NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
Note
1 — Description of Organization and Business Operations
TKB
Critical Technologies 1 (the “Company”) is a blank check company incorporated as a Cayman Islands exempted company on April
20, 2021. The Company was formed for the purpose of entering into a merger, capital share exchange, asset acquisition, share purchase,
reorganization or similar business combination with one or more businesses (the “Business Combination”).
The
Company is not limited to a particular industry or geographic location for purposes of consummating a Business Combination. The Company
is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and
emerging growth companies.
As
of March 31, 2022, the Company had not commenced any operations. All activity for the period from April 20, 2021 (inception) through
March 31, 2022 relates to the Company’s formation and its initial public offering (the “IPO”), which is described below
and, subsequent to the IPO, identifying a target company for a Business Combination. The Company will not generate any operating revenues
until after the completion of the Business Combination, at the earliest. The Company generates non-operating income from the marketable
securities held in the Trust Account (defined below).
The
registration statement for the Company’s IPO was declared effective on October 26, 2021 (the “Effective Date”). On
October 29, 2021, the Company consummated the IPO of 23,000,000 units (the “Units”), including 3,000,000 Units that were
issued pursuant to the underwriters’ exercise of their over-allotment option in full, at $10.00 per Unit, generating gross proceeds
of $230,000,000, which is discussed in Note 3. Simultaneously with the closing of the IPO, the Company consummated the sale of 10,750,000
Private Placement Warrants (the “Private Placement Warrants”) at a price of $1.00 per Private Warrant in a private placement
to TKB Sponsor I, LLC (the “Sponsor”), generating proceeds of $10,750,000.
Transaction
costs of the IPO amounted to $21,140,059, consisting of $3,850,000 of underwriting discount, $8,800,000 of deferred underwriting discount,
$7,748,431 excess fair value of Founder Shares (as defined in Note 5) and $741,628 of offering costs. Of these amounts, $19,774,814 was
recorded to additional paid-in capital and $1,365,245 costs related to the warrant liability was expensed immediately using the residual
allocation method.
Following
the closing of the IPO on October 29, 2021, $234,600,000 ($10.20 per Unit) from the net proceeds of the sale of the Units in the IPO
and the sale of the Private Placement Warrants was placed in a trust account (the “Trust Account”), located in the United
States which is invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act,
with a maturity of 185 days or less or in any open-ended investment company that holds itself out as a money market fund selected by
the Company meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i)
the completion of a Business Combination and (ii) the redemption of any Public Shares (as defined below) properly submitted in connection
with a shareholder vote to amend the Company’s Amended and Restated Memorandum and Articles of Association, and (iii) the redemption
of the Company’s Public Shares if the Company is unable to complete the initial Business Combination within 15 months from October
29, 2021 (or any extended period of time that the Company may have to consummate an initial Business Combination as a result of an amendment
to its Amended and Restated Memorandum and Articles of Association) (the “Combination Period”), the closing of the IPO.
The
Company’s management has broad discretion with respect to the specific application of the net proceeds of the IPO and the sale
of the Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating
a Business Combination. There is no assurance that the Company will be able to successfully complete a Business Combination. The Company
must complete a Business Combination with one or more operating businesses or assets that together have an aggregate fair market value
equal to at least 80% of the net assets held in the Trust Account (excluding the deferred underwriting commissions and taxes payable
on the income earned on the Trust Account) at the time of the Company’s signing a definitive agreement in connection with its initial
Business Combination. The Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more
of the outstanding voting securities of the target or otherwise acquires an interest in the target business or assets sufficient for
it not to be required to register as an investment company under the Investment Company Act of 1940, as amended (the “Investment
Company Act”).
The
Company will provide its holders of the outstanding Public Shares (the “public shareholders”) with the opportunity to redeem
all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a general meeting
called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek shareholder
approval of a Business Combination or conduct a tender offer will be made by the Company. The public shareholder will be entitled to
redeem their Public Shares for a pro rata portion of the amount then in the Trust Account ($10.20 per Public Share initially, plus any
pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations
and which interest shall be net of taxes payable), calculated as of two business days prior to the completion of the Business Combination.
The per-share amount to be distributed to public shareholders who redeem their Public Shares will not be reduced by the deferred underwriting
commissions the Company will pay to the underwriters (as discussed in Note 8). There will be no redemption rights upon the completion
of a Business Combination with respect to the Company’s warrants.
The
Company will only proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 either prior to or
upon such consummation of a Business Combination and, if the Company seeks shareholder approval. If the Company seeks shareholder approval,
the Company will complete its Business Combination only if the Company receives approval pursuant to an ordinary resolution under Cayman
Islands law, which requires the affirmative vote of a majority of the shareholders who attend and vote at a general meeting of the Company,
or (ii) if so authorized by the Company’s articles of association, a unanimous written resolution of the shareholders. If a shareholder
vote is not required by applicable law or stock exchange rules and the Company does not decide to hold a shareholder vote for business
or other reasons, the Company will, pursuant to its Amended and Restated Memorandum and Articles of Association, conduct the redemptions
pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents
with the SEC prior to completing a Business Combination. If, however, shareholder approval of the transaction is required by applicable
law or stock exchange rules, or the Company decides to obtain shareholder approval for business or other reasons, the Company will offer
to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If
the Company seeks shareholder approval in connection with a Business Combination, the Sponsor has agreed to vote its Founder Shares,
and any Public Shares purchased during or after the IPO in favor of approving a Business Combination. Additionally, each public shareholder
may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction or do not vote at all.
Notwithstanding
the above, if the Company seeks shareholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender
offer rules, the Amended and Restated Memorandum and Articles of Association provides that a public shareholder, together with any affiliate
of such shareholder or any other person with whom such shareholder is acting in concert or as a “group” (as defined under
Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its
shares with respect to more than an aggregate of 15% or more of the Public Shares, without the prior consent of the Company.
The
Amended and Restated Memorandum and Articles of Association of the Company provides that only Public Shares and not any Founder Shares
are entitled to redemption rights. In addition, the Sponsor has agreed (a) to waive its redemption rights with respect to its Founder
Shares and Public Shares held by it in connection with the completion of a Business Combination and (b) not to propose an amendment to
the Amended and Restated Memorandum and Articles of Association (i) to modify the substance or timing of the Company’s obligation
to allow redemption in connection with the Company’s initial Business Combination or to redeem 100% of its Public Shares if the
Company does not complete a Business Combination or (ii) with respect to any other provision relating to shareholders’ rights or
pre-initial business combination activity, unless the Company provides the public shareholders with the opportunity to redeem their Public
Shares in conjunction with any such amendment.
If
the Company is unable to complete a 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 and not previously released to the Company to pay its tax obligations (less up to $100,000
of interest to pay dissolution expenses, which interest shall be net of taxes payable), divided by the number of then outstanding Public
Shares, which redemption will completely extinguish public shareholders rights as shareholders (including the right to receive further
liquidating distributions, if any), and (iii) as promptly as reasonably possible following such redemption, subject to the approval of
the Company’s remaining shareholders and the Company’s board of directors, dissolve and liquidate, subject in each case to
the Company’s obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable
law. There will be no redemption rights or liquidating distributions with respect to the Company’s warrants, which will expire
worthless if the Company fails to complete a Business Combination within the Combination Period.
The
Sponsor has agreed to waive its liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination
within the Combination Period. However, if the Sponsor acquires Public Shares in or after the Proposed Public Offering, such Public Shares
will be entitled to liquidating distributions from the Trust Account if the Company fails to complete a Business Combination within the
Combination Period. The underwriter has agreed to waive it right to its deferred underwriting commission held in the Trust Account in
the event the Company does not complete a Business Combination within the Combination Period and, in such event, such amounts will be
included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event
of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than the
Proposed Public Offering price per Unit ($10.00).
The
Sponsor has agreed to be liable to the Company if and to the extent any claims by a third party for services rendered (other than its
independent registered public accounting firm) or products sold to the Company, or a prospective target business with which the Company
has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below (1) $10.20 per Public Share
or (2) such lesser amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions
in the value of the trust assets, in each case net of the interest which may be withdrawn to pay franchise and income taxes. This liability
will not apply with respect to claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account
and will not apply as to any claims under the Company’s indemnity of the underwriter of the Proposed Public Offering against certain
liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the
event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent
of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify
the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (except the Company’s independent
registered public accounting firm), prospective target businesses and other entities with which the Company does business, execute agreements
with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
Liquidity
and Going Concern
As
of March 31, 2022, the Company had $448,903 cash and working capital of $792,148. The Company has incurred and expects to continue to
incur significant costs in pursuit of its financing and acquisition plans. The Company may need to raise additional capital through loans
or additional investments from its Sponsor, shareholders, officers, directors, or third parties. The Company’s officers, directors
and Sponsor may, but are not obligated to, loan the Company funds, from time to time or at any time, in whatever amount they deem reasonable
in their sole discretion, to meet the Company’s working capital needs. Accordingly, the Company may not be able to obtain additional
financing. 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 a potential transaction, and
reducing overhead expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable
terms, if at all. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The condensed
financial statements do not include any adjustments that might result from the outcome of this uncertainty.
In
addition, if the Company is not able to consummate a Business Combination before January 29, 2023 (absent any extensions of such period
with shareholder approval), the Company will commence an automatic winding up, dissolution and liquidation. Management has determined
that the automatic liquidation, should a Business Combination not occur, and potential subsequent dissolution also raises substantial
doubt about the Company’s ability to continue as a going concern. While management intends to complete a business combination on
or before January 29, 2023, it is uncertain whether the Company will be able to do so. No adjustments have been made to the carrying
amounts of assets or liabilities should the Company be required to liquidate after January 29, 2023.
Risks
and Uncertainties
Management
continues to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus 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 condensed financial statements. The condensed financial statements
do not include any adjustments that might result from the outcome of this uncertainty.
In February 2022, the Russian Federation and Belarus commenced a military
action with the country of Ukraine. As a result of this action, various nations, including the United States, have instituted economic
sanctions against the Russian Federation and Belarus. Further, the impact of this action and related sanctions on the world economy are
not determinable as of the date of these financial statements. The specific impact on the Company’s financial condition, results
of operations, and cash flows is also not determinable as of the date of these financial statements.
Note
2 — Summary of Significant Accounting Policies
Basis
of Presentation
The
accompanying unaudited condensed financial statements as of March 31, 2022 have been prepared in accordance with U.S. GAAP for interim
financial information and Article 8 of Regulation S-X. Certain information or footnote disclosures normally included in
financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC
for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation
of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial
statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial
position, operating results and cash flows for the periods presented.
The
accompanying unaudited condensed financial statements should be read in conjunction with the audited financial statements and notes thereto
included in the Company’s Annual Report on Form 10-K filed with the SEC on March 14, 2022. The interim results for the three months
ended March 31, 2022 are not necessarily indicative of the results that may be expected for the period ending December 31, 2022
or for any future period.
Emerging
Growth Company
The
Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities
Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of
certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies,
including, but not limited to, not being required to comply with the independent registered public accounting firm 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.
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 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 neither an emerging
growth company nor an emerging growth company that 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 condensed financial statements in conformity with GAAP requires the Company’s 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 revenues and expenses during the reporting period.
Making
estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of
a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating
its estimate, could change in the near term due to one or more future confirming events. One of the more significant accounting estimates
included in these condensed financial statements is the determination of the fair value of the warrant liabilities. Such estimates may
be subject to change as more current information becomes available. 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 had $448,903 and $750,562 of operating cash as of March 31, 2022 and December 31, 2021, respectively.
Marketable
Securities Held in Trust Account
Following
the closing of the IPO on October 29, 2021, an amount of $234,600,000 from the net proceeds of the sale of the Units in the IPO and the
sale of the Private Placement Warrants was placed in the Trust Account and may be invested only in U.S. government securities with a
maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act which
invest only in direct U.S. government treasury obligations. The Trust Account is intended as a holding place for funds pending the earliest
to occur of: (i) the completion of the initial Business Combination; (ii) the redemption of any Public Shares properly submitted in connection
with a shareholder vote to amend the Company’s Amended and Restated Memorandum and Articles of Association (A) to modify the substance
or timing of the Company’s obligation to redeem 100% of the Public Shares if the Company does not complete the initial Business
Combination within the Combination Period or (B) with respect to any other provision relating to shareholders’ rights or pre-initial
Business Combination activity; or (iii) absent an initial Business Combination within the Combination Period, the return of the funds
held in the Trust Account to the public shareholders as part of redemption of the Public Shares. As of March 31, 2022 and December 31,
2021, substantially all of the assets held in the money market funds were invested primarily in U.S. Treasury securities.
Offering
Costs Associated with IPO
Offering
costs consisted of legal, accounting and other expenses incurred through the IPO that were directly related to the IPO. Offering costs
were allocated to the separable financial instruments issued in the IPO based on a relative fair value basis, compared to total proceeds
received. Offering costs allocated to warrant liabilities were expensed as incurred in the statements of operations. Offering costs associated
with the Class A ordinary shares issued were initially charged to temporary equity and then accreted to ordinary shares subject
to redemption upon the completion of the IPO. Accordingly, on October 29, 2021, offering costs totaling $21,140,038 (consisting of $3,850,000
of underwriting fees, $8,800,000 of deferred underwriting fees, $7,748,431 excess fair value of Founder Shares and $741,607 of actual
offering costs, with $1,365,245 included in the statement of operations for the period ending December 31, 2021 as an allocation for the Public Warrants and the Private Placement
Warrants, and $19,774,793 included in additional paid-in capital).
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”. For derivative financial instruments that are accounted
for as liabilities, the derivative instrument is initially recorded at its fair value on the grant date and is then re-valued at each
reporting date, with changes in the fair value reported in the statements of operations. The classification of derivative instruments,
including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period.
Derivative 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.
Warrant
Liabilities
The
Company accounts for the Public Warrants and Private Placement Warrants exercisable for the Company’s ordinary shares that are
not indexed to its own shares as liabilities at fair value on the balance sheet. The Public Warrants and Private Placement Warrants are
subject to remeasurement at each balance sheet date and any change in fair value is recognized as a component of other income (expense),
net on the condensed statement of operations. The Company will continue to adjust the liability for changes in fair value until the earlier
of the exercise or expiration of the Public Warrants and Private Placement Warrants. At that time, the portion of the warrant liability
related to the Public Warrants and Private Placement Warrants will be reclassified to additional paid-in capital.
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” (“ASC 820”), approximates the carrying amounts represented in the condensed balance sheets, primarily
due to their short-term nature, except warrant liabilities.
Fair
value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction
between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs
used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets
or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
|
● |
Level
1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; |
|
● |
Level
2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted
prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active;
and |
|
● |
Level
3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions,
such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
In
some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In
those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input
that is significant to the fair value measurement.
Class
A Ordinary Shares Subject to Possible Redemption
The
Company accounts for its Class A ordinary shares subject to possible redemption in accordance with the guidance in ASC 480. Class A ordinary
shares subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable
ordinary shares (including ordinary shares that features redemption rights that is either within the control of the holder or subject
to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity.
At all other times, ordinary shares are classified as shareholders’ equity. The Company’s Class A ordinary shares features
certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future
events. Accordingly, at March 31, 2022 and December 31, 2021, Class A ordinary shares subject to possible redemption are presented at
redemption value as temporary equity, outside of the shareholders’ equity section of the Company’s condensed balance sheets.
The
Company recognizes changes in redemption value at the end of each reporting period and adjusts the carrying value of redeemable ordinary
shares to equal the redemption value at the end of each reporting period. Such changes are reflected in additional paid-in capital, or
in the absence of additional capital, in accumulated deficit. On October 29, 2021, the Company recorded an accretion of $35,299,793,
$7,612,755 of which was recorded in additional paid-in capital and $27,687,038 was recorded in accumulated deficit.
As
of March 31, 2022 and December 31, 2021, the Class A ordinary shares, classified as temporary equity in the condensed balance sheets,
are reconciled in the following table:
Schedule of temporary equity balance
sheet | |
| | |
Gross proceeds from IPO | |
$ | 230,000,000 | |
Less: | |
| | |
Proceeds allocated to public warrants | |
| (10,925,000 | ) |
Offering costs allocated to Class A ordinary shares subject to possible redemption | |
| (19,774,793 | ) |
Plus: | |
| | |
Re-measurement on Class A ordinary shares subject to possible redemption amount | |
| 35,299,793 | |
Class A ordinary shares subject to possible redemption | |
$ | 234,600,000 | |
Income
Taxes
The
Company follows the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes” (“ASC 740”).
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.
FASB
ASC 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 recognizes accrued interest and penalties related to unrecognized
tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of March
31, 2022 and December 31, 2021. 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 is considered an exempted Cayman Islands company and is presently not subject to income taxes or income tax filing requirements
in the Cayman Islands or the United States. As such, the Company’s tax provision was zero for the period presented.
Net
Income Per Ordinary Share
The
Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. Net income per
ordinary share is computed by dividing net income by the weighted average number of ordinary shares outstanding for the period. The Company
has two classes of ordinary shares, which are referred to as Class A ordinary shares and Class B ordinary shares. Income and losses are
shared pro rata between the two classes of ordinary shares. Accretion associated with the redeemable Class A ordinary shares is excluded
from earnings per share as the redemption value approximates fair value. The calculation of diluted income per share does not consider
the effect of the warrants issued in connection with the (i) IPO and (ii) the private placement since the exercise of the warrants is
contingent upon the occurrence of future events. The warrants are exercisable to purchase 22,250,000 Class A ordinary shares in the aggregate.
As of March 31, 2022, the Company did not have any dilutive securities or other contracts that could, potentially, be exercised or converted
into ordinary shares and then share in the earnings of the Company.
The
following table reflects the calculation of basic and diluted net income per ordinary share (in dollars, except per share amounts):
Schedule of earnings per share, basic and diluted | |
| | | |
| | |
| |
Three Months
Ended March 31, 2022 | |
| |
Class A | | |
Class B | |
Basic and diluted net income per common share | |
| | | |
| | |
Numerator: | |
| | | |
| | |
Allocation of net income, as adjusted | |
$ | 1,990,690 | | |
$ | 497,672 | |
Denominator: | |
| | | |
| | |
Basic and diluted weighted average common shares outstanding | |
| 23,000,000 | | |
| 5,750,000 | |
Basic and diluted net income per common share | |
$ | 0.09 | | |
$ | 0.09 | |
Deferred
Legal Fee
As
of March 31, 2022, the Company had $307,521 in deferred legal fees that will be payable upon the consummation of a Business Combination
Related
Parties
Parties,
which can be a corporation or an individual, are considered to be related if the Company has the ability, directly or indirectly, to
control the other party or exercise significant influence over the other party in making financial and operational decisions. Companies
are also considered to be related if they are subject to common control or common significant influence.
Concentration
of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution,
which, at times, may exceed the Federal Depository Insurance Corporation coverage of $250,000. The Company has not experienced
losses on this account.
Recent
Accounting Standards
In August 2020, the FASB issued ASU No. 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): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”), which
simplifies accounting for convertible instruments by removing major separation models required under current GAAP. ASU 2020-06 removes
certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and it also simplifies
the diluted earnings per share calculation in certain areas. ASU 2020-06 is effective for fiscal years beginning after December 15, 2023,
including interim periods within those fiscal years, with early adoption permitted. 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 financial statements.
Note
3 — Initial Public Offering
In
connection with the Company’s IPO, on October 29, 2021, the Company sold 23,000,000 Units at a price of $10.00 per Unit. Each Unit
consists of one Class A ordinary share (“Public Shares”) and one-half of one warrant (“Public Warrants”). Each
whole Public Warrant entitles the holder to purchase one Class A ordinary share at a price of $11.50 per share, subject to adjustment
(see Note 7).
An
aggregate of $10.20 per Unit sold in the IPO was deposited into the Trust Account and invested in U.S. government securities, within
the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less or in any open-ended
investment company that holds itself out as a money market fund meeting the conditions of Rule 2a-7 of the Investment Company Act,
as determined by the Company. As of October 29, 2021, an aggregate of $234,600,000 of the IPO proceeds and proceeds from the sale of
the Private Placement Warrants was held in the Trust Account, representing an overfunding of the trust account of 102.0% of the IPO size.
Transaction
costs as of the IPO date amounted to $21,140,059, consisting of $3,850,000 of underwriting discount, $8,800,000 of deferred underwriting
discount, $7,748,431 excess fair value of Founder Shares and $741,628 of offering costs.
Note
4 — Private Placement
Simultaneously
with the closing of the IPO, the Sponsor purchased an aggregate of 10,750,000 Private Placement Warrants at a price of $1.00 per Private
Placement Warrant ($10,750,000 in the aggregate). Each Private Placement Warrant is exercisable for one Class A ordinary share at an
exercise price of $11.50 per share, subject to adjustment (see Note 7). A portion of the proceeds from the Private Placement Warrants
were added to the proceeds from the IPO to be held in the Trust Account. If the Company does not complete a Business Combination within
the Combination Period, the proceeds from the sale of the Private Placement Warrants held in the Trust Account will be used to fund the
redemption of the Public Shares (subject to the requirements of applicable law), and the Private Placement Warrants will expire worthless.
Note
5 — Related Party Transactions
Founder
Shares
In
April 2021, the Sponsor purchased shares of the Company’s Class B ordinary shares (the “Founder Shares”)
for an aggregate purchase price of $. The Founder Shares included an aggregate of up to shares subject to forfeiture by
the Sponsor to the extent that the underwriters’ overallotment option was not exercised in full or in part, so that the number
of Founder Shares collectively represents 20% of the Company’s issued and outstanding ordinary shares after the IPO. Simultaneously
with the closing of the IPO, the underwriters exercised the over-allotment option in full. Accordingly, Founder Shares are no
longer subject to forfeiture.
The
Sponsor has agreed, subject to certain limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier
of (A) one year after the completion of a Business Combination or (B) subsequent to a Business Combination, (x) if the last reported
sale price of the Class A ordinary shares equals or exceeds $12.00 per share (as adjusted for share sub-divisions, share reorganizations,
recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after a Business
Combination, or (y) the date on which the Company completes a liquidation, merger, share exchange, reorganization or other similar transaction
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.
On
October 8, 2021, the Sponsor entered into agreements with certain funds managed by Apollo Capital Management, L.P. (collectively, “Apollo”),
certain funds managed by Atalaya Capital Management, LP (“Atalaya”) and Meteora Capital Partners, L.P. and funds affiliated
with Meteora Capital Partners, L.P. (collectively “Meteora) (individually and collectively, the “anchor investors”).
Each of the anchor investors purchased 9.9% of the Units in the IPO (excluding Units issued in connection with the exercise of the over-allotment
option). Each of Apollo and Atalaya agreed to purchase interests in the Sponsor representing approximately 7% of the Founder Shares and
Private Placement Warrants at approximately the cost of such securities to the Sponsor, with the Sponsor’s obligation to sell some
or all of such interests conditioned upon such anchor investor’s purchase of the Units.
Meteora
entered into a separate agreement with the Sponsor pursuant to which it agreed to purchase interests in the Sponsor representing approximately
6.4% of the Founder Shares for approximately 3.7% of the cost of the Founder Shares and Private Placement Warrants to the Sponsor.
The
anchor investors acquired from the Sponsor an indirect economic interest in an aggregate of 1,173,000 Founder Shares at the original
purchase price that the Sponsor paid for the Founder Shares. The Sponsor has agreed to distribute the Founder Shares to the anchor investors
after the completion of a Business Combination. The Company estimates the aggregate fair value of the Founder Shares attributable to
the anchor investors to be approximately $7,753,530, or $6.61 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. Accordingly, the offering cost was allocated to the separable financial instruments issued in the IPO based on a relative fair value
basis, compared to total proceeds received. Offering costs allocated to derivative warrant liabilities were expensed as incurred in the
statement of operations for the period ended December 31, 2021. Offering costs allocated to the Public Shares were charged to shareholder’s deficit upon the completion
of the IPO.
Forward
Purchase Agreements
The
Company entered into separate forward purchase agreements (the “Forward Purchase Agreements”) with Apollo and Atalaya (“the
“Forward Purchasers”) on August 13, 2021 and August 4, 2021, respectively. The Forward Purchase Agreements provide, at the
Company’s option, for the aggregate purchase of up to $9,600,000 Class A ordinary shares and 4,800,000 warrants to purchase Class
A ordinary shares for an aggregate price of $96.0 million ($10.00 for one Class A ordinary share and one-half of one Warrant), in private
placements that will close concurrently with the closing of our initial business combination. The forward purchase shares and forward
purchase warrants will be identical to the Class A ordinary shares and Public Warrants included in the Units sold in the IPO. Each Forward
Purchaser’s commitment under its Forward Purchase Agreement is subject to certain conditions including investment committee approval.
Promissory
Note – Related Party
In
April 2021, the Sponsor issued an unsecured promissory note to the Company (the “Promissory Note”), pursuant to which the
Company may borrow up to an aggregate principal amount of $. The Promissory Note was non-interest bearing and payable on the earlier
of December 31, 2021 or the consummation of the IPO. On October 29, 2021, the Company repaid the Sponsor $300,000 for amounts outstanding
under the Promissory Note. However, the promissory note balance on October 29, 2021 was $279,597 and, as such, the Company recorded a
$20,403 related party receivable for the over-payment. As of March 31, 2022 and December 31, 2021, there were no amounts outstanding
under the Promissory Note, as all such amounts were paid.
Administrative
Services Agreement
The
Company has entered into an agreement with Tartavull Klein Blatteis Capital, LLC (“TKB Capital”), an affiliate of the Sponsor,
pursuant to which the Company will pay TKB Capital a total of $10,000 per month for office space, secretarial and administrative services
provided to the Company. Upon completion of the initial Business Combination or the Company’s liquidation, the Company will cease
paying these monthly fees. For the three months ended March 31, 2022, the Company incurred $30,000 of fees for these services, of which
$20,000 is included in accrued expenses in the accompanying condensed balance sheets.
Related
Party Loans
In
order to finance transaction costs in connection with a Business Combination, the Sponsor, certain of the Company’s officers and
directors or any of their affiliates may, but are not obligated to, loan the Company funds as may be required (“Working Capital
Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds
of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the
Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust
Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans.
The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s
discretion, up to $1,500,000 of such Working Capital Loans may be convertible into warrants of the post Business Combination entity at
a price of $1.00 per warrant. The warrants would be identical to the Private Placement Warrants. As of March 31, 2022 and December 31,
2021, no Working Capital Loans were outstanding.
Note
6 — Shareholders’ Deficit
Preference
Shares — The Company is authorized to issue 1,000,000 preference shares with a par value of $0.0001 per share with such
designation, rights and preferences as may be determined from time to time by the Company’s board of directors. At March 31, 2022
and December 31, 2021, there were no preference shares issued or outstanding.
Class A
Ordinary Shares — The Company is authorized to issue 200,000,000 Class A ordinary shares with a par value of $0.0001 per
share. Holders of the Company’s Class A ordinary shares are entitled to one vote for each share. At March 31, 2022 and December
31, 2021, there were no Class A ordinary shares issued and outstanding, excluding 23,000,000 Class A ordinary shares subject to possible
redemption as presented in temporary equity.
Class B
Ordinary Shares — The Company is authorized to issue 20,000,000 Class B ordinary shares with a par value of $0.0001
per share. At March 31, 2022 and December 31, 2021, there were 5,750,000 Class B ordinary shares issued and outstanding.
Ordinary
shareholders of record are entitled to one vote for each share held on all matters to be voted on by shareholders and holders of Class
A ordinary shares and holders of Class B ordinary shares will vote together as a single class on all matters submitted to a vote of the
shareholders except as required by law; provided that only holders of Class B ordinary shares will have the right to vote on the appointment
of directors prior to or in connection with the completion of the initial Business Combination.
The
Class B ordinary shares will automatically convert into Class A ordinary shares at the time of a Business Combination on a one-for-one
basis, subject to adjustment. In the case that additional Class A ordinary shares, or equity-linked securities, are issued or deemed
issued in excess of the amounts offered in the IPO and related to the closing of a Business Combination, the ratio at which Class B ordinary
shares shall convert into Class A ordinary shares will be adjusted (unless the holders of a majority of the outstanding Class B ordinary
shares to waive such adjustment with respect to any such issuance or deemed issuance) so that the number of Class A ordinary shares issuable
upon conversion of all Class B ordinary shares will equal, in the aggregate, on an as-converted basis, 20% of the sum of the total number
of all ordinary shares outstanding upon the completion of the IPO plus all Class A ordinary shares and equity-linked securities issued
or deemed issued by the Company in connection with or in relation to the consummation of the initial Business Combination, excluding
any forward purchase securities, 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 upon conversion of Working Capital Loans. In no event will the Class B ordinary shares convert into Class A ordinary shares
at a rate of less than one to one.
Note
7 — Warrant Liabilities
The
Company accounts for the 22,250,000 warrants that were issued in the IPO (representing 11,500,000 Public Warrants and 10,750,000 Private
Placement Warrants) in accordance with the guidance contained in ASC 815-40. Such guidance provides that because the warrants do not
meet the criteria for equity treatment thereunder, each warrant must be recorded as a liability. The warrants do not meet the criteria
to be considered indexed to the Company’s ordinary shares due to settlement provisions that result in holders of warrants receiving
variable settlement amounts determined by the reference table. Additionally, an event that is not within the Company’s control
could require net cash settlement, thus precluding equity classification. Accordingly, the Company will classify each warrant as a liability
at its fair value. This liability is subject to re-measurement at each balance sheet date. With each such re-measurement, the warrant
liability will be adjusted to fair value, with the change in fair value recognized in the Company’s statement of operations.
Warrants
— Public Warrants may only be exercised for a whole number of Class A ordinary shares. No fractional warrants will be issued
upon separation of the Units and only whole warrants will trade. Accordingly, unless holders purchase at least two Units, they will not
be able to receive or trade a whole warrant. The Public Warrants will become exercisable 30 days after the completion of a Business Combination.
The
Company will not be obligated to deliver any Class A ordinary shares pursuant to the exercise of a Public Warrant and will have no obligation
to settle such Public Warrant exercise unless a registration statement under the Securities Act with respect to the Class A ordinary
shares issuable upon exercise of the Public Warrants is then effective and a prospectus relating thereto is current, subject to the Company
satisfying its obligations with respect to registration, or a valid exemption from registration is available. No Public Warrant will
be exercisable, and the Company will not be obligated to issue any Class A ordinary shares upon exercise of a Public Warrant unless the
Class A ordinary shares issuable upon such Public Warrant exercise has been registered, qualified or deemed to be exempt under the securities
laws of the state of residence of the registered holder of the Public Warrants.
The
Company has agreed that as soon as practicable, but in no event later than 20 business days after the closing of a Business Combination,
it will use its commercially reasonable efforts to file with the SEC a post-effective amendment to the registration statement filed in
connection with its IPO or a new registration statement covering registration under the Securities Act, of the Class A ordinary shares
issuable upon exercise of the Public Warrants, and the Company will use its commercially reasonable efforts to cause the same to become
effective within 60 business days after the closing of a Business Combination, and to maintain the effectiveness of such registration
statement and a current prospectus relating to those Class A ordinary shares until the Public Warrants expire or are redeemed, as specified
in the warrant agreement; provided that if the Class A ordinary shares is at the time of any exercise of a Public 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 Public 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, the Company will not be
required to file or maintain in effect a registration statement, but it will use its commercially reasonably efforts to register or qualify
the shares under applicable blue sky laws to the extent an exemption is not available. If a registration statement covering the Class
A ordinary shares issuable upon exercise of the Public Warrants is not effective by the 60th day after the closing of a Business Combination,
Public 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 Public Warrants on a “cashless basis” in accordance
with Section 3(a)(9) of the Securities Act or another exemption, but the Company will use its commercially reasonably 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 Public Warrants become exercisable, the
Company may redeem the Public Warrants:
|
● |
in
whole and not in part; |
|
● |
at
a price of $0.01 per warrant; |
|
● |
upon
not less than 30 days’ prior written notice of redemption to each warrant holder; and |
|
● |
if,
and only if, the last reported sale price of the Class A ordinary share equals or exceeds $18.00 per share (as adjusted for share
sub-divisions, share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading
day period ending three trading days before the Company sends the notice of redemption to the warrant holders. |
If
and when the Public Warrants become redeemable by the Company, it may exercise its redemption right even if the Company is unable to
register or qualify the underlying securities for sale under all applicable state securities laws.
Redemption
of warrants when the price per Class A ordinary share equals or exceeds $10.00. Once the Public Warrants become exercisable, the Company
may redeem the Public Warrants:
|
● |
in
whole and not in part; |
|
● |
at
a price of $0.10 per warrant; |
|
● |
upon
a minimum of 30 days’ prior written notice of redemption to each warrant holder; provided that holders will be able to exercise
their warrants on a cashless basis prior to redemption and receive that number of shares based on the redemption date and the fair
market value of the Class A ordinary share; |
|
● |
if,
and only if, the last reported sale price of the Class A ordinary share equals or exceeds $10.00 per share (as adjusted per share
sub-divisions, share dividends, reorganizations, reclassifications, recapitalizations and the like) for any 20 trading days within
the 30-trading day period ending three trading days before the Company send the notice of redemption to the warrant holders; and |
|
● |
if
the last reported sale price of the Class A ordinary share for any 20 trading days within a 30-trading day period ending on the third
trading day prior to the date on which the Company sends the notice of redemption to the warrant holders is less than $18.00 per
share (as adjusted for share sub-divisions, share capitalizations, reorganizations, recapitalizations and the like), the Private
Placement Warrants must also be concurrently called for redemption on the same terms as the outstanding Public Warrants, as described
above. |
In
addition, if (x) the Company issues additional Class A ordinary shares or equity-linked securities (excluding the forward purchase securities)
for capital raising purposes in connection with the closing of a 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 Company’s
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, and interest thereon, available for the funding
of a Business Combination on the date of the consummation of a 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 a 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, the $18.00 per share redemption trigger price described above under “Redemption of warrants when the price per Class
A ordinary share equals or exceeds $18.00” and “Redemption of warrants when the price per Class A ordinary share equals or
exceeds $10.00” will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued
Price, and the $10.00 per share redemption trigger price described above under “Redemption of warrants when the price per Class
A ordinary share equals or exceeds $10.00” will be adjusted (to the nearest cent) to be equal to the higher of the Market Value
and the Newly Issued Price.
The
Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the IPO, except that the Private Placement
Warrants and the Class A ordinary shares issuable upon the exercise of the Private Placement Warrants are not transferable, assignable
or saleable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private
Placement Warrants are exercisable for cash or on a cashless basis, at the holder’s option, and are non-redeemable so long as they
are held by the initial purchasers or their permitted transferees (except for a number of Class A ordinary shares as described above
under “Redemption of warrants when the price per Class A ordinary share equals or exceeds $10.00”). If the Private Placement
Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be
redeemable by the Company in all redemption scenarios and exercisable by such holders on the same basis as the Public Warrants.
Note
8 — Commitments and Contingencies
Registration
Rights
The
holders of the Founder Shares, Private Placement Warrants, warrants that may be issued upon conversion of Working Capital Loans and forward
purchase securities that may be issued pursuant to the forward purchase agreements (and any Class A ordinary shares issuable upon the
exercise of the Private Placement Warrants and warrants that may be issued upon conversion of the Working Capital Loans and upon conversion
of the Founder Shares) are entitled to registration rights pursuant to a registration rights agreement that was signed on the effective
date of the IPO, requiring the Company to register such securities for resale. 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 completion of a Business Combination and rights to
require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. The Company will bear the expenses
incurred in connection with the filing of any such registration statements.
Underwriting
Agreement
The
Company granted the underwriters a 45-day option from the date of the IPO to purchase up to 3,000,000 additional Units to cover over-allotments
at the IPO price less the underwriting discount. On October 29, 2021 the underwriters exercised the over-allotment option in full, generating
an additional $30,000,000 in gross proceeds. As a result of the over-allotment being exercised in full, the Sponsor did not forfeit any
Founder Shares back to the Company. The underwriters were paid a cash underwriting discount of $3,850,000 in the aggregate at the closing
of the IPO. In addition, $0.35 per Unit, or $8,050,000, and $750,000 of deferred underwriting commissions ($8,800,000 in the aggregate)
is payable to the underwriters for deferred underwriting commissions. The deferred fee is payable to the underwriters from the amounts
held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting
agreement.
Broker
Dealer Agreement
The
Company entered a broker dealer agreement on November 23, 2021, for the purposes of identifying a target company (“Target”)
in connection with the Business Combination. The broker dealer (“Finder”) will identify potential Targets that have not already
been identified by the Company. In the event that the Company already knows the Target, the Company will inform the Finder and the agreement
will be terminated. However, the Company may enter into another agreement with the Finder for a known Target if the Company believes
the Finder can add substantial value with respect to the pursuit of the known Target. The Finder will act exclusively for the Company
with respect to all activities related to pursuit of a Target once identified. If the Company consummates a Business Combination with
the Target, the Company will pay the Finder a base success fee of $350,000 or, in lieu of the base success fee and not in addition to,
an introduction fee if, in addition to first identifying a Target, the Finder also provides the Company an introduction to a pre-existing
relationship with a person that serves as a member of the Target’s Board of Directors or senior executive management. The introduction
fee will be $1,000,000 if the Target has initiated a competitive process with respect to a strategic alternative or 0.5% of the pre-money
equity value of the Target if the Target has not initiated a competitive process with respect to a strategic alternative. Payment to
the Finder is dependent upon the closing of a Business Combination. As of March 31, 2022, the Company has not been introduced to a
Target and thus did not accrue any amounts related to this agreement.
Consulting
Agreements
The
Company entered into thirteen consulting agreements through March 31, 2022. During the term of each agreement, the consultant (“Consultant”)
will advise the Company concerning matters related to qualifying Business Combinations, including services such as valuation, diligence
and general advice with respect to the business, operations and financial conditions of any such counterparty to a qualifying Business
Combination. Upon closing of an initial Business Combination, the Company will pay the Consultant a base fee of $350,000. In lieu of
and not in addition to the base fee, the Company will pay a bonus fee of $1,000,000 if the Company and the Consultant mutually determine
and agree that the Consultant will provide advice or services that are of a different kind than those contemplated in the agreement.
In lieu of and not in addition to the base fee and bonus fee, the Company will pay 0.5% of the pre-money equity value of the Target if
the Company and the Consultant mutually determine and agree that the Consultant provided, or will provide, material support in connection
with the evaluation, negotiation, execution or marketing of an initial Business Combination that is ultimately consummated by the Company.
Payment to the Consultant is dependent upon the closing of an initial Business Combination. As of March 31, 2022, no work has been performed
related to the consulting agreements and thus the Company did not accrue any amounts related to these agreements. Subsequent to December
31, 2021 the Company entered into a broker dealer agreement
for identifying a target for the initial Business Combination. The broker dealer agreements have the same terms
as those entered into prior to December 31, 2021.
Note
9 — Fair Value Measurements
The
following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring
basis at March 31, 2022 and December 31, 2021, and indicates the fair value hierarchy of the valuation inputs the Company utilized to
determine such fair value:
Schedule of fair value liabilities
measured on recurring basis | |
| | |
| | | |
| | |
Description | |
Level | | |
March 31, 2022 | | |
December 31, 2021 | |
Assets: | |
| | |
| | | |
| | |
Cash and marketable securities held in trust account | |
1 | | |
$ | 234,627,566 | | |
$ | 234,603,942 | |
| |
| | |
| | | |
| | |
Liabilities: | |
| | |
| | | |
| | |
Warrant liability – Public Warrants | |
1 | | |
| 4,025,000 | | |
| 5,520,000 | |
Warrant liability – Private Placement Warrants | |
2 | | |
| 3,762,500 | | |
| 5,160,000 | |
The
warrants were accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities in the accompanying
condensed balance sheets. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair
value presented within the condensed statements of operations.
As of March 31, 2022, the
aggregate values of the Public Warrants and Private Placement Warrants were $4,025,000 million and $3,762,500 million, respectively, based
on a fair value of $0.35 per warrant. As of December 31, 2021, the aggregate values of the Public Warrants and Private Placement Warrants
were $5,520,000 million and $5,160,000 million, respectively, based on a fair value of $0.48 per warrant.
The following table presents
the changes in the fair value of warrant liabilities:
Schedule of changes in the fair value of warrant liabilities | |
| | |
| | |
| |
| |
Private Placement | | |
Public | | |
Warrant Liabilities | |
Fair value as of January 1, 2022 | |
$ | 5,160,000 | | |
$ | 5,520,000 | | |
$ | 10,680,000 | |
Change in valuation inputs or other assumptions | |
| (1,397,500 | ) | |
| (1,495,000 | ) | |
| (2,892,500 | ) |
Fair value as of March 31, 2022 | |
$ | 3,762,500 | | |
$ | 4,025,000 | | |
$ | 7,787,500 | |
For periods subsequent to the detachment of the
Public Warrants from the Units, the close price of the Public Warrant will be used as the fair value as of each relevant date. The subsequent
measurements of the Private Placement Warrants are classified as Level 2 due to the use of an observable market quote for a similar
asset in an active market under the ticker USCTW. For March 31, 2022 and December 31, 2021, the Public Warrants have detached from the
Units, and the closing price is utilized as the fair value.
Transfers
to/from Levels 1, 2 and 3 are recognized at the end of the reporting period in which a change in valuation technique or methodology occurs.
There were no other transfers to/from Levels 1, 2, and 3 during the three months ended March 31, 2022.
Note
10 — Subsequent Events
Management
has evaluated the impact of subsequent events through the date that 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.