UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Amendment No. 1)
(Mark One)
For the quarterly period ended
For the transition period from to
Commission File No.
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Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Indicate by check mark whether
the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
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been subject to such filing requirements for the past 90 days.
Indicate by check mark whether
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S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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If an emerging growth company,
indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
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Indicate by check mark whether
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As of December 9, 2021,
there were
ION ACQUISITION CORP 3 LTD.
FORM 10-Q/A FOR THE QUARTER ENDED SEPTEMBER 30, 2021
TABLE OF CONTENTS
i
EXPLANATORY NOTE
Background of Restatement
The Company has re-evaluated the Company’s application of ASC 480-10-S99-3A to its accounting classification of the redeemable Class A ordinary shares, par value $0.0001 per share (the “Public Shares”), issued in the Company’s initial public offering (the “Initial Public Offering”) on May 4, 2021. Historically, a portion of the Public Shares were classified as permanent equity to maintain shareholders’ equity greater than $5 million on the basis that the Company will not redeem its Public Shares in an amount that would cause its net tangible assets to be less than $5,000,001, as described in the Company’s amended and restated memorandum and articles of incorporation (the “Charter”). Pursuant to such re-evaluation, the Company’s management has determined that the Public Shares include certain provisions that require classification of all of the Public Shares as temporary equity regardless of the net tangible assets redemption limitation contained in the Charter. In addition, in connection with the change in presentation for the Public Shares, the Company also revised its net loss per ordinary share calculation.
On December 9, 2021, the Company’s management, together with the Audit Committee of the Board of Directors of the Company (the “Audit Committee”), concluded that the Company’s previously issued (i) audited balance sheet as of May 4, 2021 (the “Post IPO Balance Sheet”), filed with the SEC on May 10, 2021 and (ii) unaudited interim financial statements as of and for the period ended June 30, 2021 included in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2021, and for the period from February 4, 2021 (inception) through June 30, 2021, filed with the SEC on August 11, 2021 (collectively, the “Affected Periods”), should be restated to report all Public Shares as temporary equity and should no longer be relied upon. As such, the Company is restating the Company’s financial statements for the Affected Periods in this Amended Form 10-Q.
The restatement does not have an impact on the Company’s cash position.
The financial information that has been previously filed or otherwise reported for this period is superseded by the information in this Amended Form 10-Q, and the financial statements and related financial information contained in the Original Quarterly Report and the Post IPO Balance Sheet should no longer be relied upon. On December 9, 2021, the Company filed a Current Report on Form 8-K disclosing the Audit Committee’s conclusion that the unaudited interim financial statements for the Affected Periods should no longer be relied upon.
Internal Control Considerations
In connection with the restatement, management has re-evaluated the effectiveness of the Company’s disclosure controls and procedures and internal control over financial reporting as of September 30, 2021. The Company’s management has concluded that, in light of the errors described above, a material weakness exists in the Company’s internal control over financial reporting and that the Company’s disclosure controls and procedures were not effective as a result thereof. Management plans to enhance the system of evaluating and implementing the accounting standards that apply to our financial statements, including enhanced training of our personnel and increased communication among our personnel and third-party professionals with whom we consult regarding application of complex financial instruments. For a discussion of management’s consideration of our disclosure controls and procedures, internal controls over financial reporting, and the material weaknesses identified, see Part I, Item 4, “Controls and Procedures” of this Amended Form 10-Q.
ii
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ION ACQUISITION CORP 3 LTD.
CONDENSED BALANCE SHEET
SEPTEMBER 30, 2021
(Unaudited)
| ASSETS | ||||
| Current Assets | ||||
| Cash and cash equivalents | $ | |||
| Prepaid expenses | ||||
| Total Current Assets | ||||
| Marketable securities held in Trust Account | ||||
| TOTAL ASSETS | $ | |||
| LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||
| Current Liabilities | ||||
| Accounts payable and accrued expenses | ||||
| Accrued offering costs | ||||
| Total Current Liabilities | ||||
| Deferred underwriting fee payable | ||||
| Total Liabilities | ||||
| Commitments | ||||
| Class A ordinary shares subject to possible redemption; | ||||
| Shareholders’ Deficit | ||||
| Preference shares, $ | ||||
| Class A ordinary shares, $ | ||||
| Class B ordinary shares, $ | ||||
| Accumulated deficit | ( | ) | ||
| Total Shareholders’ Deficit | ( | ) | ||
| TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT | $ | |||
The accompanying notes are an integral part of these financial statements.
1
ION ACQUISITION CORP 3 LTD.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
| Three Months Ended September 30, |
For the Period from February 4, 2021 (Inception) through September 30, |
|||||||
| 2021 | 2021 | |||||||
| Formation and operating costs | $ | $ | ||||||
| Loss from operations | ( |
) | ( |
) | ||||
| Other income: | ||||||||
| Interest earned in marketable securities held in Trust Account | ||||||||
| Net loss | $ | ( |
) | $ | ( |
) | ||
| Weighted average shares outstanding, Redeemable Class A ordinary shares | ||||||||
| Basic and diluted net income (loss) per Redeemable Class A ordinary shares | $ | ( |
) | $ | ||||
| Weighted average shares outstanding, Non-Redeemable Class A and Class B ordinary shares | ||||||||
| Basic and diluted net loss per Non-Redeemable Class A and Class B ordinary shares | $ | ( |
) | $ | ( |
) | ||
The accompanying notes are an integral part of these financial statements.
2
ION ACQUISITION CORP 3 LTD.
CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS’ DEFICIT
FOR THE PERIOD FROM FEBRUARY 4, 2021 (INCEPTION) THROUGH SEPTEMBER 30, 2021
RESTATED
(Unaudited)
| Class A Ordinary Shares | Class B Ordinary Shares | Additional Paid-in | Accumulated | Total Shareholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance – February 4, 2021 (inception) | $ | — | $ | $ | $ | $ | ||||||||||||||||||||||
| Issuance of Class B ordinary shares to the Sponsor | — | |||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance – March 31, 2021 | $ | ( | ) | |||||||||||||||||||||||||
| Accretion for Class A ordinary shares subject to redemption amount | — | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Sale of | — | |||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance – June 30, 2021 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance – September 30, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
The accompanying notes are an integral part of these financial statements
3
ION ACQUISITION CORP 3 LTD.
CONDENSED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM FEBRUARY 4, 2021 (INCEPTION) THROUGH SEPTEMBER 30, 2021
(Unaudited)
| Cash Flows from Operating Activities: | ||||
| Net loss | $ | ( | ) | |
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||
| Payment of formation costs through issuance of Class B ordinary shares | ||||
| Interest earned on marketable securities held in Trust Account | ( | ) | ||
| Changes in operating assets and liabilities: | ||||
| Prepaid expenses | ( | ) | ||
| Accounts payable and accrued expenses | ||||
| Net cash used in operating activities | ( | ) | ||
| Cash Flows from Investing Activities: | ||||
| Investment of cash into Trust Account | ( | ) | ||
| Net cash used in investing activities | ( | ) | ||
| Cash Flows from Financing Activities: | ||||
| Proceeds from sale of Public Shares, net of underwriting discounts paid | ||||
| Proceeds from sale of Private Placement Shares | ||||
| Proceeds from promissory note – related party | ||||
| Repayment of promissory note – related party | ( | ) | ||
| Payment of offering costs | ( | ) | ||
| Net cash provided by financing activities | ||||
| Net Change in Cash | ||||
| Cash – Beginning of period | ||||
| Cash – End of period | $ | |||
| Non-cash investing and financing activities: | ||||
| Deferred offering costs included in accrued offering costs | $ | |||
| Deferred offering costs paid through promissory note – related party | $ | |||
| Deferred offering costs paid by the Sponsor in exchange for the issuance of Class B ordinary shares | $ | |||
| Initial classification of Class A ordinary shares subject to possible redemption | $ | |||
| Deferred underwriting fee payable | $ | |||
The accompanying notes are an integral part of these financial statements.
4
ION ACQUISITION CORP 3 LTD.
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
ION Acquisition Corp. 3 Ltd. (the “Company”) is a blank check company incorporated as a Cayman Islands exempted company on February 4, 2021. The Company was formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses or entities (a “Business Combination”).
The Company is not limited to a particular industry or sector 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 September 30, 2021, the Company had not commenced any operations. All activity for the period from February 4, 2021 (inception) through September 30, 2021 relates to the Company’s formation and the initial public offering (“Initial Public Offering”), which is described below, and subsequent to the Initial Public Offering, identifying a target company for a Business Combination. The Company will not generate any operating revenues until after the completion of a Business Combination, at the earliest. The Company generates non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering. The Company has selected December 31 as its fiscal year end.
The registration statement for the Company’s
Initial Public Offering was declared effective on April 29, 2021. On May 4, 2021, the Company consummated the Initial Public Offering
of
Simultaneously with the closing of the Initial
Public Offering, the Company consummated the sale of
Transaction costs amounted to $
Following the closing of the Initial Public Offering on May 4, 2021, an amount of $253,000,000 ($10.00 per Public Share) from the net proceeds of the sale of the Public Shares in the Initial Public Offering and the sale of the Private Placement Shares was placed in a trust account (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 of 1940, as amended (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 certain 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 distribution of the funds in the Trust Account to the Company’s shareholders, as described below, except that the interest earned on the Trust Account can be released to the Company to pay its tax obligations.
The Company’s management has broad discretion
with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of the Private Placement Shares,
although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. The stock
exchange listing rules require that the Business Combination must be with one or more operating businesses or assets with a fair market
value equal to at least
The Company will provide the holders of the Public Shares (the “Public Shareholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of the 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, solely in its discretion.
5
ION ACQUISITION CORP 3 LTD.
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
The Public Shareholders will be entitled to
redeem their Public Shares, for an amount equal to the aggregate amount then on deposit in the Trust Account, calculated as of two business
days prior to the consummation of the Business Combination, including any interest (which interest shall be net of taxes payable), divided
by the number of then issued and outstanding Public Shares, subject to certain limitations as described in the prospectus. Such amount
is initially $
The Company will proceed with a Business Combination
only if the Company has net tangible assets of at least $
Notwithstanding the foregoing, if the Company
seeks shareholder approval of the Business Combination and the Company does not conduct redemptions pursuant to the tender offer rules,
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
Prior to the Public Offering, the Sponsor (a) has
agreed to waive its redemption rights with respect to any Founder Shares, Private Placement Shares, and Public Shares held by it in connection
with the completion of a Business Combination, (b) has agreed to waive its rights to liquidating distributions from the Trust Account
with respect to the Founder Shares and Private Placement Shares if the Company fails to complete a Business Combination within the Combination
Period and (c) has agreed 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
The Company will have until May 4, 2023 to consummate
a Business Combination (the “Combination Period”). However, if the Company has not completed 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 10 business days thereafter, redeem
6
ION ACQUISITION CORP 3 LTD.
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
The Sponsor has agreed to waive its rights
to liquidating distributions from the Trust Account with respect to the Founder Shares and Private Placement Shares if the Company fails
to complete a Business Combination within the Combination Period. For the avoidance of doubt, there will be no redemption rights granted
to the Private Placement Shares or liquidating distributions rights from the trust account with respect to the Company’s Private
Placement Shares if the Company fails to complete the initial business combination within the Combination Period. However, if the Sponsor
or any of its affiliates acquire Public Shares, 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 underwriters have agreed to waive their rights
to their deferred underwriting commission (see Note 7) 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 Initial Public Offering price per Public Share ($
NOTE 2. RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
In connection with the preparation of the Company’s
financial statements as of September 30, 2021, management determined it should restate its previously reported financial statements.
The Company determined that it had improperly valued its Class A ordinary shares subject to possible redemption at the closing of
the Company’s Initial Public Offering. The Company previously determined the Class A ordinary shares subject to possible redemption
to be equal to the redemption value of $
In connection with the change in presentation for the Class A ordinary shares subject to redemption, the Company also restated its net loss per ordinary share calculation. In order to determine the net income (loss) attributable to both the redeemable Class A ordinary shares and the non-redeemable Class A shares and Class B shares, the Company first considered the total income (loss) allocable to both sets of shares. This is calculated using the total net income (loss) less any dividends paid. For purposes of calculating net income (loss) per share, any remeasurement of the accretion to redemption value of the redeemable ordinary shares subject to possible redemption was considered to be dividends paid to the Public Shareholders.
There has been no change in the Company’s total assets, liabilities or operating results.
7
ION ACQUISITION CORP 3 LTD.
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
The impact of the restatement on the Company’s financial statements is reflected in the following table.
| Balance Sheet as of May 4, 2021 (audited) | As Previously Reported |
Adjustment | As Restated | |||||||||
| Class A ordinary shares subject to possible redemption | $ | $ | $ | |||||||||
| Class A ordinary shares | $ | $ | ( |
) | $ | |||||||
| Additional paid-in capital | $ | $ | ( |
) | $ | |||||||
| Accumulated deficit | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||
| Total Shareholders’ Equity (Deficit) | $ | $ | ( |
) | $ | ( |
) | |||||
| Balance Sheet as of June 30, 2021 (unaudited) | As Previously Reported |
Adjustment | As Restated | |||||||||
| Class A ordinary shares subject to possible redemption | $ | $ | $ | |||||||||
| Class A ordinary shares | $ | $ | ( |
) | $ | |||||||
| Additional paid-in capital | $ | $ | ( |
) | $ | |||||||
| Accumulated deficit | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||
| Total Shareholders’ Equity (Deficit) | $ | $ | ( |
) | $ | ( |
) | |||||
| Statement of Operations for the period from February 4, 2021 through June 30, 2021 (unaudited) | As Previously Reported |
Adjustment | As Restated | |||||||||
| Weighted average shares outstanding, Redeemable Class A | ||||||||||||
| Basic and diluted net income per Redeemable Class A shares | $ | $ | $ | |||||||||
| Weighted average shares outstanding, Non-Redeemable Class A and Class B | ( |
) | ||||||||||
| Basic and diluted net loss per Non-Redeemable Class A shares and Class B shares | $ | ( |
) | $ | $ | ( |
) | |||||
| Statement of Operations for the Three Months ending June 30, 2021 (unaudited) | As Previously Reported |
Adjustment | As Restated | |||||||||
| Weighted average shares outstanding, Redeemable Class A | ||||||||||||
| Basic and diluted net income per Redeemable Class A shares | $ | $ | $ | |||||||||
| Weighted average shares outstanding, Non-Redeemable Class A and Class B | ( |
) | ||||||||||
| Basic and diluted net loss per Non-Redeemable Class A shares and Class B shares | $ | ( |
) | $ | $ | ( |
||||||
| Statement of Cash Flows for the period from February 4, 2021 (inception) thorough June 30, 2021, Non-cash Investing and Financing Activities (unaudited) | As
Previously Reported |
Adjustment | As Restated | |||||||||
| Initial classification of Class A ordinary shares subject to possible redemption | $ | $ | $ | |||||||||
| Statement of Changes in Shareholders’ Deficit from February 4, 2021 (inception) thorough June 30, 2021 (unaudited) | As Previously Reported |
Adjustment | As Restated | |||||||||
| Sale of |
$ | $ | ( |
) | $ | |||||||
| Class A ordinary shares subject to possible redemption | $ | ( |
) | $ | $ | |||||||
| Accretion for Class A ordinary shares subject to redemption amount | $ | $ | ( |
) | $ | ( |
) | |||||
| Additional paid-in capital | $ | $ | ( |
) | $ | |||||||
| Accumulated deficit | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||
| Total Shareholders’ Equity (Deficit) | $ | $ | ( |
) | $ | ( |
) | |||||
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC. 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.
8
ION ACQUISITION CORP 3 LTD.
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
In management’s opinion, the Company has made all adjustments (consisting only of normal, recurring adjustments, except as otherwise indicated) necessary to fairly present its financial position, results of operations and cash flows.
The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s prospectus for its Initial Public Offering as filed with the SEC on May 3, 2021, as well as the Company’s Current Reports on Form 8-K, as filed with the SEC on May 5, 2021 and May 10, 2021. The interim results for the three months and for the period ended September 30, 2021 are not necessarily indicative of the results to be expected for the period ending December 31, 2021 or for any future periods.
Emerging Growth Company
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 not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, 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 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 which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
9
ION ACQUISITION CORP 3 LTD.
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
Use of Estimates
The preparation of financial statements in conformity with 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 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. Accordingly, the actual results could differ significantly from those estimates.
Deferred Offering Costs
Deferred offering costs consisted of legal,
accounting and other expenses incurred through the balance sheet date that were directly related to the Initial Public Offering. Offering
costs amounting to $
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, 2021.
Marketable Securities Held in Trust Account
At September 30, 2021, substantially all of the assets held in the Trust Account were held in mutual funds which are invested primarily in U.S. Treasury securities.
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 Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Class A ordinary shares subject to mandatory redemption are classified as a liability instrument and are measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, ordinary shares are classified as shareholders’ equity. The Company’s Public Shares feature certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, at September 30, 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 balance sheet.
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable ordinary shares to equal the redemption value at the end of each reporting period. Immediately upon the closing of the Initial Public Offering, the Company recognized the accretion from initial book value to redemption amount value. The change in the carrying value of redeemable Class A ordinary shares resulted in charges against additional paid-in capital and accumulated deficit.
10
ION ACQUISITION CORP 3 LTD.
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
At September 30, 2021, the Class A ordinary shares subject to possible redemption and reflected in the condensed balance sheet are reconciled in the following table:
| Gross proceeds | $ | |||
| Less: | ||||
| Class A ordinary shares issuance costs | ( | ) | ||
| Plus: | ||||
| Accretion of carrying value to redemption value | ||||
| Class A ordinary shares subject to possible redemption | $ |
Income Taxes
The Company accounts for income taxes under ASC Topic 740, “Income Taxes,” which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. 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, 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 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. As such, the Company’s tax provision was
11
ION ACQUISITION CORP 3 LTD.
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
Net Income (Loss) per Ordinary Share
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. The condensed consolidated statements of operations include a presentation of income (loss) per redeemable Class A ordinary share and income (loss) per non-redeemable Class A share and Class B share following the two-class method of income (loss) per share. In order to determine the net income (loss) attributable to both the redeemable Class A ordinary shares and the non-redeemable Class A shares and Class B shares, the Company first considered the total income (loss) allocable to both sets of shares. This is calculated using the total net income (loss) less any dividends paid. For purposes of calculating net income (loss) per share, any remeasurement of the accretion to redemption value of the Class A ordinary shares subject to possible redemption was considered to be dividends paid to the Public Shareholders.
The following tables reflect the calculation of basic and diluted net income (loss) per ordinary share (in dollars, except per share amounts):
| Three Months Ended September 30, 2021 |
For the period from
February 4, 2021 through September 30, 2021 |
|||||||||||||||
| Redeemable Class A | Non-Redeemable Class A and Class B | Redeemable Class A | Non-Redeemable Class A and Class B | |||||||||||||
| Basic and diluted net income (loss) per ordinary share | ||||||||||||||||
| Numerator: | ||||||||||||||||
| Allocation of net loss | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Accretion of temporary equity to redemption value | — | |||||||||||||||
| Allocation of net income (loss), as adjusted | $ | ( |
) | $ | ( |
) | $ | $ | ( |
) | ||||||
| Denominator: | ||||||||||||||||
| Basic and diluted weighted average shares outstanding | ||||||||||||||||
| Basic and diluted net income (loss) per ordinary share | $ | ( |
) | $ | ( |
) | $ | $ | ( |
) | ||||||
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 Coverage of $
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 sheet, primarily due to their short-term nature.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the accompanying financial statements.
NOTE 4. INITIAL PUBLIC OFFERING
Pursuant to the Initial Public Offering, the Company
sold
12
ION ACQUISITION CORP 3 LTD.
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
NOTE 5. PRIVATE PLACEMENT
Simultaneously with the closing of the Initial
Public Offering, the Sponsor purchased
NOTE 6. RELATED PARTY TRANSACTIONS
Founder Shares
During the period ended March 31, 2021, the Sponsor
paid $
The Sponsor agreed, subject to limited exceptions, not to transfer, assign or sell any of its Founder Shares until the earliest of: (A) one year after the completion of a Business Combination and (B) subsequent to a Business Combination, (x) if the closing price of the 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 a Business Combination, or (y) the date on which the Company completes a liquidation, merger, share exchange or other similar transaction that results in all of the Public Shareholders having the right to exchange their Class A ordinary shares for cash, securities or other property.
Promissory Note — Related Party
On February 21, 2021, the Company issued an unsecured
promissory note (the “Promissory Note”) to the Sponsor, pursuant to which the Company could borrow up to an aggregate principal
amount of $
Due from Sponsor
A portion of the proceeds from the sale of the
Private Placement Shares in the amount of $
Administrative Services Agreement
The Company entered into an agreement commencing
on April 29, 2021, pursuant to which it agreed to pay the Sponsor up to $
13
ION ACQUISITION CORP 3 LTD.
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
Forward Purchase Agreements
The Company entered into forward purchase
agreements, pursuant to which the forward purchase investors (ION Crossover Partners LP, ION Asset Management Ltd., ION Tech Fund Ltd.,
The Phoenix Insurance Company Ltd., The Phoenix Insurance Company Ltd. (Nostro) and The Phoenix Excellence Pension and Provident Fund
Ltd.) agreed to purchase an aggregate of up to
Related Party Loans
In order to finance transaction costs in connection
with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may,
but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). Such Working Capital Loans
would be evidenced by promissory notes. The notes may be repaid upon completion of a Business Combination, without interest, or, at the
lender’s discretion, up to $
NOTE 7. COMMITMENTS
Risks and Uncertainties
Management has evaluated the impact of the COVID-19 pandemic on the industry 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 financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Third Point Side Letter Agreement
On April 15, 2021, the Company entered into a
side letter agreement with Third Point, pursuant to which if Third Point purchases more than
Registration Rights
Pursuant to a registration rights agreement entered into on April 29, 2021, the holders of the Founder Shares, Private Placement Shares, Forward Purchase Shares, and any Private Placement Shares that may be issued upon conversion of Working Capital Loans (and any Class A ordinary shares issuable upon the conversion of the Founder Shares) will be entitled to registration rights requiring the Company to register a sale of any of the Company’s securities held by them pursuant to a registration rights agreement. The holders of these securities will be 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. The registration rights agreement will not contain liquidating damages or other cash settlement provisions resulting from delays in registering the Company’s securities. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
14
ION ACQUISITION CORP 3 LTD.
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
Underwriting Agreement
The underwriters were provided a cash underwriting
discount of $
NOTE 8. SHAREHOLDERS’ EQUITY
Preference Shares — The Company
is authorized to issue
Class A Ordinary Shares —
The Company is authorized to issue
Class B Ordinary Shares —
The Company is authorized to issue
Only holders of Class B ordinary shares will be entitled to vote on the appointment of directors in any election held prior to or in connection with the completion of the Business Combination. Holders of Class A ordinary shares and Class B ordinary shares will vote together as a single class on all other matters submitted to a vote of shareholders, except as required by law.
The Class B ordinary shares will automatically
convert into Class A ordinary shares concurrently with or immediately following the consummation of a Business Combination on a one-for-one
basis, subject to adjustment for share sub-divisions, share capitalizations, reorganizations, recapitalizations and the like. In the case
that additional Class A ordinary shares, or equity-linked securities, are issued or deemed issued in connection with a Business Combination,
the number of Class A ordinary shares issuable upon conversion of all Founder Shares will equal, in the aggregate,
15
ION ACQUISITION CORP 3 LTD.
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
The Private Placement Shares are identical to the Public Shares, except that the Private Placement Shares are not (i) redeemable by the Company, (ii) transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions, and (iii) are entitled to registration rights. For the avoidance of doubt, there are no redemption rights granted to the Private Placement Share or liquidating distributions rights from the trust account with respect to the Private Placement Shares if the Company fails to complete the initial business combination within the Combination Period.
NOTE 9. FAIR VALUE MEASUREMENTS
The fair value of the Company’s financial assets 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, 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, 2021 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.
| Description | Level | September 30, 2021 | ||||
| Assets: | ||||||
| Marketable securities held in Trust Account | 1 | $ | ||||
NOTE 10. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to 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.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to ION Acquisition Corp 3 Ltd. References to our “management” or our “management team” refer to our officers and directors. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Amended Form 10-Q including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s final prospectus for its Initial Public Offering filed with the SEC on May 3, 2021. The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Overview
We are a blank check company incorporated in the Cayman Islands on February 4, 2021, formed for the purpose of effecting a merger, amalgamation, share exchange, asset acquisition, share purchase, reorganization or other similar Business Combination with one or more businesses. We intend to effectuate our Business Combination using cash derived from the proceeds of the Initial Public Offering and the sale of the Private Placement Shares, our shares, debt or a combination of cash, shares and debt.
We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a Business Combination will be successful.
Restatement of Previously Issued Financial Statements
In connection with the preparation of the Company’s financial statements as of September 30, 2021, management determined it should restate its previously reported financial statements. The Company determined that it had improperly valued its Class A ordinary shares subject to possible redemption at the closing of the Company’s Initial Public Offering. The Company previously determined the Class A ordinary shares subject to possible redemption to be equal to the redemption value of $10.00 per Class A ordinary share, while also taking into consideration a redemption cannot result in net tangible assets being less than $5,000,001. Management determined that the Class A ordinary shares issued during the Initial Public Offering can be redeemed or become redeemable subject to the occurrence of future events considered outside the Company’s control. Therefore, management concluded that the redemption value should include all Class A ordinary shares subject to possible redemption, resulting in the Class A ordinary shares subject to possible redemption being equal to their redemption value. In accordance with SEC Staff Accounting Bulletin No. 99, “Materiality,” and SEC Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements,” the Company evaluated the changes and has determined that the related impact was material to previously presented financial statements.
As a result, management has noted an adjustment related to temporary equity and permanent equity. This resulted in a restatement to the initial carrying value of the Class A ordinary shares subject to possible redemption with the offset recorded to additional paid-in capital (to the extent available), accumulated deficit and Class A ordinary shares.
In connection with the change in presentation for the Class A ordinary shares subject to redemption, the Company also restated its net loss per ordinary share calculation. In order to determine the net income (loss) attributable to both the redeemable Class A ordinary shares and the non-redeemable Class A shares and Class B shares, the Company first considered the total income (loss) allocable to both sets of shares. This is calculated using the total net income (loss) less any dividends paid. For purposes of calculating net income (loss) per share, any remeasurement of the accretion to redemption value of the redeemable Class A ordinary shares subject to possible redemption was considered to be dividends paid to the Public Shareholders.
Results of Operations
We have neither engaged in any operations nor generated any operating revenues to date. Our only activities from inception through September 30, 2021 were organizational activities and those necessary to prepare for the Initial Public Offering, described below. We do not expect to generate any operating revenues until after the completion of our initial Business Combination. We generate non-operating income in the form of interest income on marketable securities held in the Trust Account. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses in connection with searching for, and completing, a Business Combination.
17
For the three months ended September 30, 2021, we had a net loss of $210,881, which consisted of formation and operating expenses of $214,137 offset by interest earned in marketable securities held in the Trust Account of $3,256.
For the period from February 4, 2021 (inception) through September 30, 2021, we had a net loss of $356,822, which consisted of formation and operating expenses of $363,689 offset by interest earned on marketable securities held in the Trust Account of $6,867.
Liquidity and Capital Resources
On May 4, 2021, we consummated the Initial Public Offering of 25,300,000 Class A ordinary shares of the Company, par value $0.0001 per share (the “Shares”), at a price of $10.00 per Share, which gives effect to the full exercise by the underwriters of their over-allotment option in the amount of 3,300,000 Shares, generating gross proceeds of $253,000,000. Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 756,000 Private Placement Shares to the Sponsor at a price of $10.00 per Private Placement Share, generating gross proceeds of $7,560,000.
Following the Initial Public Offering, the full exercise of the over-allotment option, and the sale of the Private Placement Shares, a total of $253,000,000 was placed in the Trust Account. We incurred $14,457,724 in transaction costs, including $5,060,000 of underwriting fees, $8,855,000 of deferred underwriting fees and $542,724 of other offering costs.
For the period from February 4, 2021 (inception) through September 30, 2021, cash used in operating activities was $811,763. Net loss of $356,822 was affected by the payment of formation costs through the issuance of Class B ordinary shares of $5,000, interest earned on marketable securities held in the Trust Account of $6,867, and changes in operating assets and liabilities, which used $453,074 of cash from operating activities.
We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account, which interest shall be net of taxes payable and excluding deferred underwriting commissions, to complete our Business Combination. We may withdraw interest from the Trust Account to pay taxes, if any. To the extent that our share capital or debt is used, in whole or in part, as consideration to complete a Business Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, structure, negotiate and complete a Business Combination.
In order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, our Sponsor or an affiliate of our Sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete a Business Combination, we may repay such loaned amounts out of the proceeds of the Trust Account released to us. In the event that a Business Combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts, but no proceeds from our Trust Account would be used for such repayment. Upon completion of a business combination, up to $1,500,000 of such loans may be convertible into private placement shares, at a price of $10.00 per private placement share, at the option of the lender. The private placement shares would be identical to the Private Placement Shares.
We believe we will not need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating a Business Combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our initial Business Combination. Moreover, we may need to obtain additional financing either to complete our Business Combination or because we become obligated to redeem a significant number of our Public Shares upon completion of our Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of September 30, 2021. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
18
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay the Sponsor a monthly fee of $10,000 for office space, utilities and administrative and support services. We began incurring these fees on April 29, 2021 and will continue to incur these fees monthly until the earlier of the completion of the Business Combination and our liquidation. The underwriters are entitled to a deferred fee of $0.35 per share, or $8,855,000 in the aggregate. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that we complete a Business Combination, subject to the terms of the underwriting agreement.
The underwriters are entitled to a deferred fee of $0.35 per Share, or $8,855,000 in the aggregate. The deferred fee will become 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.
We entered into forward purchase agreements, pursuant to which the forward purchase investors (ION Crossover Partners LP, ION Asset Management Ltd., ION Tech Fund Ltd., The Phoenix Insurance Company Ltd., The Phoenix Insurance Company Ltd. (Nostro) and The Phoenix Excellence Pension and Provident Fund Ltd.) agreed to purchase an aggregate of up to 12,000,000 Class A ordinary shares, at a purchase price of $10.00 per share, or up to $120.0 million in the aggregate, in private placements that will close substantially concurrently with the closing of the Company's initial Business Combination. Any reduction in the number of forward purchase shares will be made in the Company’s sole discretion. The forward purchase shares are identical to the Public Shares, except that the holders thereof will have certain registration rights. The forward purchase agreements and the registration rights agreement also provide that the forward purchase investors are entitled to registration rights with respect to the forward purchase shares. The proceeds from the sale of the forward purchase shares may be used as part of the consideration to the sellers in a Business Combination, expenses in connection with a Business Combination or for working capital in the post-business combination company. The forward purchases are required to be made regardless of whether any Class A ordinary shares are redeemed by the Public Shareholders and are intended to provide the Company with a minimum funding level for a Business Combination. No forward purchase investor will have the ability to approve the Business Combination prior to the signing of a material definitive agreement. The forward purchase shares will be issued only in connection with the closing of a Business Combination.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:
Class A Ordinary Shares Subject to Possible Redemption
We account for our Class A ordinary shares subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Ordinary shares subject to mandatory redemption are classified as a liability instrument and measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) are classified as temporary equity. At all other times, ordinary shares are classified as shareholders’ equity. Our Class A ordinary shares – Public Shares feature certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, Class A ordinary shares – Public Shares subject to possible redemption are presented at redemption value as temporary equity, outside of the shareholders’ equity section of our condensed balance sheets.
Net Income (Loss) Per Ordinary Share
We apply the two-class method in calculating net income (loss) per ordinary share. In order to determine the net income (loss) attributable to both the redeemable Class A ordinary shares and the non-redeemable Class A shares and Class B shares, we first considered the total income (loss) allocable to both sets of shares. This is calculated using the total net income (loss) less any dividends paid. For purposes of calculating net income (loss) per share, any remeasurement of the accretion to redemption value of the Class A ordinary shares subject to possible redemption was considered to be dividends paid to the Public Shareholders.
Recent Accounting Standards
Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our financial statements.
19
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of September 30, 2021, we were not subject to any market or interest rate risk. Following the consummation of the Initial Public Offering, the net proceeds of the Initial Public Offering, including amounts in the Trust Account, have been invested in U.S. government treasury obligations with a maturity of 185 days or less or in certain money market funds that invest solely in U.S. treasuries. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this Report, is recorded, processed, summarized, and reported within the time period specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. Our management evaluated, with the participation of our current chief executive officer and chief financial officer (our “Certifying Officers”), the effectiveness of our disclosure controls and procedures as of September 30, 2021, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our Certifying Officers concluded that, as of September 30, 2021, our disclosure controls and procedures were not effective due solely to the material weakness in our internal control over financial reporting related to the Company’s accounting for complex financial instruments. In light of this material weakness, we performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with U.S. generally accepted accounting principles.
Accordingly, management believes that the financial statements included in this Amended Form 10-Q present fairly in all material respects our financial position, results of operations and cash flows for the period presented.
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Management’s Report on Internal Controls Over Financial Reporting
This Amended Form 10-Q does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of our independent registered public accounting firm due to a transition period established by rules of the SEC for newly public companies.
Changes in Internal Control Over Financial Reporting
Except as set forth above, there were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Management identified a material weakness in our internal control over financial reporting related to the Company’s accounting for complex financial instruments. As a result, we enhanced our processes to identify and appropriately apply applicable accounting requirements to better evaluate and understand the nuances of the complex accounting standards that apply to our financial statements. Our processes now include providing enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third-party professionals with whom we consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time. We offer no assurance that these initiatives will ultimately have the intended effects.
20
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 1A. RISK FACTORS.
As of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in our final prospectus filed with the SEC.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
On May 4, 2021, we consummated our Initial Public Offering of 25,300,000 Public Shares, inclusive of 3,300,000 Public Shares sold to the underwriter upon the election to fully exercise its over-allotment option, at a price of $10.00 per Public Share, generating total gross proceeds of $253,000,000. Goldman Sachs & Co. LLC and Morgan Stanley & Co. LLC acted as the joint book-running managers. The securities sold in the offering were registered under the Securities Act on registration statement on Form S-1, as amended (No. 333-255072). The registration statement became effective on April 29, 2021.
Simultaneously with the consummation of the Initial Public Offering, and the exercise of the over-allotment option in full, we consummated a private placement of 756,000 Private Placement Shares to our Sponsor at a price of $10.00 per Private Placement Share, generating total proceeds of $7,560,000. Such securities were issued pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
The Private Placement Shares are identical to the Public Shares sold in the Initial Public Offering, except that the Private Placement Shares are not redeemable by the Company, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions, and will be entitled to registration rights. There will be no redemption rights granted to the Private Placement Shares or liquidating distribution rights from the trust account with respect to the Company’s Private Placement Shares if the Company fails to complete the initial business combination within the Combination Period.
Of the gross proceeds received from the Initial Public Offering including the full exercise of the option to purchase additional Public Shares and the sale of the Private Placement Shares, $253,000,000 was placed in the Trust Account.
We paid a total of $5,060,000 in underwriting discounts and commissions and $542,724 for other costs and expenses related to the Initial Public Offering.
For a description of the use of the proceeds generated in our Initial Public Offering, see Part I, Item 2 of this Amended Form 10-Q.
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS.
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q/A.
| * | Filed herewith. |
| ** | Furnished. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| ION ACQUISITION CORP 3 LTD. | ||
Date: December 9, 2021 |
/s/ Gilad Shany | |
| Name: | Gilad Shany | |
| Title: | Chief Executive Officer | |
| (Principal Executive Officer) | ||
Date: December 9, 2021 |
/s/ Anthony Reich | |
| Name: | Anthony Reich | |
| Title: | Chief Financial Officer | |
| (Principal Financial and Accounting Officer) | ||
23