Rose Hill Acquisition Corp - Quarter Report: 2023 March (Form 10-Q)

ROSE HILL ACQUISITION CORPORATION

CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)

The accompanying notes are an integral part of these unaudited condensed financial statements

ROSE HILL ACQUISITION CORPORATION

CONDENSED STATEMENTS OF CHANGES IN REDEEMABLE ORDINARY SHARES AND SHAREHOLDERS’ DEFICIT

(UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2023

FOR THE THREE MONTHS ENDED MARCH 31, 2022

The accompanying notes are an integral part of these unaudited condensed financial statements

Rose Hill Acquisition Corporation (the “Company”) was incorporated in the Cayman Islands on March 29, 2021. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (an “Initial Business Combination”).

 

The Company is not limited to a particular industry or geographic region for purposes of consummating an Initial Business Combination. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.

 

As of March 31, 2023, the Company had not commenced any operations. Activity through March 31, 2023, relates to the Company’s formation and initial public offering (“IPO”), which is described below and, since the IPO, the search for a prospective Initial Business Combination. The Company will not generate any operating revenues until after the completion of its Initial Business Combination, at the earliest. The Company generates non-operating income in the form of earnings on investments from the proceeds derived from the IPO.

 

Following the closing of the IPO, $146,625,000 ($10.20 per Unit) from the net proceeds of the sale of the Units in the IPO and the Private Placement Warrants, including the amounts generated from the exercise of the underwriters’ over-allotment option, was placed in a trust account (“Trust Account”) and invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 180 days or less or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting the conditions of paragraphs (d)(2), (d)(3) and (d)(4) of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of an Initial Business Combination and (ii) the distribution of the Trust Account, as described below.

 

The Company’s management has broad discretion with respect to the specific application of the net proceeds of the IPO and the sale of the Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating an Initial Business Combination. There is no assurance that the Company will be able to complete an Initial Business Combination successfully. The Company 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, the Company will only complete an Initial 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. There is no assurance the Company will be able to successfully effect an Initial Business Combination.

All of the Public Shares contain a redemption feature which allows for the redemption of such Public Shares in connection with the Company’s liquidation, if there is a shareholder vote or tender offer in connection with the Company’s Initial Business Combination and in connection with certain amendments to the Articles. In accordance with the rules of the SEC and its guidance on redeemable equity instruments, which has been codified in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480-10-S99, redemption provisions not solely within the control of a company require ordinary shares subject to redemption to be classified outside of permanent equity. Given that the Public Shares will be issued with other freestanding instruments (i.e., public warrants), the initial carrying value of Class A ordinary shares classified as temporary equity will be the allocated proceeds determined in accordance with ASC 470-20. The Class A ordinary shares is subject to ASC 480-10-S99. If it is probable that the equity instrument will become redeemable, the Company has the option to either (i) accrete changes in the redemption value over the period from the date of issuance (or from the date that it becomes probable that the instrument will become redeemable, if later) to the earliest redemption date of the instrument or (ii) recognize changes in the redemption value immediately as they occur and adjust the carrying amount of the instrument to equal the redemption value at the end of each reporting period. The Company has elected to recognize the changes immediately. The accretion or remeasurement will be treated as a deemed dividend (i.e., a reduction to retained earnings, or in absence of retained earnings, additional paid-in capital). While redemptions cannot cause the Company’s net tangible assets to fall below $5,000,001 in connection with approval of an Initial Business Combination, the Public Shares are redeemable and are classified as such on the balance sheet until such date that a redemption event takes place.

Conversion of Class B Ordinary Shares held by the Sponsor

Business Combination with Prize

Business Combination Agreement

On October 20, 2022, the Company entered into a Business Combination Agreement with Inversiones e Inmobilaria GHC Ltda, a limited liability company organized under the laws of Chile (“Prize”) and, for certain limited purposes, Alejandro García Huidobro Empresario Individual (“AGH”) (as it may be amended and/or restated from time to time, the “Business Combination Agreement”), pursuant to which, and subject to the terms and conditions set forth therein, prior to the consummation of the Business Combination (as defined below), (i) Prize will cause to be incorporated under the laws of the Cayman Islands, (a) an exempted company with limited liability to serve as “PubCo” for all purposes under the Business Combination Agreement and (b) an exempted company with limited liability to serve as “Merger Sub” for all purposes under the Business Combination Agreement, (ii) Prize and AGH will cause to be incorporated under the laws of Chile, a simplified stock corporation that will serve as “HoldCo” for all purposes under the Business Combination Agreement, in each case, as a direct wholly owned subsidiary of Prize and (iii) promptly following the incorporation of PubCo, Merger Sub and HoldCo, Prize and AGH will consummate a pre-closing restructuring pursuant to which, among other things, all subsidiaries of Prize will become direct or indirect subsidiaries of HoldCo, HoldCo will become a wholly owned subsidiary of Merger Sub, and Merger Sub will become a wholly owned subsidiary of Prize (collectively, the “Pre-Closing Restructuring”).

Following the Pre-Closing Restructuring, at the closing of the Business Combination, (i) the Company will be merged with and into PubCo with PubCo continuing as the surviving entity (the “First Merger”) and (ii) subsequent to the First Merger, Merger Sub will be merged with and into PubCo with PubCo continuing as the surviving entity (the “Second Merger” and, together with the First Merger, the “Mergers”) (such transactions and those otherwise contemplated by the Business Combination Agreement, collectively, the “Business Combination”).

The terms of the Business Combination Agreement, which contains customary representations and warranties, covenants, closing conditions and other terms relating to the Business Combination, are summarized below. Capitalized terms used in this Quarterly Report for the quarter ended March 31, 2023 (“Quarterly Report”) but not otherwise defined herein have the meanings given to them in the Business Combination Agreement, which is included as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2022.

Consideration

In accordance with the terms and subject to the conditions of the Business Combination Agreement, by virtue of the First Merger, (i) each Rose Hill ordinary share that is issued and outstanding immediately prior to the First Merger will be converted into one validly issued, fully paid and non-assessable PubCo ordinary share, and (ii) all outstanding warrants to purchase ordinary shares of Rose Hill will be converted into warrants to purchase the same number of PubCo ordinary shares and all rights with respect to Rose Hill ordinary shares under such Rose Hill warrants will be converted into rights with respect to the applicable PubCo ordinary shares.

In accordance with the terms and subject to the conditions of the Business Combination Agreement, by virtue of the Second Merger, each Merger Sub ordinary share that is issued and outstanding immediately prior to the Second Merger will be converted into a number of PubCo ordinary shares equal to the quotient of (i) the Equity Value, divided by (ii) the number of Merger Sub ordinary shares that are issued and outstanding immediately prior to the Second Merger, divided by (iii) $10.00. The “Equity Value” under the Business Combination Agreement is an amount equal to (i) $328,000,000, minus (ii) the lesser of (a) the aggregate amount of transaction expenses (the “Specified Transaction Expenses”) of Prize and the Company (other than those expenses incurred in respect of obtaining an equity line of credit or similar financing arrangement to be in place and available to PubCo as of the closing of the Business Combination (“Closing”)) and (b) $10,000,000.

In the event that the Specified Transaction Expenses exceed $10,000,000, then the number of PubCo ordinary shares otherwise issuable to Rose Hill Sponsor LLC (the “Sponsor”) under the Business Combination Agreement will be decreased by a number of shares equal to the amount of such excess divided by $10.00.

Additionally, Prize has agreed to pay certain operating costs of the Company. For the three months ended March 31, 2023, Prize has reimbursed the Company $35,000 in operating costs.

Earn-Out Shares

If, at any time following the Closing, the daily volume-weighted average price (“VWAP”) of PubCo ordinary shares is greater than or equal to (a) $18.00, (b) $22.00, (c) $26.00, or (d) $30.00 in each case, over any thirty (30) days on which the PubCo ordinary shares are tradeable on Nasdaq (“Trading Days”) within any consecutive forty-five (45) Trading Day period then PubCo will issue 2,948,800 PubCo ordinary shares to Prize (“Earn-Out Shares”) after the occurrence of each such consecutive forty-five (45) Trading Day period. For the avoidance of doubt, Prize may be entitled to receive a maximum of 11,795,200 Earn-Out Shares in the aggregate in respect of the occurrence of all four Earn-Out Events.

In connection with the Closing of the Business Combination Agreement, PubCo, the Sponsor, Prize and certain other parties thereto will enter into a registration rights and lock-up agreement (the “Registration Rights and Lock-Up Agreement”), which, among other things, (i) effective as of the Closing, terminates and replaces the current registration rights agreement, dated as of October 13, 2021, by and among Rose Hill, the Sponsor and the other parties thereto, (ii) provides that PubCo will be obligated to file a registration statement to register the resale of certain PubCo ordinary shares held by Sponsor, Prize and certain other parties thereto, at the consummation of the Business Combination, (iii) provides certain parties thereto including Prize, certain demand and piggyback registration rights, and (iv) provides for certain restrictions on transfer relating to PubCo ordinary shares and warrants to purchase PubCo ordinary shares held by Sponsor, Prize and certain parties thereto.

Company Support Agreement

In connection with the execution of the Business Combination Agreement, Rose Hill, Prize and AGH have entered into a company support agreement (the “Company Support Agreement”) pursuant to which, among other things, AGH has agreed to (a) vote his Merger Sub ordinary shares in favor of the approval and adoption of the Business Combination Agreement and the Business Combination and (b) certain transfer restrictions with respect to his Merger Sub ordinary shares and shares of Prize.

Sponsor Support Agreement

In connection with the execution of the Business Combination Agreement, the Sponsor entered into a sponsor support agreement (the “Sponsor Support Agreement”) pursuant to which the Sponsor has agreed, among other things, to (i) certain restrictions on transfer relating to its ordinary shares of Rose Hill prior to the Closing as set forth therein, (ii) not redeem any of its shares of Rose Hill in connection with the vote to approve the Business Combination or any proposal to extend the date by which Rose Hill must complete an Initial Business Combination, (iii) vote in favor of the Mergers and the other transactions and against any alternative transaction, (iv) waive certain anti-dilution provisions contained in Rose Hill’s Articles in connection with the Mergers and (v) subject a certain number of its Class B ordinary shares of Rose Hill to vesting.

Standby Equity Purchase Agreement

In connection with the execution of the Business Combination Agreement and for purposes of obtaining equity financing on behalf of PubCo at Closing, Prize entered into a standby equity purchase agreement with a financial investor and affiliate of Yorkville Advisors (the “Investor”), pursuant to which, among other things, at the Closing, PubCo will have the right (but not the obligation) to sell to the Investor, and the Investor will purchase from PubCo, up to $150,000,000 of PubCo ordinary shares at a purchase price of 97% of the Market Price (as defined therein) of the PubCo ordinary shares, subject to the terms and conditions set forth therein.

Working Capital Loans

In order to finance transaction costs in connection with an Initial Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes an Initial Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. 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, the Company 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. 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. The Working Capital Loans would either be repaid upon consummation of an Initial Business Combination, without interest, or, at the lender’s 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 $1.25 per warrant. The warrants would be identical to the Private Placement Warrants. As of March 31, 2023 and December 31, 2022, there were no Working Capital Loans outstanding.

Support Services

The Company pays for services related to office space a fee of up to $10,000 per month following the consummation of the IPO until the earlier of the consummation of the Initial Business Combination or liquidation. In addition, the Company may make payments of up to $13,000 per month to members of the management team for services rendered to the Company commencing on the date that the Company's securities are first listed on Nasdaq through the earlier of consummation of the Initial Business Combination and our liquidation.

For the three months ended March 31, 2023 and 2022, $1,400 and $39,000, respectively, has been incurred and paid under this agreement.

References in this Quarterly Report to “we,” “us” or the “Company” refer to Rose Hill Acquisition Corporation References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refers to Rose Hill Sponsor LLC. 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 Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Special Note Regarding Forward-Looking Statements

This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Quarterly Report including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” including statements relating to our financial position, business strategy and the plans and objectives of management for future operations; our ability to complete an Initial Business Combination, including the Business Combination with Prize; our expectations regarding the Business Combination with Prize, including the expected benefits of the business combination and future value creation; our expectations regarding the cost of pursuing an Initial Business Combination; our public securities’ potential liquidity and trading; our use of proceeds not held in the Trust Account or available to us from interest income on the Trust Account balance; our ability to continue our listing on Nasdaq; our future liquidity and capital requirements; our ability to continue as a going concern; our ability to obtain additional financing to complete our Initial Business Combination; our expectations regarding future issuances of ordinary shares in connection with an Initial Business Combination; our expectations around the performance of a prospective target business or businesses; our ability to select an appropriate target business or businesses; and our expectations and estimates regarding certain tax and accounting matters, including the impact on our financial statements are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements, including that the conditions of the Business Combination are not satisfied. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s Annual Report on Form 10-K filed on March 31, 2023 with the SEC. The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

Overview

Company was incorporated on March 29, 2021, as a Cayman Islands exempted company. The Company was formed for the purpose of entering into an Initial Business Combination with one or more businesses.

We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete an Initial Business Combination will be successful.

Business Combination with Prize

Business Combination Agreement

On October 20, 2022, we entered into a Business Combination Agreement with Prize and, for certain limited purposes, AGH, pursuant to which, and subject to the terms and conditions set forth therein, prior to the consummation of the Business Combination, (i) Prize will cause to be incorporated under the laws of the Cayman Islands, (a) an exempted company with limited liability to serve as “PubCo” for all purposes under the Business Combination Agreement and (b) an exempted company with limited liability to serve as “Merger Sub” for all purposes under the Business Combination Agreement, (ii) Prize and AGH will cause to be incorporated under the laws of Chile, a simplified stock corporation that will serve as “HoldCo” for all purposes under the Business Combination Agreement, in each case, as a direct wholly owned subsidiary of Prize and (iii) promptly following the incorporation of PubCo, Merger Sub and HoldCo, Prize and AGH will consummate the Pre-Closing Restructuring pursuant to which, among other things, all subsidiaries of Prize will become direct or indirect subsidiaries of HoldCo, HoldCo will become a wholly owned subsidiary of Merger Sub, and Merger Sub will become a wholly owned subsidiary of Prize.

Following the Pre-Closing Restructuring, at the closing of the Business Combination, (i) the Company will be merged with and into PubCo with PubCo continuing as the surviving entity of the First Merger and (ii) subsequent to the First Merger, Merger Sub will be merged with and into PubCo with PubCo continuing as the surviving entity of the Second Merger.

The terms of the Business Combination Agreement, which contains customary representations and warranties, covenants, closing conditions and other terms relating to the Business Combination, are summarized below. Capitalized terms used in this Quarterly Report but not otherwise defined herein have the meanings given to them in the Business Combination Agreement, which is included as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2022, filed on March 31, 2023.

Consideration

In accordance with the terms and subject to the conditions of the Business Combination Agreement, by virtue of the First Merger, (i) each Rose Hill ordinary share that is issued and outstanding immediately prior to the First Merger will be converted into one validly issued, fully paid and non-assessable PubCo ordinary share, and (ii) all outstanding warrants to purchase ordinary shares of Rose Hill will be converted into warrants to purchase the same number of PubCo ordinary shares and all rights with respect to Rose Hill ordinary shares under such Rose Hill warrants will be converted into rights with respect to the applicable PubCo ordinary shares.

In accordance with the terms and subject to the conditions of the Business Combination Agreement, by virtue of the Second Merger, each Merger Sub ordinary share that is issued and outstanding immediately prior to the Second Merger will be converted into a number of PubCo ordinary shares equal to the quotient of (i) the Equity Value, divided by (ii) the number of Merger Sub ordinary shares that are issued and outstanding immediately prior to the Second Merger, divided by (iii) $10.00. The “Equity Value” under the Business Combination Agreement is an amount equal to (i) $328,000,000, minus (ii) the lesser of (a) the Specified Transaction Expenses of Prize and the Company (other than those expenses incurred in respect of obtaining an equity line of credit or similar financing arrangement to be in place and available to PubCo as of the Closing of the Business Combination) and (b) $10,000,000.

In the event that the Specified Transaction Expenses exceed $10,000,000, then the number of PubCo ordinary shares otherwise issuable to the Sponsor under the Business Combination Agreement will be decreased by a number of shares equal to the amount of such excess divided by $10.00.

Earn-Out Shares

If, at any time following the Closing, the VWAP of PubCo ordinary shares is greater than or equal to (a) $18.00, (b) $22.00, (c) $26.00, or (d) $30.00 in each case, over any thirty (30) days on which the PubCo ordinary shares are tradeable on Nasdaq within any consecutive forty-five (45) Trading Day period, then PubCo will issue 2,948,800 Earn-Out Shares to Prize after the occurrence of each such consecutive forty-five (45) Trading Day period. For the avoidance of doubt, Prize may be entitled to receive a maximum of 11,795,200 Earn-Out Shares in the aggregate in respect of the occurrence of all four Earn-Out Events.

 

Registration Rights and Lock-up Agreement

In connection with the Closing of the Business Combination Agreement, PubCo, the Sponsor, Prize and certain other parties thereto will enter the Registration Rights and Lock-Up Agreement, which, among other things, (i) effective as of the Closing, terminates and replaces the current registration rights agreement, dated as of October 13, 2021, by and among Rose Hill, the Sponsor and the other parties thereto, (ii) provides that PubCo will be obligated to file a registration statement to register the resale of certain PubCo ordinary shares held by Sponsor, Prize and certain other parties thereto, at the consummation of the business combination, (iii) provides certain parties thereto including Prize, certain demand and piggyback registration rights, and (iv) provides for certain restrictions on transfer relating to PubCo ordinary shares and warrants to purchase PubCo ordinary shares held by Sponsor, Prize and certain parties thereto.

Company Support Agreement

In connection with the execution of the Business Combination Agreement, Rose Hill, Prize and AGH have entered into the Company Support Agreement pursuant to which, among other things, AGH has agreed to (a) vote his Merger Sub ordinary shares in favor of the approval and adoption of the Business Combination Agreement and the Business Combination and (b) certain transfer restrictions with respect to his Merger Sub ordinary shares and shares of Prize.

Sponsor Support Agreement

In connection with the execution of the Business Combination Agreement, the Sponsor entered into the Sponsor Support Agreement pursuant to which the Sponsor has agreed, among other things, to (i) certain restrictions on transfer relating to its ordinary shares of Rose Hill prior to the Closing as set forth therein, (ii) not redeem any of its shares of Rose Hill in connection with the vote to approve the Business Combination or any proposal to extend the date by which Rose Hill must complete an Initial Business Combination, (iii) vote in favor of the Mergers and the other transactions and against any alternative transaction, (iv) waive certain anti-dilution provisions contained in Rose Hill’s Articles in connection with the Mergers and (v) subject a certain number of its Class B ordinary shares of Rose Hill to vesting.

Standby Equity Purchase Agreement

In connection with the execution of the Business Combination Agreement and for purposes of obtaining equity financing on behalf of PubCo at Closing, Prize entered into a standby equity purchase agreement the Investor, pursuant to which, among other things, at the Closing, PubCo will have the right (but not the obligation) to sell to the Investor, and the Investor will purchase from PubCo, up to $150,000,000 of PubCo ordinary shares at a purchase price of 97% of the Market Price (as defined therein) of the PubCo ordinary shares, subject to the terms and conditions set forth therein.

For additional information regarding the Business Combination and the transactions contemplated thereby, see the Current Report on Form 8-K filed with the SEC on October 25, 2022.

Other than as specifically discussed, this Quarterly Report does not assume the closing of the Business Combination.

Notice of Delisting

On February 28, 2023, the Sponsor converted 4,000,000 of its Class B ordinary shares to Class A ordinary shares of the Company on a 1:1 basis as part of the Company’s plan to regain compliance with the Nasdaq Listing Rules. As a result, the Company’s market capitalization as of March 31, 2023, was $42,186,711. The newly converted Class A ordinary shares held by the Sponsor are not subject to redemptions and have no rights to funds held in the Trust Account.

Results of Operations

As of March 31, 2023, the Company had not commenced any operations. All activity through March 31, 2023, relates to the Company’s formation and IPO, and since the IPO, the search for a prospective Initial Business Combination. The Company will not generate any operating revenues until after the completion of a Business Combination, at the earliest. The Company will generate non-operating income in the form of earnings from the proceeds derived from the Initial Public Offering.

For the three months ended March 31, 2023, we had a net profit of $941,337 which consists of operating expenses of $261,708, earnings on investments held in trust account and other interest of $400,820, recovery of offering costs allocated to warrants of $270,725 and change in fair value of warrants of $531,500.

For the three months ended March 31, 2022, we had a net profit of $2,681,318 which consists of operating expenses of $285,168, Interest income on investments held in trust account and other interest of $14,780 and change in fair value of warrants of $2,951,706.

Liquidity and Capital Resources

For the three months ended March 31, 2023, there was $349,743 cash provided by operating activities.

We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (less income taxes payable), to complete our Initial Business Combination. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our business combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.

At March 31, 2023, we had cash of $45,935 outside of 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.

In order to finance transaction costs in connection with a business combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a business combination, the Company will repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a business combination does not close, the Company 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. 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. 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 warrants of the post business combination entity at a price of $1.25 per warrant. The warrants would be identical to the Private Placement Warrants. As of March 31, 2023, the Company had no outstanding borrowings under the Working Capital Loans. In addition, the Company does not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities.

In connection with the Company’s shareholder vote to approve the Extension Proposal on January 12, 2023, the holders of 14,118,106 of our Class A ordinary shares originally issued in our IPO exercised their right to redeem their shares for cash at a redemption price of approximately $10.36 per share, for an aggregate redemption amount of approximately $146 million.

We may need to raise additional funds in order to meet the expenditures required for operating our business. If our estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating and completing a business combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our business combination. Moreover, we may need to obtain additional financing either to complete our business combination or because we become obligated to redeem a significant number of our Public Shares upon consummation of our business Combination, in which case we may issue additional securities or incur debt in connection with such business combination. If we are unable to raise additional capital, we may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses. We cannot provide any assurance that new financing will be available to us on commercially acceptable terms, if at all. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time, which is considered to be one year from the issuance date of the unaudited condensed financial statements. These unaudited condensed financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should we be unable to continue as a going concern.

The underwriters were entitled to a deferred underwriting commissions of $0.50 per Unit, or $7,187,500 from the closing of the IPO. In association with the redemption of the Company’s Class A ordinary shares on January 12, 2023, the underwriters have agreed to a reduced commission of $1,500,000. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely if the Company completes an Initial Business Combination, subject to the terms of the underwriting agreement.

The Company treated the $5,687,500 reduction of the deferred underwriting commissions as a reversal of offering costs of the IPO. As such, $270,725 of recovery of offering costs allocated to warrants is reported on the condensed statement of operations and $5,416,775 of recovery of deferred underwriting commissions is reported on the condensed statement of changes in redeemable ordinary shares and shareholders’ deficit.

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 will qualify as an “emerging growth company” and under the JOBS Act will be 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 such, our financial statements may not be comparable to companies that comply with 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 of the Sarbanes-Oxley Act, (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 executive 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.

Recent Accounting Standards

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 condensed financial statements.

As a smaller reporting company as defined by Rule 12b-2 of the Exchange Act, we are not required to provide the information under this item.

 

Evaluation of Disclosure Controls and Procedures

As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2023. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective as of March 31, 2023 to ensure that information required to be disclosed in reports that are filed or submitted under the Exchange Act are (1) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms and (2) accumulated and communicated to Management, including the certifying officers, as appropriate to allow timely decisions regarding required disclosures. As previously reported in our 2022 Annual Report on Form 10-K, management concluded that the Company did not maintain adequate controls over the classification of the statement of cash flows. This material weakness continues to exist at March 31, 2023.

Changes in Internal Control Over Financial Reporting

Other than the matters discussed above, there were no changes in our internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

The following exhibits are filed or furnished as a part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.