Item 1. Condensed Consolidated Financial Statements
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2023
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS
OPERATIONS
10X Capital Venture Acquisition Corp. II (the
“Company”) is a blank check company incorporated as a Cayman Islands exempted company on February 10, 2021. The Company
was 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 (the “Business Combination”).
As of March 31, 2023, the Company had not
commenced any operations. All activity for the period from February 10, 2021 (inception) through March 31, 2023 relates to the Company’s
formation and the Initial Public Offering (as defined below), and, since the closing of the Initial Public Offering, the search for and
efforts toward completing an 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 interest income from the
proceeds held in the Trust Account (as defined below).
The Company’s Sponsor is 10X Capital SPAC Sponsor II LLC, a Cayman
Islands limited liability company (the “Sponsor”). The registration statement for the Company’s Initial Public Offering
was declared effective on August 10, 2021. On August 13, 2021, the Company consummated its initial public offering (the “Initial
Public Offering”) of 20,000,000 units (the “Units”) at $10.00 per Unit, generating gross proceeds of $200.0 million,
and incurring offering costs of approximately $21.7 million, of which $7.0 million was for deferred underwriting commissions (see Note
6). Each Unit is comprised of one Class A ordinary share, par value $0.0001 per share (the “Public Shares”) and one-third
of one redeemable warrant (the “Public Warrants”), each whole warrant entitling the holder to purchase one Public Share.
Simultaneously with the consummation of the Initial
Public Offering, the Company consummated the private placement (the “Private Placement”) of 655,000 Units (the “Private
Units”) to the Sponsor and Cantor Fitzgerald & Co. (“Cantor”), at a price of $10.00 per Private Unit, generating
gross proceeds of approximately $6.6 million. Each Private Unit is comprised of one Class A ordinary share (a “private placement
share”) and one-third of one redeemable warrant (each whole warrant, a “private placement warrant”), with each whole
warrant entitling the holder to purchase one private placement share at an exercise price of $11.50 per share.
Following the closing of the Initial Public Offering
on August 13, 2021, $200,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering
and the sale of the Private Units and $12,515 overfunded by Sponsor, which was returned to the Sponsor on August 17, 2021, was placed
in a Trust Account (“Trust Account”) and is being invested only in U.S. government treasury obligations with a maturity of
185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act of 1940, as amended
(the “Investment Company Act”), which invest only in direct U.S. government treasury obligations. Except with respect to interest
earned on the funds held in the Trust Account that may be released to the Company to pay its taxes, up to $100,000 to pay dissolution
expenses, the proceeds from the Initial Public Offering and the sale of the Private Units will not be released from the Trust Account
until the earliest of (i) the completion of the initial Business Combination, (ii) the redemption of the Public Shares if the Company
is unable to complete the initial Business Combination within 21 months from the closing of the Initial Public Offering, subject to applicable
law, and (iii) the redemption of the Public Shares properly submitted in connection with a shareholder vote to amend the Company’s
amended and restated memorandum and articles of association to modify the substance or timing of its obligation to redeem 100% of the
Public Shares if the Company has not consummated the initial Business Combination within 21 months from the closing of the Initial Public
Offering or with respect to any other material provisions relating to shareholders’ rights or pre-initial Business Combination activity.
The proceeds deposited in the Trust Account could become subject to the claims of the Company’s creditors, if any, which could have
priority over the claims of the public shareholders.
10X CAPITAL VENTURE ACQUISITION CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2023
The Company’s Business Combination must
be with one or more target businesses that together have a fair market value equal to at least 80% of the net balance in the Trust Account
(excluding the amount of deferred underwriting discounts held and taxes payable on the income earned on the Trust Account) at the time
of the signing an agreement to enter into a Business Combination. However, the Company will only complete a Business Combination if the
post-Business Combination 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 that the Company will be able to successfully effect a Business Combination.
The Company will provide the public shareholders
with the opportunity to redeem all or a portion of their Public Shares upon the completion of the initial Business Combination either
(i) in connection with a shareholder meeting called to approve the Business Combination or (ii) without a shareholder vote by means of
a tender offer. The decision as to whether the Company will seek shareholder approval of a proposed Business Combination or conduct a
tender offer will be made by the Company, solely in its discretion. The public shareholders will be entitled to redeem their Public Shares
at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account calculated as of two business
days prior to the consummation of the initial Business Combination, including interest earned on the funds held in the Trust Account (which
interest shall be net of taxes payable), divided by the number of then outstanding Public Shares, subject to the limitations and on the
conditions described herein. The amount in the Trust Account at March 31, 2023 was $10.27 per Public Share.
The Class A ordinary shares subject to possible redemption is recorded
at a redemption value and classified as temporary equity, in accordance with Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) Topic 480, “Distinguishing Liabilities from Equity” (“ASC 480”).
In such case, the Company will proceed with a Business Combination if the Company seeks shareholder approval, a majority of the issued
and outstanding shares voted are voted in favor of the Business Combination. If a shareholder vote is not required by law and the Company
does not decide to hold a shareholder vote for business or other reasons, the Company will, pursuant to the second amended and restated
memorandum and articles of association which the Company adopted upon the consummation of the Initial Public Offering (as amended on May
10, 2023, the “Amended and Restated Memorandum and Articles of Association”), conduct the redemptions pursuant to the tender
offer rules of the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents with the SEC prior to completing
a Business Combination. If, however, shareholder approval of the transactions is required by law, or the Company decides to obtain shareholder
approval for business or other reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the
proxy rules and not pursuant to the tender offer rules. Additionally, each Public Shareholder may elect to redeem their Public Shares
irrespective of whether they vote for or against the proposed transaction or vote at all. If the Company seeks shareholder approval in
connection with a Business Combination, the initial shareholders (as defined below) agreed to vote their Founder Shares (as defined below
in Note 5) and any Public Shares purchased during or after the Initial Public Offering in favor of a Business Combination. In addition,
the initial shareholders agreed to waive their redemption rights with respect to their Founder Shares, the private placement shares underlying
the Private Units and Public Shares in connection with the completion of a Business Combination.
10X CAPITAL VENTURE ACQUISITION CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2023
The Company has until August 13, 2023, with the option to extend up
to six times, by an additional month each time, upon approval by the Company’s board of directors, up until February 13, 2024 (the
“Combination Period”) (see discussion below), to complete the initial Business Combination. If the Company is unable to complete
the Business Combination within the Combination Period, the Company 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 the Company’s remaining shareholders and the Company’s board of directors, liquidate
and dissolve, subject, in each case, to the Company’s obligations under Cayman Islands law to provide for claims of creditors and
the requirements of other applicable law.
The Sponsor, officers and directors have agreed
to (i) waive their redemption rights with respect to any Founder Shares, the private placement shares underlying the Private Units, and
Public Shares they hold in connection with the completion of the Business Combination, (ii) waive their redemption rights with respect
to any Founder Shares and Public Shares they hold in connection with a shareholder vote to approve an amendment to the Amended and Restated
Memorandum and Articles of Association, and (iii) waive their rights to liquidating distributions from the Trust Account with respect
to any Founder Shares they hold if the Company fails to complete the Business Combination within the Combination Period or any extended
period of time that the Company may have to consummate the Business Combination as a result of an amendment to the Amended and Restated
Memorandum and Articles of Association (although they will be entitled to liquidating distributions from the Trust Account with respect
to any Public Shares they hold if the Company fails to complete the Business Combination within the Combination Period).
The Sponsor has agreed that it will be liable
to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective
target business with which the Company has entered into a written letter of intent, confidentiality or other similar agreement or Business
Combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10.00 per Public Share and (ii) the
actual amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.00 per
Public Share due to reductions in the value of the assets in the Trust Account, less taxes payable, provided that such liability will
not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held
in the Trust Account (whether or not such waiver is enforceable) nor will it apply to any claims under the Company’s indemnity of
the underwriter of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act. However, the
Company has not asked the Sponsor to reserve for such indemnification obligations, nor has the Company independently verified whether
the Sponsor has sufficient funds to satisfy its indemnity obligations and the Company believes that the Sponsor’s only assets are
securities of the Company. Therefore, the Company cannot assure that the Sponsor would be able to satisfy those obligations.
Proposed Business Combination
On November 2, 2022, the Company entered into an Agreement and Plan
of Merger (as amended by that certain First Amendment to Agreement and Plan of Merger, dated as of January 3, 2023, and as may be further
amended, supplemented or otherwise modified from time to time, the “Merger Agreement”), by and among the Company, 10X AA Merger
Sub, Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Merger Sub”), and African Agriculture, Inc.,
a Delaware corporation (“African Agriculture”).
10X CAPITAL VENTURE ACQUISITION CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2023
Concurrently with the execution of the Merger
Agreement and on November 4, 2022, certain anchor investors in the Initial Public Offering (the “Initial 10X II Anchor Investors”)
entered into non-redemption agreements (the “Initial Non-Redemption Agreements”) with the Company and the Sponsor.
On November 8, 2022, an additional investor of
the Company (together with the Initial 10X II Anchor Investors, the “10X II Investors”) entered into a non-redemption agreement
(together with the Initial Non-Redemption Agreements, the “Non-Redemption Agreements”) with the Company and the Sponsor.
Pursuant to the Non-Redemption Agreements, such
10X II Investors agreed for the benefit of the Company to (i) vote certain of the Company’s Public Shares now owned or acquired
(the “Subject 10X II Equity Securities”), representing 3,705,743 Public Shares in the aggregate, in favor of the proposal
to amend the Company’s organizational documents to extend the time the Company is permitted to close a Business Combination and
(ii) not redeem the Subject 10X II Equity Securities in connection with such amendment to the organizational documents. In connection
with these commitments from the 10X II Investors, the Sponsor has agreed to transfer to each 10X II Investor an amount of its Class B
ordinary shares on or promptly after the consummation of the Business Combination.
Standby Equity Purchase Agreement
Concurrently with the execution of the Merger Agreement,
the Company entered into the Standby Equity Purchase Agreement (“SEPA”) with Yorkville Advisors Global, LP (“Yorkville”),
pursuant to which, subject to the consummation of the Business Combination, African Agriculture Holdings Inc., a Delaware corporation
(“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.
10X CAPITAL VENTURE ACQUISITION CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2023
Forward Purchase Agreement
Simultaneously with the execution of the Merger
Agreement, the Company 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)
the Public Shares, after the date of the Company’s redemption deadline in connection with a vote to approve the Business Combination
from holders of Public Shares, including those who have elected to redeem Shares (such purchased Public Shares, the “Recycled Shares”)
pursuant to the redemption rights set forth in the Amended and Restated Memorandum and Articles of Association in connection with the
Business Combination and (b) additional Public Shares in an issuance from the Company (such additional Public 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 the Company’s Public Shares outstanding as of the redemption deadline and
subject to increase to up to 10,000,000 upon mutual agreement of the Company 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.
First Extension
On November 9, 2022, the Company’s shareholders
approved, by special resolution, the proposal to amend and restate the Company’s amended and restated memorandum and articles of
association, to extend the date by which the Company must (1) consummate a Business Combination, (2) cease its operations except for the
purpose of winding up if it fails to complete such Business Combination, and (3) redeem all of the Public Shares included as part of the
Units sold in the Initial Public Offering, from November 13, 2022 to May 13, 2023 (the “First Extension,” and such proposal,
the “First Extension Proposal”). In connection with the Company’s solicitation of proxies in connection with the First
Extension Proposal, the Company was required to permit the public shareholders to redeem their Public Shares. Of the Public Shares outstanding
with redemption rights, a total of 212 of the Company’s shareholders elected to redeem an aggregate total of 15,357,970 Public Shares
at a per share redemption price of $10.09. As a result of such redemptions, approximately $154.9 million was removed from the Trust Account
to pay such holders, and approximately $47.8 million remained in the Trust Account as of March 31, 2023. Following the redemptions
and as of March 31, 2023, the Company had 4,642,030 Public Shares, including the Public Shares underlying the Units outstanding,
with redemption rights outstanding.
Second Extension
On May 2, 2023 and May 5, 2023, certain investors
of the Company (the “Second Extension 10X II Investors”) entered into non-redemption agreements (the “Second Extension
Non-Redemption Agreements”) with the Company and the Sponsor. Pursuant to the Second Extension Non-Redemption Agreements, the Second
Extension 10X II Investors agreed for the benefit of the Company to (i) vote certain Public Shares owned or acquired (the “Second
Extension Subject 10X II Equity Securities”) in favor of the Second Extension Proposal (as defined below) and (ii) not redeem the
Second Extension Subject 10X II Equity Securities in connection with the Second Extension Proposal. IN exchange for these commitments
from the Second Extension 10X II Investors, the Sponsor agreed to transfer to the Second Extension 10X II Investors (a) an aggregate of
189,011 Founder Shares in connection with the Second Extended Date (as defined below) and (b) to the extent the Company’s board
of directors agrees to further extend the date to consummate a Business Combination to the Additional Extension Date (as defined below),
an aggregate amount of up to 567,032 Founder Shares, which includes the Founder Shares referred to in clause (a), on or promptly after
the consummation of the Business Combination.
On May 10, 2023, in connection with the extraordinary
general meeting of shareholders, shareholders agreed to, among other things, amend the Company’s second amended and restated memorandum
and articles of association to further extend the date by which the Company has to consummate a Business Combination (the “Second
Extension Proposal”) from May 13, 2023 to August 13, 2023 (the “Second Extended Date”) and to allow the board of directors
of the Company, without shareholder approval, to elect to further extend the date to consummate a Business Combination after the Second
Extended Date up to six times, by an additional month each time, up to February 13, 2024 (the “Additional Extension Date”).
10X CAPITAL VENTURE ACQUISITION CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2023
Liquidity and Going Concern
As of March 31, 2023, the Company had approximately
$42,569 in cash and a working capital deficit of approximately $11.4 million.
The Company’s liquidity needs prior to the consummation of the
Initial Public Offering were satisfied through the payment of $25,000 from the Sponsor to cover certain expenses on behalf of the Company
in exchange for issuance of Founder Shares (as defined in Note 5), and loan proceeds from the Sponsor of approximately $87,000 under an
unsecured promissory note. The Company fully repaid the amounts borrowed under the unsecured promissory note upon closing of the Initial
Public Offering on August 13, 2021. Subsequent to the consummation of the Initial Public Offering, the Company’s liquidity
has been satisfied through the net proceeds from the consummation of the Initial Public Offering and the Private Placement held outside
of the Trust Account. In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor, members
of the Company’s founding team or any of their affiliates provided the Company with $1,162,002 in Working Capital Loans (as defined
in Note 5) (of which up to $1.5 million may be converted at the lender’s option into warrants to purchase the Company’s Class
A ordinary shares at an exercise price of $11.50 per share).
In connection with the Company’s 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 the Company’s ability to continue as
a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate
after August 13, 2023. The unaudited condensed consolidated financial statements do not include any adjustment that might be necessary
if the Company is unable to continue as a going concern. The Company intends to complete an initial Business Combination before Combination
Period. Over this time period, the Company will be using the funds outside of the Trust Account for paying existing accounts payable,
identifying and evaluating prospective 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 a Business
Combination.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
of the Company are presented in conformity with accounting principles generally accepted in the United States of America (“U.S.
GAAP”) and pursuant to the rules and regulations of the SEC. Certain information or footnote disclosures normally included in financial
statements prepared in accordance with U.S. GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for
interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation
of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed consolidated
financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of
the financial position, operating results and cash flows for the periods presented. The accompanying unaudited condensed consolidated
financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K as filed with the SEC on April
17, 2023. The interim results for the three months ended March 31, 2023, are not necessarily indicative of the results to be expected
for the year ending December 31, 2023, or for any future periods.
10X CAPITAL VENTURE ACQUISITION CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2023
Principles of Consolidation
The accompanying unaudited condensed consolidated
financial statements include the accounts of the Company and its wholly owned subsidiary. All significant intercompany accounts and transactions
have been eliminated in consolidation.
Emerging Growth Company
The Company is an “emerging growth company,” as defined
in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart Our Business
Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements
that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required
to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding
executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory
vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts
emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that
is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered
under the Securities Exchange Act of 1934, as amended) are required to comply with the new or revised financial accounting standards.
The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply
to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended
transition period which means that when a standard is issued or revised and it has different application dates for public or private companies,
the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised
standard. This may make comparison of the Company’s unaudited condensed consolidated financial statements with another public company
which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period
difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of the unaudited condensed consolidated
financial statements in conformity with U.S. GAAP 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 unaudited condensed consolidated financial
statements and the reported amounts of revenues and expenses during the reporting periods. Making estimates requires management to exercise
significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances
that existed at the date of the unaudited condensed consolidated financial statements, which management considered in formulating its
estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ from
those estimates.
Concentration of Credit Risk
Financial instruments that potentially subject
the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed the Federal
Deposit Insurance Corporation coverage limit of $250,000. Any loss incurred or a lack of access to such funds could have a significant
adverse impact on the Company’s financial condition, results of operations, and cash flows.
10X CAPITAL VENTURE ACQUISITION CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2023
Cash and Cash Equivalents
The Company considers all short-term investments
with an original maturity of three months or less when purchased to be cash equivalents. The Company had no cash equivalents as of March 31,
2023 and December 31, 2022.
Investments Held in Trust Account
The Company’s 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 the Company’s investments held in the Trust Account are comprised of U.S. government securities, the investments are
classified as trading securities. When the Company’s 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 condensed
consolidated 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 are included in income from investments held in Trust Account in the accompanying condensed consolidated statements
of operations. The estimated fair values of investments held in the Trust Account are determined using available market information.
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which
qualify as financial instruments under ASC 820, “Fair Value Measurements,” approximates the carrying amounts represented in
the condensed consolidated balance sheets, primarily due to their short-term nature.
Fair Value of Financial Instruments
Fair value is defined as the price that would be received for sale
of an asset or paid for transfer of a liability in an orderly transaction between market participants at the measurement date. U.S. GAAP
establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest
priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority
to unobservable inputs (Level 3 measurements). These tiers consist of:
| ● | Level 1, defined as observable inputs such as quoted prices
(unadjusted) for identical instruments in active markets; |
| ● | Level 2, defined as inputs other than quoted prices in active
markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices
for identical or similar instruments in markets that are not active; and |
| ● | Level 3, defined as unobservable inputs in which little or
no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques
in which one or more significant inputs or significant value drivers are unobservable. |
In some circumstances, the inputs used to measure
fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is
categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.
10X CAPITAL VENTURE ACQUISITION CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2023
Working Capital Loan—Related Party
The Company accounts for its New Note (as defined below in Note 5)
under ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). Under ASC 815-15-25, the election can be made at the
inception of a financial instrument to account for the instrument under the fair value option under ASC Topic 825, “Financial Instruments”
(“ASC 825”). The primary reason for electing the fair value option is to provide better information on the financial liability
amount given current market and economic conditions of the Company. As a result of applying the fair value option, the Company records
each draw at fair value with a gain or loss recognized at issuance, and subsequent changes in fair value recorded as change in the fair
value of convertible note—related party on the accompanying condensed consolidated statements of operations. The fair value are
classified on a combined basis with the loan in promissory note – related party in the accompanying condensed consolidated balance
sheets.
Derivative Financial Instruments
The Company does not use derivative instruments to hedge exposures
to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments to determine if such instruments
are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and ASC 815. The classification of derivative
instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting
period.
The Public Warrants and the Private Placement
Warrants are classified in accordance with ASC Topic 480, “Distinguishing Liabilities and Equity” (“ASC 480”)
and ASC 815, which provides that the warrants are not precluded from equity classification. Equity-classified contracts were initially
measured at fair value (or allocated value). Subsequent changes in fair value will not be recognized as long as the contracts continue
to be classified in equity in accordance with ASC 480 and ASC 815.
The Forward Purchase Agreement (defined in Note 1) is recognized as
a derivative liability in accordance with ASC 815. Accordingly, the Company recognizes the instrument as an asset or liability at fair
value and with changes in fair value recognized in the Company’s condensed consolidated statements of operations. The estimated
fair value of the Forward Purchase Agreement is measured at fair value using a Monte Carlo simulation model.
Offering Costs Associated with the Initial
Public Offering
Offering costs consisted of legal, accounting,
underwriting and other costs incurred that were directly related to the Initial Public Offering. Offering costs were allocated to the
separable financial instruments issued in the Initial Public Offering based on a relative fair value basis, compared to total proceeds
received. Offering costs associated with Public Warrants are recognized net in equity. Offering costs associated with the Class A ordinary
shares were charged against the carrying value of Class A ordinary shares upon the completion of the Initial Public Offering. The Company
classifies deferred underwriting commissions as non-current liabilities as their liquidation is not reasonably expected to require the
use of current assets or require the creation of current liabilities.
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 possible 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. The Company’s Class A ordinary shares feature certain redemption
rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly,
all outstanding Class A ordinary shares subject to possible redemption are presented at redemption value as temporary equity, outside
of the shareholders’ deficit section of the Company’s condensed consolidated balance sheets.
10X CAPITAL VENTURE ACQUISITION CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2023
Under ASC 480, the Company has 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 Initial Public Offering, the Company 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 Loss Per Ordinary Share
The Company complies with accounting and disclosure
requirements of FASB ASC Topic 260, “Earnings Per Share.” The Company has two classes of shares, which are referred to as
Class A ordinary shares and Class B ordinary shares. Income and losses are shared pro rata between the two classes of shares. Net loss
per ordinary share is calculated by dividing the net loss by the weighted average ordinary shares outstanding for the respective period.
The calculation of diluted net loss per ordinary
shares does not consider the effect of the Public Warrants, the Private Placement Warrants, and the warrants underlying the Working Capital
Units, if any since their inclusion would be anti-dilutive under the treasury stock method. As a result, diluted net loss per share is
the same as basic net loss per share for three months ended March 31, 2023 and 2022. Accretion associated with the redeemable Class A
ordinary shares is excluded from earnings per share as the redemption value approximates fair value.
The following table presents a reconciliation
of the numerator and denominator used to compute basic and diluted net loss per share for each class of ordinary shares:
| |
For the Three Months Ended March 31, | |
| |
2023 | | |
2022 | |
| |
Class A | | |
Class B | | |
Class A | | |
Class B | |
Basic and diluted net loss per share: | |
| | |
| | |
| | |
| |
Numerator: | |
| | |
| | |
| | |
| |
Net loss | |
$ | (401,341 | ) | |
$ | (505,115 | ) | |
$ | (1,440,954 | ) | |
$ | (465,087 | ) |
Denominator: | |
| | | |
| | | |
| | | |
| | |
Basic and diluted weighted average shares outstanding | |
| 5,297,030 | | |
| 6,666,667 | | |
| 20,655,000 | | |
| 6,666,667 | |
Basic and diluted net loss per share | |
$ | (0.08 | ) | |
$ | (0.08 | ) | |
$ | (0.07 | ) | |
$ | (0.07 | ) |
Income Taxes
The Company follows the guidance of accounting
for income taxes under ASC 740, “Income Taxes,” which prescribes a recognition threshold and a measurement attribute
for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits
to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company recognizes
accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and
no amounts accrued for interest and penalties as of March 31, 2023 and December 31, 2022. The Company is currently not aware of any
issues under review that could result in significant payments, accruals or material deviation from its position.
There is currently no taxation imposed on income by the government
of the Cayman Islands. In accordance with Cayman Islands federal income tax regulations, income taxes are not levied on the Company. Consequently,
income taxes are not reflected in the Company’s unaudited condensed consolidated financial statements. The Company’s management
does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
10X CAPITAL VENTURE ACQUISITION CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2023
Recent Accounting Standards
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. ASU 2020-06 eliminates the current models that require separation
of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance
pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures
for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends
the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU
2020-06 allows for a modified or full retrospective method of transition. ASU 2020-06 is effective January 1, 2022 and should be applied
on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. We adopted ASU 2020-06 on January
1, 2023. Adoption of the ASU did not impact our financial position, results of operations or cash flows.
The Company’s management does not believe
that any other recently issued, but not yet effective, accounting standards updates, if currently adopted, would have a material effect
on the Company’s unaudited condensed consolidated financial statements.
NOTE 3. INITIAL PUBLIC OFFERING
On August 13, 2021, the Company consummated
its Initial Public Offering of 20,000,000 Units at a purchase price of $10.00 per Unit, generating gross proceeds of $200,000,000. Of
the 20,000,000 Units sold, 19,780,000 Units were purchased by qualified institutional buyers not affiliated with the Sponsor or any member
of the management team (the “Anchor Investors”).
Each Unit consists of one Class A ordinary share,
and one-third of one redeemable warrant. Each whole warrant entitles the holder to purchase one Class A ordinary share at a price of $11.50
per share, subject to adjustment (see Note 8). Each warrant will become exercisable 30 days after the completion of the initial Business
Combination and will expire five years after the completion of the Business Combination, or earlier upon redemption or liquidation.
NOTE 4. PRIVATE PLACEMENT
Simultaneously with the closing of the Initial
Public Offering, the Sponsor and Cantor purchased an aggregate of 655,000 Private Units, at a price of $10.00 per Unit, for an aggregate
purchase price of $6,550,000, in a private placement.
If the Company does not complete a Business Combination
within the Combination Period, the Private Units will expire worthless. The Private Units, including the private placement shares and
private placement warrants each underlying the Private Units are subject to the transfer restrictions. The Private Units have terms and
provisions that are identical to those of the Units sold in the Initial Public Offering.
10X CAPITAL VENTURE ACQUISITION CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2023
NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
In February 2021, the Sponsor paid $25,000, or
approximately $0.003 per share, to cover certain of the offering and formation costs in exchange for an aggregate of 7,666,667 Class B
ordinary shares, par value $0.0001 per share, 1,000,000 of which were subject to forfeiture depending on the extent to which the underwriter’s
over-allotment option was exercised. The option expired on September 25, 2021, and subsequently, the Sponsor forfeited 1,000,000 Class
B ordinary shares. Additionally, upon consummation of the Business Combination, the Sponsor agreed to transfer an aggregate of 1,334,339
Class B ordinary shares to the Anchor Investor for the same price originally paid for such shares. The Class B ordinary shares will automatically
convert into Class A ordinary shares upon consummation of a Business Combination on a one-for-one basis, subject to certain adjustments,
as described in Note 8. The Company determined that the fair value of these Class B ordinary shares was approximately $10.0 million (or
approximately $7.50 per share) using a Monte Carlo simulation. The Company recognized the excess fair value of these Class B ordinary
shares, over the price sold to the Anchor Investors, as an expense of the Initial Public Offering resulting in a charge against the carrying
value of Class A ordinary shares subject to possible redemption.
The initial shareholders and the Anchor Investors
have agreed not to transfer, assign or sell any of their Class B ordinary shares until after, or concurrently with, the consummation of
the initial Business Combination.
Related Party Loans
In order to finance transaction costs in connection with an intended
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 (the “Working Capital Loans”). If the Company completes
the initial Business Combination, the Company would repay the Working Capital Loans. In the event that the Business Combination does not
close, the Company may use a portion of the working capital held outside the Trust Account to repay the Working Capital Loans but no proceeds
from the Trust Account would be used to repay the Working Capital Loans. Up to $1,500,000 of the Working Capital Loans may be convertible
into units of the post Business Combination entity at a price of $10.00 per unit at the option of the lender. The units would be identical
to the Private Units. On November 14, 2022, the Sponsor agreed to loan the Company up to $800,000 pursuant to a promissory note (as amended
and restated on November 14, 2022, the “New Note”). The New Note is non-interest bearing, unsecured and due at the earlier
of the consummation of the Business Combination and the day prior to the date the Company must elect to liquidate and dissolve in accordance
with the provisions of the Amended and Restated Memorandum and Articles of Association. On May 17, 2023, the Sponsor agreed to loan the
Company up to an additional $2,500,000 pursuant to the second amended and restated promissory note (see Note 10). As of March 31,
2023 and December 31, 2022, the Company had $1,162,002 and $600,000 outstanding under the Working Capital Loans, respectively.
Administrative Support Agreement
The Company pays an affiliate of the Sponsor $20,000
per month for office space and secretarial and administrative services. Upon the earlier of the Company’s consummation of a Business
Combination and its liquidation, the Company will cease paying these monthly fees. For the three months ended March 31, 2023 and 2022,
the Company incurred and paid approximately $60,000 and $60,000 of administrative support expense, respectively.
10X CAPITAL VENTURE ACQUISITION CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2023
NOTE 6. COMMITMENTS AND CONTINGENCIES
Registration Rights
The holders of the Class B ordinary shares, private placement units,
and warrants that may be issued upon conversion of Working Capital Loans (and any Class A ordinary shares and warrants issuable upon the
exercise of the private placement units and units that may be issued upon conversion of Working Capital Loans and upon conversion of the
Class B ordinary shares) are entitled to registration rights pursuant to a registration rights agreement dated August 10, 2021 requiring
the Company to register such securities for resale (in the case of the Class B ordinary shares, only after conversion to Class A ordinary
shares). The holders of these securities are entitled to make up to three demands, excluding short form demands, that the Company register
such securities. In addition, the holders have certain “piggyback” registration rights with respect to registration statements
filed subsequent to the completion of the initial Business Combination. The Company will bear the expenses incurred in connection with
the filing of any such registration statements.
Underwriting Agreement
The Company granted the underwriter a 45-day option
from the date of effectiveness to purchase up to an additional 3,000,000 Units at the Initial Public Offering price less the underwriting
discounts and commissions. The option expired on September 25, 2021.
The underwriter was entitled to an underwriting
discount of approximately $4.0 million, paid upon the closing of the Initial Public Offering. In addition, approximately $7.0 million
was recorded as 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 the Company completes a Business Combination, subject to the terms
of the underwriting agreement.
Contingent Fee Arrangements
On October 21, 2022, the Company entered into an arrangement with Canaccord
Genuity LLC (“Canaccord”) to obtain financial advisory and equity capital market advisory services and to act as the Company’s
placement agent in connection with raising capital with a specific target in its search for a Business Combination. Canaccord would be
entitled to a capital markets advisory fee of $1.0 million. In addition, Canaccord would also be entitled to a discretionary incentive
fee of $250,000. Per the arrangement, the capital markets advisory fee and discretionary incentive fee for these services is contingent
upon the closing of a Business Combination and therefore are not included as liabilities on the accompanying condensed consolidated balance
sheets. Under the arrangement, the Company will also reimburse Canaccord for reasonable expenses. As of March 31, 2023, no expenses
have been claimed.
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. Per the arrangement, the Yorkville commitment fee is contingent
upon the closing of a Business Combination and therefore is not included as a liability on the accompanying condensed consolidated balance
sheets.
10X CAPITAL VENTURE ACQUISITION CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2023
NOTE 7. CLASS A ORDINARY SHARES SUBJECT TO
POSSIBLE REDEMPTION
The Company’s Class A ordinary shares contain certain redemption
rights that are considered to be outside of the Company’s control and subject to the occurrence of future events. The Company is
authorized to issue 500,000,000 Class A ordinary shares with a par value of $0.0001 per share. Holders of Company’s Class A ordinary
shares are entitled to one vote for each share. As of March 31, 2023 and December 31, 2022, there were 4,642,030 Class A ordinary
shares outstanding which were subject to possible redemption.
The Class A ordinary shares subject to possible redemption reflected
on the accompanying condensed consolidated balance sheets as of March 31, 2023 and December 31, 2022 are reconciled in the following table:
Gross proceeds | |
$ | 200,000,000 | |
Less: | |
| | |
Redemption of Class A ordinary share subject to possible redemption | |
| (154,906,130 | ) |
Plus: | |
| | |
Increase in redemption value of Class A ordinary shares subject to possible redemption | |
| 2,070,678 | |
Class A ordinary shares subject to possible redemption at December 31, 2022 | |
| 47,164,548 | |
Increase in redemption value of Class A ordinary shares subject to possible redemption | |
| 501,501 | |
Class A ordinary shares subject to possible redemption at March 31, 2023 | |
$ | 47,666,049 | |
NOTE 8. SHAREHOLDERS’ DEFICIT
Preference shares — The Company
is authorized to issue 1,000,000 preference shares at par value of $0.0001 each. As of March 31, 2023 and December 31, 2022,
there were no preference shares issued or outstanding.
Class A ordinary shares — The
Company is authorized to issue 500,000,000 Class A ordinary shares with a par value of $0.0001 per share. Holders of the Company’s
Class A ordinary shares are entitled to one vote for each share. As of March 31, 2023 and December 31, 2022, there were 655,000
Class A ordinary shares issued and outstanding, excluding 4,642,030 Class A ordinary shares subject to possible redemption classified
outside of permanent equity on the condensed consolidated balance sheets.
Class B ordinary shares — The
Company is authorized to issue 50,000,000 Class B ordinary shares with a par value of $0.0001 per share. As of March 31, 2023 and
December 31, 2022, there were 6,666,667 Class B ordinary shares issued and outstanding (see Note 5).
The Class B ordinary shares will automatically
convert into Class A ordinary shares concurrently with the consummation of the Business Combination on a one-for-one basis, subject to
adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like, and subject to further adjustment as provided
herein. In the case that additional Class A ordinary shares or equity-linked securities are issued or deemed issued in connection with
the Business Combination in excess of the number of Class A ordinary shares or equity-linked securities issued in the Company’s
Initial Public Offering, the number of Class A ordinary shares issuable upon conversion of all Class B ordinary shares will equal, in
the aggregate, on an as-converted basis, 25% of the total number of Class A ordinary shares outstanding after such conversion (after giving
effect to any redemptions of Class A ordinary shares by public shareholders and not including the Class A ordinary shares underlying the
Private Units), including the total number of Class A ordinary shares issued, or deemed issued or issuable upon conversion or exercise
of any equity-linked securities or rights issued or deemed issued, by the Company in connection with or in relation to the consummation
of the Business Combination, excluding any Class A ordinary shares or equity-linked securities or rights exercisable for or convertible
into Class A ordinary shares issued, or to be issued, to any seller in the Business Combination and any Working Capital Units issued to
the Sponsor, officers or directors upon conversion of Working Capital Loans, provided that such conversion of Founder Shares will never
occur on a less than one-for-one basis.
10X CAPITAL VENTURE ACQUISITION CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2023
Holders of record of the Class A ordinary shares
and Class B ordinary shares are entitled to one vote for each share held on all matters to be voted on by shareholders.
Warrants — As of March 31,
2023, there were 6,885,000 warrants (6,666,667 Public Warrants and 218,333 Private Warrants included in the Private Units) outstanding.
Each whole warrant entitles the holder to purchase one Class A ordinary share at a price of $11.50 per share, subject to adjustments
as described herein. In addition, if (x) the Company issues additional Class A ordinary shares or equity-linked securities for capital
raising purposes in connection with the closing of the initial Business Combination at an issue price or effective issue price of less
than $9.20 per Class A ordinary share (with such issue price or effective issue price to be determined in good faith by the board of
directors and, in the case of any such issuance to the initial shareholders or their affiliates, without taking into account any founder
shares or private placement shares held by the initial shareholders or such affiliates, as applicable, prior to such issuance) (the “Newly
Issued Price”) (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest
thereon, available for the funding of the initial Business Combination on the date of the consummation of the initial Business Combination
(net of redemptions), and (z) the volume weighted average trading price of the Class A ordinary shares during the 20 trading day period
starting on the trading day after the day on which the Company consummates the initial Business Combination (such price, the “Market
Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115%
of the higher of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price described below will
be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price. No warrants are currently
outstanding. Each whole warrant entitles the holder to purchase one Class A ordinary share at a price of $11.50 per share, subject to
adjustments as described herein.
The warrants cannot be exercised until 30 days
after the completion of the initial Business Combination, and will expire at five p.m., New York City time, five years after the completion
of the initial Business Combination or earlier upon redemption or liquidation.
10X CAPITAL VENTURE ACQUISITION CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2023
The Company will not be obligated to deliver any
Class A ordinary shares pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration
statement under the Securities Act with respect to the Class A ordinary shares underlying the warrants is then effective and a prospectus
relating thereto is current, subject to the Company’s satisfying its obligations described below with respect to registration. No
warrant will be exercisable and the Company will not be obligated to issue a Class A ordinary share upon exercise of a warrant unless
the Class A ordinary share issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities
laws of the state of residence of the registered holder of the warrants. In the event that the conditions in the two immediately preceding
sentences are not satisfied with respect to a warrant, the holder of such warrant will not be entitled to exercise such warrant and such
warrant may have no value and expire worthless.
In no event will the Company be required to net
cash settle any warrant. In the event that a registration statement is not effective for the exercised warrants, the purchaser of a Unit
containing such warrant will have paid the full purchase price for the Unit solely for the Class A ordinary share underlying such Unit.
Once the warrants become exercisable, the Company
may redeem the outstanding warrants for cash (except as described herein with respect to the private placement warrants):
| ● | in whole and not in part; |
| ● | at a price of $0.01 per warrant; |
| ● | upon a minimum of 30 days’ prior written notice of
redemption (the “30-day redemption period”); and |
| ● | if, and only if, the closing price of the Class A ordinary
shares equals or exceeds $18.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations and
the like and for certain issuances of Class A ordinary shares and equity-linked securities for capital raising purposes in connection
with the closing of the initial Business Combination) for any 20 trading days within a 30-trading day period ending on the third trading
day prior to the date on which the Company sends the notice of redemption to the warrant holders. |
If the Company calls the warrants for redemption
as described above, the management will have the option to require all holders that wish to exercise warrants to do so on a “cashless
basis.” In determining whether to require all holders to exercise their warrants on a “cashless basis,” the management
will consider, among other factors, the Company’s cash position, the number of warrants that are outstanding and the dilutive effect
on the shareholders of issuing the maximum number of Class A ordinary shares issuable upon the exercise of the warrants. In such event,
each holder would pay the exercise price by surrendering the warrants for that number of Class A ordinary shares equal to the quotient
obtained by dividing (x) the product of the number of Class A ordinary shares underlying the warrants, multiplied by the excess of the
“fair market value” of the Class A ordinary shares (defined below) over the exercise price of the warrants by (y) the fair
market value. The “fair market value” will mean the average reported closing price of the Class A ordinary shares for the
10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants.
The private placement warrants underlying the Private
Units, as well as any warrants underlying Working Capital Units the Company issues to the Sponsor, officers, directors, initial shareholders
or their affiliates in payment of Working Capital Loans made to the Company, are identical to the Public Warrants.
10X CAPITAL VENTURE ACQUISITION CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2023
NOTE 9. FAIR VALUE MEASUREMENTS
The following table presents information about the Company’s
assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2023 and December 31, 2022 and indicates
the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value at each respective date:
Description | |
Amount at Fair Value | | |
Level 1 | | |
Level 2 | | |
Level 3 | |
March 31, 2023 | |
| | |
| | |
| | |
| |
Assets | |
| | |
| | |
| | |
| |
Funds that invest in U.S. Treasury Securities | |
$ | 47,766,049 | | |
$ | 47,766,049 | | |
$ | — | | |
$ | — | |
Liabilities | |
| | | |
| | | |
| | | |
| | |
Derivative liabilities - Forward Purchase Agreement | |
$ | 521,886 | | |
$ | — | | |
$ | — | | |
$ | 521,886 | |
| |
| | | |
| | | |
| | | |
| | |
December 31, 2022 | |
| | | |
| | | |
| | | |
| | |
Assets | |
| | | |
| | | |
| | | |
| | |
Funds that invest in U.S. Treasury Securities | |
$ | 47,264,548 | | |
$ | 47,264,548 | | |
$ | — | | |
$ | — | |
Liabilities | |
| | | |
| | | |
| | | |
| | |
Derivative liabilities - Forward Purchase Agreement | |
$ | 331,777 | | |
$ | — | | |
$ | — | | |
$ | 331,777 | |
Transfers to/from Levels 1, 2, and 3 are recognized
at the beginning of the reporting period. There were no transfers to/from Levels 1, 2, and 3 during the three months ended March 31, 2023
and 2022.
Level 1 instruments include investments in mutual
funds invested in government securities. The Company uses inputs such as actual trade data, benchmark yields, quoted market prices from
dealers or brokers, and other similar sources to determine the fair value of its investments.
The estimated fair value of the Forward Purchase
Agreement was measured at fair value using a Monte Carlo simulation model, which was determined using Level 3 inputs. Inherent in a Monte
Carlo simulation are assumptions related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield.
The Company estimates the volatility of its warrants based on implied volatility from the Company’s traded warrants and from historical
volatility of select peer company’s shares that matches the expected remaining life of the warrants. The risk-free interest rate
is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants.
The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical
rate, which the Company anticipates remaining at zero. Any changes in these assumptions can change the valuation significantly.
10X CAPITAL VENTURE ACQUISITION CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2023
The following table provides quantitative information
regarding Level 3 fair value measurements inputs at their measurement dates:
| |
As of
March 31,
2023 | | |
As of
December 31,
2022 | |
Expected redemption price | |
$ | 10.36 | | |
$ | 10.48 | |
Stock price | |
$ | 10.18 | | |
$ | 9.89 | |
Volatility | |
| 55.0 | % | |
| 65.0 | % |
Term (years) | |
| 3.40 | | |
| 3.50 | |
Risk-free rate | |
| 3.77 | % | |
| 4.49 | % |
Cost of debt | |
| 16.30 | % | |
| 14.80 | % |
The change in the fair value of the forward purchase
agreement assets and liabilities, measured with Level 3 inputs, for three months ended March 31, 2023 is summarized as follows:
Derivative liabilities at January 1, 2022 | |
$ | — | |
Loss on entry into Forward Purchase Agreement | |
| 295,330 | |
Change in fair value of derivative liabilities | |
| 36,447 | |
Derivative liabilities at December 31, 2022 | |
| 331,777 | |
Change in fair value of derivative liabilities | |
| 190,109 | |
Derivative liabilities at March 31, 2023 | |
$ | 521,886 | |
NOTE 10. SUBSEQUENT EVENTS
The Company evaluated subsequent events and
transactions that occurred after the unaudited condensed consolidated balance sheets date up to the date that the unaudited
condensed consolidated financial statements were issued. Based upon this review, other than as described in Note 1 and the paragraph
below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the unaudited
condensed consolidated financial statements.
On May 17, 2023, the Sponsor agreed to loan the
Company up to an additional $2,500,000 pursuant to the second amended and restated promissory note. The loan is non-interest bearing,
unsecured and due at the earlier of the consummation of the Company’s Business Combination and the day prior to the date the Company
must elect to liquidate and dissolve in accordance with the provisions of the Amended and Restated Memorandum and Articles of Association.