Item 1. Financial Statements.
INFLECTION POINT ACQUISITION CORP.
CONDENSED BALANCE SHEETS
| |
September 30, 2022 | | |
December 31, 2021 | |
| |
(Unaudited) | | |
(Audited) | |
Assets: | |
| | |
| |
Cash | |
$ | 19,442 | | |
$ | 359,610 | |
Prepaid expenses | |
| 457,847 | | |
| 475,532 | |
Total current assets | |
| 477,289 | | |
| 835,142 | |
Prepaid expenses – noncurrent portion | |
| — | | |
| 326,032 | |
Marketable Securities held in Trust Account | |
| 331,742,611 | | |
| 329,755,798 | |
Total assets | |
$ | 332,219,900 | | |
$ | 330,916,972 | |
| |
| | | |
| | |
Liabilities, Redeemable Ordinary Shares and Shareholders’ Equity | |
| | | |
| | |
Accrued offering costs and expenses | |
$ | 2,237,404 | | |
$ | 218,421 | |
Due to related party | |
| 110,000 | | |
| 1,032 | |
Working Capital Loan | |
| 125,000 | | |
| — | |
Total current liabilities | |
| 2,472,404 | | |
| 219,453 | |
Deferred underwriting fee | |
| 11,541,250 | | |
| 11,541,250 | |
Total liabilities | |
| 14,013,654 | | |
| 11,760,703 | |
| |
| | | |
| | |
Commitments and Contingencies (Note 7) | |
| | | |
| | |
| |
| | | |
| | |
Class A ordinary share subject to possible redemption, 31,588,011 shares at redemption value | |
| 317,872,721 | | |
| 315,880,110 | |
| |
| | | |
| | |
Shareholders’ Equity: | |
| | | |
| | |
Preference shares, $0.0001 par value; 5,000,000 shares authorized; none issued and outstanding | |
| — | | |
| — | |
Class A ordinary shares, $0.0001 par value; 500,000,000 shares authorized; 1,386,989 shares issued and outstanding (excluding 31,588,011 shares subject to possible redemption) | |
| 139 | | |
| 139 | |
Class B ordinary shares, $0.0001 par value; 50,000,000 shares authorized; 8,243,750 shares issued and outstanding | |
| 825 | | |
| 825 | |
Additional paid-in capital | |
| 1,598,095 | | |
| 3,590,706 | |
Accumulated deficit | |
| (1,265,534 | ) | |
| (315,511 | ) |
Total Shareholders’ Equity | |
| 333,525 | | |
| 3,276,159 | |
Total Liabilities, Redeemable Ordinary Shares and Shareholders’ Equity | |
$ | 332,219,900 | | |
$ | 330,916,972 | |
The accompanying notes are an integral part of
these unaudited condensed financial statements.
INFLECTION POINT ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
| |
For the three months ended September 30, | | |
For the nine months ended September 30, | | |
For the period from January 27, 2021 (inception) through September 30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
Formation and operating costs | |
$ | 2,011,943 | | |
$ | 21,737 | | |
$ | 2,936,836 | | |
$ | 41,625 | |
Loss from operations | |
| (2,011,943 | ) | |
| (21,737 | ) | |
| (2,936,836 | ) | |
| (41,625 | ) |
| |
| | | |
| | | |
| | | |
| | |
Other income | |
| | | |
| | | |
| | | |
| | |
Issuance cost of over-allotment | |
| — | | |
| (23,439 | ) | |
| — | | |
| (23,439 | ) |
Interest income | |
| 1,491,055 | | |
| 200 | | |
| 1,986,813 | | |
| 200 | |
Total other income | |
| 1,491,055 | | |
| (23,239 | ) | |
| 1,986,813 | | |
| (23,239 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net loss | |
$ | (520,888 | ) | |
$ | (44,976 | ) | |
$ | (950,023 | ) | |
$ | (64,864 | ) |
| |
| | | |
| | | |
| | | |
| | |
Basic and diluted weighted average shares outstanding of Class A ordinary shares | |
| 32,975,000 | | |
| 2,282,609 | | |
| 32,975,000 | | |
| 850,202 | |
Basic and diluted net loss per share, Class A ordinary shares | |
$ | (0.01 | ) | |
$ | (0.00 | ) | |
$ | (0.02 | ) | |
$ | (0.01 | ) |
Basic and diluted weighted average shares outstanding of Class B ordinary shares | |
| 8,243,750 | | |
| 7,500,000 | | |
| 8,243,750 | | |
| 7,287,449 | |
Basic and diluted net loss per share, Class B ordinary shares | |
$ | (0.01 | ) | |
$ | (0.00 | ) | |
$ | (0.02 | ) | |
$ | (0.01 | ) |
The accompanying notes are an integral part of
these unaudited condensed financial statements.
INFLECTION POINT ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENTS OF CHANGES IN
SHAREHOLDERS’ EQUITY
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER
30, 2022
| |
Class A Ordinary Shares | | |
Class B Ordinary Shares | | |
Additional Paid-in | | |
Accumulated | | |
Total Shareholders’ | |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Equity | |
Balance as of December 31, 2021 | |
| 1,386,989 | | |
$ | 139 | | |
| 8,243,750 | | |
$ | 825 | | |
$ | 3,590,706 | | |
$ | (315,511 | ) | |
$ | 3,276,159 | |
Net loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (320,455 | ) | |
| (320,455 | ) |
Balance as of March 31, 2022 | |
| 1,386,989 | | |
| 139 | | |
| 8,243,750 | | |
| 825 | | |
| 3,590,706 | | |
| (635,966 | ) | |
| 2,955,704 | |
Net loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (108,680 | ) | |
| (108,680 | ) |
Remeasurement of Class A ordinary shares subject to possible redemption | |
| — | | |
| — | | |
| — | | |
| — | | |
| (501,556 | ) | |
| — | | |
| (501,556 | ) |
Balance as of June 30, 2022 | |
| 1,386,989 | | |
| 139 | | |
| 8,243,750 | | |
| 825 | | |
| 3,089,150 | | |
| (744,646 | ) | |
| 2,345,468 | |
Net loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (520,888 | ) | |
| (520,888 | ) |
Remeasurement of Class A ordinary shares subject to possible redemption | |
| — | | |
| — | | |
| — | | |
| — | | |
| (1,491,055 | ) | |
| — | | |
| (1,491,055 | ) |
Balance as of September 30, 2022 | |
| 1,386,989 | | |
$ | 139 | | |
| 8,243,750 | | |
$ | 825 | | |
$ | 1,598,095 | | |
$ | (1,265,534 | ) | |
$ | 333,525 | |
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021
AND FOR THE PERIOD FROM JANUARY 27, 2021
(INCEPTION) TO SEPTEMBER 30, 2021
| |
Class A Ordinary Shares | | |
Class B Ordinary Shares | | |
Additional Paid-in | | |
Accumulated | | |
Total Shareholders’ | |
| |
Shares | | |
Amount | | |
Shares(1) | | |
Amount | | |
Capital | | |
Deficit | | |
Equity | |
Balance as of January 27, 2021 (Inception) | |
| — | | |
$ | — | | |
| — | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | |
Issuance of Class B ordinary share to initial shareholders | |
| — | | |
| — | | |
| 8,625,000 | | |
| 863 | | |
| 24,137 | | |
| — | | |
| 25,000 | |
Net loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (16,114 | ) | |
| (16,114 | ) |
Balance as of March 31, 2021 | |
| — | | |
| — | | |
| 8,625,000 | | |
| 863 | | |
| 24,137 | | |
| (16,114 | ) | |
| 8,886 | |
Net loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (3,774 | ) | |
| (3,774 | ) |
Balance as of June 30, 2021 | |
| — | | |
| — | | |
| 8,625,000 | | |
| 863 | | |
| 24,137 | | |
| (19,888 | ) | |
| 5,112 | |
Sale of 6,845,000 Private Placement Warrants, net of offering costs | |
| | | |
| | | |
| — | | |
| — | | |
| 6,236,701 | | |
| — | | |
| 6,236,701 | |
Capital contribution for sale of Class B shares to Anchor Investors | |
| — | | |
| — | | |
| — | | |
| — | | |
| 9,680,125 | | |
| — | | |
| 9,680,125 | |
Sale of 1,386,989 Units not subject to redemption, net of underwriter discount and offering costs | |
| 1,386,989 | | |
| 139 | | |
| — | | |
| — | | |
| 12,756,833 | | |
| | | |
| 12,756,972 | |
Allocated proceeds to Public Warrants, net of underwriter discount and offering costs | |
| — | | |
| — | | |
| — | | |
| — | | |
| 10,043,226 | | |
| — | | |
| 10,043,226 | |
Fair value of over-allotment at issuance | |
| — | | |
| — | | |
| — | | |
| — | | |
| 281,301 | | |
| — | | |
| 281,301 | |
Remeasurement of Class A ordinary shares subject to redemption | |
| — | | |
| — | | |
| — | | |
| — | | |
| (34,196,934 | ) | |
| — | | |
| (34,196,934 | ) |
Net loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (44,976 | ) | |
| (44,976 | ) |
Balance as of September 30, 2021 | |
| 1,386,989 | | |
$ | 139 | | |
| 8,625,000 | | |
$ | 863 | | |
$ | 4,825,389 | | |
$ | (64,864 | ) | |
$ | 4,761,527 | |
(1) | This number includes up to 1,125,000 shares subject to forfeiture if the over-allotment option was not exercised in full or in part by the underwriters (see Note 6 and Note 8). On October 29, 2021, as a result of the partial exercise of the over-allotment option, the Sponsor forfeited 381,250 of these shares and the remaining Class B ordinary shares are no longer subject to forfeiture (see Note 8). |
The accompanying notes are an integral part of
these unaudited condensed financial statements.
INFLECTION POINT ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
| |
For the nine months ended September 30, 2022 | | |
For the period from January 27, 2021 (Inception) through September 30, 2021 | |
Cash flows from operating activities: | |
| | |
| |
Net loss | |
$ | (950,023 | ) | |
$ | (64,864 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: | |
| | | |
| | |
Formation cost paid by Sponsor in exchange of issuance of Class B ordinary shares | |
| — | | |
| 11,388 | |
Operating costs paid by related party | |
| — | | |
| 8,500 | |
Interest earned on marketable securities held in trust account | |
| (1,986,813 | ) | |
| (200 | ) |
Issuance cost of over-allotment | |
| — | | |
| 23,439 | |
Changes in current assets and liabilities: | |
| | | |
| | |
Prepaid assets | |
| 343,717 | | |
| (476,930 | ) |
Other assets | |
| — | | |
| (439,220 | ) |
Due to related party | |
| 108,968 | | |
| 4,500 | |
Accrued offering costs and expenses | |
| 2,018,983 | | |
| 6,000 | |
Net cash used in operating activities | |
| (465,168 | ) | |
| (927,387 | ) |
Cash flows from investing activities: | |
| | | |
| | |
Investment of cash in Trust Account | |
| — | | |
| (300,000,000 | ) |
Net cash used in investing activities | |
| — | | |
| (300,000,000 | ) |
Cash flows from financing activities: | |
| | | |
| | |
Proceeds from issuance of Private Placement Warrants | |
| — | | |
| 6,250,000 | |
Proceeds from sale of Units, net of underwriting discount | |
| — | | |
| 296,000,000 | |
Proceeds from working capital loan | |
| 125,000 | | |
| — | |
Payment of promissory note – related party | |
| — | | |
| (188,805 | ) |
Payment of offering costs | |
| — | | |
| (497,021 | ) |
Net cash provided by financing activities | |
| 125,000 | | |
| 301,564,174 | |
Net change in cash | |
| (340,168 | ) | |
| 636,787 | |
Cash, beginning of the period | |
| 359,610 | | |
| — | |
Cash, end of the period | |
$ | 19,442 | | |
$ | 636,787 | |
| |
| | | |
| | |
Supplemental disclosure of non-cash financing activities: | |
| | | |
| | |
Offering costs paid by Sponsor in exchange for issuance of Class B ordinary shares | |
$ | — | | |
$ | 13,612 | |
Offering costs paid by promissory note - related party | |
$ | — | | |
$ | 180,305 | |
Deferred underwriting commissions payable charged to additional paid in capital | |
$ | — | | |
$ | 10,500,000 | |
Accrued offering costs | |
$ | — | | |
$ | 151,000 | |
Re-measurement of Class A ordinary shares subject to possible redemption | |
$ | 1,992,611 | | |
$ | — | |
The accompanying notes are an integral part of
these unaudited condensed financial statements.
INFLECTION POINT ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
Note 1 — Organization, Business Operations, Proposed Business
Combination and Going Concern
Inflection Point Acquisition Corp. (the “Company”)
is a blank check company incorporated as a Cayman Islands exempted company on January 27, 2021. The Company was incorporated for the purpose
of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more
businesses (an “Initial Business Combination”).
As of September 30, 2022, the Company had not
commenced any operations. All activity for the period from January 27, 2021 (inception) through September 30, 2022 relates to the Company’s
formation and the initial public offering (the “IPO”) which is described below, and, subsequent to the IPO, identifying a
target company for 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 on cash
and cash equivalents from the proceeds derived from the IPO.
The Company’s sponsor is Inflection Point
Holdings LLC, a Cayman Islands limited liability company (the “Sponsor”). The registration statement for the Company’s
IPO was declared effective on September 21, 2021 (the “Effective Date”). On September 24, 2021, the Company consummated the
IPO of 30,000,000 units at $10.00 per unit (the “Units”), which is discussed in Note 4. Each Unit consists
of one Class A ordinary share (the “Class A ordinary shares” or “Public Shares”) of the Company, par value $0.0001,
and one-half of one redeemable warrant (the “Public Warrants”) of the Company, with each whole warrant entitling the holder
to purchase one Class A ordinary share for $11.50 per share, subject to adjustment. The underwriters had a 45-day option from the
Effective Date to purchase up to an additional 4,500,000 Units to cover over-allotments, if any. On October 29, 2021, the underwriters
partially exercised the over-allotment option (the “Over-Allotment” and together with the IPO, the “Public Offering”)
and purchased an additional 2,975,000 Units (the “Over-Allotment Units”), generating additional gross proceeds of
$29,750,000, and forfeited their option to purchase the remaining 1,525,000 Units.
Simultaneously with the closing of the IPO, the
Company consummated the private placement (the “Private Placement”) of 6,250,000 warrants (each an “IPO Private
Placement Warrant”) to the Sponsor, each exercisable to purchase one Class A ordinary share at $11.50 per share, at a price
of $1.00 per IPO Private Placement Warrant, generating gross proceeds to the Company of $6,250,000, which is described in Note 5.
On October 29, 2021, simultaneously with the sale of the Over-Allotment Units, the Sponsor purchased an additional 595,000 warrants
in a private placement (the “Over-Allotment Private Placement Warrants” and together with the IPO Private Placement Warrants,
the “Private Placement Warrants”), generating aggregate gross proceeds to the Company of $595,000.
An aggregate of 12 qualified institutional buyers
(“Anchor Investors”) expressed an interest to purchase an aggregate of approximately $322.3 million of the Units sold
in the IPO. None of the Anchor Investors expressed an interest in purchasing more than 9.9% of the Units sold in the IPO. The Anchor
Investors were allocated and purchased a total of 29,540,000 Units or 98.5% of the Units sold in the IPO. One of the Anchor
Investors, Kingstown 1740 Fund, LP, (“Kingstown 1740”) is an affiliate of the Sponsor, and was allocated and purchased 2,900,000 Units
sold in the IPO.
In addition, subject to each Anchor Investor purchasing 100%
of the Units allocated to it, in connection with the closing of the IPO, the Sponsor sold membership interests reflecting an allocation
of Class B ordinary shares, par value $0.0001 per share (the “Founder Shares”) to each Anchor Investor, amounting to
an aggregate of 1,625,000 Founder Shares to all Anchor Investors collectively (see Note 7). The Company estimated the aggregate
fair value of these Founder Shares attributable to Anchor Investors to be approximately $9.68 million, or $5.96 per share. The
excess of the fair value of the Founder Shares was determined to be an offering cost in accordance with Staff Accounting Bulletin Topic
5A. Upon the completion of the IPO, offering costs allocated (1) to the Public Shares not subject to possible redemption and the Public
Warrants were charged to additional paid-in capital; (2) to the Public Shares subject to redemption were charged to temporary equity;
and (3) to the over-allotment option were charged to expense.
Transaction costs amounted to $26,658,313 consisting
of $4,595,000 of underwriting commissions, $11,541,250 of deferred underwriting commissions, $9,680,125 excess fair value
of founder shares (see Note 6), and $841,938 of other offering costs, with $23,439 allocated to the over-allotment option, $24,538,134 allocated
to the Class A ordinary shares subject to redemption, and $2,096,740 allocated to the Class A ordinary shares not subject to redemption,
the Public Warrants and the Private Placement Warrants.
Following the closing of the IPO on September
24, 2021, $300,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the IPO and the sale of the IPO Private
Placement Warrants was deposited into a trust account (the “Trust Account”). Following the closing of the Over-Allotment on
October 29, 2021, an additional $29,750,000 ($10.00 per Over-Allotment Unit) from the net proceeds from the sale of the Over-Allotment
Units in the Over-Allotment and the sale of the Over-Allotment Private Placement Warrants was deposited into the Trust Account. The proceeds
deposited in the Trust Account will be invested only in U.S. government securities, within the meaning set forth in Section 2(a)(16) of
the Investment Company Act, having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7
promulgated under the Investment Company Act 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 taxes, if any, the proceeds from the
Public Offering and the sale of the Private Placement Warrants will not be released from the Trust Account until the earliest of (i) the
completion of an Initial Business Combination, (ii) the redemption of the Company’s Public Shares if the Company is unable to complete
an Initial Business Combination within 24 months from the closing of the IPO, subject to applicable law, or (iii) the redemption of the
Company’s Public Shares properly submitted in connection with a shareholder vote to amend the Company’s amended and restated
memorandum and articles of association to (A) modify the substance or timing of the Company’s obligation to allow redemption in
connection with an Initial Business Combination or to redeem 100% of its Public Shares if the Company has not consummated an Initial Business
Combination within 24 months from the closing of the IPO or (B) 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 Company’s public shareholders.
The Company’s management has broad discretion
with respect to the specific application of the net proceeds of the Public Offering and the Private Placement Warrants, although substantially
all of the net proceeds are intended to be generally applied toward consummating an Initial Business Combination (less deferred underwriting
commissions). The Company’s Initial Business Combination must be with one or more operating businesses or assets with a fair
market value equal to at least 80% of the value of the Trust Account (excluding the amount of any deferred underwriting discount held
in trust and taxes payable on the income earned on the Trust Account). However, the Company will only complete an Initial Business Combination
if the post-transaction company owns or acquires 50% or more of the issued and 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 of 1940, as amended, and the rules and regulations promulgated thereunder (the “Investment Company Act”). There
is no assurance that the Company will be able to successfully effect an Initial Business Combination.
The Company will provide holders of Public Shares
(the “Public Shareholders”), with the opportunity to redeem all or a portion of their Public Shares upon the completion of
an Initial Business Combination either (i) in connection with a general meeting called to approve such Initial 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 any
Initial 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 for a pro rata portion of the amount then on deposit in the Trust Account (initially $10.00
per Public Share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company
to pay its taxes).
The Company will have 24 months from the closing
of the IPO to complete an Initial Business Combination (the “Combination Period”). However, if the Company is unable
to complete an Initial 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 (less tax 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 liquidation 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 the case of clauses (ii) and (iii) to the Company’s obligations under Cayman Islands law to provide for claims of creditors
and in all cases subject to the other requirements of applicable law.
The Sponsor, officers and directors have agreed
to (i) waive their redemption rights with respect to their Founder Shares and Public Shares in connection with the completion of an Initial
Business Combination, (ii) waive their redemption rights with respect to their Founder Shares and Public Shares in connection with a shareholder
vote to approve an amendment to the Company’s amended and restated memorandum and articles of association (A) to modify the substance
or timing of the Company’s obligation to allow redemption in connection with an Initial Business Combination or to redeem 100%
of its Public Shares if the Company has not consummated an Initial Business Combination within 24 months from the closing of the IPO or
(B) with respect to any other material provisions relating to shareholders’ rights or pre-initial Business Combination activity,
(iii) waive their rights to liquidating distributions from the Trust Account with respect to their Founder Shares if the Company fails
to complete an Initial Business Combination within 24 months from the closing of the IPO, 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 an Initial Business
Combination within the prescribed time frame, and (iv) vote any Founder Shares held by them and any Public Shares purchased during or
after the IPO (including in open market and privately-negotiated transactions) in favor of an Initial Business Combination.
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 trust assets, 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 underwriters of
the IPO against certain liabilities, including liabilities under the Securities Act of 1933, as amended (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. None of the
Company’s officers or directors will indemnify the Company for claims by third parties including, without limitation, claims by
vendors and prospective target businesses.
Proposed Business Combination with Intuitive
Machines
On September 16, 2022, the Company entered
into a business combination agreement (the “Business Combination Agreement”) with Intuitive Machines, LLC, a Texas limited
liability company (“Intuitive Machines” and, subsequent to the Proposed Business Combination, “Intuitive Machines OpCo”),
pursuant to which, subject to the satisfaction or waiver of certain closing conditions, including the approval of the Business Combination
Agreement and the transactions contemplated thereby by the Company’s shareholders, (1) at the closing of the transactions contemplated
by the Business Combination Agreement (the “Closing”) and following the Domestication (as defined below), (a) the Company
will acquire equity securities and become the managing member of Intuitive Machines OpCo and (b) the Company will issue voting equity
securities without economic rights to the existing members of Intuitive Machines prior to the Closing (“Intuitive Machines Members”),
resulting in a combined company organized in an umbrella partnership C corporation (“Up-C”) structure, in which substantially
all of the assets and the business of the combined company will be held by Intuitive Machines OpCo; (2) the Company will domesticate (the
“Domestication”) as a Delaware corporation in accordance with the Delaware General Corporation Law (“DGCL”), the
Companies Act (As Revised) of the Cayman Islands (the “Companies Act”) and the Company’s amended and restated memorandum
and articles of association, (3) Intuitive Machines will change its jurisdiction from Texas to Delaware (the “Conversion”)
and complete a recapitalization (the “Recapitalization”) whereby all outstanding equity securities of Intuitive Machines will
be converted or exchanged into common units, options, and unvested earn out units, as applicable, and (4) the other transactions contemplated
by the Business Combination Agreement and documents related thereto will be consummated (such transactions, together with the business
combination and the Domestication, Conversion, and Recapitalization, the “Proposed Business Combination”). In connection with
the Proposed Business Combination, the Company will be renamed “Intuitive Machines, Inc.” (“New Intuitive Machines”).
The Domestication
As a condition to the Proposed Business Combination,
the Company will change its jurisdiction of incorporation by effecting a deregistration under Section 206 of the Companies Act and
a domestication under Section 388 of the DGCL, pursuant to which the Company’s jurisdiction of incorporation will be changed
from the Cayman Islands to the State of Delaware. Immediately prior to the Domestication, pursuant to the Company’s amended and
restated memorandum and articles of association, each Founder Share will convert automatically, on a one-for-one basis, into a Class A
ordinary share. Immediately following such conversion, in connection with the Domestication, each of the then issued and outstanding
Class A ordinary shares will convert automatically, on a one-for-one basis, into one share of New Intuitive Machines Class A
common stock, par value $0.0001 per share, each of which will carry voting rights of one vote per share (collectively, the “New
Intuitive Machines Class A Common Stock”); (iii) each whole warrant to purchase one Class A ordinary share (each warrant, a
“Company Warrant”) will automatically represent the right to purchase one share of New Intuitive Machines Class A Common Stock
on the same terms as the Company Warrants (each a “New Intuitive Machines Warrant”) and (c) each of the units of the Company
outstanding as of immediately prior to the Domestication will automatically be canceled and each holder will be entitled to one share
of New Intuitive Machines Class A Common Stock and one-half of one New Intuitive Machines Warrant, per unit. No fractional New Intuitive
Machines Warrants will be issued upon such cancellation.
Concurrently with the Domestication and subject
to the satisfaction or waiver of the conditions set forth in the Business Combination Agreement, including approval by the Company’s
shareholders, the Company will adopt a certificate of incorporation (the “Proposed Certificate of Incorporation”) that, among
other things, will implement a revised class structure with the shares of New Intuitive Machines Class A Common Stock having one
vote per share and economic rights, the shares of Class B common stock of New Intuitive Machines, par value $0.0001 per share, having
one vote per share and no economic rights (collectively, the “New Intuitive Machines Class B Common Stock”) and the shares
of Class C common stock of New Intuitive Machines, par value $0.0001 per share, having three votes per share and no economic rights
(collectively, the “New Intuitive Machines Class C Common Stock” and the New Intuitive Machines Class A Common Stock,
the New Intuitive Machines Class B Common Stock and New Intuitive Machines Class C Common Stock, collectively, the “New
Intuitive Machines Common Stock”). The Proposed Certificate of Incorporation will also authorize the issuance of “blank check”
preferred stock, par value $0.0001 per share, having such characteristics as the board may, from time to time, provide. The Company’s
board of directors will adopt a Certificate of Designation of Preferences, Rights and Limitations of 10% Series A Cumulative Convertible
Preferred Stock, creating the Series A Preferred Stock (as defined below).
The Conversion and Recapitalization
In connection with the Proposed Business Combination,
Intuitive Machines will change its jurisdiction of organization from Texas to Delaware. Immediately prior to the Closing, Intuitive Machines
will effectuate the Recapitalization whereby all outstanding equity securities of Intuitive Machines will be converted into common units
of Intuitive Machines OpCo (“Intuitive Machines OpCo Common Units”), options to purchase Intuitive Machines OpCo Common Units
(“Intuitive Machines OpCo Options”) and unvested earn out units of Intuitive Machines OpCo (“Earn Out Units”).
Consideration and Structure
As a result of the Up-C structure, the business
combination consideration to be received by Intuitive Machines Members will consist of securities of both Intuitive Machines OpCo having
economic rights but not voting rights and New Intuitive Machines having voting rights but not economic rights equal to a value of approximately
$700,000,000. In particular, the business combination consideration to be received by the Intuitive Machines Members will be an aggregate
of (a) (i) 68,125,987 Intuitive Machines OpCo Common Units, (ii) 1,874,013 Intuitive Machines OpCo Options and (iii) 10,000,000
Earn Out Units and (b) (i) 278 shares of New Intuitive Machines Class B Common Stock (excluding 1,874,013 shares of
New Intuitive Machines Class B Common Stock reserved for issuance upon exercise of Intuitive Machines OpCo Options) and (ii) 68,125,709 shares
of New Intuitive Machines Class C Common Stock (excluding 10,000,000 shares of New Intuitive Machines Class C Common Stock reserved
for issuance upon vesting of the Earn Out Units).
The 10,000,000 Earn Out Units received by the
applicable Intuitive Machines Members will be subject to vesting and will be earned, released and delivered upon satisfaction of the following
milestones: (i) 2,500,000 Earn Out Units will vest if, during the Earn Out Period (as defined below), Intuitive Machines is awarded the
OMES III Contract by NASA (“Triggering Event I”), (ii) 5,000,000 Earn Out Units will vest if, within the Earn Out Period,
Triggering Event I occurs and the volume weighted average closing sale price of New Intuitive Machines Class A Common Stock equals or
exceeds $15.00 per share (“Triggering Event II-A”), (iii) 7,500,000 Earn Out Units will vest if, within the Earn Out Period,
Triggering Event I has not occurred and the volume weighted average closing sale price of New Intuitive Machines Class A Common Stock
equals or exceeds $15.00 per share (“Triggering Event II-B”), and (iv) 2,500,000 Earn Out Units will vest if, within the Earn
Out Period, Triggering Event III occurs the volume weighted average closing sale price of New Intuitive Machines Class A Common Stock
equals or exceeds $17.50 per share (“Triggering Event III”), provided, that Triggering Event II-A and Triggering Event II-B
may not both be achieved. “Earn Out Period” means (i) with respect to Triggering Event I, the time period beginning on September
16, 2022 and ending at 11:59 pm ET on December 31, 2023, and (ii) with respect to Triggering Event II-A, Triggering Event II-B and Triggering
Event III, the time period beginning on the date that is 150 days following the date of Closing and ending on the date that is the five
(5) year anniversary of the date of Closing. If a Change of Control (as defined in the Business Combination Agreement) occurs during the
Earn Out Period that results in the holders of New Intuitive Machines Class A Common Stock receiving a per share price greater than or
equal to $15.00 or $17.50, respectively, then immediately prior to the consummation of such Change of Control, to the extent not previously
triggered, then Triggering Event II-A or Triggering Event II-B will be deemed to have occurred, as applicable, and the applicable Earn
Out Units shall vest.
After the expiration of the applicable lock-up
period, holders of certain Intuitive Machines OpCo Common Units will be permitted to exchange such Intuitive Machines OpCo Common Units
(along with the cancellation of the paired share of New Intuitive Machines Class B Common Stock or share of New Intuitive Machines Class
C Common Stock) for shares of New Intuitive Machines Class A Common Stock on a one-for-one basis pursuant to the second amended and restated
limited liability company agreement of Intuitive Machines OpCo (the “Second A&R Operating Agreement”) (subject to customary
conversion rate adjustments for stock splits, stock dividends and reclassifications) or, at the election of New Intuitive Machines (determined
by a majority of the directors of New Intuitive Machines who are disinterested with respect to such determination), cash from a substantially
concurrent public offering or private sale in an amount equal to the net amount, on a per share basis, of cash received as a result of
such public offering or private sale.
Upon the vesting of any Earn Out Units, each of
the applicable Intuitive Machines Members will be issued (i) by Intuitive Machines OpCo an equal number of Intuitive Machines OpCo Common
Units and (ii) by New Intuitive Machines an equal number of shares of New Intuitive Machines Class C Common Stock, in exchange for surrender
of the applicable Earn Out Units and the payment to New Intuitive Machines of a per-share price equal to the par value per share of the
New Intuitive Machines Class C Common Stock. Upon the exercise of any Intuitive Machines OpCo Option, (i) Intuitive Machines OpCo will
issue to the exercising holder such number of Intuitive Machines OpCo Common Units to be received by such exercising holder as a result
of such exercise and (ii) New Intuitive Machines will issue to the exercising holder an equal number of shares of New Intuitive Machines
Class B Common Stock, in exchange for the payment to New Intuitive Machines of a per-share price equal to the par value per share of the
New Intuitive Machines Class B Common Stock.
Representations, Warranties, Covenants and
Termination
The parties to the Business Combination Agreement
have made customary representations, warranties and covenants in the Business Combination Agreement, including, among others, covenants
with respect to the conduct of Intuitive Machines and the Company prior to the Closing. The Closing is subject to certain customary conditions.
There is no assurance that the Proposed Business Combination will be completed.
The Business Combination Agreement may be terminated
under certain customary and limited circumstances at any time prior to the Closing, including, among others, (i) by mutual written consent
of the Company and Intuitive Machines; (ii) either the Company or Intuitive Machines if the Closing has not occurred on or before September
16, 2023; and (iii) by Intuitive Machines if the Company has not obtained shareholder approval after the conclusion of the extraordinary
general meeting of the Company’s shareholders to be held for the purpose of voting on the Proposed Business Combination. Upon termination
of the Business Combination Agreement, in certain circumstances, Intuitive Machines will reimburse the Company for any amounts due and
owing to the Sponsor, up to $1,500,000.
The Series A Investment
On September 16, 2022, concurrently with the execution
of the Business Combination Agreement, the Company entered into a purchase agreement (the “Series A Purchase Agreement”) with
Kingstown 1740 (an existing security holder of the Company and an affiliate of the Sponsor) and Ghaffarian Enterprises, LLC (an affiliate
of Kamal Ghaffarian, an Intuitive Machines founder) (collectively, the “Series A Investors”), pursuant to which, and on the
terms and subject to the conditions of which, New Intuitive Machines agreed to issue and sell to the Series A Investors (i) an aggregate
of 26,000 shares of 10% Series A Cumulative Convertible Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”)
which will be convertible into shares of New Intuitive Machines Class A Common Stock in accordance with the terms of the Certificate of
Designation of Preferences, Rights and Limitations of 10% Series A Cumulative Convertible Preferred Stock (the “Certificate of Designation”)
to be adopted by the Company’s board of directors following the Domestication but prior to the Closing and (ii) warrants to purchase
541,667 shares of New Intuitive Machines Class A Common Stock at an initial exercise price of $15.00 per share, subject to adjustment
(the “Preferred Investor Warrants”). The Series A Investment will be consummated following the Domestication but immediately
prior to the Closing.
Tax Receivable Agreement
The Business Combination Agreement contemplates
that, at the Closing, New Intuitive Machines will enter into a tax receivable agreement (the “Tax Receivable Agreement”) with
Intuitive Machines OpCo and certain Intuitive Machines Members (the “TRA Holders”). Pursuant to the Tax Receivable Agreement,
New Intuitive Machines will generally be required to pay the TRA Holders 85% of the amount of the cash tax savings, if any, in U.S. federal,
state, and local taxes that are based on, or measured with respect to, net income or profits, and any interest related thereto that New
Intuitive Machines (and applicable consolidated, unitary, or combined subsidiaries thereof, if any and collectively the “Tax Group”)
realizes, or is deemed to realize, as a result of certain tax attributes (the “Tax Attributes”), including:
| ● | existing tax basis in certain assets of Intuitive Machines OpCo and certain of its direct or indirect
subsidiaries, including assets that will eventually be subject to depreciation or amortization, once placed in service; |
| ● | tax basis adjustments resulting from taxable exchanges of Intuitive Machines OpCo Common Units (including
any such adjustments resulting from certain payments made by New Intuitive Machines under the Tax Receivable Agreement) acquired by New
Intuitive Machines from a TRA Holder pursuant to the terms of the Second A&R Operating Agreement; |
| ● | certain tax benefits realized by New Intuitive Machines as a result of certain U.S. federal income
tax allocations of taxable income or gain away from New Intuitive Machines and to other members of Intuitive Machines OpCo and deductions
or losses to New Intuitive Machines and away from other members of Intuitive Machines OpCo, in each case as a result of the Proposed Business
Combination; and |
| ● | tax deductions in respect of portions of certain payments made under the Tax Receivable Agreement. |
Upon the completion of the Proposed Business Combination,
New Intuitive Machines will be a party to the Tax Receivable Agreement. Under the terms of the Tax Receivable Agreement, New Intuitive
Machines will make payments to the TRA Holders in respect of 85% of the cash tax savings resulting from the net tax benefit to New Intuitive
Machines of certain Tax Attributes (calculated using certain assumptions, and subject to the terms of the Tax Receivable Agreement). However,
until a TRA Holder exchanges at least 5% of its Intuitive Machines OpCo Common Units, New Intuitive Machines will hold such payments applicable
to existing basis until the TRA Holder satisfies such threshold exchange. Upon the completion of the Proposed Business Combination, no
TRA Holder will have exchanged at least 5% of its Intuitive Machines OpCo Common Units. The tax impacts of the transaction were estimated
based on the applicable law in effect on June 30, 2022.
Future exchanges will result in incremental tax
attributes and potential cash tax savings for New Intuitive Machines. Depending on New Intuitive Machines’ assessment on realizability
of such tax attributes, the arising Tax Receivable Agreement liability will be recorded at the exchange date against equity, or at a later
point through income.
However, if all of the TRA Holders were to exchange
or sell us all of their Intuitive Machines OpCo Common Units, New Intuitive Machines would recognize a deferred tax asset of approximately
$169.2 million and a liability under the Tax Receivable Agreement of approximately $147.2 million, assuming: (i) all exchanges
or purchases occurred on the same day; (ii) a price of $10 per share; (iii) a constant corporate tax rate; (iv) that
New Intuitive Machines will have sufficient taxable income to fully utilize the tax benefits; and (v) no material changes in tax
law. These amounts are estimates and have been prepared for illustrative purposes only. The actual amount of deferred tax assets and related
liabilities that New Intuitive Machines will recognize will differ based on, among other things, the timing of the exchanges, the price
per share of New Intuitive Machines Class A Common Stock at the time of the exchange, and the tax rates then in effect and certain
change of control or early termination events occurring.
If New Intuitive Machines exercises its right
to terminate the Tax Receivable Agreement or in the case of a change in control of New Intuitive Machines or a material breach of New
Intuitive Machines’ obligations under the Tax Receivable Agreement, all obligations under the Tax Receivable Agreement will be accelerated
and New Intuitive Machines will be required to make a payment to the TRA Holders in an amount equal to the present value of future payments
under the Tax Receivable Agreement. This payment would be based on certain assumptions, including that New Intuitive Machines would have
sufficient taxable income to fully utilize the benefits arising from the Tax Attributes subject to the Tax Receivable Agreement. If New
Intuitive Machines were to elect to terminate the Tax Receivable Agreement immediately after the Proposed Business Combination, assuming
the market value of New Intuitive Machines Class A Common Stock is equal to $10 per share, the Company currently estimates that it
would be required to pay approximately $99.7 million to satisfy its total liability.
Equity Facility
On September 16, 2022, the Company entered
into a common stock purchase agreement (the “Cantor Purchase Agreement”), dated September 16, 2022, with CF Principal Investments
LLC (“CFPI”) relating to an equity facility under which shares of newly issued New Intuitive Machines Class A Common Stock
may be sold to CFPI by New Intuitive Machines. Pursuant to the terms of the Cantor Purchase Agreement, New Intuitive Machines will have
the right, but not the obligation, from time to time at its sole discretion, until the first day of the month following the 18-month period
from and after the Commencement (as defined in the Cantor Purchase Agreement), to direct CFPI to purchase up to the lesser of (i) $50 million
of newly issued New Intuitive Machines Class A Common Stock and (ii) the Exchange Cap, by delivering written notice to CFPI
prior to the commencement of trading on any trading day, subject to certain customary conditions and limitations set forth in the
Cantor Purchase Agreement. In connection with the execution of the Cantor Purchase Agreement, the Company agreed to issue 100,000 shares
(the “Commitment Shares”) of New Intuitive Machines Class A Common Stock to CFPI. The Company entered into a registration
rights agreement with CFPI, pursuant to which it agreed to register for resale, pursuant to Rule 415 under the Securities Act, the shares
of New Intuitive Machines Class A Common Stock that are sold to CFPI under the equity facility and the Commitment Shares.
Sponsor Support Agreement
Concurrently with the execution and delivery of
the Business Combination Agreement, the Sponsor, the Company and Intuitive Machines entered into the Sponsor Support Agreement pursuant
to which the Sponsor agreed to, among other things, vote and approve the Business Combination Agreement and all other documents and transaction
contemplated thereby, and to waive, subject to the consummation of the Proposed Business Combination, any and all anti-dilution rights
with respect to the rate that the Founder Shares convert into Class A ordinary shares in connection with the transactions contemplated
by the Business Combination Agreement, in each case, subject to the terms and conditions of the Sponsor Support Agreement. In connection
with the Sponsor Support Agreement, the Company provided the Sponsor with indemnification against certain claims brought against the Sponsor
for a period of six years following the Closing.
Non-Redemption Agreement
Concurrently with the execution of the Business
Combination Agreement, the Company and Intuitive Machines entered into a non-redemption agreement (the “Non-Redemption Agreement”)
with Kingstown 1740, an affiliate of the Sponsor, pursuant to which Kingstown 1740 agreed not to redeem the 2,900,000 Class A ordinary
shares held by it.
For additional information regarding the Proposed
Business Combination, see the Company’s Registration Statement on Form S-4 filed by on October 13, 2022.
Going Concern
As of September 30, 2022, the Company had $19,442
in its operating bank account, and working capital deficiency $1,995,115. On September 30, 2021, the Sponsor agreed to provide the Company
with loans in such amounts as may be required by the Company to fund the Company’s working capital requirements up to an aggregate
of $250,000. On March 8, 2022, the Sponsor agreed to provide the Company with loans in such amounts as may be required by the Company
to fund the Company’s working capital requirements up to an aggregate of $500,000.
On August 4, 2022, the Sponsor agreed to loan
the Company up to $1,000,000 to be used for ongoing expenses reasonably related to the business of the Company and the consummation of
an Initial Business Combination pursuant to a convertible promissory note (the “Working Capital Note”).
All unpaid principal under the Working Capital
Note shall be due and payable in full on the earlier of (i) September 24, 2023 and (ii) the effective date of an Initial Business Combination,
involving the Company and one or more businesses (such earlier date, the “Maturity Date”), unless accelerated upon the occurrence
of an event of default as set forth in the Working Capital Note. The Sponsor will have the option, at any time on or prior to the Maturity
Date, to convert up to $1,000,000 outstanding under the Working Capital Note into warrants to purchase Class A ordinary shares at a conversion
price of $1.00 per warrant, with each warrant entitling the holder to purchase one Class A ordinary share at a price of $11.50 per share,
subject to the same adjustments applicable to the Private Placement Warrants. As of September 30, 2022, there was $125,000 outstanding
under the Working Capital Note.
Until consummation of its Initial Business Combination,
the Company will be using these funds for paying existing accounts payable, identifying and evaluating prospective Initial Business Combination
candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to
merge with or acquire, and structuring, negotiating and consummating an Initial Business Combination. In addition to the Working Capital
Note, in order to finance transaction costs in connection with an Initial Business Combination, the Sponsor or an affiliate of the Sponsor,
or certain of the Company’s officers and directors may, but, except as set forth above, are not obligated to, loan the Company funds
as may be required on a non-interest basis (any such loans together with the loans made under the Working Capital Note, the “Working
Capital Loans”).
Based on the foregoing, the $19,442 in cash held
outside the Trust Account will not be sufficient to allow the Company to operate for at least 12 months from the issuance of these unaudited
condensed financial statements, assuming that an Initial Business Combination is not consummated during that time.
Prior to the completion of an Initial Business
Combination, the Company does not expect to seek loans from parties other than our Sponsor or an affiliate of our Sponsor as it does not
believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in the
Trust Account. If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity,
which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of its business plan, and reducing
overhead expenses. The Company cannot provide assurance that new financing will be available to it on commercially acceptable terms, if
at all.
In connection with the Company’s assessment of going concern
considerations in accordance with Financial Accounting Standard Board’s Accounting Standards Codification (“ASC”) Topic
205-40, “Basis of Presentation - Going Concern”, the Company has until September 24, 2023 (absent any extensions of such period)
to consummate the Proposed Business Combination or another Initial Business Combination. It is uncertain that the Company will be able
to consummate the Proposed Business Combination or another Initial Business Combination by this time. If the Proposed Business Combination
or another Initial Business Combination is not consummated by this date, there will be a mandatory liquidation and subsequent dissolution
of the Company. Management has determined that the liquidity condition and mandatory liquidation, should the Proposed Business Combination
or another Initial Business Combination not occur, and potential subsequent dissolution, raises substantial doubt about the Company’s
ability to continue as a going concern after September 24, 2023. No adjustments have been made to the carrying amounts of assets or liabilities
should the Company be required to liquidate after September 24, 2023. The Company intends to complete the Proposed Business Combination
or another Initial Business Combination before the mandatory liquidation date. However, there can be no assurance that the Company will
be able to consummate the Proposed Business Combination or any Initial Business Combination by September 24, 2023.
Risks and Uncertainties
Management is currently evaluating the impact
of the COVID-19 pandemic and Russian-Ukraine war on the industry and has concluded that while it is reasonably possible that the virus
and the war could have a negative effect on the Company’s financial position, results of its operations and/or search for a target
company, the specific impact is not readily determinable as of the date of these unaudited condensed financial statements. The unaudited
condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Note 2 – Revision of Previously Issued
Financial Statements
In connection with the preparation of the Company’s
financial statements as of December 31, 2021, Management identified errors made in its historical financial statements where, at the closing
of the Company’s Initial Public Offering, the Company did not properly allocate the offering costs.
The error was recorded and presented within the
financial statements as of December 31, 2021. This revision note is presenting the changes from the previously reported balances to the
revised balances as of and for the three months ended September 30, 2021 and for the period January 27, 2021 (inception) through September
30, 2021 for comparative purposes of these condensed financial statements.
The impact of the revision on the
Company’s financial statements is reflected in the following table.
| |
| | |
| | |
| |
Statement of Operations for the three months ended September 30, 2021 | |
As Previously
Reported | | |
Adjustment | | |
As Revised | |
Issuance cost of over-allotment | |
$ | — | | |
$ | (23,439 | ) | |
$ | (23,439 | ) |
Net (loss) income | |
$ | (21,537 | ) | |
$ | (23,439 | ) | |
$ | (44,976 | ) |
Statement of Operations for the period January 27, 2021 through September 30, 2021 | |
As Previously Reported | | |
Adjustment | | |
As Revised | |
Issuance cost of over-allotment | |
$ | — | | |
$ | (23,439 | ) | |
$ | (23,439 | ) |
Net (loss) income | |
$ | (41,425 | ) | |
$ | (23,439 | ) | |
$ | (64,864 | ) |
| |
As Previously
| | |
| | |
| |
Statement of Shareholders’ Equity as of September 30, 2021 | |
Reported | | |
Adjustment | | |
As Revised | |
Additional paid in capital | |
$ | 4,871,950 | | |
$ | (46,561 | ) | |
| 4,825,389 | |
Accumulated deficit | |
$ | (41,425 | ) | |
$ | (23,439 | ) | |
$ | (64,864 | ) |
Total Shareholders’ Deficit | |
$ | 4,831,527 | | |
$ | (70,000 | ) | |
$ | 4,761,527 | |
Statement of Cashflow for the period January 27, 2021 through September 30, 2021 | |
As Previously
Reported | | |
Adjustment | | |
As Revised | |
Supplemental disclosure of non-cash financing activities: | |
| | |
| | |
| |
Accrued offering costs | |
$ | 81,000 | | |
$ | 70,000 | | |
$ | 151,000 | |
Note 3 — Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial
statements of the Company are presented in conformity with accounting principles generally accepted in the United States of America (“US
GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). Accordingly,
they do not include all of the information and footnotes required by GAAP. In the opinion of management, the unaudited condensed financial
statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and
results for the periods presented.
The accompanying unaudited condensed financial
statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 as filed
with the SEC on April 14, 2022, which contains the audited financial statements and notes thereto. The interim results for the three and
nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022
or for any future interim periods.
Emerging Growth Company Status
The Company is an “emerging growth company,”
as defined in Section 2(a) of 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 (the “Exchange Act”)) 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 financial statements with another public
company which is either not an emerging growth company or 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 financial statements in
conformity with US 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 financial statements and the reported amounts of expenses during
the reporting period.
Making estimates requires management to exercise
significant judgement. 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 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 significantly from those estimates.
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 did not have any cash equivalents
as of September 30, 2022 and December 31, 2021.
Marketable Securities Held in Trust Account
At September 30, 2022 and December 31, 2021, all
of the assets held in the Trust Account were held in money market funds which invest in U.S. Treasury securities.
Concentration of credit risk
Financial instruments that potentially subject
the Company to concentration of credit risk consist of a cash account in a financial institution which, at times, may exceed the Federal
depository insurance coverage of $250,000. The Company has not experienced losses on this account.
Fair Value of Financial Instruments
The fair value of the Company’s assets and
liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates the carrying
amounts represented in the accompanying balance sheets, primarily due to their short-term nature. See Note 9 for further discussion of
the fair values of the Company’s assets and liabilities.
Derivative Financial Instruments
The Company evaluates its financial instruments
to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic
815, “Derivatives and Hedging”. Derivative instruments are initially recorded at fair value on the grant date and re-valued
at each reporting date, with changes in the fair value reported in the unaudited condensed statements of operations. Derivative assets
and liabilities are classified in the condensed balance sheets as current or non-current based on whether or not net-cash settlement or
conversion of the instrument could be required within 12 months of the balance sheet date.
For issued or modified warrants that meet all
of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital
at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are
required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated
fair value of the warrants are recognized as a non-cash gain or loss on the unaudited condensed statements of operations. The
Company has analyzed the Public Warrants and Private Placement Warrants and determined they meet all of the requirements for equity classification
under ASC 815 (see Notes 3 and 4).
Net Loss Per Ordinary Share
We comply with accounting and disclosure requirements
of ASC Topic 260, “Earnings Per Share.” Our unaudited condensed statements of operations includes a presentation of loss per
share for ordinary shares subject to possible redemption in a manner similar to the two-class method of loss per share. The remeasurement
associated with the redeemable Class A ordinary shares is excluded from net loss per ordinary share as the redemption value approximates
fair value. The Company has two classes of shares, Class A ordinary shares and Class B ordinary shares. Earnings and losses are shared
pro rata between the two classes of shares. The Company has not considered the effect of the warrants sold in the IPO, the Over-Allotment,
the Private Placement and the Over-Allotment Private Placement to purchase an aggregate of 23,332,500 of the Company’s
Class A ordinary shares in the calculation of diluted loss per share, since their exercise is contingent upon the future consummation
of an Initial Business Combination which cannot be assured. As a result, diluted net loss per ordinary share is the same as basic net
loss per ordinary share for the periods. The table below 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 September 30, | |
| |
2022 | | |
2021 | |
| |
Class A | | |
Class B | | |
Class A | | |
Class B | |
Basic and diluted net loss per share: | |
| | |
| | |
| | |
| |
Numerator: | |
| | |
| | |
| | |
| |
Allocation of net loss | |
$ | (416,710 | ) | |
$ | (104,178 | ) | |
$ | (10,494 | ) | |
$ | (34,482 | ) |
Denominator: | |
| | | |
| | | |
| | | |
| | |
Basic and diluted weighted-average shares outstanding | |
| 32,975,000 | | |
| 8,243,750 | | |
| 2,282,609 | | |
| 7,500,000 | |
Basic and diluted net loss per share | |
$ | (0.01 | ) | |
$ | (0.01 | ) | |
$ | (0.00 | ) | |
$ | (0.00 | ) |
| |
For the nine months ended September 30, 2022 | | |
For the period from January 27, 2021 (inception) through September 30, 2021 | |
| |
Class A | | |
Class B | | |
Class A | | |
Class B | |
Basic and diluted net loss per share: | |
| | |
| | |
| | |
| |
Numerator: | |
| | |
| | |
| | |
| |
Allocation of net loss | |
$ | (760,018 | ) | |
$ | (190,005 | ) | |
$ | (6,777 | ) | |
$ | (58,087 | ) |
Denominator: | |
| | | |
| | | |
| | | |
| | |
Basic and diluted weighted-average shares outstanding | |
| 32,975,000 | | |
| 8,243,750 | | |
| 850,202 | | |
| 7,287,449 | |
Basic and diluted net loss per share | |
$ | (0.02 | ) | |
$ | (0.02 | ) | |
$ | (0.01 | ) | |
$ | (0.01 | ) |
Offering Costs associated with the Public Offering
The Company complies with the requirements of
the ASC 340-10-S99-1. Offering costs consisted of legal, accounting, underwriting fees and other costs incurred through the IPO that
were directly related to the Public Offering. Offering costs associated with the Public Offering amounted to $26,658,313, consisting
of $4,595,000 of underwriting commissions, $11,541,250 of deferred underwriting commissions, $9,680,125 of excess fair
value of founder shares (see Note 6), and $841,938 of other offering costs, with $23,439 allocated to the over-allotment option,
$24,538,134 allocated to the Class A ordinary shares subject to redemption, and $2,096,740 allocated to the Class A ordinary
shares not subject to redemption, the Public Warrants and the Private Placement Warrants .
Ordinary Shares Subject to Possible Redemption
31,588,011 Class A ordinary shares sold as
part of the Units in the Public Offering contain a redemption feature which allows for the redemption of such Public Shares in connection
with the Company’s liquidation, if there is a shareholder vote or tender offer in connection with an Initial Business Combination
and in connection with certain amendments to the Company’s amended and restated memorandum and articles of association. In accordance
with SEC and its staff’s guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99, redemption provisions
not solely within the control of the Company require ordinary shares subject to redemption to be classified outside of permanent equity.
The Class A ordinary shares are subject to SEC
and its staff’s guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99. If it is probable that the
equity instrument will become redeemable, the Company has the option to either accrete changes in the redemption value over the period
from the date of issuance (or from the date that it becomes probable that the instrument will become redeemable, if later) to the earliest
redemption date of the instrument or to recognize changes in the redemption value immediately as they occur and adjust the carrying amount
of the instrument to equal the redemption value at the end of each reporting period. The Company recognizes changes in redemption value
immediately as they occur. Immediately upon the closing of the IPO, the Company recognized the remeasurement from initial book value to
redemption amount value. The change in the carrying value of redeemable ordinary shares resulted in charges against additional paid-in
capital.
Related Party Redemption Waiver Agreement
In September 2021, the Company entered into a
redemption waiver agreement with one of its Anchor Investors, Kingstown 1740, whereby Kingstown 1740 agreed to waive its redemption rights
on 1,386,989 Class A ordinary shares (the “Non-Redemption Shares”) it held, and these ordinary shares are classified
as shareholders’ equity.
As of September 30, 2022 and December 31, 2021,
the Class A ordinary shares subject to possible redemption reflected on the balance sheets are reconciled in the following table:
Gross proceeds from IPO and partial exercise of over-allotment option | |
$ | 329,750,000 | |
Less: proceeds from shares not subject to redemption | |
| (13,869,890 | ) |
| |
| | |
Less: | |
| | |
Proceeds allocated to public warrants | |
| (11,995,753 | ) |
Over-allotment liability | |
| (281,301 | ) |
Ordinary share issuance costs | |
| (24,538,134 | ) |
Plus: | |
| | |
Remeasurement of carrying value to redemption value | |
| 36,815,188 | |
| |
| | |
Class A ordinary shares subject to redemption, December 31, 2021 | |
| 315,880,110 | |
Plus: | |
| | |
Remeasurement of carrying value to redemption value | |
| 1,992,611 | |
| |
| | |
Class A ordinary shares subject to redemption, September 30, 2022 | |
$ | 317,872,721 | |
Income Taxes
The Company follows the asset and liability method
of accounting for income taxes under FASB ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for
the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances
are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC Topic 740 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’s management determined that the Cayman Islands is the Company’s major tax jurisdiction. The Company
recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. As of September 30, 2022 and December
31, 2021, there were no unrecognized tax benefits and no amounts accrued for interest and penalties. The Company is currently not aware
of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company’s
management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
The Company is considered to be an exempted Cayman
Islands company with no connection to any other taxable jurisdiction and is presently not subject to income taxes or income tax filing
requirements in the Cayman Islands or the United States.
Recent Accounting Pronouncements
In August 2020, the Financial Accounting Standards
Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt — Debt with Conversion and Other
Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”)
to simplify accounting for certain financial 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 is effective
for fiscal years beginning after December 15, 2023 for emerging growth companies and should be applied on a full or modified retrospective
basis, with early adoption permitted beginning on January 1, 2021. The Company is currently assessing the impact, if any, that ASU 2020-06
would have on its financial position, results of operations or cash flows.
Management does not believe that any other recently
issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s unaudited
condensed financial statements.
Note 4 — Public Offering
On September 24, 2021, the Company sold 30,000,000 Units,
at a purchase price of $10.00 per Unit in its IPO. Each Unit consists of one Class A ordinary share and one-half of one
redeemable Public Warrant. Each whole Public Warrant will entitle the holder to purchase one Class A ordinary share at a price of
$11.50 per share, subject to adjustment). Each Public Warrant will become exercisable 30 days after the completion of an Initial
Business Combination and will expire five years after the completion of an Initial Business Combination, or earlier upon redemption or
liquidation.
One of the Anchor Investors, Kingstown 1740, an
affiliate of the Sponsor, was allocated and purchased 2,900,000 Units sold in the IPO.
The underwriters had a 45-day option from the
Effective Date to purchase up to an additional 4,500,000 Units to cover over-allotments. On October 29, 2021, the underwriters
partially exercised the over-allotment option and purchased an additional 2,975,000 Units, generating aggregate gross proceeds
of $29,750,000, and forfeited their option to purchase the remaining 1,525,000 Units.
The Company provided a discount to the underwriters at the closing
of the IPO of $4,000,000, and an additional discount of $595,000 upon the closing of the Over-Allotment. Additionally, the underwriting
agreement states that the Company will pay Citigroup Global Markets Inc. (“Citi”) a deferred discount of $0.35 per Unit sold
in the Public Offering including pursuant to the Over-Allotment, or an aggregate of $11,541,250 (see Note 7), upon the Company’s
completion of an Initial Business Combination, which would be payable from the amounts held in the Trust Account solely in the event we
complete an Initial Business Combination, subject to the terms of the underwriting agreement. Accordingly, as of September 30, 2022 and
December 31, 2021, aggregate additional fees of $11,541,250 (see Note 7) were recorded as deferred and payable upon the Company’s
completion of an Initial Business Combination.
Warrants — As of
September 30, 2022 and December 31, 2021, there were 16,487,500 Public Warrants and 6,845,000 Private Placement Warrants
outstanding. The Company evaluated the terms of the warrants and determined the warrants meet the criteria in ASC 815, “Derivatives
and Hedging”, to be classified in shareholders equity upon issuance. Each whole warrant will entitle the holder to purchase one
Class A ordinary share at a price of $11.50 per share, subject to adjustment as discussed herein. The warrants will become exercisable
30 days after the completion of the Company’s Initial Business Combination, and will expire five years after the completion
of the Company’s Initial Business Combination at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.
The Private Placement Warrants are identical to
the Public Warrants included in the Units sold in the IPO except that the Private Placement Warrants may not (including the Class A ordinary
shares issuable upon exercise of the Private Placement Warrants), subject to certain limited exceptions, be transferred, assigned or sold
by the holders until 30 days after the completion of the Company’s Initial Business Combination.
The Company has agreed that as soon as practicable,
but in no event later than 15 business days after the closing of the Initial Business Combination, the Company will use its best efforts
to file with the SEC a post-effective amendment to the registration statement for the Public Offering or a new registration statement
covering the registration, under the Securities Act, of the Class A ordinary shares issuable upon exercise of the warrants. The Company
will use its best efforts to cause the same to become effective and to maintain the effectiveness of such registration statement, and
a current prospectus relating thereto, until the expiration of the warrants in accordance with the provisions of the warrant agreement.
If a registration statement covering the Class A ordinary shares issuable upon exercise of the warrants is not effective by the sixtieth
(60th) business day after the closing of the Initial Business Combination, warrant holders may, until such time as there is
an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement,
exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. Notwithstanding
the above, if the Class A ordinary shares are at the time of any exercise of a warrant not listed on a national securities exchange such
that they satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at
its option, require holders of warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section
3(a)(9) of the Securities Act and, in the event the Company so elects, it will not be required to file or maintain in effect a registration
statement, and in the event the Company does not so elect, it will use its best efforts to register or qualify the shares under applicable
blue sky laws to the extent an exemption is not available.
Redemption of Warrants When the Price per Class A Ordinary Share
Equals or Exceeds $18.00
Once the warrants become exercisable, the Company
may redeem the outstanding 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 share sub-divisions, share dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending three business days before it sends the notice of redemption to the warrant holders. |
Additionally, if the number of outstanding Class
A ordinary shares is increased by a share capitalization payable in Class A ordinary shares, or by a sub-division of ordinary shares or
other similar event, then, on the effective date of such share capitalization, sub-division or similar event, the number of Class A ordinary
shares issuable on exercise of each warrant will be increased in proportion to such increase in the outstanding ordinary shares. A rights
offering made to all or substantially all holders of ordinary shares entitling holders to purchase Class A ordinary shares at a price
less than the fair market value will be deemed a share capitalization of a number of Class A ordinary shares equal to the product of (i)
the number of Class A ordinary shares actually sold in such rights offering (or issuable under any other equity securities sold in such
rights offering that are convertible into or exercisable for Class A ordinary shares) and (ii) the quotient of (x) the price per Class
A ordinary share paid in such rights offering and (y) the fair market value. For these purposes (i) if the rights offering is for securities
convertible into or exercisable for Class A ordinary shares, in determining the price payable for Class A ordinary shares, there will
be taken into account any consideration received for such rights, as well as any additional amount payable upon exercise or conversion
and (ii) fair market value means the volume weighted average price of Class A ordinary shares as reported during the ten (10) trading
day period ending on the trading day prior to the first date on which the Class A ordinary shares trade on the applicable exchange or
in the applicable market, regular way, without the right to receive such rights.
Further, if: (i) the Company issues additional
Class A ordinary shares or equity-linked securities for capital raising purposes in connection with the closing of its 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 Sponsor or its affiliates,
without taking into account any Founder Shares held by the Sponsor 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 (including
from such issuances and the Public Offering), 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 prior to the day on which the Company consummates
its Initial Business Combination (such price, the “Market Value”) is below $9.20 per share, then 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 will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value
and the Newly Issued Price.
Note 5 — Private Placement
Simultaneously with the closing of the IPO, the
Company’s Sponsor purchased an aggregate of 6,250,000 IPO Private Placement Warrants at a price of $1.00 per IPO
Private Placement Warrant, for an aggregate purchase price of $6,250,000. On October 29, 2021, simultaneously with the closing of the
Over-Allotment, the Sponsor purchased an additional 595,000 Over-Allotment Private Placement Warrants at a price of $1.00 per
Over-Allotment Private Placement Warrant, generating aggregate gross proceeds of $595,000.
The Private Placement Warrants are identical to
the Public Warrants included in the Units sold in the Public Offering except that the Private Placement Warrants may not (including the
Class A ordinary shares issuable upon exercise of the Private Placement Warrants), subject to certain limited exceptions, be transferred,
assigned or sold by the holders until 30 days after the completion of the Company’s Initial Business Combination. If the Company
does not complete the Initial Business Combination within 24 months from the closing of the IPO, the Private Placement Warrants will expire
worthless.
Note 6 — Related Party Transactions
Founder Shares
On February 3, 2021, the Sponsor paid $25,000,
or approximately $0.003 per share, to cover certain offering and formation costs in consideration for 7,187,500 Founder
Shares. On March 5, 2021, the Company effected a 1.2 to 1 share recapitalization with respect to its Class B ordinary shares, resulting
in the Sponsor holding an aggregate of 8,625,000 Founder Shares. Up to 1,125,000 Founder Shares were subject to forfeiture
by the Sponsor depending on the extent to which the underwriters’ over-allotment option was exercised. On October 29, 2021, as a
result of the partial exercise of the over-allotment option, the Sponsor forfeited 381,250 of these Founder Shares and the remaining
Founder Shares are no longer subject to forfeiture.
The Sponsor and the Company’s officers and
directors have agreed not to transfer, assign or sell any of their Founder Shares and any Class A ordinary shares issuable upon conversion
thereof until the earlier to occur of: (i) one year after the completion of the Initial Business Combination, or (ii) the date
on which the Company completes a liquidation, merger, share exchange or other similar transaction after the Initial Business Combination
that results in all of the Company’s shareholders having the right to exchange their Class A ordinary shares for cash, securities
or other property; except to certain permitted transferees and under certain circumstances (the “lock-up”). Notwithstanding
the foregoing, if (1) the closing price of Class A ordinary shares equals or exceeds $12.00 per share (as adjusted for
share sub-divisions, share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading
day period commencing at least 150 days after the Initial Business Combination or (2) if the Company consummates a transaction
after the Initial Business Combination which results in the Company’s shareholders having the right to exchange their shares for
cash, securities or other property, the Founder Shares will be released from the lock-up.
In addition, subject to each Anchor Investor purchasing 100%
of the Units allocated to it, in connection with the closing of the IPO, the Sponsor sold membership interests reflecting an allocation
of an aggregate of 1,625,000 Founder Shares to the Anchor Investors collectively. The Company estimated the aggregate fair value
of these Founder Shares attributable to Anchor Investors to be approximately $9.68 million, or $5.96 per share. The excess of
the fair value of the Founder Shares was determined to be an offering cost in accordance with Staff Accounting Bulletin Topic 5A. Upon
the completion of the IPO, offering costs allocated (1) to the Public Shares not subject to possible redemption and the Public Warrants
were charged to additional paid-in capital; (2) to the Public Shares subject to redemption were charged to temporary equity; and (3) to
the over-allotment liability were charged to expense.
At the Closing of the Proposed Business Combination,
New Intuitive Machines will enter into a lock-up agreement superseding the lock-up imposed at IPO, pursuant to which the Sponsor and its
permitted assigns will agree not to, without the prior written consent of the New Intuitive Machines board of directors, prior to the
date that is six months after the date of the Closing, (i) sell, pledge, grant any option to purchase or otherwise dispose of
(a) any shares of New Intuitive Machines Class A Common Stock the Sponsor received upon conversion of its Founder Shares in
connection with the Domestication (the “Sponsor Lock-Up Shares”), (ii) enter into any swap or other transfer
arrangement in respect of the Sponsor Lock-Up Shares or (iii) take any other similar actions (the actions specified in the foregoing
clauses (i) through (iii), collectively, “Transfer”). The Sponsor also will agree to not Transfer any New Intuitive
Machines Warrants received upon conversion of its Private Placement Warrants in connection with the Domestication (or the shares of New
Intuitive Machines Class A Common Stock issuable upon exercise of such warrants), prior to the date that is 30 days after the
date of the Closing. The lock-up agreement will provides for certain permitted transfers, including but not limited to, transfers
to certain affiliates or family members, transfers of shares acquired on the open market after the consummation of the Proposed Business
Combination, subject to certain conditions, or the exercise of certain stock options and warrants.
Redemption Waiver Agreement
In September 2021, the Company entered into a
redemption waiver agreement with one of its Anchor Investors, Kingstown 1740, whereby Kingstown 1740 agreed to waive its redemption rights
on the Non-Redemption Shares, which are 1,386,989 Class A ordinary shares, and these ordinary shares are classified as
shareholders’ equity.
Promissory Note—Related Party
On February 2, 2021, the Sponsor agreed to loan
the Company up to $300,000 to be used for a portion of the expenses of the IPO. These loans were non-interest bearing, unsecured
and were due at the earlier of December 31, 2021 or the closing of the IPO. As of September 24, 2021, the Company had borrowed $188,805 under
the promissory note, which was fully repaid by September 30, 2021. On September 30, 2021, the Sponsor agreed to provide the Company with
loans in such amounts as may be required by the Company to fund the Company’s working capital requirements up to an aggregate of
$250,000, and no amounts have been drawn upon this loan commitment. On March 8, 2022, the Sponsor agreed to provide the Company with loans
in such amounts as may be required by the Company to fund the Company’s working capital requirements up to an aggregate of $500,000,
and no amounts have been drawn upon this loan commitment.
Working Capital Loans
On August 4, 2022, the Sponsor agreed to loan
the Company up to $1,000,000 to be used for ongoing expenses reasonably related to the business of the Company and the consummation of
an Initial Business Combination pursuant to the Working Capital Note. The Working Capital Note is non-interest bearing and all unpaid
principal under the Working Capital Note shall be due and payable in full on the Maturity Date, unless accelerated upon the occurrence
of an event of default as set forth in the Working Capital Note. The Sponsor will have the option, at any time on or prior to the Maturity
Date, to convert up to $1,000,000 outstanding under the Working Capital Note into warrants to purchase Class A ordinary shares at a conversion
price of $1.00 per warrant, with each warrant entitling the holder to purchase one Class A ordinary share at a price of $11.50 per share,
subject to the same adjustments applicable to the Private Placement Warrants. On September 30, 2022, the Company drew $125,000 on the
Working Capital Note. The conversion feature was analyzed under ASC 470-20, “Debt with Conversion or Other Options”, and the
Working Capital Note did not include any premium or discounts. The conversion option did not include elements that would require bifurcation
under ASC 815-40, “Derivatives and Hedging.”
In addition to the Working Capital Note, in order
to finance transaction costs in connection with an Initial Business Combination, the Sponsor or an affiliate of the Sponsor, or certain
of the Company’s officers and directors may, but, except as set forth above, are not obligated to, make Working Capital Loans to
the Company as may be required on a non-interest basis. Up to an aggregate of $1,500,000 outstanding under the Working Capital Loans
may be convertible into warrants to purchase Class A ordinary shares at a conversion price of $1.00 per warrant at the option of the lender,
with each warrant entitling the holder to purchase one Class A ordinary share at a price of $11.50 per share, subject to the same adjustments
applicable to the Private Placement Warrants. If the Company completes an Initial Business Combination, the Company would repay the Working
Capital Loans, unless they are converted into warrants. In the event that an Initial 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.
At September 30, 2022 and December 31, 2021, $125,000
and $0, respectively, were outstanding under Working Capital Loans.
Administrative Service Fee
On September 21, 2021, the Company entered into
an Administrative Services Agreement with Kingstown Capital Management L.P., an affiliate of the Sponsor, pursuant to which it pays a
total of $15,000 per month for office space, utilities, secretarial and administrative support services provided to members of the
Company’s management team. Upon completion of an Initial Business Combination or a liquidation, the Company will cease paying these
monthly fees. For the three and nine months ended September 30, 2022, the Company recorded $45,000 and $135,000 of administrative
service fees under the agreement, respectively. For the three months ended September 30, 2021, and for the period from January 27, 2021
(inception) through September 30, 2021, the Company recorded $4,500 for these services. As of September 30, 2022 and December 31,
2021, $60,000 and $4,500 was due under the agreement which is included in due to related party on the Company’s unaudited condensed
Balance Sheets, respectively.
Professional Service Agreement
The Company reimburses its Sponsor for services
provided by one of the Sponsor’s employees who serve as the Company’s Chief of Staff (“COS”). The COS receives
$12,500 per month for services rendered, commencing September 25, 2021, through the closing of an Initial Business Combination. For
the three and nine months ended September 30, 2022, the Company recorded $37,500 and $112,500 of compensation for services provided,
respectively. For the three months ended September 30, 2021, and for the period from January 27, 2021 (inception) through September 30,
2021, the Company did not incur fees for these services. As of September 30, 2022 and December 31, 2021, there was $50,000 and $0 due
to the COS which is included in due to related party on the Company’s unaudited condensed Balance Sheets, respectively.
Forward Purchase Agreement
On September 21, 2021, the Company entered into
a forward purchase agreement (“FPA”) pursuant to which certain affiliates of the Sponsor (“Kingstown”) agreed
to purchase up to 5,000,000 forward purchase Class A ordinary shares (“Forward Purchase Shares”), for $10.00 per
share, or an aggregate amount of up to $50,000,000, in a private placement that will close concurrently with the closing of an Initial
Business Combination, subject to approval by the Kingstown investment committee. The proceeds from the sale of these Forward Purchase
Shares, together with the amounts available to the Company from the Trust Account (after giving effect to any redemptions of Public Shares)
and any other equity or debt financing obtained by the Company in connection with an Initial Business Combination, will be used to satisfy
the cash requirements of an Initial Business Combination, including funding the purchase price and paying expenses and retaining specified
amounts to be used by the post-Initial Business Combination company for working capital or other purposes. To the extent that the amounts
available from the Trust Account and other financing are sufficient for such cash requirements, Kingstown may purchase less than 5,000,000 Forward
Purchase Shares. In addition, Kingstown’s commitment under the FPA will be subject to approval of its investment committee prior
to the closing of an Initial Business Combination. Accordingly, if Kingstown’s investment committee does not give its approval,
Kingstown will not be obligated to purchase the Forward Purchase Shares. Further, the Company has the right, in its sole discretion, to
reduce the amount of Forward Purchase Shares that Kingstown may purchase pursuant to the FPA. Pursuant to the terms of the FPA, Kingstown
will have the option to assign its commitment to one of its affiliates. The Forward Purchase Shares will be identical to the Class A ordinary
shares included in the Units sold in the Public Offering, except that they will be subject to transfer restrictions and registration rights.
The Company evaluated the FPA under ASC 480 and
ASC 815-40 to determine the appropriate accounting treatment. The FPA does not meet the criteria to be classified as a liability under
ASC 480. In addition, there is no net cash settlement feature and settlement will be in gross physical delivery of Class A ordinary shares;
therefore, the FPA should be classified as equity. However, as the issuance of Forward Purchase Shares is contingent on several factors,
including the consummation of an Initial, approval by the Kingstown board of directors, and the Company’s discretion, the Company
will record the FPA when it becomes probable that the triggering events will occur.
Note 7 — Commitments and Contingencies
Registration Rights
The holders of the (i) Founder Shares, which
were issued in a private placement prior to the closing of the IPO, (ii) Forward Purchase Shares, (iii) Private Placement Warrants
which were issued in private placements simultaneously with the closing of the IPO and the Over-Allotment and the Class A ordinary
shares underlying such Private Placement Warrants and (iv) warrants that may be issued upon conversion of Working Capital Loans and
the Class A ordinary shares underlying such warrants will have registration rights to require the Company to register a sale of any
of the Company’s securities held by them and any other securities of the Company acquired by them prior to the consummation of an
Initial Business Combination pursuant to a registration rights agreement entered into in connection with the IPO. Pursuant to the
registration rights agreement and assuming $1,500,000 of Working Capital Loans are converted into additional warrants, the Company will
be obligated to register up to 21,588,750 Class A ordinary shares and 8,345,000 warrants. The number of Class A ordinary shares
includes (i) 8,243,750 Class A ordinary shares to be issued upon conversion of the Founder Shares, (ii) 5,000,000 Forward Purchase
Shares, (iii) 6,845,000 Class A ordinary shares underlying the Private Placement Warrants and (iv) 1,500,000 Class A ordinary
shares underlying the warrants issuable upon conversion of Working Capital Loans. The number of warrants includes 6,845,000 Private Placement
Warrants and 1,500,000 additional warrants issuable upon the conversion of Working Capital Loans. 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 “piggy-back” registration rights with respect to registration statements filed subsequent to the Company’s
completion of an Initial Business Combination. The Company will bear the expenses incurred in connection with the filing of any such registration
statements. The Company evaluated the registration rights agreement in accordance with the guidance in ASC 825-20 “Registration
Payment Arrangements,” ASC 470-20 “Debt with Conversion and Other Options,” and ASC 450 “Contingencies.”
The registration rights agreement does not contain liquidating damages, penalty payment, or other cash settlement provisions resulting
from delays in registering the Company’s securities. As such, there are no accounting implications that arise due to the registration
rights.
At the Closing, the Company, the Sponsor and certain
securityholders of Intuitive Machines will enter into an amended and restated registration rights agreement (the “A&R Registration
Rights Agreement”), pursuant to which, among other things, the Sponsor and such securityholders will be granted certain customary
registration rights, on the terms and subject to the conditions therein, with respect to securities of New Intuitive Machines that they
will hold following the Proposed Business Combination.
Underwriting Agreement
The Company granted the underwriters a 45-day
option from the Effective Date to purchase up to an additional 4,500,000 Units to cover over-allotments, if any.
On September 24, 2021, the Company paid a cash
underwriting discount of 2.0% per Unit, or $4,000,000, excluding the proceeds from the purchase of an aggregate of 10,000,000 Units
by certain of our anchor investors. The Company paid an underwriting fee at the closing of the Over-Allotment of $595,000.
The underwriting agreement states that Citi will
be entitled to a deferred underwriting discount of 3.5% of the gross proceeds of the Public Offering, or $11,541,250, held in the
Trust Account upon the completion of an Initial Business Combination, which would be payable 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.
Proposed Business Combination with Intuitive
Machines
As more fully described in Note 1, the Company
entered into a number of agreements as part of its Proposed Business Combination with Intuitive Machines. These agreements included but
are not limited to the Business Combination Agreement, the Series A Purchase Agreement, the Cantor Purchase Agreement and Sponsor Purchase
Agreement, each of which contained terms and conditions which commit the Company to certain obligations in the event the Proposed Business
Combination is successful.
Note 8 — Shareholders’ Equity
Preference Shares
The Company is authorized to issue 5,000,000 preference
shares with a par value of $0.0001 per share. At September 30, 2022 and December 31, 2021, 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 Class A ordinary shares are entitled to one vote
for each share. At September 30, 2022 and December 31, 2021, there were 1,386,989 Class A ordinary shares issued and outstanding,
excluding 31,588,011 Class A ordinary shares subject to possible redemption.
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. Holders of the Class B ordinary shares are entitled to one vote for each
ordinary share. On February 3, 2021, the Sponsor paid $25,000, or approximately $0.003 per share, to cover certain offering and formation
costs in consideration for 7,187,500 Founder Shares. On March 5, 2021, the Company effected a 1.2 to 1 share recapitalization
with respect to its Class B ordinary shares, resulting in the Sponsor holding an aggregate of 8,625,000 Founder Shares. Up
to 1,125,000 Founder Shares were subject to forfeiture by the Sponsor depending on the extent to which the underwriters’
over-allotment option was exercised. On October 29, 2021, as a result of the partial exercise of the over-allotment option, the Sponsor
forfeited 381,250 of these shares and the remaining Class B ordinary shares are no longer subject to forfeiture. At September
30, 2022 and December 31, 2021, there were 8,243,750 Class B ordinary shares issued and outstanding.
Prior to the closing of the Company’s Initial
Business Combination, only holders of the Class B ordinary shares will be entitled to vote on continuing the Company in a jurisdiction
outside the Cayman Islands (including any special resolution required to amend the constitutional documents of the Company or to adopt
new constitutional documents of the Company, in each case, as a result of the Company approving a transfer by way of continuation in a
jurisdiction outside the Cayman Islands). On all other matters submitted to a vote of the Company’s shareholders, holders of Class A
ordinary shares and holders of Class B ordinary shares will vote together as a single class except as required by law. Unless specified
in the Company’s amended and restated memorandum and articles of association, or as required by applicable provisions of the Companies
Act (As Revised) of the Cayman Islands or applicable stock exchange rules, the affirmative vote of a majority of the Company’s ordinary
shares that are voted is required to approve any such matter voted on by its shareholders.
The Class B ordinary shares will automatically
convert into Class A ordinary shares concurrently with or immediately following the consummation of the Initial Business Combination
on a one-for-one basis, subject to adjustment for share sub-divisions, share capitalizations, 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 Initial Business Combination, the number of Class A ordinary shares issuable
upon conversion of all Founder Shares will equal, in the aggregate, 20% of the total number of Class A ordinary shares outstanding after
such conversion (after giving effect to any redemptions of Public Shares by Public Shareholders), 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 Initial Business Combination (including the
Forward Purchase Shares), excluding any Class A ordinary shares or equity-linked securities exercisable for or convertible into Class
A ordinary shares issued, or to be issued, to any seller in the Initial Business Combination and any Private Placement Warrants 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.
Note 9 — Fair Value Measurements
The Company follows the guidance in ASC 820 for
its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets
and liabilities that are re-measured and reported at fair value at least annually.
The fair value of the Company’s financial
assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale
of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the
measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of
observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions
about how market participants would price assets and liabilities).
The following fair value hierarchy is used to
classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
Level 1: |
|
Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. |
|
|
|
Level 2: |
|
Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active. |
|
|
|
Level 3: |
|
Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability. |
The following table presents information about
the Company’s assets that are measured at fair value on a recurring basis at September 30, 2022 and December 31, 2021, and indicates
the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
Description | |
Level | | |
September 30, 2022 | | |
December 31, 2021 | |
Assets: | |
| | |
| | |
| |
Marketable securities held in Trust Account | |
| 1 | | |
$ | 331,742,611 | | |
$ | 329,755,798 | |
Note 10 — Subsequent Events
The Company evaluated subsequent events and transactions
that occurred after the balance sheet date through the date the unaudited condensed financial statements were issued. Based upon this
review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the unaudited condensed
financial statements.
On October 12, 2022 and October 21, 2022 the Company
drew an additional $300,000 and $75,000 on the Working Capital Loan, as described in Note 6, respectively.
Item 2. Management’s Discussion and Analysis
of Financial Condition and Results of Operations.
References to the “Company,” “Inflection
Point Acquisition Corp.,” “our,” “us” or “we” refer to Inflection Point Acquisition Corp. The
following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with
the unaudited interim condensed financial statements and the notes thereto contained elsewhere in this Quarterly Report on Form 10-Q (this
“Quarterly Report”).
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report includes forward-looking
statements. These forward-looking statements are based on our current expectations and beliefs concerning future developments and their
potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These
forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may
cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. Our
forward-looking statements include, but are not limited to, statements regarding our or our management team’s expectations, hopes,
beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations
of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,”
“believe,” “continue,” “could,” “estimate,” “expect,” “intends,”
“may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,”
“should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words
does not mean that a statement is not forward-looking. Factors that might cause or contribute to such forward-looking statements include,
but are not limited to, those set forth in the Risk Factors section of our Annual Report on Form 10-K for the year ended December 31,
2021 filed with the SEC and this Quarterly Report. The following discussion and analysis of our financial condition and results of operations
should be read in conjunction with the unaudited interim condensed financial statements and the notes thereto contained elsewhere in this
Quarterly Report.
Overview
We are a blank check company incorporated on January
27, 2021 as a Cayman Islands exempted company for the purpose of effecting a merger, share exchange, asset acquisition, share purchase,
reorganization or similar business combination with one or more businesses (the “Initial Business Combination”).
Our sponsor is Inflection Point Holdings LLC,
a Cayman Islands limited liability company (the “Sponsor”). The registration statement for our initial public offering was
declared effective on September 21, 2021. On September 24, 2021, we consummated our initial public offering (the “IPO”) of
30,000,000 units, at $10.00 per unit (the “Units”). Each Unit consists of one of our Class A ordinary shares, $0.0001
par value (the “Class A ordinary shares” or “Public Shares”) and one-half of one redeemable warrant
(each, a “Public Warrant”), with each whole warrant entitling the holder to purchase one Class A ordinary share for $11.50 per
share, subject to adjustment. The underwriters had a 45-day option from the effective date to purchase up to an additional 4,500,000 Units
to cover over-allotments, if any. On October 29, 2021, the underwriters partially exercised the over-allotment option (the “Over-Allotment”
and together with the IPO, the “Public Offering”) and purchased an additional 2,975,000 Units (the “Over-Allotment Units”),
generating additional gross proceeds of $29,750,000, and forfeited their option to purchase the remaining 1,525,000 Units.
Simultaneously with the closing of the IPO, our
Sponsor purchased an aggregate of 6,250,000 private placement warrants (“IPO Private Placement Warrants”) at a price of $1.00
per IPO Private Placement Warrants, for an aggregate purchase price of $6,250,000. On October 29, 2021, simultaneously with the sale of
the Over-Allotment Units, our Sponsor purchased an additional 595,000 private placement warrants (the “Over-Allotment Private Placement
Warrants” and together with the IPO Private Placement Warrants, the “Private Placement Warrants”), generating aggregate
gross proceeds to us of $595,000.
An aggregate of 12 qualified institutional buyers
(“Anchor Investors”) expressed an interest to purchase an aggregate of approximately $322.3 million of the Units to be sold
in the IPO. None of the Anchor Investors expressed an interest in purchasing more than 9.9% of the Units sold in the IPO. The Anchor Investors
were allocated and purchased a total of 29,540,000 Units or 98.5% of the Units sold in the IPO. One of the Anchor Investors, Kingstown
1740 Fund, LP (“Kingstown 1740”), is an affiliate of our Sponsor, and was allocated and purchased 2,900,000 Units in the IPO.
In addition, subject to each Anchor Investor purchasing
100% of the Units allocated to it, in connection with the closing of the IPO, our Sponsor sold membership interests reflecting an allocation
of Class B ordinary shares, par value $0.0001 per share (the “Founder Shares”) to each Anchor Investor, amounting to an aggregate
of 1,625,000 Founder Shares to all Anchor Investors collectively. We estimated the aggregate fair value of these Founder Shares attributable
to Anchor Investors to be approximately $9.68 million, or $5.96 per share. The excess of the fair value of the Founder Shares was determined
to be an offering cost in accordance with Staff Accounting Bulletin Topic 5A. Offering costs allocated to the Public Shares and the Public
Warrants was all charged to shareholder’s equity upon the completion of the IPO.
Transaction costs amounted to $26,658,313, consisting
of $4,595,000 of underwriting commissions, $11,541,250 of deferred underwriting commissions, $9,680,125 of excess fair value of founder
shares, and $841,938 of other offering costs, with $23,439 allocated to the over-allotment option, $24,538,134 allocated to the Class
A ordinary shares subject to redemption, and $2,096,740 allocated to the Class A ordinary shares not subject to redemption, the Public
Warrants and the Private Placement Warrants.
Following the closing of the IPO on September
24, 2021, $300,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the IPO and the sale of the IPO Private Placement
Warrants was deposited into a trust account (the “Trust Account”). Following the closing of the Over-Allotment on October
29, 2021, an additional $29,750,000 ($10.00 per Over-Allotment Unit) from the net proceeds from the sale of the Over-Allotment Units in
the Over-Allotment and the sale of the Over-Allotment Private Placement Warrants was deposited into the Trust Account. The proceeds deposited
in the Trust Account are, and will be, invested only in U.S. government securities, within the meaning set forth in Section 2(a)(16) of
the Investment Company Act of 1940, as amended (the “Investment Company Act”), having a maturity of 185 days or less or in
money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act 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 us to pay taxes, if any, the proceeds from the Public Offering and the sale of the Private Placement Warrants will not be released
from the Trust Account until the earliest of (i) the completion of an Initial Business Combination, (ii) the redemption of our Public
Shares if we are unable to complete an Initial Business Combination by September 24, 2023, subject to applicable law, or (iii) the redemption
of our Public Shares properly submitted in connection with a shareholder vote to amend our amended and restated memorandum and articles
of association to (A) modify the substance or timing of our obligation to allow redemption in connection with an Initial Business Combination
or to redeem 100% of its Public Shares if we have not consummated an Initial Business Combination by September 24, 2023 or (B) 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 our creditors, if any, which could have priority over the claims of our Public
Shareholders.
Our management has broad discretion with respect
to the specific application of the net proceeds of the Public Offering and the sale of the Private Placement Warrants although substantially
all of the net proceeds are intended to be generally applied toward consummating an Initial Business Combination (less deferred underwriting
commissions). Our Initial Business Combination must be with one or more operating businesses or assets with a fair market value equal
to at least 80% of the value of the Trust Account (excluding the amount of any deferred underwriting discount held in trust and taxes
payable on the income earned on the Trust Account). However, we will only complete an Initial Business Combination if the post-transaction
company owns or acquires 50% or more of the issued and 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 we will be able to successfully effect an Initial Business Combination.
We will have until September 24, 2023 to complete
an Initial Business Combination (the “Combination Period”). However, if we are unable to complete an Initial Business Combination
within the Combination Period, we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible
but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate
amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account (less tax 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 liquidation 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 the case of clauses (ii) and (iii) to our obligations under Cayman Islands law
to provide for claims of creditors and in all cases subject to the other requirements of applicable law.
Proposed Business Combination with Intuitive
Machines
On September 16, 2022, the Company entered
into a business combination agreement (the “Business Combination Agreement”) with Intuitive Machines, LLC, a Texas limited
liability company (“Intuitive Machines” and, subsequent to the Proposed Business Combination, “Intuitive Machines OpCo”),
pursuant to which, subject to the satisfaction or waiver of certain closing conditions, including the approval of the Business Combination
Agreement and the transactions contemplated thereby by the Company’s shareholders, (1) at the closing of the transactions contemplated
by the Business Combination Agreement (the “Closing”) and following the Domestication (as defined below), (a) the Company
will acquire equity securities and become the managing member of Intuitive Machines OpCo and (b) the Company will issue voting equity
securities without economic rights to the existing members of Intuitive Machines prior to the Closing (“Intuitive Machines Members”),
resulting in a combined company organized in an umbrella partnership C corporation (“Up-C”) structure, in which substantially
all of the assets and the business of the combined company will be held by Intuitive Machines OpCo; (2) the Company will domesticate (the
“Domestication”) as a Delaware corporation in accordance with the Delaware General Corporation Law (“DGCL”), the
Companies Act (As Revised) of the Cayman Islands (the “Companies Act”) and the Company’s amended and restated memorandum
and articles of association, (3) Intuitive Machines will change its jurisdiction from Texas to Delaware (the “Conversion”)
and complete a recapitalization (the “Recapitalization”) whereby all outstanding equity securities of Intuitive Machines will
be converted or exchanged into common units, options, and unvested earn out units, as applicable, and (4) the other transactions contemplated
by the Business Combination Agreement and documents related thereto will be consummated (such transactions, together with the business
combination and the Domestication, Conversion, and Recapitalization, the “Proposed Business Combination”). In connection with
the Proposed Business Combination, the Company will be renamed “Intuitive Machines, Inc.” (“New Intuitive Machines”).
The Domestication
As a condition to the Proposed Business Combination,
the Company will change its jurisdiction of incorporation by effecting a deregistration under Section 206 of the Companies Act and
a domestication under Section 388 of the DGCL, pursuant to which the Company’s jurisdiction of incorporation will be changed
from the Cayman Islands to the State of Delaware. Immediately prior to the Domestication, pursuant to the Company’s amended and
restated memorandum and articles of association, each Founder Share will convert automatically, on a one-for-one basis, into a Class A
ordinary share. Immediately following such conversion, in connection with the Domestication, each of the then issued and outstanding
Class A ordinary shares will convert automatically, on a one-for-one basis, into one share of New Intuitive Machines Class A
common stock, par value $0.0001 per share, each of which will carry voting rights of one vote per share (collectively, the “New
Intuitive Machines Class A Common Stock”); (iii) each whole warrant to purchase one Class A ordinary share (each warrant, a
“Company Warrant”) will automatically represent the right to purchase one share of New Intuitive Machines Class A Common Stock
on the same terms as the Company Warrants (each a “New Intuitive Machines Warrant”) and (c) each of the units of the Company
outstanding as of immediately prior to the Domestication will automatically be canceled and each holder will be entitled to one share
of New Intuitive Machines Class A Common Stock and one-half of one New Intuitive Machines Warrant, per unit. No fractional New Intuitive
Machines Warrants will be issued upon such cancellation.
Concurrently with the Domestication and subject
to the satisfaction or waiver of the conditions set forth in the Business Combination Agreement, including approval by the Company’s
shareholders, the Company will adopt a certificate of incorporation (the “Proposed Certificate of Incorporation”) that, among
other things, will implement a revised class structure with the shares of New Intuitive Machines Class A Common Stock having one
vote per share and economic rights, the shares of Class B common stock of New Intuitive Machines, par value $0.0001 per share, having
one vote per share and no economic rights (collectively, the “New Intuitive Machines Class B Common Stock”) and the shares
of Class C common stock of New Intuitive Machines, par value $0.0001 per share, having three votes per share and no economic rights
(collectively, the “New Intuitive Machines Class C Common Stock” and the New Intuitive Machines Class A Common Stock,
the New Intuitive Machines Class B Common Stock and New Intuitive Machines Class C Common Stock, collectively, the “New
Intuitive Machines Common Stock”). The Proposed Certificate of Incorporation will also authorize the issuance of “blank check”
preferred stock, par value $0.0001 per share, having such characteristics as the board may, from time to time, provide. The Company’s
board of directors will adopt a Certificate of Designation of Preferences, Rights and Limitations of 10% Series A Cumulative Convertible
Preferred Stock, creating the Series A Preferred Stock (as defined below).
The Conversion and Recapitalization
In connection with the Proposed Business Combination,
Intuitive Machines will change its jurisdiction of organization from Texas to Delaware. Immediately prior to the Closing, Intuitive Machines
will effectuate the Recapitalization whereby all outstanding equity securities of Intuitive Machines will be converted into common units
of Intuitive Machines OpCo (“Intuitive Machines OpCo Common Units”), options to purchase Intuitive Machines OpCo Common Units
(“Intuitive Machines OpCo Options”) and unvested earn out units of Intuitive Machines OpCo (“Earn Out Units”).
Consideration and Structure
As a result of the Up-C structure, the business
combination consideration to be received by Intuitive Machines Members will consist of securities of both Intuitive Machines OpCo having
economic rights but not voting rights and New Intuitive Machines having voting rights but not economic rights equal to a value of approximately
$700,000,000. In particular, the business combination consideration to be received by the Intuitive Machines Members will be an aggregate
of (a) (i) 68,125,987 Intuitive Machines OpCo Common Units, (ii) 1,874,013 Intuitive Machines OpCo Options and (iii) 10,000,000
Earn Out Units and (b) (i) 278 shares of New Intuitive Machines Class B Common Stock (excluding 1,874,013 shares of
New Intuitive Machines Class B Common Stock reserved for issuance upon exercise of Intuitive Machines OpCo Options) and (ii) 68,125,709 shares
of New Intuitive Machines Class C Common Stock (excluding 10,000,000 shares of New Intuitive Machines Class C Common Stock reserved
for issuance upon vesting of the Earn Out Units).
The 10,000,000 Earn Out Units received by the
applicable Intuitive Machines Members will be subject to vesting and will be earned, released and delivered upon satisfaction of the following
milestones: (i) 2,500,000 Earn Out Units will vest if, during the Earn Out Period (as defined below), Intuitive Machines is awarded the
OMES III Contract by NASA (“Triggering Event I”), (ii) 5,000,000 Earn Out Units will vest if, within the Earn Out Period,
Triggering Event I occurs and the volume weighted average closing sale price of New Intuitive Machines Class A Common Stock equals or
exceeds $15.00 per share (“Triggering Event II-A”), (iii) 7,500,000 Earn Out Units will vest if, within the Earn Out Period,
Triggering Event I has not occurred and the volume weighted average closing sale price of New Intuitive Machines Class A Common Stock
equals or exceeds $15.00 per share (“Triggering Event II-B”), and (iv) 2,500,000 Earn Out Units will vest if, within the Earn
Out Period, Triggering Event III occurs the volume weighted average closing sale price of New Intuitive Machines Class A Common Stock
equals or exceeds $17.50 per share (“Triggering Event III”), provided, that Triggering Event II-A and Triggering Event II-B
may not both be achieved. “Earn Out Period” means (i) with respect to Triggering Event I, the time period beginning on September
16, 2022 and ending at 11:59 pm ET on December 31, 2023, and (ii) with respect to Triggering Event II-A, Triggering Event II-B and Triggering
Event III, the time period beginning on the date that is 150 days following the date of Closing and ending on the date that is the five
(5) year anniversary of the date of Closing. If a Change of Control (as defined in the Business Combination Agreement) occurs during the
Earn Out Period that results in the holders of New Intuitive Machines Class A Common Stock receiving a per share price greater than or
equal to $15.00 or $17.50, respectively, then immediately prior to the consummation of such Change of Control, to the extent not previously
triggered, then Triggering Event II-A or Triggering Event II-B will be deemed to have occurred, as applicable, and the applicable Earn
Out Units shall vest.
After the expiration of the applicable lock-up
period, holders of certain Intuitive Machines OpCo Common Units will be permitted to exchange such Intuitive Machines OpCo Common Units
(along with the cancellation of the paired share of New Intuitive Machines Class B Common Stock or share of New Intuitive Machines Class
C Common Stock) for shares of New Intuitive Machines Class A Common Stock on a one-for-one basis pursuant to the second amended and restated
limited liability company agreement of Intuitive Machines OpCo (the “Second A&R Operating Agreement”) (subject to customary
conversion rate adjustments for stock splits, stock dividends and reclassifications) or, at the election of New Intuitive Machines (determined
by a majority of the directors of New Intuitive Machines who are disinterested with respect to such determination), cash from a substantially
concurrent public offering or private sale in an amount equal to the net amount, on a per share basis, of cash received as a result of
such public offering or private sale.
Upon the vesting of any Earn Out Units, each of
the applicable Intuitive Machines Members will be issued (i) by Intuitive Machines OpCo an equal number of Intuitive Machines OpCo Common
Units and (ii) by New Intuitive Machines an equal number of shares of New Intuitive Machines Class C Common Stock, in exchange for surrender
of the applicable Earn Out Units and the payment to New Intuitive Machines of a per-share price equal to the par value per share of the
New Intuitive Machines Class C Common Stock. Upon the exercise of any Intuitive Machines OpCo Option, (i) Intuitive Machines OpCo will
issue to the exercising holder such number of Intuitive Machines OpCo Common Units to be received by such exercising holder as a result
of such exercise and (ii) New Intuitive Machines will issue to the exercising holder an equal number of shares of New Intuitive Machines
Class B Common Stock, in exchange for the payment to New Intuitive Machines of a per-share price equal to the par value per share of the
New Intuitive Machines Class B Common Stock.
Representations, Warranties, Covenants and
Termination
The parties to the Business Combination Agreement
have made customary representations, warranties and covenants in the Business Combination Agreement, including, among others, covenants
with respect to the conduct of Intuitive Machines and the Company prior to the Closing. The Closing is subject to certain customary conditions.
There is no assurance that the Proposed Business Combination will be completed.
The Business Combination Agreement may be terminated
under certain customary and limited circumstances at any time prior to the Closing, including, among others, (i) by mutual written consent
of the Company and Intuitive Machines; (ii) either the Company or Intuitive Machines if the Closing has not occurred on or before September
16, 2023; and (iii) by Intuitive Machines if the Company has not obtained shareholder approval after the conclusion of the extraordinary
general meeting of the Company’s shareholders to be held for the purpose of voting on the Proposed Business Combination. Upon termination
of the Business Combination Agreement, in certain circumstances, Intuitive Machines will reimburse the Company for any amounts due and
owing to the Sponsor, up to $1,500,000.
The Series A Investment
On September 16, 2022, concurrently with the execution
of the Business Combination Agreement, the Company entered into a purchase agreement (the “Series A Purchase Agreement”) with
Kingstown 1740 (an existing security holder of the Company and an affiliate of the Sponsor) and Ghaffarian Enterprises, LLC (an affiliate
of Kamal Ghaffarian, an Intuitive Machines founder) (collectively, the “Series A Investors”), pursuant to which, and on the
terms and subject to the conditions of which, New Intuitive Machines agreed to issue and sell to the Series A Investors (i) an aggregate
of 26,000 shares of 10% Series A Cumulative Convertible Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”)
which will be convertible into shares of New Intuitive Machines Class A Common Stock in accordance with the terms of the Certificate of
Designation of Preferences, Rights and Limitations of 10% Series A Cumulative Convertible Preferred Stock (the “Certificate of Designation”)
to be adopted by the Company’s board of directors following the Domestication but prior to the Closing and (ii) warrants to purchase
541,667 shares of New Intuitive Machines Class A Common Stock at an initial exercise price of $15.00 per share, subject to adjustment
(the “Preferred Investor Warrants”). The Series A Investment will be consummated following the Domestication but immediately
prior to the Closing.
Tax Receivable Agreement
The Business Combination Agreement contemplates
that, at the Closing, New Intuitive Machines will enter into a tax receivable agreement (the “Tax Receivable Agreement”) with
Intuitive Machines OpCo and certain Intuitive Machines Members (the “TRA Holders”). Pursuant to the Tax Receivable Agreement,
New Intuitive Machines will generally be required to pay the TRA Holders 85% of the amount of the cash tax savings, if any, in U.S. federal,
state, and local taxes that are based on, or measured with respect to, net income or profits, and any interest related thereto that New
Intuitive Machines (and applicable consolidated, unitary, or combined subsidiaries thereof, if any and collectively the “Tax Group”)
realizes, or is deemed to realize, as a result of certain tax attributes (the “Tax Attributes”), including:
| ● | existing tax basis in certain assets of Intuitive Machines OpCo and certain of its direct or indirect
subsidiaries, including assets that will eventually be subject to depreciation or amortization, once placed in service; |
| ● | tax basis adjustments resulting from taxable exchanges of Intuitive Machines OpCo Common Units (including
any such adjustments resulting from certain payments made by New Intuitive Machines under the Tax Receivable Agreement) acquired by New
Intuitive Machines from a TRA Holder pursuant to the terms of the Second A&R Operating Agreement; |
| ● | certain tax benefits realized by New Intuitive Machines as a result of certain U.S. federal income
tax allocations of taxable income or gain away from New Intuitive Machines and to other members of Intuitive Machines OpCo and deductions
or losses to New Intuitive Machines and away from other members of Intuitive Machines OpCo, in each case as a result of the Proposed Business
Combination; and |
| ● | tax deductions in respect of portions of certain payments made under the Tax Receivable Agreement. |
Upon the completion of the Proposed Business Combination,
New Intuitive Machines will be a party to the Tax Receivable Agreement. Under the terms of the Tax Receivable Agreement, New Intuitive
Machines will make payments to the TRA Holders in respect of 85% of the cash tax savings resulting from the net tax benefit to New Intuitive
Machines of certain Tax Attributes (calculated using certain assumptions, and subject to the terms of the Tax Receivable Agreement). However,
until a TRA Holder exchanges at least 5% of its Intuitive Machines OpCo Common Units, New Intuitive Machines will hold such payments applicable
to existing basis until the TRA Holder satisfies such threshold exchange. Upon the completion of the Proposed Business Combination, no
TRA Holder will have exchanged at least 5% of its Intuitive Machines OpCo Common Units. The tax impacts of the transaction were estimated
based on the applicable law in effect on June 30, 2022.
Future exchanges will result in incremental tax
attributes and potential cash tax savings for New Intuitive Machines. Depending on New Intuitive Machines’ assessment on realizability
of such tax attributes, the arising Tax Receivable Agreement liability will be recorded at the exchange date against equity, or at a later
point through income.
However, if all of the TRA Holders were to exchange
or sell us all of their Intuitive Machines OpCo Common Units, New Intuitive Machines would recognize a deferred tax asset of approximately
$169.2 million and a liability under the Tax Receivable Agreement of approximately $147.2 million, assuming: (i) all exchanges
or purchases occurred on the same day; (ii) a price of $10 per share; (iii) a constant corporate tax rate; (iv) that
New Intuitive Machines will have sufficient taxable income to fully utilize the tax benefits; and (v) no material changes in tax
law. These amounts are estimates and have been prepared for illustrative purposes only. The actual amount of deferred tax assets and related
liabilities that New Intuitive Machines will recognize will differ based on, among other things, the timing of the exchanges, the price
per share of New Intuitive Machines Class A Common Stock at the time of the exchange, and the tax rates then in effect and certain
change of control or early termination events occurring.
If New Intuitive Machines exercises its right
to terminate the Tax Receivable Agreement or in the case of a change in control of New Intuitive Machines or a material breach of New
Intuitive Machines’ obligations under the Tax Receivable Agreement, all obligations under the Tax Receivable Agreement will be accelerated
and New Intuitive Machines will be required to make a payment to the TRA Holders in an amount equal to the present value of future payments
under the Tax Receivable Agreement. This payment would be based on certain assumptions, including that New Intuitive Machines would have
sufficient taxable income to fully utilize the benefits arising from the Tax Attributes subject to the Tax Receivable Agreement. If New
Intuitive Machines were to elect to terminate the Tax Receivable Agreement immediately after the Proposed Business Combination, assuming
the market value of New Intuitive Machines Class A Common Stock is equal to $10 per share, the Company currently estimates that it
would be required to pay approximately $99.7 million to satisfy its total liability.
Equity Facility
On September 16, 2022, the Company entered
into a common stock purchase agreement (the “Cantor Purchase Agreement”), dated September 16, 2022, with CF Principal Investments
LLC (“CFPI”) relating to an equity facility under which shares of newly issued New Intuitive Machines Class A Common Stock
may be sold to CFPI by New Intuitive Machines. Pursuant to the terms of the Cantor Purchase Agreement, New Intuitive Machines will have
the right, but not the obligation, from time to time at its sole discretion, until the first day of the month following the 18-month period
from and after the Commencement (as defined in the Cantor Purchase Agreement), to direct CFPI to purchase up to the lesser of (i) $50 million
of newly issued New Intuitive Machines Class A Common Stock and (ii) the Exchange Cap, by delivering written notice to CFPI
prior to the commencement of trading on any trading day, subject to certain customary conditions and limitations set forth in the
Cantor Purchase Agreement. In connection with the execution of the Cantor Purchase Agreement, the Company agreed to issue 100,000 shares
(the “Commitment Shares”) of New Intuitive Machines Class A Common Stock to CFPI. The Company entered into a registration
rights agreement with CFPI, pursuant to which it agreed to register for resale, pursuant to Rule 415 under the Securities Act of 1933,
as amended (the “Securities Act”), the shares of New Intuitive Machines Class A Common Stock that are sold to CFPI under the
equity facility and the Commitment Shares.
Sponsor Support Agreement
Concurrently with the execution and delivery of
the Business Combination Agreement, the Sponsor, the Company and Intuitive Machines entered into the Sponsor Support Agreement pursuant
to which the Sponsor agreed to, among other things, vote and approve the Business Combination Agreement and all other documents and transaction
contemplated thereby, and to waive, subject to the consummation of the Proposed Business Combination, any and all anti-dilution rights
with respect to the rate that the Founder Shares convert into Class A ordinary shares in connection with the transactions contemplated
by the Business Combination Agreement, in each case, subject to the terms and conditions of the Sponsor Support Agreement. In connection
with the Sponsor Support Agreement, the Company provided the Sponsor with indemnification against certain claims brought against the Sponsor
for a period of six years following the Closing.
Non-Redemption Agreement
Concurrently with the execution of the Business
Combination Agreement, the Company and Intuitive Machines entered into a non-redemption agreement (the “Non-Redemption Agreement”)
with Kingstown 1740, an affiliate of the Sponsor, pursuant to which Kingstown 1740 agreed not to redeem the 2,900,000 Class A ordinary
shares held by it.
For additional information regarding the Proposed
Business Combination, see the Company’s Registration Statement on Form S-4 filed by on October 13, 2022.
Liquidity and Capital Resources; Going Concern
As of September 30, 2022, we had $19,442 in cash and working capital
deficit of $1,995,115.
On September 30, 2021, our Sponsor agreed to provide
us with loans in such amounts as may be required by us to fund our working capital requirements up to an aggregate of $250,000. On
March 8, 2022, the Sponsor agreed to provide us with loans in such amounts as may be required by us to fund our working capital requirements
up to an aggregate of $500,000.
On August 4, 2022, the Sponsor agreed to loan
the Company up to $1,000,000 to be used for ongoing expenses reasonably related to the business of the Company and the consummation of
an Initial Business Combination pursuant to a convertible promissory note (the “Working Capital Note”).
All unpaid principal under the Working Capital
Note shall be due and payable in full on the earlier of (i) September 24, 2023 and (ii) the effective date of an Initial Business Combination,
involving the Company and one or more businesses (such earlier date, the “Maturity Date”), unless accelerated upon the occurrence
of an event of default as set forth in the Working Capital Note. The Sponsor will have the option, at any time on or prior to the Maturity
Date, to convert up to $1,000,000 outstanding under the Working Capital Note into warrants to purchase Class A ordinary shares at a conversion
price of $1.00 per warrant, with each warrant entitling the holder to purchase one Class A ordinary share at a price of $11.50 per share,
subject to the same adjustments applicable to the Private Placement Warrants. As of September 30, 2022, there was $125,000 outstanding
under the Working Capital Note.
Until consummation of its Initial Business Combination,
the Company will be using these funds for paying existing accounts payable, identifying and evaluating prospective Initial Business Combination
candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to
merge with or acquire, and structuring, negotiating and consummating an Initial Business Combination. In addition to the Working Capital
Note, in order to finance transaction costs in connection with an Initial Business Combination, the Sponsor or an affiliate of the Sponsor,
or certain of the Company’s officers and directors may, but, except as set forth above, are not obligated to, loan the Company funds
as may be required on a non-interest basis (any such loans together with the loans made under the Working Capital Note, the “Working
Capital Loans”).
Based on the foregoing, the $19,442 in cash held
outside the Trust Account will not be sufficient to allow the Company to operate for at least 12 months from the issuance of these unaudited
condensed financial statements, assuming that an Initial Business Combination is not consummated during that time.
Prior to the completion of an Initial Business
Combination, the Company does not expect to seek loans from parties other than our Sponsor or an affiliate of our Sponsor as it does not
believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in the
Trust Account. If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity,
which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of its business plan, and reducing
overhead expenses. The Company cannot provide assurance that new financing will be available to it on commercially acceptable terms, if
at all.
In connection with the Company’s assessment of going concern
considerations in accordance with Financial Accounting Standard Board’s Accounting Standards Codification (“ASC”) Topic
205-40, “Basis of Presentation - Going Concern”, the Company has until September 24, 2023 (absent any extensions of such period)
to consummate the Proposed Business Combination or another Initial Business Combination. It is uncertain that the Company will be able
to consummate the Proposed Business Combination or another Initial Business Combination by this time. If the Proposed Business Combination
or another Initial Business Combination is not consummated by this date, there will be a mandatory liquidation and subsequent dissolution
of the Company. Management has determined that the liquidity condition and mandatory liquidation, should the Proposed Business Combination
or another Initial Business Combination not occur, and potential subsequent dissolution, raises substantial doubt about the Company’s
ability to continue as a going concern after September 24, 2023. No adjustments have been made to the carrying amounts of assets or liabilities
should the Company be required to liquidate after September 24, 2023. The Company intends to complete the Proposed Business Combination
or another Initial Business Combination before the mandatory liquidation date. However, there can be no assurance that the Company will
be able to consummate the Proposed Business Combination or any Initial Business Combination by September 24, 2023.
Risks and Uncertainties
We are currently evaluating the impact of the
COVID-19 pandemic and Russian-Ukraine war on the industry and have concluded that while it is reasonably possible that the virus and the
war could have a negative effect on our financial position, results of its operations and/or search for a target company, the specific
impact is not readily determinable as of the date of the unaudited condensed financial statements included elsewhere in this Quarterly
Report. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Results of Operations
As of September 30, 2022, we had not commenced
any operations. All activity for the period from January 27, 2021 (inception) through September 30, 2022 relates to our formation and
the Public Offering and, subsequent to the closing of the IPO, identifying a target company for an Initial Business Combination. We
have neither engaged in any operations nor generated any revenues to date. We will not generate any operating revenues until after
the completion of our Initial Business Combination, at the earliest. We generate non-operating income in the form of interest
income on cash and cash equivalents from the proceeds derived from the Public Offering. We 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 had net loss of $520,888, which consisted primarily of formation and operating costs amounting to $2,011,943, offset by interest income
earned on cash and marketable securities held in Trust Account amounting to $1,491,055.
For the nine months ended September 30, 2022,
we had net loss of $950,023, which consisted primarily of formation and operating costs amounting to $2,936,836, offset by interest income
earned on cash and marketable securities held in Trust Account amounting to $1,986,813.
For the three months ended September 30,
2021, we had a net loss of $44,976 which consisted of formation and operating costs amounting to $21,737 and $23,439 of issuance
cost of over-allotment offset by interest income earned on cash and marketable securities held in Trust Account amounting to
$200.
For the period from January 27, 2021
(Inception) to September 30, 2021, we had net loss of $64,864, which consisted of formation and operating costs amounting to $41,625
and $23,439 of issuance cost of over-allotment offset by interest income earned on cash and marketable securities held in Trust
Account amounting to $200.
We do not have any long-term debt obligations,
capital lease obligations, operating lease obligations, purchase obligations or long-term liabilities.
As of September 30, 2022 and December 31, 2021,
we did not have any off-balance sheet arrangements.
Administrative Services Agreement
Commencing on September 21, 2021, we agreed to
pay Kingstown Capital Management L.P., an affiliate of our Sponsor, $15,000 per month for office space, utilities and secretarial
and administrative support services. Upon the earlier of the completion of an Initial Business Combination or our liquidation, we
will cease paying such monthly fees.
Registration Rights
The holders of the (i) Founder Shares and
the Class A ordinary shares issuable upon conversion of Founder Shares, (ii) Forward Purchase Shares, (iii) Private Placement
Warrants and the Class A ordinary shares underlying such Private Placement Warrants and (iv) warrants that may be issued upon
conversion of Working Capital Loans and the Class A ordinary shares underlying such warrants will have registration rights to require
us to register a sale of any of our securities held by them and our any other securities acquired by them prior to the consummation of
our Initial Business Combination pursuant to a registration rights agreement entered into in connection with the IPO. Pursuant to the
registration rights agreement and assuming $1,500,000 of Working Capital Loans are converted into additional warrants, we will be obligated
to register up to 21,588,750 Class A ordinary shares and 8,345,000 warrants. The number of Class A ordinary shares includes
(i) 8,243,750 Class A ordinary shares to be issued upon conversion of the Founder Shares, (ii) 5,000,000 Forward Purchase Shares,
(iii) 6,845,000 Class A ordinary shares underlying the Private Placement Warrants and (iv) 1,500,000 Class A ordinary shares
underlying the warrants issuable upon conversion of Working Capital Loans. The number of warrants includes 6,845,000 Private Placement
Warrants and 1,500,000 additional warrants issuable upon the conversion of Working Capital Loans. The holders of these securities are
entitled to make up to three demands, excluding short form demands, that we register such securities. In addition, the holders have certain
“piggy-back” registration rights with respect to registration statements filed subsequent to our completion of our Initial
Business Combination. We will bear the expenses incurred in connection with the filing of any such registration statements.
At the Closing, the Company, the Sponsor and certain
securityholders of Intuitive Machines will enter into an amended and restated registration rights agreement (the “A&R Registration
Rights Agreement”), pursuant to which, among other things, the Sponsor and such securityholders will be granted certain customary
registration rights, on the terms and subject to the conditions therein, with respect to securities of New Intuitive Machines that they
will hold following the Proposed Business Combination.
Underwriting Agreement
We granted the underwriters a 45-day option from
the Effective Date to purchase up to an additional 4,500,000 Units to cover over-allotments, if any. On October 29, 2021, the underwriters
partially exercised the over-allotment option and purchased 2,975,000 Over-Allotment Units, generating aggregate gross proceeds of $29,750,000,
and forfeited their option to purchase the remaining 1,525,000 Units.
The Company provided a discount to the underwriters at the closing
of the Public Offering of 2.0% per Unit, or $4,595,000, excluding the proceeds from the purchase of an aggregate of 10,000,000 Units by
certain of our Anchor Investors, $4,000,000 of which was payable upon the closing of the IPO and $595,000 was payable upon closing of
the Over-Allotment. Additionally, the underwriting agreement states that the Company will pay Citigroup Global Markets Inc. (“Citi”) a
deferred discount of $0.35 per Unit sold in the Public Offering including pursuant to the Over-Allotment, or an aggregate of $11,541,250
upon the Company’s completion of an Initial Business Combination, which would be payable 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.
Professional Service Agreement
We reimburse our Sponsor for services provided
by one of our Sponsor’s employees who serves as our Chief of Staff (“COS”). The COS receives $12,500 per month for services
rendered, commencing September 25, 2021, through the closing of our Initial Business Combination. For the three and nine months ended
September 30, 2022, we recorded $37,500 and $112,500, respectively, of compensation for services provided. As of September 30, 2022, there
was $37,500 due to the COS.
Critical Accounting Policies
This management’s discussion and analysis
of our financial condition and results of operations is based on our unaudited condensed financial statements, which have been prepared
in accordance with US GAAP. The preparation of our unaudited condensed financial statements requires us to make estimates and judgments
that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities
in our unaudited condensed financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related
to fair value of financial instruments and accrued expenses. We base our estimates on historical experience, known trends and events and
various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments
about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. We have identified the following as its critical accounting policies:
Offering Costs
We comply with the requirements of the ASC 340-10-S99-1. Offering
costs consists of legal, accounting, underwriting fees and other costs incurred through the balance sheet date that are directly related
to the Public Offering. Offering costs are allocated to the separable financial instruments issued in the Public Offering based on
a relative fair value basis, compared to total proceeds received. Transaction costs amounted to $26,658,313, consisting of $4,595,000
of underwriting commissions, $11,541,250 of deferred underwriting commissions, $9,680,125 of excess fair value of founder shares, and
$841,938 of other offering costs, with $23,439 included in the unaudited condensed statements of operations as an allocation for the over-allotment
option, $24,538,134 included in temporary equity as an allocation for the Class A ordinary shares subject to redemption, and $2,096,740
included in additional paid-in capital as an allocation for the Class A ordinary shares not subject to redemption, the Public Warrants
and the Private Placement Warrants.
Subject to each Anchor Investor purchasing 100%
of the Units allocated to it in the IPO, and in connection with the closing of the IPO, our Sponsor sold membership interests reflecting
an allocation of an aggregate of 1,625,000 Founder Shares to the Anchor Investors collectively. We, through an independent valuations
expert, estimated the aggregate fair value of these Founder Shares attributable to Anchor Investors to be approximately $9.68 million,
or $5.96 per share. The excess of the fair value of the Founder Shares was determined to be an offering cost in accordance with Staff
Accounting Bulletin Topic 5A.
Class A Ordinary Shares Subject to Possible
Redemption
All of the Class A Ordinary Share sold as part
of the Units in the Public Offering contain a redemption feature which allows for the redemption of such Public Shares in connection with
our liquidation, if there is a shareholder vote or tender offer in connection with an Initial Business Combination and in connection with
certain amendments to our amended and restated memorandum and articles of association. In accordance with SEC and its staff’s guidance
on redeemable equity instruments, which has been codified in ASC 480-10-S99, redemption provisions not solely within our control require
ordinary shares subject to redemption to be classified outside of permanent equity.
The Class A ordinary shares are subject to SEC
and its staff’s guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99. If it is probable that the
equity instrument will become redeemable, we have the option to either accrete changes in the redemption value over the period from the
date of issuance (or from the date that it becomes probable that the instrument will become redeemable, if later) to the earliest redemption
date of the instrument or to recognize changes in the redemption value immediately as they occur and adjust the carrying amount of the
instrument to equal the redemption value at the end of each reporting period. We recognize changes in redemption value immediately as
they occur. Immediately upon the closing of the IPO and the Over-Allotment, we recognized the remeasurement from initial book value to
redemption amount value. The change in the carrying value of redeemable ordinary shares resulted in charges against additional paid-in
capital.
Related Party Redemption Waiver Agreement
In September 2021, we entered into a redemption
waiver agreement with one of our Anchor Investors, Kingstown 1740, whereby Kingstown 1740 agreed to waive its redemption rights on 1,386,989
Class A ordinary shares it holds, and these Class A ordinary shares are classified as shareholders’ equity.
Net Loss Per Ordinary Share
We comply with accounting and disclosure requirements
of ASC Topic 260, “Earnings Per Share.” Our unaudited condensed statements of operations includes a presentation of loss per
share for ordinary shares subject to possible redemption in a manner similar to the two-class method of loss per share. The remeasurement
associated with the redeemable Class A ordinary shares is excluded from net loss per ordinary share as the redemption value approximates
fair value. Net loss per share, basic and diluted, for Class A redeemable ordinary shares is calculated by dividing interest income earned
and realized gains or losses on the Trust Account for the nine months ended September 30, 2022 and for the period from January 27, 2021
(Inception) to September 30, 2021, by the weighted average number of Class A ordinary shares outstanding since original issuance. We have
not considered the effect of the Public Warrants or the Private Placement Warrants to purchase an aggregate of 23,332,500 of our Class A
ordinary shares in the calculation of diluted loss per share, since their exercise is contingent upon future events. Net loss per
share, basic and diluted, for Class A and Class B non-redeemable ordinary shares is calculated by dividing the net loss, adjusted for
income or loss attributable to Class A ordinary shares, by the weighted average number of Class A and Class B non-redeemable ordinary
shares outstanding for the period. Class A non-redeemable ordinary shares and Class B non-redeemable ordinary shares, which include the
Founder Shares, do not have any redemption features and do not participate in the income or losses of the Trust Account. At September
30, 2022 and December 31, 2021, we did not have any dilutive securities and other contracts that could, potentially, be exercised or converted
into ordinary shares and then share in the earnings of our company. As a result, diluted loss per share is the same as basic loss per
share for the period presented.
Warrants
We evaluated the warrants in accordance with ASC
815-40, “Derivatives and Hedging — Contracts in Entity’s Own Equity,” and concluded that there were no indexation
or tender offer provisions in the warrant agreement that precluded the warrants from being accounted for as components of equity, and
the warrants meet the criteria in ASC 815-40-25 to be classified in shareholders’ deficit. Fair value of the Public and Private
Placement Warrants was determined by an independent valuation expert as of September 24, 2021 (the date of the IPO) and October 29, 2021
(the date of the Over-Allotment) using a Monte Carlo Model. Proceeds from the IPO and subsequent partial exercise of the over-allotment
option allocated to the Public Warrants was an aggregate $11,995,753 ($11,025,229, net of offering costs) and is recorded in additional
paid-in capital. Proceeds from the issuance of the Private Placement Warrants were $6,845,000 ($6,831,701, net of offering costs) and
is recorded in additional paid-in capital.
Forward Purchase Agreement
In September 2021, we entered into a forward purchase
agreement (“FPA”) pursuant to which certain affiliates of our Sponsor (“Kingstown”) agreed to purchase up to 5,000,000
forward purchase Class A ordinary shares (“Forward Purchase Shares”), for $10.00 per share, or an aggregate amount of up to
$50,000,000, in a private placement that will close concurrently with the closing of our Initial Business Combination, subject to approval
by the Kingstown investment committee. We have the right, in our sole discretion, to reduce the amount of Forward Purchase Shares that
Kingstown may purchase pursuant to the FPA. We have not considered the effect of the Forward Purchase Shares in the calculation of diluted
income per share, since their issuance is contingent upon future events.
We evaluated the FPA under ASC 480 and ASC 815-40
to determine the appropriate accounting treatment. The FPA does not meet the criteria to be classified as a liability under ASC 480. In
addition, there is no net cash settlement feature and settlement will be in gross physical delivery of Class A ordinary shares; therefore,
the FPA should be classified as equity. However, as the issuance of Forward Purchase Shares is contingent on several factors, including
the consummation of an Initial Business Combination, approval by the Kingstown investment committee, and our discretion, we will record
the FPA when it becomes probable that the triggering events will occur. Until such time, due to the contingent nature of the FPA, we will
disclose the contingency in the notes to our unaudited condensed financial statements.
Series A Purchase Agreement
In connection with the transactions contemplated
by the Business Combination Agreement, the Company entered into the Series A Purchase Agreement with the Series A Investors. Pursuant
to the Securities Purchase Agreement, the Series A Investors have agreed to purchase an aggregate of $26.0 million of Series A Preferred
Stock and Preferred Investor Warrants in the Series A Investment. The Company will, upon the terms and subject to the conditions of the
Series A Purchase Agreement, issue and sell to the Series A Investors (i) an aggregate of 26,000 shares of Series A Preferred Stock which
will be convertible into shares of New Intuitive Machines Class A Common Stock at an initial conversion price determined by dividing the
Stated Value (as defined in the Certificate of Designation) of such shares of Series A Preferred Stock by the conversion price of $12.00
per share, subject to adjustment, at the holder’s option and (ii) the Preferred Investor Warrants to purchase 541,667 shares of
New Intuitive Machines Class A Common Stock at an initial exercise price of $15.00 per share, subject to adjustment in accordance with
the terms of the Preferred Investor Warrants. The Series A Investment will be consummated following the Domestication but immediately
prior to the Closing.
The Preferred Investor Warrants and Series A Preferred
Stock each represent freestanding financial instruments. The Series A Preferred Stock will be classified in temporary equity pursuant
to ASC 480-10-S99-3A. The Preferred Investor Warrants will be initially recorded at fair value, with the residual amount allocated to
the Series A Preferred Stock.
Inflation
We do not believe that inflation had a material
impact on our business, revenues or operating results during the period presented.
Emerging Growth Company Status
We are an “emerging growth company,”
as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart our Business Startups Act of 2012, (the “JOBS
Act”), and 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 (the “Exchange Act”)) 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. We have 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, we, 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 our unaudited condensed financial statements with another public company
which is either not an emerging growth company or 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.