References to the "Company," "our," "us" or "we" refer to two. The following
discussion and analysis of the Company's financial condition and results of
operations should be read in conjunction with the financial statements and the
notes thereto contained elsewhere in this report. Certain information contained
in the discussion and analysis set forth below includes forward-looking
statements that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Annual Report on Form 10-K includes forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Exchange Act. We have based these forward-looking statements on our
current expectations and projections about future events. These forward-looking
statements are subject to known and unknown risks, uncertainties and assumptions
about us that may cause our actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by such
forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as "may," "should," "could," "would," "expect,"
"plan," "anticipate," "believe," "estimate," "continue," or the negative of such
terms or other similar expressions. Factors that might cause or contribute to
such a discrepancy include, but are not limited to, those described in our other
SEC filings.
Overview
We are a blank check company incorporated as a Cayman Islands exempted company
on January 15, 2021. We were formed for the purpose of effecting a merger, share
exchange, asset acquisition, share purchase, reorganization or similar business
combination with one or more businesses (the "Business Combination"). We are an
emerging growth company and, as such, we are subject to all of the risks
associated with emerging growth companies.
Our sponsor is two sponsor, a Cayman Islands exempted limited company (the
"Sponsor"). The registration statement for our Initial Public Offering was
declared effective March 29, 2021. On April 1, 2021, we consummated our Initial
Public Offering of 20,000,000 Class A ordinary shares (the "Public Shares"), at
an offering price of $10.00 per Public Share, generating gross proceeds of
$200.0 million, and incurring offering costs of approximately $11.1 million (net
of a required reimbursement from the underwriter), of which $7.0 million was for
deferred underwriting commissions (see Note 5). The underwriter was granted a
45-day option from the date of the final prospectus relating to the Initial
Public Offering to purchase up to 3,000,000 additional shares to cover
over-allotments, if any, at $10.00 per share. The Underwriter partially
exercised the over-allotment option and on April 13, 2021 purchased an
additional 1,437,500 Class A ordinary shares (the "Additional Shares"),
generating gross proceeds of approximately $14.4 million (the "Over-Allotment"),
and we incurred additional offering costs of approximately $755,000 (net of a
required reimbursement from the underwriter), of which approximately $503,000
was for deferred underwriting fees.
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Simultaneously with the closing of the Initial Public Offering, we consummated
the private placement ("Private Placement") of 600,000 Class A ordinary shares
(the "Private Placement Shares"), at a price of $10.00 per Private Placement
Share to the Sponsor, generating gross proceeds of approximately $6.0 million
(see Note 4). Simultaneously with the closing of the Over-Allotment on April 13,
2021, we consummated the second closing of the Private Placement, resulting in
the purchase of an aggregate of an additional 28,750 Private Placement Shares by
the Sponsor, generating gross proceeds to the Company of $287,500. On December
30, 2022, our Sponsor unconditionally and irrevocably forfeited all 628,750
Private Placement Shares to our Company for no value and we cancelled the
Private Placement Shares effective as of the same date.
Upon the closing of the Initial Public Offering, the Over-Allotment, and the
Private Placements, $214.4 million ($10.00 per share) of the net proceeds of the
sale of the Public Shares in the Initial Public Offering and of the Private
Placement Shares in the Private Placement were placed in a trust account ("Trust
Account"), located in the United States with Continental Stock Transfer & Trust
Company acting as trustee, and will invest only in United States "government
securities" within the meaning of Section 2(a)(16) of the Investment Company Act
of 1940, as amended (the "Investment Company Act"), having a maturity of 185
days or less or in money market funds meeting certain conditions under Rule 2a-7
promulgated under the Investment Company Act that invest only in direct U.S.
government treasury obligations, until the earlier of: (i) the completion of a
Business Combination and (ii) the distribution of the Trust Account as described
below.
Our management has broad discretion with respect to the specific application of
the net proceeds of the Initial Public Offering and the sale of Private
Placement Shares, although substantially all of the net proceeds are intended to
be applied generally toward consummating a Business Combination. There is no
assurance that we will be able to complete a Business Combination successfully.
We must complete one or more initial Business Combinations having an aggregate
fair market value of at least 80% of the assets held in the Trust Account
(excluding the deferred underwriting commissions and taxes payable on income
earned on the Trust Account) at the time of the agreement to enter into the
initial Business Combination. However, we will only complete a Business
Combination if the post-transaction company owns or acquires 50% or more of the
outstanding voting securities of the target or otherwise acquires a controlling
interest in the target sufficient for it not to be required to register as an
investment company under the Investment Company Act.
If we are unable to complete a Business Combination within the Combination
Period, we will (i) cease all operations except for the purpose of winding up;
(ii) as promptly as reasonably possible but not more than ten business days
thereafter, redeem the Public Shares, at a per-share price, payable in cash,
equal to the aggregate amount then on deposit in the Trust Account, including
interest earned on the funds held in the Trust Account and not previously
released to the Company to pay our income taxes, if any (less up to $100,000 of
interest to pay dissolution expenses), divided by the number of the
then-outstanding Public Shares, which redemption will completely extinguish
Public Shareholders' rights as shareholders (including the right to receive
further liquidation distributions, if any); and (iii) as promptly as reasonably
possible following such redemption, subject to the approval of the remaining
shareholders and the board of directors, liquidate and dissolve, subject in the
case of clauses (ii) and (iii) to the Company's obligations under Cayman Islands
law to provide for claims of creditors and the requirements of other applicable
law.
Liquidity and Capital Resources
As of December 31, 2022, we had approximately $336,000 in cash and a working
deficit of approximately $187,000.
Our liquidity needs to date have been satisfied through $25,000 paid by the
Sponsor to cover certain expenses in exchange for the issuance of the Founder
Shares, a loan of approximately $81,000 from the Sponsor pursuant to the Note
(as defined in Note 4), and the proceeds from the consummation of the Private
Placement not held in the Trust Account of $2.5 million (net of a required
reimbursement from the underwriter). We repaid the Note in full on April 5,
2021, and no additional borrowing is available under the Note. In addition, in
order to finance transaction costs in connection with a Business Combination,
the Sponsor or an affiliate of the 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 under any Working
Capital Loan.
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Our management has determined that we may not have sufficient liquidity to meet
our anticipated obligations through the earlier of our consummation of an
initial business combination or our liquidation date. Over this time period, we
will be using these funds for paying existing accounts payable, identifying and
evaluating prospective initial Business Combination candidates, performing due
diligence on prospective target businesses, paying for travel expenditures,
selecting the target business to merge with or acquire, and structuring,
negotiating and consummating the Business Combination.
In connection with our assessment of going concern considerations in accordance
with FASB Accounting Standards Update ("ASU") 2014-15, "Disclosures of
Uncertainties about an Entity's Ability to Continue as a Going Concern," our
management has determined that the liquidity issue and the mandatory liquidation
and subsequent dissolution raises substantial doubt about our ability to
continue as a going concern. No adjustments have been made to the carrying
amounts of assets or liabilities should the Company be required to liquidate
after April 1, 2023. The financial statements do not include any adjustment that
might be necessary if we are unable to continue as a going concern. We plan to
complete a business combination prior to the mandatory liquidation date.
Various social and political circumstances in the United States and around the
world (including wars and other forms of conflict, including rising trade
tensions between the United States and China, and other uncertainties regarding
actual and potential shifts in the United States and foreign, trade, economic
and other policies with other countries, terrorist acts, security operations and
catastrophic events such as fires, floods, earthquakes, tornadoes, hurricanes
and global health epidemics), may also contribute to increased market volatility
and economic uncertainties or deterioration in the United States and worldwide.
Specifically, the rising conflict between Russia and Ukraine, and resulting
market volatility could adversely affect our ability to complete a business
combination. In response to the conflict between Russia and Ukraine, the United
States and other countries have imposed sanctions or other restrictive actions
against Russia. Any of the above factors, including sanctions, export controls,
tariffs, trade wars and other governmental actions, could have a material
adverse effect on our ability to complete a business combination and the value
of the our securities.
Management continues to evaluate the impact of these types of risks on the
industry and has concluded that while it is reasonably possible that these types
of risks could have a negative effect on our financial position, results of our
operations and/or search for a target company, the specific impact is not
readily determinable as of the date of these financial statements. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Results of Operations
Our entire activity from inception to December 31, 2022, was for our formation
and the Initial Public Offering, and subsequent to the Initial Public Offering,
the search for a target for its initial Business Combination. We will not be
generating any operating revenues until the closing and completion of our
initial Business Combination.
For the year ended December 31, 2022, we had net income of approximately $1.5
million, which consisted of approximately $2.9 million in income from
investments held in Trust Account, partially offset by approximately $1.2
million in general and administrative expenses, and $120,000 in administrative
expenses-related party.
For the period from January 15, 2021 (inception) through December 31, 2021, we
had a net loss of approximately $743,000, which consisted of approximately
$688,000 in general and administrative expenses, $90,000 in administrative
expenses-related party, partially offset by approximately $36,000 in income from
investments held in Trust Account.
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Related Party Transactions
Founder Shares
On January 21, 2021, the Sponsor paid $25,000, or approximately $0.004 per
share, to cover expenses in consideration for 5,750,000 Class B ordinary shares,
par value $0.0001 (the "Founder Shares"). Up to 750,000 Founder Shares were
subject to forfeiture to the extent that the over-allotment option was not
exercised in full by the underwriter, so that the Founder Shares would represent
20.0% of our issued and outstanding shares after the Initial Public Offering. On
March 8, 2021, the Sponsor transferred 25,000 Founder Shares to each of Michelle
Gill, Ryan Petersen and Laura de Petra, and 30,000 Founder Shares to Pierre
Lamond. Such shares were not subject to forfeiture in the event the
underwriter's over-allotment was not exercised. The underwriters partially
exercised their over-allotment option on April 13, 2021 and on April 19, 2021,
the Sponsor surrendered 390,625 Class B ordinary shares for no consideration
resulting in 5,359,375 Class B ordinary shares issued and outstanding with no
shares subject to forfeiture.
The initial shareholders agreed, subject to limited exceptions, not to transfer,
assign or sell any of their Founder Shares until the earlier to occur of: (A)
one year after the completion of the initial Business Combination and (B)
subsequent to the initial Business Combination, (x) if the closing price of
Class A ordinary shares equals or exceeds $12.00 per share (as adjusted for
share splits, 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, or (y) the date on which
we complete a liquidation, merger, share exchange, reorganization or other
similar transaction that results in all of the Public Shareholders having the
right to exchange their ordinary shares for cash, securities or other property.
Private Placement Shares
Simultaneously with the closing of the Initial Public Offering, we consummated
the Private Placement of 600,000 Private Placement Shares, at a price of $10.00
per Private Placement Share to the Sponsor, generating gross proceeds of
approximately $6.0 million. A portion of the proceeds from the Private Placement
Shares was added to the proceeds from the Initial Public Offering held in the
Trust Account. Simultaneously with the closing of the Over-Allotment on April
13, 2021, we consummated the second closing of the Private Placement, resulting
in the purchase of an aggregate of an additional 28,750 Private Placement Shares
by the Sponsor, generating gross proceeds of $287,500.
The Sponsor and our officers and directors agreed, subject to limited
exceptions, not to transfer, assign or sell any of their Private Placement
Shares until 30 days after the completion of the initial Business Combination.
On December 30, 2022, our Sponsor unconditionally and irrevocably forfeited all
628,750 Private Placement Shares to our Company for no value and our Company
cancelled the Private Placement Shares effective as of the same date.
Sponsor Loan
On January 21, 2021, the Sponsor agreed to loan us up to $300,000 pursuant to a
promissory note (the "Note"). This loan was non-interest bearing and payable
upon the completion of the Initial Public Offering. We borrowed approximately
$81,000 under the Note and repaid the Note in full on April 5, 2021. No
additional borrowing is available under the Note.
Working Capital Loans
In addition, in order to finance transaction costs in connection with a Business
Combination, the Sponsor or an affiliate of the Sponsor, or certain of our
officers and directors may, but are not obligated to, loan us funds as may be
required ("Working Capital Loans"). If we complete a Business Combination, we
would repay the Working Capital Loans. In the event that a 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 a Business Combination, without
interest, or, at the lender's discretion, up to $1.5 million of such Working
Capital Loans may be convertible into private placement shares at a price of
$10.00 per share. 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 borrowings
under the Working Capital Loans.
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Contractual Obligations
Registration Rights
The holders of Founder Shares, Private Placement Shares, and Class A ordinary
shares that may be issued upon conversion of Working Capital Loans were entitled
to registration rights pursuant to a registration rights agreement signed upon
consummation of the Initial Public Offering. These holders were entitled to make
up to three demands, excluding short form demands, that we register such
securities. In addition, these holders will have certain "piggy-back"
registration rights with respect to registration statements filed subsequent to
the completion of the initial Business Combination. We will bear the expenses
incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The underwriter was entitled to an underwriting discount of $0.20 per share, or
$4.0 million in the aggregate, paid upon the closing of the Initial Public
Offering. In addition, $0.35 per share, or approximately $7.0 million in the
aggregate will be payable to the underwriter for deferred underwriting
commissions. The deferred fee will become payable to the underwriter 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.
The underwriter partially exercised the over-allotment option and was entitled
to an additional fee of approximately $755,000 (net of a required reimbursement
from the underwriter), of which approximately $503,000 was for deferred
underwriting commissions fees.
Contingent Fee Arrangement
On June 22, 2022, we entered arrangement with Oppenheimer & Co. Inc.
("Oppenheimer") to obtain financial advisory services and for Oppenheimer to act
as the Company's placement agent in connection with raising capital with a
specific target in its search for a Business Combination. Oppenheimer would be
entitled to a transaction fee of $7.0 million and a financing fee of 4.0% of the
principal balance placed, subject to a minimum fee of $2.0 million
("Arrangement"). Per the Arrangement, fees for these services are contingent
upon the closing of a Business Combination and consummation of the financing and
therefore they not included as liabilities on the accompanying balance sheets.
Under the arrangement, the Company will also reimburse Oppenheimer for
reasonable expenses. As of December 31, 2022, no expenses have been incurred.
Administrative Support Agreement
On March 29, 2021, we entered into an agreement with the Sponsor pursuant to
which, commencing on the date our securities were first listed on the New York
Stock Exchange, we agreed to pay the Sponsor a total of $10,000 per month for
office space, secretarial and administrative services. Upon completion of the
initial Business Combination or our liquidation, we will cease paying these
monthly fees. During the year ended December 31, 2022 and during the period from
January 15, 2021 (inception) through December 31, 2021, we incurred $120,000 and
$90,000, respectively, in expenses for these services, which is included in
administrative expenses-related party on the accompanying statement of
operations. No amount was due as of December 31, 2022.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and liabilities at the
date of the financial statements, and income and expenses during the periods
reported. Actual results could materially differ from those estimates. We have
identified the following as our critical accounting policies:
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Class A Ordinary Shares Subject to Possible Redemption
We account for our Class A ordinary shares subject to possible redemption (our
Public Shares) in accordance with the guidance in ASC 480. Class A ordinary
shares subject to mandatory redemption (if any) are classified as liability
instruments and are measured at fair value. Conditionally redeemable Class A
ordinary shares (including Class A ordinary shares that feature redemption
rights that are either within the control of the holder or subject to redemption
upon the occurrence of uncertain events not solely within the Company's control)
are classified as temporary equity. At all other times, Class A ordinary shares
are classified as shareholders' equity. Our Public Shares feature certain
redemption rights that are considered to be outside of the Company's control and
subject to the occurrence of uncertain future events. Accordingly, as of
December 31, 2022 and 2021, 21,437,500 Class A ordinary shares subject to
possible redemption are presented as temporary equity, outside of the
shareholders' deficit section of the Company's balance sheet.
Under ASC 480-10S99, we have elected to recognize changes in the redemption
value immediately as they occur and adjust the carrying value of the security to
equal the redemption value at the end of each reporting period. This method
would view the end of the reporting period as if it were also the redemption
date for the security. Effective upon the closing of the Initial Public
Offering, the Company recognized the accretion from initial book value to
redemption amount value. The change in the carrying value of redeemable Class A
ordinary shares resulted in charges against additional paid-in capital and
accumulated deficit. Subsequently, we recognized changes in the redemption value
as an increase in redemption value of Class A ordinary shares subject to
possible redemption as reflected on the accompanying statements of changes in
shareholders' deficit.
Investments Held in the Trust Account
Our portfolio of investments is comprised of U.S. government securities, within
the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a
maturity of 185 days or less, or investments in money market funds that invest
in U.S. government securities and generally have a readily determinable fair
value, or a combination thereof. When our investments held in the Trust Account
are comprised of U.S. government securities, the investments are classified as
trading securities. When our investments held in the Trust Account are comprised
of money market funds, the investments are recognized at fair value. Trading
securities and investments in money market funds are presented on the 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 from 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.
Offering Costs Associated with the Initial Public Offering
Offering costs consisted of legal, accounting, underwriting fees and other costs
incurred through the balance sheet date that were directly related to the
Initial Public Offering and that were charged against the carrying value of the
Class A ordinary shares subject to possible redemption upon the completion of
the Initial Public Offering in April 2021.
Net Income (Loss) Per Ordinary Share
We comply with accounting and disclosure requirements of FASB ASC Topic 260,
"Earnings Per Share." We have two classes of shares, which are referred to as
Class A ordinary shares and Class B ordinary shares. Income and losses are
shared pro rata between the two classes of shares, which assumes a business
combination as the most likely outcome. Net income (loss) per ordinary share is
calculated by dividing the net income (loss) by the weighted average shares of
ordinary shares outstanding for the respective period.
At December 31, 2022 and 2021, we did not have any dilutive securities and other
contracts that could potentially be exercised or converted into ordinary shares
and then share in our earnings. Accretion associated with the redeemable Class A
ordinary shares is excluded from earnings per share as the redemption value
approximates fair value.
Recent Accounting Pronouncements
Our management does not believe that any recently issued, but not yet effective,
accounting standards updates, if currently adopted, would have a material effect
on the accompanying financial statement.
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Off-Balance Sheet Arrangements
As of December 31, 2022, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K.
JOBS Act
The Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") contains
provisions that, among other things, relax certain reporting requirements for
qualifying public companies. We qualify as an "emerging growth company" and
under the JOBS Act are allowed to comply with new or revised accounting
pronouncements based on the effective date for private (not publicly traded)
companies. We are electing to delay the adoption of new or revised accounting
standards, and as a result, we may not comply with new or revised accounting
standards on the relevant dates on which adoption of such standards is required
for non-emerging growth companies. As a result, the financial statements may not
be comparable to companies that comply with new or revised accounting
pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the
other reduced reporting requirements provided by the JOBS Act. Subject to
certain conditions set forth in the JOBS Act, if, as an "emerging growth
company," we choose to rely on such exemptions we may not be required to, among
other things, (i) provide an auditor's attestation report on our system of
internal controls over financial reporting pursuant to Section 404, (ii) provide
all of the compensation disclosure that may be required of non-emerging growth
public companies under the Dodd-Frank Wall Street Reform and Consumer Protection
Act, (iii) comply with any requirement that may be adopted by the PCAOB
regarding mandatory audit firm rotation or a supplement to the auditor's report
providing additional information about the audit and the financial statements
(auditor discussion and analysis) and (iv) disclose certain executive
compensation related items such as the correlation between executive
compensation and performance and comparisons of the CEO's compensation to median
employee compensation. These exemptions will apply for a period of five years
following the completion of our Initial Public Offering or until we are no
longer an "emerging growth company," whichever is earlier.
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