UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the quarterly period ended
OR
For the transition period from ________ to ________
(Exact name of registrant as specified in its charter)
| (State
or other jurisdiction of incorporation or organization) |
(Commission File Number) |
(IRS Employer Identification No.) |
| (Address Of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code
PORTAGE FINTECH ACQUISITION CORPORATION
315 Lake Street East, Suite 301, Wayzata, MN 55391
(Former name or former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class: | Trading Symbol: | Name of Each Exchange on Which Registered: | ||
| The Stock Market LLC | ||||
| The Stock Market LLC | ||||
| The Stock Market LLC |
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 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405
of Regulation 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, 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.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
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 accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
As of November 15, 2023, Class A ordinary shares, par value $0.0001 per share, and Class B ordinary shares, par value $0.0001 per share, were issued and outstanding, respectively.
PERCEPTION CAPITAL CORP. III
(F/K/A PORTAGE FINTECH ACQUISITION CORPROATION)
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2023
TABLE OF CONTENTS
i
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
PERCEPTION CAPITAL CORP. III
(F/K/A PORTAGE
FINTECH ACQUISITION CORPORATION)
CONDENSED BALANCE SHEETS
| September 30, 2023 | December 31, 2022 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Investments held in Trust Account | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES, CLASS A ORDINARY SHARES SUBJECT TO POSSIBLE REDEMPTION AND SHAREHOLDERS’ DEFICIT | ||||||||
| Current liabilities | ||||||||
| Accrued expenses | $ | $ | ||||||
| Total current liabilities | ||||||||
| Subscription agreement liability | ||||||||
| Warrant liabilities | ||||||||
| Deferred underwriting fee payable | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Class A ordinary shares subject to possible redemption; and shares at redemption value as of September 30, 2023 and December 31, 2022, respectively | ||||||||
| Shareholders’ Deficit | ||||||||
| Preference shares, $ par value; shares authorized; issued or outstanding | ||||||||
| Class A ordinary shares, $ par value; shares authorized; shares issued or outstanding (excluding 3,910,370 and 25,911,379 shares subject to possible redemption) as of September 30, 2023 and December 31, 2022, respectively | ||||||||
| Class B ordinary shares, $ par value; shares authorized; shares issued and outstanding as of September 30, 2023 and December 31, 2022 | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Shareholders’ Deficit | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES, CLASS A ORDINARY SHARES SUBJECT TO POSSIBLE REDEMPTION AND SHAREHOLDERS’ DEFICIT | $ | $ | ||||||
The accompanying notes are an integral part of these financial statements.
1
PERCEPTION CAPITAL CORP. III
(F/K/A PORTAGE
FINTECH ACQUISITION CORPORATION)
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
| For the Three Months Ended September 30, | For the September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative expenses | $ | $ | $ | $ | ||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income: | ||||||||||||||||
| Change in fair value of warrant liabilities | ( | ) | ||||||||||||||
| Forgiveness of debt | ||||||||||||||||
| Reduction of deferred underwriter fees | ||||||||||||||||
| Investment income earned on Trust Account | ||||||||||||||||
| Other income | ||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||
| Weighted average Class A ordinary shares outstanding, basic and diluted | ||||||||||||||||
| Basic and diluted net income per ordinary share, Class A | $ | $ | $ | $ | ||||||||||||
| Weighted average Class B ordinary shares outstanding, basic and diluted | ||||||||||||||||
| Basic and diluted net income per ordinary share, Class B | $ | $ | $ | $ | ||||||||||||
The accompanying notes are an integral part of these financial statements.
2
PERCEPTION CAPITAL CORP. III
(F/K/A PORTAGE
FINTECH ACQUISITION CORPORATION)
UNAUDITED CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023
| Class A Ordinary Shares | Class B Ordinary Shares | Additional Paid in | Accumulated | Total Shareholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance – January 1, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Remeasurement of Class A ordinary shares to redemption value | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||
| Balance – March 31, 2023 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Remeasurement of Class A ordinary shares to redemption value | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Reduction of deferred underwriter fees | - | - | ||||||||||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||
| Balance – June 30, 2023 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Debt forgiven by initial sponsor PFTA I LP | - | - | ||||||||||||||||||||||||||
| Remeasurement of Class A ordinary shares to redemption value | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||
| Balance – September 30, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
3
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022
Class A Ordinary Shares | Class B Ordinary Shares | Additional Paid in | Accumulated | Total Shareholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance – January 1, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Remeasurement of Class A ordinary shares to redemption value | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||
| Balance – March 31, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Remeasurement of Class A ordinary shares to redemption value | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||
| Balance – June 30, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Remeasurement of Class A ordinary shares to redemption value | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Reduction of deferred underwriter | - | - | ||||||||||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||
| Balance – September 30, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
4
PERCEPTION CAPITAL CORP. III
(F/K/A PORTAGE
FINTECH ACQUISITION CORPORATION)
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
| For the Nine Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
| Investment income earned on Trust Account | ( | ) | ( | ) | ||||
| Change in fair value of warrant liabilities | ( | ) | ( | ) | ||||
| Reduction of deferred underwriter fees | ( | ) | ( | ) | ||||
| Forgiveness of debt | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses | ||||||||
| Accounts payable and accrued expenses | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Cash withdrawn from Trust Account in connection with redemption | ||||||||
| Net cash provided by investing activities | ||||||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from subscription agreement liability | ||||||||
| Proceeds from promissory note - related party | ||||||||
| Redemption of common stock | ( | ) | ||||||
| Net cash used in financing activities | ( | ) | ||||||
| Net Change in Cash | ( | ) | ( | ) | ||||
| Cash – Beginning | ||||||||
| Cash – Ending | $ | $ | ||||||
| Non-Cash Investing and Financing Activities: | ||||||||
| Remeasurement of Class A ordinary shares subject to redemption | $ | $ | ||||||
| Reduction of deferred underwriting fee payable | $ | $ | ||||||
| Forgiveness of debt from initial sponsor PFTA I LP | $ | $ | ||||||
The accompanying notes are an integral part of these financial statements.
5
PERCEPTION CAPITAL CORP. III
(F/K/A PORTAGE
FINTECH ACQUISITION CORPORATION)
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Perception Capital Corp. III (the “Company”) is a blank check company incorporated in the Cayman Islands on March 17, 2021. Effective October 11, 2023, the Company changed its name from “Portage Fintech Acquisition Corporation.” The Company was formed for the purpose of effectuating a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more businesses (the “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, 2023, the Company had not yet commenced any operations. All activity for the period March 17, 2021 (inception) through September 30, 2023 relates to the Company’s formation, the initial public offering (the “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 its initial Business Combination, at the earliest. The Company generates non-operating income in the form of interest income from the securities held in the Trust Account. The Company has selected December 31 as its fiscal year end.
The Company’s initial sponsor was PFTA I LP, an Ontario limited partnership (the “Initial Sponsor”). On July 21, 2023, the Initial Sponsor sold a portion of its Class B ordinary shares and Private Placement Warrants (defined below) to Perception Capital Partners IIIA LLC, a Delaware limited liability company (the “Managing Sponsor”), pursuant to a Securities Purchase Agreement dated July 12, 2023 (the “Purchase Agreement”).
The registration statement for the Company’s Initial Public Offering was declared effective by the Securities and Exchange Commission
(the “SEC”) on July 20, 2021. On July 23, 2021, the Company consummated its Initial Public Offering of units (the “Units” and, with respect to the Class A ordinary shares included in the
Units being offered, the “Public Shares”), at $ per Unit, generating gross proceeds of $
The Company incurred offering costs in the Initial Public Offering totaling $
Simultaneously with the closing of the Initial Public Offering, the Company consummated
the private placement (“Private Placement”) of warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement
Warrants”), at a price of $ per Private Placement Warrant with the Initial Sponsor, generating gross proceeds
of $
Upon the closing of the Initial Public Offering and the Private Placement, an amount
of $
On August 3, 2021, the underwriters notified the Company of their intention to partially exercise
the over-allotment option on August 5, 2021 (the “Over-Allotment”). As such, on August 5, 2021, the Company consummated the sale of an additional Units (the “Over-Allotment Units”), at $ per Unit, and the sale of an additional Private Placement Warrants, at $ per Private Placement Warrant, generating total gross proceeds of $
6
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
Warrants, although substantially all of the net proceeds, which are placed in the
Trust Account, are intended to be applied generally toward consummating a Business
Combination. The Company’s initial Business Combination must be with one or more target businesses that together
have a fair market value equal to at least
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 shareholder
meeting called to approve the Business Combination pursuant to the proxy solicitation
rules of the SEC or (ii) by means of a tender offer. In connection with a proposed
Business Combination, the Company will be required to seek shareholder approval of
a Business Combination at a meeting called for such purpose at which shareholders
may seek to redeem their shares, regardless of whether they vote for or against a
Business Combination. The Company will proceed with a Business Combination only if
the Company has net tangible assets of at least $
Notwithstanding the foregoing, the Company’s amended and restated memorandum and articles of association (the “Articles”) provide 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 seeking redemption rights with respect to 15% or more of the Public Shares without the Company’s prior written consent.
The Public Shareholders will be entitled to redeem their shares for a pro rata portion of the amount then in the Trust Account (initially $10.00 per share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations). The per-share amount to be distributed to shareholders who redeem their shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriters. There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants. These Public Shares are recorded at a redemption value and classified as temporary equity upon the completion of the Initial Public Offering, in accordance with Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.”
If the Company is not required to conduct redemptions pursuant to the proxy solicitation rules as described above, the Company will, pursuant to its Articles, offer such redemption pursuant to the tender offer rules of the SEC, and file tender offer documents containing substantially the same information as would be included in a proxy statement with the SEC prior to completing a Business Combination.
Pursuant to an amended and restated letter agreement dated July 21, 2023 (the “Letter Agreement”), the Company’s sponsors and current and former officers, directors and certain advisors have agreed (a) to vote their Founder Shares (as defined in Note 8) and any Public Shares purchased during or after the Initial Public Offering in favor of a Business Combination, (b) not to redeem any shares (including the Founder Shares) into the right to receive cash from the Trust Account in connection with a shareholder vote to approve a Business Combination or a vote to amend the provisions of the Articles relating to shareholders’ rights of pre-Business Combination activity and (c) that the Founder Shares shall not participate in any liquidating distributions upon winding up if a Business Combination is not consummated. However, the above-listed parties to the Letter Agreement will be entitled to liquidating distributions from the Trust Account with respect to any Public Shares purchased during or after the Initial Public Offering if the Company fails to complete its Business Combination.
7
On July 21, 2023, the Company held an extraordinary general meeting of shareholders (the “Meeting”).
At the Meeting, the Company’s shareholders approved two proposals to amend the Company’s amended and restated memorandum and articles of association (the “Articles”). The
first such proposal (the “Extension Amendment” and, such proposal, the “Extension
Amendment Proposal”) sought to amend the Articles to extend the date by which the
Company must (1) consummate a Business Combination, (2) cease its operations except
for the purpose of winding up if it fails to complete a Business Combination, and
(3) redeem all of the Company’s Class A ordinary shares sold in the Company’s IPO, from 24 months from the closing of the IPO to 36 months from the closing of
the IPO or such earlier date as is determined by our board of directors (the “Board”)
to be in the best interests of the Company. The second such proposal (the “Redemption
Limitation Amendment” and such proposal, the “Redemption Limitation Amendment Proposal”)
sought to eliminate from the Articles the limitation that the Company shall not redeem
Class A ordinary shares sold in the IPO to the extent that such redemption would cause
the Company’s net tangible assets to be less than $
In connection with the vote to approve the Extension Amendment Proposal, effective as of July 21, 2023, holders of Class A ordinary shares exercised their right to redeem their shares for cash at a redemption price of approximately $ per share, for an aggregate redemption amount of approximately $ million. As a result, approximately $ million remained in the Company’s trust account as of July 21, 2023 and Class A ordinary shares remained outstanding.
If the Company is unable to complete a Business Combination by July 23, 2024 (the “Combination Period”), the Company will (i) cease all operations except
for the purpose of winding up, (ii) as promptly as reasonably possible but no 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 taxes (less up to $
Pursuant to the Letter Agreement, the Managing Sponsor has agreed that it will be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10.00 per Public Share and (ii) the actual amount per Public Share held in the Trust Account as of the date of liquidation of the Trust Account, if less than $10.00 per share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to monies held in the Trust Account (whether or not such waiver is enforceable) nor will it apply to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). However, the Company has not asked the Managing Sponsor to reserve for such indemnification obligations, nor has the Company independently verified whether the Managing Sponsor has sufficient funds to satisfy its indemnity obligations and believe that the Managing Sponsor’s only assets are securities of the Company. Therefore, the Company cannot assure its shareholders that the Managing Sponsor would be able to satisfy those obligations. Neither the Initial Sponsor nor any of the Company’s officers or directors will indemnify the Company for claims by third parties including, without limitation, claims by vendors and prospective target businesses. The Company will seek to reduce the possibility that the Managing Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers, prospective target businesses or 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.
8
Going Concern, Liquidity and Management’s Plans
As of September 30, 2023, the Company had $
The Company has principally financed its operations from inception using proceeds from the sale of its equity securities to its shareholders prior to the Initial Public Offering and such amount of proceeds from the Private Placement that were placed in an account outside of the Trust Account for working capital purposes. Until the consummation of a Business Combination, the Company will be using the funds not held in the Trust Account for identifying and evaluating prospective acquisition candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to acquire, and structuring, negotiating and consummating the Business Combination.
The Company may need to raise additional capital through loans or additional investments from its sponsors, shareholders, officers, directors, or third parties. The Company’s officers, directors and sponsors may, but are not obligated to (other than as described above), 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.
In connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standard Board’s (“FASB”) ASC Subtopic 205-40, “Presentation of Financial Statements - Going Concern,” the Company has until July 23, 2024 to consummate a Business Combination. It is uncertain whether the Company will be able to consummate a Business Combination by this time. If a Business Combination is not consummated by this date, there will be a mandatory liquidation and subsequent dissolution of the Company. Management has determined that the liquidity condition and mandatory liquidation, should a Business Combination not occur, raises substantial doubt about the Company’s ability to continue as a going concern through approximately one year from the date these unaudited financial statements were issued. Management intends to consummate a Business Combination prior to July 23, 2024. These unaudited financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
Risks and Uncertainties
Management continues to evaluate 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 unaudited condensed financial statements. These unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Various social and political circumstances in the U.S. and around the world (including wars and other forms of conflict, including rising trade tensions between the United States and China, and other uncertainties regarding actual and potential shifts in the U.S. and foreign, trade, economic and other policies with other countries, terrorist acts, security operations and catastrophic events such as fires, floods, earthquakes, tornadoes, hurricanes and global health epidemics), may also contribute to increased market volatility and economic uncertainties or deterioration in the U.S. and worldwide. Specifically, the rising conflict in the Middle East and between Russia and Ukraine, and resulting market volatilities could adversely affect the Company’s ability to complete a Business Combination. In response to the conflict between Russia and Ukraine, the U.S. and other countries have imposed sanctions or other restrictive actions against Russia. Any of the above factors, including sanctions, export controls, tariffs, trade wars and other governmental actions, could have a material adverse effect on the Company’s ability to complete a Business Combination and the value of the Company’s securities.
9
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed financial statements are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for financial information and pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP. In the opinion of management, the unaudited condensed financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented. Operating results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected through December 31, 2023 or for any future periods.
The accompanying unaudited condensed financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Annual Report on Form 10-K filed by the Company with the SEC on March 13, 2023.
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, 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.
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.
Use of Estimates
The preparation of unaudited condensed 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 future confirming events. Accordingly, the actual results could differ significantly from those estimates. One of the more significant accounting estimates included in these unaudited 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 and, accordingly, the actual results could differ significantly from those estimates.
10
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, 2023 and December 31, 2022. The Company had $
Investments Held in Trust Account
The Company’s portfolio of investments held in trust is comprised substantially of investments
in U.S. government securities. The Company’s investments held in the Trust Account are classified as trading securities. Trading
securities are presented on the balance sheets at fair value at the end of each reporting
period. Gains and losses resulting from the change in fair value of these investments
are included in interest earned on investments held in Trust Account in the accompanying
statements of operations. The estimated fair values of investments held in the Trust
Account are determined using available market information. At September 30, 2023 and December 31, 2022, the Trust Account had $
Warrant Liabilities
The Company evaluated the Public Warrants and the Private Placement Warrants (collectively, “Warrants”, which are discussed in Note 3 and Note 8) in accordance with ASC 815-40, “Derivatives and Hedging — Contracts in Entity’s Own Equity”, and concluded that a provision in the warrant agreement related to certain tender or exchange offers precludes the Warrants from being accounted for as components of equity. As the Warrants meet the definition of a derivative as contemplated in ASC 815, the Warrants are recorded as derivative liabilities on the balance sheets and measured at fair value at inception (on the date of the Initial Public Offering) and at each reporting date in accordance with ASC 820, “Fair Value Measurement”, with changes in fair value recognized in the statements of operations in the period of change.
The Company accounts for its Class A ordinary shares subject to possible redemption
in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from
Equity.” Class A ordinary shares subject to mandatory redemption (if any) are classified
as liability instruments and are measured at fair value. Conditionally redeemable
Class A ordinary shares (including Class A ordinary shares that feature redemption
rights that are either within the control of the holder or subject to redemption upon
the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, Class A ordinary
shares are classified as shareholders’ equity. The Company’s Class A ordinary shares feature certain redemption rights that are considered to
be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, as
of September 30, 2023 and December 31, 2022, Class A ordinary shares subject to possible redemption are presented as temporary
equity, outside of the shareholders’ deficit section of the Company’s balance sheets. 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. The dissolution expense of $
11
At September 30, 2023 and December 31, 2022, the Class A ordinary shares subject to redemption reflected in the condensed balance sheets are reconciled in the following table:
| Gross Proceeds | $ | |||
| Less: | ||||
| Proceeds allocated to Public Warrants | ( | ) | ||
| Class A ordinary shares issuance costs | ( | ) | ||
| Add: | ||||
| Remeasurement of carrying value to redemption value | ||||
| Class A ordinary shares subject to possible redemption at December 31, 2022 | ||||
| Less: | ||||
| Redemptions | ( | ) | ||
| Add: | ||||
| Remeasurement of carrying value to redemption value | ||||
| Class A ordinary shares subject to possible redemption at September 30, 2023 | $ |
Income Taxes
The Company complies with the accounting and reporting requirements of 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 recognizes accrued interest and penalties related to unrecognized tax benefits,
if any, as income tax expense. There were
There is currently no taxation imposed on income by the Government of the Cayman Islands. In accordance with Cayman Islands income tax regulations, income taxes are not levied on the Company. Consequently, income taxes are not reflected in the Company’s financial statements. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months. In accordance with federal income tax regulations, income taxes are not levied on the Company, but rather on the individual owners. United States (“U.S.”) taxation would occur on the individual owners if certain tax elections are made by U.S. owners and the Company were treated as a passive foreign investment company. Additionally, U.S. taxation could occur to the Company itself if the Company is engaged in a U.S. trade or business. The Company is not expected to be treated as engaged in a U.S. trade or business at this time.
Net income per share is computed by dividing net income by the weighted-average number of ordinary shares outstanding during the period.
The contractual formula utilized to calculate the redemption amount approximates fair value. The Class A ordinary shares’ feature to redeem at fair value means that there is effectively only one class of shares. Changes in fair value are not considered a dividend for the purposes of the numerator in the earnings per share calculation. Net income per ordinary share is computed by dividing the pro rata net income between the Class A ordinary shares and the Class B ordinary shares by the weighted average number of ordinary shares outstanding for each of the periods.
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The calculation of diluted income per ordinary share does not consider the effect of the warrants sold in the Initial Public Offering and the Private Placement to purchase an aggregate of of the Company’s Class A ordinary shares since the exercise of the warrants is contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive.
The following table reflects the calculation of basic and diluted net income per ordinary share:
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||||||||
| Class A | Class B | Class A | Class B | Class A | Class B | Class A | Class B | |||||||||||||||||||||||||
| Basic and diluted net income per ordinary share | ||||||||||||||||||||||||||||||||
| Numerator: | ||||||||||||||||||||||||||||||||
| Allocation of net income, as adjusted | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Denominator: | ||||||||||||||||||||||||||||||||
| Basic and diluted weighted average shares outstanding | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Basic and diluted net income per ordinary share | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentration of credit
risk consist of a cash account in a financial institution, which at times may exceed
the Federal Depository Insurance Corporation coverage limit of $
Forgiveness of Debt
On July 5, 2023, Kirkland & Ellis LLP agreed to waive outstanding legal fees totaling $
On April 5, 2023, the Company issued a promissory note (the “Promissory Note”) to the Initial
Sponsor, pursuant to which the Company may borrow up to $
13
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities approximates the carrying amounts represented in the accompanying balance sheets, primarily due to their short-term nature, except for the warrants (see Note 9).
The Company applies ASC 820, which establishes a framework for measuring fair value and clarifies the definition of fair value within that framework. ASC 820 defines fair value as an exit price, which is the price that would be received for an asset or paid to transfer a liability in the Company’s principal or most advantageous market in an orderly transaction between market participants on the measurement date. The fair value hierarchy established in ASC 820 generally requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs reflect the assumptions that market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the entity’s own assumptions based on market data and the entity’s judgments about the assumptions that market participants would use in pricing the asset or liability and are to be developed based on the best information available in the circumstances.
Level 1 — Assets and liabilities with unadjusted, quoted prices listed on active market exchanges. Inputs to the fair value measurement are observable inputs, such as quoted prices in active markets for identical assets or liabilities.
Level 2 — Inputs to the fair value measurement are determined using prices for recently traded assets and liabilities with similar underlying terms, as well as direct or indirect observable inputs, such as interest rates and yield curves that are observable at commonly quoted intervals.
Level 3 — Inputs to the fair value measurement are unobservable inputs, such as estimates, assumptions, and valuation techniques when little or no market data exists for the assets or liabilities.
Offering Costs Associated with the Initial Public Offering
Offering costs consisted of legal, accounting and other expenses incurred through
the Initial Public Offering that were directly related to the Initial Public Offering.
Offering costs were allocated to the separable financial instruments issued in the
Initial Public Offering based on a relative fair value basis, compared to total proceeds
received. Offering costs associated with warrant liabilities were expensed as incurred
in the statements of operations. Offering costs associated with the Class A ordinary
shares issued were charged to temporary equity and warrants upon the completion of
the Initial Public Offering. Offering costs amounting to $ were charged to shareholders’ deficit upon the completion of the Initial Public Offering and $
Recently Issued Accounting Standards
In August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06, “Debt — Debt with Conversion and Other Options” (Subtopic 470-20) and “Derivatives and Hedging — Contracts in Entity’s Own Equity” (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective for the Company for the fiscal year 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 pronouncements, if currently adopted, would have a material effect on the Company’s condensed financial statements.
14
NOTE 3. INITIAL PUBLIC OFFERING
On July 23, 2021, the Company sold Units at $ per Unit, generating gross proceeds of $
Each Unit consists of one of the Company’s Class A ordinary shares, par value $ per share, and one-third of one redeemable warrant (“Public Warrant”). Each whole
Public Warrant entitles the holder to purchase one Class A ordinary shares at an exercise
price of $
NOTE 4. PRIVATE PLACEMENT
Simultaneously with the closing of the Initial Public Offering, the Initial Sponsor
purchased an aggregate of Private Placement Warrants at a price of $ per warrant (for consideration of $
Each Private Placement Warrant is identical to the warrants offered in the Initial Public Offering, except there will be no redemption rights or liquidating distributions from the Trust Account with respect to Private Placement Warrants, which will expire worthless if we do not consummate a Business Combination within the Combination Period.
NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
On March 22, 2021, the Initial Sponsor paid $
The sale or transfers of the Founders Shares to independent directors and advisors on April 30, 2021, as described above, 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 Founders Shares were effectively sold or transferred subject to a performance condition (i.e., the occurrence of a Business Combination). Compensation expense related to the Founders Shares is recognized only when the performance condition is probable of occurrence under the applicable accounting literature in this circumstance. A Business Combination is not probable until it is completed. 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. The fair value at the grant date is deemed to be de minimis. As of September 30, 2023 and December 31, 2022, the Company determined that a Business Combination was not considered probable because no Business Combination has been completed, and therefore, no stock-based compensation expense has been recognized.
15
Pursuant to the Letter Agreement, the Company’s sponsors and current and former officers, directors and certain advisors have agreed not to transfer, assign or sell any of its Founder Shares until the earlier to occur of: (A) one year after the completion of a Business Combination or (B) following the completion of an initial Business Combination, the date on which the Company completes a liquidation, merger, capital stock exchange or similar transaction that results in the Company’s shareholders having the right to exchange their ordinary shares for cash, securities or other property. Notwithstanding the foregoing, if the last sale price of the Company’s Class A ordinary shares equals or exceeds $12.00 per share (as adjusted for share splits, share dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the Business Combination, the Founder Shares will be released from the lock-up.
On July 21, 2023, the Initial Sponsor sold Class B ordinary shares (“Transferred Shares”) and Private Placement Warrants (“Transferred Warrants” and collectively with the Transferred Shares, the “Transferred Securities”) to the Managing Sponsor, pursuant to the Purchase Agreement dated July 12, 2023 for an aggregate purchase price of $1.00. Pursuant to the Purchase Agreement, up to Transferred Shares (the “Extension Shares”) may be assigned to or transferred by the Initial Sponsor to certain investors who have entered into non-redemption agreements and up to Transferred Share (the “Financing Shares”) may be assigned or transferred in Managing Sponsors’ sole discretion in connection with obtaining additional bona fide financing for the Company prior to the Business Combination.
Share Based Compensation
Effective as of August 11, 2023, the Company entered into a twelve-month consultant agreement with John Stanfield, pursuant to which he has agreed to serve as Chief Financial Officer of the Company in exchange for the ability to acquire 5 Class B Units of the Managing Sponsor, which will correspond to one half of one percent (0.5%) of our Class B ordinary shares held by the Managing Sponsor. The Company determined the value of the services performed will be recognized over the engagement period. As of September 30, 2023, the share-based compensation expense for this consultant agreement is considered de minimis.
Cancelled Promissory Note — Related Party
On March 22, 2021, the Initial Sponsor agreed to loan the Company an aggregate of up to $
On April 5, 2023, the Company issued a promissory note (the “Promissory Note”) to the Initial
Sponsor, pursuant to which the Company was entitled to borrow up to $
Related Party Loans
In order to finance transaction costs in connection with a Business Combination, the
Company’s sponsors, one or more affiliate of the Company’s sponsors, or the Company’s officers and directors may, but are not obligated to, loan the Company funds as
may be required (the “Working Capital Loans”). Such Working Capital Loans would be
evidenced by promissory notes.
16
Administrative Services and Reimbursement Agreement
Pursuant to an administrative services and reimbursement agreement, on or prior to
the closing of the Business Combination, the Company was obligated to reimburse the
Initial Sponsor or its affiliates for formation and other pre-Initial Public Offering
expenses incurred on the Company’s behalf not to exceed $
The Company recognized approximately $
The Initial Sponsor had paid expenses on behalf of the Company prior to the Company’s Initial Public Offering in an amount of approximately $
NOTE 6. COMMITMENTS AND CONTINGENCIES
Registration Rights
Pursuant to a registration rights agreement originally entered into on July 21, 2021, the holders of the Founder Shares, Private Placement Warrants and any warrants that may be issued upon conversion of the Working Capital Loans (and in each case holders of their component securities, as applicable) are entitled to registration rights requiring the Company to register such securities for resale (in the case of the Founder Shares, only after conversion to our Class A ordinary shares). The holders of the majority 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 consummation 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.
Underwriter’s Agreement
The Company granted the underwriters a 45-day option to purchase up to
17
The underwriters were paid a cash underwriting discount of
On August 15, 2022, one of the underwriters waived its entitlement to the payment of any deferred
fee to be paid under the terms of the underwriting agreement and is no longer serving
in an advisor capacity. As a result, the Company recognized $
Non-Redemption Agreements
On July 14, 2023, July 17, 2023, July 18, 2023 and July 19, 2023, the Company and the Initial Sponsor entered into non-redemption agreements (each, a “Non-Redemption Agreement”) with certain unaffiliated third parties (each, a “Holder,” and collectively, the “Holders”) in exchange for the Holder or Holders agreeing either not to request redemption in connection with the Extension (as defined below) or to reverse any previously submitted redemption demand in connection with the Extension with respect to an aggregate of Class A ordinary shares, par value $0.0001 per share (the “Class A ordinary shares”), of the Company sold in its initial public offering (the “IPO”) at the extraordinary general meeting called by the Company to, among other things, approve an amendment to the Company’s amended and restated memorandum and articles of association to extend the date by which the Company must consummate an initial Business Combination from 24 months from the completion of the Company’s IPO to 36 months from the completion of the Company’s IPO or such earlier date as is determined by the board of directors of the Company to be in the best interests of the Company (the “Extension”). In consideration of the Non-Redemption Agreements, immediately prior to, and substantially concurrently with, the closing of an initial Business Combination, (i) the Managing Sponsor (or its designees or transferees) has agreed to surrender and forfeit to the Company for no consideration an aggregate of approximately million shares of the Company’s Class B ordinary shares, par value $0.0001 per share, held by the Managing Sponsor (the “Forfeited Shares”) and (ii) the Company shall issue to the Holders a number of Class A ordinary shares equal to those underlying the Forfeited Shares.
The Non-Redemption Agreements are accounted for under ASC 815 which concludes that the fair value of the shares transferred will be recorded within equity upon the date the shares are granted to the holder, which is the date a business combination is consummated.
Subscription Agreement
On August 1, 2023, the Company entered into a Subscription Agreement (the “Subscription Agreement”) with an investor (the “Investor”) and the Managing Sponsor pursuant to which the parties agreed to the following:
| ● | The Investor shall make a cash contribution to Managing Sponsor
in an aggregate amount of $ |
18
| ● | The Investor Capital Contribution will in turn be loaned by the Managing Sponsor to the Company to cover working capital expenses (the “SPAC Loan”). The SPAC Loan will not accrue interest and will be repaid by the Company upon the closing of the Company’s initial Business Combination (the “De-SPAC Closing”). The Managing Sponsor will pay to the Investor all repayments of the SPAC Loan the Managing Sponsor has received within five business days of the date of receipt. The Investor may elect at the De-SPAC Closing to receive such payments in cash or shares of Class A common stock of the Company (“Class A common stock”) at a rate of one share of Class A common stock for each $10 of the Investor Capital Contribution. |
| ● | In consideration of the Investor Capital Contribution, at the De-SPAC Closing the Company will issue to the Investor 0.9 shares of Class A Common Stock for each dollar of the Investor Capital Contribution funded by the Investor, which shares shall be subject to no transfer restrictions or any other lock-up provisions, earn outs, or other contingencies and shall be registered as part of any registration statement to be filed in connection with the De-SPAC Closing or, if no such registration statement is filed in connection with the De-SPAC Closing, pursuant to the first registration statement to be filed by the Company or the surviving entity following the De-SPAC Closing. |
| ● | If the Company liquidates without consummating a De-SPAC, any amounts remaining in the Managing Sponsor or the Company’s cash accounts, not including the Company’s trust account, will be paid to the Investor within five days of the liquidation. |
| ● | On the De-SPAC Closing, the Managing Sponsor will pay the Investor
an amount equal to the reasonable attorney fees incurred by the Investor in connection with the Subscription Agreement not to exceed
$ |
The Subscription Agreement is accounted for under ASC 470 which concludes that all
proceeds received from issuance will be recorded as a liability, at par value, on
the balance sheets. As of September 30, 2023, the Subscription Agreement liability is $
NOTE 7. SHAREHOLDERS’ DEFICIT
Preference Shares — The Company is authorized to issue preference shares of par value $ per share. As of September 30, 2023 and December 31, 2022, there were preference shares issued or outstanding.
Class A Ordinary Shares — The Company is authorized to issue up to Class A ordinary shares, par value $ per share. Holders of the Company’s Class A ordinary shares are entitled to one vote for each share. As of September 30, 2023 and December 31, 2022, there were Class A ordinary shares issued or outstanding (excluding and shares then subject to possible redemption).
Class B Ordinary Shares — The Company is authorized to issue up to Class B ordinary shares, par value $ per share. Holders of the Company’s Class B ordinary shares are entitled to one vote for each share. On March 22, 2021, the Initial Sponsor paid $
19
The Class B ordinary shares will automatically convert into Class A ordinary shares at the time of the Business Combination on a one-for-one basis, subject to adjustment for share splits, share dividends, reorganizations, recapitalizations and the like. 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 Initial Public Offering 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 agree 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 Initial Public Offering plus all Class A ordinary shares and equity linked securities issued or deemed issued in connection with a Business Combination (excluding any shares or equity linked securities issued, or to be issued, to any seller in a Business Combination, and any private placement-equivalent warrants issued to the Initial Sponsor or its affiliates upon conversion of loans made to the Company). Holders of Founder Shares may also elect to convert their Class B ordinary shares into an equal number of Class A ordinary shares, subject to adjustment as provided above, at any time.
The Company may issue additional ordinary shares or preference shares to complete its Business Combination or under an employee incentive plan after completion of its Business Combination.
NOTE 8. WARRANT LIABILITIES
The Company accounts for the
Public Warrants may only be exercised for a whole number of shares. No fractional shares will be issued upon exercise of the Public Warrants. The Public Warrants will become exercisable 30 days after the consummation of a Business Combination. The Public Warrants will expire five years from the consummation of a Business Combination or earlier upon redemption or liquidation.
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 covering the issuance of 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. No Public Warrant will be exercisable for cash or on a cashless basis, and the Company will not be obligated to issue any shares to holders seeking to exercise their Public Warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder, or an exemption from registration is available.
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 for the Initial Public Offering or a new registration statement covering the Class A ordinary shares issuable upon exercise of the Public Warrants. 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 warrants expire or are redeemed, as specified in the warrant agreement. If a post-effective amendment or a new registration statement covering the Class A ordinary shares issuable upon exercise of the warrants is not effective by the 60th business day after the closing of a Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption.
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Redemption of warrants when the price per Class A ordinary share equals or exceeds $. Once the warrants become exercisable, the Company may redeem the Warrants for redemption:
| ● | in whole and not in part; | |
| ● | at a price of $ |
|
| ● | upon not less than 30 days’ prior written notice of redemption to each warrant holder; and | |
| ● | if, and only if, the reported last sale price of the Class A ordinary shares equals or exceeds $ per share (as adjusted for share splits, share dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending three business days before the Company sends the notice of redemption to the warrant holders. |
The Company will not redeem the warrants as described above unless an effective registration statement under the Securities Act covering the issuance of the Class A ordinary shares issuable upon exercise of the warrants is then effective and a current prospectus relating to those Class A ordinary shares is available throughout the 30-day redemption period. If and when the warrants become redeemable by the Company, the Company 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 Warrants become exercisable, the Company may redeem the Warrants for redemption:
| ● | 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 provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares determined by reference to an agreed table based on the redemption date and the “fair market value” of Class A ordinary shares; |
| ● | if, and only if, the closing price of Class A ordinary shares equals or exceeds $10.00 per share (as adjusted share splits, share dividends, reorganizations, recapitalizations and the like) for any 20 trading days within the 30-trading day period ending three trading days before the Company sends a notice of redemption to the warrant holders; and |
| ● | if the closing price of Class A ordinary shares for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which we send the notice of redemption to the warrant holders is less than $18.00 per share (as adjusted share splits, share dividends, 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. |
If and when the Public Warrants become redeemable by the Company, the Company may not exercise its redemption right if the issuance of Class A ordinary shares upon exercise of the warrants is not exempt from registration or qualification under applicable state blue sky laws or the Company is unable to effect such registration or qualification.
21
The exercise price and number of Class A ordinary shares issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a share dividend, or recapitalization, reorganization, merger or consolidation. Additionally, in no event will the Company be required to net cash settle the Public Warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless. If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of Class A ordinary shares issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a share dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such warrants. Accordingly, the warrants may expire worthless.
In addition, if (x) the Company issues additional Class A ordinary shares or equity-linked securities for capital raising purposes in connection with the closing of its initial Business Combination at an issue price or effective issue price of less than $9.20 per Class A ordinary share (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of any such issuance to the sponsors or their affiliates, without taking into account any Founder Shares held by a 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 the Company’s initial Business Combination on the date of the consummation of such initial Business Combination (net of redemptions), and (z) the volume weighted average trading price of the Company’s Class A ordinary shares during the 20 trading day period starting on the trading day prior to the day on which the Company consummates its initial Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price and the $18.00 per share redemption trigger price described above will be adjusted (to the nearest cent) to be equal to 180% of the greater of the Market Value and the Newly Issued Price.
The Private Placement Warrants are identical to the Public Warrants included in the Units sold in the Initial Public Offering, except that the Private Placement Warrants and the Class A ordinary shares issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be exercisable on a cashless basis and will be non-redeemable so long as they are held by the initial purchasers or their permitted transferees. 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 and exercisable by such holders on the same basis as the Public Warrants.
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 September 30, 2023 and December 31, 2022, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
| Description | Level | September 30, 2023 | December 31, 2022 | ||||||||
| Assets: | |||||||||||
| Investments held in Trust Account(1) | 1 | $ | $ | ||||||||
| Liabilities: | |||||||||||
| Private Placement Warrants(2) | 2 | ||||||||||
| Public Warrants(2) | 2 | ||||||||||
| (1) | |
| (2) |
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Warrants
The Warrants are accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on the balance sheets. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the statements of operations.
Subsequent Measurement
The Private Placement Warrants and the Public Warrants were initially valued using a Monte Carlo simulation model, which is considered to be a Level 3 fair value measurement. Inherent in an options pricing model are assumptions related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its ordinary shares based on historical volatility that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates will remain at zero. The Monte Carlo simulation model was used for estimating the fair value of Public Warrants for periods where no observable traded price was available, using the same expected volatility as was used in measuring the fair value of the Private Placement Warrants. The subsequent measurements of the Public Warrants after the detachment of the Public Warrants from the Units is classified as Level 2 due to the use of an observable market quote in an active market for a similar asset in an active market. For periods subsequent to the detachment of the warrants from the Units, the close price of the Public Warrant price was used as the fair value as of each relevant date. The subsequent measurements of the Private Placement Warrants after the detachment of the Public Warrants from the Units are classified as Level 2 due to the use of an observable market quote for a similar asset in an active market.
The key inputs into the Monte Carlo simulation model for the Private Placement Warrants and the Public Warrants were as follows:
| Input | July 23, 2021 (initial measurement) | |||
| Risk-free interest rate | % | |||
| Expected term (years) | ||||
| Expected volatility | % | |||
| Exercise price | $ | |||
The following table presents the changes in the fair value of Level 3 warrant liabilities:
Private Placement | Public Warrants | Warrant Liabilities | ||||||||||
| Fair value as of April 26, 2021 (inception) | $ | $ | $ | |||||||||
| Initial measurement on July 23, 2021 | ||||||||||||
| Change in fair value as of December 31, 2021 | ( | ) | ( | ) | ( | ) | ||||||
| Transfer to Level 1 | ( | ) | ( | ) | ||||||||
| Transfer to Level 2 | ( | ) | ( | ) | ||||||||
| Fair value as of December 31, 2022 | $ | $ | $ | |||||||||
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. The estimated fair
value of the Public Warrants transferred from a Level 3 measurement to a Level 2 fair
value measurement during the year ended December 31, 2022 was $
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NOTE 10. SUBSEQUENT EVENTS
Management of the Company evaluated events that have occurred after the balance sheet date of September 30, 2023 through the date these financial statements were issued. Based upon the review, other than noted below, management did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the financial statements.
On October 11, 2023, the Company held an extraordinary general meeting of shareholders (the “Meeting”) at which shareholders approved changing the name of the Company from “Portage Fintech Acquisition Corporation” to “Perception Capital Corp. III” (the “Name Change”) and the amendment and restatement of the Company’s amended and restated memorandum and articles of association to reflect the Name Change (the “Articles Amendment”). The Name Change and the Articles Amendment did not alter the voting powers or relative rights of the Company’s ordinary shares. The Articles Amendment was filed with the Cayman Islands Registrar of Companies on October 11, 2023.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
References to the “Company,” “our,” “us” or “we” refer to Perception Capital Corp. III. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Such statements include, but are not limited to, possible business combinations and the financing thereof, and related matters, as well as all other statements other than statements of historical fact included in this Form 10-Q. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other Securities and Exchange Commission (“SEC”) filings.
Overview
We are a blank check company incorporated as a Cayman Islands exempted company on March 17, 2021 for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). We intend to effectuate our Business Combination using cash from the proceeds of our Initial Public Offering and the sale of the Private Placement Warrants, our ordinary 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.
Recent Developments
Extension of Initial Business Combination Deadline
Our initial memorandum and articles of association provided that we had until July 23, 2023 to consummate an initial Business Combination. On July 21, 2023, we held an extraordinary general meeting of shareholders (the “EGM”). In this meeting the shareholders approved amendments to our amended and restated memorandum and articles of association to extend the date by which we must complete an initial Business Combination to July 23, 2024 (the “Extension” and such date, the “Extended Date”). In connection with the EGM, shareholders holding an aggregate of 22,001,009 shares of the Company’s Class A ordinary shares exercised their right to redeem their shares for approximately $10.41 per share of the funds held in the Company’s trust account (the “Trust Account”), leaving approximately $40.7 million in the Trust Account and 3,910,370 Class A ordinary shares outstanding after such redemption.
Change in Primary Sponsor, Board, and Management; Securities Purchase Agreement
The Company’s initial sponsor was PFTA I LP, an Ontario limited partnership (the “Initial Sponsor”). On July 21, 2023, the Initial Sponsor sold a portion of its Class B ordinary shares and Private Placement Warrants (defined below) to Perception Capital Partners IIIA LLC, a Delaware limited liability company (the “Managing Sponsor”), pursuant to a Securities Purchase Agreement dated July 12, 2023 (the “Purchase Agreement”).
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Effective as of July 21, 2023, each of Adam Felesky, Ajay Chowdhery, Paul Desmarais III, Steven Jay Freiberg, Stuart Charles Harvey, Jr., G. Thompson Hutton, Seraina Macia and Jason Michael Pate resigned from the Company’s board of directors in accordance with the terms of the Purchase Agreement. Each of Scott Honour, Rick Gaenzle, R. Rudolph Reinfrank, Thomas J. Abood and Karrie Willis were appointed to fill the vacancies left by the departing directors. Also on July 21, 2023, Rick Gaenzle replaced Adam Felesky as Chief Executive Officer, Corey Campbell replaced Ajay Chowdhery as Chief Financial Officer, and Tao Tan and Jim Sheridan joined the Company as Co-Presidents. On August 11, 2023, John Stanfield was appointed Chief Financial Officers of the Company and Corey Campbell ceased to serve in that position effective as of Mr. Stanfield’s appointment.
Non-Redemption Agreements
On July 14, 2023, July 17, 2023, July 18, 2023 and July 19, 2023, the Company and the Initial Sponsor entered into non-redemption agreements (each, a “Non-Redemption Agreement”) with certain unaffiliated third parties (each, a “Holder,” and collectively, the “Holders”) in exchange for the Holder or Holders agreeing either not to request redemption in connection with the Extension (as defined below) or to reverse any previously submitted redemption demand in connection with the Extension with respect to an aggregate of 2,166,667 Class A ordinary shares, par value $0.0001 per share (the “Class A ordinary shares”), of the Company sold in its initial public offering (the “IPO”) at the extraordinary general meeting called by the Company to, among other things, approved the Extension. In consideration of the Non-Redemption Agreements, immediately prior to, and substantially concurrently with, the closing of an initial Business Combination, (i) the Managing Sponsor (or its designees or transferees) has agreed to surrender and forfeit to the Company for no consideration an aggregate of approximately 0.6 million shares of the Company’s Class B ordinary shares, par value $0.0001 per share, held by the Managing Sponsor (the “Forfeited Shares”) and (ii) the Company shall issue to the Holders a number of Class A ordinary shares equal to those underlying the Forfeited Shares.
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, 2023 were organizational activities, those necessary to prepare for our IPO, described below, and our search for a target company for a Business Combination. We do not expect to generate any operating revenues until after the completion of our Business Combination. We generate non-operating income in the form of interest income on investments 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.
For the three months ended September 30, 2023, we had net income of $1,078,395, which consisted of $1,154,446 of investment income earned on the Trust Account, forgiveness of debt of $1,333,584, offset by $648,369 of general and administrative expenses, and $761,266 of other income due to change in the fair value of the warrant liabilities.
For the nine months ended September 30, 2023, we had net income of $8,309,580, which consisted of $7,093,546 of investment income earned on the Trust Account, $1,674,784 of other income due to change in the fair value of the warrant liabilities, forgiveness of debt of $1,333,584, and $352,969 of reduction of deferred underwriter fees, offset by $2,145,303 of general and administrative expenses.
For the three months ended September 30, 2022, we had net income of $1,313,539, which consisted of $1,482,224 of investment income earned on the Trust Account, $304,506 of other income due to change in the fair value of the warrant liabilities and $298,484 of reduction of deferred underwriter fee payable, offset by $771,675 of general and administrative expenses.
For the nine months ended September 30, 2022, we had net income of $7,348,178, which consisted of $1,998,013 of investment income earned on the Trust Account, $7,162,484 of other income due to change in the fair value of the warrant liabilities and $298,484 of reduction of deferred underwriter fee payable, offset by $2,110,803 of general and administrative expenses.
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Liquidity and Capital Resources
On July 23, 2021, we consummated the IPO with the sale and issuance of 24,000,000 Units, generating gross proceeds of $240,000,000. Simultaneously with the closing of the IPO, we consummated the sale of 6,333,334 Private Placement Warrants at a price of $1.50 per Private Placement Warrant in a private placement to our Sponsor, generating gross proceeds of $9,500,000. On August 3, 2021, the underwriters notified the Company of their intention to partially exercise their over-allotment option. As such, on August 5, 2021, the Company consummated the sale of an additional 1,911,379 Units, at $10.00 per Unit, and the sale of an additional 254,850 Private Placement Warrants, at $1.50 per Private Placement Warrant, generating total gross proceeds of $19,496,065.
Following the IPO, the sale of the Private Placement Warrants, and the exercise of the over-allotment option by the underwriters, a total of $259,113,790 ($10.00 per Unit) was placed in the Trust Account. We incurred $15,406,275 in IPO related costs, including $5,182,276 of underwriting fees, $9,068,983 of deferred underwriting fees and $1,155,016 of other costs.
For the nine months ended September 30, 2023, cash used in operating activities was $2,082,284. Net income of $8,309,580 was affected by investment income earned on the Trust Account of $7,093,546, changes in the fair value of warrants liabilities of $1,674,784, forgiveness of debt of $1,333,584, and reduction of deferred underwriter fees of $352,969. Changes in operating assets and liabilities used $63,019 of cash for operating activities.
For the nine months ended September 30, 2022, cash used in operating activities was $782,466. Net income of $7,348,178 was affected by reduction of deferred underwriter fee payable of $298,484, investment income earned on the Trust Account of $1,998,013, and changes in the fair value of warrants liabilities of $7,162,484. Changes in operating assets and liabilities provided $1,328,337 of cash for operating activities.
As of September 30, 2023, we had investments held in the Trust Account of $41,243,930. We intend to use the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (less taxes payable), to complete our Business Combination. To the extent that our share capital or debt is used, in whole or in part, as consideration to complete our 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. In connection with the vote to approve the Extension Amendment Proposal, holders Class A ordinary shares exercised their right to redeem their shares an aggregate redemption amount of approximately $229.1 million in cash. As a result, approximately $40.7 million remained in the Trust Account after the completion of those redemptions on July 21, 2023.
As of September 30, 2023, we had cash of $61,403. 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, and structure, negotiate and complete a Business Combination.
In order to fund any working capital deficiencies or finance transaction costs in connection with a Business Combination, the sponsors, or certain of our officers and directors or their affiliates may, but are not obligated to, loan us funds as may be required. If we complete a Business Combination, we would repay such loaned amounts. 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. Up to $1,500,000 of such loans (“Working Capital Loans”) may be convertible into warrants upon consummation of the Business Combination at a price of $1.50 per warrant. The warrants would be identical to the Private Placement Warrants. There are no Working Capital Loans outstanding. On April 5, 2023, the Company issued a promissory note (the “Promissory Note”) to the Initial Sponsor, pursuant to which the Company may borrow up to $1,250,000 from the Initial Sponsor to fund the Company’s working capital expenses prior to completion of any potential initial Business Combination. Also on April 5, 2023, the Company made a draw on the Promissory Note of $1,250,000. The Promissory Note was non-interest bearing and payable on the earlier of July 23, 2023 and the date on which the Company consummates a Business Combination. On July 21, 2023, the Initial Sponsor cancelled and forgave the outstanding balance on the Promissory Note of $1,250,000 in connection with the closing under the Purchase Agreement.
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Going Concern
In connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standard Board’s (“FASB”) ASC Subtopic 205-40, “Presentation of Financial Statements - Going Concern,” the Company has until July 23, 2024 to consummate a Business Combination. It is uncertain whether the Company will be able to consummate a Business Combination by this time. If a Business Combination is not consummated by this date, there will be a mandatory liquidation and subsequent dissolution of the Company. Management has determined that the liquidity conditions and mandatory liquidation, should a Business Combination not occur, raises substantial doubt about the Company’s ability to continue as a going concern through approximately one year from the date these unaudited financial statements were issued. Management intends to consummate a Business Combination prior to July 23, 2024. These unaudited financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
Contractual Obligations
Pursuant to an administrative services agreement, we had agreed to pay the Initial Sponsor a total of $10,000 per month for office space, utilities, secretarial and administrative support services provided to members of our management team. Upon completion of the initial Business Combination or our liquidation, we would have ceased paying those monthly fees. In addition, until completion of our Business Combination or liquidation, we were required to reimburse the Initial Sponsor or its affiliates monthly for compensation expenses of employees dedicated to us (including the Chief Financial Officer) not to exceed $900,000 per year. We recognized approximately $10,000 and $70,000 for administrative support services and approximately $47,000 and $444,000 for reimbursement of compensation expenses for the three and nine months ended September 30, 2023. We recognized approximately $30,000 and $90,000 for administrative support services and approximately $229,000 and $662,000 for reimbursement of compensation expenses for the three and nine months ended September 30, 2022. The administrative services agreement was terminated in connection with the closing under the Purchase Agreement on July 21, 2023.
The holders of Founder Shares, Private Placement Warrants, and securities that may be issued upon conversion of Working Capital Loans, if any, are entitled to registration rights pursuant to a registration rights agreement. These holders will be entitled to make up to three demands, excluding short form demands, that we register such securities. In addition, these holders will have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of the initial Business Combination. We will bear the expenses incurred in connection with the filing of any such registration statements.
The underwriters are entitled to a deferred fee of three and half percent (3.50%) of the gross proceeds of the IPO, or $9,068,983. On August 15, 2022, one of the underwriters, Goldman Sachs & Co. LLC (“Goldman Sachs”), waived its entitlement to the payment of any deferred fee to be paid under the terms of the underwriting agreement and is no longer serving in an advisor capacity. As a result of Goldman Sachs waiving all of its $6,529,668 of deferred underwriting fees, the deferred underwriting fee payable was $2,539,315. In June of 2023, the remaining underwriters waived their entitlement to the payment of any deferred fee to be paid under the terms of the underwriting agreement and is no longer serving in an advisor capacity. As a result, the Company recognized $352,969 of income and $2,186,346 was recorded to additional paid-in capital in relation to the reduction of the deferred underwriter fee. As of September 30, 2023, the deferred underwriting fee payable was $0.
Critical Accounting Estimates
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 period reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:
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Warrant Liabilities
We evaluated the Public Warrants and the Private Placement Warrants in accordance with ASC 815-40, “Derivatives and Hedging — Contracts in Entity’s Own Equity” and concluded that a provision in the warrant agreement related to certain tender or exchange offers precludes the Warrants from being accounted for as components of equity. As the Warrants meet the definition of a derivative as contemplated in ASC 815, the Warrants are recorded as derivative liabilities on the balance sheets and measured at fair value at inception (on the date of the IPO) and at each reporting date in accordance with ASC 820, “Fair Value Measurement”, with changes in fair value recognized in the statements of operations in the period of change.
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 ASC Topic 480 “Distinguishing Liabilities from Equity.” The Class A ordinary shares subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Conditionally redeemable shares of Class A ordinary shares (including Class A ordinary shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, Class A ordinary shares are classified as shareholders’ equity. The Company’s Class A ordinary shares feature certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, as of September 30, 2023 and December 31, 2022, Class A ordinary shares subject to possible redemption are presented as temporary equity, outside of the shareholders’ deficit section of the Company’s balance sheets.
Net income per ordinary share
Net income per share is computed by dividing net income by the weighted-average number of ordinary shares outstanding during the period. The contractual formula utilized to calculate the redemption amount approximates fair value. The Class A ordinary shares’ feature to redeem at fair value means that there is effectively only one class of shares. Changes in fair value are not considered a dividend for the purposes of the numerator in the earnings per share calculation. Net income per ordinary share is computed by dividing the pro rata net income between the Class A ordinary shares and the Class B ordinary shares by the weighted average number of ordinary shares outstanding for each of the periods. The calculation of diluted income per ordinary share does not consider the effect of the warrants issued in connection with the IPO and the Private Placement since the exercise of the warrants is contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive.
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, but not limited to, not being required to comply with the auditor 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.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not required for smaller reporting companies.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period ended September 30, 2023, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act.
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Based on this evaluation, our principal executive officer and principal financial officer have concluded that during the period covered by this report, our disclosure controls and procedures were not effective as of September 30, 2023, because of a material weakness in our internal control over financial reporting relating to the Company’s classification of a portion of its Class A ordinary shares in permanent equity rather than temporary equity, and the recording of activity impacting our warrant liabilities and the recording of offering costs, as further described herein.
Changes in Internal Control over Financial Reporting
In connection with the audit of the balance sheet at July 23, 2021 and the preparation of the interim financial statements for the fiscal period ended September 30, 2021, we identified a material weakness in our controls over financial reporting related to the Company’s classification of a portion of its Class A ordinary shares in permanent equity rather than temporary equity and the accounting for significant transactions that resulted in the incorrect recording of activity impacting warrant liabilities and offering costs occurred during the fiscal quarter ended September 30, 2021. Specifically, the Company’s management has concluded that the Company’s control around the interpretation and accounting for certain complex features of the shares of Class A ordinary shares and warrants issued by the Company was not effectively designed or maintained. This material weakness resulted in the restatement of the Company’s balance sheet as of July 23, 2021. Additionally, this material weakness could result in a misstatement of the warrant liability, shares of Class A ordinary shares and related accounts and disclosures that would result in a material misstatement of the financial statements that would not be prevented or detected on a timely basis.
In order to remediate this material weakness, we expanded and improved our review process for complex securities and related accounting standards. We plan to further improve this process by enhancing access to accounting literature, identification and consideration of third-party professionals with whom to consult regarding complex accounting applications and implementing additional layers of reviews in the financial close process. Based on these measures, management believes that the control deficiencies will be remediated in a timely manner as the revised controls will need to operate for a sufficient period of time for management to test that they are designed and operating effectively before the material weakness will be considered remediated. Should additional changes to the remediation plan be warranted, management will modify the planned measures accordingly. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects.
Other than the steps taken to remediate the material weakness, there was no change in our internal control over financial reporting that occurred during the period ended September 30, 2023, covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
As of the date of this Report there have been no material changes to the risk factors disclosed in the Company’s Annual Report on Form 10-K filed with the SEC on March 13, 2023.
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities
Unregistered Sales of Equity Securities
On March 22, 2021, the Initial Sponsor paid $25,000, or approximately $0.003 per share, to cover certain offering costs in consideration for 7,187,500 Class B ordinary shares, par value $0.0001. On June 15, 2021, the Initial Sponsor surrendered an aggregate of 1,437,500 Class B ordinary shares for no consideration, which were cancelled, resulting in an aggregate of 5,750,000 Class B ordinary shares issued and outstanding. On July 20, 2021, the Initial Sponsor received an additional 1,150,000 Class B ordinary shares resulting in an aggregate of 6,900,000 Class B ordinary shares issued and outstanding. Up to 900,000 Founder Shares were subject to forfeiture by the Initial Sponsor depending on the extent to which the underwriters’ over-allotment option was exercised. On August 5, 2021, the underwriters partially exercised the over-allotment option to purchase an additional 1,911,379 Units. As a result, 422,155 Class B ordinary shares were forfeited.
On July 23, 2021, the Company consummated its IPO of 24,000,000 Units, at $10.00 per Unit, generating gross proceeds of $240.0 million. The Company granted the underwriter a 45-day option to purchase up to an additional 3,600,000 Units at the IPO price to cover over-allotments. On August 5, 2021, the underwriters partially exercised the over-allotment option to purchase an additional 1,911,379 Units generating gross proceeds of approximately $19.1 million. The underwriters forfeited the balance of the option. The securities sold in the IPO were registered under the Securities Act on registration statements on Form S-1 (No. 333-257185 and 333-258062). The primary registration statement was declared effective on July 20, 2021.
Simultaneously with the closing of the IPO, the Company consummated the Private Placement of 6,333,334 Private Placement Warrants at a price of $1.50 per Private Placement Warrant to the Initial Sponsor, generating proceeds of $9.5 million. On August 5, 2021, simultaneously with the issuance and sale of the Over-Allotment Units, the Company consummated the sale of an additional 254,850 Private Placement Warrants at $1.50 per Private Placement Warrant, generating additional gross proceeds of approximately $382,000. Such securities were issued pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
The Private Placement Warrants are substantially similar to the Public Warrants, except that if held by the Initial Sponsor or its permitted transferees, they (i) may be exercised for cash or on a cashless basis, (ii) are not subject to being called for redemption (except in certain circumstances when the Public Warrants are called for redemption and a certain price per Class A ordinary share threshold is met) and (iii) subject to certain limited exceptions, will be subject to transfer restrictions until 30 days following the consummation of the Company’s initial Business Combination. If the Private Placement Warrants are held by holders other than the Initial Sponsor or its permitted transferees, the Private Placement Warrants will be redeemable by the Company in all redemption scenarios and exercisable by holders on the same basis as the Public Warrants.
Of the gross proceeds received from the IPO, including the partial exercise of the Over-Allotment option, and the sale of the Private Placement Warrants, $259,113,790 was placed in the Trust Account. As of September 30, 2023 the Company had withdrawn a total of $229,119,437 from the Trust Account solely to satisfy payment obligations in connection with the redemptions of Class A ordinary shares.
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We paid a total of $5,182,275 in underwriting discounts and commissions related to the IPO (including in connection the exercise of the over-allotment option). In addition, the underwriters agreed to defer $9,068,983 in underwriting discounts and commissions (including those attributable to the Units sold in connection the exercise of the over-allotment option).
For a description of the use of the proceeds generated in our IPO, see Part I, Item 2 of this Form 10-Q.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
During the three months ended September 30, 2023, no director or officer of the Company adopted, modified or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
Effective as of August 11, 2023, the Company entered into a consultant agreement with John Stanfield pursuant to which he has agreed to serve as Chief Financial Officer of the Company in exchange for the ability to acquire 5 Class B Units of the Managing Sponsor, which will correspond to one half of one percent (0.5%) of our Class B ordinary shares held by the Managing Sponsor. The consultant agreement has an initial term of twelve months, with the Company having the right to extend it for an additional six months without any additional consideration. The foregoing description of the material terms of the consultant agreement is qualified by the text of the agreement, which is filed as Exhibit 10.4 to this Quarterly Report on Form 10-Q.
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Item 6. Exhibits
| * | Management compensatory contract or arrangement. |
| † | These certifications are furnished to the SEC pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing. |
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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 hereunto duly authorized.
| Dated: November 20, 2023 | PERCEPTION CAPITAL CORP. III | |
| By: | /s/ Rick Gaenzle | |
| Name: | Rick Gaenzle | |
| Title: | Chief Executive Officer (On Behalf of the Registrant) |
|
| Dated: November 20, 2023 | By: | /s/ John Stanfield |
| Name: | John Stanfield | |
| Title: | Chief Financial Officer (Principal Financial and Accounting Officer) |
|
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Exhibit 10.4
CONSULTANT AGREEMENT
This consultant agreement (“Consultant Agreement”) is made as of August 11, 2023 between Perception Capital Corp. III (“SPAC”) a Cayman Islands corporation with a place of business located at 315 Lake Street East, Suite 301, Wayzata, MN 55391, and John Stanfield (“Consultant”), with a place of business located at 594 Hickory Road, Glen Ellyn, IL 60137. Together, this Consultant Agreement and the exhibits, shall constitute the “Agreement.” Consultant and SPAC are hereinafter collectively referred to as the “Parties” and each individually as a “Party.”
| 1. | Consultant’s Services. |
1.1. During the Term (as defined below), Consultant shall perform the duties and services customarily performed by a Chief Financial Officer (“CFO”) (the “Services”). Consultant recognizes that SPAC is relying on Consultant as an expert in its field of practice and business. Consultant represents to SPAC that it possesses the requisite skill and ability to discharge its responsibilities in a professional and efficient manner, it offers and provides similar services to other organizations, and that it is familiar with the requirements of projects similar in type and character that are the subject of the Services, to be performed in connection with providing the Services of an acting CFO for the SPAC. Consultant shall devote such time as is necessary for the satisfactory performance of the Services hereunder.
1.2. In consideration for the timely, full and satisfactory completion of the Services in accordance with this Agreement, Consultant shall have the ability to acquire five (5) Class B Units (as defined in the Amended and Restated Limited Liability Company Operating Agreement of Perception Capital Partners IIIA LLC (“Holdings”), dated on or about the date hereof, as amended from time to time (the “Operating Agreement”)), pursuant to a Subscription Agreement (the “Purchase Agreement”) to be entered into by and between Consultant and Holdings (the “Fee”). The Class B Units correspond to one half of one percent (0.5%) of the Class B Ordinary Shares of the SPAC held by Holdings, and will be subject to the applicable terms and conditions of the Purchase Agreement and the Operating Agreement (including such Class B Units remaining unvested until the Initial Business Combination (as defined in the Operating Agreement)).
1.3. Unless sooner terminated pursuant to Article 7 below, the term of this Agreement shall commence as of the date hereof and shall expire twelve (12) consecutive months after the date hereof (“Term”). The SPAC shall have the right, upon prior written notice to Consultant, to extend the Term for an additional six (6) month term, upon the same terms and conditions herein and without any additional consideration. Consultant shall not perform any Services after the expiration of the Term, and shall not be entitled to any compensation for any Services performed after the Term expires, except to the extent otherwise agreed to in advance by SPAC and Consultant in writing. Notwithstanding the foregoing, the parties hereby agree that any Services performed prior to the execution of this Agreement shall be deemed included in and governed by the terms hereof.
1.4. All Services performed by Consultant shall be in compliance with all applicable laws, rules, codes and regulations, and Consultant shall assist SPAC with obtaining all necessary government approvals, consents and sign-offs required with respect thereto. Consultant represents that it is properly licensed and insured to perform all Services and agrees to maintain all necessary licenses for the duration of the engagement.
1.5. Consultant is aware of the nature and scope of the engagement and will provide any complete and required documents/deliverables with respect to its Services. Consultant shall cooperate and work harmoniously with other executives, officers, employees, professionals, consultants, and contractors retained by SPAC, SPAC’s lender(s) and all governmental agencies and departments, as well as provide any statements, notices, confirmations or amendments related to Consultant’s Services or performance under this Agreement that may be requested or required.
1.6. Consultant shall not engage the services of a subconsultant to perform any portion of the Services without the prior written consent of SPAC in each instance, which may be provided or withheld in SPAC’s sole discretion. Neither the submission of a subconsultant agreement or sub-subcontract to SPAC, nor the review or approval of a subconsultant agreement or sub-subcontract by SPAC, shall be deemed to (a) relieve Consultant of its duty of due diligence in selecting a subconsultant, (b) relieve Consultant from any of its obligations under this Agreement, (c) establish privity of contract between SPAC and any subconsultant or otherwise create any rights in favor of any subconsultant as against SPAC, (d) impose on SPAC any liability arising from, or in connection with, such subconsultant agreements or sub-subcontracts, or (e) make SPAC responsible for a subconsultant’s or sub-subcontractor’s performance or failure to perform. Where, after receiving SPAC’s written consent, Consultant engages the services of subconsultants to perform any portion of the Services, any such subconsultant shall agree to the same performance standards, duties, obligations, and restrictions that Consultant has agreed to hereunder. In all events, and notwithstanding SPAC’s consent, Consultant shall, at all times, remain responsible for the work of any subcontractor, be solely responsible for any compensation to be provided to such subcontractors, and remain fully responsible to SPAC for performance of the Services in accordance with this Agreement, and for the performances of Services by any subconsultant as if Consultant itself was performing such Services. Consultant shall incorporate the terms of this Agreement into any agreements with subconsultants for Services, and shall require all such subconsultants to obligate themselves to Consultant in the same manner as Consultant has obligated itself to SPAC hereunder.
1.7. Consultant shall not be replaced without the prior written consent of SPAC in each instance, provided, however that if Consultant shall otherwise become incapacitated, Consultant may suggest a replacement having at least the same qualifications, skill and level of experience as the Consultant, and who shall otherwise be satisfactory to SPAC. SPAC shall have the sole and exclusive right to interview and approve any such proposed replacement, or to terminate this Agreement in accordance with Article 7 below.
1.8. Time is of the essence with respect to this Agreement and Consultant’s performance of the Services. Consultant agrees to provide the Services in a timely manner so as to cause no delay to the expeditious and orderly progress of the engagement.
1.9. Consultant and the SPAC agree that Consultant will perform the Services to the SPAC solely as an independent contractor, retaining control over and responsibility for Consultant’s own conduct and the means and manner of performing the Services. Consultant shall not, by virtue of this Agreement or the arrangements hereunder, be considered an agent or employee of the SPAC or any of the SPAC’s affiliates, and Consultant will not have any authority to contract in the name of or bind the SPAC or any of the SPAC’s affiliates, except as expressly agreed to in writing by the SPAC. Except as otherwise set forth herein, it is understood that Consultant (and any of Consultant’s subcontractors, as applicable) will not be entitled under this Agreement to any fees, compensation, or employee benefits in connection with the performance of services for the SPAC, including any compensation or benefits available to employees of the SPAC.
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| 2. | Additional Services. |
2.1. Consultant shall perform any additional services reasonably requested by SPAC (collectively, “Additional Services,” it being understood and agreed that Additional Services do not include services required due to Consultant’s default or breach of this Agreement). Prior to the performance of any Additional Services, SPAC and Consultant shall agree in writing as to the scope of such Additional Services and the amount and method of payment for such Additional Services. SPAC’s prior written approval of the scope of such Additional Services and of the amount and method of payment for such Additional Services is a condition precedent to any claim by Consultant for payment thereof, and Consultant shall not present any invoices to SPAC for payment of Additional Services without SPAC’s prior written approval of such Additional Services.
| 3. | Indemnification. |
3.1. To the fullest extent permitted by law, Consultant shall defend, indemnify, and hold harmless SPAC, and the SPAC and anyone who might be liable by, through, or under SPAC (collectively, the “Indemnitees”), from and against any and all loss or damage, claim, demand, liability, fine, penalty, lien, suit or action (collectively, a “Claim”), including without limitation claims for reasonable attorneys’ fees, professional fees, court costs, and expenses and disbursements, directly or indirectly arising out of a third-party claim, to the extent caused by (i) any negligent performance of services of Consultant or of any of Consultant’s subconsultants of any tier or of any of Consultant’s or such subconsultants’ respective agents, servants, employees or any other party for which Consultant or such sub-consultant is responsible; (ii) breach of this Agreement or any negligent failure to perform any work required; (iii) any negligence, willful misconduct, breach of contract or infringement of any intellectual property right; (iv) any failure to comply with any applicable law, rule, regulation or permit; or (v) any lien filed by Consultant or by any party claiming through Consultant; and Consultant shall, at its own cost and expense, defend any Claim which may be asserted or commenced against the Indemnitees by reason thereof and shall pay and satisfy (a) all judgments which may be rendered in any such Claim and (b) all related costs and expenses, including reasonable attorneys’ fees, professional fees, court costs, expenses and disbursements, and shall keep the property of the Indemnitees free and unencumbered of any charge or lien of any kind. Consultant shall advise SPAC promptly, in writing, of the service upon Consultant or any party for which Consultant is responsible of any summonses, notices, letters or other communications alleging or threatening any claim or liability against the Indemnitees or with respect to the Services or any related services upon which Consultant is working. In the event that any Claims are made, asserted or threatened against the Indemnitees, SPAC shall have the right to withhold from any payments due or to become due to Consultant an amount sufficient in SPAC’s judgment to protect and indemnify Indemnitees from and against any and all such Claims.
3.2. Limitation of Liability. To the fullest extent permitted by law, the total liability, in the aggregate, of Consultant to SPAC for any and all claims arising out of, resulting from, or in any way related to, the Services shall not exceed the compensation received by the Consultant under this agreement; provided, however, that the foregoing limitation of liability shall not apply to claims arising out of, resulting from, or in any way related to: (a) any claim by a third party against one or more of the Indemnitees for which Consultant owes indemnity obligations; (b) the negligence or willful misconduct of Consultant or any of Consultant’s officers, directors, employees, or subconsultants; and (c) any damages incurred by SPAC as a result of Consultant’s breach of Section 4.1 or Section 9.
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| 4. | Continuation of Services During Dispute. |
4.1. If a dispute arises between SPAC and Consultant with respect to Consultant’s compensation or any other term of this Agreement, Consultant shall continue to fully perform under this Agreement provided only that SPAC makes timely payment of fees and reimbursements not in dispute and due in accordance with this Agreement. In the event Consultant breaches the terms of this Section 4.1, and notwithstanding anything to the contrary herein, Consultant shall be liable for all direct, indirect, and consequential damages sustained by SPAC as a result of such breach.
| 5. | Assignment and Transfer. |
5.1. SPAC and Consultant, respectively, bind themselves, their successors and permitted assigns and to the other party to this Agreement and to successors and permitted assigns of such other party with respect to all covenants of this Agreement. Consultant shall not assign, transfer, encumber or otherwise affect its obligations, responsibilities and rights under this Agreement without the prior written consent of SPAC, which may be provided or withheld in SPAC’s sole discretion. SPAC may assign this Agreement to any affiliate or successor of SPAC, or to SPAC’s lender or mortgagee or landlord without Consultant’s consent, and to any other entity upon notice to Consultant.
| 6. | Suspension of Services. |
6.1. SPAC may suspend work on all or any part of the engagement, including Services under this Agreement, with or without Cause (as defined below), effective immediately upon notice to Consultant which shall not result in adjustment of the Fee. Consultant shall resume provision of the Services upon SPAC’s written notice to proceed. In such case, where the Services are suspended, Consultant shall be entitled to an extension of time to perform the Services for the number of days the performance of the Services was delayed as a direct result of such suspension, provided, however that such suspension shall not entitle Consultant to an increase in fees or other form of compensation and/or reimbursement.
| 7. | Termination. |
7.1. The Agreement may be terminated by SPAC upon seven (7) calendar days’ written notice to Consultant for SPAC’s convenience and without Cause. In the event of SPAC’s termination for convenience, Consultant shall turn over to SPAC for its use all Services then completed or in progress.
7.2. SPAC may also terminate this Agreement immediately for Cause. In the event of any termination (however characterized), SPAC may retain, withhold and offset any sums due to Consultant for damages or costs incurred as a result of Consultant’s failure to fully and properly perform its obligations under this Agreement. In the event it is determined that Consultant was not in default in accordance with this Section 7.2, then SPAC’s termination for Cause shall be deemed a termination for convenience in accordance with Section 7.1 above.
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7.3. For purposes of this Agreement, “Cause” means (a) Consultant’s willful failure to perform Consultant’s material duties hereunder (other than any such failure due to Consultant’s physical or mental illness or incapacity) and the continuance of such failure for more than 30 days following Consultant’s receipt of written notice from the SPAC specifying such failure; (b) any continued and intentional refusal by Consultant to reasonably cooperate, if reasonably requested by the SPAC, with any investigation or inquiry into Consultant’s or the SPAC’s business practices, whether internal or external, including, but not limited to, Consultant’s refusal to be deposed or to provide testimony at any trial, following Consultant’s receipt of written notice from the SPAC’s request; (c) Consultant engaging in fraud, willful misconduct, gross negligence or knowing and material dishonesty in the course of Consultant’s engagement with the SPAC that has caused or is reasonably expected to result in material injury to the SPAC Group; (d) Consultant’s conviction of, or entering a plea of guilty or nolo contendere to, a crime that constitutes a felony; or (e) any material breach by Consultant of any of Consultant’s obligations hereunder or under any other material written agreement with the SPAC or any of its affiliates, which, if curable, continues for more than 30 consecutive days after the SPAC notifies Consultant in writing of such breach.
| 8. | Items of Reimbursable Expenses. |
8.1. SPAC shall reimburse Consultant for the reasonable and actual expenditures incurred by Consultant in the interest of the Services, without mark-up of any kind (“Reimbursable Expenses”); provided, however Consultant shall not incur any expense without the prior written approval of SPAC.
9. Restrictive Covenants. The provisions of this Article 9 shall survive the expiration or earlier termination of this Agreement. For purposes of this Article 9, “Consultant” shall also be deemed to include, without limitation, any other executive, employee, director, manager, officer, independent contractor, subcontractor, service provider, or agent of Consultant, if applicable.
9.1. Confidentiality/Non-Disclosure. Consultant acknowledges that it or its employees and subcontractors may, in the course of performing its responsibilities under this Agreement, be exposed to or acquire information which is proprietary to or confidential to SPAC, its affiliated companies or third parties to whom SPAC has a duty of confidentiality. Any and all non-public information of any form obtained by Consultant or its employees in the performance of this Agreement shall be deemed to be confidential and proprietary information. Consultant agrees to hold, and require its employees to hold, such information in strict confidence and not to disclose such information to third parties or to use such information for any purpose whatsoever other than the provision of services to SPAC as contemplated by this Agreement, and to advise each of its employees who are reasonably likely to be exposed to such proprietary and confidential information of their obligations to keep such information confidential. Consultant acknowledges that disclosure of such information will cause irreparable injury to SPAC, and agrees not to make any disclosures regarding the Services without SPAC’s prior written consent, which may be granted or withheld in the sole discretion of SPAC. Without limitation, disclosure of such information in connection with Consultant’s marketing efforts shall not be permitted without the prior written consent of SPAC in each instance.
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9.2. Non-Solicitation of Employees. During the period beginning on the date hereof and ending one year after the termination of Consultant’s engagement with the SPAC (the “Restriction Period”), Consultant shall not, directly or indirectly, for Consultant’s own account or for the account of any other natural person, partnership, limited liability company, association, corporation, company, trust, business trust, governmental authority or other entity (each, a “Person”) in any jurisdiction in which SPAC or any of its affiliates or subsidiaries (the “SPAC Group”) has commenced or has documented plans, as of the termination of Consultant’s engagement with SPAC, to commence operations during the Term, (i) solicit for employment, employ or otherwise interfere with the relationship of the SPAC Group with any natural person throughout the world who is or was employed by or otherwise engaged to perform services for the SPAC Group at any time (a) during the Term, in the case of such prohibited activity occurring during such time, or (b) during the twelve month period preceding such prohibited activity, in the case of such prohibited activity occurring during the Restriction Period but after the date of Consultant’s termination of engagement with the SPAC, in each case, other than any such solicitation or employment on behalf of or at the request of the SPAC Group during the Term; or (ii) induce any employee of the SPAC Group to engage in any activity which Consultant is prohibited from engaging in under any of this Article 9 or to terminate such employee’s employment with the SPAC. The restrictions in this Section 9.2 shall not apply with regard to general solicitations that are not specifically directed to employees of the SPAC Group; provided, that Consultant shall not hire, employ or engage any employee who responds to such general solicitation made during the Restriction Period.
9.3. Non-Solicitation of Business Relationships. During the Restriction Period, Consultant shall not, directly or indirectly, for Consultant’s own account or for the account of any other Person, in any jurisdiction in which the SPAC Group has commenced or has made plans to commence operations, solicit, interfere with, or otherwise attempt to establish any business relationship of a nature that is competitive with the business or relationship of the SPAC Group with any Person throughout the world which is or was a customer, client, distributor, supplier or vendor of the SPAC Group (x) at any time during the Term (in the case of such prohibited activity occurring during such time) or (y) during the twelve month period preceding such prohibited activity (in the case of such prohibited activity occurring during the Restriction Period but after the date of Consultant’s termination of engagement with the SPAC), other than any such activity on behalf of or at the request of the SPAC Group during the Term. The restrictions in this Section 9.3 shall not apply with regard to general solicitations that are not specifically directed to customers, clients, distributors, suppliers or vendors of the SPAC Group; provided, that Consultant shall not establish any business relationship with any such customers, clients, distributors, suppliers or vendors who respond to such general solicitation made during the Restriction Period.
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9.4. Mutual Non-Disparagement. Consultant agrees that Consultant shall neither, directly or indirectly, engage in any conduct or make any statement (including through social media) disparaging or criticizing in any way the SPAC Group, or any of the SPAC’s founders, directors and senior executives and officers, nor engage in any other conduct or make any other statement that could be reasonably expected to impair the goodwill of the SPAC Group or the reputation of the SPAC Group, in each case, except to (i) make any truthful statement to the extent required by law, and then only after consultation with the SPAC to the extent possible or (ii) rebut any statements made by the SPAC Group or any of the SPAC’s founders, directors and senior executives and officers in connection with normal performance evaluations. The SPAC agrees that it shall instruct its founders, directors and senior executives and officers to not, directly or indirectly, engage in any conduct or make any statement disparaging or criticizing Consultant in any way, nor engage in any other conduct or make any other statement that could be reasonably expected to impair Consultant’s goodwill or reputation, in each case, (1) except to make any truthful statement to the extent required by law, and then only after consultation with Consultant to the extent possible, or (2) other than from discussing Consultant in connection with normal performance evaluations.
9.5. Return of Documents. In the event of the termination of Consultant’s engagement, Consultant shall promptly deliver to the SPAC (i) all property of the SPAC Group then in Consultant’s possession; and (ii) all documents and data of any nature and in whatever medium of the SPAC Group, and Consultant shall not take with Consultant’s any such property, documents or data or any reproduction thereof, or any documents containing or pertaining to any Confidential Information.
9.6. Confidentiality of Agreement. The parties to this Agreement agree not to disclose its terms to any Person, other than their attorneys, accountants, financial advisors or, in Consultant’s case, members of Consultant’s immediate family or, in the SPAC’s case, for any reasonable purpose that is reasonably related to its business operations; provided, that, this Section 9.6 shall not be construed to prohibit any disclosure required by law or in any proceeding to enforce the terms and conditions of this Agreement.
9.7. Certain Acknowledgements; Injunctive Relief. Consultant acknowledges and agrees that the covenants, obligations and agreements contained in this Article 9 relate to special, unique and extraordinary matters and that a violation of any of the terms of such covenants, obligations or agreements will cause the SPAC Group irreparable injury for which adequate remedies are not available at law. Therefore, Consultant agrees that the SPAC shall be entitled to an injunction, restraining order or such other equitable relief (without the requirement to post bond) to restrain Consultant from committing any violation of such covenants, obligations or agreements. These injunctive remedies are cumulative and in addition to any other rights and remedies the SPAC Group may have.
| 10. | Severability; Blue Pencil. |
10.1. If any provisions of this Agreement are invalid or unenforceable as against any person, party or under certain circumstances, the remainder thereof and the applicability of such provisions to other persons, parties or circumstances shall not be affected thereby. Each provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law. Additionally, Consultant and the SPAC agree that the covenants contained in Article 9 are reasonable covenants under the circumstances, and further agree that if, in the opinion of any court of competent jurisdiction such covenants are not reasonable in any respect, such court shall have the right, power and authority to excise or modify such provision or provisions of these covenants as to the court shall appear not reasonable and to enforce the remainder of these covenants as so amended.
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| 11. | No Waiver. |
11.1. The failure of either Party to insist upon the strict performance of any provision of this Agreement shall not constitute a waiver in the future of any such provision or right or as a waiver of a subsequent breach thereof.
| 12. | Dispute Resolution. |
12.1. In the event of any dispute between the Parties arising under this Agreement, the Parties shall first endeavor to settle such dispute through mediation. If the Parties are unable to settle the dispute through mediation, the dispute shall be settled by litigation in a court of competent jurisdiction located within Hennepin County of Minnesota, State of Minnesota. THE PARTIES HEREBY WAIVE ANY TRIAL BY JURY IN CONNECTION WITH ANY SUCH ACTION RELATING TO THIS AGREEMENT OR THE SERVICES.
| 13. | Governing Law/Venue. |
13.1. This Agreement and any and all claims or disputes shall be governed by the law of the State of Minnesota, without regard to its choice of law rules principles.
13.2. The forum for all claims or disputes shall be in the jurisdiction of the courts of the State of Minnesota, and the federal courts of the United States of America located in the District of Minnesota. The Parties hereby irrevocably waive any objection on the grounds of venue, forum non conveniens, or any similar grounds.
| 14. | Statutes of Limitation. |
14.1. With respect to any claim or controversy asserted by Consultant against SPAC and arising out of or under the Agreement, Consultant shall have one (1) year to assert such claim, which one year period shall commence to run on the date following the earlier of: (i) the date of SPAC’s last payment to Consultant; or (ii) the date on which SPAC took substantial control of the Services.
| 15. | Notices. |
15.1. All notices under this Agreement shall be given in writing and shall be sent: (i) by U.S. mail or commercial messenger service, or (ii) by hand-delivery with a copy by certified mail, to the following addresses:
| If to SPAC: | Perception Capital Corp. III | |||
| 315 Lake Street East, Suite 301 | ||||
| Wayzata, MN 55391 | ||||
| Attn: | Tao Tan | |||
| Co-President | ||||
| Email: | tao.tan@perceptioncapitalpartners.com | |||
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| cc: | Faegre Drinker Biddle & Reath LLP | |||
| 90 South Seventh Street | ||||
| 2200 Wells Fargo Center | ||||
| Minneapolis, Minnesota 55402, USA | ||||
| Attn: | Steven C. Kennedy | |||
| Email: | steven.kennedy@faegredrinker.com | |||
| If to Consultant | John Stanfield | |||
| 594 Hickory Road | ||||
| Glen Ellyn, IL 60137 | ||||
| cc: | Katten Muchin Roseman LLP | |||
| 575 Madison Avenue | ||||
| New York, NY 10022-2585 | ||||
| Attention: Matthew Sperry | ||||
| 16. | Construction of Language. |
16.1. The language in this Agreement shall be construed according to its customary meaning within the industry applicable to the Services, except where a specific definition is provided in this Agreement. Whenever used, the singular number shall include the plural, and the plural the singular, and the use of any gender is applicable to all genders.
| 17. | Third-Parties. |
17.1. Except as otherwise expressly provided for herein, nothing contained in this Agreement shall create a contractual relationship with, or a cause of action in favor of, a third-party against either SPAC or Consultant. Consultant’s Services hereunder are being performed solely for the benefit of SPAC.
| 18. | No Personal Liability. |
18.1. No officers, directors, principals, founders, employers, shareholders, affiliates or agents of SPAC or Consultant shall have any personal liability under or relating to this Agreement. This Section 18.1 shall survive the expiration or earlier termination of this Agreement.
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| 19. | OFAC Compliance and Certification. |
19.1. As an inducement to enter into this Agreement, Consultant represents and certifies that neither Consultant, nor any partner, officer, or member of Consultant, nor any owner of a direct or indirect interest in Consultant: (i) is listed on any Government Lists (defined below); (ii) is a person who has been determined by competent authority to be subject to the prohibitions contained in Presidential Executive Orders No. 13224 (Sept. 23, 2001) or any other similar prohibitions contained in the rules and regulations of the Office of Foreign Asset Control (“OFAC”) or in any enabling legislation or other Presidential Executive Order in respect thereof; (iii) has been previously indicted for or convicted of any felony involving a crime or crimes of moral turpitude or for any Patriot Act Offense (defined below); or (iv) is currently under investigation by any governmental authority for alleged criminal activity. For the purposes hereof, “Government Lists” means: (a) the Specially Designated Nationals and Blocked Persons Lists maintained by OFAC; (b) any other list of terrorists, terrorist organizations, or narcotics traffickers maintained pursuant to any of the Rules and Regulations of OFAC; or (c) similar lists maintained by the U.S. Department of State, the U.S. Department of Commerce or any other governmental authority. For the purposes hereof, “Patriot Act Offense” means any violation of the Patriot Act or of the criminal laws of the United States of America or any of the several states relating to terrorism or the laundering of monetary instruments, including the Bank Secrecy Act and the Money Laundering Control Act of 1986. To the fullest extent permitted by law, Consultant agrees to defend, indemnify and hold harmless SPAC, and their Indemnitees, from and against any and all claims, damages, losses, risks, liability and expenses (including attorneys’ fees and costs) arising from or related to any breach of the foregoing certification. The provisions of this Section 19.1 shall survive the completion of the Services under this Agreement and the expiration or termination of this Agreement.
| 20. | Anti-Bribery and Anti-Corruption. |
20.1. Consultant will (i) not directly or indirectly violate any applicable law, rule, regulation, or order relating to anti-bribery or anticorruption (governmental or commercial), or otherwise use any unlawful or improper means of obtaining business or any improper advantage, (ii) use reasonable efforts to obtain appropriate anticorruption covenants, representations, and warranties from all service providers or subcontractors engaged by Consultant in connection with this Agreement, and (iii) cooperate with any compliance audit or investigation by SPAC relating to compliance with this provision, including providing full access to any relevant books and records.
| 21. | Taxes. |
21.1. The SPAC will not withhold any U.S. federal, state, local or foreign income, social security, unemployment or other taxes on account of payments made to Consultant hereunder, but will remit the full amount of such payments to Consultant and report them as required by applicable law. Consultant shall pay and be solely responsible for any and all taxes required by law to be paid by Consultant on account of payments to Consultant hereunder. In addition, Consultant agrees to promptly indemnify, defend and hold the SPAC Group harmless from any claims, losses, liabilities or expenses that the SPAC Group may suffer, including, without limitation, attorney’s fees and costs, judgments, fines, settlements, arising as a result of Consultant’s treatment as an independent contractor, and/or Consultant’s failure to pay any and all withholding obligations and/or tax liabilities associated with any payments made to Consultant by the SPAC.
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| 22. | Neutral Interpretation. |
22.1. This is a negotiated Agreement. Accordingly, any ambiguity in the language of this Agreement shall not be construed against either Party on the theory that it was the drafter of the Agreement.
| 23. | Counterparts/Facsimile. |
23.1. This Agreement may be executed in any number of counterparts and via facsimile or electronic signature and .pdf, and all such counterparts taken together shall be deemed to constitute one and the same original instrument. Signature pages may be detached from counterpart documents and reassembled to form duplicate executed originals.
| 24. | Entire Agreement. |
24.1. This Agreement represents the entire and fully integrated agreement between SPAC and Consultant and supersedes all prior negotiations, representations or agreements between the parties, whether written or oral.
| 25. | Due Authority. |
25.1. Each individual signing below hereby represents and warrants that the signatory is duly authorized to execute and enter into this Agreement.
-- Signature page follows --
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IN WITNESS WHEREOF, this Agreement is hereby executed by SPAC and Consultant by their respective duly authorized representatives as of the date set forth above.
ACCEPTED AND AGREED:
| SPAC: | CONSULTANT: | |||||
| PERCEPTION CAPITAL CORP. III | JOHN STANFIELD | |||||
| By: | /s/ Rick Gaenzle | By: | /s/ John Stanfield | |||
| Name: | Rick Gaenzle | Name: | John Stanfield | |||
| Title: | Managing Member | Title: | Individual | |||
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EXHIBIT 31.1
CERTIFICATION PURSUANT TO RULES 13a-14(a) AND 15d-14(a)
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Rick Gaenzle, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q for the quarter ended September 30, 2023 of Perception Capital Corp. III; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting. |
Date: November 20, 2023
| By: | /s/ Rick Gaenzle | |
| Rick Gaenzle | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) |
EXHIBIT 31.2
CERTIFICATION PURSUANT TO RULES 13a-14(a) AND 15d-14(a)
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, John Stanfield, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q for the quarter ended September 30, 2023 of Perception Capital Corp. III; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting. |
Date: November 20, 2023
| By: | /s/ John Stanfield | |
| John Stanfield | ||
| Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Perception Capital Corp. III (the “Company”) on Form 10-Q for the quarter ended September 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Rick Gaenzle, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
| (1) | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: November 20, 2023
| /s/ Rick Gaenzle | ||
| Name: | Rick Gaenzle | |
| Title: | Chief Executive Officer | |
| (Principal Executive Officer) | ||
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Perception Capital Corp. III (the “Company”) on Form 10-Q for the quarter ended September 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John Stanfield, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
| (1) | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: November 20, 2023
| /s/ John Stanfield | ||
| Name: | John Stanfield | |
| Title: | Chief Financial Officer | |
| (Principal Financial and Accounting Officer) | ||
CONDENSED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Preferred stock, par value | $ 0.0001 | $ 0.0001 |
| Preferred stock, shares authorized | 1,000,000 | 1,000,000 |
| Preferred stock, shares issued | 0 | 0 |
| Preferred stock, shares outstanding | 0 | 0 |
| Common Class A [Member] | ||
| Ordinary shares subject to possible redemption | 3,910,370 | 25,911,379 |
| Common stock, par value | $ 0.0001 | $ 0.0001 |
| Common stock shares authorized | 300,000,000 | 300,000,000 |
| Common stock, shares issued | 0 | 0 |
| Common stock, shares outstanding | 0 | 0 |
| Common Class B [Member] | ||
| Common stock, par value | $ 0.0001 | $ 0.0001 |
| Common stock shares authorized | 30,000,000 | 30,000,000 |
| Common stock, shares issued | 6,477,845 | 6,477,845 |
| Common stock, shares outstanding | 6,477,845 | 6,477,845 |
CONDENSED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Operating expenses: | ||||
| General and administrative expenses | $ 648,369 | $ 771,675 | $ 2,145,303 | $ 2,110,803 |
| Loss from operations | (648,369) | (771,675) | (2,145,303) | (2,110,803) |
| Other income: | ||||
| Change in fair value of warrant liabilities | (761,266) | 304,506 | 1,674,784 | 7,162,484 |
| Forgiveness of debt | 1,333,584 | 1,333,584 | ||
| Reduction of deferred underwriter fees | 298,484 | 352,969 | 298,484 | |
| Investment income earned on Trust Account | 1,154,446 | 1,482,224 | 7,093,546 | 1,998,013 |
| Other income | 1,726,764 | 2,085,214 | 10,454,883 | 9,458,981 |
| Net income | $ 1,078,395 | $ 1,313,539 | $ 8,309,580 | $ 7,348,178 |
| Weighted average Class A ordinary shares outstanding, basic and diluted | 9,229,295 | 25,911,379 | 20,350,684 | 25,911,379 |
| Basic and diluted net income per ordinary share, Class A | $ 0.07 | $ 0.04 | $ 0.31 | $ 0.23 |
| Weighted average Class B ordinary shares outstanding, basic and diluted | 6,477,845 | 6,477,845 | 6,477,845 | 6,477,845 |
| Basic and diluted net income per ordinary share, Class B | $ 0.07 | $ 0.04 | $ 0.31 | $ 0.23 |
DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS |
9 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS | NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Perception Capital Corp. III (the “Company”) is a blank check company incorporated in the Cayman Islands on March 17, 2021. Effective October 11, 2023, the Company changed its name from “Portage Fintech Acquisition Corporation.” The Company was formed for the purpose of effectuating a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more businesses (the “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, 2023, the Company had not yet commenced any operations. All activity for the period March 17, 2021 (inception) through September 30, 2023 relates to the Company’s formation, the initial public offering (the “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 its initial Business Combination, at the earliest. The Company generates non-operating income in the form of interest income from the securities held in the Trust Account. The Company has selected December 31 as its fiscal year end.
The Company’s initial sponsor was PFTA I LP, an Ontario limited partnership (the “Initial Sponsor”). On July 21, 2023, the Initial Sponsor sold a portion of its Class B ordinary shares and Private Placement Warrants (defined below) to Perception Capital Partners IIIA LLC, a Delaware limited liability company (the “Managing Sponsor”), pursuant to a Securities Purchase Agreement dated July 12, 2023 (the “Purchase Agreement”).
The registration statement for the Company’s Initial Public Offering was declared effective by the Securities and Exchange Commission (the “SEC”) on July 20, 2021. On July 23, 2021, the Company consummated its Initial Public Offering of units (the “Units” and, with respect to the Class A ordinary shares included in the Units being offered, the “Public Shares”), at $ per Unit, generating gross proceeds of $240.0 million.
The Company incurred offering costs in the Initial Public Offering totaling $14,355,016, consisting of $4,800,000 of underwriting fees, $8,400,000 of deferred underwriting fees, and $1,155,016 of other offering costs (see Note 2).
Simultaneously with the closing of the Initial Public Offering, the Company consummated the private placement (“Private Placement”) of warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”), at a price of $ per Private Placement Warrant with the Initial Sponsor, generating gross proceeds of $9,500,000 (see Note 4 and Note 8).
Upon the closing of the Initial Public Offering and the Private Placement, an amount of $240.0 million ($ per Unit) from the net proceeds of the Initial Public Offering and certain of the proceeds of the Private Placement were placed in a trust account (“Trust Account”) with Continental Stock Transfer & Trust Company acting as trustee and invested in United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”) having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government treasury obligations, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account as described below.
On August 3, 2021, the underwriters notified the Company of their intention to partially exercise the over-allotment option on August 5, 2021 (the “Over-Allotment”). As such, on August 5, 2021, the Company consummated the sale of an additional Units (the “Over-Allotment Units”), at $ per Unit, and the sale of an additional Private Placement Warrants, at $ per Private Placement Warrant, generating total gross proceeds of $19,113,790 and $382,275, respectively. The underwriters forfeited the balance of the over-allotment option. A total of $19,113,790 of the net proceeds was deposited into the Trust Account, bringing the aggregate proceeds held in the Trust Account to $259,113,790 (see Note 2). The Company incurred additional offering costs of $1,051,258 in connection with the Over-Allotment (of which $668,983 was for deferred underwriting fees).
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 Warrants, although substantially all of the net proceeds, which are placed in the Trust Account, are intended to be applied generally toward consummating a Business Combination. The Company’s initial Business Combination must be with one or more target businesses that together have a fair market value equal to at least 80% of the balance held in the Trust Account (less any deferred underwriting commissions and taxes payable on interest earned on the Trust Account) at the time the Company signs a definitive agreement in connection with the initial Business Combination. However, the Company will only complete a Business Combination if the post-Business Combination company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act.
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 shareholder meeting called to approve the Business Combination pursuant to the proxy solicitation rules of the SEC or (ii) by means of a tender offer. In connection with a proposed Business Combination, the Company will be required to seek shareholder approval of a Business Combination at a meeting called for such purpose at which shareholders may seek to redeem their shares, regardless of whether they vote for or against a Business Combination. The Company will proceed with a Business Combination only if the Company has net tangible assets of at least $5,000,001 either immediately prior to or upon such consummation of a Business Combination and a majority of the outstanding shares voted are voted in favor of the Business Combination.
Notwithstanding the foregoing, the Company’s amended and restated memorandum and articles of association (the “Articles”) provide 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 seeking redemption rights with respect to 15% or more of the Public Shares without the Company’s prior written consent.
The Public Shareholders will be entitled to redeem their shares for a pro rata portion of the amount then in the Trust Account (initially $10.00 per share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations). The per-share amount to be distributed to shareholders who redeem their shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriters. There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants. These Public Shares are recorded at a redemption value and classified as temporary equity upon the completion of the Initial Public Offering, in accordance with Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.”
If the Company is not required to conduct redemptions pursuant to the proxy solicitation rules as described above, the Company will, pursuant to its Articles, offer such redemption pursuant to the tender offer rules of the SEC, and file tender offer documents containing substantially the same information as would be included in a proxy statement with the SEC prior to completing a Business Combination.
Pursuant to an amended and restated letter agreement dated July 21, 2023 (the “Letter Agreement”), the Company’s sponsors and current and former officers, directors and certain advisors have agreed (a) to vote their Founder Shares (as defined in Note 8) and any Public Shares purchased during or after the Initial Public Offering in favor of a Business Combination, (b) not to redeem any shares (including the Founder Shares) into the right to receive cash from the Trust Account in connection with a shareholder vote to approve a Business Combination or a vote to amend the provisions of the Articles relating to shareholders’ rights of pre-Business Combination activity and (c) that the Founder Shares shall not participate in any liquidating distributions upon winding up if a Business Combination is not consummated. However, the above-listed parties to the Letter Agreement will be entitled to liquidating distributions from the Trust Account with respect to any Public Shares purchased during or after the Initial Public Offering if the Company fails to complete its Business Combination.
On July 21, 2023, the Company held an extraordinary general meeting of shareholders (the “Meeting”). At the Meeting, the Company’s shareholders approved two proposals to amend the Company’s amended and restated memorandum and articles of association (the “Articles”). The first such proposal (the “Extension Amendment” and, such proposal, the “Extension Amendment Proposal”) sought to amend the Articles to extend the date by which the Company must (1) consummate a Business Combination, (2) cease its operations except for the purpose of winding up if it fails to complete a Business Combination, and (3) redeem all of the Company’s Class A ordinary shares sold in the Company’s IPO, from 24 months from the closing of the IPO to 36 months from the closing of the IPO or such earlier date as is determined by our board of directors (the “Board”) to be in the best interests of the Company. The second such proposal (the “Redemption Limitation Amendment” and such proposal, the “Redemption Limitation Amendment Proposal”) sought to eliminate from the Articles the limitation that the Company shall not redeem Class A ordinary shares sold in the IPO to the extent that such redemption would cause the Company’s net tangible assets to be less than $5,000,001.
In connection with the vote to approve the Extension Amendment Proposal, effective as of July 21, 2023, holders of Class A ordinary shares exercised their right to redeem their shares for cash at a redemption price of approximately $ per share, for an aggregate redemption amount of approximately $ million. As a result, approximately $ million remained in the Company’s trust account as of July 21, 2023 and Class A ordinary shares remained outstanding.
If the Company is unable to complete a Business Combination by July 23, 2024 (the “Combination Period”), the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but no 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 taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish Public Shareholders’ rights as shareholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining shareholders and the Company’s board of directors, proceed to commence a voluntary liquidation and thereby a formal dissolution of the Company, subject in each case to the requirements of applicable law, including any obligations to provide for claims of creditors. The underwriters have agreed to waive their rights to the 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 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 Unit $10.00.
Pursuant to the Letter Agreement, the Managing Sponsor has agreed that it will be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10.00 per Public Share and (ii) the actual amount per Public Share held in the Trust Account as of the date of liquidation of the Trust Account, if less than $10.00 per share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to monies held in the Trust Account (whether or not such waiver is enforceable) nor will it apply to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). However, the Company has not asked the Managing Sponsor to reserve for such indemnification obligations, nor has the Company independently verified whether the Managing Sponsor has sufficient funds to satisfy its indemnity obligations and believe that the Managing Sponsor’s only assets are securities of the Company. Therefore, the Company cannot assure its shareholders that the Managing Sponsor would be able to satisfy those obligations. Neither the Initial Sponsor nor any of the Company’s officers or directors will indemnify the Company for claims by third parties including, without limitation, claims by vendors and prospective target businesses. The Company will seek to reduce the possibility that the Managing Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers, prospective target businesses or 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.
Going Concern, Liquidity and Management’s Plans
As of September 30, 2023, the Company had $61,403 in its operating bank account and working capital of $206,920.
The Company has principally financed its operations from inception using proceeds from the sale of its equity securities to its shareholders prior to the Initial Public Offering and such amount of proceeds from the Private Placement that were placed in an account outside of the Trust Account for working capital purposes. Until the consummation of a Business Combination, the Company will be using the funds not held in the Trust Account for identifying and evaluating prospective acquisition candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to acquire, and structuring, negotiating and consummating the Business Combination.
The Company may need to raise additional capital through loans or additional investments from its sponsors, shareholders, officers, directors, or third parties. The Company’s officers, directors and sponsors may, but are not obligated to (other than as described above), 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.
In connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standard Board’s (“FASB”) ASC Subtopic 205-40, “Presentation of Financial Statements - Going Concern,” the Company has until July 23, 2024 to consummate a Business Combination. It is uncertain whether the Company will be able to consummate a Business Combination by this time. If a Business Combination is not consummated by this date, there will be a mandatory liquidation and subsequent dissolution of the Company. Management has determined that the liquidity condition and mandatory liquidation, should a Business Combination not occur, raises substantial doubt about the Company’s ability to continue as a going concern through approximately one year from the date these unaudited financial statements were issued. Management intends to consummate a Business Combination prior to July 23, 2024. These unaudited financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
Risks and Uncertainties
Management continues to evaluate 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 unaudited condensed financial statements. These unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Various social and political circumstances in the U.S. and around the world (including wars and other forms of conflict, including rising trade tensions between the United States and China, and other uncertainties regarding actual and potential shifts in the U.S. and foreign, trade, economic and other policies with other countries, terrorist acts, security operations and catastrophic events such as fires, floods, earthquakes, tornadoes, hurricanes and global health epidemics), may also contribute to increased market volatility and economic uncertainties or deterioration in the U.S. and worldwide. Specifically, the rising conflict in the Middle East and between Russia and Ukraine, and resulting market volatilities could adversely affect the Company’s ability to complete a Business Combination. In response to the conflict between Russia and Ukraine, the U.S. and other countries have imposed sanctions or other restrictive actions against Russia. Any of the above factors, including sanctions, export controls, tariffs, trade wars and other governmental actions, could have a material adverse effect on the Company’s ability to complete a Business Combination and the value of the Company’s securities.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
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| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed financial statements are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for financial information and pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP. In the opinion of management, the unaudited condensed financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented. Operating results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected through December 31, 2023 or for any future periods.
The accompanying unaudited condensed financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Annual Report on Form 10-K filed by the Company with the SEC on March 13, 2023.
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, 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.
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.
Use of Estimates
The preparation of unaudited condensed 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 future confirming events. Accordingly, the actual results could differ significantly from those estimates. One of the more significant accounting estimates included in these unaudited 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 and, accordingly, the actual results could differ significantly from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents as of September 30, 2023 and December 31, 2022. The Company had $61,403 and $368,687 of cash as of September 30, 2023 and December 31, 2022, respectively.
Investments Held in Trust Account
The Company’s portfolio of investments held in trust is comprised substantially of investments in U.S. government securities. The Company’s investments held in the Trust Account are classified as trading securities. Trading securities are presented on the balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these investments are included in interest earned on investments held in Trust Account in the accompanying statements of operations. The estimated fair values of investments held in the Trust Account are determined using available market information. At September 30, 2023 and December 31, 2022, the Trust Account had $41,243,930 and $263,269,821 held in marketable securities, respectively. As of September 30, 2023 the Company had withdrawn a total of $229,119,437 from the Trust Account solely to satisfy payment obligations in connection with the redemptions of Class A ordinary shares as discussed further in Note 1.
Warrant Liabilities
The Company evaluated the Public Warrants and the Private Placement Warrants (collectively, “Warrants”, which are discussed in Note 3 and Note 8) in accordance with ASC 815-40, “Derivatives and Hedging — Contracts in Entity’s Own Equity”, and concluded that a provision in the warrant agreement related to certain tender or exchange offers precludes the Warrants from being accounted for as components of equity. As the Warrants meet the definition of a derivative as contemplated in ASC 815, the Warrants are recorded as derivative liabilities on the balance sheets and measured at fair value at inception (on the date of the Initial Public Offering) and at each reporting date in accordance with ASC 820, “Fair Value Measurement”, with changes in fair value recognized in the statements of operations in the period of change.
The Company accounts for its Class A ordinary shares subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Class A ordinary shares subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Conditionally redeemable Class A ordinary shares (including Class A ordinary shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, Class A ordinary shares are classified as shareholders’ equity. The Company’s Class A ordinary shares feature certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, as of September 30, 2023 and December 31, 2022, Class A ordinary shares subject to possible redemption are presented as temporary equity, outside of the shareholders’ deficit section of the Company’s balance sheets. 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. The dissolution expense of $100,000 is not included in the redemption value of the Class A ordinary shares subject to redemption since it is only taken into account in the event of the Company’s liquidation. Immediately upon the closing of the Initial Public Offering, the Company recognized the remeasurement adjustment from carrying value to redemption value. Increases or decreases in the carrying amount of redeemable ordinary shares are affected by charges against additional paid-in capital (to the extent available) and accumulated deficit.
At September 30, 2023 and December 31, 2022, the Class A ordinary shares subject to redemption reflected in the condensed balance sheets are reconciled in the following table:
Income Taxes
The Company complies with the accounting and reporting requirements of 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 recognizes accrued interest and penalties related to unrecognized tax benefits, if any, as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of September 30, 2023 and December 31, 2022. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
There is currently no taxation imposed on income by the Government of the Cayman Islands. In accordance with Cayman Islands income tax regulations, income taxes are not levied on the Company. Consequently, income taxes are not reflected in the Company’s financial statements. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months. In accordance with federal income tax regulations, income taxes are not levied on the Company, but rather on the individual owners. United States (“U.S.”) taxation would occur on the individual owners if certain tax elections are made by U.S. owners and the Company were treated as a passive foreign investment company. Additionally, U.S. taxation could occur to the Company itself if the Company is engaged in a U.S. trade or business. The Company is not expected to be treated as engaged in a U.S. trade or business at this time.
Net income per share is computed by dividing net income by the weighted-average number of ordinary shares outstanding during the period.
The contractual formula utilized to calculate the redemption amount approximates fair value. The Class A ordinary shares’ feature to redeem at fair value means that there is effectively only one class of shares. Changes in fair value are not considered a dividend for the purposes of the numerator in the earnings per share calculation. Net income per ordinary share is computed by dividing the pro rata net income between the Class A ordinary shares and the Class B ordinary shares by the weighted average number of ordinary shares outstanding for each of the periods.
The calculation of diluted income per ordinary share does not consider the effect of the warrants sold in the Initial Public Offering and the Private Placement to purchase an aggregate of of the Company’s Class A ordinary shares since the exercise of the warrants is contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive.
The following table reflects the calculation of basic and diluted net income per ordinary share:
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentration of credit risk consist of a cash account in a financial institution, which at times may exceed the Federal Depository Insurance Corporation coverage limit of $250,000. The Company has not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.
Forgiveness of Debt
On July 5, 2023, Kirkland & Ellis LLP agreed to waive outstanding legal fees totaling $1,483,584, in exchange for cash payment in the amount of $150,000 which will be repaid by the Initial Sponsor. Accordingly, $1,333,584 has been recorded as forgiveness of debt on the unaudited condensed statement of operations and $150,000 is included in the contribution for debt forgiven by Initial Sponsor on the unaudited condensed statement of changes in shareholders’ deficit.
On April 5, 2023, the Company issued a promissory note (the “Promissory Note”) to the Initial Sponsor, pursuant to which the Company may borrow up to $1,250,000 from the Initial Sponsor to fund the Company’s working capital expenses prior to completion of any potential initial Business Combination. Also on April 5, 2023, the Company made a draw on the Promissory Note of $1,250,000. The Promissory Note was non-interest bearing and payable on the earlier of July 23, 2023 and the date on which the Company consummates a Business Combination. On July 21, 2023, the Initial Sponsor cancelled and forgave the outstanding balance on the Promissory Note of $1,250,000 in connection with the closing under the Purchase Agreement. The total recorded as contribution in debt forgiven by Initial Sponsor on the unaudited condensed statement of shareholders’ deficit is $1,487,092.
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities approximates the carrying amounts represented in the accompanying balance sheets, primarily due to their short-term nature, except for the warrants (see Note 9).
The Company applies ASC 820, which establishes a framework for measuring fair value and clarifies the definition of fair value within that framework. ASC 820 defines fair value as an exit price, which is the price that would be received for an asset or paid to transfer a liability in the Company’s principal or most advantageous market in an orderly transaction between market participants on the measurement date. The fair value hierarchy established in ASC 820 generally requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs reflect the assumptions that market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the entity’s own assumptions based on market data and the entity’s judgments about the assumptions that market participants would use in pricing the asset or liability and are to be developed based on the best information available in the circumstances.
Level 1 — Assets and liabilities with unadjusted, quoted prices listed on active market exchanges. Inputs to the fair value measurement are observable inputs, such as quoted prices in active markets for identical assets or liabilities.
Level 2 — Inputs to the fair value measurement are determined using prices for recently traded assets and liabilities with similar underlying terms, as well as direct or indirect observable inputs, such as interest rates and yield curves that are observable at commonly quoted intervals.
Level 3 — Inputs to the fair value measurement are unobservable inputs, such as estimates, assumptions, and valuation techniques when little or no market data exists for the assets or liabilities.
Offering Costs Associated with the Initial Public Offering
Offering costs consisted of legal, accounting and other expenses incurred through the Initial Public Offering that were directly related to the Initial Public Offering. Offering costs were allocated to the separable financial instruments issued in the Initial Public Offering based on a relative fair value basis, compared to total proceeds received. Offering costs associated with warrant liabilities were expensed as incurred in the statements of operations. Offering costs associated with the Class A ordinary shares issued were charged to temporary equity and warrants upon the completion of the Initial Public Offering. Offering costs amounting to $ were charged to shareholders’ deficit upon the completion of the Initial Public Offering and $701,000 were expensed as of the date of the Initial Public Offering.
Recently Issued Accounting Standards
In August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06, “Debt — Debt with Conversion and Other Options” (Subtopic 470-20) and “Derivatives and Hedging — Contracts in Entity’s Own Equity” (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective for the Company for the fiscal year 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 pronouncements, if currently adopted, would have a material effect on the Company’s condensed financial statements.
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INITIAL PUBLIC OFFERING |
9 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Initial Public Offering | |
| INITIAL PUBLIC OFFERING | NOTE 3. INITIAL PUBLIC OFFERING
On July 23, 2021, the Company sold Units at $ per Unit, generating gross proceeds of $240,000,000, and incurring offering costs totaling $14,355,016, consisting of $4,800,000 of underwriting fees, $8,400,000 of deferred underwriting fees and $1,155,016 of other offering costs. On August 5, 2021, the Company completed the sale of additional Over-Allotment Units to the underwriters, generating gross proceeds of $19,113,790, and incurring offering costs totaling $1,051,258, consisting of $382,275 of underwriting fees and $668,983 of deferred underwriting fees (see Note 6).
Each Unit consists of one of the Company’s Class A ordinary shares, par value $ per share, and one-third of one redeemable warrant (“Public Warrant”). Each whole Public Warrant entitles the holder to purchase one Class A ordinary shares at an exercise price of $11.50 per whole share (see Note 8).
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PRIVATE PLACEMENT |
9 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Private Placement | |
| PRIVATE PLACEMENT | NOTE 4. PRIVATE PLACEMENT
Simultaneously with the closing of the Initial Public Offering, the Initial Sponsor purchased an aggregate of Private Placement Warrants at a price of $ per warrant (for consideration of $9,500,000 in the aggregate). On August 5, 2021, simultaneously with the issuance and sale of the Over-Allotment Units, the Company consummated the sale of an additional Private Placement Warrants at $ per Private Placement Warrant, generating additional gross proceeds of $382,275.
Each Private Placement Warrant is identical to the warrants offered in the Initial Public Offering, except there will be no redemption rights or liquidating distributions from the Trust Account with respect to Private Placement Warrants, which will expire worthless if we do not consummate a Business Combination within the Combination Period.
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RELATED PARTY TRANSACTIONS |
9 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Related Party Transactions [Abstract] | |
| RELATED PARTY TRANSACTIONS | NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
On March 22, 2021, the Initial Sponsor paid $25,000, or approximately $ per share, to cover certain offering costs in consideration for Class B ordinary shares, par value $ (the “Founder Shares”). On April 30, 2021, the Initial Sponsor transferred an aggregate of Founder Shares to five independent directors (each received Founder Shares). On April 30, 2021, the Initial Sponsor transferred an aggregate of Founder Shares to three advisors (each received Founder Shares). On June 15, 2021, the Initial Sponsor surrendered an aggregate of Class B ordinary shares for no consideration, which were cancelled, resulting in an aggregate of Class B ordinary shares issued and outstanding. On July 20, 2021, the Initial Sponsor received an additional Class B ordinary shares resulting in an aggregate of Class B ordinary shares issued and outstanding. Up to Founder Shares were subject to forfeiture by the Initial Sponsor depending on the extent to which the underwriters’ over-allotment option was exercised. On August 5, 2021, the underwriters partially exercised the over-allotment option to purchase an additional Units; thus, Class B ordinary shares were forfeited. As of September 30, 2023 and December 31, 2022, the Company had of Class B ordinary shares issued and outstanding.
The sale or transfers of the Founders Shares to independent directors and advisors on April 30, 2021, as described above, 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 Founders Shares were effectively sold or transferred subject to a performance condition (i.e., the occurrence of a Business Combination). Compensation expense related to the Founders Shares is recognized only when the performance condition is probable of occurrence under the applicable accounting literature in this circumstance. A Business Combination is not probable until it is completed. 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. The fair value at the grant date is deemed to be de minimis. As of September 30, 2023 and December 31, 2022, the Company determined that a Business Combination was not considered probable because no Business Combination has been completed, and therefore, no stock-based compensation expense has been recognized.
Pursuant to the Letter Agreement, the Company’s sponsors and current and former officers, directors and certain advisors have agreed not to transfer, assign or sell any of its Founder Shares until the earlier to occur of: (A) one year after the completion of a Business Combination or (B) following the completion of an initial Business Combination, the date on which the Company completes a liquidation, merger, capital stock exchange or similar transaction that results in the Company’s shareholders having the right to exchange their ordinary shares for cash, securities or other property. Notwithstanding the foregoing, if the last sale price of the Company’s Class A ordinary shares equals or exceeds $12.00 per share (as adjusted for share splits, share dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the Business Combination, the Founder Shares will be released from the lock-up.
On July 21, 2023, the Initial Sponsor sold Class B ordinary shares (“Transferred Shares”) and Private Placement Warrants (“Transferred Warrants” and collectively with the Transferred Shares, the “Transferred Securities”) to the Managing Sponsor, pursuant to the Purchase Agreement dated July 12, 2023 for an aggregate purchase price of $1.00. Pursuant to the Purchase Agreement, up to Transferred Shares (the “Extension Shares”) may be assigned to or transferred by the Initial Sponsor to certain investors who have entered into non-redemption agreements and up to Transferred Share (the “Financing Shares”) may be assigned or transferred in Managing Sponsors’ sole discretion in connection with obtaining additional bona fide financing for the Company prior to the Business Combination.
Share Based Compensation
Effective as of August 11, 2023, the Company entered into a twelve-month consultant agreement with John Stanfield, pursuant to which he has agreed to serve as Chief Financial Officer of the Company in exchange for the ability to acquire 5 Class B Units of the Managing Sponsor, which will correspond to one half of one percent (0.5%) of our Class B ordinary shares held by the Managing Sponsor. The Company determined the value of the services performed will be recognized over the engagement period. As of September 30, 2023, the share-based compensation expense for this consultant agreement is considered de minimis.
Cancelled Promissory Note — Related Party
On March 22, 2021, the Initial Sponsor agreed to loan the Company an aggregate of up to $300,000 to cover expenses related to the Initial Public Offering pursuant to a promissory note (the “Note”). The Note is non-interest bearing and is payable on the earlier of (i) September 30, 2021 or (ii) the consummation of the Initial Public Offering. The Company borrowed approximately $181,000 under the Note. The Company fully repaid this balance on August 31, 2021. As of September 30, 2023 and December 31, 2022, there were no amounts outstanding on the Note.
On April 5, 2023, the Company issued a promissory note (the “Promissory Note”) to the Initial Sponsor, pursuant to which the Company was entitled to borrow up to $1,250,000 from the Initial Sponsor to fund the Company’s working capital expenses prior to completion of any potential initial Business Combination. Also on April 5, 2023, the Company made a draw on the Promissory Note of $1,250,000. The Promissory Note was non-interest bearing and payable on the earlier of July 23, 2023 and the date on which the Company consummates a Business Combination. On July 21, 2023, the Initial Sponsor cancelled and forgave the Promissory Note in connection with the closing under the Purchase Agreement. As of September 30, 2023, there were no amounts outstanding under this Promissory Note.
Related Party Loans
In order to finance transaction costs in connection with a Business Combination, the Company’s sponsors, one or more affiliate of the Company’s sponsors, or the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (the “Working Capital Loans”). Such Working Capital Loans would be evidenced by promissory notes. The notes would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of notes may be converted upon consummation of a Business Combination into warrants at a price of $1.50 per warrant. The warrants will be identical to the Private Placement Warrants. 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. As of September 30, 2023 and December 31, 2022, there were no amounts outstanding under the Working Capital Loans.
Administrative Services and Reimbursement Agreement
Pursuant to an administrative services and reimbursement agreement, on or prior to the closing of the Business Combination, the Company was obligated to reimburse the Initial Sponsor or its affiliates for formation and other pre-Initial Public Offering expenses incurred on the Company’s behalf not to exceed $900,000. Further, commencing on July 21, 2021 and until completion of the Company’s initial Business Combination or liquidation, the Company was required to (a) reimburse the Initial Sponsor or its affiliates up to an amount of $10,000 per month for office space and secretarial, administrative and other services and (b) reimburse the Initial Sponsor or its affiliates for any out-of-pocket expenses (or an allocable portion thereof), to the extent that any of them incurs expenses related to identifying, investigating, negotiating and completing an initial Business Combination (including any travel expenses). In addition, commencing on July 21, 2021 and until completion of the Company’s initial Business Combination or liquidation, the Company was required to reimburse the Initial Sponsor or its affiliates monthly for compensation expenses of employees dedicated to the Company (including the Chief Financial Officer) not to exceed $ per year. Under the agreement, the Company was also required to Indemnify the Initial Sponsor and its affiliates for any claims made by the Company or a third party and resulting liabilities in respect of any investment opportunities sourced by them and any liability arising with respect to their activities in connection with the Company’s affairs. Such indemnity provides that the indemnified parties cannot access the funds held in the Trust Account.
The Company recognized approximately $57,000 and $259,000 in connection with such services for the three months ended September 30, 2023 and 2022, respectively and $514,000 and $752,000 for the nine months ended September 30, 2023 and 2022, respectively, which is included in general and administrative expenses in the accompanying condensed statements of operations. The Company owed the Initial Sponsor approximately $0 and $741,000 for the periods ended September 30, 2023 and December 31, 2022, respectively, for reimbursement of out-of-pocket expenses which is included in accrued expenses on the condensed balance sheets. The administrative services agreement was terminated in connection with the closing under the Purchase Agreement.
The Initial Sponsor had paid expenses on behalf of the Company prior to the Company’s Initial Public Offering in an amount of approximately $433,000, for which approximately $272,000 was related to offering costs. The Company repaid the amount to the Initial Sponsor on August 31, 2021. As of September 30, 2023 and December 31, 2022, there were no amounts outstanding due to any sponsor for offering costs.
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COMMITMENTS AND CONTINGENCIES |
9 Months Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | ||||||||||||||||
| Commitments and Contingencies | ||||||||||||||||
| COMMITMENTS AND CONTINGENCIES | NOTE 6. COMMITMENTS AND CONTINGENCIES
Registration Rights
Pursuant to a registration rights agreement originally entered into on July 21, 2021, the holders of the Founder Shares, Private Placement Warrants and any warrants that may be issued upon conversion of the Working Capital Loans (and in each case holders of their component securities, as applicable) are entitled to registration rights requiring the Company to register such securities for resale (in the case of the Founder Shares, only after conversion to our Class A ordinary shares). The holders of the majority 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 consummation 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.
Underwriter’s Agreement
The Company granted the underwriters a 45-day option to purchase up to 3,600,000 additional Units to cover over-allotments at the Initial Public Offering price, less the underwriting discounts and commissions. On August 5, 2021, the underwriters partially exercised the over-allotment option to purchase an additional Units and forfeited the option to exercise the remaining 1,688,621 Units.
The underwriters were paid a cash underwriting discount of 2.00% of the gross proceeds of the Initial Public Offering, or $5,182,275. In addition, the underwriters are entitled to a deferred fee of three and half percent (3.50%) of the gross proceeds of the Initial Public Offering, or $9,068,983.
On August 15, 2022, one of the underwriters waived its entitlement to the payment of any deferred fee to be paid under the terms of the underwriting agreement and is no longer serving in an advisor capacity. As a result, the Company recognized $298,484 of income and $6,231,184 was recorded to additional paid-in capital in relation to the reduction of the deferred underwriter fee. In June of 2023, the remaining underwriters waived their entitlement to the payment of any deferred fee to be paid under the terms of the underwriting agreement and is no longer serving in an advisor capacity. As a result, the Company recognized $352,969 of income and $2,186,346 was recorded to additional paid-in capital in relation to the reduction of the deferred underwriter fee. As of September 30, 2023 and December 31, 2022, the deferred underwriting fee payable was $0 and $2,539,315, respectively.
Non-Redemption Agreements
On July 14, 2023, July 17, 2023, July 18, 2023 and July 19, 2023, the Company and the Initial Sponsor entered into non-redemption agreements (each, a “Non-Redemption Agreement”) with certain unaffiliated third parties (each, a “Holder,” and collectively, the “Holders”) in exchange for the Holder or Holders agreeing either not to request redemption in connection with the Extension (as defined below) or to reverse any previously submitted redemption demand in connection with the Extension with respect to an aggregate of Class A ordinary shares, par value $0.0001 per share (the “Class A ordinary shares”), of the Company sold in its initial public offering (the “IPO”) at the extraordinary general meeting called by the Company to, among other things, approve an amendment to the Company’s amended and restated memorandum and articles of association to extend the date by which the Company must consummate an initial Business Combination from 24 months from the completion of the Company’s IPO to 36 months from the completion of the Company’s IPO or such earlier date as is determined by the board of directors of the Company to be in the best interests of the Company (the “Extension”). In consideration of the Non-Redemption Agreements, immediately prior to, and substantially concurrently with, the closing of an initial Business Combination, (i) the Managing Sponsor (or its designees or transferees) has agreed to surrender and forfeit to the Company for no consideration an aggregate of approximately million shares of the Company’s Class B ordinary shares, par value $0.0001 per share, held by the Managing Sponsor (the “Forfeited Shares”) and (ii) the Company shall issue to the Holders a number of Class A ordinary shares equal to those underlying the Forfeited Shares.
The Non-Redemption Agreements are accounted for under ASC 815 which concludes that the fair value of the shares transferred will be recorded within equity upon the date the shares are granted to the holder, which is the date a business combination is consummated.
Subscription Agreement
On August 1, 2023, the Company entered into a Subscription Agreement (the “Subscription Agreement”) with an investor (the “Investor”) and the Managing Sponsor pursuant to which the parties agreed to the following:
The Subscription Agreement is accounted for under ASC 470 which concludes that all proceeds received from issuance will be recorded as a liability, at par value, on the balance sheets. As of September 30, 2023, the Subscription Agreement liability is $525,000 and included on the unaudited condensed balance sheet.
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SHAREHOLDERS’ DEFICIT |
9 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Equity [Abstract] | |
| SHAREHOLDERS’ DEFICIT | NOTE 7. SHAREHOLDERS’ DEFICIT
Preference Shares — The Company is authorized to issue preference shares of par value $ per share. As of September 30, 2023 and December 31, 2022, there were preference shares issued or outstanding.
Class A Ordinary Shares — The Company is authorized to issue up to Class A ordinary shares, par value $ per share. Holders of the Company’s Class A ordinary shares are entitled to one vote for each share. As of September 30, 2023 and December 31, 2022, there were Class A ordinary shares issued or outstanding (excluding and shares then subject to possible redemption).
Class B Ordinary Shares — The Company is authorized to issue up to Class B ordinary shares, par value $ per share. Holders of the Company’s Class B ordinary shares are entitled to one vote for each share. On March 22, 2021, the Initial Sponsor paid $25,000 in consideration of Class B ordinary shares. On June 15, 2021, the Initial Sponsor surrendered an aggregate of Class B ordinary shares for no consideration, which were cancelled, resulting in an aggregate of Class B ordinary shares issued and outstanding. On July 20, 2021, the Initial Sponsor received an additional Class B ordinary shares resulting in an aggregate of Class B ordinary shares issued and outstanding. Up to Founder Shares were subject to forfeiture by the Initial Sponsor depending on the extent to which the underwriters’ over-allotment option was exercised. On August 5, 2021, the underwriters partially exercised the over-allotment option to purchase an additional Units. As a result, Class B ordinary shares were forfeited. As of September 30, 2023 and December 31, 2022, the Company had of Class B ordinary shares issued and outstanding.
The Class B ordinary shares will automatically convert into Class A ordinary shares at the time of the Business Combination on a one-for-one basis, subject to adjustment for share splits, share dividends, reorganizations, recapitalizations and the like. 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 Initial Public Offering 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 agree 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 Initial Public Offering plus all Class A ordinary shares and equity linked securities issued or deemed issued in connection with a Business Combination (excluding any shares or equity linked securities issued, or to be issued, to any seller in a Business Combination, and any private placement-equivalent warrants issued to the Initial Sponsor or its affiliates upon conversion of loans made to the Company). Holders of Founder Shares may also elect to convert their Class B ordinary shares into an equal number of Class A ordinary shares, subject to adjustment as provided above, at any time.
The Company may issue additional ordinary shares or preference shares to complete its Business Combination or under an employee incentive plan after completion of its Business Combination.
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WARRANT LIABILITIES |
9 Months Ended | |||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||
| Warrant Liabilities | ||||||||||||||||||||||||||||||||||
| WARRANT LIABILITIES | NOTE 8. WARRANT LIABILITIES
The Company accounts for the 15,225,310 warrants issued in connection with the Initial Public Offering (8,637,126 Public Warrants and 6,588,184 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. Accordingly, the Company has classified 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 statements of operations.
Public Warrants may only be exercised for a whole number of shares. No fractional shares will be issued upon exercise of the Public Warrants. The Public Warrants will become exercisable 30 days after the consummation of a Business Combination. The Public Warrants will expire five years from the consummation of a Business Combination or earlier upon redemption or liquidation.
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 covering the issuance of 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. No Public Warrant will be exercisable for cash or on a cashless basis, and the Company will not be obligated to issue any shares to holders seeking to exercise their Public Warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder, or an exemption from registration is available.
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 for the Initial Public Offering or a new registration statement covering the Class A ordinary shares issuable upon exercise of the Public Warrants. 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 warrants expire or are redeemed, as specified in the warrant agreement. If a post-effective amendment or a new registration statement covering the Class A ordinary shares issuable upon exercise of the warrants is not effective by the 60th business day after the closing of a Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption.
Redemption of warrants when the price per Class A ordinary share equals or exceeds $. Once the warrants become exercisable, the Company may redeem the Warrants for redemption:
The Company will not redeem the warrants as described above unless an effective registration statement under the Securities Act covering the issuance of the Class A ordinary shares issuable upon exercise of the warrants is then effective and a current prospectus relating to those Class A ordinary shares is available throughout the 30-day redemption period. If and when the warrants become redeemable by the Company, the Company 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 Warrants become exercisable, the Company may redeem the Warrants for redemption:
If and when the Public Warrants become redeemable by the Company, the Company may not exercise its redemption right if the issuance of Class A ordinary shares upon exercise of the warrants is not exempt from registration or qualification under applicable state blue sky laws or the Company is unable to effect such registration or qualification.
The exercise price and number of Class A ordinary shares issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a share dividend, or recapitalization, reorganization, merger or consolidation. Additionally, in no event will the Company be required to net cash settle the Public Warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless. If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of Class A ordinary shares issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a share dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such warrants. Accordingly, the warrants may expire worthless.
In addition, if (x) the Company issues additional Class A ordinary shares or equity-linked securities for capital raising purposes in connection with the closing of its initial Business Combination at an issue price or effective issue price of less than $9.20 per Class A ordinary share (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of any such issuance to the sponsors or their affiliates, without taking into account any Founder Shares held by a 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 the Company’s initial Business Combination on the date of the consummation of such initial Business Combination (net of redemptions), and (z) the volume weighted average trading price of the Company’s Class A ordinary shares during the 20 trading day period starting on the trading day prior to the day on which the Company consummates its initial Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price and the $18.00 per share redemption trigger price described above will be adjusted (to the nearest cent) to be equal to 180% of the greater of the Market Value and the Newly Issued Price.
The Private Placement Warrants are identical to the Public Warrants included in the Units sold in the Initial Public Offering, except that the Private Placement Warrants and the Class A ordinary shares issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be exercisable on a cashless basis and will be non-redeemable so long as they are held by the initial purchasers or their permitted transferees. 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 and exercisable by such holders on the same basis as the Public Warrants.
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FAIR VALUE MEASUREMENTS |
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| Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| FAIR VALUE MEASUREMENTS | 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 September 30, 2023 and December 31, 2022, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
Warrants
The Warrants are accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on the balance sheets. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the statements of operations.
Subsequent Measurement
The Private Placement Warrants and the Public Warrants were initially valued using a Monte Carlo simulation model, which is considered to be a Level 3 fair value measurement. Inherent in an options pricing model are assumptions related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its ordinary shares based on historical volatility that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates will remain at zero. The Monte Carlo simulation model was used for estimating the fair value of Public Warrants for periods where no observable traded price was available, using the same expected volatility as was used in measuring the fair value of the Private Placement Warrants. The subsequent measurements of the Public Warrants after the detachment of the Public Warrants from the Units is classified as Level 2 due to the use of an observable market quote in an active market for a similar asset in an active market. For periods subsequent to the detachment of the warrants from the Units, the close price of the Public Warrant price was used as the fair value as of each relevant date. The subsequent measurements of the Private Placement Warrants after the detachment of the Public Warrants from the Units are classified as Level 2 due to the use of an observable market quote for a similar asset in an active market.
The key inputs into the Monte Carlo simulation model for the Private Placement Warrants and the Public Warrants were as follows:
The following table presents the changes in the fair value of Level 3 warrant liabilities:
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. The estimated fair value of the Public Warrants transferred from a Level 3 measurement to a Level 2 fair value measurement during the year ended December 31, 2022 was $5,614,132.
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SUBSEQUENT EVENTS |
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| Subsequent Events [Abstract] | |
| SUBSEQUENT EVENTS | NOTE 10. SUBSEQUENT EVENTS
Management of the Company evaluated events that have occurred after the balance sheet date of September 30, 2023 through the date these financial statements were issued. Based upon the review, other than noted below, management did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the financial statements.
On October 11, 2023, the Company held an extraordinary general meeting of shareholders (the “Meeting”) at which shareholders approved changing the name of the Company from “Portage Fintech Acquisition Corporation” to “Perception Capital Corp. III” (the “Name Change”) and the amendment and restatement of the Company’s amended and restated memorandum and articles of association to reflect the Name Change (the “Articles Amendment”). The Name Change and the Articles Amendment did not alter the voting powers or relative rights of the Company’s ordinary shares. The Articles Amendment was filed with the Cayman Islands Registrar of Companies on October 11, 2023. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basis of Presentation | Basis of Presentation
The accompanying unaudited condensed financial statements are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for financial information and pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP. In the opinion of management, the unaudited condensed financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented. Operating results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected through December 31, 2023 or for any future periods.
The accompanying unaudited condensed financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Annual Report on Form 10-K filed by the Company with the SEC on March 13, 2023.
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| Emerging Growth Company | 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, 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.
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.
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| Use of Estimates | Use of Estimates
The preparation of unaudited condensed 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 future confirming events. Accordingly, the actual results could differ significantly from those estimates. One of the more significant accounting estimates included in these unaudited 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 and, accordingly, the actual results could differ significantly from those estimates.
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| Cash and Cash Equivalents | 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, 2023 and December 31, 2022. The Company had $61,403 and $368,687 of cash as of September 30, 2023 and December 31, 2022, respectively.
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| Investments Held in Trust Account | Investments Held in Trust Account
The Company’s portfolio of investments held in trust is comprised substantially of investments in U.S. government securities. The Company’s investments held in the Trust Account are classified as trading securities. Trading securities are presented on the balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these investments are included in interest earned on investments held in Trust Account in the accompanying statements of operations. The estimated fair values of investments held in the Trust Account are determined using available market information. At September 30, 2023 and December 31, 2022, the Trust Account had $41,243,930 and $263,269,821 held in marketable securities, respectively. As of September 30, 2023 the Company had withdrawn a total of $229,119,437 from the Trust Account solely to satisfy payment obligations in connection with the redemptions of Class A ordinary shares as discussed further in Note 1.
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| Warrant Liabilities | Warrant Liabilities
The Company evaluated the Public Warrants and the Private Placement Warrants (collectively, “Warrants”, which are discussed in Note 3 and Note 8) in accordance with ASC 815-40, “Derivatives and Hedging — Contracts in Entity’s Own Equity”, and concluded that a provision in the warrant agreement related to certain tender or exchange offers precludes the Warrants from being accounted for as components of equity. As the Warrants meet the definition of a derivative as contemplated in ASC 815, the Warrants are recorded as derivative liabilities on the balance sheets and measured at fair value at inception (on the date of the Initial Public Offering) and at each reporting date in accordance with ASC 820, “Fair Value Measurement”, with changes in fair value recognized in the statements of operations in the period of change.
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| 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 Topic 480 “Distinguishing Liabilities from Equity.” Class A ordinary shares subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Conditionally redeemable Class A ordinary shares (including Class A ordinary shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, Class A ordinary shares are classified as shareholders’ equity. The Company’s Class A ordinary shares feature certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, as of September 30, 2023 and December 31, 2022, Class A ordinary shares subject to possible redemption are presented as temporary equity, outside of the shareholders’ deficit section of the Company’s balance sheets. 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. The dissolution expense of $100,000 is not included in the redemption value of the Class A ordinary shares subject to redemption since it is only taken into account in the event of the Company’s liquidation. Immediately upon the closing of the Initial Public Offering, the Company recognized the remeasurement adjustment from carrying value to redemption value. Increases or decreases in the carrying amount of redeemable ordinary shares are affected by charges against additional paid-in capital (to the extent available) and accumulated deficit.
At September 30, 2023 and December 31, 2022, the Class A ordinary shares subject to redemption reflected in the condensed balance sheets are reconciled in the following table:
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| Income Taxes | Income Taxes
The Company complies with the accounting and reporting requirements of 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 recognizes accrued interest and penalties related to unrecognized tax benefits, if any, as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of September 30, 2023 and December 31, 2022. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
There is currently no taxation imposed on income by the Government of the Cayman Islands. In accordance with Cayman Islands income tax regulations, income taxes are not levied on the Company. Consequently, income taxes are not reflected in the Company’s financial statements. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months. In accordance with federal income tax regulations, income taxes are not levied on the Company, but rather on the individual owners. United States (“U.S.”) taxation would occur on the individual owners if certain tax elections are made by U.S. owners and the Company were treated as a passive foreign investment company. Additionally, U.S. taxation could occur to the Company itself if the Company is engaged in a U.S. trade or business. The Company is not expected to be treated as engaged in a U.S. trade or business at this time.
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| Net Income Per Ordinary Share |
Net income per share is computed by dividing net income by the weighted-average number of ordinary shares outstanding during the period.
The contractual formula utilized to calculate the redemption amount approximates fair value. The Class A ordinary shares’ feature to redeem at fair value means that there is effectively only one class of shares. Changes in fair value are not considered a dividend for the purposes of the numerator in the earnings per share calculation. Net income per ordinary share is computed by dividing the pro rata net income between the Class A ordinary shares and the Class B ordinary shares by the weighted average number of ordinary shares outstanding for each of the periods.
The calculation of diluted income per ordinary share does not consider the effect of the warrants sold in the Initial Public Offering and the Private Placement to purchase an aggregate of of the Company’s Class A ordinary shares since the exercise of the warrants is contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive.
The following table reflects the calculation of basic and diluted net income per ordinary share:
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| Concentration of Credit Risk | Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentration of credit risk consist of a cash account in a financial institution, which at times may exceed the Federal Depository Insurance Corporation coverage limit of $250,000. The Company has not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.
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| Forgiveness of Debt | Forgiveness of Debt
On July 5, 2023, Kirkland & Ellis LLP agreed to waive outstanding legal fees totaling $1,483,584, in exchange for cash payment in the amount of $150,000 which will be repaid by the Initial Sponsor. Accordingly, $1,333,584 has been recorded as forgiveness of debt on the unaudited condensed statement of operations and $150,000 is included in the contribution for debt forgiven by Initial Sponsor on the unaudited condensed statement of changes in shareholders’ deficit.
On April 5, 2023, the Company issued a promissory note (the “Promissory Note”) to the Initial Sponsor, pursuant to which the Company may borrow up to $1,250,000 from the Initial Sponsor to fund the Company’s working capital expenses prior to completion of any potential initial Business Combination. Also on April 5, 2023, the Company made a draw on the Promissory Note of $1,250,000. The Promissory Note was non-interest bearing and payable on the earlier of July 23, 2023 and the date on which the Company consummates a Business Combination. On July 21, 2023, the Initial Sponsor cancelled and forgave the outstanding balance on the Promissory Note of $1,250,000 in connection with the closing under the Purchase Agreement. The total recorded as contribution in debt forgiven by Initial Sponsor on the unaudited condensed statement of shareholders’ deficit is $1,487,092.
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| Fair Value of Financial Instruments | Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities approximates the carrying amounts represented in the accompanying balance sheets, primarily due to their short-term nature, except for the warrants (see Note 9).
The Company applies ASC 820, which establishes a framework for measuring fair value and clarifies the definition of fair value within that framework. ASC 820 defines fair value as an exit price, which is the price that would be received for an asset or paid to transfer a liability in the Company’s principal or most advantageous market in an orderly transaction between market participants on the measurement date. The fair value hierarchy established in ASC 820 generally requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs reflect the assumptions that market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the entity’s own assumptions based on market data and the entity’s judgments about the assumptions that market participants would use in pricing the asset or liability and are to be developed based on the best information available in the circumstances.
Level 1 — Assets and liabilities with unadjusted, quoted prices listed on active market exchanges. Inputs to the fair value measurement are observable inputs, such as quoted prices in active markets for identical assets or liabilities.
Level 2 — Inputs to the fair value measurement are determined using prices for recently traded assets and liabilities with similar underlying terms, as well as direct or indirect observable inputs, such as interest rates and yield curves that are observable at commonly quoted intervals.
Level 3 — Inputs to the fair value measurement are unobservable inputs, such as estimates, assumptions, and valuation techniques when little or no market data exists for the assets or liabilities.
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| Offering Costs Associated with the Initial Public Offering | Offering Costs Associated with the Initial Public Offering
Offering costs consisted of legal, accounting and other expenses incurred through the Initial Public Offering that were directly related to the Initial Public Offering. Offering costs were allocated to the separable financial instruments issued in the Initial Public Offering based on a relative fair value basis, compared to total proceeds received. Offering costs associated with warrant liabilities were expensed as incurred in the statements of operations. Offering costs associated with the Class A ordinary shares issued were charged to temporary equity and warrants upon the completion of the Initial Public Offering. Offering costs amounting to $ were charged to shareholders’ deficit upon the completion of the Initial Public Offering and $701,000 were expensed as of the date of the Initial Public Offering.
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| Recently Issued Accounting Standards | Recently Issued Accounting Standards
In August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06, “Debt — Debt with Conversion and Other Options” (Subtopic 470-20) and “Derivatives and Hedging — Contracts in Entity’s Own Equity” (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective for the Company for the fiscal year 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 pronouncements, if currently adopted, would have a material effect on the Company’s condensed financial statements.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) |
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Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of shares subject to redemption |
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| Schedule of basic and diluted net income per ordinary share |
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FAIR VALUE MEASUREMENTS (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of fair value, assets measured on recurring basis |
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| Schedule of private placement And public warrants |
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| Schedule of warrant liabilities |
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - Common Class A [Member] - USD ($) |
9 Months Ended | 12 Months Ended |
|---|---|---|
Sep. 30, 2023 |
Dec. 31, 2022 |
|
| Gross Proceeds | $ 259,113,790 | |
| Proceeds allocated to Public Warrants | (11,539,202) | |
| Class A ordinary shares issuance costs | (14,705,275) | |
| Remeasurement of carrying value to redemption value | $ 7,093,546 | 30,400,508 |
| Class A ordinary shares subject to possible redemption at Beginning | 263,269,821 | |
| Redemptions | (229,119,437) | |
| Class A ordinary shares subject to possible redemption at Ending | $ 41,243,930 | $ 263,269,821 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Class A [Member] | ||||
| Numerator: | ||||
| Allocation of net income, as adjusted | $ 633,650 | $ 1,050,831 | $ 6,303,202 | $ 5,878,542 |
| Denominator: | ||||
| Basic and diluted weighted average shares outstanding | 9,229,295 | 25,911,379 | 20,350,684 | 25,911,379 |
| Basic and diluted net income per ordinary share | $ 0.07 | $ 0.04 | $ 0.31 | $ 0.23 |
| Class B [Member] | ||||
| Numerator: | ||||
| Allocation of net income, as adjusted | $ 444,745 | $ 262,708 | $ 2,006,378 | $ 1,469,636 |
| Denominator: | ||||
| Basic and diluted weighted average shares outstanding | 6,477,845 | 6,477,845 | 6,477,845 | 6,477,845 |
| Basic and diluted net income per ordinary share | $ 0.07 | $ 0.04 | $ 0.31 | $ 0.23 |
PRIVATE PLACEMENT (Details Narrative) - Sponsor [Member] - Private Placement [Member] - USD ($) |
1 Months Ended | |
|---|---|---|
Aug. 05, 2021 |
Jul. 23, 2021 |
|
| Defined Benefit Plan Disclosure [Line Items] | ||
| Sale of units in initial public offering | 254,850 | 6,333,334 |
| Sale of units per share | $ 1.50 | $ 1.50 |
| Sale of units in initial public offering aggragate amount | $ 19,113,790 | $ 9,500,000 |
| Underwriting fees | $ 382,275 |
WARRANT LIABILITIES (Details Narrative) |
9 Months Ended |
|---|---|
|
Sep. 30, 2023
$ / shares
shares
| |
| Subsidiary, Sale of Stock [Line Items] | |
| Share redemption price per share | $ / shares | $ 18.00 |
| Warrant Price | $ / shares | $ 0.01 |
| IPO [Member] | |
| Subsidiary, Sale of Stock [Line Items] | |
| Number of warrent issued | 15,225,310 |
| Public Warrants [Member] | |
| Subsidiary, Sale of Stock [Line Items] | |
| Number of warrent issued | 8,637,126 |
| Private Placement Warrants [Member] | |
| Subsidiary, Sale of Stock [Line Items] | |
| Number of warrent issued | 6,588,184 |
FAIR VALUE MEASUREMENTS (Details) - USD ($) |
Sep. 30, 2023 |
Dec. 31, 2022 |
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|---|---|---|---|---|---|---|
| Fair Value, Inputs, Level 1 [Member] | ||||||
| Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||||
| Investments held in Trust Account | [1] | $ 41,243,930 | $ 263,269,821 | |||
| Fair Value, Inputs, Level 2 [Member] | Private Placement Warrants [Member] | ||||||
| Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||||
| Liabilities | [2] | 592,937 | 1,317,637 | |||
| Fair Value, Inputs, Level 2 [Member] | Public Warrants [Member] | ||||||
| Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||||
| Liabilities | [2] | $ 777,341 | $ 1,727,425 | |||
| ||||||
FAIR VALUE MEASUREMENTS (Details 1) |
9 Months Ended |
|---|---|
|
Sep. 30, 2023
$ / shares
| |
| Fair Value Disclosures [Abstract] | |
| Risk-free interest rate | 1.03% |
| Expected term (years) | 6 years |
| Expected volatility | 21.20% |
| Exercise price | $ 11.50 |
FAIR VALUE MEASUREMENTS (Details Narrative) - USD ($) |
3 Months Ended | 9 Months Ended | 12 Months Ended | ||
|---|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
Dec. 31, 2022 |
|
| Subsidiary, Sale of Stock [Line Items] | |||||
| Fair value of warrants | $ 761,266 | $ (304,506) | $ (1,674,784) | $ (7,162,484) | |
| Public Warrants [Member] | |||||
| Subsidiary, Sale of Stock [Line Items] | |||||
| Fair value of warrants | $ 5,614,132 | ||||