponsor on January 11,
2023 and $45,000 to the Sponsor on March 2, 2023, for an aggregate payment of
$295,000.
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The Sponsor subsequently advanced these funds to TKB for working capital
purposes. The advance is non-interest bearing, unsecured and payable in cash
upon the consummation of TKB's initial business combination.
Working Capital Advance
On January 26, 2023, in connection with the proposed Business Combination,
Sponsor and Wejo entered into the Phelan Note, which provides for working
capital for TKB in an aggregate principal amount of up to $750,000. The Phelan
Note was amended and restated on March 9, 2023. As of January 30, 2023, TKB had
drawn $250,000 under the Phelan Note. The Phelan Note is non-interest bearing
and non-convertible. All unpaid principal accrued under the Phelan Note will be
repaid at the closing of the Business Combination or the earlier termination of
the Business Combination Agreement in certain circumstances specified in the
Phelan Note. In consideration for the Phelan Note, Sponsor agreed to pay to the
Lender at the closing of the Business Combination a commitment fee equal to 50%
of the then-outstanding principal balance of the Phelan Note up to a maximum of
$375,000. If the Business Combination does not close, the commitment fee will
not be paid.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities since inception have been organizational activities and
those necessary to prepare for our initial public offering. We will not generate
any operating revenues until after completion of our initial business
combination. We generate non-operating income in the form of interest income on
cash and cash equivalents. Our expenses have increased substantially after the
closing of our initial public offering 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 $11,245,341 which
consists of the change in fair value of warrant liabilities of $10,197,175 and
interest earned on marketable securities held in the Trust Account of
$3,383,885, offset by formation and operational costs of $2,335,719.
For the period from April 20, 2021 (inception), through December 31, 2021, we
had net income of $8,644,188, which consists of a change in fair value of the
warrant liability of $10,457,500 and unrealized gains and interest earned on
marketable securities held in the Trust Account of $3,950, offset by formation
and operational costs of $1,817,262.
Liquidity, Capital Resources and Going Concern
Until the consummation of the initial public offering, our only source of
liquidity was an initial purchase of founder shares by our sponsor, TKB Sponsor,
LLC, for $25,000 and a $300,000 loan from our sponsor which has been repaid in
full in connection with the closing of the IPO.
On October 29, 2021, we consummated the initial public offering of 23,000,000
units, at $10.00 per unit, which included the full exercise by the underwriters
of their over-allotment option in the amount of 3,000,000 units, generating
gross proceeds of $230,000,000.
Simultaneously with the closing of the initial public offering, the Company
completed the private sale of an aggregate of 10,750,000 warrants to our sponsor
at a purchase price of $1.00 per private placement warrant, generating gross
proceeds to the Company of $10,750,000.
A total of $234,600,000 of the proceeds from the initial public offering and the
sale of the private placement warrants were placed in a U.S.-based Trust Account
at J.P. Morgan Chase Bank, N.A., maintained by Continental Stock Transfer &
Trust Company, acting as trustee.
Transaction costs of the initial public offering amounted to $21,140,059,
consisting of $3,850,000 of underwriting discount, $8,800,000 of deferred
underwriting discount, $7,748,431 of excess fair value of founder shares and
$741,628 of actual offering costs. Of these amounts, $19,774,814 was recorded to
additional paid-in capital and $1,365,245 costs related to the warrant liability
was expensed immediately using the residual allocation method.
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For the year ended December 31, 2022, net cash used in operating activities was
$606,240. Net income of $11,245,341 was adjusted by $3,383,885 of interest
income on marketable securities held in trust, $10,197,175 change in fair value
of warrant liabilities, and $1,729,479 changes in operating assets and
liabilities.
For the period from April 20, 2021 (inception), through December 31, 2021, net
cash used in operating activities was $837,851. Net income of $8,644,188 was
adjusted by $3,950 of unrealized gains and interest income on marketable
securities held in trust, $1,365,245 transaction costs incurred in connection
with the IPO, $10,457,500 change in fair value of warrant liabilities, and
$385,834 of changes in operating assets and liabilities.
As of December 31, 2022, we had marketable securities held in the Trust Account
of $237,987,827 (including approximately $3,387,827 of interest income and
unrealized gains) consisting of securities held in a money market fund that
invests in U.S. Treasury securities with a maturity of 185 days or less.
As of December 31, 2022, we had cash of $124,237 held outside the Trust Account.
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 a business combination.
We expect that we will need to raise additional funds in order to meet the
expenditures required for operating our business prior to our initial business
combination. We expect to incur significant costs related to identifying a
target business, undertaking in-depth due diligence and negotiating an initial
business combination. These conditions raise substantial doubt about the
Company's ability to continue as a going concern for a period of time within one
year from the date that the financial statements are issued. In order to fund
working capital deficiencies or finance transaction costs in connection with an
intended initial business combination, our sponsor or an affiliate of our
sponsor or certain of our officers and directors may, but are not obligated to,
loan us funds as may be required. If we complete our initial business
combination, we will repay such loaned amounts. In the event that our initial
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 $1,500,000 of such
loans may be convertible into warrants of the post-business combination entity
at a price of $1.00 per warrant at the option of the lender. The warrants would
be identical to the private placement warrants. The terms of such loans, if any,
have not been determined and no written agreements exist with respect to such
loans. Prior to the completion of our initial business combination, we do not
expect to seek loans from parties other than our sponsor or an affiliate of our
sponsor as we do not believe third parties will be willing to loan such funds
and provide a waiver against any and all rights to seek access to funds in our
Trust Account.
On January 27, 2023, the Company held an extraordinary general meeting (the
"Extraordinary General Meeting"). At the Extraordinary General Meeting, the
shareholders approved a proposal (the "Extension Amendment Proposal") to amend
the Company's Amended and restated memorandum and articles of association (the
"Articles") to extend the date that the Company has to consummate a business
combination from January 29, 2023 to June 29, 2023 (the "Extension Amendment").
The shareholders also approved a proposal (the "Trust Agreement Amendment
Proposal") to amend the Company's Investment Management Trust Agreement, dated
as of October 26, 2021, by and between the Company and Continental Stock
Transfer & Trust Company as trustee (the "Trust Agreement"), to make a
corresponding extension to the date the Company must commence liquidation of the
Trust Account from January 29, 2023, to June 29, 2023. In connection with the
vote to approve the Extension Amendment Proposal, the holders of 17,533,296 TKB
Class A Shares properly exercised their right to redeem their shares for cash at
a redemption price of approximately $10.38 per share, for an aggregate
redemption amount of approximately $181.9 million.
The Company's assessed going concern considerations in accordance with the
Financial Accounting Standard Board's Accounting Standards Codification ("ASC")
Topic 205-40, "Basis of Presentation - Going Concern". The Company has until
June 29, 2023 (absent any extensions of such period by the Company's public
shareholders) to consummate a Business Combination. While the Company intends to
complete a Business Combination by such date, it is uncertain that the Company
will be able to consummate the proposed Business Combination by that time. If a
Business Combination is not consummated by this date, there will be a mandatory
liquidation and subsequent dissolution of the Company. Management has determined
that the liquidity condition and mandatory liquidation, should a Business
Combination not occur, and potential subsequent dissolution, raises substantial
doubt about the Company's ability to continue as a going concern. No adjustments
have been made to the carrying amounts of assets or liabilities should the
Company be required to liquidate after June 29, 2023.
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Going Concern
We have until June 29, 2023 to consummate a Business Combination. It is
uncertain that we will be able to consummate a Business Combination by this
time. If a Business Combination is not consummated by this date, there will be a
mandatory liquidation and subsequent dissolution. Management has determined that
the mandatory liquidation, should a 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 after June
29, 2023.
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
We do not have any long-term debt obligations, capital lease obligations,
operating lease obligations, purchase obligations or other long-term
liabilities, other than described below.
We have an agreement to pay our sponsor a monthly fee of $10,000 for office
space, utilities and administrative support. We began incurring these fees on
October 29, 2021 and will continue to incur these fees monthly until the earlier
of the completion of the Business Combination and our liquidation.
The underwriters of the initial public offering are entitled to a deferred fee
$8,800,000. The deferred fee will become payable to the underwriters from the
amounts held in the Trust Account solely in the event that we complete our
initial business combination, subject to the terms of the underwriting
agreement.
Critical Accounting Policies
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. Significant estimates include the fair value of warrant liabilities,
which requires a Black-Scholes model to fair value the warrants. We have
identified the following critical accounting policies:
Warrant Liabilities
The Company accounts for the warrants as either equity-classified or
liability-classified instruments based on an assessment of the warrant's
specific terms and applicable authoritative guidance in ASC 480, Distinguishing
Liabilities from Equity ("ASC 480") and ASC 815. The assessment considers
whether the warrants are freestanding financial instruments pursuant to ASC 480,
meet the definition of a liability pursuant to ASC 480, and whether the warrants
meet all of the requirements from equity classification under ASC 815, including
whether the warrants are indexed to the Company's own ordinary shares, among
other conditions for equity classification. This assessment, which requires the
use of professional judgment, is conducted at the time of warrant issuance and
as of each subsequent quarterly period end date while the warrants are
outstanding.
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For issued or modified warrants that meet all of the criteria for equity
classification, the warrants are required to be recorded as a component of
additional paid-in capital at the time of issuance. For issued or modified
warrants that do not meet all the criteria for equity classification, the
warrants are required to be recorded at their initial fair value on the date of
issuance, and each balance sheet date thereafter. Changes in the estimated fair
value of the warrants are recognized as a non-cash gain or loss on the
statements of operations. See Note 9 for valuation methodology of warrants.
TKB Class A Shares Subject to Possible Redemption
The Company accounts for its ordinary shares subject to possible redemption in
accordance with the guidance in ASC 480. Ordinary shares subject to mandatory
redemption 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
the Company's control) are classified as temporary equity. At all other times,
ordinary shares are classified as shareholders' deficit. The Company's ordinary
shares feature certain redemption rights that are considered to be outside of
the Company's control and subject to occurrence of uncertain future events.
Accordingly, at December 31, 2022 and December 31, 2021, ordinary shares subject
to possible redemption are presented at redemption value as temporary equity,
outside of the shareholders' deficit section of the Company's balance sheets.
The Company recognizes changes in redemption value immediately as they occur and
adjusts the carrying value of redeemable ordinary shares to equal the redemption
value at the end of each reporting period. Increases or decreases in the
carrying amount of redeemable ordinary shares are affected by charges against
additional paid in capital and accumulated deficit.
Net Income Per Ordinary Share
The Company complies with accounting and disclosure requirements of FASB ASC
Topic 260, "Earnings Per Share". Net income per ordinary share is computed by
dividing net income by the weighted average number of ordinary shares
outstanding for the period. The Company has two classes of ordinary shares,
which are referred to as TKB Class A Shares and TKB Class B Shares. Income and
losses are shared pro rata between the two classes of ordinary shares. Accretion
associated with the redeemable TKB Class A Shares is excluded from earnings per
share as the redemption value approximates fair value. The calculation of
diluted income per share does not consider the effect of the warrants issued in
connection with the (i) IPO and (ii) the private placement since the exercise of
the warrants is contingent upon the occurrence of future events. The warrants
are exercisable to purchase 22,250,000 TKB Class A Shares in the aggregate. As
of December 31, 2022 and 2021, the Company did not have any dilutive securities
or other contracts that could, potentially, be exercised or converted into
ordinary shares and then share in the earnings of the Company.
Recent Accounting Standards
In August 2020, the FASB issued ASU No. 2020-06, "Debt-Debt with Conversion and
Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in
Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments
and Contracts in an Entity's Own Equity" ("ASU 2020-06"), which simplifies
accounting for convertible instruments by removing major separation models
required under current GAAP. ASU 2020-06 removes certain settlement conditions
that are required for equity contracts to qualify for the derivative scope
exception and it also simplifies the diluted earnings per share calculation in
certain areas. ASU 2020-06 is effective for fiscal years beginning after
December 15, 2023, including interim periods within those fiscal years, with
early adoption permitted. The Company is currently assessing the impact, if any,
that ASU 2020-06 would have on its financial position, results of operations or
cash flows.
In June 2022, the FASB issued ASU 2022-03, ASC Subtopic 820 "Fair Value
Measurement of Equity Securities Subject to Contractual Sale Restrictions". The
ASU amends ASC 820 to clarify that a contractual sales restriction is not
considered in measuring an equity security at fair value and to introduce new
disclosure requirements for equity securities subject to contractual sale
restrictions that are measured at fair value. The ASU applies to both holders
and issuers of equity and equity-linked securities measured at fair value. The
amendments in this ASU are effective for the Company in fiscal years beginning
after December 15, 2023, including interim periods within those fiscal years,
with early adoption permitted. The Company is currently assessing the impact, if
any, that ASU 2022-03 would have on its financial position, results of
operations or cash flows.
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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.
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