References in this Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 2022 (the "Quarterly Report") to "we," "us," "our" or the
"Company" are to 10X Capital Venture Acquisition Corp. II, except where the
context requires otherwise. References to our "management" or our "management
team" refer to our officers and directors. The following discussion and analysis
of the Company's financial condition and results of operations should be read in
conjunction with our unaudited consolidated condensed financial statements and
related notes thereto included 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, as amended (the "Securities Act")
and Section 21E of the Securities Exchange Act of 1934, as amended (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" regarding the Company's financial position, business
strategy, plans to consummate the Company's initial business combination,
statements about the business operations and prospects of African Agriculture,
and the plans and objectives of management for future operations, 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. 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 sections of our
Annual Report on Form 10-K for the year ended December 31, 2021 (the "Annual
Report") filed with the U.S. Securities and Exchange Commission (the "SEC") on
March 30, 2022 and this Quarterly Report on Form 10-Q and elsewhere in our
filings 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
We are a blank check company incorporated on February 10, 2021 as a Cayman
Islands exempted company and formed for the purpose of effecting a merger, share
exchange, asset acquisition, share purchase, reorganization or similar business
combination with one or more businesses or entities.
On August 13, 2021, we consummated our initial public offering (the "Public
Offering") of 20,000,000 units, at $10.00 per unit (the "Units"), generating
gross proceeds of $200 million. Each Unit consists of one Class A ordinary
share, par value $0.0001 per share, and one-third of one redeemable warrant
(such Class A ordinary shares, the "Public Shares" and such warrants, the
"Public Warrants").
Simultaneously with the closing of the Public Offering, 10X Capital SPAC Sponsor
II LLC, a Cayman Islands limited liability company (the "Sponsor"), and Cantor
Fitzgerald & Co. ("Cantor") purchased an aggregate of 655,000 private placement
units (the "Private Placement Units"), each Private Placement Unit consisting of
one Class A ordinary share (the "Private Placement Shares") and one-third of one
redeemable warrant (the "Private Placement Warrants"), at a price of $10.00 per
Private Placement Unit, for an aggregate purchase price of $6,550,000, in a
private placement.
Upon the closing of the Public Offering on August 13, 2021, a total of
$200 million ($10.00 per Unit), comprised of $196 million from the proceeds of
the Public Offering and $4 million from the proceeds of the sale of the Private
Placement Units, was placed in a trust account (the "Trust Account").
As of October 1, 2021, our Class A ordinary shares and our Public Warrants began
separately trading on Nasdaq.
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On August 12, 2022, the Company, 10X Magic First Merger Sub, Inc., a Delaware
corporation and wholly owned subsidiary of the Company ("First Merger Sub"), 10X
Magic Second Merger Sub, LLC, a Delaware limited liability company and wholly
owned subsidiary of the Company ("Second Merger Sub"), and Prime Blockchain
Inc., a Delaware corporation ("PrimeBlock") entered into a Mutual Termination of
Merger Agreement pursuant to which the parties mutually agreed to terminate the
Merger Agreement by and among the Company, First Merger Sub, Second Merger Sub
and PrimeBlock, dated March 31, 2022 (the "PrimeBlock Merger Agreement")
effective as of such date.
As a result of the termination of the PrimeBlock Merger Agreement, the
PrimeBlock Merger Agreement and the Support Agreements (as defined in the
PrimeBlock Merger Agreement) are of no further force and effect.
In addition, pursuant to its terms, that certain stock purchase agreement, dated
March 31, 2022 by and between the Company and CF Principal Investments, LLC, a
Delaware limited liability company, was automatically terminated upon the
termination of the PrimeBlock Merger Agreement.
Recent Developments
The Merger Agreement
On November 2, 2022, we entered into an Agreement and Plan of Merger (the "AA
Merger Agreement") with 10X AA Merger Sub, Inc., a Delaware corporation and our
wholly-owned subsidiary (the "AA Merger Sub") and African Agriculture, Inc., a
Delaware corporation ("African Agriculture"). The AA Merger Agreement and the
transactions contemplated thereby were approved by our board of directors and
the boards of directors of African Agriculture.
Pursuant to the Merger Agreement, we will, subject to obtaining the required
shareholder approvals and at least one day prior to the Effective Time (as
defined in the AA Merger Agreement), change our jurisdiction of incorporation by
deregistering as a Cayman Islands exempted company and continuing and
domesticating as a corporation incorporated under the laws of the State of
Delaware (the "Domestication"). Following the Domestication, AA Merger Sub will
merge with and into African Agriculture (the "Merger"), with African Agriculture
surviving the Merger as our wholly-owned subsidiary. In connection with the
closing of the Merger (the "Closing"), we will change our name to "African
Agriculture Holdings Inc." ("New African Agriculture"). The Domestication, the
Merger and the other transactions contemplated by the Merger Agreement are
hereinafter referred to as the "Business Combination".
In accordance with the terms and subject to the conditions of the Merger
Agreement, at the effective time of the Merger (the "Effective Time"), each
share of common stock of African Agriculture issued and outstanding immediately
prior to the Effective Time, shall be converted into the right to receive the
number of shares of duly authorized, validly issued, fully paid and
nonassessable common stock of New African Agriculture ("New African Agriculture
Common Stock") equal to the quotient obtained by dividing (i) the sum of (1)
$450,000,000 and (2) the aggregate amount of any Company Pre-Closing Financing
(as defined in the AA Merger Agreement) by (ii) ten dollars ($10.00) by (y) the
sum, without duplication, of the aggregate number of shares of common stock of
African Agriculture that are (i) issued and outstanding immediately prior to the
Effective Time, (ii) issuable upon the exercise or settlement of options or
restricted stock units of African Agriculture (whether or not then vested or
exercisable) that are outstanding immediately prior to the Effective Time, or
(iii) issuable upon conversion of any African Agriculture convertible note
outstanding at the Effective Time (the "Merger Consideration").
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The AA Merger Agreement may be terminated under certain customary and limited
circumstances prior to the closing of the Business Combination, including, but
not limited to, (i) by our or African Agriculture's mutual written consent,
(ii) by us, subject to certain exceptions, if any of the representations and
warranties of African Agriculture are not true and correct or if African
Agriculture fails to perform any of its respective covenants or agreements set
forth in the AA Merger Agreement such that certain conditions to our obligations
cannot be satisfied and the breach (or breaches) of such representations or
warranties or failure (or failures) to perform such covenants or agreements, as
applicable, are not cured or cannot be cured within certain specified time
periods, (iii) by African Agriculture, subject to certain exceptions, if any of
the representations and warranties made by us are not true and correct or if we
fail to perform any of its covenants or agreements set forth in the AA Merger
Agreement such that the condition to the obligations of African Agriculture
cannot be satisfied and the breach (or breaches) of such representations or
warranties or failure (or failures) to perform such covenants or agreements, as
applicable, are not cured or cannot be cured within certain specified time
periods, (iv) by either us or African Agriculture if the Closing has not
occurred on or before May 13, 2023 (the "Termination Date"); provided that the
Termination Date may be extended at our discretion up to August 13, 2023;
provided further that such date is prior to the deadline by which we must
complete our initial business combination under our organizational documents,
(v) by either African Agriculture or us if the consummation of the Merger is
permanently enjoined or prohibited by the terms of a final, non-appealable
governmental order or other law; (vi) by either us or African Agriculture if the
Extension Proposal (as defined below) is not duly approved on or before
November 13, 2022, (vii) prior to obtaining the required approvals by our
shareholders, by African Agriculture if our board of directors changes its
recommendation that our shareholders approve the proposals included in the proxy
statement/prospectus or fails to include such recommendation in the proxy
statement/prospectus, (viii) by African Agriculture if certain required
approvals are not obtained by our shareholders after the conclusion of a meeting
of our shareholders held for the purpose of voting on such approvals, and
(ix) by us if the required approvals by African Agriculture stockholders have
not been obtained within ten (10) business days following the date that the
Registration Statement is disseminated by African Agriculture to its
stockholders.
African Agriculture will be obligated to pay us a termination fee equal to 1.0%
of the Merger Consideration if the AA Merger Agreement is terminated by us
pursuant to clause (ii) or (iv) of the preceding paragraph or by African
Agriculture pursuant to clause (iv) of the AA Merger Agreement. We will be
obligated to pay African Agriculture a termination fee equal to 1.0% of the
Merger Consideration if the AA Merger Agreement is terminated by African
Agriculture pursuant to clause (iii) of the preceding paragraph.
Acquiror Support Agreement
Concurrently with the execution of the AA Merger Agreement, we entered into the
Acquiror Support Agreement (the "Acquiror Support Agreement") with African
Agriculture, and the Sponsor and our directors and officers (collectively, the
"Class B Holders") pursuant to which the Class B Holders agreed to, among other
things, (i) vote at any meeting or pursuant to any action of written resolution
of our shareholders all of their class B ordinary shares, par value $0.0001 per
share, held of record or thereafter acquired in favor of the Business
Combination, the Domestication and the other Proposals (as defined in the Merger
Agreement) and (ii) be bound by certain other covenants and agreements related
to the Business Combination, in each case, on the terms and subject to the
conditions set forth in the Acquiror Support Agreement. Additionally, for a
period ending six months after Closing (the "First Lock-up Period"), the Class B
Holders will be subject to a lock-up with respect to one-third Lock-Up Shares
(as defined in the Acquiror Support Agreement), and for a period beginning six
months after Closing and ending twelve months after Closing (the "Second Lock-up
Period") the Class B Holders will be subject to a lock-up with respect to the
remaining two-thirds of the Lock-Up Shares; provided that the lock-up shall
expire upon the date on which the last reported sale price of the shares of New
African Agriculture Common Stock exceeds $12.00 per share for any twenty
(20) trading days within any consecutive thirty (30) trading day period during
the Second Lock-up Period.
The Non-Redemption Agreement
Concurrently with the execution of the Merger Agreement, certain of our IPO
anchor investors (the "10X II Anchor Investors") entered into non-redemption
agreements (the "Non-Redemption Agreements") with us and the Sponsor.
Pursuant to the Non-Redemption Agreements, such 10X II Anchor Investor agreed
for the benefit of us to vote certain of our ordinary shares now owned or
hereafter acquired (the "Subject 10X II Equity Securities"), representing
3,355,743 of our ordinary shares in the aggregate, in favor of the proposal to
amend our organizational documents to extend the time we are permitted to close
an initial business combination and not redeem the Subject 10X II Equity
Securities in connection with such proposal. In connection with these
commitments from the 10X II Anchor Investors, Sponsor has agreed to transfer to
each 10X II Anchor Investor an amount of its Class B ordinary shares following
the Closing of the Merger.
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The Standby Equity Purchase Agreement
Concurrently with the execution of the AA Merger Agreement, we entered into a
Standby Equity Purchase Agreement ("SEPA") with YA II PN, Ltd. ("Yorkville")
pursuant to which, subject to the consummation of the Business Combination, New
African Agriculture has the option, but not the obligation, to issue, and
Yorkville shall subscribe for, an aggregate amount of up to $100 million of New
African Agriculture Common Stock at the time of New African Agriculture's
choosing during the term of the agreement, subject to certain limitations,
including caps on issuance and subscriptions based on trading volumes. Each
advance under the SEPA (an "Advance") may be for an aggregate amount of New
African Agriculture Common Stock purchased at 96% of the Market Price during a
one-day pricing period or 97% of the Market Price during a three-day pricing
period elected by New African Agriculture. The "Market Price" is defined in the
SEPA as the VWAP (as defined below) during the trading day, in the case of a one
day pricing period, or the lowest daily VWAP of the three consecutive trading
days, in the case of a three day pricing period, commencing on the trading day
on which New African Agriculture submits an Advance notice to Yorkville. "VWAP"
means, for any trading day, the daily volume weighted average price of New
African Agriculture Common Stock for such date on Nasdaq as reported by
Bloomberg L.P. during regular trading hours or such other period in the case of
a one-day trading period. The SEPA will continue for a term of three years
commencing from the sixth trading day following the closing of the Business
Combination (the "SEPA Effective Date").
Pursuant to the SEPA, New African Agriculture will pay to Yorkville a commitment
fee of $1.0 million, which is to be paid on the SEPA Effective Date. New African
Agriculture can elect to pay the commitment fee by issuing New African
Agriculture Common Stock to Yorkville in an amount equal to the commitment fee
divided by the average daily VWAP for the five consecutive trading days prior to
the SEPA Effective Date.
The Forward Purchase Agreement
Simultaneously with the execution of the AA Merger Agreement, we and African
Agriculture entered into an OTC Equity Prepaid Forward Transaction (the "Forward
Purchase Agreement") with Vellar Opportunity Fund SPV LLC - Series 8 ("Seller"),
a client of Cohen & Company Financial Management, LLC ("Cohen"). Pursuant to the
Forward Purchase Agreement, Seller intends, but is not obligated, to purchase
through a broker in the open market (a) our Class A ordinary shares, par value
$0.0001 per share (the "Shares") after the date of our redemption deadline from
holders of Shares, including those who have elected to redeem Shares (such
purchased Shares, the "Recycled Shares") pursuant to the redemption rights set
forth in our amended and restated memorandum and articles of association in
connection with the Business Combination and (b) additional Shares in an
issuance from us (such Shares, the "Additional Shares" and, together with the
Recycled Shares, the "Subject Shares"). The aggregate total Subject Shares will
be 4,000,000, subject to automatic reduction to equal the amount of our ordinary
shares outstanding as of the redemption deadline and subject to increase to up
to 10,000,000 upon mutual agreement of us and Seller (the "Maximum Number of
Shares"). Seller has agreed to waive any redemption rights with respect to any
Subject Shares in connection with the Business Combination.
Prior to maturity, Seller may also purchase through a broker in the open market
additional Shares, subject to adjustment, which Shares shall be incremental to
the Maximum Number of Shares and shall not be included in the Maximum Number of
Shares under the Forward Purchase Agreement.
The Forward Purchase Agreement provides that following the closing of the
Business Combination, we will pay to Seller, out of funds held in its account,
an amount (the "Prepayment Amount") equal to (x) the pre-share redemption price
(the "Initial Price") multiplied by (y) the number of Recycled Shares on the
date of such prepayment. At our option, up to 10% of such Prepayment Amount may
be paid to us and netted from the Prepayment Amount (the "Prepayment
Shortfall").
From time to time following the closing of the SEPA, Seller, in its discretion,
may sell the Subject Shares and remit to us an amount equal to the amount of
such Subject Shares multiplied by the Reset Price (as defined in the Forward
Purchase Agreement); provided that no proceeds will be paid to us in respect of
such sales of Subject Shares with net proceeds equal to the Prepayment
Shortfall.
Upon the occurrence of the Maturity Date (as defined in the Forward Purchase
Agreement), we are obligated to pay to Seller an amount equal to the product of
(a) (x) the Maximum Number of Shares, less (y) the number of Terminated Shares
(as defined in the Forward Purchase Agreement), multiplied by (b) $2.00 payable
in cash or in shares at our option. The Maturity Date may be accelerated upon
occurrences described in the Forward Purchase Agreement.
We have agreed to file, upon the request of the Seller, a registration statement
with the SEC registering the resale of the Subject Shares and the Share
Consideration under the Securities Act of 1933, within thirty (30) days
following such request. Entities and funds managed by Cohen own equity interests
in the Sponsor.
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The Forward Purchase Agreement contains additional representations, warranties,
indemnities, agreements and termination rights of the parties thereto.
If we have not completed our initial business combination within such time
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 (which interest shall be
net of taxes payable and up to $100,000 of interest to pay dissolution
expenses), divided by the number of then outstanding public shares, which
redemption will completely extinguish public shareholders' rights as
shareholders (including the right to receive further liquidating distributions,
if any), and (iii) as promptly as reasonably possible following such redemption,
subject to the approval of our remaining shareholders and our board of
directors, liquidate and dissolve, subject in each case, to our obligations
under Cayman Islands law to provide for claims of creditors and the requirements
of other applicable law.
We cannot assure you that our plans to complete our initial business combination
will be successful.
Non-Redemption Agreements
On November 2, 2022, concurrently with the execution of the AA Merger Agreement,
on November 4, 2022, and on November 8, 2022, certain of our Public Offering
anchor investors (the "Anchor Investors") entered into non-redemption agreements
(the "Non-Redemption Agreements") with us and our Sponsor. Pursuant to the
Non-Redemption Agreements, such Anchor Investors agreed for our benefit to
(i) vote certain of our ordinary shares now owned or hereafter acquired (the
"Subject Equity Securities"), representing 3,705,743 of our ordinary shares in
the aggregate, in favor of the proposal to amend our organizational documents to
extend the time we are permitted to close a business combination and (ii) not
redeem the Subject Equity Securities in connection with such proposal. In
connection with these commitments from the Anchor Investors, our Sponsor has
agreed to transfer to each Anchor Investor an amount of our Class B ordinary
shares on or promptly after the consummation of the Business Combination.
Extraordinary General Meeting
On November 9, 2022, we held an extraordinary general meeting of shareholders
(the "Extraordinary General Meeting"), to vote on an amendment to our Amended
and Restated Memorandum and Articles of Association to, among other things,
extend the date by which we must (1) consummate an initial business combination,
(2) cease our operations except for the purpose of winding up if we fail to
complete such initial business combination, and (3) redeem all of our Class A
ordinary shares included as part of the units sold in our Public Offering (such
proposal, the "Extension Proposal"). At the meeting our shareholders voted to
amend our Amended and Restated Memorandum and Articles of Association by special
resolution, extending the date by which we must consummate our initial business
combination from November 13, 2022 to May 13, 2023. On November 9, 2022, the
Company filed the Special Resolution and the Company's Second Amended and
Restated Memorandum and Articles of Association with the Cayman Islands
Registrar of Companies.
In connection with its solicitation of proxies in connection with the Extension
Proposal, the Company was required to permit its public shareholders to redeem
their Public Shares. Of the 20,000,000 Public Shares outstanding with redemption
rights, a total of 212 of our shareholders elected to redeem 15,357,970 Public
Shares at a per share redemption price of $10.09. As a result, approximately
$154.9 million will be removed from the Trust Account to pay such holders, and
approximately $46.9 million will remain in the Trust Account. Following the
redemptions, we will have 4,642,030 Public Shares with redemption rights
outstanding.
See the Definitive Proxy Statement on Schedule 14A filed by the Company with the
SEC on October 19, 2022 and the Current Report on Form 8-K filed by the Company
with the SEC on November 9, 2022 for additional information.
Liquidity and Going Concern
As of September 30, 2022, we had approximately $147,000 outside of the Trust
Account and a working capital deficit of approximately $7.4 million.
Our liquidity needs up to September 30, 2022 had been satisfied through a
payment from the Sponsor of $25,000 for Class B ordinary shares to cover certain
offering costs and the loan under an unsecured promissory note from the Sponsor
of $81,457. The promissory note was fully repaid upon the closing of the Public
Offering. 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 September 30, 2022 and December 31, 2021, there were no
amounts outstanding under any working capital loans.
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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,"
management has determined that the liquidity condition and date for 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 we be required to liquidate
after May 13, 2023. The condensed consolidated financial statements do not
include any adjustment that might be necessary if we are unable to continue as a
going concern. We intend to complete an initial business combination before the
mandatory liquidation date. Over this time period, we will be using the funds
outside of the Trust Account 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 an initial business combination.
Results of Operations
Our entire activity from inception to September 30, 2022 related to our
formation, the preparation for the Public Offering, and since the closing of the
Public Offering, the search for a prospective initial business combination. We
will not generate any operating revenues until after the completion of our
initial business combination. We generate non-operating income in the form of
investment income from the Trust Account. We will continue to incur increased
expenses as a result of being a public company (for legal, financial reporting,
accounting and auditing compliance), as well as for due diligence expenses.
For the three months ended September 30, 2022, we incurred a net loss of
$925,998, which consisted of $1,768,741 in general and administrative expense
and $60,000 in administrative expenses-related party, partially offset by
$902,743 in income from investments held in Trust Account.
For the three months ended September 30, 2021, we had net loss of $305,586,
which consisted of formation and operating costs of $306,845 and interest income
on investments held in the Trust Account of $1,259.
For the nine months ended September 30, 2022, we incurred a net loss of
$6,570,706, which consisted of $7,583,664 in general and administrative expense
and $60,000 in administrative expenses-related party, partially offset by
$1,192,958 in income from investments held in Trust Account.
For the period from February 10, 2021 through September 30, 2021, we had net
loss of $317,317, which consisted of formation and operating costs of $318,576
and interest income on investments held in the Trust account of $1,259.
Commitments and Contingencies
Registration and Shareholder Rights
Pursuant to a registration rights agreement entered into on August 10, 2021, the
holders of Class B ordinary shares, Private Placement Units, Private Placement
Shares and Private Placement Warrants and the Class A ordinary shares underlying
such Private Placement Warrants and Private Placement Units that may be issued
upon conversion of the working capital loans will have registration rights. We
will bear the expenses incurred in connection with the filing of any such
registration statements.
Underwriting Agreement
We granted the underwriters a 45-day option from August 10, 2021 to purchase up
to 3,000,000 additional Units at the Public Offering price less the underwriting
discounts and commissions. On September 25, 2021, the over-allotment option
expired.
The underwriters were entitled to an underwriting discount of approximately
$4.0 million, paid upon the closing of the Public Offering. In addition,
approximately $7.0 million in the aggregate will be payable to the underwriters
for deferred underwriting commissions. The deferred fee will become payable to
the underwriters from the amounts held in the Trust Account solely in the event
that we complete an initial business combination, subject to the terms of the
underwriting agreement.
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Critical Accounting Policies
The preparation of these unaudited condensed consolidated financial statements
in conformity with U.S. generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the condensed consolidated financial statements and the reported
amounts of expenses during the reporting period. Actual results could differ
from those estimates. We have identified the following as our critical
accounting policies:
Class A Ordinary Shares Subject to Possible Redemption
Class A ordinary shares subject to mandatory redemption (if any) are classified
as liability instruments and are measured at fair value. Conditionally
redeemable Class A ordinary shares (including Class A ordinary shares that
feature redemption rights that are either within the control of the holder or
subject to redemption upon the occurrence of uncertain events not solely within
our control) are classified as temporary equity. At all other times, Class A
ordinary shares are classified as shareholders' equity. Our Class A ordinary
shares feature certain redemption rights that are considered to be outside of
our control and subject to occurrence of uncertain future events. Accordingly,
all outstanding Class A ordinary shares subject to possible redemption are
presented at redemption value as temporary equity, outside of the shareholders'
equity section of our consolidated balance sheet.
Under ASC 480, 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. Immediately upon the closing of the Public Offering, we recognized the
accretion from initial book value to redemption amount value. The change in the
carrying value of the redeemable Class A ordinary shares resulted in charges
against additional paid-in capital (to the extent available) and accumulated
deficit.
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. This presentation 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.
The calculation of diluted net income (loss) per ordinary share does not
consider the effect of the Public Warrants and the Private Placement Warrants to
purchase an aggregate of 6,885,000 Class A ordinary shares since their inclusion
would be anti-dilutive under the treasury stock method. As a result, diluted net
income (loss) per share is the same as basic net income (loss) per share for the
three and nine months ended September 30, 2022, the three months ended September
30, 2021 and for the period from February 10, 2021 (inception) through
September 30, 2021. 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
In August 2020, the FASB issued ASU No. 2020-06, "Debt with Conversion and Other
Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity's Own
Equity (Subtopic 815-40)" ("ASU 2020-06"), which simplifies the accounting for
convertible instruments. The guidance removes certain accounting models that
separate the embedded conversion features from the host contract for convertible
instruments. ASU 2020-06 allows for a modified or full retrospective method of
transition. This update is effective for fiscal years beginning after January 1,
2024 and interim periods within those fiscal years. Early adoption is permitted.
We are currently evaluating the impact this change will have on our condensed
consolidated financial statements.
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Other recent accounting pronouncements issued by the FASB (including its
Emerging Issues Task Force), the American Institute of Certified Public
Accountants, and the SEC did not, or are not believed by management to, have a
material impact on our condensed consolidated financial statements.
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 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 a result, our condensed consolidated
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 independent registered public accounting firm'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 independent registered public accounting firm'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 Public Offering or until we are no longer an
"emerging growth company," whichever is earlier.
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