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)
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(Commission File Number) |
(IRS Employer Identification No.) |
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| (Address Of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code
N/A
(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 August 28, 2024, 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 JUNE 30, 2024
TABLE OF CONTENTS
i
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
PERCEPTION CAPITAL CORP. III
(F/K/A PORTAGE FINTECH ACQUISITION CORPORATION)
CONDENSED CONSOLIDATED BALANCE SHEETS
| June 30, 2024 |
December 31, 2023 |
|||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Cash held in Trust Account | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES, CLASS A ORDINARY SHARES SUBJECT TO POSSIBLE REDEMPTION AND SHAREHOLDERS’ DEFICIT | ||||||||
| Current liabilities | ||||||||
| Accrued expenses | $ | $ | ||||||
| Ordinary Class A shares to be redeemed | ||||||||
| Total current liabilities | ||||||||
| Subscription agreement liability | ||||||||
| Warrant liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies (Note 6) | ||||||||
| Class A ordinary shares subject to possible redemption; and shares at redemption value as of June 30, 2024 and December 31, 2023, respectively | ||||||||
| Shareholders’ Deficit | ||||||||
| Preference shares, $ par value; shares authorized; issued or outstanding | ||||||||
| Class A ordinary shares, $ par value; shares authorized; and shares issued or outstanding (excluding 1,622,500 and 3,910,370 shares subject to possible redemption) as of June 30, 2024 and December 31, 2023, respectively | ||||||||
| Class B ordinary shares, $ par value; shares authorized; and shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively | ||||||||
| 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 CONSOLIDATED STATEMENTS OF OPERATIONS
| For the Three Months Ended June 30, |
For the June 30, |
|||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative expenses | $ | $ | $ | $ | ||||||||||||
| Loss from operations | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Other income: | ||||||||||||||||
| Change in fair value of warrant liabilities | ||||||||||||||||
| Reduction of deferred underwriter fees | ||||||||||||||||
| Interest and investment income earned on Trust Account | ||||||||||||||||
| Other income | ||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||
| Weighted average redeemable ordinary shares outstanding, basic and diluted | ||||||||||||||||
| Basic and diluted net income per ordinary share, redeemable | $ | $ | $ | $ | ||||||||||||
| Weighted average Class B ordinary shares outstanding, basic and diluted | ||||||||||||||||
| Basic and diluted net income per ordinary share, nonredeemable | $ | $ | $ | $ | ||||||||||||
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 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024
| Class A Ordinary Shares |
Class B Ordinary Shares |
Additional Paid in |
Accumulated | Total Shareholders’ |
||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance – January 1, 2024 | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||
| Remeasurement of Class A ordinary shares to redemption value | - | - | ( |
) | ( |
) | ||||||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||
| Balance – March 31, 2024 | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||
| Remeasurement of Class A ordinary shares to redemption value | - | - | ( |
) | ( |
) | ||||||||||||||||||||||
| Contribution – non-redemption agreement | - | - | ||||||||||||||||||||||||||
| Fair value of shareholder non-redemption agreements | - | - | ( |
) | ( |
) | ||||||||||||||||||||||
| Conversion of Class B ordinary shares to Class A ordinary shares | ( |
) | ( |
) | ||||||||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||
| Balance – June 30, 2024 | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||
FOR THE THREE AND SIX MONTHS ENDED JUNE 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 | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
3
PERCEPTION CAPITAL CORP. III
(F/K/A PORTAGE FINTECH ACQUISITION CORPORATION)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
For the June 30, |
||||||||
| 2024 | 2023 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
| Interest and investment income from Trust Account | ( |
) | ( |
) | ||||
| Change in fair value of warrant liabilities | ( |
) | ( |
) | ||||
| Reduction of deferred underwriter fees | ( |
) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses | ||||||||
| Accrued expenses | ( |
) | ||||||
| Net cash used in operating activities | ( |
) | ( |
) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from subscription agreement liability | ||||||||
| Proceeds from promissory note - related party | ||||||||
| Net cash provided by financing activities | ||||||||
| Net Change in Cash | ||||||||
| Cash – Beginning | ||||||||
| Cash – Ending | $ | $ | ||||||
| Non-Cash Investing and Financing Activities: | ||||||||
| Remeasurement of Class A ordinary shares to redemption value | $ | $ | ||||||
| Reduction of deferred underwriting fee payable | $ | $ | ||||||
| Common stock to be redeemed | $ | $ | ||||||
| Contribution – non-redemption agreements | $ | $ | ||||||
| Fair value of shareholder non-redemption agreements | $ | ( | ) | $ | ||||
The accompanying notes are an integral part of these financial statements.
4
PERCEPTION CAPITAL CORP. III
(F/K/A PORTAGE FINTECH ACQUISITION CORPORATION)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Perception Capital Corp. III (the “Company” or “PC3”) 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 June 30, 2024, the Company had not yet commenced any operations. All activity for the period March 17, 2021 (inception) through June 30, 2024 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 and cash 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 $
5
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 $1.50 per Private Placement Warrant, generating total gross proceeds of $
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 (as amended, 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.
6
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 favour 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 “First Extension Meeting”). At the First Extension 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.
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.
On February 6, 2024, the Company entered into a business combination agreement (the “Business Combination Agreement” or “BCA”) with RBio Energy Holdings Corp., a Delaware corporation and a wholly owned subsidiary of PC3 (“NewPubco”), Perception RBio Merger Sub, a Cayman Islands exempted company and a wholly owned subsidiary of NewPubco (“Merger Sub”), and RBio Energy Corporation, a Delaware corporation (“RBio Energy”).
On February 6, 2024, the Company received a notice (the “Notice”) from the Listing Qualifications Department of Nasdaq stating that the Company had failed to hold an annual meeting of shareholders within 12 months after our fiscal year end, as required by Nasdaq Listing Rule 5620(a) (the “Annual Shareholders Meeting Rule”) and therefore was not in compliance with the Annual Shareholders Meeting Rule. The Notice stated that the Company had 45 calendar days, or until March 25, 2024, to submit a plan to regain compliance with the Annual Shareholders Meeting Rule. On March 19, 2024, the Company submitted to Nasdaq a plan to regain compliance with the Annual Shareholders Meeting Rule within the required timeframe. On April 15, 2024, Nasdaq accepted the Company’s plan and granted the Company an extension until June 30, 2024 to regain compliance with the Annual Shareholders Meeting Rule.
7
On June 28, 2024, the Company held its second extraordinary general meeting in lieu of annual meeting of shareholders (the “Second Extension Meeting”) at which its shareholders approved a proposal to amend the Articles to extend the date by which the Company has to consummate a business combination from July 23, 2024 to April 23, 2025, or such earlier date as may be determined by the Company’s board of directors to be in the best interests of the Company (the “Second Extension Amendment” and such later date, the “Extended Date”).
In connection with the votes to approve the proposal above, the holders of Class A Ordinary Shares of the Company properly 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, leaving approximately $ million in the trust account.
In connection with the implementation of the Second Extension Amendment, the Sponsor and PFTA 1 LP, the former sponsor, converted an aggregate of Class B Ordinary Shares into Class A Ordinary Shares (the “Class B Conversion”).
As a result of holding its extraordinary general meeting in lieu of annual meeting on June 28, 2024 within Nasdaq’s extended timeframe, the Company regained compliance with the Annual Shareholders Meeting Rule.
On July 23, 2024, the Company received a notice from the staff of the Listing Qualifications Department of Nasdaq indicating that unless the Company timely requests a hearing before the Nasdaq Hearings Panel (the “Panel”), trading of the Company’s securities on Nasdaq would be suspended at the opening of business on August 1, 2024, due to the Company’s non-compliance with Nasdaq IM-5101-2, which requires that a special purpose acquisition company complete one or more business combinations within 36 months of the effectiveness of its registration statement in connection with its initial public offering.
The Company timely requested a hearing before the Panel to request sufficient time to complete its previously disclosed proposed business combination with RBio Energy Corporation (“RBio”). The hearing request resulted in a stay of any suspension or delisting action pending the hearing, which is scheduled for August 29, 2024.
There can be no assurance that the Company will be able to satisfy Nasdaq’s continued listing requirements, regain compliance with Nasdaq IM-5101-2, and maintain compliance with other Nasdaq listing requirements.
If the Company is unable to complete a Business Combination by April 23, 2025 (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 $
8
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 June 30, 2024, 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 April 23, 2025 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 April 23, 2025. 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.
9
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 financial statements. These 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.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated 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 consolidated 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 six months ended June 30, 2024 are not necessarily indicative of the results that may be expected through December 31, 2024 or for any future periods.
The accompanying unaudited condensed consolidated 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 April 16, 2024.
Principles of Consolidation
The accompanying unaudited consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, RBio Energy Holdings Corp., a Delaware corporation. There has been no intercompany activity since inception.
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.
10
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 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 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 June 30, 2024 and December 31, 2023. The Company had $
Cash Held in Trust Account
On July 27, 2023, the Company liquidated the U.S. government treasury obligations or money market funds held in the Trust Account. The funds in the Trust Account are currently maintained in cash in an interest-bearing demand deposit account at a bank until the earlier of consummation of the Company’s initial Business Combination and liquidation. Prior to July 27, 2023, the Company’s portfolio of investments was comprised of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or investments in money market funds that invest in U.S. government securities and generally have a readily determinable fair value, or a combination thereof. When the Company’s investments held in the Trust Account are comprised of U.S. government securities, the investments are classified as “Trading Securities” in accordance with ASC 320 “Investments – Debt Securities”. When the Company’s investments held in the Trust Account are comprised of money market funds, the investments are recognized at fair value. Trading securities and investments in money market funds are presented on the balance sheets at fair value at the end of each reporting period. The change in fair value of these securities is included in investment income earned on 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. As of June 30, 2024, the Company had withdrawn a total of $ 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
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 June 30, 2024 and December 31, 2023, 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 $
At June 30, 2024 and December 31, 2023, the Class A ordinary shares subject to redemption reflected in the balance sheets are reconciled in the following table:
| Change in Class A ordinary shares |
Change in 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 December 31, 2023 | $ | |||||||
| Add: | ||||||||
| Remeasurement of carrying value to redemption value | ||||||||
| Class A ordinary shares subject to possible redemption at March 31, 2024 | $ | |||||||
| Less: | ||||||||
| Ordinary Class A shares to be redeemed | ( |
) | ( |
) | ||||
| Add: | ||||||||
| Remeasurement of carrying value to redemption value | ||||||||
| Class A ordinary shares subject to possible redemption at June 30, 2024 | $ | |||||||
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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.
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.
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The following table reflects the calculation of basic and diluted net income per ordinary share:
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||||||||
| Redeemable | Nonredeemable | Redeemable | Nonredeemable | Redeemable | Nonredeemable | Redeemable | Nonredeemable | |||||||||||||||||||||||||
| Basic and diluted net income per ordinary share | ||||||||||||||||||||||||||||||||
| Numerator: | ||||||||||||||||||||||||||||||||
| Allocation of net income | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| 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 totalling $
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 $
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).
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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 adoption of this pronouncement did not have a material impact on the condensed consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires disaggregated information about a reporting entity’s effective tax rate reconciliation, as well as information related to income taxes paid to enhance the transparency and decision usefulness of income tax disclosures. This ASU will be effective for the annual period ending December 31, 2025. The Company is currently evaluating the timing and impacts of adoption of this ASU.
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 financial statements.
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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 $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 $
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 June 30, 2024 and December 31, 2023, 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.
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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. As of June 30, 2024, 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.
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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
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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 First Extension Meeting or to reverse any previously submitted redemption demand in connection with the First Extension Meeting with respect to an aggregate of Class A ordinary shares. 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 Topic 5T 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.
In connection with the Second Extension Meeting, the Company and the Managing Sponsor entered into non-redemption agreements (“2024 Non-Redemption Agreements”) with one or more unaffiliated third-party shareholders of the Company in exchange for such shareholders agreeing to not redeem a to-be-determined number of Class A ordinary shares (“Non-Redeemed Shares”) at the Second Extension Meeting.
The 2024 Non-Redemption Agreements shall terminate on the earlier of (i) the failure of the Company’s shareholders to approve the Second Extension Amendment Proposal at the Meeting, (ii) the Company’s determination not to proceed with the Second Extension, (iii) the fulfilment of all obligations of parties to the Non-Redemption Agreements, (iv) the liquidation or dissolution of the Company, (v) the mutual written agreement of the parties or (vi) if the applicable shareholder exercises its redemption rights with respect to any Non-Redeemed Shares in connection with the Meeting and such Non-Redeemed Shares are actually redeemed.
In connection with the Class B ordinary shares the Sponsor agreed to transfer to the Investors on or promptly after the consummation of the Business Combination pursuant to the 2024 Non-Redemption Agreements, the Company estimated the aggregate fair value attributable to the Investors to be $ or a weighted average of $ per share, which is estimated by taking into considerations the estimated probability of the consummation of a Business Combination, estimated concessions and estimated cost of carrying charges to eliminate the investor’s exposure to changes in the price of their Class B Ordinary Shares. The excess of the fair value of the Class B Ordinary Shares was determined to be an offering cost in accordance with Staff Accounting Bulletin Topic 5A. In substance, the Company recognized the offering cost as a capital contribution by the Sponsor to induce the Investors not to redeem their Class A ordinary shares, with a corresponding charge to additional paid-in capital to recognize the fair value of the shares transferred as an offering cost.
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CCM Engagement
On July 17, 2023, the Company entered into an engagement letter with J.V.B Financial Group, acting through its Cohen & Company Capital Markets division (“CCM”) to obtain capital markets advisory services in connection with seeking an extension for completing a business combination, capital market advisory services in connection with a possible business combination transaction with an unaffiliated third party (the “Target”) and to act as the Company’s placement agent in connection with raising capital. CCM would be entitled to an advisor fee of $
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 $ |
| ● | 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. |
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| ● | 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 $5,000. |
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 June 30, 2024 and December 31, 2023, the Subscription Agreement liability is $
Business Combination Agreement
On February 6, 2024, the Company entered into a business combination agreement (the “Business Combination Agreement”) with RBio Energy Holdings Corp., a Delaware corporation and a wholly owned subsidiary of PC3 (“NewPubco”), Perception RBio Merger Sub, a Cayman Islands exempted company and a wholly owned subsidiary of NewPubco (“Merger Sub”), and RBio Energy Corporation, a Delaware corporation (“RBio Energy”).
Pursuant to the Business Combination Agreement, among other things, (i) the holders (whether one or more) of the common stock of RBio Energy (the “RBio Energy Stockholders”) will exchange all of their shares of common stock of RBio Energy (“RBio Common Stock”) for shares of common stock of NewPubco (the “Share Exchange”), as a result of which RBio Energy will become a direct wholly owned subsidiary of NewPubco, and (ii) Merger Sub will merge with and into PC3, with PC3 surviving such merger as a wholly-owned subsidiary of NewPubco (the “Merger” and, together with the other transactions contemplated by the Business Combination Agreement, the “Transaction” and the closing of the Transaction, the “Closing”).
Sponsor Support Agreement
Concurrently with the execution of the Business Combination Agreement, the Sponsor, RBio Energy and the Company entered into the Sponsor Support Agreement, pursuant to which, among other things, (i) Sponsor will vote its shares of the Company in favor of the Business Combination Agreement and the Transaction, and any other proposal submitted for approval by the shareholders of the Company in connection with the Transaction and against any action, agreement, transaction or proposal that would result in a breach of any covenant, representation or warranty or any other obligation or agreement of the Company under the BCA, (ii) Sponsor will agree to not demand that the Company redeem Sponsor’s Ordinary Shares in connection with the Transaction, and not to otherwise participate in any such redemption by tendering or submitting any of such shares for redemption, (iii) Sponsor will waive certain anti-dilution provisions of its the Company’s Ordinary Shares set forth in the Company’s amended and restated memorandum and articles of incorporation, and any and all other anti-dilution rights, in connection with the Transaction with respect to each Class B ordinary share of the Company held by Sponsor, and (iv) at the Closing and upon the written notice of RBio Energy, Sponsor will forfeit up to all of the private placement warrants of the Company (the “PC3 Private Placement Warrants”). Thereafter, in connection with any Potential Financing, Sponsor will cause the Company to issue new warrants exercisable at the same price per share for up to the number of the Company’s Ordinary Shares for which the PC3 Private Placement Warrants so forfeited were exercisable, to such persons as RBio Energy may direct in writing in its discretion prior to the Closing.
NOTE 7. SHAREHOLDERS’ DEFICIT
Preference Shares — The Company is authorized to issue preference shares of par value $ per share. As of June 30, 2024 and December 31, 2023, there were preference shares issued or outstanding.
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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 June 30, 2024 and December 31, 2023, there were and Class A ordinary shares issued or outstanding (excluding shares then subject to possible redemption), respectively.
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 $
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.
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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:
| ● | 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 $18.00 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; |
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| ● | 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.
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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NOTE 9. FAIR VALUE MEASUREMENTS
At June 30, 2024 and December 31, 2023,
The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at June 30, 2024 and December 31, 2023, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
| Description | Level |
June 30, 2024 |
December 31, 2023 |
||||||||
| Liabilities: | |||||||||||
| Private Placement Warrants(1) | 2 | ||||||||||
| Public Warrants(1) | 2 | ||||||||||
| (1) |
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 | $ | |||
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NOTE 10. SUBSEQUENT EVENTS
Management of the Company evaluated events that have occurred after the balance sheet date of June 30, 2024 through the date these financial statements were issued. Based upon the review, management did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the financial statements.
On July 23, 2024, the Company received a notice from Nasdaq indicating that unless the Company timely requested a hearing before the Nasdaq Hearings Panel (the “Panel”), trading of the Company’s securities on Nasdaq would be suspended at the opening of business on August 1, 2024, due to the Company’s non-compliance with Nasdaq IM-5101-2, which requires that a special purpose acquisition company complete one or more business combinations within 36 months of the effectiveness of its registration statement in connection with its initial public offering. The Company timely requested a hearing before the Panel to request sufficient time to complete its business combination with RBio Energy Corporation (“RBio”). The hearing request resulted in a stay of any suspension or delisting action pending the hearing, which is scheduled for August 29, 2024.
There can be no assurance that the Company will be able to satisfy Nasdaq’s continued listing requirements, regain compliance with Nasdaq IM-5101-2, and maintain compliance with other Nasdaq listing requirements.
On August 26, 2024, the Company received written notice (the “Late Filing Notice”) from Nasdaq indicating that the Company is delinquent in filing its Quarterly Report on Form 10-Q for the period ended June 30, 2024 (the “Form 10-Q”), which may serve as an additional basis for the delisting of the Company’s securities from Nasdaq. As a result, the Company was not in compliance with Nasdaq Listing Rule 5250(c)(1), which requires listed companies to timely file all required periodic financial reports with the SEC. On the date hereof, the Company has filed the Form 10-Q with the SEC, therefore, curing the deficiency outlined in the Late Filing Notice.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
References to the “Company,” “our,” “us,” “we,” or PC3 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 consolidated 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.
Proposed Business Combination
Business Combination Agreement
On February 6, 2024, we entered into a business combination agreement (the “Business Combination Agreement”) with RBio Energy Holdings Corp., a Delaware corporation and a wholly owned subsidiary of the Company (“New Pubco”), Perception RBio Merger Sub, a Cayman Islands exempted company and a wholly owned subsidiary of the NewPubco (“Merger Sub”) and RBio Energy Corporation, a Delaware corporation (“RBio Energy”).
Pursuant to the Business Combination Agreement, among other things, (i) the stockholders of RBio Energy will exchange all of their shares of common stock of RBio Energy for shares of common stock of NewPubco (the “Share Exchange”), as a result of which RBio Energy will become a direct wholly owned subsidiary of NewPubco, and (ii) Merger Sub will merge with and into the Company, with the Company surviving such merger as a wholly-owned subsidiary of NewPubco.
The Business Combination is expected to be consummated after receipt of the required approvals by the shareholders of the Company and stockholders of RBio Energy and the satisfaction or waiver of certain other customary conditions, as summarized below.
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Commercial/Supply Agreement
RBio Energy plans to negotiate and execute a commercial supply and/or fulfillment agreement with a supplier or other vendor to produce the bioenergy, biofuels and biomaterials and, to the extent necessary and appropriate, lease, license or acquire certain of such supplier’s or other vendor’s assets (the “C/S Agreement,” together with any agreements, documents, certificates or instruments relating thereto or executed or delivered in connection therewith, the “C/S Documents,” and the transactions contemplated by the C/S Documents, the “C/S Business Combinations”), all on the terms and conditions to be agreed by, and subject to the approval of RBio Energy.
Sponsor Support Agreement
Concurrently with the execution of the Business Combination Agreement, the Sponsor, RBio Energy and the Company entered into the Sponsor Support Agreement, pursuant to which, among other things, (i) the Sponsor will vote its shares in favor of the Business Combination Agreement and the Business Combination, and any other proposal submitted for approval by our shareholders in connection with the Business Combination and against any action, agreement, transaction or proposal that would result in a breach of any covenant, representation or warranty or any other obligation or agreement of the Company under the Business Combination Agreement, (ii) the Sponsor will agree to not demand that we redeem the Sponsor’s Class B ordinary shares in connection with the Business Combination, and not to otherwise participate in any such redemption by tendering or submitting any of such shares for redemption, (iii) the Sponsor will waive certain anti-dilution provisions of its Class B ordinary shares set forth in the Articles, and any and all other anti-dilution rights, in connection with the Business Combination with respect to each Class B ordinary share held by the Sponsor, and (iv) at the Closing and upon the written notice of RBio Energy, the Sponsor will forfeit up to all of the Private Placement Warrants. Thereafter, in connection with any potential financing, the Sponsor will cause the Company to issue new warrants exercisable at the same price per share for up to the number of ordinary shares for which the Private Placement Warrants so forfeited were exercisable, to such persons as RBio Energy may direct in writing in its discretion prior to the Closing.
Change in Primary Sponsor, Board, and Management; Securities Purchase Agreement
On July 21, 2023, the Initial Sponsor sold 4,215,230 Class B ordinary shares and 4,392,123 Private Placement Warrants to the Sponsor, pursuant to the Purchase Agreement.
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 Officer of the Company and Corey Campbell ceased to serve in that position effective as of Mr. Stanfield’s appointment. On January 3, 2024, Mr. Sheridan resigned as Co-President of the Company. On May 17, 2024, Mr. Tan resigned as President of the Company.
First Extension
On July 21, 2023, we held an extraordinary general meeting of shareholders in which our shareholders approved the Extension Amendment to extend the date by which we must complete an initial Business Combination from July 23, 2023 to July 23, 2024. In connection with the vote to approve the Extension Amendment, holders of an aggregate of 22,001,009 Class A ordinary shares exercised their right to redeem their shares cash at a redemption price of approximately $10.41 per share, for an aggregate redemption amount of approximately $229.1 million, leaving approximately $40.7 million in the Trust Account and 3,910,370 Class A ordinary shares outstanding after such redemption.
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Second Extension
On June 28, 2024, we held an extraordinary general meeting in lieu of annual meeting of shareholders in which our shareholders approved an amendment to the amended and restated memorandum and articles of association to extend the date by which we have to consummate a business combination from July 23, 2024 to April 23, 2025, or such earlier date as may be determined by the Company’s board of directors to be in the best interests of the Company (the “Second Extension Amendment” and such later date, the “Extended Date”).
In connection with the votes to approve the Second Extension Amendment, the holders of 2,287,870 Class A Ordinary Shares properly exercised their right to redeem their shares for cash at a redemption price of approximately $10.89 per share, for an aggregate redemption amount of approximately $24.9 million, leaving approximately $17.7 million in the trust account.
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 (the “2023 Non-Redemption Agreements”) with certain unaffiliated third parties in exchange for such holders agreeing either not to request redemption in connection with the Extension 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. In consideration of the 2023 Non-Redemption Agreements, immediately prior to, and substantially concurrently with, the closing of an initial Business Combination, (i) the 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 Class B ordinary shares held by the Sponsor and (ii) the Company shall issue to such holders a number of Class A ordinary shares equal to those underlying the Forfeited Shares.
In connection with the Second Extension Meeting, the Company and Sponsor entered into non-redemption agreements (“2024 Non-Redemption Agreements”) with one or more unaffiliated third-party shareholders of the Company in exchange for such shareholders agreeing to not redeem a to-be-determined number of Class A ordinary shares (“Non-Redeemed Shares”) at the Second Extension Meeting. In exchange for the foregoing commitment to the Company to not redeem the Non-Redeemed Shares, the Company anticipates agreeing to issue, or cause to be issued, to such shareholders, for every 200,000 Non-Redeemed Shares, 40,000 Class A ordinary shares for the first six months of extension, and 8,000 additional Class A ordinary shares for each additional month of extension, up to three additional months (such shares, the “Promote Shares”), upon closing of the initial business combination, and the Sponsor anticipates agreeing to surrender and forfeit, for no consideration, a number of Class B ordinary shares, par value $0.0001 per share, of the Company equal to the number of Promote Shares upon closing of the initial business combination.
Subscription Agreement
On August 1, 2023, we entered into a Subscription Agreement (the “Subscription Agreement”) with Polar Multi-Strategy Master Fund (the “Investor”) and the Sponsor, pursuant to which the parties agreed, among other things, that: (i) the Investor will make a cash contribution to Sponsor in an aggregate amount of $1,300,000 (the “Investor Capital Contribution”) as follows: (i) an initial tranche of $650,000, to be paid within five business days of the date of the Subscription Agreement, (ii) a second tranche of up to $325,000, to be paid following the Company’s announcement of executing an agreement for the Company’s initial business combination, and (iii) a third tranche of up to $325,000, to be paid after the Company files an initial registration statement with the SEC related to initial business combination. At the request of the Sponsor, the Investor may agree, in its sole discretion, to fund up to an additional $200,000 at any time; (ii) the Investor Capital Contribution will in turn be loaned by the 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 Sponsor will pay to the Investor all repayments of the SPAC Loan the 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 Capital Contribution; (iii) 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; and (iv) if the Company liquidates without consummating a De-SPAC, any amounts remaining in the 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.
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On March 11, 2024, we entered into an Amended and Restated Subscription Agreement (the “A&R Polar Agreement”) with the Investor to, among other things, amend the terms as to when the remainder of the Investor Capital Contribution (as defined in the A&R Polar Agreement) may be called.
On July 25, 2024, we entered into a Second Amended and Restated Subscription Agreement (the “Second A&R Polar Agreement”) with the Investor to, among other things, increase the Investor Capital Contribution to $1,500,000 and amend the terms as to when the Investor Capital Contributions must be repaid.
Nasdaq Delisting Notices
On February 6, 2024, we received a notice (the “Notice”) from the Listing Qualifications Department of Nasdaq stating that we had failed to hold an annual meeting of shareholders within 12 months after our fiscal year end, as required by Nasdaq Listing Rule 5620(a) (the “Annual Shareholders Meeting Rule”) and therefore were not in compliance with the Annual Shareholders Meeting Rule. The Notice stated that we had until March 25, 2024 to submit a plan to regain compliance with the Annual Shareholders Meeting Rule. On March 19, 2024, we submitted to Nasdaq a plan to regain compliance with the Annual Shareholders Meeting Rule within the required timeframe. On April 15, 2024, Nasdaq accepted our plan and granted us an extension until June 30, 2024 to regain compliance with the Annual Shareholders Meeting Rule. We held an extraordinary general meeting in lieu of an annual meeting of shareholders on June 28, 2024 and, therefore, regained compliance with the Annual Shareholders Meeting Rule.
On July 23, 2024, we received a notice from the staff of the Listing Qualifications Department of Nasdaq indicating that unless the Company timely requests a hearing before the Nasdaq Hearings Panel (the “Panel”), trading of the Company’s securities on Nasdaq would be suspended at the opening of business on August 1, 2024, due to the Company’s non-compliance with Nasdaq IM-5101-2, which requires that a special purpose acquisition company complete one or more business combinations within 36 months of the effectiveness of its registration statement in connection with its initial public offering. We timely requested a hearing before the Panel to request sufficient time to complete our business combination with RBio. The hearing request resulted in a stay of any suspension or delisting action pending the hearing, which is scheduled for August 29, 2024.
There can be no assurance that we will be able to satisfy Nasdaq’s continued listing requirements, regain compliance with Nasdaq IM-5101-2, and maintain compliance with other Nasdaq listing requirements.
On August 26, 2024, we received written notice (the “Late Filing Notice”) from Nasdaq indicating that the Company is delinquent in filing its Quarterly Report on Form 10-Q for the period ended June 30, 2024 (the “Form 10-Q”), which may serve as an additional basis for the delisting of the Company’s securities from Nasdaq. As a result, the Company was not in compliance with Nasdaq Listing Rule 5250(c)(1), which requires listed companies to timely file all required periodic financial reports with the SEC. On the date hereof, the Company has filed the Form 10-Q with the SEC, therefore, curing the deficiency outlined in the Late Filing Notice.
Results of Operations
We have neither engaged in any operations nor generated any operating revenues to date. Our only activities from inception through June 30, 2024 were organizational activities, those necessary to prepare for our Initial Public Offering, 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 June 30, 2024, we had net income of $277,276, which consisted of $438,066 of investment income earned on the Trust Account and $409,561 of other income due to change in the fair value of the warrant liabilities, offset by $570,351 of general and administrative expenses.
For the six months ended June 30, 2024, we had net income of $900,237, which consisted of $871,622 of investment income earned on the Trust Account and $1,400,729 of other income due to change in the fair value of the warrant liabilities, offset by $1,371,114 of general and administrative expenses.
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For the three months ended June 30, 2023, we had net income of $4,008,488, which consisted of $3,191,741 of investment income earned on the Trust Account, $1,370,278 of other income due to change in the fair value of the warrant liabilities and $352,969 of reduction of deferred underwriter fees, offset by $906,500 of general and administrative expenses.
For the six months ended June 30, 2023, we had net income of $7,231,185, which consisted of $5,939,100 of investment income earned on the Trust Account, $2,436,050 of other income due to change in the fair value of the warrant liabilities and $352,969 of reduction of deferred underwriter fees, offset by $1,496,934 of general and administrative expenses.
Liquidity and Capital Resources
On July 23, 2021, we consummated the Initial Public Offering with the sale and issuance of 24,000,000 Units, generating gross proceeds of $240,000,000. Simultaneously with the closing of the Initial Public Offering, 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 Initial Public Offering, 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 Initial Public Offering 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 six months ended June 30, 2024, cash used in operating activities was $346,090. Net income of $900,237 was affected by investment income earned on the Trust Account of $871,622 and changes in the fair value of warrants liabilities of $1,400,729. Changes in operating assets and liabilities provided $1,026,024 of cash for operating activities.
For the six months ended June 30, 2023, cash used in operating activities was $1,184,920. Net income of $7,231,185 was affected by investment income earned on the Trust Account of $5,939,100, changes in the fair value of warrants liabilities of $2,436,050 and reduction of deferred underwriter fees of $352,969. Changes in operating assets and liabilities used $312,014 of cash for operating activities.
As of June 30, 2024, we had cash held in the Trust Account of $42,550,517. 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 June 30, 2024, we had operating cash of $131,835. 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.
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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.
On August 1, 2023, we entered into a Subscription Agreement with Investor and the Sponsor, pursuant to which the parties agreed, among other things, that: (i) the Investor will make a cash contribution to Sponsor in an aggregate amount of $1,300,000 (the “Investor Capital Contribution”) as follows: (i) an initial tranche of $650,000, to be paid within five business days of the date of the Subscription Agreement, (ii) a second tranche of up to $325,000, to be paid following the Company’s announcement of executing an agreement for the Company’s initial business combination, and (iii) a third tranche of up to $325,000, to be paid after the Company files an initial registration statement with the SEC related to initial business combination. At the request of the Sponsor, the Investor may agree, in its sole discretion, to fund up to an additional $200,000 at any time; (ii) the Investor Capital Contribution will in turn be loaned by the 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. As of June 30, 2024 and December 31, 2023, the Subscription Agreement liability is $1,025,000 and $650,000 and included on the balance sheets, respectively.
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 April 23, 2025 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 financial statements were issued. Management intends to consummate a Business Combination prior to April 23, 2025. These 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 $0 for administrative support services and approximately and $0 for reimbursement of compensation expenses for the three and six months ended June 30, 2024. We recognized approximately $30,000 and $60,000 for administrative support services and approximately $199,000 and $397,000 for reimbursement of compensation expenses for the three and six months ended June 30, 2023. The administrative services agreement was terminated in connection with the closing under the Purchase Agreement on July 21, 2023.
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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 Initial Public Offering, 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 as of December 31, 2022. 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 June 30, 2024 and December 31, 2023, the deferred underwriting fee payable was $0.
On July 17, 2023, the Company entered into an engagement letter with J.V.B Financial Group, acting through its Cohen & Company Capital Markets division (“CCM”) to obtain capital markets advisory services in connection with seeking an extension for completing a business combination, capital market advisory services in connection with a possible business combination transaction with an unaffiliated third party (the “Target”) and to act as the Company’s placement agent in connection with raising capital. CCM would be entitled to an advisor fee of $2.0 million and a transaction fee of an amount equal to 5% of the sum of the gross proceeds raised from investors and received by the Company or Target plus proceeds released from the Trust Account with respect to any of the Class A ordinary shares that did not redeem such shares in connection with the extension or the business combination. If the gross proceeds raised from investors is $3,000,000 or less, the Company may elect to pay the portion of the fee related to the offering in the form of an equivalent dollar amount of Class A ordinary shares or equivalent equity of the post-business combination company, which shares shall be delivered four (4) business days following the closing of the sale transaction as determined by the Company. The shares, if issued, shall be duly authorized, validly issued, paid and non-assessable and shall be registered for resale under the Act, or otherwise freely tradeable, as of the delivery of the shares and will be delivered in book entry form in the name of and delivered to CCM (or its designee) four (4) business days following the closing of the transaction. In addition, up to 50% of the advisor fee may be paid in shares as described above in the case of gross proceeds raised from investors. Pursuant to the engagement letter, the advisor fee cannot be less than $1,000,000.
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:
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 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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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 June 30, 2024, 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 June 30, 2024, because of a material weakness in internal controls related to the accounting of complex financial instruments.
Changes in Internal Control over Financial Reporting
Other than the identified material weakness and steps taken to remediate the material weakness, there was no change in our internal control over financial reporting that occurred during the period ended June 30, 2024, 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 April 16, 2024, other than as discussed below:
The Second Extension Amendment contravenes Nasdaq rules and, as a result, may lead Nasdaq to suspend trading in our securities or lead our securities to be delisted from Nasdaq. If our securities are delisted from Nasdaq, our Class A ordinary shares would be deemed a “penny stock” and we may become subject to the requirements of Rule 419 to which we are not currently subject.
Our Class A ordinary shares, units and public warrants are listed on Nasdaq. Nasdaq IM-5101-2 requires that a special purpose acquisition company complete one or more business combinations within 36 months of the effectiveness of its registration statement for its initial public offering, which, in the case of PC3, was July 23, 2024 (the “Nasdaq Deadline”). On June 28, 2024, our shareholders approved the Second Extension Amendment which allows us to extend the termination date to up April 23, 2025, or such earlier date as may be determined by our board of directors to be in the best interests of the Company, which is beyond the Nasdaq Deadline. As a result, the Second Extension Amendment does not comply with Nasdaq rules. On July 23, 2024, we received a notice from the staff of the Listing Qualifications Department of The Nasdaq Stock Market LLC indicating that, unless we timely requested a hearing before the Panel, our securities would be subject to suspension and delisting from Nasdaq at the opening of business on August 1, 2024, due to our non-compliance with Nasdaq IM-5101-2. We timely requested a hearing before the Panel. The hearing request resulted in a stay of any suspension or delisting action pending the hearing, which is scheduled for August 29, 2024. There can be no assurance that the Panel will grant our request for an extension, or that we will be able to regain compliance with Nasdaq IM-5101-2.
In addition, we are subject to compliance with Nasdaq’s continued listing requirements in order to maintain the listing of our securities on Nasdaq. Such continued listing requirements for our Class A ordinary shares include, among other things, the requirement to maintain at least 300 public holders.
We expect that if our Class A ordinary shares fail to meet Nasdaq’s continued listing requirements, our units and public warrants will also fail to meet Nasdaq’s continued listing requirements for those securities. If our securities do not meet Nasdaq’s continued listing requirements, Nasdaq may delist our securities from trading on its exchange. If our securities are delisted from Nasdaq, our Class A ordinary shares could become subject to the regulations of the SEC relating to the market for “penny stocks.” Under Rule 419 of the Securities Act, the term “blank check company” means a company that (i) is a development stage company that has no specific business plan or purpose or has indicated that its business plan is to engage in a merger or acquisition with an unidentified company or companies, or other entity or person; and (ii) is issuing “penny stock,” as defined in Rule 3a51-1 under the Exchange Act. Under Rule 3a51-1, the term “penny stock” means any equity security, unless it fits within certain enumerated exclusions including being listed on a national securities exchange, such as Nasdaq (Rule 3a51-1(a)(2)) (the “Exchange Rule”). We currently rely on the Exchange Rule to not be deemed a penny stock issuer (and consequently a “blank check company” under Rule 419). If we are deemed a “blank check company” as defined under Rule 419, we may become subject to additional restrictions on the trading of our securities. Among those restrictions is that brokers trading in the securities of a blank check company under Rule 419 adhere to more stringent rules, including being subject to the depository requirements of Rule 419.
The “penny stock” rules are burdensome and may reduce the trading activity for our Class A ordinary shares. If our Class A ordinary shares are subject to the “penny stock” rules, the holders of such Class A ordinary shares may find it more difficult to sell their shares.
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If Nasdaq delists any of our securities from trading on its exchange and we are not able to list such securities on another national securities exchange, we expect such securities could be quoted on an over-the-counter market. If this were to occur, we and our shareholders could face significant material adverse consequences, including:
| ● | a limited availability of market quotations for our securities, which may limit your ability to determine the price of our securities in a timely manner; |
| ● | reduced liquidity for our securities, which may impact your ability to sell our securities; |
| ● | as discussed above, a determination that our Class A ordinary shares is a “penny stock” which will require brokers trading in our Class A ordinary shares to adhere to more stringent rules, including being subject to the depository requirements of Rule 419 of the Securities Act, and possibly resulting in a reduced level of trading activity in the secondary trading market for our Class A ordinary shares; and |
| ● | a decreased ability to issue additional securities or obtain additional financing in the future, which may adversely impact our efforts to consummate a Business Combination and otherwise continue our operations. |
The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” Since our Class A ordinary shares, units and public warrants are listed on Nasdaq, such securities qualify as covered securities under such statute. Although the states are preempted from regulating the sale of covered securities, the federal statute does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case. While we are not aware of a state having used these powers to prohibit or restrict the sale of securities issued by blank check companies, other than the State of Idaho, certain state securities regulators view blank check companies unfavorably and might use these powers, or threaten to use these powers, to hinder the sale of securities of blank check companies in their states. Further, if our Class A ordinary shares, units and public warrants were no longer listed on Nasdaq, these securities would not qualify as covered securities under such statute and we would be subject to regulation in each state in which we offers our securities.
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities
On July 23, 2021, we consummated our initial public offering of 24,000,000 units, at $10.00 per unit, generating gross proceeds of $240.0 million. We granted the underwriter a 45-day option to purchase up to an additional 3,600,000 units 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 initial public offering were registered under the Securities Act on registration statements on Form S-1 (Nos. 333-257185 and 333- 258062). The registration statement was declared effective on July 20, 2021.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
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Item 6. Exhibits
| * | Filed herewith |
| † | 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. |
| + | Certain of the schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(b)(2). The Company agrees to furnish supplementally a copy of all omitted schedules to the Securities and Exchange Commission upon its request. |
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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: August 28, 2024 | PERCEPTION CAPITAL CORP. III | |
| By: | /s/ Rick Gaenzle | |
| Name: | Rick Gaenzle | |
| Title: | Chief Executive Officer (On Behalf of the Registrant) | |
| Dated: August 28, 2024 | By: | /s/ John Stanfield |
| Name: | John Stanfield | |
| Title: | Chief Financial Officer (Principal Financial and Accounting Officer) | |
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