UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
For the transition period from to
Commission File No.
| (Exact name of registrant as specified in its charter) |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| (Address of Principal Executive Offices, including zip code) |
| (Registrant’s telephone number, including area code) |
| N/A |
| (Former name, former address and former fiscal year, if changed since last report) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| The | ||||
| Redeemable warrants, each warrant exercisable for one Class A ordinary share at an exercise price of $11.50 | CCTSW | The Nasdaq Stock Market LLC | ||
| Units, each consisting of one Class A ordinary share and one-half of a redeemable warrant | CCTSU | The Nasdaq 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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| ☐ | 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): Yes
As of August 15, 2022, there were
CACTUS ACQUISITION CORP. 1 LTD
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
i
CERTAIN TERMS
Unless otherwise stated in this Quarterly Report on Form 10-Q (this “Quarterly Report” or “Form 10-Q”), references to:
| ● | “we,” “us,” “our,” “the Company” or “our company” are to Cactus Acquisition Corp. 1 Limited, a Cayman Islands exempted company; |
| ● | “amended and restated memorandum and articles of association” are to our amended and restated memorandum and articles of association, which went into effect upon the completion of our IPO; |
| ● | “Class A ordinary shares” are to our Class A ordinary shares, par value $0.0001 per share; |
| ● | “Class B ordinary shares” are to our Class B ordinary shares, par value $0.0001 per share; |
| ● | “Companies Law” are to the Companies Law (2021 Revision) of the Cayman Islands, as the same may be amended from time to time; |
| ● | “directors” are to our current directors; |
| ● | “equity-linked securities” are to any securities of our company that are convertible into or exchangeable or exercisable for, Class A ordinary shares of our company; |
| ● | “Exchange Act” are to the U.S. Securities Exchange Act of 1934, as amended; |
| ● | “founders shares” are to our 3,162,500 Class B ordinary shares, in the aggregate, initially purchased in a private placement (2,875,000 shares), or received in a share dividend (287,500 shares), by our sponsor prior to our IPO, and the Class A ordinary shares that will be issued upon the automatic conversion of those Class B ordinary shares at the time of our initial business combination (for the avoidance of doubt, such Class A ordinary shares will not be “public shares”); |
| ● | “initial shareholders” are to our sponsor, Cactus Healthcare Management LP, a Delaware limited partnership, and other holders (if any) of our founders shares prior to our IPO; |
| ● | “IPO” or “initial public offering” refers to the initial public offering of our Class A ordinary shares, which was consummated on November 2, 2021; |
| ● | “letter agreement” refers to the letter agreement entered into between us and our initial shareholders, directors and officers on or prior to the date of our IPO, the form of which was filed as an exhibit to the registration statement for our IPO; |
| ● | “management” or our “management team” are to our officers and directors; |
| ● | “private warrants” are to the 4,866,667 warrants that were issued and sold to our sponsor in a private placement simultaneously with the closing of our initial public offering; |
| ● | “public shareholders” are to the holders of our public shares, including our sponsor, officers and directors to the extent our sponsor, officers or directors purchase public shares, provided their status as a “public shareholder” shall only exist with respect to such public shares; |
| ● | “public shares” are to our Class A ordinary shares sold as part of the public units in our initial public offering (whether they were purchased in our initial public offering or thereafter in the open market); |
| ● | “public units” are to the units (consisting of public shares and warrants) sold in our initial public offering; |
| ● | “SEC” are to the U.S. Securities and Exchange Commission; |
| ● | “Securities Act” are to the U.S. Securities Act of 1933, as amended; |
| ● | “sponsor” are to Cactus Healthcare Management LP, a Delaware limited partnership, including, where applicable, its affiliates; |
| ● | “warrants” are to our redeemable warrants sold as part of the public units in our initial public offering (whether they were purchased in our initial public offering or thereafter in the open market) and the private warrants; |
| ● | “$,” “US$” and “U.S. dollar” each refer to the United States dollar; and |
| ● | “2021 Annual Report” are to our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 31, 2022. |
ii
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements other than statements of historical fact included in this Form 10-Q, including statements in “Part 1- Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to “Part I- Item 1A. Risk Factors” in the 2021 Annual Report. The Company’s securities filings can be accessed on the EDGAR section of the website of the SEC, at www.sec.report. Except as expressly required by applicable securities laws, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
iii
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CACTUS ACQUISITION CORP. 1 LIMITED
UNAUDITED CONDENSED FINANCIAL STATEMENTS
AS OF JUNE 30, 2022, AND FOR THE SIX MONTHS ENDED ON THAT DATE
1
CACTUS ACQUISITION CORP. 1 LIMITED
UNAUDITED CONDENSED FINANCIAL STATEMENTS
AS OF JUNE 30, 2022, AND FOR THE SIX MONTHS ENDED ON THAT DATE
INDEX
F-1
CACTUS ACQUISITION CORP. 1 LIMITED
UNAUDITED CONDENSED BALANCE SHEETS
| June 30, | December 31, | |||||||||||
| Note | 2022 | 2021 | ||||||||||
| U.S. Dollars in thousands | ||||||||||||
| Assets | ||||||||||||
| CURRENT ASSETS: | ||||||||||||
| Cash and cash equivalents | ||||||||||||
| Prepaid expenses | ||||||||||||
| TOTAL CURRENT ASSETS | ||||||||||||
| NON-CURRENT ASSETS: | ||||||||||||
| Prepaid expenses | ||||||||||||
| Cash held in trust account | ||||||||||||
| TOTAL ASSETS | ||||||||||||
| Liabilities, shares subject to possible redemption and shareholders’ equity (capital deficiency) | ||||||||||||
| CURRENT LIABILITIES: | ||||||||||||
| Accrued expenses | ||||||||||||
| Related Party | ||||||||||||
| TOTAL CURRENT LIABILITIES | ||||||||||||
| LONG TERM LIABILITIES - | ||||||||||||
| Underwriter’s deferred compensation | 7 | |||||||||||
| TOTAL LIABILITIES | ||||||||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||||||
| CLASS A ORDINARY SHARES SUBJECT TO POSSIBLE REDEMPTION: | ||||||||||||
| CAPITAL DEFICIENCY: | 4 | |||||||||||
| Class A ordinary shares, $ | ||||||||||||
| Class B ordinary shares, $ | ||||||||||||
| Preference Shares, $ | ||||||||||||
| Additional paid-in capital | ||||||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||||||
| TOTAL CAPITAL DEFICIENCY | ( | ) | ( | ) | ||||||||
| TOTAL LIABILITIES, SHARES SUBJECT TO POSSIBLE REDEMPTION AND SHAREHOLDERS’ EQUITY (CAPITAL DEFICIENCY) | ||||||||||||
| (*) |
The accompanying notes are an integral part of these unaudited condensed financial statements
.
F-2
CACTUS ACQUISITION CORP. 1 LIMITED
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
Six months ended | Three months | Period
from | ||||||||||
| U.S. Dollars in thousands | ||||||||||||
| Except per share data | ||||||||||||
| OPERATING EXPENSES | ( | ) | ( | ) | ( | ) | ||||||
| INTEREST INCOME | ||||||||||||
| NET LOSS FOR THE PERIOD | ( | ) | ( | ) | ( | ) | ||||||
| ( | ) | |||||||||||
| ( | ) | ( | ) | ( | ) | |||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
F-3
CACTUS ACQUISITION CORP. 1 LIMITED
UNAUDITED CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (CAPITAL DEFICIENCY)
| Ordinary shares | Additional | |||||||||||||||||||
| Number of shares | Par value | paid-in capital | Accumulated Deficit | Total | ||||||||||||||||
| U.S. dollars in thousands (except share data) | ||||||||||||||||||||
| BALANCE AT JANUARY 1, 2022- | ( | ) | ( | ) | ||||||||||||||||
| Subsequent accretion of Class A common stock subject to redemption to redemption amount as of June 30, 2022 | ( | ) | ( | ) | ||||||||||||||||
| Net loss for the period | ( | ) | ( | ) | ||||||||||||||||
| BALANCE AT JUNE 30, 2022 | ( | ) | ( | ) | ||||||||||||||||
| BALANCE AT April 1, 2022- | ( | ) | ( | ) | ||||||||||||||||
| Subsequent accretion of Class A common stock subject to redemption to redemption amount as of June 30, 2022 | ( | ) | ( | ) | ||||||||||||||||
| Net loss for the period | ( | ) | ( | ) | ||||||||||||||||
| BALANCE AT JUNE 30, 2022 | ( | ) | ( | ) | ||||||||||||||||
| CHANGES DURING THE PERIOD FROM APRIL 19, 2021 (INCEPTION) TO JUNE 30, 2021: | ||||||||||||||||||||
| Issuance of Class B Ordinary Shares to the Sponsor (note 3) | ||||||||||||||||||||
| Net loss for the period | - | ( | ) | ( | ) | |||||||||||||||
| BALANCE AT JUNE 30, 2021 | ( | ) | ( | ) | ||||||||||||||||
| (*) |
The accompanying notes are an integral part of these unaudited condensed financial statements.
F-4
CACTUS ACQUISITION CORP. 1 LIMITED
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
| Six months ended June 30, 2022 | Period from April 19, 2021 (inception) to June 30, 2021 | |||||||
| U.S. Dollars in thousands | ||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss for the period | ( | ) | ( | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Decrease in prepaid expenses | ||||||||
| Increase (decrease) in accrued expenses | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Issuance of Class B Ordinary Shares | ||||||||
| Proceeds from a promissory note – related party | ||||||||
| Net cash provided by financing activities | ||||||||
| NET CHANGE IN CASH, CASH EQUIVALENTS AND CASH HELD IN A TRUST ACCOUNT | ( | ) | ||||||
| CASH, CASH EQUIVALENTS AND CASH HELD IN A TRUST ACCOUNT AT BEGINNING OF THE PERIOD | ||||||||
| CASH, CASH EQUIVALENTS AND CASH HELD IN A TRUST ACCOUNT AT END OF THE PERIOD | ||||||||
| RECONCILIATION OF CASH, CASH EQUIVALENTS AND CASH AND CASH EQUIVALENTS HELD IN TRUST ACCOUNT: | ||||||||
| Cash and cash equivalents | ||||||||
| Cash held in trust account | ||||||||
| CASH, CASH EQUIVALENTS AND CASH AND CASH EQUIVALENTS HELD IN TRUST ACCOUNT AT END OF THE PERIOD | ||||||||
| SUPPLEMENTARY INFORMATION REGARDING NON-CASH ACTIVITIES: | ||||||||
| Deferred offering costs | ( | ) | ||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
F-5
CACTUS ACQUISITION CORP. 1 LIMITED
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS:
| a. | Organization and General |
Cactus Acquisition Corp. 1 Limited (hereafter – the Company) is a blank check company, incorporated on April 19, 2021 as a Cayman Islands exempted company, formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination (hereafter – the Business Combination).
Although the Company is not limited to a particular industry or geographic region for the purpose of consummating a Business Combination, the Company intends to focus its search on Israeli technology-based life science businesses or industries, that are domiciled in Israel, that carry out all or a substantial portion of their activities in Israel, or that have some other significant Israeli connection.
The Company is an early stage and an emerging growth company, and as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
All activity for the period from inception through June 30, 2022 relates to the Company’s formation, its initial public offering (the “Public offering”) described below and its search for a target company. The Company generates interest income on proceeds held in the trust account derived from the Public Offering and the private placement (as defined below in Note 3).
| b. | Sponsor and Financing |
The Company’s sponsor is Cactus Healthcare Management, L.P., a Delaware limited partnership (the “Sponsor”).
The registration statement relating
to the Company’s Public Offering was declared effective by the United States Securities and Exchange Commission (the “SEC”)
on October 28, 2021.
| c. | The Trust Account |
The proceeds held in the Trust Account
are invested in money market funds registered under the Investment Company Act and compliant with Rule 2a-7 thereof that maintain a stable
net asset value of $
F-6
CACTUS ACQUISITION CORP. 1 LIMITED
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (continued)
NOTE 1 - GENERAL (continued):
| d. | Initial Business Combination |
The Company’s management has
broad discretion with respect to the specific application of the net proceeds of the Public Offering, although substantially all of the
net proceeds of the Public Offering are intended to be generally applied toward consummating an initial Business Combination. The initial
Business Combination must occur with one or more operating businesses or assets with a fair market value equal to at least
The Company, after signing a definitive
agreement for an Initial Business Combination, will provide its public shareholders the opportunity to redeem all or a portion of their
shares upon the completion of the initial Business Combination, either (i) in connection with a shareholder meeting called to approve
the business combination or (ii) by means of a tender offer. However, in no event will the Company redeem its public shares in an amount
that would cause its net tangible assets to be less than $
If the Company holds a shareholder vote or there is a tender offer for shares in connection with an initial Business Combination, a public shareholder will have the right to redeem its shares for an amount in cash equal to its pro rata share of the aggregate amount then on deposit in the Trust Account, calculated as of two days prior to the general meeting or commencement of the Company’s tender offer, including interest but less taxes payable. As a result, the Company’s Class A ordinary shares are recorded at redemption amount and classified as temporary equity upon the completion of the Public Offering, in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, “Distinguishing Liabilities from Equity.”
| e. | Substantial Doubt about the Company’s Ability to Continue as a Going Concern |
The Company has until May 2, 2023 (hereafter – the Mandatory Liquidation Date) to consummate an Initial Business Combination. If a business combination is not consummated by this date, there will be a mandatory liquidation and subsequent dissolution of the Company. The Company intends to complete an Initial Business Combination before the Mandatory Liquidation Date. However, there can be no assurance that the Company will be able to consummate any business combination ahead of the Mandatory Liquidation Date, nor that they will be able to raise sufficient funds to complete an Initial Business Combination. These matters raise substantial doubt about the Company’s ability to continue as a going concern, for the subsequent twelve months following the issuance date of these financial statements.
No adjustments have been made to the carrying amounts of assets or liabilities should the Company fail to obtain financial support in its search for an Initial Business Combination, nor if it is required to liquidate after the Mandatory Liquidation Date.
F-7
CACTUS ACQUISITION CORP. 1 LIMITED
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (continued)
NOTE 1 - GENERAL (continued):
| f. | Emerging Growth Company |
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 a 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.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES:
The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (hereafter – U.S. GAAP) and the regulations of the Securities Exchange Commission (hereafter – SEC). The significant accounting policies used in the preparation of the financial statements are as follows:
Basis of Presentation
The Company’s unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the rules and regulations of the SEC for interim financial information and the instructions to Form 10-Q.
Certain disclosures included in the financial statements as of, and for the period from April 19, 2021 to, December 31, 2021, have been condensed or omitted from these financial statements as they are not required for interim financial statements under U.S. GAAP and the rules of the SEC. These unaudited condensed financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. These adjustments are of a normal, recurring nature. Interim period operating results may not be indicative of the operating results for a full year.
These unaudited condensed financial statements should be read in conjunction with the Company’s audited financial statements.
The accounting policies applied in the preparation of the unaudited condensed financial statements are consistent with those applied in the preparation of the annual financial statements as of December 31, 2021.
F-8
CACTUS ACQUISITION CORP. 1 LIMITED
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (continued)
NOTE 3 - PUBLIC OFFERING
In the Initial Public Offering, the
Company issued and sold
Each Unit consists of one Class A ordinary
share, $
Once the Public Warrants become exercisable,
the Company may redeem them in whole and not in part at a price of $
The Warrants sold in the Private Placement (the “Private Warrants”) are identical to the Public Warrants except that the Private Warrants, for so long as they are held by the Sponsor or its respective affiliates: (1) will not be redeemable by the Company; (2) may not (including the Class A ordinary shares issuable upon exercise of those warrants), subject to certain limited exceptions, be transferred, assigned or sold by the holders thereof until 30 days after the completion of the Company’s initial Business Combination; (3) they (including the Class A ordinary shares issuable upon exercise thereof) are entitled to registration rights with respect to the resale thereof.
The Company paid an underwriting commission
of
NOTE 4 - CAPITAL DEFICIENCY:
| a. | Ordinary Shares |
Class A ordinary shares
The Company is authorized to issue up
to
F-9
CACTUS ACQUISITION CORP. 1 LIMITED
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (continued)
NOTE 4 - CAPITAL DEFICIENCY (continued):
Class B ordinary shares
The Company is authorized to issue up
to
Class B ordinary shares are convertible into Class A ordinary shares, on a one-to-one basis, at any time and from time to time at the option of the holder, or automatically on the day of the business combination. Class B ordinary shares also possess the sole right to vote for the election or removal of directors, until the consummation of an initial business combination.
| b. | Preference shares |
The Company is authorized to issue up
to
NOTE 5 - EARNINGS (LOSS) PER SHARE:
| a. | Basic |
As of June 30, 2022, the Company had two classes of ordinary shares, Class A ordinary shares and Class B ordinary shares. In order to determine the net loss attributable to each class, the Company first considered the total earnings (loss) allocable to both sets of shares. This is calculated using the total earnings (loss) less any Interest Earned on Investments Held in Trust Account. The accretion to redemption value of the Class A ordinary shares subject to possible redemption is fully allocated to the Class A ordinary shares subject to redemption.
| Six months ended June 30, 2022 | Three months ended June 30, 2022 | Period from April 19 (inception), 2021 to June 30, 2021 | ||||||||||
U.S. dollars in thousands (except share data) | ||||||||||||
| Net loss attributable to Class A ordinary shareholders | ( | ) | ( | ) | ||||||||
| Accretion on Class A ordinary shares subject to possible redemption | ||||||||||||
| ( | ) | |||||||||||
| Weighted average of class A ordinary shares subject to possible redemption | ||||||||||||
| Basic and diluted loss per Class A ordinary share | ( | ) | ||||||||||
| Loss attributable to Class B ordinary shareholders | ( | ) | ( | ) | ( | ) | ||||||
| Weighted average of Class B ordinary shares outstanding | ||||||||||||
| Basic and diluted (loss) per Class B ordinary share | ( | ) | ( | ) | ( | ) | ||||||
F-10
CACTUS ACQUISITION CORP. 1 LIMITED
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (continued)
NOTE 5 - LOSS PER SHARE (continued):
For the calculation of loss per share, the Company used the weighted average number of each of the Company’s ordinary shares issued and outstanding, divided by the earnings (loss) attributable to the shareholders of each class. The number of shares used in the calculation is the weighted average number of each class’ shares issued and outstanding for the period ended June 30, 2022.
| b. | Diluted |
As of June 30, 2022, the Company did not have any dilutive securities or any other contracts which could, potentially, be exercised or converted into ordinary shares and then share in the earnings of the Company.
NOTE 6 - RELATED PARTY TRANSACTIONS:
Administrative Services Agreement
On
May 21, 2021, the Company signed an agreement with the Sponsor, under
which the Company shall pay the Sponsor a fixed $
Promissory note
On March 16,
2022, the Company signed a convertible promissory note under which it can borrow up to a $
NOTE 7 - COMMITMENTS AND CONTINGENCIES
Underwriters’ Deferred Compensation
Under the Underwriting Agreement, the
Company shall pay an additional fee (the “Deferred Underwriting Compensation”) of
F-11
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited condensed financial statements and related notes appearing elsewhere in this Quarterly Report, and our audited financial statements and related notes thereto as of, and for the period from April 19, 2021 (inception) to, December 31, 2021, included in the 2021 Annual Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our initial business combination, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of the 2021 Annual Report, as updated by the “Risk Factors” in Part II, Item 1A of this Quarterly Report, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Overview
We are a blank check company incorporated as a Cayman Islands exempted company and incorporated for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses. We completed our initial public offering in November 2021, and since that time, we have engaged in discussions with potential business combination target companies; we have not, however, as of yet, reached a definitive agreement with a specific target company with respect to an initial business combination with us. We intend to effectuate our initial business combination using (i) cash from the proceeds of our initial public offering and the private placement of the private warrants, (ii) cash from a new financing involving the sale of our shares and/or other equity, (iii) cash from one or more debt financings, and/or (iv) issuance of shares by our company to target company shareholders or by the target company to our shareholders.
The issuance of additional ordinary shares in a business combination:
| ● | may significantly dilute the equity interest of investors in our initial public offering, which dilution would increase if the anti-dilution provisions of the Class B ordinary shares result in the issuance of Class A ordinary shares on a greater than one-to-one basis upon conversion of the Class B ordinary shares; |
| ● | may subordinate the rights of holders of Class A ordinary shares if preference shares are issued with rights senior to those afforded our Class A ordinary shares; |
| ● | could cause a change of control if a substantial number of our Class A ordinary shares are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors; |
| ● | may have the effect of delaying or preventing a change of control of us by diluting the share ownership or voting rights of a person seeking to obtain control of us; and |
| ● | may adversely affect prevailing market prices for our Class A ordinary shares, warrants and/or public units. |
Similarly, if we issue debt securities or otherwise incur significant indebtedness, it could result in:
| ● | default and foreclosure on our assets if our operating revenues after an initial business combination are insufficient to repay our debt obligations; |
| ● | acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require compliance with certain financial ratios or reserves without a waiver or renegotiation of the relevant covenant; |
2
| ● | our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand; |
| ● | our inability to obtain necessary additional financing if the debt security contains covenants restricting our ability to obtain such financing while the debt security is issued and outstanding; |
| ● | our inability to pay dividends on our Class A ordinary shares; |
| ● | using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our Class A ordinary shares if declared, payment of expenses, capital expenditures, acquisitions and other general corporate purposes; |
| ● | limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we will operate; |
| ● | increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; and |
| ● | limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, execution of our strategy and other purposes and other disadvantages compared to our competitors who have less debt. |
As indicated in the accompanying financial statements, at June 30, 2022 and December 31, 2021 we had approximately $537,000 and $975,000 of cash, respectively, and approximately $761,000 and $1,068,000 of working capital, respectively. Further, we expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete our initial business combination or a related capital-raise will be successful.
Results of Operations and Known Trends or Future Events
We have not engaged in any revenue-generating operations to date. Our only activities since inception have been organizational activities, preparations for our initial public offering, and, subsequent to our initial public offering, searching for, and due diligence related to, potential target companies with which to consummate a business combination transaction. We have not and we will not generate any operating revenues until after completion of our initial business combination. We generate non-operating income in the form of interest income on funds held in our trust account after our initial public offering. There has been no significant change in our financial or trading position and no material adverse change has occurred since the June 30, 2022 date of our financial statements contained in this Quarterly Report. After our initial public offering, which was consummated in November 2021, we have been incurring increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses related to our search for a target company.
Liquidity and Capital Resources
We have incurred and expect to continue to incur significant costs in pursuit of our financing and acquisition plans. Our management expects that the proceeds of our initial public offering, together with proceeds from additional loans from our sponsor, if necessary (as described below), will suffice to cover our working capital needs until our initial business combination. We cannot assure you that our plans to consummate, or to finance our preparations for, an initial business combination will be successful.
Prior to the completion of our initial public offering, our liquidity needs were satisfied from the availability of up to $300,000 in loans from our sponsor under an unsecured promissory note. After having borrowed the full $300,000 under that promissory note, we repaid that amount upon the closing of our initial public offering, and as of June 30, 2022, no amounts remained outstanding under that note.
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In order to fund potential working capital deficiencies or finance transaction costs in connection with our intended initial business combination, our sponsor, together with its three primary limited partners (Clal Biotechnology Industries, Israel Biotech Fund and Consensus Business Group (via its affiliate, Kalistcare Ltd.)), have committed to funding us, in equal amounts among those limited partners, an aggregate of up to $450,000, as may be required by us. If we complete our initial business combination, we would repay such loaned amounts. In the event that our initial business combination does not close, we may use a portion of the working capital held outside of the trust account to repay such loaned amounts, but no proceeds from our trust account would be used for such repayment. In lieu of cash repayment, upon the closing of our initial business combination, up to $1,500,000 of loans from our sponsor and its affiliates (including the foregoing $450,000 amount) may be converted into warrants at a price of $1.50 per warrant at the option of the lender. The warrants would be identical to the private warrants issued to our sponsor. As of June 30, 2022 and as of the date of this Quarterly Report, there are no amounts outstanding under any such loans from our sponsor or its affiliates. We do not expect to seek loans from parties other than our sponsor or an affiliate of our sponsor, as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our trust account.
The net proceeds from (i) the sale of the units in our initial public offering, including due to the underwriters’ exercise, in full, of their over-allotment option, after deducting offering expenses of approximately $1,128,000 and underwriting commissions of $2,530,000 (but excluding a deferred underwriting fee of $4,427,500 that will be payable to the representatives of the underwriters upon (and subject to) the consummation of our initial business combination transaction), and (ii) the sale of the private warrants for a purchase price of $7,300,000, was, in the aggregate, $130,142,000. Of that amount, $129,030,000 (including up to $4,427,500 as a deferred underwriting fee to be payable to the representatives of the underwriters upon (and subject to) the consummation of our initial business combination transaction) was deposited into a non- interest-bearing trust account. The funds in the trust account are invested only in specified U.S. government treasury bills or in specified money market funds. We may withdraw interest from the trust to pay taxes, if any. Our annual income tax obligations depend on the amount of interest and other income earned on the amounts held in the trust account. The remaining $1,112,000 from the IPO and private placement proceeds was placed into our bank account outside of the trust account, and after we have incurred and paid operating expenses of $575,000 following the IPO, the cash on hand balance in that bank account as of June 30, 2022 was $537,000.
We intend to use substantially all of the funds held in the trust account, including any amounts representing interest earned on the trust account (which interest shall be net of taxes payable and excluding potential fees to be payable to the underwriters for advisory services in connection with our initial business combination transaction), minus amounts paid out to redeeming shareholders, as consideration to complete our initial business combination. To the extent that our ordinary shares or debt is used, in whole or in part, as consideration to complete our initial business combination, the remaining proceeds held in the trust account (less any amounts paid out to redeeming shareholders) will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
Prior to our initial business combination, we are using the proceeds held outside of the trust account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, structure, negotiate and complete a business combination, pay for administrative and support services, and pay taxes to the extent the interest earned on the trust account is not sufficient to pay our taxes.
Our primary anticipated liquidity requirements during our post-initial public offering, pre-business combination period include approximately: $400,000 for legal, accounting, due diligence, travel and other expenses associated with structuring, negotiating and documenting any business combinations; $300,000 for legal and accounting fees related to regulatory reporting requirements, including Nasdaq and other regulatory fees; $180,000 for administrative and support services; and $232,000 for working capital that is being used for miscellaneous expenses and reserves.
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These amounts are estimates and may differ materially from our actual expenses. In addition, we could use a portion of the funds not being placed in trust to pay commitment fees for financing, fees to consultants to assist us with our search for a target business or as a down payment or to fund a “no-shop” provision (a provision designed to keep target businesses from “shopping” around for transactions with other companies on terms more favorable to such target businesses) with respect to a particular proposed business combination, although we do not have any current intention to do so. If we entered into an agreement where we paid for the right to receive exclusivity from a target business, the amount that would be used as a down payment or to fund a “no-shop” provision would be determined based on the terms of the specific business combination and the amount of our available funds at the time. Our forfeiture of such funds (whether as a result of our breach or otherwise) could result in our not having sufficient funds to continue searching for, or conducting due diligence with respect to, prospective target businesses.
Because of the anticipated costs of identifying a target business, undertaking in-depth due diligence and negotiating an initial business combination, as noted above, we have secured up to $450,000 of sponsor/affiliate loans. While we anticipate that these loans will suffice for the period leading up to our initial business combination, the costs of identifying a target business, undertaking in-depth due diligence and negotiating and consummating an initial business combination may be greater than what we currently estimate would be needed to do so. Consequently, we may have insufficient funds available to operate our business prior to our initial business combination. If we are unable to complete our initial business combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the trust account. That required liquidation date would be less than 12 months after the date of this Quarterly Report. That, among other factors, raises substantial doubt about our ability to continue as a going concern.
Moreover, we will likely need to obtain additional financing (either by issuing additional securities or incurring debt) to operate the combined company following our initial business combination, in part because we may become obligated to redeem a significant number of our public shares upon completion of our initial business combination. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of our business combination. We cannot assure you that our plans for that financing or to consummate an initial business combination will be successful.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of June 30, 2022. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay the sponsor a monthly fee of $10,000 for office space, and administrative and support services, provided to our company. We will continue to incur those monthly fees until the earlier of the completion of a business combination and our company’s liquidation. We are also obligated to pay a deferred underwriting fee of $4,427,500 to the representatives of the underwriters of our IPO upon— and subject to— the consummation of our initial business combination transaction.
Critical Accounting Estimates
None.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The net proceeds from our initial public offering and the sale of the private warrants held in the trust account are invested in U.S. government treasury bills with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act, which invest only in direct U.S. government treasury obligations. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this Quarterly Report, is recorded, processed, summarized, and reported within the time period specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. Our management evaluated, with the participation of our chief executive officer and chief financial officer, whom we refer to as our Certifying Officers, the effectiveness of our disclosure controls and procedures as of June 30, 2022, pursuant to Rule 13a-15(b) or Rule 15d-15(b) under the Exchange Act. Based upon that evaluation, our Certifying Officers concluded that, as of June 30, 2022 our disclosure controls and procedures were effective.
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 1A. RISK FACTORS.
Factors that could cause our actual results to differ materially from those in this report include the risk factors described in our 2021 Annual Report. As of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in our 2021 Annual Report filed with the SEC, except as described below:
The notes to the condensed financial statements included in this Quarterly Report contain an explanatory paragraph that expresses substantial doubt about our ability to continue as a “going concern.”
We cannot assure you that our plans to consummate an initial business combination will be successful, which is in part dependent on our ability to obtain sufficient financing for the company that continues after that business combination. The market for financings of companies emerging from a business combination with a SPAC has become very tight in the last several months. In the absence of such a business combination transaction, our company will cease to exist after 18 months have passed from the closing date of our initial public offering, which would occur less than 12 months following the date of this Quarterly Report. The short-term expiration date for our company raises substantial doubt about our ability to continue as a going concern. The financial statements contained in Part 1, Item 1 of this Quarterly Report do not include any adjustments that might result from our inability to consummate a business combination or our inability to continue as a going concern.
Our search for a business combination, and any target business with which we ultimately consummate a business combination, may be materially adversely affected by unfavorable macro-economic trends or by the ongoing invasion of the Ukraine by Russia.
The coronavirus (COVID-19) pandemic, together with actions taken to counter-act its impact, have, in large part, triggered certain adverse macro-economic trends that threaten the improved economic outlook achieved in its aftermath. Specifically, supply chain delays and rising shipping costs, along with significant inflationary pressures due to the infusion of money into circulation as part of a “loose” monetary policy designed to ease economic conditions during the pandemic, now threaten global economic prosperity. Many governments and central banks have responded by raising interest rates in order to curb inflationary pressures, which, in turn, has hurt financial markets and made it more difficult for companies to raise capital. The extent to which these trends impact our search for a business combination, or the financial condition of our post-business combination company (assuming that we successfully locate a target company and consummate a business combination), depends on present and future developments in the industry in which we are searching for target companies, which developments are highly uncertain and cannot be predicted.
In a similar manner, Russia’s invasion of the Ukraine could also have an adverse effect on our ability to consummate a business combination transaction or on the operations of the target business with which we combine. That invasion may result in increased costs of compliance, restrictions on our target business’ ability to sell into specific regions, higher volatility in foreign currency exchange rates, increased use of less cost-efficient resources and negative impacts to our target business. The invasion may also cause a deterioration in general economic conditions, which may adversely impact our access to financing for the combined company upon the consummation of a business combination, thereby frustrating our ability to effect that combination.
If the disruptions posed by unfavorable macro-economic conditions, Russia’s invasion of the Ukraine, or other matters of global concern continue for a further extensive period of time, our ability to consummate a business combination, or the operations of a target business with which we ultimately consummate a business combination, may be materially adversely affected.
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Changes in SEC rules affecting special purpose acquisition companies may adversely affect our ability to negotiate and complete our initial business combination.
Our consummation of a business combination may be contingent upon our ability to comply with certain laws, regulations, interpretations and applications, and any post-business combination company may be subject to additional laws, regulations, interpretations and applications. Compliance with the foregoing may be difficult, time consuming and costly. Laws and regulations and their interpretation and application may also change from time to time, and those changes could have a material adverse effect on our business, including our ability to negotiate and complete an initial business combination.
On March 30, 2022, the SEC issued proposed rules relating to, among other items, disclosures in business combination transactions involving special purpose acquisition companies, or SPACs, and private operating companies; the financial statement requirements applicable to transactions involving shell companies; the use of projections in SEC filings in connection with proposed business combination transactions; the potential liability of certain participants in proposed business combination transactions; and the extent to which SPACs could become subject to regulation under the Investment Company Act of 1940, as amended, including a proposed rule that would provide SPACs a safe harbor from treatment as an investment company if they satisfy certain conditions that limit a SPAC’s duration, asset composition, business purpose and activities. These rules, if adopted, whether in the form proposed or in a revised form, may increase the costs of and the time needed to negotiate and complete an initial business combination, and may constrain the circumstances under which we could complete an initial business combination.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
On October 28, 2021, the Registration Statements on Form S-1 (File No.’s 333-258042 and 333-260567) relating to our IPO were declared effective by the SEC. For a description of the use of the proceeds generated in our IPO, see Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations— Liquidity and Capital Resources” of this Form 10-Q. The use of net proceeds from our IPO described herein does not reflect a material change in the expected use of such proceeds as described in our final prospectus for the IPO.
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.
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
| * | Filed herewith. |
| ** | Furnished. |
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SIGNATURES
Pursuant to the requirements of Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Cactus Acquisition Corp. 1 Limited | ||
| Date: August 15, 2022 | /s/ Ofer Gonen | |
| Name: | Ofer Gonen | |
| Title: | Chief Executive Officer and Director | |
| (Principal Executive Officer) | ||
| Date: August 15, 2022 | /s/ Stephen T. Wills | |
| Name: | Stephen T. Wills | |
| Title: | Chief Financial Officer | |
| (Principal Financial and Accounting Officer) | ||
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