QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
(Address of principal executive offices) |
(Zip Code) | |
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
one-half of one Redeemable Warrant |
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| Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
| ☒ | Smaller reporting company | |||||
| Emerging growth company | ||||||
ENTERPRISE 4.0 TECHNOLOGY ACQUISITION CORP.
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2023
TABLE OF CONTENTS
i
March 31, |
December 31, |
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2023 |
2022 |
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| ASSETS |
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| Current assets |
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| Cash |
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| Prepaid expenses and other current assets |
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| Total Current Assets |
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| Cash and investments held in Trust Account |
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| TOTAL ASSETS |
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$ |
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| LIABILITIES AND SHAREHOLDERS’ DEFICIT |
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| Current Liabilities |
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| Accrued expenses |
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| Advances from related parties |
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| Total Current Liabilities |
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| Sponsor Loan |
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| Deferred underwriting fee payable |
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| TOTAL LIABILITIES |
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| Commitments |
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| Class A ordinary shares subject to redemption; |
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| Shareholders’ Deficit |
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| Preference shares, $ |
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| Class A ordinary shares, $ |
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| Class B ordinary shares, $ |
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| Accumulated deficit |
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| Total Shareholders’ Deficit |
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| TOTAL LIABILITIES, CLASS A ORDINARY SHARES SUBJECT TO REDEMPTION AND SHAREHOLDERS’ DEFICIT |
$ |
$ |
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Three Months Ended March 31, |
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2023 |
2022 |
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Formation and operating costs |
$ | $ | ||||||
Loss from operations |
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Other income: |
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Interest earned on Investments held in Trust Account |
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Net income (loss) |
$ |
$ |
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Weighted average shares outstanding of Class A ordinary shares |
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Basic and diluted net income (loss) per share, Class A ordinary shares |
$ |
$ |
( |
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Weighted average shares outstanding of Class B ordinary shares |
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Basic and diluted net income (loss) per share, Class B ordinary shares |
$ |
$ |
( |
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Class A Ordinary Shares |
Class B Ordinary Shares |
Additional Paid-in |
Accumulated |
Total Shareholders’ |
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Shares |
Amount |
Shares |
Amount |
Capital |
Deficit |
Deficit |
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Balance — January 1, 2023 |
$ |
$ |
$ |
$ |
( |
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$ |
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Accretion of Class A Ordinary Shares Subject to Redemption |
— | — | — | — | ( |
) | ( |
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Net income |
— | — | — | — | — | |||||||||||||||||||||||
Balance — March 31, 2023 |
$ |
$ |
$ | $ |
( |
) |
$ |
( |
) | |||||||||||||||||||
Class A Ordinary Shares |
Class B Ordinary Shares |
Additional Paid-in |
Accumulated |
Total Shareholders’ |
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Shares |
Amount |
Shares |
Amount |
Capital |
Deficit |
Deficit |
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Balance — January 1, 2022 |
$ |
$ |
$ |
$ |
( |
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$ |
( |
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Net loss |
— | — | — | — | — | ( |
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Balance — March 31, 2022 |
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Three Months Ended March 31, 2023 |
Three Months Ended March 31, 2022 |
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Cash Flows from Operating Activities: |
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Net income (loss) |
$ | $ | ( |
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Adjustments to reconcile net income (loss) to net cash used in operating activities: |
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Interest earned on investments held in Trust Account |
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Changes in operating assets and liabilities: |
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Prepaid expenses and other current assets |
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Accrued expenses |
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Net cash used in operating activities |
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Cash Flows from Financing Activities: |
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Advances from related party |
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Net cash provided by financing activities |
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Net Change in Cash |
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Cash – Beginning |
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Cash – Ending |
$ |
$ |
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| Gross proceeds |
$ | |||
| Less: |
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| Proceeds allocated to Public Warrants |
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| Class A ordinary shares issuance costs |
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| Plus: |
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| Accretion of carrying value to redemption value |
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| Class A ordinary shares subject to possible redemption, December 31, 2022 |
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| Plus: |
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| Accretion of carrying value to redemption value |
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| Class A ordinary shares subject to possible redemption, March 31, 2023 |
$ |
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Three Months Ended March 31, 2023 |
Three Months Ended March 31, 2022 |
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Class A |
Class B |
Class A |
Class B |
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Basic and diluted income (loss) per ordinary share |
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Numerator: |
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Allocation of net income (loss) |
$ | $ | $ | ( |
) | $ | ( |
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Denominator: |
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Basic and diluted weighted average shares outstanding |
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Basic and diluted net income (loss) per ordinary share |
$ | $ | $ | ( |
) | $ | ( |
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| • | Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; |
| • | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
| • | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
| • | in whole and not in part; |
| • | at a price of $ |
| • | upon a minimum of 30 days’ prior written notice of redemption to each warrant holder; and |
| • | If, and only if, the closing price of the Class A ordinary shares equals or exceeds $ per share (as adjusted) for any 20 trading days within a 30-trading day period ending three trading days before the date on which the Company sends the notice of redemption to the warrant holders. |
| Level 1: | Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. | |
| Level 2: | Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active. | |
| Level 3: | Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability. | |
Held-To-Maturity |
Level |
Amortized Cost |
Gross Holding Gain (Loss) |
Fair Value |
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December 31, 2022 |
U.S. Treasury Securities (Mature on 02/23/2023) |
1 | $ | $ | $ | |||||||||||||
Description |
Level |
December 31, 2022 |
March 31, 2023 |
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Assets: |
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Investments held in Trust Account – U.S. Treasury Securities Money Market Fund |
1 | $ | $ | |||||||||
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Note Regarding Forward-Looking Statements
All statements other than statements of historical fact included in this Quarterly Report on Form 10-Q (this “Report”), including, without limitation, statements in this section regarding our financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. When used in this Report, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions, as they relate to us or our management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors detailed in our filings with the SEC. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety by this paragraph.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto included in this Report under “Item 1. Financial Statements.”
Overview
We are a blank check company incorporated in the Cayman Islands on May 3, 2021 formed for the purpose of effecting a merger, amalgamation, share exchange, asset acquisition, share purchase, reorganization or other similar Business Combination with one or more businesses. We intend to effectuate our initial Business Combination using cash derived from the proceeds of the Initial Public Offering and the sale of the Placement Warrants, our shares, debt or a combination of cash, shares and debt. We are not limited to a particular industry or sector for purposes of completing a Business Combination although we previously focused our search within the technology industry along the trendlines set by a new wave of cloud native companies that combine artificial intelligence, intelligent automation and proprietary access to data to deliver actionable insights for enterprise businesses. As previously disclosed by the Company, the Board has determined, for commercial and other reasons, to change the focus of the Company’s search for a Business Combination. The Company is currently focusing its search within the life sciences industry. We are an early stage and emerging growth company and, as such, we are subject to all of the risks associated with early stage and emerging growth companies.
We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a Business Combination will be successful.
Recent Developments
On April 20, 2023, we held the Extension Meeting at which our shareholders approved an amendment to the our Amended and Restated Memorandum and Articles of Association to (i) extend the date by which we must consummate our initial Business Combination from April 21, 2023 to October 21, 2023 (or such earlier date as determined by the Board) and (ii) provide for the right of a holder of Class B ordinary shares to convert such shares into Class A ordinary shares on a one-for-one basis at any time prior to the closing of the initial Business Combination at the option of such holder of Class B ordinary shares. The Company filed the Charter Amendment with the Secretary of State of the State of Delaware on April 21, 2023.
In connection with the vote to approve the Extension Amendment Proposal, holders of 23,233,981 Class A ordinary shares properly exercised their right to redeem their shares for cash at a redemption price of approximately $10.49 per share, for an aggregate redemption amount of approximately $243,620,483.
Following the approval of the Extension Amendment Proposal, on April 20, 2023, the Company issued the Extension Note in the aggregate principal amount of up to $900,000 to the Sponsor, pursuant to which the Sponsor agreed to loan to the Company up to $900,000 to deposit into the Trust Account for the Public Shares that were not redeemed in connection with the extension of the Company’s termination date from April 21, 2023 to October 21, 2023 (or such earlier date as determined by the Board).
The Company will deposit $150,000 into the Trust Account for each calendar month (commencing on April 21, 2023 and ending on the 21st day of each subsequent month), or portion thereof, that is needed by the Company to complete an initial Business Combination until October 21, 2023, and such amount will be distributed either to: (i) all of the holders of Public Shares upon the Company’s liquidation or (ii) holders of Public Shares who elect to have their shares redeemed in connection with the consummation of the initial Business Combination. $150,000 was deposited into the Trust Account on April 21, 2023.
The Extension Note bears no interest and is repayable in full upon the date of the consummation of the initial Business Combination or the liquidation of the Company. Notwithstanding, as the Sponsor’s election at any time prior to payment in full of the principal balance of the Extension Note, the Sponsor may elect to convert the unpaid principal balance of this Extension Note into that number of units, each unit consisting of one Class A ordinary share of the Company and one half of one warrant, each whole warrant exercisable for one Class A ordinary share of the Company, equal to: (x) the portion of the principal amount of this Extension Note being converted pursuant to the Extension Note, divided by (y) $10.00, rounded up to the nearest whole number of units.
The foregoing description is qualified in its entirety by reference to the Extension Note, a copy of which is included as Exhibit 10.1 to this Report and is incorporated herein by reference.
In addition, on April 21, 2023, we issued an aggregate of 7,499,999 Class A ordinary shares to the Sponsor upon the conversion of an equal number of the Company’s Class B ordinary share held by the Sponsor. The 7,499,999 Class A ordinary shares issued in connection with the Conversion are subject to the same restrictions as applied to the Class B ordinary shares before the Conversion, including, among others, certain transfer restrictions, waiver of redemption rights and the obligation to vote in favor of an initial Business Combination as described in the prospectus for the Initial Public Offering.
Results of Operations
We have neither engaged in any operations nor generated any operating revenues to date. Our only activities from inception through March 31, 2023 were organizational activities and those necessary to prepare for the Initial Public Offering, described below, and following the Initial Public Offering, identifying a target company for a Business Combination. We do not expect to generate any operating revenues until after the completion of our initial Business Combination. We expect to generate non-operating income in the form of interest income on marketable securities held after the Initial Public Offering. We expect that we will incur 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 in connection with searching for, and completing, a Business Combination.
For the three months ended March 31, 2023, we had a net income of $3,045,536, which consisted of interest earned on investment held in the Trust Account of $3,339,414, offset by operating expense of $293,878.
For the three months ended March 31, 2022, we had a net loss of $147,258, which consisted of operating expenses of $213,017, offset by interest earned on investment held in the Trust Account of $65,759.
Liquidity and Capital Resources
On October 21, 2021, we consummated our initial public offering of 30,000,000 units, including 3,900,000 Units issued pursuant to the partial exercise of the underwriters’ over-allotment option. Each Unit consists of one Public Share and one-half of one redeemable Public Warrant, with each whole warrant entitling the holder thereof to purchase one Class A ordinary share for $11.50 per share. The Units were sold at a price of $10.00 per Unit, generating gross proceeds of $300,000,000. Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 700,000 Placement Units at a price of $10.00 per Placement Unit in a private placement to our Sponsor and the representatives of the underwriters, generating gross proceeds of $7,000,000.
Following the Initial Public Offering and the sale of the Placement Units and the Sponsor Loan from the Sponsor to the Company of $6,220,000 as of the closing date of the Initial Public Offering, a total of $306,000,000 was placed in the Trust Account. We incurred transaction costs of $17,078,457, consisting of $5,220,000 of underwriting fees, and $11,280,000 of deferred underwriting fees and $578,457 of other offering costs.
17
For the three months ended March 31, 2023, net cash used in operating activities was $225,148. Net income of $3,045,536 was affected by interest earned on marketable securities of $3,339,414. Changes in operating assets and liabilities provided $68,730 of cash from operating activities.
For the three months ended March 31, 2022, net cash used in operating activities was $129,370. Net loss of $147,258 was affected by interest earned on marketable securities of $65,759. Changes in operating assets and liabilities provided $83,647 of cash from operating activities.
At March 31, 2023, we had cash and marketable securities held in the Trust Account of $313,876,112. We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account, which interest shall be net of taxes payable and excluding deferred underwriting commissions, to complete our initial Business Combination. We may withdraw interest from the Trust Account to pay taxes, if any. To the extent that our share capital or debt is used, in whole or in part, as consideration to complete a Business Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
At March 31, 2023, we had cash of $8,980 held outside of the Trust Account. We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, structure, negotiate and complete a Business Combination.
To finance transaction costs in connection with an initial Business Combination, our Sponsor or an affiliate of our Sponsor or certain of the Company’s directors and officers may, but are not obligated to, loan the Company funds as may be required. If the Company completes an initial Business Combination, the Company will repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. If an initial Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans, but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. The Working Capital Loans would either be repaid upon consummation of an initial Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of such Working Capital Loans may be convertible into units of the post-Business Combination entity at a price of $10.00 per unit. The Working Capital Units would be identical to the Placement Units. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans.
Going Concern
We will need to raise additional capital through loans or additional investments from our Sponsor, shareholders, officers, directors, or third parties. Our officers, directors and Sponsor may, but are not obligated to, 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, we may not be able to obtain additional financing. If we are unable to raise additional capital, we 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. We cannot provide any assurance that new financing will be available to us on commercially acceptable terms, if at all. These conditions raise substantial doubt about the Company’s ability to continue as a going concern through October 21, 2023, the date that the Company will be required to cease all operations, except for the purpose of winding up, if an initial Business Combination is not consummated. 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.
Off-Condensed balance Sheet Financing Arrangements
We have no obligations, assets or liabilities that would be considered off-condensed balance sheet arrangements as of March 31, 2023. 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-condensed balance sheet arrangements. We have not entered into any off-condensed 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 our Sponsor monthly fee of $12,500 for office space, administrative and support services. We began incurring these fees on October 19, 2021 and will continue to incur these fees monthly until the earlier of the completion of the Business Combination and our liquidation.
The underwriters were entitled to a cash underwriting discount of $0.20 per unit, or $5,220,000 in the aggregate, which was paid upon the closing of the Initial Public Offering. In addition, the underwriters are entitled to a deferred fee of (i) $0.35 per unit of the gross proceeds of the initial 26,100,000 Units sold in the Initial Public Offering, or $9,135,000, and (ii) $0.55 per Unit of the gross proceeds from the Units sold pursuant to the over-allotment option, or $2,145,000. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account if and only if the Company completes a Business Combination, subject to the terms of the underwriting agreement.
Concurrent with the closing of our Initial Public Offering, our Sponsor loaned the Company $6,220,000 to be deposited into the Trust Account and used to fund the redemption of Public shares (as necessary). The Sponsor Loan is non-interest bearing and will be repaid or converted into units at a conversion price of $10.00 per unit, at the discretion of our sponsor at any time up until the consummation of an initial Business Combination. If the Company does not consummate an initial Business Combination, the Company will not repay the Sponsor Loan and its proceeds will be distributed to the public shareholders.
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Critical Accounting Estimates
The preparation of unaudited condensed financial statements and related disclosures in conformity with GAAP 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 unaudited condensed financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have not identified any critical accounting estimates.
Class A Ordinary Shares Subject to Possible Redemption
We account for our 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 is classified as a liability instrument and is measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares that features redemption rights that is either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) are classified as temporary equity. At all other times, ordinary shares are classified as shareholders’ equity. Our Class A ordinary shares feature certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, Class A ordinary shares subject to possible redemption are presented as temporary equity, outside of the shareholders’ deficit section of our condensed balance sheets.
Net Income (Loss) per Ordinary Share
Net income (loss) per ordinary share is computed by dividing net income (loss) by the weighted average number of ordinary share outstanding for the period. The Company applies the two-class method in calculating earnings per share. Accretion associated with the redeemable Class A ordinary shares are excluded from earnings per share as the redemption value approximates fair value.
Recent Accounting Pronouncements
In August 2020, the FASB issued 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) to simplify 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 for fiscal years beginning after December 15, 2021 and should be applied on a full or modified retrospective basis. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Management continues to evaluate the impact of adopting ASU 2020-06.
In June 2016, the FASB issued ASU 2016-13 – Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This update requires financial assets measured at amortized cost basis to be presented at the net amount expected to be collected. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amount. Since June 2016, the FASB issued clarifying updates to the new standard including changing the effective date for smaller reporting companies. The guidance is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years, with early adoption permitted. The Company adopted ASU 2016-13 on January 1, 2023. The adoption of ASU 2016-13 did not have a material impact on its financial statements.
Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our unaudited condensed financial statements.
Factors That May Adversely Affect our Results of Operations
Our results of operations and our ability to complete a Business Combination may be adversely affected by various factors that could cause economic uncertainty and volatility in the financial markets, many of which are beyond our control. Our business could be impacted by, among other things, downturns in the financial markets or in economic conditions, increases in oil prices, inflation, increases in interest rates, supply chain disruptions, declines in consumer confidence and spending, the ongoing effects of the COVID-19 pandemic, including resurgences and the emergence of new variants, and geopolitical instability, such as the military conflict in Ukraine. We cannot at this time fully predict the likelihood of one or more of the above events, their duration or magnitude or the extent to which they may negatively impact our business and our ability to complete a Business Combination.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this Item.
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Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Co-Chief Executive Officers and Co-Chief Financial Officers (together, the “Certifying Officers”), or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our Certifying Officers, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on the foregoing, our Certifying Officers concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Report.
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.
20
Changes in Internal Control over Financial Reporting
There have been no changes to our internal control over financial reporting during the quarterly period ended March 31, 2023 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II—OTHER INFORMATION
Item 1. Legal Proceedings
To the knowledge of our management team, there is no litigation currently pending or contemplated against us, any of our officers or directors in their capacity as such or against any of our property.
Item 1A. Risk Factors
As a smaller reporting company under Rule 12b-2 of the Exchange Act, we are not required to include risk factors in this Report. However, as of the date of this Report, other than as set forth below, there have been no material changes with respect to those risk factors previously disclosed in our (i) Registration Statement on Form S-1 initially filed with the SEC on September 24, 2021 (File No. 333-259773), as amended; (ii) Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2022, June 30, 2022 and September 30, 2022, as filed with the SEC on May 11, 2022, August 8, 2022 and November 7, 2022, respectively; (iii) Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on March 27, 2023; and (iv) Definitive Proxy Statement on Schedule 14A, as filed with the SEC on April 10, 2023. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risks could arise that may also affect our business or ability to consummate an initial Business Combination. We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future filings with the SEC.
To mitigate the risk that we might be deemed to be an investment company for purposes of the Investment Company Act, we may, at any time, instruct the trustee to liquidate the securities held in the Trust Account and instead to hold the funds in the Trust Account in cash items until the earlier of the consummation of our Business Combination or our liquidation. As a result, following the liquidation of securities in the Trust Account, we would likely receive minimal interest, if any, on the funds held in the Trust Account, which would reduce the dollar amount our public shareholders would receive upon any redemption or liquidation of the Company.
The funds in the Trust Account have, since our IPO, been held only in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds investing solely in U.S. government treasury obligations and meeting certain conditions under Rule 2a-7 under the Investment Company Act. However, to mitigate the risk of us being deemed to be an unregistered investment company (including under the subjective test of Section 3(a)(1)(A) of the Investment Company Act) and thus subject to regulation under the Investment Company Act, we may, at any time, instruct Continental Stock Transfer & Trust Company, the trustee with respect to the Trust Account, to liquidate the U.S. government treasury obligations or money market funds held in the Trust Account and thereafter to hold all funds in the Trust Account as cash items until the earlier of the consummation of our Business Combination or the liquidation of the Company. Following such liquidation, we would likely receive minimal interest, if any, on the funds held in the Trust Account. However, interest previously earned on the funds held in the Trust Account still may be released to us to pay our taxes, if any, and certain other expenses as permitted. As a result, any decision to liquidate the investments held in the Trust Account and thereafter to hold all funds in the Trust Account in cash items would reduce the dollar amount our public shareholders would receive upon any redemption or liquidation of the Company.
In the event that we may be deemed to be an investment company, we may be required to liquidate the Company.
We may not be able to complete a Business Combination with certain potential target companies if a proposed transaction with the target company may be subject to review or approval by regulatory authorities pursuant to certain U.S. or foreign laws or regulations.
Certain acquisitions or business combinations may be subject to review or approval by regulatory authorities pursuant to certain U.S. or foreign laws or regulations. In the event that such regulatory approval or clearance is not obtained, or the review process is extended beyond the period of time that would permit a Business Combination to be consummated with us, we may not be able to consummate a Business Combination with such target.
Among other things, the U.S. Federal Communications Act prohibits foreign individuals, governments, and corporations from owning more a specified percentage of the capital stock of a broadcast, common carrier, or aeronautical radio station licensee. In addition, U.S. law currently restricts foreign ownership of U.S. airlines. In the United States, certain mergers that may affect competition may require certain filings and review by the Department of Justice and the Federal Trade Commission, and investments or acquisitions that may affect national security are subject to review by the Committee on Foreign Investment in the United States (“CFIUS”). CFIUS is an interagency committee authorized to review certain transactions involving foreign investment in the United States by foreign persons in order to determine the effect of such transactions on the national security of the United States. The scope of CFIUS was expanded by the Foreign Investment Risk Review Modernization Act of 2018 (“FIRRMA”) to include certain non-controlling investments in sensitive U.S. businesses and certain acquisitions of real estate even with no underlying U.S. business. FIRRMA, and subsequent implementing regulations that are now in force, also subject certain categories of investments to mandatory filings. Because we are a Cayman Islands exempted company, we may be considered a “foreign person” under such rules. Additionally, our Sponsor, which is also a Cayman Islands limited liability company, has ties to non-US persons. Alex Vieux, who is an advisor to the Company and one of three managing members of our Sponsor, is a French citizen. Mr. Vieux is also one of two managing members of Founder Holdings LLC, which is the managing member of Explorer Parent LLC – a member of our Sponsor. Mr. Vieux is also a joint owner of an affiliate of the Sponsor that receives administrative fees from the Company. Except as disclosed herein, the Sponsor has no other substantial ties with a non-U.S. Person.
Outside the United States, laws or regulations may affect our ability to consummate a Business Combination with potential target companies incorporated or having business operations in jurisdiction where national security considerations, involvement in regulated industries (including telecommunications), or in businesses relating to a country’s culture or heritage may be implicated. We and our Sponsor are Cayman Island exempted companies that are subject to the laws of the Cayman Islands.
U.S. and foreign regulators generally have the power to deny the ability of the parties to consummate a transaction or to condition approval of a transaction on specified terms and conditions, which may not be acceptable to us or a target. In such event, we may not be able to consummate a transaction with that potential target.
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As a result of these various restrictions, the pool of potential targets with which we could complete an initial Business Combination may be limited and we may be adversely affected in terms of competing with other SPACs that do not have similar ownership issues. Moreover, the process of government review, could be lengthy. Because we have only a limited time to complete our Business Combination, our failure to obtain any required approvals within the requisite time period may require us to liquidate. If we liquidate, our public shareholders may only receive $10.00 per share, and our warrants will expire worthless. This will also cause you to lose any potential investment opportunity in a target company and the chance of realizing future gains on your investment through any price appreciation in the combined company.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Unregistered Sales of Equity Securities
None.
Use of Proceeds
For a description of the use of proceeds generated in our initial public offering and private placement, see Part II, Item 2 of the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, as filed with the SEC on December 2, 2021. There has been no material change in the planned use of proceeds from the Company’s initial public offering and private placement as described in the Registration Statement. The specific investments in our trust account may change from time to time.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
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 Report.
| * | Filed herewith. |
| ** | Furnished herewith. |
| (1) | Incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on April 26, 2023. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| ENTERPRISE 4.0 TECHNOLOGY ACQUISITION CORP. | ||||||
| Date: May 12, 2023 | By: | /s/ Ross Haghighat | ||||
| Name: | Ross Haghighat | |||||
| Title: | Chief Executive Officer and Chief Financial Officer | |||||
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