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Related Party Transactions
9 Months Ended
Sep. 30, 2024
Related Party Transactions [Abstract]  
Related Party Transactions
NOTE 5 — RELATED PARTY TRANSACTIONS
Founder Shares
On February 8, 2021, an affiliate of the Sponsor paid $25,000, to cover certain offering and formation costs in consideration for 7,187,500 Class B ordinary shares, par value $0.0001 (the “Founder Shares”), which Founder Shares were subsequently transferred to the Sponsor for consideration of $25,000. On November 8, 2021, 1,437,500 Class B ordinary shares were cancelled by the Company resulting in a decrease in the total number of Class B ordinary shares outstanding from 7,187,500 shares to 5,750,000 shares. All amounts have been retroactively restated to reflect this. Up to 750,000 Founder Shares were subject to forfeiture by the Sponsor depending on the extent to which the underwriters’ over-allotment option was exercised. On December 29, 2021, 377,585 Founder Shares were forfeited as a result of underwriter’s partial exercise of its over-allotment option. On January 27, 2022, the over-allotment option expired. As a result, the Founder Shares are no longer subject to forfeiture.
On and prior to July 10, 2024, the Company and the Sponsor entered into agreements (the “July 2024 Non-Redemption Agreements”) with third parties in exchange for them agreeing not to redeem Class A ordinary shares at the Special Meeting at which a proposal to amend to the Company’s Memorandum and Articles of Association to effect an extension of time for the Company to consummate an initial business combination (the “The Third Extension Charter Amendment Proposal”) from July 8, 2024 to June 9, 2025 (the “The Third Extension”). The Non-Redemption Agreements provide for the allocation of 629,852 Founder Shares held by the Sponsor in exchange for such investors agreeing to hold and not redeem certain public shares at the Special Meeting. The Company estimated the aggregate fair value of the Founder Shares attributable to the July 2024 Non-Redemption Agreements to be $2,813,549 or approximately $4.47 per share. The excess of the fair value of the Founder Shares was determined to be a contribution to the Company from the Sponsor in accordance with Staff Accounting Bulletin (“SAB”) Topic 5T and a finance cost in accordance with SAB Topic 5A.
Prior to the completion of the IPO, the Sponsor transferred 300,000 of Founder Shares to some of the Company’s directors and executives in recognition of and compensation for their future services to the Company. On July 11, 2023, the Company issued an aggregate of 275,000 Class A ordinary shares to certain of the Company’s directors and executives upon the conversion of an equal number of Founder Shares held by such directors and executives. On November 29, 2023, pursuant to a securities exchange agreement between the Sponsor and a director of the Company (the “Director”), the Sponsor assigned and transferred to the Director 25,000 of the Company’s Class A ordinary shares in exchange for the simultaneous transfer and assignment to the Sponsor by the Director of 25,000 Founder Shares. The assignment of the Founders Shares to the Company’s directors and advisors is within the scope of ASC Topic 718, “Compensation-Stock Compensation” (“ASC 718”). Under ASC 718, stock-based compensation associated with equity-classified awards is measured at fair value upon the grant date. The fair value of the 300,000 shares granted to the Company’s directors, and executives was $1,926,000 or $6.42 per share. The Founders Shares were effectively assigned to directors and executives subject to a performance condition (i.e., the consummation of a Business Combination). Compensation expense related to the Founders Shares is recognized only when the performance condition is probable of achievement under the applicable accounting literature. Stock-based compensation would be recognized at the date a Business Combination is considered probable in an amount equal to the number of Founders Shares times the grant date fair value per share (unless subsequently modified) less the amount initially received for the purchase of the Founders Shares. As of September 30, 2024 and December 31, 2023, the Company has not yet entered into any definitive agreements in connection with any Business Combination. Any such agreements may be subject to certain conditions to closing, such as, for example, approval by the Company’s shareholders. As a result, the Company determined that taking into account that there is a possibility that a Business Combination might not happen, and, therefore, no stock-based compensation expense has been recognized.
The Sponsor has agreed to certain transfer restrictions and performance conditionality on its Founder Shares:
 
   
50% of the Founder Shares and any Class A ordinary shares issuable upon conversion thereof held by the Sponsor shall not be transferred, assigned or sold except to certain permitted transferees until the completion of the initial Business combination;
 
   
25% of the Founder Shares and any Class A ordinary shares issuable upon conversion thereof held by the Sponsor shall not be transferred, assigned or sold except to certain permitted transferees unless and until the last sale price of the ordinary shares equals or exceeds $11.50 per share (as adjusted for share subdivisions, share consolidations, share capitalizations, rights issuances, reorganizations, recapitalizations and the like) for any 20 trading days within any
30-trading
day period commencing at least 150 days after the initial Business Combination; and
 
   
25% of the Founder Shares and any Class A ordinary shares issuable upon conversion thereof held by the Sponsor shall not be transferred, assigned or sold except to certain permitted transferees unless and until the last sale price of the ordinary shares equals or exceeds $13.00 per share (as adjusted for share subdivisions, share consolidations, share capitalizations, rights issuances, reorganizations, recapitalizations and the like) for any 20 trading days within any30-tradingday period commencing at least 150 days after the initial Business Combination.
On May 31, 2024, the Sponsor transferred 3,533,191 Class A and 17,500 Class B Ordinary Shares to CIIG III as part of the terms of the 2024 Securities Assignment Agreement, described in Note 1.
In connection with the Transaction, the
Lock-Up
period definition in the Insider Letters were amended with the consent of the Company and the IPO underwriters. Pursuant to the Insider Letter with CIIG III, CIIG III and the Chief Executive Officer have agreed that, it or he shall not Transfer 50% of the Founder Shares (or any Class A ordinary shares issuable upon conversion thereof) until the completion of the Company’s initial Business Combination and 50% of the Founder Shares (or any Class A ordinary shares issuable upon conversion thereof shall not be transferred, assigned or sold except to permitted transferees unless and until the earlier to occur of (A) six months after the completion of the Company’s initial Business Combination and (B) subsequent to the Company’s initial Business Combination if the last sale price of the ordinary shares equals or exceeds $12.00 per share (subject to adjustment) for any 20 trading days within any
30-trading
day period commencing at least 150 days after the Company’s initial Business Combination.
In connection with the Shareholder Meeting, the Company and CIIG III entered into
non-redemption
agreements with unaffiliated third-party shareholders of the Company in exchange for such shareholders agreeing to not redeem (or validly rescind any redemption requests on) an aggregate of 1,679,608 Class A ordinary shares.
Promissory Note — Related Party
On February 19, 2021, the Sponsor agreed, under a promissory note, to loan the Company up to $500,000 to be used for a portion of the expenses of the IPO. Any loans under the promissory note are
non-interest
bearing, unsecured and have no fixed terms or repayment and can be repaid at any time. The loans under the initial promissory note were repaid upon the closing of the IPO out of the $1,000,000 of offering proceeds that has been allocated to the payment of offering expenses.
In addition, the Company and the Sponsor entered into the following promissory notes:
 
   
On November 11, 2022, the Sponsor agreed, under a separate promissory note, to loan the Company up to $500,000. This note is not interest bearing and it has to be repaid the date on which the Company consummates its initial business combination. This facility was fully drawn as of September 30, 2024.
 
   
On June 27, 2023, the Sponsor agreed, under a separate promissory note, to loan the Company additional $100,000. This note is not interest bearing and it has to be repaid on the earlier of (i) the date on which the Company consummates its initial business combination and (ii) the date on which the Company is liquidated. This facility was fully drawn as of
September 30, 2024
.
 
   
On August 17, 2023, the Sponsor agreed, under a separate promissory note, to loan the Company additional $100,000. This note is not interest bearing and it has to be repaid on the earlier of (i) the date on which the Company consummates its initial business combination and (ii) the date on which the Company is liquidated. This facility was fully drawn as of
September 30, 2024
.
 
   
On August 17, 2023, the Sponsor agreed, under a separate promissory note, to loan the Company additional $250,000. This note is not interest bearing and it has to be repaid on the earlier of (i) the date on which the Company consummates its initial business combination and (ii) the date on which the Company is liquidated. This facility was fully drawn as of
September 30, 2024
.
 
   
On December 15, 2023, the Sponsor agreed, under a separate promissory note, to loan the Company additional amount of $1,000,000.This note is not interest bearing and it has to be repaid on or before December 31, 2025. The Company has drawn $
701,000
under terms of this note as of September 30, 2024.
 
   
On March 26, 2024, the Sponsor agreed, under a separate promissory note, to loan the Company additional amount of $80,000. This note is not interest bearing and it has to be repaid on or before
December 31, 2025
. The Company has drawn $57,250 under terms of this note as of September 30, 2024.
 
   
On May 14, 2024, the Sponsor agreed, under an additional promissory note, to loan the Company additional amount of $30,000. This note is not interest bearing and it has to be repaid on the date on which the Company consummates its initial business combination. This facility was fully drawn as of September 30, 2024.
 
   
On May 17, 2024, the Sponsor agreed, under an additional promissory note, to loan the Company additional amount of $300,000. This note is not interest bearing and it has to be repaid on the date on which the Company consummates its initial business combination. The Company has drawn $300,000 under terms of this note as of September 30, 2024.
Contribution Notes
In connection with the amendment of the Articles of June 2, 2023, the Contributor agreed to deposit into the Trust Account the June 2023 EGM Contributions for the maximum aggregate amount of $810,000. The June 2023 EGM Contributions are evidenced by anon-interest bearing, unsecured convertible promissory note to our Sponsor (the “June 2023 EGM Contribution Note”) and will be repayable by the Company upon consummation of a Business Combination. The amount of $630,015 was drawn and contributed to the Trust Account and was outstanding under the June 2023 EGM Contribution Note as of September 30, 2024 and December 31, 2023.
The June 2023 EGM Contribution Note may be converted into warrants of the post-business combination entity, which shall have terms identical to the Private Placement Warrants sold concurrently with the Company’s IPO, each exercisable for one Class A ordinary share at a purchase price of $11.50 per share, at a price of $1.50 per warrant at the option of the Contributor. The conversion feature included in the June 2023 EGM Contribution Note does not meet the definition of a derivative instrument.
In connection with the Second Extension, the Contributor agreed to deposit into the Trust Account the December 2023 EGM Contributions for the maximum aggregate amount of $975,000. The December 2023 EGM Contributions are evidenced by the December 2023 EGM Contribution Note and will be repayable by the Company upon consummation of a Business Combination. As of September 30, 2024, and December 31, 2023, $435,000 and $0, respectively, was drawn and contributed to the Trust Account and was outstanding under the December 2023 EGM Contribution Note, respectively.
The December 2023 EGM Contribution Note may be converted into warrants of the post-business combination entity, which shall have terms identical to the Private Placement Warrants sold concurrently with the Company’s IPO, each exercisable for one Class A ordinary share at a purchase price of $11.50 per share, at a price of $1.50 per warrant at the option of the Contributor. The conversion feature included in the December 2023 EGM Contribution Note does not meet the definition of a derivative instrument.
2024 Securities Assignment Agreement
Pursuant to the Assignment Agreement, Sponsor agreed to reduce to zero any remaining balance of the promissory notes issued to the Company on
November 11, 2022
,
June 27, 2023
,
August 17, 2023
,
December 15, 2023
, and
January 9, 2024
, and the contribution notes issued to the Company on
June 2, 2023
and
January 9, 2024
in excess of $1,750,000 and have the $1,750,000 balance of the promissory notes and contribution notes paid as part of the Reimbursement so long as the inclusion of such balance does not result in the aggregate amount of Legacy Expenses exceeding $1,750,000. The residual amount of promissory notes to the Sponsor as of September 30, 2024 is $1,302,581, which is reflected in the Company’s balance sheet.
Working Capital Loans
In addition, in order to finance transaction costs in connection with an intended 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”) on anon-interest basis. If the Company completes the initial Business Combination, the Company would repay the Working Capital Loans.
In the event that the initial Business Combination does not close, the Company may use a portion of the working capital held outside the Trust Account to repay the Working Capital Loans but no proceeds from the Trust Account would be used to repay the Working Capital Loans. Up to $1,500,000 of such Working Capital Loans may be convertible into Private Placement Warrants of the post Business Combination entity at a price of $1.50 per warrant at the option of the lender. Such warrants would be identical to the Private Placement Warrants. As of September 30, 2024, and December 31, 2023, the Company had no borrowings under the Working Capital Loans.
Administrative Services Fee
The Company pays Sponsor $10,000 per month for office space, utilities, secretarial and administrative support services provided to members of the Company’s management team. Upon completion of the initial Business Combination or the Company’s liquidation, the Company will cease paying these monthly fees. As of September 30, 2024 and December 31, 2023, the Company had accrued $313,951 and $247,419, respectively, for the administrative support services. According to the terms of the Assignment Agreement the administrative services agreement was terminated and the amount of the administrative fees previously incurred by the Company and outstanding was reduced to the amount of $247,419 which is included in the amount due to related party in the Company’s balance sheet as of September 30, 2024 , and which is expected to be paid at the completion of Business Combination.
Advances from CIIG III
Subsequent to the date of the Transaction, CIIG III paid certain operating expenses of the Company. A total of such payments amounted to $301,364, which is included in the due to related party in the Company’s balance sheet as of September 30, 2024.
Dissolution Expenses
On June 25, 2024, the Board of Directors agreed to waive the Company’s right under Article 49 of the Company’s Amended and Restated Memorandum and Articles of Association to access up to $100,000 of interest from the Company’s trust account established in connection with Company’s initial public offering in the event Proposals 1 and 2 were approved at the Company’s July 10, 2024 Shareholder Meeting. As a result of the approval of Proposals 1 and 2 at the Company’s July 10, 2024 Shareholder Meeting, CIIG Management III LLC, a Delaware limited liability company, has agreed to pay up to $100,000 of dissolution expenses that might occur in the event a business combination transaction does not occur.