CBRRF 10-Q
Chain Bridge I (CBRRF)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
OR
For the transition period from to
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Registrant’s telephone number, including area code: ( |
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Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class: |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting company | ||
Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of December 7, 2023, there are
CHAIN BRIDGE I
Form 10-Q
For the Quarter Ended September 30, 2023
Table of Contents
i
PART I. FINANCIAL INFORMATION
Item 1. Condensed Interim Financial Statements
CHAIN BRIDGE I
CONDENSED BALANCE SHEETS
| September 30, 2023 | December 31, 2022 | ||||
(Unaudited) | ||||||
Assets | ||||||
Current assets: | ||||||
Cash | $ | | $ | | ||
Prepaid expenses |
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Total current assets | | | ||||
Investments held in Trust Account |
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Total Assets | $ | | $ | | ||
Liabilities, Class A Ordinary Shares Subject to Possible Redemption and Shareholders’ Deficit: |
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Current liabilities: | ||||||
Accounts payable | $ | | $ | | ||
Accrued expenses | | | ||||
Total current liabilities |
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Derivative liabilities | | | ||||
Deferred legal fees | | | ||||
Total Liabilities | | | ||||
Commitments and Contingencies (Note 5) |
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Class A ordinary shares subject to possible redemption; $ | | | ||||
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Shareholders’ deficit: |
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Preference shares, $ |
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Class A ordinary shares, $ |
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Class B ordinary shares, $ |
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Additional paid-in capital |
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Accumulated deficit |
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Total shareholders’ deficit |
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Total Liabilities, Class A Ordinary Shares Subject to Possible Redemption and Shareholders’ Deficit | $ | | $ | | ||
The accompanying notes are an integral part of these unaudited condensed interim financial statements.
1
CHAIN BRIDGE I
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
For the Three Months Ended | For the Nine Months Ended | |||||||||||
September 30, | September 30, | |||||||||||
| 2023 |
| 2022 |
| 2023 |
| 2022 | |||||
General and administrative expenses | $ | | $ | | $ | | $ | | ||||
General and administrative expenses - related party | | | | | ||||||||
Loss from operations | ( | ( | ( | ( | ||||||||
Other income (expense): |
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Change in fair value of derivative liabilities | ( | | | | ||||||||
Change in fair value of convertible note - related party | | ( | | | ||||||||
Income from investments held in Trust Account | | | | | ||||||||
Net (loss) income | $ | ( | $ | | $ | | $ | | ||||
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Weighted average shares outstanding of Class A ordinary shares, basic and diluted |
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Basic and diluted net (loss) income per share, Class A ordinary shares | $ | ( | $ | | $ | | $ | | ||||
Weighted average shares outstanding of Class B ordinary shares, basic and diluted | | | | | ||||||||
Basic and diluted net (loss) income per share, Class B ordinary shares | $ | ( | $ | | $ | | $ | | ||||
The accompanying notes are an integral part of these unaudited condensed interim financial statements.
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CHAIN BRIDGE I
UNAUDITED CONDENSED 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 | — | $ | — | | $ | | $ | — | $ | ( | $ | ( | |||||||
Net income |
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Deemed dividend - increase in redemption value of Class A ordinary shares subject to possible redemption | — | — | — | — | — | ( | ( | ||||||||||||
Balance - March 31, 2023 (unaudited) | — | $ | — | | $ | | $ | — | $ | ( | $ | ( | |||||||
Fair value of transferred Class B Shares (non-redemption agreements) | — | — | — | — | ( | — | ( | ||||||||||||
Deemed capital contribution from non-redemption agreements | — | — | — | — | | — | | ||||||||||||
Net income | — | — | — | — | — | | | ||||||||||||
Deemed dividend - increase in redemption value of Class A ordinary shares subject to possible redemption | — | — | — | — | — | ( | ( | ||||||||||||
Balance - June 30, 2023 (unaudited) |
| — | $ | — | | $ | | $ | — | $ | ( | $ | ( | ||||||
Net loss | — | — | — | — | — | ( | ( | ||||||||||||
Deemed dividend - increase in redemption value of Class A ordinary shares subject to possible redemption | — | — | — | — | — | ( | ( | ||||||||||||
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 |
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| Capital |
| Deficit |
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Balance - December 31, 2021 | | $ | | | $ | | $ | | $ | ( | $ | ( | |||||||
Net income | — | — | — | — | — | | | ||||||||||||
Balance - March 31, 2022 (unaudited) | — | $ | — | | $ | | $ | — | $ | ( | $ | ( | |||||||
Net income | — | — | — | — | — | | | ||||||||||||
Deemed dividend - increase in redemption value of Class A ordinary shares subject to possible redemption | — | — | — | — | — | ( | ( | ||||||||||||
Balance - June 30, 2022 (unaudited) |
| — | $ | — | | $ | | $ | — | $ | ( | $ | ( | ||||||
Net income | — | — | — | — | — | ||||||||||||||
Deemed dividend - 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 interim financial statements.
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CHAIN BRIDGE I
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
| For the Nine Months Ended | |||||
September 30, | ||||||
2023 | 2022 | |||||
Cash Flows from Operating Activities: | ||||||
Net income | $ | | $ | | ||
Adjustments to reconcile net income to net cash used in operating activities: |
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Change in fair value of derivative liabilities | ( | ( | ||||
Change in fair value of convertible note - related party | ( | ( | ||||
Income from investments held in Trust Account | ( | ( | ||||
Changes in operating assets and liabilities: |
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Prepaid expenses | | | ||||
Accounts payable | | | ||||
Accrued expenses | |
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Net cash used in operating activities | ( |
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Cash Flows from Investing Activities: | ||||||
Cash withdrawn from Trust Account in connection with redemption | | — | ||||
Net cash provided by investing activities | | — | ||||
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Cash Flows from Financing Activities: |
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Proceeds from convertible note - related party | |
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Redemption of Class A ordinary shares | ( | — | ||||
Net cash used in financing activities | ( |
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Net change in cash | ( |
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Cash — beginning of the period | |
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Cash — end of the period | $ | | $ | | ||
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Supplemental disclosure of noncash financing activities: |
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Deemed capital contribution from non-redemption agreements | $ | | $ | — | ||
Fair value of transferred Class B shares (non-redemption agreements) | $ | ( | $ | — | ||
Deemed dividend - increase in redemption value of Class A ordinary shares subject to possible redemption | $ | | $ | | ||
The accompanying notes are an integral part of these unaudited condensed interim financial statements.
4
Note 1 — Description of Organization and Business Operations
Chain Bridge I (the “Company”) is a blank check company incorporated as a Cayman Islands exempted company on January 21, 2021. The Company was incorporated for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with
As of September 30, 2023, the Company had not yet commenced operations. All activity for the period from January 21, 2021 (inception) through September 30, 2023 relates to the Company’s formation and the initial public offering (“Initial Public Offering”), which is described below, and since the closing of the Initial Public Offering, the search for a prospective Business Combination. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate 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 has selected December 31st as its fiscal year end.
The Company’s sponsor is Chain Bridge Group, a Cayman Islands exempted limited liability company (the “Sponsor”). The registration statement for the Company’s Initial Public Offering was declared effective on November 9, 2021. On November 15, 2021, the Company consummated its Initial Public Offering of
Simultaneously with the closing of the Initial Public Offering, the Company consummated the private placement (“Private Placement”) of
In addition, upon closing of the Initial Public Offering, CB Co-Investment loaned the Company $
Upon the closing of the Initial Public Offering, $
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The Company’s management has broad discretion with respect to the specific application of the net proceeds of its Initial Public Offering and the sale of Private Placement Warrants and the proceeds from the promissory note issued to CB Co-Investment, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. The Company’s initial Business Combination must be with
The Company will provide its holders of the Public Shares (the “Public Shareholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a general meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek shareholder approval of a Business Combination or conduct a tender offer will be made by the Company. The Public Shareholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account. The Company expects the pro rata price to be $
Notwithstanding the foregoing, the Company’s Amended and Restated Memorandum and Articles of Association provides that a Public Shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of
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As a result of the amendment to the Company’s Amended and Restated Memorandum and Articles of Association approved by the Company’s shareholders, as discussed below, the Company has until January 15, 2024 (the “Extended Date”) to consummate an initial Business Combination. However, if the Company anticipates that it may not be able to consummate the initial Business Combination by the Extended Date, the Company may, by resolution of the board of directors of the Company if requested by the Sponsor, extend the period of time to consummate a Business Combination up to three times, each by an additional month up to February 15, 2024 (the “Additional Extended Date”), the date (the “Termination Date”) by which, if the Company has not consummated a Business Combination, the Company must (a) cease all operations except for the purpose of winding up; (b) as promptly as reasonably possible but not more than business days thereafter, redeem the Public Shares; and (c) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining shareholders and the directors, liquidate and dissolve, subject in each case to its obligations under Cayman Islands law to provide for claims of creditors and in all cases subject to the other requirements of applicable law. On December 13, 2023, the board of directors of the Company adopted resolutions to extend the Company’s business operations until January 15, 2024.
The Company’s Sponsor, officers and directors agreed not to propose an amendment to the Company’s Amended and Restated Memorandum and Articles of Association (A) to modify the substance or timing of the Company’s obligation to allow the redemption of its Public Shares in connection with a Business Combination or to redeem
If the Company is unable to complete a Business Combination within
On May 12, 2023, at an extraordinary general meeting of its shareholders (the “Special Meeting”) the Company’s shareholders approved a proposal to amend the Company’s existing Amended and Restated Memorandum and Articles of Association to extend the date to consummate an initial Business Combination from May 15, 2023 to November 15, 2023 and to allow the board of directors of the Company, without another shareholder vote, to elect to further extend the date to consummate an initial Business Combination after the Extended Date up to
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In connection with the Special Meeting, the Company, the Sponsor and CB Co-Investment have entered into non-redemption agreements (the “Non-Redemption Agreements”), with several unaffiliated third parties (“Investors”), pursuant to which such third parties agreed not to redeem (or to validly rescind any redemption requests on) an aggregate of
On June 14, 2023, the board of directors of the Company approved the grant of
The Initial Shareholders agreed to waive their liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period. However, if the Initial Shareholders should acquire Public Shares in or after the Initial Public Offering, they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if the Company fails to complete a Business Combination within the Combination Period. The underwriters agreed to waive their rights to the Marketing Fee (see Note 6) held in the Trust Account in the event the Company does not complete a Business Combination within in the Combination Period and, in such event, such amounts will be included with the funds held in the Trust Account that will be available to fund the redemption of the Company’s Public Shares. In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution in the Trust Account will be less than the $
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
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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 election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statement with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Risks and Uncertainties
Management continues to evaluate the current or anticipated military conflicts, including between Russia and Ukraine, and Israel and Hamas, terrorism, sanctions or other geopolitical events as well as adverse developments in the economy and capital markets, including rising energy costs, inflation and interest rates, in the United States and globally, on the industry and has concluded that while it is reasonably possible that these events could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of the unaudited condensed interim financial statements. The unaudited condensed interim financial statements do not include any adjustments that might result from the outcome of this uncertainty.
On March 10, 2023, Silicon Valley Bank (“SVB”) was closed by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation (“FDIC”) as receiver. On March 12, 2023, the FDIC, the Department of Treasury and the Federal Reserve issued a joint statement indicating that actions would be taken to complete the FDIC’s resolution of SVB in a manner that protects depositors. The financial institution was reopened by the FDIC on March 13, 2023, with customers having full access to their deposits and debt facilities as at the time of the closure. On March 26, 2023, the FDIC entered into a purchase and assumption agreement for all deposits and loans of Silicon Valley Bridge Bank, National Association with First Citizens Bank & Trust Company. Management has evaluated the situation and since the Company is not a borrower or party to any such instruments with SVB or any other financial institution currently in receivership, there is no material impact on the unaudited condensed interim financial statements of the Company.
On May 1, 2023, First Republic Bank was closed by the California Department of Financial Protection and Innovation, which appointed the FDIC as receiver. To protect depositors, the FDIC entered into a purchase and assumption agreement with JPMorgan Chase Bank, National Association, Columbus, Ohio, to assume all of the deposits and substantially all of the assets of First Republic Bank. Management has evaluated the situation and determined there is no material impact on the unaudited condensed interim financial statements of the Company.
Liquidity and Capital Resources
As of September 30, 2023, the Company had approximately $
The Company’s liquidity needs prior to the consummation of the Initial Public Offering were satisfied through the payment of $
The Company has until January 15, 2024 to consummate an initial Business Combination. However, if the Company anticipates that it may not be able to consummate the initial Business Combination by the Extended Date, the Company may, by resolution of its board if requested by the Sponsor, extend the period of time to consummate a Business Combination up to one additional time, by an additional month up to February 15, 2024 (the “Additional Extended Date”), the date (the “Termination Date”) by which, if the Company
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has not consummated a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination involving the Company, with one or more businesses or entities (a “Business Combination”), the Company must (a) cease all operations except for the purpose of winding up; (b) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Class A ordinary shares sold in the Company’s initial public offering (the “Public Shares”); and (c) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining shareholders and the directors, liquidate and dissolve, subject in each case to its obligations under Cayman Islands law to provide for claims of creditors and in all cases subject to the other requirements of applicable law.
In connection with our assessment of going concern considerations in accordance with FASB Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” the Company has determined that the liquidity condition and the date for mandatory liquidation and 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 January 15, 2024. The unaudited condensed interim financial statements do not include any adjustment that might be necessary if the Company is unable to continue as a going concern.
Note 2 — Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed interim 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 10 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 interim financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the period 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.
The accompanying unaudited condensed interim financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Annual Report on Form 10-K filed by the Company with the SEC on March 17, 2023.
Use of Estimates
The preparation of condensed interim 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 condensed interim financial statements and the reported amounts of income and expenses during the reporting period. Making estimates require 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 condensed interim financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. 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. As of September 30, 2023 and December 31, 2022, the Company had
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 (“FDIC”) coverage limit of $250,000 per institution. The Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.
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Financial Instruments
The fair value of the Company’s assets and liabilities which qualify as financial instruments under the ASC Topic 820, “Fair Value Measurements,” equal or approximate the carrying amounts represented in the condensed balance sheets primarily due to their short-term nature.
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.
Offering Costs Associated with the Initial Public Offering
The Company complies with the requirements of FASB ASC 340-10-S99-1. Offering costs consisted of legal, accounting, underwriting fees and other costs incurred that were directly related to the Initial Public Offering. Upon completion of 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 allocated to the derivative warrant liabilities were charged to operations. Offering costs associated with the Class A ordinary shares were charged against the carrying value of Class A ordinary shares subject to possible redemption upon the completion of the Initial Public Offering.
Derivative Financial Instruments
The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. The Company evaluates all of the financial instruments, including issued stock purchase warrants, and forward purchase agreements, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC Topic 480 and ASC Topic 815, “Derivatives and Hedging” (“ASC Topic 815”). The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, will be re-assessed at the end of each reporting period. Derivative warrant liabilities will be 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
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in connection with the Initial Public Offering have subsequently been measured based on the listed market price of such Public Warrants. As of September 30, 2023 and December 31, 2022, the fair value of the Forward Purchase Securities are measured using a Monte Carlo simulation, and the fair value of the convertible note is measured using Black-Scholes model. As of September 30, 2023 and December 31, 2022, the fair value of Private Placement Warrants was determined based on the quoted price of the Public Warrants.
Class A Ordinary Shares Subject to Possible Redemption
The Company accounts for the Class A ordinary shares subject to possible redemption in accordance with the guidance in ASC Topic 480. Class A ordinary shares subject to mandatory redemption (if any) is classified as liability instruments and are measured at fair value. Conditionally redeemable Class A ordinary shares (including Class ordinary shares that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) are classified as temporary equity. At all other times, Class A ordinary shares are classified as shareholders’ equity. The Company’s Class A ordinary shares feature certain redemption rights that are considered to be outside of our control and subject to the occurrence of uncertain future events. Accordingly, as of September 30, 2023 and December 31, 2022,
On May 12, 2023, the Company held an extraordinary general meeting of its shareholders (the “Special Meeting”) at which the Company’s shareholders approved a proposal to amend the Company’s existing Amended and Restated Memorandum and Articles of Association to extend from May 15, 2023 to November 15, 2023 (the “Extended Date”) and to allow the board of directors of the Company, without another shareholder vote, to elect to further extend the date to consummate an initial Business Combination after the Extended Date up to
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As of September 30, 2023 and December 31, 2022, the amounts of Class A ordinary shares reflected on the condensed balance sheets are reconciled in the following table:
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: | |||
Deemed dividend - increase in redemption value of Class A ordinary shares subject to possible redemption | | ||
Class A ordinary shares subject to possible redemption, December 31, 2021 | | ||
Plus: | |||
Deemed dividend - increase in redemption value of Class A ordinary shares subject to possible redemption | | ||
Class A ordinary shares subject to possible redemption, December 31, 2022 | | ||
Plus: | |||
Deemed dividend - increase in redemption value of Class A ordinary shares subject to possible redemption | | ||
Less: | |||
Redemptions of Class A ordinary shares | ( | ||
Class A ordinary shares subject to possible redemption, September 30, 2023 (unaudited) | $ | |
Net Income Per Share
The Company complies with accounting and disclosure requirements of 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 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 does not consider the effect of the warrants underlying the Units sold in the Initial Public Offering (including the consummation of the over-allotment) and the Private Placement Warrants to purchase an aggregate of
The Company has considered the effect of Class B ordinary shares that were excluded from weighted average number as they were contingent on the exercise of over-allotment option by the underwriters. Since the contingency was satisfied, the Company has included these shares in the weighted average number as of the beginning of the period to determine the dilutive impact of these shares.
The table below presents a reconciliation of the numerator and denominator used to compute basic and diluted net income per share for each class of ordinary shares:
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||||||||||
September 30 (unaudited), | September 30 (unaudited), | |||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||
| Class A |
| Class B |
| Class A |
| Class B |
| Class A |
| Class B |
| Class A |
| Class B | |||||||||
Basic and diluted net (loss) income per ordinary share |
|
| ||||||||||||||||||||||
Numerator: |
|
| ||||||||||||||||||||||
Allocation of net (loss) income | $ | ( | $ | ( | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||
Denominator: | ||||||||||||||||||||||||
Basic and diluted weighted average ordinary shares outstanding | | | | | | | | | ||||||||||||||||
Basic and diluted net (loss) income per ordinary share | $ | ( | $ | ( | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||
13
Recent Accounting Pronouncements
In June 2022, the FASB issued ASU 2022-03, ASC Topic 820 “Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions”. The ASU amends ASC Topic 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, 2023, 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 unaudited condensed interim 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 the accompanying unaudited condensed interim financial statements.
Note 3 — Initial Public Offering
On November 15, 2021, the Company consummated its Initial Public Offering of
Each Unit consists of
Note 4 — Private Placement Warrants
Simultaneously with the closing of the Initial Public Offering, the Company consummated the Private Placement of
Each whole Private Placement Warrant is exercisable for
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
Note 5 — Related Party Transactions
Founder Shares
On February 3, 2021, the Sponsor and CB Co-Investment paid an aggregate of $
On November 9, 2021, the Sponsor transferred an aggregate of
14
at fair value upon the grant date. The Founders Shares were granted subject to a performance condition (i.e., the occurrence of a Business Combination). Compensation expense related to the Founders Shares is recognized only when the performance condition is probable of occurrence under the applicable accounting literature in this circumstance. As of September 30, 2023, the Company determined that a Business Combination is not considered probable, and, therefore,
The Sponsor and CB Co-Investment agreed to forfeit up to an aggregate of
On October 13, 2022, the Sponsor exercised its right to repurchase
The Initial Shareholders, and the executive officers and directors of the Company, agreed not to transfer, assign or sell any of their Founder Shares until the earlier to occur of: (A)
Related Party Loans
Promissory Note to Sponsor
On February 1, 2021, the Sponsor agreed to loan the Company up to $
Convertible Note — Related Party
Upon closing of the Initial Public Offering, CB Co-Investment loaned the Company approximately $
On November 16, 2022, the Sponsor agreed to loan the Company up to $
15
Working Capital Loan
In addition, in order to fund working capital deficiencies or 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”). If the Company completes a Business Combination, the Company may repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans may be repaid only out of funds held outside the Trust Account. 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 Convertible Note and 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 $
Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans.
Administrative Services Agreement
On November 9, 2021, the Company entered into an agreement that provided that, the Company pay the Sponsor $
In addition, the Sponsor, officers and directors, and any of 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 partner 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, officers or directors, or the Company’s or their affiliates. Any such payments prior to an initial Business Combination will be made from funds held outside the Trust Account.
As of September 30, 2023 and December 31, 2022, the Company had
Note 6 — Commitments and Contingencies
Registration Rights and Shareholder Rights
The holders of the Founder Shares, Private Placement Warrants, Class A ordinary shares underlying the Private Placement Warrants, the Forward Purchase Securities and warrants that may be issued upon conversion of the Convertible Note and the Working Capital Loans (and any Class A ordinary shares issuable upon the exercise of the Private Placement Warrants, Forward Purchase Warrants and warrants that may be issued upon conversion of such loans) were entitled to registration rights pursuant to a registration and shareholder rights agreement signed upon the effective date of the Initial Public Offering. The holders of these securities are entitled to make up to three demands, excluding short form demands, that the Company registers such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to 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 Agreement
The Company granted the underwriters a
16
The underwriters were entitled to an underwriting discount of $
Business Combination Marketing Agreement
On November 9, 2021, the Company entered into an agreement with one of the underwriters, Cowen and Company, LLC, as advisors in connection with the Company’s Business Combination to assist the Company in holding meetings with the shareholders to discuss the potential Business Combination and the target business’ attributes, introduce the Company to potential investors that are interested in purchasing the Company’s securities in connection with the potential Business Combination, assist the Company in obtaining shareholder approval for the Business Combination and assist the Company with its press releases and public filings in connection with the Business Combination. The Company agreed to pay a fee for such services (the “Marketing Fee”) upon the consummation of the initial Business Combination in an amount equal to, in the aggregate,
Forward Purchase Agreement
Franklin Strategic Series — Franklin Growth Opportunities Fund (“Franklin”) on November 1, 2021 entered into a forward purchase agreement (“Forward Purchase Agreement”) with the Company that provides for the purchase by Franklin, in the aggregate, of
The Forward Purchase Securities will not have any redemption rights in connection with the initial Business Combination and will not be entitled to liquidating distributions from the Trust Account if the Company fails to complete the initial Business Combination within the prescribed time frame. The Forward Purchase Securities, to the extent issued prior to the record date for a shareholder vote on the initial Business Combination or any other matter, will have the right to vote on such matter with all other holders of the outstanding Class A ordinary shares; provided that if the Company seeks shareholder approval of a proposed initial Business Combination after Franklin has purchased the Forward Purchase Securities, Franklin agreed under the forward purchase agreement to vote any of the Class A ordinary shares owned by Franklin in favor of any proposed initial Business Combination.
The Forward Purchase Securities sold pursuant to the Forward Purchase Agreement will be identical to the Class A ordinary shares and redeemable warrants included in the Units being sold in the Initial Public Offering, except as described herein. In addition, the Forward Purchase Securities will have certain registration rights, so long as such Forward Purchase Securities are held by Franklin or any third party to which Franklin transfers any portion of its obligation under the Forward Purchase Agreement.
The capital from such private placement would be used as part of the consideration to the sellers in the initial Business Combination, and any excess capital from such private placement would be used for working capital in the post-transaction company.
17
Non-Redemptions Agreements
In connection with the extraordinary general meeting of shareholders (the “Special Meeting”) of the Company, to extend the date by which the Company has to consummate a Business Combination (the “Articles Extension”) from May 15, 2023 to November 15, 2023 (with right to extend additionally for
The Company estimated the aggregate fair value of a weighted number of founder shares based on the likelihood of consummating an initial Business Combination beyond November 15, 2023, or
The fair value of the founder shares were based on a Monte Carlo Model using the following significant inputs:
| May 10, 2023 |
| ||
Stock price | $ | | ||
Risk free rate |
| | % | |
Remaining life |
| | ||
Volatility |
| | % | |
Probability of transaction |
| | % | |
Letter and Joinder Agreement
In connection with the grant of the RSUs to Mr. Lazarus, the Company and Mr. Lazarus entered into Letter Agreement dated June 15, 2023 and Joinder Agreement dated June 20, 2023. Pursuant to which, among other things, the Company agreed to grant Mr. Lazarus
Note 7 — Shareholders’ Deficit
Preference Shares — The Company is authorized to issue
Class A Ordinary shares — The Company is authorized to issue
18
Class B Ordinary shares — The Company is authorized to issue
Class A and Class B ordinary shareholders of record are entitled to
The Class B ordinary shares will automatically convert into Class A ordinary shares on the first business day following the consummation of the initial Business Combination at a ratio such that the number of Class A ordinary shares issuable upon conversion of all Founder Shares will equal, in the aggregate, on an as-converted basis,
Note 8 —Warrants
As of September 30, 2023 and December 31, 2022, the Company had
Public Warrants may only be exercised for a whole number of shares. No fractional Public Warrants will be issued upon separation of the Units and only whole Public Warrants will trade. The Public Warrants will become exercisable on the later of (a)
19
The warrants have an exercise price of $
The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except (i) that the Private Placement Warrants and the Class A ordinary shares issuable upon exercise of the Private Placement Warrants will not be transferable, assignable or salable until
Redemption of warrant when the price per share of Class A ordinary shares equals or exceeds $
| ● | in whole and not in part; |
| ● | at a price of $ |
| ● | upon a minimum of |
| ● | if, and only if, the closing price of Class A ordinary shares equals or exceeds $ |
Redemption of warrants when the price per share of Class A ordinary shares equals or exceeds $
| ● | in whole and not in part; |
| ● | at $ |
| ● | if, and only if, the closing price of Class A ordinary shares equals or exceeds $ |
20
| ● | if the Reference Value is less than $ |
The “fair value” of Class A ordinary shares for the above purpose shall mean the volume weighted average price of Class A ordinary shares during the
In no event will the Company be required to net cash settle any warrant. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.
Note 9 —Fair Value Measurements
The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2023 and December 31, 2022 and indicates the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value.
September 30, 2023 (unaudited)
| Quoted Prices in |
| Significant Other |
| Significant Other | ||||
Active Markets | Observable Inputs | Unobservable Inputs | |||||||
Description | (Level 1) | (Level 2) | (Level 3) | ||||||
Assets: | |||||||||
Investments held in Trust Account - U.S. Treasury Securities | $ | | $ | — | $ | — | |||
Liabilities: |
|
|
|
|
|
| |||
$ | — | $ | — | $ | | ||||
Derivative liabilities- Public Warrants | $ | | $ | — | $ | — | |||
Derivative liabilities- Private Placement Warrants | $ | — | $ | | $ | — | |||
Derivative liabilities - Forward Purchase Agreement | $ | — | $ | — | $ | | |||
December 31, 2022
| Quoted Prices in |
| Significant Other |
| Significant Other | ||||
Active Markets | Observable Inputs | Unobservable Inputs | |||||||
Description | (Level 1) | (Level 2) | (Level 3) | ||||||
Assets: | |||||||||
Investments held in Trust Account - U.S. Treasury Securities (1) | $ | | $ | — | $ | — | |||
Liabilities: |
|
|
| ||||||
$ | — | $ | — | $ | | ||||
Derivative liabilities- Public Warrants | $ | | $ | — | $ | — | |||
Derivative liabilities- Private Placement Warrants | $ | — | $ | | $ | — | |||
Derivative liabilities - Forward Purchase Agreement | $ | — | $ | — | $ | | |||
| (1) | Excludes $ |
21
Transfers to/from Levels 1, 2, and 3 are recognized at the beginning of the reporting period. The estimated fair value of Public Warrants was transferred from a Level 3 measurement to a Level 1 measurement, when the Public Warrants were separately listed and traded in an active market in December 2021. The estimated fair value of the Private Placement Warrants was transferred from a Level 3 measurement to a Level 2 fair value measurement in January 2022, as the transfer of Private Placement Warrants to anyone who is not a permitted transferee would result in the Private Placement Warrants having substantially the same terms as the Public Warrants, the Company determined that the fair value of each Private Placement Warrant is equivalent to that of each Public Warrant. There were no other transfers between levels of the hierarchy for the three and nine months ended September 30, 2023.
Level 1 assets include investments in U.S. treasury 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 initial estimated fair value as of November 15, 2021, of the Public Warrants, the Private Placement Warrants, and the Forward Purchase Agreement is measured at fair value using a Monte Carlo simulation, determined using Level 3 inputs. The fair value of Public Warrants issued in connection with the Initial Public Offering have subsequently been measured based on the listed market price of such warrants. As of September 30, 2023 and December 31, 2022, the fair value of the Forward Purchase Securities are measured using a Monte Carlo simulation, and the fair value of the convertible note is measured using a Black-Scholes model. As of September 30, 2023 and December 31, 2022, the fair value of Private Placement Warrants was determined based on the quoted price of the Public Warrants. Inherent in a Monte Carlo simulation and Black-Scholes model are assumptions related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield.
The following table provides quantitative information regarding Level 3 fair value measurements inputs at September 30, 2023 and December 31, 2022 measurement date:
September 30, 2023 (unaudited)
| Private Placement |
| Forward Purchase |
|
|
| ||||
| Warrants |
| Agreements |
| Convertible Note |
| ||||
Exercise price | $ | | $ | | $ | | ||||
Stock price | $ | | $ | | $ | | ||||
Term (years) |
| |
| |
| | ||||
Volatility |
| | % |
| — |
| | % | ||
Risk-free rate |
| | % |
| | % |
| | % | |
Dividend yield |
| | % |
| | % |
| | % | |
December 31, 2022
| Private Placement |
| Forward Purchase |
|
|
| ||||
Warrants | Agreements | Convertible Note |
| |||||||
Exercise price | $ | | $ | | $ | | ||||
Stock price | $ | | $ | | $ | | ||||
Term (years) |
| |
| |
| | ||||
Volatility |
| | % |
| — |
| | % | ||
Risk-free rate |
| | % |
| | % |
| | % | |
Dividend yield |
| % |
| % |
| % | ||||
22
The change in the fair value of the derivative liabilities measured using Level 3 inputs for the three and nine months ended September 30, 2023 and 2022, is summarized as follows:
Derivative liabilities at December 31, 2022 |
| $ | |
Change in fair value of derivative warrant liabilities - forward purchase agreement |
| ( | |
Derivative liabilities at March 31, 2023 (unaudited) | $ | | |
Change in fair value of derivative warrant liabilities - forward purchase agreement | ( | ||
Derivative liabilities at June 30, 2023 (unaudited) | $ | | |
Change in fair value of derivative warrant liabilities - forward purchase agreement | | ||
Derivative liabilities at September 30, 2023 (unaudited) | $ | |
Derivative liabilities at December 31, 2021 |
| $ | |
Transfer of Private Placement Warrants to Level 2 |
| ( | |
Change in fair value of derivative warrant liabilities - forward purchase agreement |
| | |
Derivative liabilities at March 31, 2022 (unaudited) | $ | | |
Change in fair value of derivative warrant liabilities - forward purchase agreement | ( | ||
Derivative liabilities at June 30, 2022 (unaudited) | $ | | |
Change in fair value of derivative warrant liabilities - forward purchase agreement | ( | ||
Derivative liabilities at September 30, 2022 (unaudited) | $ |
The change in the fair value of the convertible note – related party measured using Level 3 inputs for the three and nine months ended September 30, 2023 and 2022, is summarized as follows:
Convertible note - related party at December 31, 2022 |
| $ | |
Additional issuance of convertible note - related party |
| | |
Change in fair value of convertible note - related party |
| ( | |
Convertible note - related party at March 31, 2023 (unaudited) | $ | | |
Additional issuance of convertible note - related party | | ||
Change in fair value of convertible note - related party | | ||
Convertible note - related party at June 30, 2023 (unaudited) | $ | | |
Additional issuance of convertible note - related party | |||
Change in fair value of convertible note - related party | ( | ||
Convertible note - related party at September 30, 2023 (unaudited) | $ |
Convertible note - related party at December 31, 2021 |
| $ | |
Change in fair value of convertible note - related party | | ||
Convertible note - related party at March 31, 2022 (unaudited) | $ | | |
Change in fair value of convertible note - related party | ( | ||
Convertible note - related party at June 30, 2022 (unaudited) | $ | | |
Change in fair value of convertible note - related party | | ||
Convertible note - related party at September 30, 2022 (unaudited) | $ | |
Note 10 — Subsequent Events
The Company has evaluated subsequent events and transactions that occurred up to the date the unaudited condensed interim financial statements were issued. Except for the identified below, the Company did not identify any subsequent events, that would have required adjustment or disclosure in the unaudited condensed interim financial statements.
23
On October 31, 2023, the Company disclosed on a Current Report on Form 8-K indicating the Company’s intent to (a) redeem all of its outstanding Class A ordinary shares, (b) cease all operations as of November 15, 2023, except those required to wind up the Company’s business, and (c) subject to the approval of the Company’s remaining shareholders and the Company’s board of directors, liquidate and dissolve, subject to the Company’s obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law, after concluding that the Company would be unlikely to complete an initial Business Combination by November 15, 2023 (twenty-four months from the closing of the Company’s initial public offering). On November 14, 2023 the Company disclosed on a Current Report on Form 8-K that the Company decided (a) not to redeem all of its outstanding Class A ordinary shares as of November 15, 2023, as previously disclosed on October 31, 2023, and (b) to extend its business operations for an additional month, in accordance with the Company’s Amended and Restated Memorandum and Articles of Association. On December 13, 2023, the board of directors of the Company adopted a resolution to extend the Company’s business operations until January 15, 2024.
The Company did not file its 2023 Q3 financial results and quarter report on Form 10-Q by the November 15, 2023 deadline because of its original intent to cease all operations as of November 15, 2023 and liquidate and dissolve the Company as disclosed in the Company’s Current Reports on Form 8-K.
Effective as of December 4, 2023, the Company switched from the Nasdaq Global Market to the Nasdaq Capital Market. The Company’s Class A ordinary shares and units are trading on the Nasdaq Capital Market under the symbols “CBRG” and “CBRGU”, respectively.
On December 8, 2023, the Company, the Sponsor, CB Co-Investment LLC (“CB Co-Investment” and, together with the Sponsor, the “Sellers”) and Fulton AC I LLC (“Buyer”), entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”), pursuant to which Buyer will acquire from the Sellers an aggregate of (i)
Consummation of the transactions contemplated by the Securities Purchase Agreement requires, among other things, the conversion of the $
Subsequent to September 30, 2023, the Company drew down the remaining amount available under the Additional Convertible Note, resulting in an outstanding balance of $
On December 13, 2023, each current member of the Company’s board of directors and the Company’s chief executive officer have tendered their resignations from their positions as directors and/or officers of the Company effective upon the consummation of the transactions contemplated by the Securities Purchase Agreement. Roger Lazarus shall continue in his role as chief financial officer. There were no disagreements between the current members of the Company’s board of directors, its chief executive officer and the Company which led to their resignation.
24
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
References to the “Company,” “Chain Bridge I,” “our,” “us” or “we” refer to Chain Bridge I. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited condensed interim financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the 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 result 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 January 21, 2021. We were incorporated for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses that we have not yet identified (the “Business Combination”). Although we are not limited to a particular industry or geographic region for purposes of consummating an initial Business Combination, we intend to focus on partnering with a technology company that will advance U.S. national security and intelligence interests.
As of September 30, 2023, we had not yet commenced operations. All activity for the period from January 21, 2021 (inception) through September 30, 2023 relates to our formation, our initial public offering (the “Initial Public Offering”), which is described below and, subsequent to the Initial Public Offering, the search for a prospective Business Combination. We will not generate any operating revenues until after the completion of our initial Business Combination, at the earliest. We will generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the Initial Public Offering.
Our sponsor is Chain Bridge Group, a Cayman Islands exempted 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 23,000,000 units (the “Units”), including 3,000,000 additional Units to cover over-allotments, at $10.00 per Unit, generating gross proceeds of $230.0 million, and incurring offering costs of approximately $5.7 million, of which approximately $254,000 was for offering costs allocated to derivative warrant liabilities.
Simultaneously with the closing of the Initial Public Offering, we consummated the private placement (“Private Placement”) of 10,550,000 private placement warrants, at a price of $1.00 per private placement warrant to the Sponsor and CB Co-Investment LLC (“CB Co-Investment”), generating proceeds of approximately $10.6 million (Note 4).
In addition, upon closing of the Initial Public Offering, CB Co-Investment loaned us approximately $1,150 thousand at no interest. On November 16, 2022, the Sponsor agreed to loan the Company up to $1,200 thousand pursuant to an unsecured non-interest bearing convertible promissory note (“Additional Convertible Note”). Such Additional Convertible Note will not be repaid in the event that the Company is unable to close a Business Combination unless there are funds available outside the Trust Account to do so. Such Additional Convertible Note would either be paid upon consummation of the Company’s initial Business Combination, or, at the discretion of Sponsor, converted into additional warrants at a price of $1.00 per warrant, which warrants will be identical to the Private Placement Warrants. As of September 30, 2023, and December 31, 2022, the Company had an outstanding balance of $1,094,600 and $350,000, respectively, under the Additional Convertible Note.
25
Upon the closing of the Initial Public Offering, $234.6 million ($10.20 per Unit) of net proceeds, including the net proceeds of the Initial Public Offering, certain of the proceeds of the Private Placement and the proceeds from the convertible promissory note issued to CB Co-Investment, was placed in a trust account (the “Trust Account”) with Continental Stock Transfer & Trust Company acting as trustee and invested in United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended, or the Investment Company Act, having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government treasury obligations, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account as described in the unaudited condensed interim financial statements.
Liquidity and Going Concern
At September 30, 2023, we had cash of approximately $33,000 and working capital deficit of approximately $53,000.
Our liquidity needs up to December 31, 2022 had been satisfied through the cash receipt of $25,000 from the Sponsor and CB Co-Investment to cover for certain expenses on behalf of the Company in exchange for issuance of founder shares, and loan from the related party of approximately $244,000 under the Note (as defined herein). The Company repaid the original Note of approximately $244,000 in full on November 17, 2021. Subsequent to the consummation of the Initial Public Offering, the Company’s liquidity has been satisfied through the net proceeds from the consummation of the Initial Public Offering, over-allotment, the Private Placement held outside of the trust account and the issuance of the convertible notes. In addition, 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, provide the Company Working Capital Loans (as defined in Note 5). As of September 30, 2023 and December 31, 2022, there was $2,244,600 and $1,500,000, respectively, outstanding under the Working Capital Loans (convertible notes).
The Company has until November 15, 2023 (the “Extended Date”) to consummate an initial Business Combination. However, if the Company anticipates that it may not be able to consummate the initial Business Combination by the Extended Date, the Company may, by resolution of its board if requested by the Sponsor, extend the period of time to consummate a Business Combination up to three times, each by an additional month up to February 15, 2024 (the “Additional Extended Date”), the date (the “Termination Date”) by which, if the Company has not consummated a Business Combination, the Company must (a) cease all operations except for the purpose of winding up; (b) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Class A ordinary shares sold in the Company’s initial public offering (the “Public Shares”); and (c) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining shareholders and the directors, liquidate and dissolve, subject in each case to its obligations under Cayman Islands law to provide for claims of creditors and in all cases subject to the other requirements of applicable law. On December 13, 2023, the board of directors of the Company adopted resolutions to extend the Company’s business operations until January 15, 2024.
In connection with our assessment of going concern considerations in accordance with ASU 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” the Company has determined that the liquidity condition and the date for mandatory liquidation and 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 January 15, 2024. The unaudited condensed interim financial statements do not include any adjustment that might be necessary if the Company is unable to continue as a going concern.
Results of Operations
Our entire activity since inception up to September 30, 2023 was in preparation for our Initial Public Offering and since the closing of the Initial Public Offering, the search for a prospective Business Combination. We will not generate any operating revenues until the closing and completion of our initial business combination, at the earliest.
For the three months ended September 30, 2023, we had a net loss of approximately $472,000, which consisted of general and administrative expenses of approximately $170,000, general and administrative expenses to related party of $90,000, and loss from the change in fair value of derivative liabilities of approximately $791,000, partially offset by investment income on the Trust Account of approximately $576,000 and gain from the change in fair value of convertible note to related party of approximately $3,600.
26
For the three months ended September 30, 2022, we had a net income of approximately $2.7 million, which consisted of net gain from the change in fair value of derivative liabilities of approximately $2.1 million, and investment income on the Trust Account of approximately $903,000, partially offset by general and administrative expenses of approximately $165,000, general and administrative expenses to related party of $90,000, and net loss from the change in fair value of convertible note to related party of approximately $8,000.
For the nine months ended September 30, 2023, we had a net income of approximately $4.1 million, which consisted of a gain from the change in fair value of derivative liabilities of approximately $452,000, gain from the change in fair value of convertible note to related party of approximately $67,000 and investment income on the Trust Account of approximately $4.8 million, partially offset by general and administrative expenses of approximately $934,000 and general and administrative expenses to related party of $270,000.
For the nine months ended September 30, 2022, we had a net income of approximately $8.4 million, which consisted of net gain from the change in fair value of derivative liabilities of approximately $8 million, investment income on the Trust Account of approximately $1.3 million, and net gain from the change in fair value of convertible note to related party of approximately $34,000, partially offset by general and administrative expenses of approximately $717,000, and general and administrative expenses to related party of $210,000.
Contractual Obligations
Registration Rights and Shareholder Rights
The holders of Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans (and any shares of ordinary shares issuable upon the exercise of the Private Placement Warrants or warrants issued upon conversion of the Working Capital Loans and upon conversion of the Founder Shares), as well as Franklin and their permitted transferees, were entitled to registration rights pursuant to a registration and shareholder rights agreement signed upon the consummation of the Initial Public Offering. These holders will be entitled to certain demand and “piggyback” registration rights. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The underwriters were entitled to an underwriting discount of $0.20 per Unit, or approximately $4.6 million in the aggregate, paid upon the closing of the Initial Public Offering.
Critical Accounting Policies
Derivative Financial Instruments
We do not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. We evaluate all of our financial instruments, including issued stock purchase warrants, and forward purchase agreements, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC Topic 480, “Distinguishing Liabilities from Equity” (“ASC Topic 480”) and ASC Topic 815, “Derivatives and Hedging” (“ASC Topic 815”). The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, will be re-assessed at the end of each reporting period. Derivative warrant liabilities will be 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 22,050,000 warrants that were issued in connection with the Initial Public Offering (including the 11,500,000 warrants included in the Units and the 10,550,000 Private Placement Warrants) and the 4,000,000 Forward Purchase Securities, were recognized as derivative liabilities in accordance with ASC Topic 815. Accordingly, the Company recognized the warrant instruments as liabilities at fair value and adjust the instruments to fair value at each reporting period. The liabilities will be subject to re-measurement at each balance sheet date until exercised. The fair value of the Forward Purchase Securities, Public Warrants and the Private Placement Warrants were initially measured using a Monte Carlo simulation. The fair value of Public Warrants issued in connection with the Initial Public Offering have subsequently been measured based on the listed market price of such Public Warrants. As of September 30, 2023 and December 31, 2022, the fair value of the Forward Purchase Securities are measured using a Monte Carlo simulation, and the fair value of the convertible note is measured using Black-Scholes model. As of September 30, 2023 and December 31, 2022, the fair value of Private Placement Warrants was determined based on the quoted price of the Public Warrants.
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Class A Ordinary Shares Subject to Possible Redemption
We account for our Class A ordinary shares subject to possible redemption in accordance with the guidance in ASC Topic 480. 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 features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) are classified as temporary equity. At all other times, Class A ordinary shares are classified as shareholders’ equity. Our Class A ordinary shares feature certain redemption rights that are considered to be outside of our control and subject to the occurrence of uncertain future events. Accordingly, as of September 30, 2023 and December 31, 2022, 4,151,134 and 23,000,000, respectively, Class A ordinary shares subject to possible redemption are presented at redemption value as temporary equity, outside of the shareholders’ deficit section of our condensed balance sheets.
We recognize 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), we 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.
Net Income Per Share
We comply with accounting and disclosure requirements of ASC Topic 260, “Earnings Per Share.” We have 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 does not consider the effect of the warrants underlying the Units sold in the Initial Public Offering (including the consummation of the over-allotment) and the Private Placement Warrants to purchase an aggregate of 22,050,000 Class A ordinary shares in the calculation of diluted income per share, because their inclusion would be anti-dilutive under the treasury stock method. As a result, diluted net income per share is the same as basic net income per share for the three and nine months ended September 30, 2023 and 2022. Accretion associated with the redeemable Class A ordinary shares is excluded from earnings per share as the redemption value approximates fair value.
We have considered the effect of Class B ordinary shares that were excluded from weighted average number as they were contingent on the exercise of over-allotment option by the underwriters. Since the contingency was satisfied, we have included these shares in the weighted average number as of the beginning of the period to determine the dilutive impact of these shares.
Recent Accounting Pronouncements
In June 2022, the FASB issued ASU 2022-03, ASC Topic 820 “Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions”. The ASU amends ASC Topic 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, 2023, 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 unaudited condensed interim 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 the accompanying unaudited condensed interim financial statements.
Off-Balance Sheet Arrangements
As of September 30, 2023 and December 31, 2022, 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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JOBS Act
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 are 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, the unaudited condensed interim 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
Not required for smaller reporting companies.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of September 30, 2023, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial and accounting officer have concluded that as of September 30, 2023, our disclosure controls and procedures were effective.
Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Management assessed the effectiveness of our internal control over financial reporting as of September 30, 2023 based on the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on its assessment, management concluded that our internal control over financial reporting was effective as of September 30, 2023.
Changes in Internal Control over Financial Reporting
There were no changes to our internal control over financial reporting that occurred during our fiscal quarter ended September 30, 2023 that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II — OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
Factors that could cause our actual results to differ materially from those in this Quarterly Report on Form 10-Q include the risk factors described in our Annual Report on Form 10-K filed with the SEC on March 17, 2023. You should review the risk factors described in our Annual Report on Form 10-K filed with the SEC on March 17, 2023 for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in this Quarterly Report on Form 10-Q. If any of the risks described in our Annual Report on Form 10-K filed with the SEC on March 17, 2023 actually occur, our business, financial condition and results of operations could be adversely affected.
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
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Item 6. Exhibits.
Exhibit Number |
| Description |
31.1 | ||
31.2 | ||
32.1* | ||
32.2* | ||
101.INS | XBRL Instance Document | |
101.SCH | XBRL Taxonomy Extension Schema Document | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* | These certifications are furnished to the SEC pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on this 15th day of December, 2023.
Chain Bridge I | ||
By: | /s/ Michael Rolnick | |
Name: | Michael Rolnick | |
Title: | Chief Executive Officer | |
By: | /s/ Roger Lazarus | |
Name: | Roger Lazarus | |
Title: | Chief Financial Officer | |
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