UNITED STATES
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As of November 14, 2023,
BLOCKCHAIN COINVESTORS ACQUISITION CORP. I
Form 10-Q
For the Quarter Ended September 30, 2023
Table of Contents
i
PART I. FINANCIAL INFORMATION
Item 1. Condensed consolidated financial Statements
BLOCKCHAIN COINVESTORS ACQUISITION CORP. I
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 2023 | December 31, 2022 | |||||||
(Unaudited) | ||||||||
Assets: | ||||||||
Current assets: | ||||||||
Cash | $ | $ | ||||||
Prepaid expenses | ||||||||
Total current assets | ||||||||
Investments held in Trust Account | ||||||||
Total Assets | $ | $ | ||||||
Liabilities, Class A Ordinary Shares Subject to Possible Redemption and Shareholders’ Deficit: | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | $ | ||||||
Convertible promissory note – related party, fair value | ||||||||
Convertible promissory note – related party, par value | ||||||||
Accrued expenses | ||||||||
Total current liabilities | ||||||||
Derivative liabilities | ||||||||
Deferred underwriting commissions in connection with the initial public offering | ||||||||
Total Liabilities | ||||||||
Commitments and Contingencies | ||||||||
Class A ordinary shares subject to possible redemption; $ | ||||||||
Shareholders’ Deficit: | ||||||||
Preference shares, $ | ||||||||
Class A ordinary shares, $ | ||||||||
Class B ordinary shares, $ | ||||||||
Additional paid-in capital | ||||||||
Accumulated deficit | ( | ) | ( | ) | ||||
Total shareholders’ deficit | ( | ) | ( | ) | ||||
Total Liabilities, Class A Ordinary Shares Subject to Possible Redemption and Shareholders’ Deficit | $ | $ |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
1
BLOCKCHAIN COINVESTORS ACQUISITION CORP. I
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
General and administrative expenses | $ | $ | $ | $ | ||||||||||||
General and administrative expenses - related party | ||||||||||||||||
Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Other income: | ||||||||||||||||
Change in fair value of derivative liabilities | ||||||||||||||||
Change in fair value of forward purchase agreement | ||||||||||||||||
Income earned on investments held in Trust Account | ||||||||||||||||
Total Other income | ||||||||||||||||
Net income | $ | $ | $ | $ | ||||||||||||
$ | $ | $ | $ | |||||||||||||
$ | $ | $ | $ |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
BLOCKCHAIN COINVESTORS ACQUISITION CORP. I
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023
Ordinary Shares | Additional | Total | ||||||||||||||||||||||||||
Class A | Class B | Paid-in | Accumulated | Shareholders’ | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
Balance - December 31, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
Shareholder non-redemption agreements | — | — | ||||||||||||||||||||||||||
Shareholder non-redemption agreements | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
Increase in redemption value of Class A ordinary shares subject to possible redemption | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
Balance - March 31, 2023 (unaudited) | ( | ) | ( | ) | ||||||||||||||||||||||||
Increase in redemption value of Class A ordinary shares subject to possible redemption | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
Net income | — | — | ||||||||||||||||||||||||||
Balance – June 30, 2023 (unaudited) | ( | ) | ( | ) | ||||||||||||||||||||||||
Increase in redemption value of Class A ordinary shares subject to possible redemption | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
Net income | — | — | ||||||||||||||||||||||||||
Balance – September 30, 2023 (unaudited) | $ | $ | $ | $ | ( | ) | $ | ( | ) |
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022
Ordinary Shares | Additional | Total | ||||||||||||||||||||||||||
Class A | Class B | Paid-in | Accumulated | Shareholders’ | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
Balance - December 31, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
Net income | — | — | ||||||||||||||||||||||||||
Balance - March 31, 2022 (Unaudited) | ( | ) | ( | ) | ||||||||||||||||||||||||
Net income | — | — | ||||||||||||||||||||||||||
Increase in redemption value of Class A ordinary shares subject to possible redemption | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
Balance - June 30, 2022 (Unaudited) | ( | ) | ( | ) | ||||||||||||||||||||||||
Net income | — | — | ||||||||||||||||||||||||||
Increase in redemption value of Class A ordinary shares subject to possible redemption | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
Balance - September 30, 2022 (Unaudited) | $ | $ | $ | $ | ( | ) | $ | ( | ) |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
BLOCKCHAIN COINVESTORS ACQUISITION CORP. I
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine months Ended September 30, | ||||||||
2023 | 2022 | |||||||
Cash Flows from Operating Activities: | ||||||||
Net income | $ | $ | ||||||
Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
Change in fair value of derivative warrant liabilities | ( | ) | ( | ) | ||||
Change in fair value of forward purchase agreement | ( | ) | ||||||
Income earned on investments held in Trust Account | ( | ) | ( | ) | ||||
Changes in operating assets and liabilities: | ||||||||
Prepaid expenses | ||||||||
Accounts payable | ||||||||
Accrued expenses | ||||||||
Net cash used in operating activities | ( | ) | ( | ) | ||||
Cash Flows from Investing Activities: | ||||||||
Cash withdrawn from trust account for redemptions | ||||||||
Net cash provided by investing activities | ||||||||
Cash Flows from Financing Activities: | ||||||||
Proceeds from note payable to related party | ||||||||
Offering costs paid | ( | ) | ||||||
Redemption of Class A Ordinary Shares | ( | ) | ||||||
Net cash (used in) provided by financing activities | ( | ) | ||||||
Net change in cash | ( | ) | ( | ) | ||||
Cash - beginning of the period | ||||||||
Cash - end of the period | $ | $ |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
BLOCKCHAIN COINVESTORS ACQUISITION CORP. I
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 — Organization and Business Operations
Blockchain Coinvestors Acquisition Corp. I (the “Company”) was incorporated as a Cayman Islands exempted company on June 11, 2021. The Company was incorporated for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). The Company is an emerging growth company and, as such, the Company is subject to all of the risks associated with emerging growth companies.
As of September 30, 2023, the Company had not commenced any operations. All activity for the period from June 11, 2021 (inception) through September 30, 2023 relates to the Company’s formation and the initial public offering (the “Initial Public Offering”) described below, and, subsequent to the Initial Public Offering, identifying a target company for a Business Combination. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company generates non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the Initial Public Offering.
The Company’s sponsor is Blockchain Coinvestors
Acquisition Sponsors I LLC, a Delaware limited liability company (the “Sponsor”). The registration statement for the Company’s
Initial Public Offering was declared effective on November 9, 2021 (the “Effective Date”). On November 15, 2021,
the Company commenced the Initial Public Offering of
Simultaneously with the consummation of the Initial
Public Offering and partial exercise of the over-allotment option by the underwriters, the Company consummated the private placement of
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of Private Placement Units, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination.
The Company must complete one or more initial
Business Combinations having an aggregate fair market value of at least
Following the closing of the Initial Public Offering
and partial exercise of the over-allotment by the underwriters on November 15, 2021, $
5
BLOCKCHAIN COINVESTORS ACQUISITION CORP. I
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Company will provide holders of its Class A
ordinary shares, par value $
Notwithstanding the foregoing, the Memorandum
and Articles of Association provide that a Public Shareholder, together with any affiliate of such shareholder or any other person with
whom such shareholder is acting in concert or as a “group” (as defined in Section 13 of the Securities Exchange Act of
1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate
of
The Company’s Sponsor, officers and directors
(the “initial shareholders”) have agreed not to propose an amendment to the Memorandum and Articles of Association (A) that
would modify the substance or timing of the Company’s obligation to allow redemption in connection with its initial Business Combination
or to redeem
The Company had 18 months from the closing of
the Initial Public Offering to consummate the initial Business Combination, which has been subsequently extended to May 15, 2024 (the
“Combination Period”). If the Company is unable to complete a Business Combination within the Combination Period and the Combination
Period is not further extended, the Company will (i) cease all operations except for the purpose of winding up; (ii) as promptly
as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash,
equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and
not previously released to the Company to pay its tax obligations, if any (less up to $
The Sponsor and each member of the Company’s
management team have entered into an agreement with the Company, pursuant to which they have agreed to (i) waive their redemption
rights with respect to the ordinary shares of the Company that they received in connection with the Company's initial public offering
in connection with the completion of a Business Combination; (ii) waive their redemption rights with respect to the ordinary shares
that they received in connection with the Company's initial public offering in connection with a shareholder vote to approve an amendment
to the Company’s Memorandum and Articles of Association (A) that would modify the substance or timing of the Company’s
obligation to provide holders of the Class A ordinary shares the right to have their shares redeemed in connection with the initial
Business Combination or to redeem
Business Combination
On November 10, 2022, the Company entered into a Business Combination Agreement (as it may be amended, supplemented or otherwise modified from time to time, the “Business Combination Agreement”), by and among the Company, BCSA Merger Sub, Inc., a Delaware corporation (“Merger Sub”), and Qenta Inc., a Delaware corporation (“Qenta”).
6
BLOCKCHAIN COINVESTORS ACQUISITION CORP. I
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Business Combination Agreement and the transactions
contemplated thereby were approved by the boards of directors of each of the Company and Qenta. The Business Combination Agreement provides
for, among other things, the following transactions: (i) the Company would become a Delaware corporation (the “Domestication”)
and, in connection with the Domestication, (A) the Company’s name would be changed to “Qenta Inc.” (“New
Qenta”) and (B) each outstanding ordinary share of the Company will become
The Domestication, the Merger and the other transactions contemplated by the Business Combination Agreement are referred to as the “Qenta Business Combination.”
On August 24, 2023, the Company, Merger Sub, and Qenta entered into an amendment (the “First BCA Amendment”) to the Business Combination agreement, to, among other things, extend the Termination Date (as defined in the Business Combination Agreement) until May 15, 2024. In addition, under the terms of the First BCA Amendment, Qenta agreed to deliver to the Company specified financial statements and other financial information by specified deadlines (the “Financial Information Obligations”), and the Company agreed not to exercise, but did not waive, BCSA’s Financial Statement Termination Right (as defined in the Business Combination Agreement) unless Qenta failed to comply with the Financial Information Obligations. Qenta failed to meet the first specified Financial Information Obligations deadline.
On August 29, 2023, the Company, Merger Sub, and Qenta entered into a second amendment (the “Second BCA Amendment”) to the Business Combination Agreement to eliminate the exclusive dealing provision applicable to the Company and to limit the exclusive dealing provision applicable to Qenta to transactions involving special purpose acquisition companies and similar “blank check” companies.
On August 24, 2023, the Company, Sponsor and Qenta entered into
an amendment (the “Sponsor Letter Amendment”) to the Sponsor Letter Agreement, dated as of November 10, 2022, by and
among the Company, the Sponsor and Qenta, pursuant to which the Sponsor agreed, in connection with the completion of a financing transaction
between Qenta and financing parties, to transfer and assign, contingent and conditioned upon the closing of the transactions contemplated
by the Business Combination Agreement, up to
In connection with the execution of the Business Combination Agreement, the Company entered into a Confirmation (the “Forward Purchase Agreement”), with Vellar Opportunity Fund SPV LLC—Series 5 (the “FPA Seller”), a client of Cohen & Company Financial Management, LLC (“Cohen”). Entities and funds managed by Cohen own equity interests in the Sponsor. The primary purpose of entering into the Forward Purchase Agreement was to help ensure the aggregate cash proceeds condition in the Business Combination Agreement would be met, increasing the likelihood that the transaction would close. Pursuant to the Forward Purchase Agreement, (a) the FPA Seller could have, but was not obligated to, purchase after the date of the Company’s redemption deadline through a broker in the open market the Company’s Class A ordinary shares, including such shares that holders had elected to redeem pursuant to the Company’s organizational documents in connection with the Qenta Business Combination, other than from the Company or affiliates of the Company, and (b) the FPA Seller agreed to waive any redemption rights in connection with the Qenta Business Combination with respect to such Class A ordinary shares of the Company it purchased in accordance with the Forward Purchase Agreement (the “Subject Shares”). See Note 6 where the Forward Purchase Agreement is more fully described.
On November 8, 2023, the Company delivered to Qenta written notice of its election to terminate the Business Combination Agreement pursuant to Section 7.1(h) thereof, and abandoned the Qenta Business Combination.
In conjunction with the termination of the Business Combination Agreement, the Lock-up Agreements, Sponsor Letter Agreement, Transaction Support Agreements and Forward Purchase Agreement were also terminated in accordance with their respective terms.
7
BLOCKCHAIN COINVESTORS ACQUISITION CORP. I
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The full Business Combination Agreement, Forward Purchase Agreement, related amendments and other agreements entered into or contemplated to be executed prior to closing the Qenta Business Combination were included with the Company’s Current Reports on Form 8-K filed with the SEC on November 10, 2022 and August 30, 2023.
Emerging Growth Company Status
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth 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 an 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 the comparison of the Company’s condensed consolidated financial statements with those of another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Going Concern, Liquidity and Capital Resources
As of September 30, 2023, the Company had approximately
$
The Company’s liquidity needs up to September
30, 2023 had been satisfied through a payment from the Sponsor of $
In connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” the Company has until May 15, 2024 to consummate a Business Combination. The Company does not have adequate liquidity to sustain operations; however, the Company has access to a Working Capital Loan from the Sponsor that management believes will enable the Company to sustain operations until it completes its initial Business Combination. If a Business Combination is not consummated by May 15, 2024, and such deadline to consummate a Business Combination is not further extended, there will be a mandatory liquidation and subsequent dissolution of the Company. Management has determined that the Company’s liquidity issue, mandatory liquidation should a Business Combination not occur by the applicable deadline, and potential subsequent dissolution, raises substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after May 15, 2024. There can be no assurance that the Company will be able to consummate any Business Combination by May 15, 2024.
8
BLOCKCHAIN COINVESTORS ACQUISITION CORP. I
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Risks and Uncertainties
In February 2022, the Russian Federation and Belarus commenced a military action with the country of Ukraine. As a result of this action, various nations, including the United States, have instituted economic sanctions against the Russian Federation and Belarus. Further, the impact of this action and related sanctions on the world economy is not determinable as of the date of these condensed unaudited consolidated financial statements, and the specific impact on the Company’s financial condition, results of operations, and cash flows is also not determinable as of the date of these unaudited condensed consolidated financial statements.
On May 1, 2023, First Republic Bank became insolvent. Federal regulators seized the assets of the bank and negotiated a sale of its assets to JP Morgan Chase. The Company held deposits with this bank. As a result of the sale of the assets to JP Morgan Chase, the Company’s insured and uninsured deposits are held at JP Morgan Chase. The Company also moved the funds held in trust for the shareholders and invested in federal government securities through Morgan Stanley.
Note 2 — Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X and pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP. In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented. Operating results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected through December 31, 2023, or any future period.
The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Annual Report on Form 10-K filed by the Company with the SEC on April 17, 2023.
Principles of Consolidation
The unaudited condensed consolidated financial statements of the Company include its wholly owned subsidiary in connection with the planned merger. All inter-company accounts and transactions are eliminated in consolidation.
Use of Estimates
The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of income and expenses during the reporting period. Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the unaudited condensed consolidated financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. One of the more significant accounting estimates included in the accompanying unaudited condensed consolidated financial statements is the determination of the fair value of derivative warrant liabilities. Accordingly, the actual results could differ significantly from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company had no cash equivalents as of September 30, 2023 and December 31, 2022.
Investments Held in Trust Account
The Company’s portfolio of investments is comprised of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or investments in money market funds that invest in U.S. government securities and generally have a readily determinable fair value, or a combination thereof. When the Company’s investments held in the Trust Account are comprised of U.S. government securities, the investments are classified as trading securities. When the Company’s investments held in the Trust Account are comprised of money market funds, the investments are recognized at fair value. Trading securities and investments in money market funds are presented on the condensed consolidated balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these securities are included in income earned on investments held in Trust Account in the accompanying unaudited condensed consolidated statements of operations. The estimated fair values of investments held in the Trust Account are determined using available market information.
Concentration of Credit Risk
Financial instruments that potentially subject
the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed the Federal
Deposit Insurance Corporation coverage limit of $
9
BLOCKCHAIN COINVESTORS ACQUISITION CORP. I
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under the FASB ASC Topic 820, “Fair Value Measurements,” equals or approximates the carrying amounts represented in the condensed consolidated balance sheets.
Fair Value Measurements
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers consist of:
● | 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 some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.
Convertible Promissory Note —Related Party, Fair Value
The Company entered into a convertible promissory note with its Sponsor on June 15, 2022. The Company has elected the fair value option to account for proceeds received during 2022. This amount is presented on the balance sheet as “Convertible Promissory Note —Related Party, Fair Value.” The primary reason for electing the fair value option in the 2022 proceeds is to provide better information on the financial liability amount given current market and economic conditions of the Company. As a result of applying the fair value option, the Company records each draw at fair value with a gain or loss recognized at issuance, and subsequent changes in fair value recorded as change in the fair value of convertible note—related party on the accompanying unaudited condensed consolidated statements of operations. The fair value is based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s and, if applicable, an independent third-party valuation firm’s own assumption about the assumptions a market participant would use in pricing the asset or liability.
Convertible Promissory Note —Related Party, Par Value
The Company has elected the bifurcated option to account for proceeds received during 2023 from the Convertible promissory notes with its Sponsor on June 2023. This amount is presented on the balance sheet as “Convertible Promissory Note —Related Party, Par Value.”
The Company analyzed the Convertible Promissory Note – Related Party to assess if the fair value option was appropriate in 2023, due to the substantial premium which results in an offsetting entry to additional paid in capital and under the related party guidance which precludes the fair value option it was determined the fair value option was not appropriate. As such, the Company accounted for the Convertible Promissory Note – Related Party, Par Value, analyzing the conversion options embedded in convertible notes in accordance with ASC 815. ASC 815 generally requires companies to bifurcate conversion options embedded in convertible notes from their host instruments and to account for them as free-standing derivative financial instruments.
The Company reviews the terms of convertible debt issued to determine whether there are embedded derivative instruments, including embedded conversion options, which are required to be bifurcated and accounted for separately as derivative financial instruments. In circumstances where the host instrument contains more than one embedded derivative instrument, including the conversion option, that is required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument.
Bifurcated embedded derivatives are initially recorded at fair value and are then revalued at each reporting date with changes in the fair value reported as nonoperating income or expense. When the equity or convertible debt instruments contain embedded derivative instruments that are to be bifurcated and accounted for as liabilities, the total proceeds received are first allocated to the fair value of all the bifurcated derivative instruments. The remaining proceeds, if any, are then allocated to the host instruments themselves, usually resulting in those instruments being recorded at a discount from their face value. The discount from the face value of the convertible debt, together with the stated interest on the instrument, is amortized over the life of the instrument through periodic charges to interest expense.
It was determined that the previous conversion option was de minimis, as such the Company has recorded the Convertible Promissory Note – Related Party at par value through the rest of the note’s use.
10
BLOCKCHAIN COINVESTORS ACQUISITION CORP. I
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Derivative Liabilities
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and FASB ASC Topic 815-40, “Derivatives and Hedging—Contracts in Entity’s Own Equity” (“ASC 815-40”). The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.
The Public Warrants and the Private Placement Warrants are recognized as derivative liabilities in accordance with ASC 815. Accordingly, the Company recognizes the warrant instruments as liabilities at fair value and adjusts the instruments to fair value at each reporting period. The liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s condensed consolidated statements of operations. The initial fair value of the Public Warrants issued in connection with the Initial Public Offering and Private Placement Warrants was estimated using a stochastic trinomial tree model. The determination of the fair value of the warrants may be subject to change as more current information becomes available and accordingly the actual results could differ significantly. Derivative warrant liabilities are classified as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.
The Company determined the Forward Purchase Agreement (defined in Note 1) is a derivative instrument. Accordingly, the Company recognizes the instrument as an asset or liability at fair value and adjusts the instrument to fair value at each reporting period. Any changes in fair value are recognized on the Company’s unaudited condensed consolidated statements of operations. The estimated fair value of the Forward Purchase Agreement is measured at fair value utilizing a Monte Carlo simulation model.
Offering Costs Associated with the Initial Public Offering
Offering costs consisted of legal, accounting, underwriting fees and other costs incurred through the Initial Public Offering that were directly related to the Initial Public Offering. Offering costs were allocated to the separable financial instruments issued in the Initial Public Offering based on a relative fair value basis, compared to total proceeds received. Offering costs associated with derivative warrant liabilities were expensed as incurred and presented as non-operating expenses in the unaudited condensed consolidated statements of operations. Offering costs associated with the Class A ordinary shares were charged against the carrying value of the Class A ordinary shares upon the completion of the Initial Public Offering. The Company classifies deferred underwriting commissions as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.
Class A Ordinary Shares Subject to Possible Redemption
The Company accounts for its Class A ordinary
shares subject to possible redemption in accordance with the guidance in ASC 480. Class A ordinary shares subject to mandatory redemption
(if any) are classified as liability instruments and are measured at fair value. Conditionally redeemable Class A ordinary shares
(including Class A ordinary shares that feature redemption rights that are either within the control of the holder or subject to
redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity.
At all other times, Class A ordinary shares are classified as shareholders’ equity. As part of the Private Placement, the Company
issued
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of the Class A ordinary shares subject to possible redemption to equal the redemption value at the end of each reporting period. This method would view the end of the reporting period as if it were also the redemption date for the security. Effective with the closing of the Initial Public Offering (including exercise of the over-allotment option), the Company recognized the accretion from initial book value to redemption amount, which resulted in charges against additional paid-in capital (to the extent available) and accumulated deficit. Subsequently, the Company recognized changes in the redemption value as an increase in redemption value of Class A ordinary shares subject to possible redemption as reflected on the accompanying unaudited condensed consolidated statements of changes in shareholders’ deficit.
Income Taxes
The Company complies with the accounting and reporting requirements of FASB ASC Topic 740, “Income Taxes,” which prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company’s management determined that the Cayman Islands is the Company’s only major tax jurisdiction. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of September 30, 2023 and December 31, 2022. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
11
BLOCKCHAIN COINVESTORS ACQUISITION CORP. I
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
There is currently no taxation imposed on income by the government of the Cayman Islands. In accordance with Cayman Islands federal income tax regulations, income taxes are not levied on the Company. Consequently, income taxes are not reflected in the Company’s unaudited condensed consolidated financial statements. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
Net Income per Ordinary Share
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” The Company has two classes of shares, which are referred to as Class A ordinary shares and Class B ordinary shares. Income and losses are shared pro rata between the two classes of shares. Net income per ordinary share is calculated by dividing the net income by the weighted average shares of ordinary shares outstanding for the respective period.
The calculation of diluted net income per ordinary
share does not consider the effect of the warrants issued in connection with the Initial Public Offering (including exercise of the over-allotment
option) and the Private Placement to purchase an aggregate of
For the Three Months Ended September 30, | For the Nine months Ended September 30, | |||||||||||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||||||||
Class A | Class B | Class A | Class B | Class A | Class B | Class A | Class B | |||||||||||||||||||||||||
Basic and diluted net income per ordinary share: | ||||||||||||||||||||||||||||||||
Numerator: | ||||||||||||||||||||||||||||||||
Allocation of net income | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Denominator: | ||||||||||||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | $ | $ |
Recent Accounting Standards
In June 2022, the FASB issued ASU 2022-03, ASC Subtopic 820, “Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions.” The ASU amends ASC 820 to clarify that a contractual sales restriction is not considered in measuring an equity security at fair value and to introduce new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value. The ASU applies to both holders and issuers of equity and equity-linked securities measured at fair value. The amendments in this ASU are effective for the Company in fiscal years beginning after December 15, 2024, and interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance. The Company is still evaluating the impact of this pronouncement on the condensed consolidated financial statements.
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 collectability 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 condensed consolidated financial statements.
Management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s unaudited condensed consolidated financial statements.
12
BLOCKCHAIN COINVESTORS ACQUISITION CORP. I
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 3 — Initial Public Offering
On November 15, 2021, the Company consummated
its Initial Public Offering of
Following the closing of the Initial Public Offering
and the partial exercise of the over-allotment by the underwriters on November 15, 2021, $
Note 4 — Private Placement
Simultaneously with the closing of the Initial
Public Offering and partial exercise of the over-allotment option by the underwriters, the Company’s Sponsor purchased an aggregate
of
Each Private Placement Unit consists of one share
of Class A ordinary share and one-half of one warrant (the “Private Placement Warrant”). Each whole Private Placement
Warrant is exercisable for one whole Class A ordinary share at a price of $
The Sponsor and the Company’s officers and directors agreed, subject to limited exceptions, not to transfer, assign or sell any of their Private Placement Warrants until 30 days after the completion of the initial Business Combination or 12 months from the closing of the Initial Public Offering.
Note 5 — Related Party Transactions
Founder Shares
On July 2, 2021, the Sponsor paid $
The initial shareholders agreed, subject to limited
exceptions, not to transfer, assign or sell any of their Founder Shares until the earliest of (A)
Promissory Note—Related Party
On July 2, 2021, the Sponsor agreed to loan
the Company up to $
13
BLOCKCHAIN COINVESTORS ACQUISITION CORP. I
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Working Capital Loans
In order to finance transaction costs in connection
with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors, may,
but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). In the event that a Business
Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans,
but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. The Working Capital Loans would either be
repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $
Convertible Promissory Notes – Related Party, Fair Value and Par Value
On June 15, 2022, the Company issued a promissory
note for a Working Capital Loan, as described above, of $
As of September 30, 2023 and December 31, 2022,
the portion of the Sponsor Note carried under the fair value method is described as “Convertible Promissory Note – Related
Party, Fair Value” on the accompanying condensed consolidated balance sheets with a balance of $
During the period ended September 30, 2023, the Company has concluded that the fair value of the conversion feature on 2023 proceeds from principal, require bifurcation under ASC 815 and is considered de minimis. The underlying economics of the transaction are more accurately represented by recording this portion of the convertible debt agreement as a liability at par value given the de minimis value of the embedded conversion feature in this case.
As of September 30, 2023, a portion of the Sponsor Note carried under
the bifurcation method is described as “Convertible Promissory Note – Related Party, Par Value” on the accompanying
condensed consolidated balance sheets with a balance of $
Administrative Services Agreement
Commencing on the date the securities are first
listed on Nasdaq, the Company has agreed to pay the Sponsor a total of $
In addition, the Sponsor, executive officers and directors, or their respective affiliates will be reimbursed for any out-of-pocket expenses incurred in connection with activities on the Company’s behalf such as identifying potential target businesses and performing due diligence on suitable Business Combinations. The audit committee will review on a quarterly basis all payments that were made by the Company to the Sponsor, executive officers or directors, or their affiliates. Any such payments prior to an initial Business Combination will be made using funds held outside the Trust Account.
14
BLOCKCHAIN COINVESTORS ACQUISITION CORP. I
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 6 — Commitments and Contingencies
Registration and Shareholder Rights
The holders of Founder Shares, Private Placement Warrants and securities included in private placement units that may be issued upon conversion of Working Capital Loans (and any Class A ordinary shares issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans) will be entitled to registration rights pursuant to a registration rights agreement entered into in connection with the Initial Public Offering. These holders are entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, these holders have certain “piggyback” registration rights with respect to registration statements filed after the completion of the initial Business Combination. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreements and Amendments
The underwriters had a 45-day option from the
date of the Initial Public Offering to purchase up to an additional
The Company entered into an amended agreement
with one of its underwriters (Cantor Fitzgerald) to reduce the amount of deferred underwriting fees associated with the Qenta Business
Combination. Upon the successful completion of the Qenta Business Combination, the $
Forward Share Purchase Agreement
In connection with the execution of the Business
Combination Agreement, the Company entered into the Forward Purchase Agreement. Pursuant to the Forward Purchase Agreement, (a) the FPA
Seller could have, but was not obligated to, purchase after the date of the Company’s redemption deadline through a broker in the
open market the Company’s Class A ordinary shares, including such shares that holders had elected to redeem pursuant to the
Company’s organizational documents in connection with the Qenta Business Combination, other than from the Company or affiliates
of the Company, and (b) the FPA Seller agreed to waive any redemption rights in connection with the Qenta Business Combination with
respect to such Class A ordinary shares of the Company it purchased in accordance with the Forward Purchase Agreement (the “Subject
Shares”). The Number of Shares were to equal the Subject Shares but be no more than
The Forward Purchase Agreement provided that (a) one
business day following the closing of the Qenta Business Combination, New Qenta would pay to the FPA Seller, out of the Trust Account,
an amount (the “Prepayment Amount”) equal to the Redemption Price per share (the “Initial Price”) multiplied by
the aggregate number of Subject Shares, if any (together, the “Number of Shares”), less
From time to time and on any scheduled trading day after the closing of the Qenta Business Combination, the FPA Seller could have sold Subject Shares or Additional Shares (as defined in the Forward Purchase Agreement) at its absolute discretion in one or more transactions, publicly or privately, and, in connection with such sales, terminate the Forward Purchase Transaction in whole or in part in an amount corresponding to the number of Subject Shares and Additional Shares.
15
BLOCKCHAIN COINVESTORS ACQUISITION CORP. I
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Forward Purchase Agreement had a tenure of
The Company and Qenta agreed to pay to the FPA
Seller a break-up fee equal to the sum of (i) all fees (in an amount not to exceed $
The primary purpose of entering into the Forward Purchase Agreement was to help ensure the aggregate cash proceeds condition in the Business Combination Agreement would be met, increasing the likelihood that the transaction would close.
In conjunction with the termination of the Business Combination Agreement, the Forward Purchase Agreement was terminated in accordance with its terms on November 8, 2023.
Shareholder Meetings, Extensions, and Redemptions
On February 3, 2023, the Company held an extraordinary general meeting (the “Shareholder Meeting”) at which the Company’s shareholders approved a proposal to amend the Company’s amended and restated memorandum and articles of association (the “Memorandum and Articles of Association”) to extend the date by which it has to consummate a business combination from May 15, 2023 to November 15, 2023 (the “Extension Amendment Proposal”). The Extension Amendment Proposal is described in more detail in the Company’s definitive proxy statement filed with the U.S. Securities and Exchange Commission on December 29, 2022.
In connection with the vote to approve the Extension
Amendment Proposal, holders of
On October 27, 2023, the Company held an extraordinary
general meeting in lieu of the 2023 annual general meeting of shareholders (the “Second Shareholder Meeting”) at which the
Company shareholders approved proposals to amend the Company’s amended and restated memorandum and articles of association to (i)
extend the date by which BCSA must consummate a business combination from November 15, 2023 to May 15, 2024 or such earlier date as may
be determined by the Company’s board of directors in its sole discretion (the “Second Extension Amendment Proposal”),
(ii) eliminate the limitation that the Company may not redeem its Class A ordinary shares in an amount that would cause the Company’s
net tangible assets to be less than $
In connection with the approval of the Founder Share Amendment Proposal,
the Sponsor voluntarily elected to convert all
In connection with the vote to approve the Articles Amendment Proposals,
holders of
16
BLOCKCHAIN COINVESTORS ACQUISITION CORP. I
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Vendor Agreements Contingent on the Business Combination
The Company entered into an agreement with a vendor
for merger advisory services and the total fee will be $
In January 2023, the Company entered into an agreement
with a vendor for investment banking services. The agreement specifies that upon a successful Business Combination, the Company will owe
a fee of $
Non-redemption Agreements
The Sponsor entered into Non-Redemption Agreements
with various shareholders of the Company (the “Non-Redeeming Shareholders”), pursuant to which these shareholders agreed not
to redeem a portion of their shares of Company common stock (the “Non-Redeemed Shares”) in connection with the Special Meeting
held on February 3, 2023, but such shareholders retained their right to require the Company to redeem such Non-Redeemed Shares in connection
with the closing of the Business Combination. The Sponsor has agreed to transfer to such Non-Redeeming shareholders an aggregate of
Note 7 — Class A Ordinary Shares Subject to Possible Redemption
The Company’s Class A ordinary shares
feature certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of future
events. The Company is authorized to issue
Gross proceeds from Initial Public Offering | $ | |||
Less: | ||||
Fair value of Public Warrants at issuance | ( | ) | ||
Offering Costs allocated to Class A ordinary shares subject to possible redemption | ( | ) | ||
Plus: | ||||
Increase in redemption value of Class A ordinary shares subject to possible redemption | ||||
Class A ordinary shares subject to possible redemption as of December 31, 2022 | ||||
Less: | ||||
Redemption | ( | ) | ||
Increase in redemption value of Class A ordinary shares subject to possible redemption | ||||
Class A ordinary shares subject to possible redemption as of September 30, 2023 | $ |
Note 8 — Shareholders’ Deficit
Preference shares—The Company is
authorized to issue
17
BLOCKCHAIN COINVESTORS ACQUISITION CORP. I
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Class A ordinary shares—The
Company is authorized to issue
Class B ordinary shares—The
Company is authorized to issue
Prior to the initial Business Combination, only holders of Class B ordinary shares will have the right to vote on the appointment of directors. In addition, in a vote to continue the company in a jurisdiction outside the Cayman Islands (which requires the approval of at least two thirds of the votes of all ordinary shares voted at a general meeting), holders of the Class B ordinary shares will have ten votes for every Class B ordinary share and holders of Class A ordinary shares will have one vote for every Class A ordinary share. Holders of the Class A ordinary shares will not be entitled to vote on the appointment of directors during such time. In addition, prior to the completion of an initial Business Combination, holders of a majority of Class B ordinary shares may remove a member of the board of directors for any reason. With respect to any other matter submitted to a vote of the shareholders, including any vote in connection with the initial Business Combination, except as required by law, holders of Class B and Class A ordinary shares will vote together as a single class, with each share entitling the holder to one vote.
The Class B ordinary shares will automatically
convert into Class A ordinary shares at the time of the initial Business Combination at a ratio such that the number of Class A ordinary
shares issuable upon conversion of all Class B ordinary shares will equal, in the aggregate, on an as-converted basis, approximately
Note 9 — Warrants
As of September 30, 2023, and December 31, 2022,
the Company had
The Public Warrants will become exercisable at
$
18
BLOCKCHAIN COINVESTORS ACQUISITION CORP. I
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The exercise price and number of shares issuable
upon exercise of the warrants may be adjusted in certain circumstances including in the event of a share dividend or recapitalization,
reorganization, merger or consolidation. In addition, if (x) the Company issues additional Class A ordinary shares or equity-linked
securities for capital raising purposes in connection with the closing of the initial Business Combination at an issue price or effective
issue price of less than $
The warrants underlying the Private Placement Units (the “Private Placement Warrants”) are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants and the ordinary shares issuable upon exercise of the Private Placement Warrants, so long as they are held by the Sponsor or its permitted transferees, (i) will not be redeemable by the Company, (ii) may not (including the Class A ordinary shares issuable upon exercise of these warrants), subject to certain limited exceptions, be transferred, assigned or sold by the holders until 30 days after the completion of the initial Business Combination, (iii) may be exercised by the holders on a cashless basis and (iv) will be entitled to registration rights. If the Private Placement Warrants are held by holders other than the Sponsor or its permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by the holders on the same basis as the Public Warrants.
Once the warrants become exercisable, the Company may redeem the outstanding warrants (except as described herein with respect to the Private Placement Warrants):
● | in whole and not in part; |
● | at a price of $ |
● | upon a minimum of |
● | if, and only if, the Redemption Reference Price equals or exceeds $ |
The Company will not redeem the warrants as described above unless an effective registration statement under the Securities Act covering the Class A ordinary shares issuable upon exercise of the warrants is effective and a current prospectus relating to those Class A ordinary shares is available throughout the 30-day redemption period. If and when the warrants become redeemable by the Company, it may exercise its redemption right even if the Company is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
19
BLOCKCHAIN COINVESTORS ACQUISITION CORP. I
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 10 — Fair Value Measurements
September 30, 2023
Description | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | |||||||||
Assets: | ||||||||||||
Investments held in Trust Account – Money market fund | $ | $ | $ | |||||||||
Liabilities: | ||||||||||||
Derivative warrant liabilities—Public Warrants | $ | — | $ | $ | ||||||||
Derivative warrant liabilities—Private Warrants | $ | $ | $ | |||||||||
Forward Purchase Agreement | $ | $ | $ | |||||||||
Convertible note – related party | $ | $ | $ |
December 31, 2022
Description | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | |||||||||
Assets: | ||||||||||||
Investments held in Trust Account – Money market fund | $ | $ | $ | |||||||||
Liabilities: | ||||||||||||
Derivative warrant liabilities—Public Warrants | $ | $ | $ | |||||||||
Derivative warrant liabilities—Private Warrants | $ | $ | $ | |||||||||
Forward Purchase Agreement | $ | $ | $ | |||||||||
Convertible note – related party | $ | $ | $ |
Transfers to/from Levels 1, 2, and 3 are recognized at the beginning of the reporting period.
The Company values its investments held in money market accounts as Level 1 instruments, since they include investments in money market funds invested in U.S. government securities. The Company uses inputs such as actual trade data, quoted market prices from dealers or brokers, and other similar sources to determine the fair value of its investments.
The
estimated fair value of Public Warrants for $
The estimated fair value of the Private Placement Warrants is determined using Level 3 input during the IPO of the Company in November 2021. The Company used a stochastic trinomial tree model to value the Private Placement warrants, wherein input assumptions are related to expected flat volatility, expected life, risk-free rate and dividend yield. There have been no transfers to/from levels 1, 2 or 3 for Private Placement Warrants during the reporting period ending September 30, 2023 and year ended December 31, 2022.
The Company used an intrinsic value model to determine
the fair value of the Convertible note at December 31, 2022. As of September 30, 2023 and December 31, 2022, the portion of the Sponsor
Note carried under the fair value method is described as “Convertible Promissory Note – Related Party, Fair Value” on
the accompanying condensed consolidated balance sheets with a balance of $
20
BLOCKCHAIN COINVESTORS ACQUISITION CORP. I
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
During the period ended June 30, 2023, the Company has concluded that the fair value of the conversion feature on 2023 proceeds from principal, require bifurcation under ASC 815 and is considered de minimis. The underlying economics of the transaction are more accurately represented by recording this portion of the convertible debt agreement as a liability at par value given the de minimis value of the embedded conversion feature in this case.
The estimated fair value of the Forward Purchase Agreement was measured at fair value using a Monte Carlo simulation model, which was determined using Level 3 inputs. Inherent in the Monte Carlo simulation are assumptions related to expected stock-price volatility, expected life, risk-free interest rate, expected Business Combination close date and probability of a successful transaction. The Company estimates the volatility based on implied volatility from the Company’s traded warrants and from historical volatility of select peer company’s shares that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. Any changes in these assumptions can change the valuation significantly.
For the three and nine months ended September 30, 2023, the Company
recognized a gain of approximately $
September 30, 2023 | December 31, 2022 | |||||||
Exercise price | $ | $ | ||||||
Stock price | $ | $ | ||||||
Volatility | % | % | ||||||
Term (years) | ||||||||
Risk-free rate | % | % | ||||||
Dividend yield | % | % |
September 30, 2023 | December 31, 2022 | |||||||
Probability of a Business Combination Close | % | % | ||||||
Stock price as of Valuation Date | $ | $ | ||||||
Expected Stock price as of Business Combination Date | $ | $ | ||||||
Risk-Free Rate | % | % |
Derivative warrant liabilities at December 31, 2022 | $ | |||
Change in fair value of derivative liabilities | ||||
Derivative warrant liabilities at March 31, 2023 | ||||
Change in fair value of derivative liabilities | ( | ) | ||
Derivative warrant liabilities at June 30, 2023 | ||||
Change in fair value of derivative liabilities | ( | ) | ||
Derivative warrant liabilities at September 30, 2023 | $ |
Derivative warrant liabilities at December 31, 2021 | $ | |||
Transfer of Public Warrants to Level 1 | ( | ) | ||
Change in fair value of derivative warrant liabilities | ( | ) | ||
Derivative warrant liabilities at March 31, 2022 | ||||
Change in fair value of derivative warrant liabilities | ( | ) | ||
Derivative warrant liabilities at June 30, 2022 | ||||
Change in fair value of derivative warrant liabilities | ( | ) | ||
Derivative warrant liabilities at September 30, 2022 | $ |
21
BLOCKCHAIN COINVESTORS ACQUISITION CORP. I
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Working capital loan – related party at December 31, 2022—Level 3 measurement | $ | |||
Proceeds from the convertible note—related party | ||||
Change in fair value of convertible note—related party—Level 3 measurement | ||||
Working capital loan – related party at March 31, 2023—Level 3 measurement | $ | |||
Proceeds from the convertible note—related party | ||||
Change in fair value of convertible note—related party—Level 3 measurement | ||||
Working capital loan – related party at June 30, 2023—Level 3 measurement | $ | |||
Proceeds from the convertible note—related party | ||||
Change in fair value of convertible note—related party—Level 3 measurement | ||||
Working capital loan – related party at September 30, 2023—Level 3 measurement | $ |
Note 11 — Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date through the date that the unaudited condensed consolidated financial statements were issued. Based on this review, the Company did not identify any subsequent events, other than below, that would have required adjustment or disclosure in the unaudited condensed consolidated financial statements.
On October 27, 2023, the Company held the Second
Shareholder Meeting at which the Company shareholders approved (i) the Second Extension Amendment Proposal, (ii) (the Redemption Limitation
Amendment Proposal), and (iii) (the Founder Share Amendment Proposal. The Articles Amendment Proposals are described in more detail in
BCSA’s definitive proxy statement filed with the U.S. Securities and Exchange Commission on September 5, 2023. In connection with
the Second Shareholder Meeting, the Sponsor entered into Non-Redemption Agreements with several unaffiliated third parties and agreed
to transfer an aggregate of
In connection with the approval of the Founder
Share Amendment Proposal, the sponsor of the Company, voluntarily elected to convert all
In connection with the vote to approve the Articles
Amendment Proposals, holders of
On November 8, 2023, the Company delivered to
Qenta written notice of its election to terminate the Business Combination Agreement pursuant to Section 7.1(h) thereof, and abandoned
the Qenta Business Combination, primarily based on Qenta’s failure to (i) deliver the Closing Company Financial Statements (as defined
in the Business Combination Agreement) by the applicable deadline and (ii) comply with the Financial Information Obligations specified
in the First BCA Amendment. In connection with the Sponsor’s obligations in support of the Qenta Business Combination and Qenta’s
failure to meet the Financial Information Obligations, Qenta delivered to the Sponsor
22
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
References to the “Company,” “our,” “us” or “we” refer to Blockchain Coinvestors Acquisition Corp. I. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited interim condensed consolidated financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”). The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, 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.
Overview
We are a blank check company incorporated as a Cayman Islands exempted company on June 11, 2021. We were formed for the purpose of effectuating a Business Combination. We are an emerging growth company and, as such, we are subject to all of the risks associated with emerging growth companies.
Our Sponsor is Blockchain Coinvestors Acquisition Sponsors I LLC, a Delaware limited liability company (the “Sponsor”). The registration statement for our Initial Public Offering was declared effective on November 9, 2021. On November 15, 2021, we consummated our Initial Public Offering of 30,000,000 Units, including 3,900,000 additional Over-Allotment Units, at $10.00 per Unit, generating gross proceeds of $300,000,000, and incurring offering costs and expenses of approximately $17.8 million of which approximately $11.3 million was for deferred underwriting commissions.
Each Unit consists of one Class A ordinary share of the Company, par value $0.0001 per share, and one-half of one redeemable warrant (each whole warrant, a “Public Warrant”). Each Public Warrant entitles the holder to purchase one Class A ordinary share for $11.50 per whole share.
Simultaneously with the consummation of the closing of the Initial Public Offering, we consummated the Private Placement of an aggregate of 1,322,000 Private Placement Units at a price of $10.00 per Private Placement Unit with the Sponsor, generating total gross proceeds of $13,220,000.
Following the closing of the Initial Public Offering and partial exercise of the over-allotment by the underwriters on November 15, 2021, an amount of $306,000,000 ($10.20 per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering and the sale of the Private Placement Units was placed in the Trust Account in the United States maintained by Continental Stock Transfer & Trust Company, as trustee, and was invested, in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or in any open-ended investment company that holds itself out as a money market fund meeting the conditions under Rule 2a-7 of the Investment Company Act, as determined by the Company. After November 15, 2023, the Company intends to maintain funds in the Trust Account in demand deposits.
Although we are not limited to a particular industry or sector for purposes of consummating a Business Combination, we have concentrated on sourcing business combination opportunities in the financial services, technology and other sectors of the economy that are being enabled by emerging applications of blockchain.
Our management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of the Private Placement Units, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that we will be able to complete a Business Combination successfully. The Nasdaq rules provide that the initial Business Combination must be with one or more target businesses that together have a fair market value equal to at least 80% of the value of the Trust Account (excluding deferred underwriting costs and taxes payable on the income earned on the Trust Account) at the time of the Company’s signing a definitive agreement to enter a Business Combination. We will only complete a Business Combination if the post-business combination company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act.
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We had until 18 months from the closing of the Initial Public Offering to complete a Business Combination, which has been extended to May 15, 2024 as described below. If we are unable to complete a Business Combination within this Combination Period and the Combination Period is not further extended, we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish Public Shareholders’ rights as shareholders (including the right to receive further liquidating distributions, if any), and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining shareholders and our board of directors, liquidate and dissolve, subject in the case of clauses (ii) and (iii) to the Company’s obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to our warrants, which will expire worthless if we fail to complete a Business Combination within the Combination Period.
Shareholder Meeting, Extension, and Redemptions
On February 3, 2023, we held an extraordinary general meeting at which our shareholders approved a proposal to amend our Company’s amended and restated memorandum and articles of association to extend the date by which we have to consummate a business combination from May 15, 2023 to November 15, 2023 (the “Extension Amendment Proposal”). The Extension Amendment Proposal is described in more detail in our definitive proxy statement filed with the U.S. Securities and Exchange Commission on December 29, 2022.
In connection with the vote to approve the Extension Amendment Proposal, holders of 26,406,729 Class A ordinary shares of our Company exercised their right to redeem their shares for cash at a redemption price of approximately $10.38 per share, for an aggregate redemption amount of approximately $274.2 million. As a result, approximately $274.2 million has been removed from the Trust Account to redeem such shares and 4,915,271 Class A ordinary shares remain outstanding after the redemption, including 1,322,000 shares underlying the Private Placement Units. Upon payment of the redemption, approximately $37.3 million remained in the Trust Account.
On October 27, 2023, the Company held an extraordinary general meeting in lieu of the 2023 annual general meeting of shareholders (the “Second Shareholder Meeting”) at which the Company shareholders approved proposals to amend the Company’s amended and restated memorandum and articles of association to (i) extend the date by which BCSA must consummate a business combination from November 15, 2023 to May 15, 2024 or such earlier date as may be determined by the Company’s board of directors in its sole discretion (the “Second Extension Amendment Proposal”), (ii) eliminate the limitation that the Company may not redeem its Class A ordinary shares in an amount that would cause the Company’s net tangible assets to be less than $5,000,001 either immediately prior to or upon consummation of a business combination (the “Redemption Limitation Amendment Proposal”), and (iii) permit for the issuance of Class A Shares to holders of the Company’s Class B ordinary shares (“Founder Shares”) upon the exercise of the right of a holder of BCSA’s Founder Shares to convert such holder’s Founder Shares into Class A Shares on a one-for-one basis at any time and from time to time prior to the closing of an initial business combination at the election of the holder (the “Founder Share Amendment Proposal,” and together with the Extension Amendment Proposal and the Redemption Limitation Amendment Proposal, the “Articles Amendment Proposals”). The Articles Amendment Proposals are described in more detail in BCSA’s definitive proxy statement filed with the U.S. Securities and Exchange Commission on September 5, 2023.
In connection with the approval of the Founder Share Amendment Proposal, the sponsor of the Company, voluntarily elected to convert all 9,850,000 of its Founder Shares to Class A Shares, and the independent directors of BCSA voluntarily elected to convert all 150,000 of their Founder Shares to Class A Shares, in each case, on a one-for-one basis in accordance with the Memorandum and Articles of Association (such conversions collectively, the “Founder Share Conversion”). The Sponsor and the independent directors waived any right to receive funds from the trust account established by the Company in connection with its initial public offering with respect to the Class A Shares received upon such conversion and no additional amounts were deposited into the Trust Account in respect of any of those Class A Shares.
In connection with the vote to approve the Articles Amendment Proposals, holders of 1,481,477 Class A Shares exercised their right to redeem such shares for a pro rata portion of the funds in the Trust Account. As a result, approximately $16.2 million (approximately $10.91 per share) was removed from the Trust Account to redeem such shares. Upon payment of the redemption, and after giving effect to the Founder Share Conversion, BCSA has approximately 13,433,794 Class A Shares outstanding, including 2,111,794 Class A Shares having a right to request redemptions for a pro rata portion of the funds remaining in the Trust Account.
Business Combination
As more fully described in Note 1 to the condensed consolidated financial statements in Part I of this Quarterly Report on Form 10-10, on November 10, 2022, we entered into a Business Combination Agreement, with Merger Sub and Qenta Inc. The Business Combination Agreement provides for, among other things, the following transactions: (i) we will become a Delaware corporation and, in connection with the Domestication, (A) our name will be changed to “Qenta Inc.” and (B) each of our outstanding ordinary shares will become one share of common stock of New Qenta; and (ii) following the Domestication, Merger Sub will merge with and into Qenta, with Qenta as the surviving company in the merger and continuing as a wholly owned subsidiary of New Qenta.
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On August 24, 2023, the Company, Merger Sub, and Qenta entered into an amendment (the “First BCA Amendment”) to the Business Combination agreement, to, among other things, extend the Termination Date (as defined in the Business Combination Agreement) until November 15, 2024. In addition, under the terms of the First BCA Amendment, Qenta agreed to deliver to the Company specified financial statements and other financial information by specified deadlines (the “Financial Information Obligations”), and the Company agreed not to exercise, but did not waive, BCSA’s Financial Statement Termination Right (as defined in the Business Combination Agreement) unless Qenta failed to comply with the Financial Information Obligations. As of November 1, 2023, Qenta failed to meet the first specified Financial Information Obligations deadline.
On August 29, 2023, the Company, Merger Sub, and Qenta entered into a second amendment (the “Second BCA Amendment”) to the Business Combination Agreement to eliminate the exclusive dealing provision applicable to the Company and to limit the exclusive dealing provision applicable to Qenta to transactions involving special purpose acquisition companies and similar “blank check” companies.
On August 24, 2023, the Company, Sponsor and Qenta entered into an amendment (the “Sponsor Letter Amendment”) to the Sponsor Letter Agreement, dated as of November 10, 2022, by and among the Company, the Sponsor and Qenta, pursuant to which the Sponsor agreed, in connection with the completion of a financing transaction between Qenta and financing parties, to transfer and assign, contingent and conditioned upon the closing of the transactions contemplated by the Business Combination Agreement, up to 3,178,000 of the Sponsor’s Class B ordinary shares of the Company (or, if converted, Class A ordinary shares) and 1,322,000 of the Sponsor’s private placement units of the Company to such financing parties or to Qenta in such amounts and proportions as designated by Qenta, provided that all transferees of such shares or units, as applicable, execute and deliver to the Company a lockup agreement in respect of such securities.
On November 8, 2023, the Company delivered to Qenta written notice of its election to terminate the Business Combination Agreement pursuant to Section 7.1(h) thereof, and abandoned the Qenta Business Combination, primarily based on Qenta’s failure to (i) deliver the Closing Company Financial Statements (as defined in the Business Combination Agreement) by the applicable deadline and (ii) comply with the Financial Information Obligations required by the First BCA Amendment. In connection with the Sponsor’s obligations in support of the Qenta Business Combination and Qenta’s failure to meet the Financial Information Obligations, Qenta delivered to the Sponsor 50 shares of Qenta common stock to reimburse the Sponsor and the Company for costs, expenses and other liabilities incurred in connection with the Business Combination Agreement.
In conjunction with the termination of the Business Combination Agreement, the Lock-up Agreements, Sponsor Letter Agreement, Transaction Support Agreements and Forward Purchase Agreement were also terminated in accordance with their respective terms.
Results of Operations
Our entire activity since June 11, 2021 (inception) up to September 30, 2023 was in preparation for our formation and the Initial Public Offering and since the Initial Public Offering, our search for prospective Business Combination. We will not generate any operating revenues until the closing and completion of our initial Business Combination. We generate non-operating income in the form of investment income from our investments held in the Trust Account.
For the three months ended September 30, 2023 we had net income of approximately $436,000 which consisted of a non-operating loss of approximately $189,000 from change in fair value of derivative liabilities, approximately $128,000 from change in fair value of forward purchase agreement and approximately $502,000 of income from investments held in the Trust Account, offset by approximately $0.3 million of general and administrative expenses and approximately $29,000 of general and administrative expenses to related party.
For the nine months ended September 30, 2023 we had net income of approximately $672,000 which consisted of approximately $255,000 in a non-operating loss from change in fair value of derivative liabilities, approximately $274,000 from change in fair value of forward purchase agreement and approximately $3 million of income from investments held in the Trust Account, offset by approximately $2.7 million of general and administrative expenses and approximately $107,000 of general and administrative expenses to related party.
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For the three months ended September 30, 2022 we had net income of approximately $431,000 which consisted of approximately $117,000 in a non-operating gain from change in fair value of derivative liabilities, and approximately $1.5 million of income from investments held in the Trust Account, offset by approximately $1,174,000 of general and administrative expenses, and $45,000 of general and administrative expenses to related party.
For the nine months ended September 30, 2022 we had a net income of approximately $8.3 million, which consisted of approximately $9.8 million in non-operating gain from change in fair value of derivative liabilities, and approximately $1.7 million of income from investments held in the Trust Account, offset by approximately $3.1 million of general and administrative expenses, and $135,000 of general and administrative expenses to related party.
We will not be generating any operating revenues until the closing and completion of our initial Business Combination.
Going Concern, Liquidity and Capital Resources
As of September 30, 2023, we had approximately $222,000 of cash in our operating bank account and a working capital deficit of approximately $6.8 million.
Our liquidity needs prior to the consummation of the Initial Public Offering were satisfied through the payment of $25,000 from our Sponsor to cover for certain offering costs on our behalf in exchange for the issuance of Founder Shares, and loan proceeds of $131,517 under a promissory note with the Sponsor. We repaid this promissory note in full on November 15, 2021. Our liquidity needs have otherwise been satisfied through the net proceeds from the consummation of the Initial Public Offering and the Private Placement. In order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors, may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans, but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1.5 million of such Working Capital Loans may be convertible into private placement units at a price of $10.00 per unit.
On June 15, 2022, the Company issued a promissory note for a Working Capital Loan, as described above, of $1,500,000 to the Sponsor for the Sponsor to provide additional working capital to the Company on an as-needed basis toward the consummation of a Business Combination. The note was amended effective June 29, 2023 to increase the maximum principal amount to $3,000,000. Proceeds from the Trust Account may only be used to pay off outstanding working capital loans under this promissory note upon the closing of the Business Combination. The Sponsor Note bears no interest and is due and payable upon the earlier to occur of (i) the date on which the Company consummates its initial Business Combination and (ii) the date that the winding up of the Company is effective. At the election of the Sponsor, all or any portion of the Sponsor Note may be converted into units of the Company upon the consummation of an initial Business Combination (the “Conversion Units”), equal to (x) the portion of the principal amount of the Sponsor Note being converted, divided by (y) $10.00. The Conversion Units are identical to the Private Placement Units issued by the Company to the Sponsor in connection with the Company’s Initial Public Offering. As of September 30, 2023 the Company has drawn down a total of $1,767,244 and still can borrow up $1,232,756 on the Sponsor Note.
In connection with our assessment of going concern considerations in accordance with Financial Accounting Standard Board’s Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” we have until May 15, 2024 to consummate a Business Combination. We do not have adequate liquidity to sustain operations, however, we have access to a Working Capital Loan from our Sponsor that management believes will enable us to sustain operations until we complete our initial Business Combination. If a Business Combination is not consummated by May 15, 2024, there will be a mandatory liquidation and subsequent dissolution of our Company. Management has determined that the liquidity issue and the mandatory liquidation, should a Business Combination not occur, and potential subsequent dissolution, raises substantial doubt about our ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should we be required to liquidate after May 15, 2024. We intend to complete a Business Combination before the mandatory liquidation date. However, there can be no assurance that we will be able to consummate any Business Combination by May 15, 2024.
Off-Balance Sheet Arrangements
As of September 30, 2023, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
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Commitments and Contractual Obligations
As of September 30, 2023, we did not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities.
Administrative Services Agreement
Commencing on the date of the Initial Public Offering, we entered into an agreement to pay our Sponsor a total of $15,000 per month for secretarial and administrative services and office space provided to members of our management team. Upon completion of the Business Combination or the Company’s liquidation, the Company will cease paying these monthly fees. Our Sponsor, executive officers and directors, or any of their respective affiliates will be reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations.
Underwriting Agreement
On November 9, 2021, we granted the underwriters a 45-day option to purchase up to 3,915,000 additional Units to cover over-allotments at the Initial Public Offering price, less the underwriting discounts and commissions. In connection with the Initial Public Offering, the underwriters exercised the over-allotment option for 3,900,000 Units and forfeited the remaining 15,000 Units.
The underwriters earned an underwriting commission of $0.55 per Unit and $0.55 per Over-Allotment Unit, or $16,500,000 in the aggregate, of which $5,220,000 was paid upon the closing of the Initial Public Offering. The representatives of the underwriters agreed to defer underwriting commissions of 3.5% of the gross proceeds of the Initial Public Offering and 5.5% of the gross proceeds from the partial exercise of the over-allotment option. Upon and concurrently with the completion of our initial business combination, $11,280,000, which constitutes the underwriters’ deferred commissions will be paid to the underwriters from the funds held in the Trust Account.
The Company entered into an amended agreement with one of its underwriters (Cantor Fitzgerald) to reduce the amount of deferred underwriting fees associated with the Qenta Business Combination. Upon the successful completion of the Qenta Business Combination, the $6,800,000 deferred underwriting owed to Cantor Fitzgerald will be reduced by $3,400,000.
Forward Purchase Agreement
In connection with the Business Combination Agreement, we entered into the Forward Purchase Agreement as more fully described in the Business Combination section and Note 6 to the condensed consolidated financial statements.
Critical Accounting Estimates
The preparation of condensed consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. Excluding the valuation of derivative liabilities and convertible note -related party, we have not identified any critical accounting estimates.
Recent Accounting Standards
In June 2022, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2022-03, Accounting Standards Codification (“ASC”) Subtopic 820, “Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions.” The ASU amends ASC 820 to clarify that a contractual sales restriction is not considered in measuring an equity security at fair value and to introduce new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value. The ASU applies to both holders and issuers of equity and equity-linked securities measured at fair value. The amendments in this ASU are effective for the Company in fiscal years beginning after December 15, 2024, and interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance. The Company is still evaluating the impact of this pronouncement.
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In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13 – Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). 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 condensed consolidated 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 condensed consolidated financial statements.
JOBS Act
The Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an “emerging growth company” and under the JOBS Act will be allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis) and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our Initial Public Offering or until we are no longer an “emerging growth company,” whichever is earlier.
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.
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, 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.
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our chief executive officer and chief financial officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2023. Based upon their evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) 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 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
None.
Item 6. Exhibits.
* | Filed herewith. |
** | Furnished herewith. |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
BLOCKCHAIN COINVESTORS ACQUISITION CORP. I | ||
Date: November 14, 2023 | By: | /s/ Lou Kerner |
Lou Kerner | ||
Chief Executive Officer and Director (Principal Executive Officer) | ||
By: | /s/ Mitchell Mechigian | |
Mitchell Mechigian | ||
Chief Financial Officer (Principal Accounting Officer) |
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