Tlgy Acquisition Corp 10-Q for FY2024 Q2
Tlgy Acquisition Corp (TLGYF)
About this 10-Q
Tlgy Acquisition Corp filed this 10-Q on August 20, 2024, covering the quarter ended June 30, 2024 (FY2024 Q2).
Headline figures
Quarter ended June 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net income
- $11.31K
- compared with a net loss of $947.54K a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
For the transition period from to
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Securities registered pursuant to Section 12(g) of the Act: None
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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.
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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.
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As of August 16, 2024, there were a total of
TLGY ACQUISITION CORPORATION
FORM 10-Q FOR THE QUARTER ENDED
June 30, 2024
TABLE OF CONTENTS
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| | Balance Sheets as of June 30, 2024 (unaudited) and December 31, 2023 | 1 |
| | Statements of Operations for the Three and Six Months Ended June 30, 2024 and 2023 (unaudited) | 2 |
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| | Statements of Cash Flows for the Six Months Ended June 30, 2024 and 2023 (unaudited) | 4 |
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| Management’s Discussion and Analysis of Financial Condition and Results of Operations | 27 | |
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i
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
TLGY ACQUISITION CORPORATION
BALANCE SHEETS
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| June 30, 2024 |
| December 31, 2023 | ||
| | (unaudited) | | | ||
ASSETS | | | | | | |
Current Assets: | | | | | | |
Cash | | $ | | | $ | |
Prepaid expenses | |
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Total Current Assets | | | | | | |
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Cash and investments held in Trust Account | | | | | | |
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Total Assets | | $ | | | $ | |
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LIABILITIES, ORDINARY SHARES SUBJECT TO POSSIBLE REDEMPTION AND SHAREHOLDERS’ DEFICIT | |
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Current Liabilities: | | | | | | |
Accounts payable and accrued expenses | | $ | | | $ | |
Accrued offering costs | | | | | | |
| | — | | | | |
Convertible promissory note payable - sponsor | | | | | | |
Convertible promissory note payable – third party | | | — | | | |
Convertible promissory note payable – CPC | | | | | | — |
Due to related party | | | | | | |
Total Current Liabilities | | | | | | |
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Derivative warrant liabilities | |
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Deferred underwriting commission | |
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Total Liabilities | |
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COMMITMENTS AND CONTINGENCIES | |
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Class A ordinary shares subject to possible redemption; | | | | | | |
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Shareholders’ deficit: | |
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Preferred stock, $ | |
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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 | |
| ( | |
| ( |
Total Shareholders’ Deficit | |
| ( | |
| ( |
LIABILITIES, ORDINARY SHARES SUBJECT TO POSSIBLE REDEMPTION AND SHAREHOLDERS’ DEFICIT | | $ | | | $ | |
The accompanying notes are an integral part of these unaudited condensed financial statements.
1
TLGY ACQUISITION CORPORATION
STATEMENTS OF OPERATIONS
(UNAUDITED)
| | For the Three Months | | For the Six Months | ||||||||
| | Ended | | Ended | ||||||||
| | June 30, | | June 30, | ||||||||
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| 2024 |
| 2023 |
| 2024 |
| 2023 | ||||
EXPENSES | | | | | | | | | ||||
Administrative fee - related party | | $ | | | $ | | | $ | | | $ | |
General and administrative | | | | | | | | | | | | |
TOTAL EXPENSES | | | | | | | | | | | | |
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OTHER INCOME (LOSS) | | | | | | | | | | | | |
Income earned on Cash and Investments held in Trust Account | | | | | | | | | | | | |
Forgiveness of debt | | | | | | — | | | | | | — |
Change in fair value of derivative liabilities | | | ( | | | ( | | | ( | | | ( |
TOTAL OTHER INCOME (LOSS) | | | | | | ( | | | | | | |
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Net income (loss) | | $ | | | $ | ( | | $ | | | $ | ( |
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Basic and diluted weighted average shares outstanding, Class A ordinary shares subject to possible redemption | |
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Basic and diluted net income (loss) per share, Class A ordinary shares subject to possible redemption | | $ | | $ | ( | | $ | | $ | ( | ||
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Weighted average number of shares of Class B ordinary shares outstanding, basic and diluted | |
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Basic and diluted net income (loss) per Class B ordinary share | | $ | | $ | ( | | $ | | $ | ( | ||
The accompanying notes are an integral part of these unaudited condensed financial statements.
2
TLGY ACQUISITION CORPORATION
STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
(UNAUDITED)
| | Class B | | Additional | | | | | | |||||
| | Ordinary Shares | | Paid-In | | Accumulated | | Shareholders’ | ||||||
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| Shares |
| Amount |
| Capital |
| Deficit |
| Deficit | ||||
Balance as of December 31, 2023 | | | | $ | | | $ | — | | $ | ( | | $ | ( |
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Current period remeasurement to redemption value | | — | | | — | | | — | | | ( | | | ( |
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Net income | | — | | | — | | | — | | | | | | |
Balance as of March 31, 2024, as restated (unaudited) | | | | | | | | — | | | ( | | | ( |
Current period remeasurement to redemption value | | — | | | — | | | — | | | ( | | | ( |
Underwriter fee waiver | | — | | | — | | | — | | | | | | |
Net loss | | — | | | — | | | — | | | | | | |
Balance as of June 30, 2024 (unaudited) | | | | $ | | | $ | — | | $ | ( | | $ | ( |
| | Class B | | Additional | | | | | | |||||
| | Ordinary Shares | | Paid-In | | Accumulated | | Shareholders’ | ||||||
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| Shares |
| Amount |
| Capital |
| Deficit |
| Deficit | ||||
Balance as of December 31, 2022 | | | | $ | | | $ | — | | $ | ( | | $ | ( |
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Current period remeasurement to redemption value | | — | | | — | | | — | | | ( | | | ( |
Net income | | — | | | — | | | — | | | | | | |
Balance as of March 31, 2023, as restated (unaudited) | | | | | | | | — | | | ( | | | ( |
Current period remeasurement to redemption value | | — | | | — | | | — | | | ( | | | ( |
Net loss | | — | | | — | | | — | | | ( | | | ( |
Balance as of June 30, 2023, as restated (unaudited) | | | | $ | | | $ | — | | $ | ( | | $ | ( |
The accompanying notes are an integral part of these unaudited condensed financial statements.
3
TLGY ACQUISITION CORPORATION
STATEMENTS OF CASH FLOWS
(UNAUDITED)
| | For the | | For the | ||
| | Six Months Ended | | Six Months Ended | ||
| | June 30, | | June 30, | ||
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| 2024 |
| 2023 | ||
Cash Flows From Operating Activities: | | | | | | |
Net income (loss ) | | $ | | | $ | ( |
Adjustments to reconcile net (loss) to net cash used in operating activities: | |
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Income earned on cash and investments held in the Trust Account | | | ( | | | ( |
Loss on change in fair value of derivative warrant liabilities | | | | | | |
Forgiveness of debt | | | ( | | | — |
Changes in operating assets and liabilities: | | | | | | |
Prepaid expenses | |
| ( | |
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Changes in accrued offering costs | | | — | | | ( |
Accounts payable and accrued expenses | | | ( | | | |
Net Cash Used In Operating Activities | |
| ( | |
| ( |
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Cash Flows from Investing Activities: | | | | | | |
Cash deposited into Trust Account | | | ( | | | ( |
Cash withdrawn from Trust Account | | | | | | |
Net Cash Provided By Investing Activities | | | | | | |
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Cash Flows from Financing Activities: | | | | | | |
Redemptions of Class A ordinary shares | | | ( | | | ( |
Proceeds from promissory note – third party | | | | | | — |
Proceeds from convertible promissory note - CPC | | | | | | — |
Proceeds from convertible promissory note - related party | | | | | | |
Net Cash Used In Financing Activities | | | ( | | | ( |
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Net change in cash | |
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Cash at beginning of period | |
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Cash at end of period | | $ | | | $ | |
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Supplemental disclosure of non-cash financing activities: | | | | | | |
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Partial waiver of deferred underwriting commission | | $ | | | $ | — |
The accompanying notes are an integral part of these unaudited condensed financial statements.
4
TLGY ACQUISITION CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1 — DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
TLGY Acquisition Corporation (the “Company”) was incorporated in the Cayman Islands on May 21, 2021. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with
As of June 30, 2024, the Company had not commenced any operations. All activity for the period from May 21, 2021 (inception) through June 30, 2024 were organizational activities and those necessary to prepare for the Initial Public Offering, described below, and, since the completion of our Initial Public Offering, searching for a target to consummate an initial business combination. The Company will not generate any operating revenues until after the completion of an initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering. The Company has selected December 31 as its fiscal year end.
The registration statement for the Company’s Initial Public Offering was declared effective on November 30, 2021. On December 3, 2021, the Company consummated the Initial Public Offering of
Simultaneously with the closing of the Initial Public Offering, the Company consummated the private sale (the “Private Placement”) of an aggregate of
On December 8, 2021, the Company consummated the closing of the sale of an additional
Transaction costs amounted to $
5
Following the closing of the Initial Public Offering on December 3, 2021 and the sale of the underwriters’ overallotment units on December 8, 2021, an amount of $
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. The stock exchange listing rules require that the Business Combination must be with one or more operating businesses or assets with a fair market value equal to at least
The Company will provide the holders of the outstanding Public Shares (the “Public Shareholders”) with the opportunity to redeem all or a portion of their Public Shares either (i) in connection with a shareholder meeting called to approve the Business Combination or (ii) by means of a tender offer in connection with the Business Combination. 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 (initially anticipated to be $
All of the Public Shares contain a redemption feature which allows for the redemption of such Public Shares in connection with the Company’s liquidation, if there is a shareholder vote or tender offer in connection with the Company’s Business Combination and in connection with certain amendments to the Company’s amended and restated memorandum and articles of association (the “Amended and Restated Memorandum and Articles of Association”). In accordance with the rules of the U.S. Securities and Exchange Commission (the “SEC”) and its guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99, redemption provisions not solely within the control of a company require ordinary shares subject to redemption to be classified outside of permanent equity. Given that the Public Shares will be issued with other freestanding instruments (i.e., public warrants), the initial carrying value of the Class A ordinary shares classified as temporary equity will be the allocated proceeds determined in accordance with ASC 470-20. The Class A ordinary shares are subject to ASC 480-10-S99. If it is probable that the equity instrument will become redeemable, the Company has the option to either (i) accrete changes in the redemption value over the period from the date of issuance (or from the date that it becomes probable that the instrument will become redeemable, if later) to the earliest redemption date of the instrument or (ii) recognize changes in the redemption value immediately as they occur and adjust the carrying amount of the instrument to equal the redemption value at the end of each reporting period. The Company has elected to recognize the changes immediately. The Public Shares are redeemable and will be classified as such on the balance sheet until such date that a redemption event takes place. Redemptions of the Company’s Public Shares may be subject to the satisfaction of conditions, including minimum cash conditions, pursuant to an agreement relating to the Company’s Business Combination.
6
If the Company seeks shareholder approval of the Business Combination, the Company will proceed with a Business Combination only if the Company receives an ordinary resolution under Cayman Islands law approving a Business Combination, which requires the affirmative vote of a majority of the shareholders who attend and vote at a general meeting of the Company, or such other vote as required by law or stock exchange rule. If a shareholder vote is not required and the Company does not decide to hold a shareholder vote for business or other legal reasons, the Company will, pursuant to its Amended and Restated Memorandum and Articles of Association, conduct the redemptions pursuant to the tender offer rules of the SEC, and file tender offer documents containing substantially the same information as would be included in a proxy statement with the SEC prior to completing a Business Combination. If the Company seeks shareholder approval in connection with a Business Combination, the Sponsor has agreed to vote its Founder Shares (as defined in Note 6) and any Public Shares purchased during or after the Initial Public Offering in favor of approving a Business Combination. Additionally, each Public Shareholder may elect to redeem their Public Shares, without voting, and if they do vote, irrespective of whether they vote for or against a proposed Business Combination. Additionally, each Public Shareholder may elect to redeem their Public Shares without voting, and if they do vote, irrespective of whether they vote for or against the proposed transaction.
Notwithstanding the foregoing, if the Company seeks shareholder approval of the Business Combination and the Company does not conduct redemptions pursuant to the tender offer rules, 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
The Sponsor has agreed (a) to waive its redemption rights with respect to any Founder Shares and Public Shares held by it in connection with the completion of a Business Combination and (b) not to propose an amendment to the Amended and Restated Memorandum and Articles of Association (i) to modify the substance or timing of the Company’s obligation to allow redemption in connection with the Company’s initial Business Combination or to redeem
If the Company has not completed a Business Combination by September 16, 2024 (or up to April 16, 2025 if the period of time to consummate a business combination is extended in accordance with the terms of the Amended and Restated Memorandum and Articles of Association) (the “Combination Period”), the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than business days thereafter, redeem
The Sponsor has agreed to waive its rights to liquidating distributions from the Trust Account with respect to the Founder Shares it will receive if the Company fails to complete a Business Combination within the Combination Period. However, if the Sponsor or any of its respective affiliates acquire Public Shares, such Public Shares will be entitled to liquidating distributions from the Trust Account if the Company fails to complete a Business Combination within the Combination Period. The underwriters have agreed to waive their rights to their deferred underwriting commission (see Note 7) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period, and in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than the Initial Public Offering price per Unit ($
7
In order to protect the amounts held in the Trust Account, the Sponsor has agreed that it will be liable to the Company if and to the extent any claims by a third party (other than the Company’s independent registered public accounting firm) for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below the lesser of (1) $
Verde Bioresins Merger Agreement
The Company and the Sponsor previously entered into an Agreement and Plan of Merger, as amended (the “Merger” Agreement) on June 21, 2023, as amended on August 11, 2023, with Virgo Merger Sub Corp., a Delaware corporation and wholly-owned subsidiary of the Company (“Merger Sub”), Verde Bioresins, Inc., a Delaware corporation (“Verde”). On March 12, 2024, the Company received a termination notice (the “Termination Notice”) from Verde stating that Verde was exercising its right to terminate the Merger Agreement (the “Termination”) and all ancillary agreements, pursuant to Section 10.01(c) of the Merger Agreement. On March 18, 2024, the Company responded to the Termination Notice and agreed to a termination of the Merger Agreement, but disputed the grounds for the termination of the Merger Agreement. As a result of the agreed upon termination of the Merger Agreement, the Acquiror Support Agreement entered among the Company, Verde and the Sponsor dated June 21, 2023, the Company Support Agreement between Humanitario Capital LLC, the Company and Verde dated June 21, 2023, and Sponsor Share Restriction Agreement entered among the Company, Verde and the Sponsor dated June 21, 2023, automatically terminated. The Company intends to continue evaluating other possible business combination targets.
Changes in Control of Registrant
On April 16, 2024, the Company, the Sponsor, TLGY Holdings LLC, which is the holding company of the Sponsor, CPC Sponsor Opportunities I, LP and CPC Sponsor Opportunities I (Parallel), LP (CPC Sponsor Opportunities I, LP and CPC Sponsor Opportunities I (Parallel), LP, together, the “CPC Funds”), the CPC Funds being current stakeholders of economic interests in the Sponsor, entered into a securities transfer agreement (“Securities Transfer Agreement”), pursuant to which, at a closing on June 19, 2024 (the “Closing”), CPC Funds, for an aggregate purchase price of $
Following the completion of the Securities Transfer Transaction, CPC Funds held and controlled
8
On June 19, 2024, in connection with the Securities Transfer Transaction, the Company and the Sponsor entered into a letter agreement (the “Termination Letter”) terminating the administrative services agreement (the “Administrative Services Agreement”), dated November 30, 2021, by and between the Company and the Sponsor. Pursuant to the Termination Letter, the Company and the Sponsor agreed to irrevocably release, waive, and forever discharge the Company and its successors or assigns, the Sponsor and its members, directors, advisors, officers and its holding company, from any and all actions, compensations, fees and expenses, obligations and claims of all types and nature, including all sums that may be or have been accrued or outstanding, arising from or in connection with the Administrative Services Agreement.
On June 20, 2024, in connection with the Securities Transfer Transaction, the Company and CPC Funds entered into a joinder to a certain letter agreement, dated November 30, 2021 (the “Letter Agreement Joinder”) and a joinder to a certain registration rights agreement, dated November 30, 2021 (the “Registration Rights Agreement”). In addition, on June 21, 2024, the Company entered into an agreement (the “CPC Funds Indemnification Agreement”) to indemnify CPC Funds and their affiliates (each, a “Indemnitee”) from any claims made by the Company or a third party in respect of any investment opportunities sourced by an Indemnitee, any liability arising with respect to an Indemnitee’s activities in connection with the Company’s affairs, and that are provided without a separate written agreement between the Company and any Indemnitee. Such indemnity will provide that the Indemnitees cannot access the funds held in the Company’s trust account.
On June 20, 2024, in connection with the Closing of the Securities Transfer Transaction, Jin-Goon Kim resigned as the CEO and the interim CFO of the Company, and remained as the chairman of Board of the Company. Vikas Desai was appointed as the CEO and a director of the Company, and Merrick Friedman was appointed as the CFO of the Company. Enrique Klix was appointed as an independent director of the Company, and Young Cho was appointed as an independent director of the Company.
Change in Auditor
On June 27, 2024, the Company dismissed Marcum Asia CPAs LLP (“Marcum Asia”) as its independent registered public accounting firm to audit the Company’s financial statements, to be effective immediately. The dismissal of Marcum Asia was approved by the Audit Committee of the Company’s Board of Directors (the “Audit Committee”). On June 28, 2024, the Company engaged WithumSmith+Brown, PC (“Withum”) as its new independent registered public accounting firm. The engagement of Withum was approved by Audit Committee.
Liquidity, Capital Resources, and Going Concern
As of June 30, 2024, the Company had cash of approximately $
In connection with the Company’s assessment of going concern considerations in accordance with Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management is satisfied that Sponsor has committed, but not obliged, to provide fund in form of working capital loan for the working capital needs of the Company until the consummation of an initial business combination or the winding up of the Company as stipulated in the Company’s amended and restated memorandum and articles of association, though no assurance can be provided that such additional capital will ultimately be available. Management has determined that if the Company is unsuccessful in consummating an initial business combination by September 16, 2024 (or up to April 16, 2025 if the period of time to consummate a business combination is extended in accordance with the terms of the Amended and Restated Memorandum and Articles of Association), the requirement that the Company cease all operations, redeem the public shares and thereafter liquidate and dissolve raise substantial doubt about the ability to continue as a going concern. There is no assurance that the Company’s plans to consummate a Business Combination will be successful within the Combination Period. Additionally, management has determined that the Combination Period is less than one year from the date of the issuance of the financial statements. This, coupled with the current liquidity condition of the Company, raises substantial doubt about the Company’s ability to continue as a going concern. As a result, this factor raises substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
9
Risks and Uncertainties
As a result of the military action commenced in February 2022 by the Russian Federation and Belarus in the country of Ukraine and related economic sanctions, the Company’s ability to consummate a Business Combination, or the operations of a target business with which the Company ultimately consummates a Business Combination, may be materially and adversely affected. In addition, the Company’s ability to consummate a transaction may be dependent on the ability to raise equity and debt financing which may be impacted by these events, including as a result of increased market volatility, or decreased market liquidity in third-party financing being unavailable on terms acceptable to the Company or at all. The impact of this action and related sanctions on the world economy and the specific impact on the Company’s financial position, results of operations and/or ability to consummate a Business Combination are not yet determinable.
The financial statements do not include any adjustments that might result from the outcome of the above uncertainties.
NOTE 2. RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
In connection with the preparation of the Company’s quarterly financial statements as of June 30, 2024, the Company identified an error in its misapplication of accounting guidance related to amounts reported in certain previously issued financial statements related to the recording of convertible promissory notes. The Company had incorrectly marked the Company’s convertible promissory notes to fair value from the inception of the notes. The Company improperly elected the fair value option under Accounting Standards Codification No. 825 – Financial Instruments (“ASC 825 the Company had recorded a gain on the issuance of the notes. However, the notes were with related parties and the gain should have been classified as an in substance capital contribution. This equity component precludes the use of the fair value option under ASC 825.. In reassessing the notes\, the Company determined that the notes should have been assessed for a bifurcated derivative under Accounting Standards Codification No. 815 – Derivatives and Hedging (“ASC 815”). The conversion features of the notes did result in de minimis bifurcated derivatives. . As a result, management determined that the notes payable account, and therefore total liabilities as well, was understated by $
The following tables contain the restated financial information for the 2024 period previously reported. The restatements do not have an impact on the Company’s cash position and investments held in the Trust Account established in connection with the Initial Public Offering. The Company has amended its previously filed Annual Report on Form 10-K/A for the year ended December 31, 2023. The financial information that has been previously filed or otherwise reported for this period should no longer be relied upon and is superseded by the information below in this Quarterly Report on Form 10-Q.
| | As Previously | | | | | | | |
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| Reported |
| Adjustment |
| As Restated | |||
Balance Sheet as of March 31, 2024 (unaudited) | | | | | | | | | |
Notes payable | | $ | | | $ | | | $ | |
Total Current Liabilities | | $ | | | $ | | | $ | |
Total Liabilities | | $ | | | $ | | | $ | |
Accumulated Deficit | | $ | ( | | $ | ( | | $ | ( |
Total Shareholders’ Deficit | | $ | ( | | $ | ( | | $ | ( |
10
| | As Previously | | | | | | | |
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| Reported |
| Adjustment |
| As Restated | |||
Statement of Operations as of March 31, 2024 (unaudited) |
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Change in fair value of convertible notes | | $ | | | $ | ( | | $ | — |
Net income | | $ | | | $ | ( | | $ | |
Basic and diluted net income per share, Class A ordinary shares subject to possible redemption | | $ | | | $ | ( | | $ | |
Basic and diluted net income per Class B ordinary share | | $ | | | $ | ( | | $ | |
| | As Previously | | | | | | | |
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| Reported |
| Adjustment |
| As Restated | |||
Statements of Cash Flows as of March 31, 2024 (unaudited) |
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Net income | | $ | | | $ | ( | | $ | |
Loss (gain) on change in fair value of note payable | | $ | ( | | $ | | | $ | — |
NOTE 3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed financial statements are presented in U.S. dollars and have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, the accompanying unaudited condensed financial statements do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of Management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.
The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s December 31, 2023 Annual Report on Form 10-K, as filed with the SEC on March 26, 2024. The interim results for the three and six months ended June 30, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or for any future periods.
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, as amended (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
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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 a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of the financial statements in conformity with US GAAP requires the Company’s 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 balance sheet.
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 balance sheets, 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 June 30, 2024 and December 31, 2023, the Company had cash of $
Cash and investments held in Trust Account
At June 30, 2024 and December 31, 2023, the Company had $
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Offering Costs associated with the Initial Public Offering
The Company complies with the requirements of the Financial Accounting Standards Board (“FASB”) ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A, “Expenses of Offering.” Offering costs were allocated to the separable financial instruments issued in the Initial Public Offering. Upon completion of the Initial Public Offering, offering costs associated with warrant liabilities are expensed as incurred. Offering costs associated with the Units were allocated between temporary equity and the Public Warrants by the relative fair value method. Offering costs of $
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 enumerated in ASC 480 “Distinguishing Liabilities from Equity”. Ordinary shares subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares that 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, ordinary shares are classified as shareholders’ equity. The Company’s Class A ordinary shares feature certain redemption rights that are considered by the Company to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, at June 30, 2024 and December 31, 2023, the
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable Class A ordinary shares to equal the redemption value at the end of each reporting period. During the six months ended June 30, 2024 and 2023, the Company recorded a measurement adjustment of $
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Net income (loss) per Ordinary Share
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” Net income (loss) per ordinary share is computed by dividing net income (loss) by the weighted average number of ordinary shares outstanding for the period. The Company applies the two-class method in calculating earnings per share. The remeasurement adjustment associated with the redeemable Class A Ordinary Shares is excluded from earnings per share as the redemption value approximates fair value.
The calculation of diluted income (loss) per ordinary share does not consider the effect of the warrants issued in connection with the (i) Initial Public Offering and (ii) the Private Placement. As of June 30, 2024, the Company did not have any dilutive securities or other contracts that could, potentially, be exercised or converted into ordinary shares and subsequently share in the earnings of the Company.
The following table reflects the calculation of basic and diluted net income (loss) per ordinary share.
| | For the Three Months | | For the Three Months | ||
|
| Ended June 30, | | Ended June 30, | ||
|
| 2024 |
| 2023 | ||
| | | | | (Restated) | |
Class A Redeemable ordinary shares |
| |
|
| |
|
Numerator: Allocation of net income (loss), as adjusted |
| $ | |
| $ | ( |
Denominator: Basic and diluted weighted average shares outstanding | | | | | | |
Basic and diluted net income (loss) per Class A Ordinary Shares | | $ | | $ | ( | |
| | | | | | |
Class B Non-redeemable ordinary shares (1) | | | | | | |
Numerator: Allocation of net income (loss), as adjusted | | $ | | | $ | ( |
Denominator: Basic and diluted weighted average shares outstanding | |
| | |
| |
Basic and diluted net income (loss) per Class B Ordinary Shares | | $ | | $ | ( | |
|
| For the Six Months |
| For the Six Months | ||
| | Ended June 30, | | Ended June 30, | ||
|
| 2024 |
| 2023 | ||
Class A Redeemable ordinary shares |
| |
|
| |
|
Numerator: Allocation of net income (loss), as adjusted | | $ | | | $ | ( |
Denominator: Basic and diluted weighted average shares outstanding | |
| | |
| |
Basic and diluted net income (loss) per Class A Ordinary Shares | | $ | | $ | ( | |
| | | | | | |
Class B Non-redeemable ordinary shares | |
|
| |
|
|
Numerator: Allocation of net income (loss), as adjusted | | $ | | | $ | ( |
Denominator: Basic and diluted weighted average shares outstanding | |
| | |
| |
Basic and diluted net income (loss) per Class B Ordinary Shares | | $ | | | $ | ( |
(1) In May 2024, the Company entered into a certain waiver with Mizuho Securities USA LLC (“Mizuho”), one of the underwriters of the Company’s Initial Public Offering, pursuant to which Mizuho agreed to a forfeiture of all
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Income Taxes
The Company follows the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were
There is currently no taxation imposed on income by the Government of the Cayman Islands. In accordance with Cayman income tax regulations, income taxes are not levied on the Company. Consequently, income taxes are not reflected in the Company’s financial statements.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times, may exceed the Federal Depository Insurance Coverage of $250,000. Any loss incurred or lack of access to such funds could have a significant adverse impact on the Company’s financial condition, results of operations, and cash flows.
Fair Value of Financial Instruments
Fair value is defined as the price that would be received for sale of an asset or paid to transfer of a liability, in an orderly transaction between market participants at the measurement date. US 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 include:
| ● | 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. |
See Note 10 for additional information regarding liabilities measured at fair value.
Convertible Promissory Note
The Company accounts for its convertible promissory notes under ASC 470-20, Debt --Debt with Conversion and other Options (“ASC 470”). The notes are assessed under ASC 815 for any conversion features which may require bifurcation.
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Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging.” The Company’s derivative instruments are recorded at fair value as of the closing date of the Initial Public Offering (December 3, 2021) and re-valued at each reporting date, with changes in the fair value reported in the statements of operations. Derivative assets and liabilities are classified on the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date. The Company has determined the Public Warrants and the Private Placement Warrants are a derivative instrument. As the Public Warrants and the Private Placement Warrants meet the definition of a derivative, the Public Warrants and the Private Placement Warrants are measured at fair value at issuance and at each reporting date in accordance with ASC 820, “Fair Value Measurement,” with changes in fair value recognized in the statements of operations in the period of change.
Convertible Promissory Note
The Company accounts for its convertible promissory note under ASC 815, Derivatives and Hedging (“ASC 815”). Under 815-15-25, the election can be at the inception of a financial instrument to account for the instrument under the fair value option under ASC 825. The Company has made such election for its convertible promissory note. Using fair value option, the convertible promissory note is required to be recorded at its initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the note are recognized as non-cash change in the fair value of the convertible promissory note in the statements of operations. The fair value of the option to convert into private warrants was valued utilizing the Monte Carlo model.
Warrant Liabilities
The Company accounts for the Public Warrants and the Private Placement Warrants issued in connection with the Initial Public Offering and the Private Placement in accordance with the guidance contained in FASB ASC 815, “Derivatives and Hedging” whereby under that provision, the Public Warrants and the Private Placement Warrants do not meet the criteria for equity treatment and must be recorded as a liability. Accordingly, the Company classifies the warrant instrument as a liability at fair value and adjusts the instrument to fair value at each reporting period. This liability will be re-measured at each balance sheet date until the Public Warrants and the Private Placement Warrants are exercised or expire, and any change in fair value will be recognized in the Company’s statements of operations. Upon issuance and as of December 31, 2021, the Company used a Monte Carlo simulation model to value the Public Warrants and a modified Black-Scholes model to value the Private Placement Warrants. As of June 30, 2024, the quoted market price is used as the fair value as of each relevant date for valuing the Public Warrants. The Private Placement Warrants are valued using a modified Black-Scholes model. The Company’s valuation model utilizes inputs and other assumptions and may not be reflective of the price at which they can be settled. Such warrant classification is also subject to re-evaluation at each reporting period.
Recent Accounting Standards
In June 2016, the Financial Accounting Standards Bureau (“FASB”) issued Accounting Standards Update 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 collectability of the reported amount. Since June 2016, 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. We adopted ASU 2016-13 on January 1, 2023. The adoption of ASU 2016-13 did not have a material impact on its financial statements.
Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our financial statements.
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NOTE 4 — INITIAL PUBLIC OFFERING
Pursuant to the Initial Public Offering and the underwriters’ exercise of the over-allotment option, the Company sold
NOTE 5 — PRIVATE PLACEMENTS
Simultaneously with the closing of the Initial Public Offering and the exercise of the over-allotment option, the Company consummated the private sale (the “Private Placement”) of an aggregate of
A portion of the proceeds from the Private Placement Warrants was added to the proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private Placement Warrants held in the Trust Account will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Private Placement Warrants will be worthless.
The Private Placement Warrants (including the Class A ordinary shares issuable upon exercise of the Private Placement Warrants) will not be transferable, assignable or salable until
NOTE 6 — RELATED PARTY TRANSACTIONS
Founder Shares
On June 17, 2021, the Sponsor received
The Sponsor has agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier to occur of: (A)
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Concurrent with the closing of the Initial Public Offering, the Sponsor transferred
As described in Note 1, pursuant to the Securities Transfer Agreement and at a closing on June 19, 2024, CPC Funds (i) purchased
General and Administrative Services
Commencing on November 30, 2021, the Company has agreed to pay the Sponsor a total of $
Convertible Promissory Note
i)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 its officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). Such Working Capital Loans would be evidenced by promissory notes. The notes may be repaid upon completion of a Business Combination, without interest, or, at the lender’s discretion, up to $
On each of April 24, 2023 (the “2023 April Promissory Note”) and August 10, 2023 (the “2023 August Promissory Note”), the Company issued an unsecured working capital promissory note to the Sponsor, pursuant to which the Company may borrow up to an aggregate principal amount of $
On May 1, 2024, the Company issued an unsecured working capital promissory note to the Sponsor, pursuant to which the Company may borrow up to an aggregate principal amount of $
As of June 30, 2024 and December 31, 2023, there was $
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ii)Time Extension Funding Loans
In order to extend the Company’s time period for consummating a Business Combination, the Sponsor or an affiliate of the Sponsor or certain of its officers and directors may, but are not obligated to, loan the Company funds as may be required. If the Company completes its Business Combination, the Company will repay such loaned amounts. In the event that the Business Combination does not close, no proceeds from the Trust Account would be used to repay such time extension funding loaned amounts. If the Company does not complete a Business Combination, the Company will not repay such time extension funding loans. Up to $
As of June 30, 2024, $
On April 18, 2024, in order to deposit the monthly extension payment to extend the period of time that the Company has to complete its initial business combination by an additional month for the period from April 17, 2024 to May 16, 2024, the Company issued unsecured promissory notes to each of the Sponsor, CPC Sponsor Opportunities I, LP and CPC Sponsor Opportunities I (Parallel), LP (the “2024 April Extension Promissory Notes”), pursuant to which the Company was provided $
On May 18, 2024, in order to deposit the monthly extension payment to extend the period of time that the Company has to complete its initial business combination by an additional month for the period from May 17, 2024 to June 16, 2024, the Company issued unsecured promissory notes to each of CPC Sponsor Opportunities I, LP and CPC Sponsor Opportunities I (Parallel), LP (the “2024 May Extension Promissory Notes”), pursuant to which the Company was provided $
On June 16, 2024, in order to deposit the monthly extension payment to extend the period of time that the Company has to complete its initial business combination by an additional month for the period from June 17, 2024 to July 16, 2024, the Company issued unsecured promissory notes to each of CPC Sponsor Opportunities I, LP and CPC Sponsor Opportunities I (Parallel), LP (the “2024 June Extension Promissory Notes”), pursuant to which the Company were provided $
As of June 30, 2024 and December 31, 2023, the Company had $
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NOTE 7 — COMMITMENTS AND CONTINGENCIES
Registration Rights
The holders of the Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans or Extension 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 or Extension Loans and upon conversion of the Founder Shares) are entitled to registration rights pursuant to a registration rights agreement requiring the Company to register such securities for resale (in the case of the Founder Shares, only after conversion to shares of Class A ordinary shares). The holders of these securities are entitled to make up to
Underwriting Agreement
The Company granted the underwriters a
On December 3, 2021, concurrent with the closing of the Initial Public Offering, the underwriters were paid a cash underwriting discount of $
On December 8, 2021, the Company consummated the closing of the sale of an additional
Concurrent with the closing of the Initial Public Offering, the Sponsor transferred
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In May 2024, the Company entered into a certain waiver with Mizuho Securities USA LLC (“Mizuho Waiver”), pursuant to which Mizuho agreed to waive the Deferred Underwriting Fees and agreed to a forfeiture of all
Legal Fees
The Company has an agreement in place whereby if its prior legal counsel for the Company’s IPO assists in the initial business combination, payment of their charges plus a success premium to be agreed is contingent on a successful de-SPAC closing or recovery under certain cost coverage provisions in the merger agreement. In accordance with ASC 805, Business Combinations, this fee will not be recorded until Business Combination is consummated.
On May 2, 2024, the Company entered into a waiver with its prior legal counsel for the Company’s IPO, pursuant to which its prior legal counsel agreed to a waiver for IPO of all fees and payment under and pursuant to their engagement. Solely in the event of a consummation by the Company of its initial business combination, the Company shall pay the legal counsel for the Company’s IPO a sum of $
NOTE 8 — SHAREHOLDERS’ DEFICIT
Preference Shares —The Company is authorized to issue
Class A Ordinary Shares —The Company is authorized to issue
Class B Ordinary Shares —The Company is authorized to issue
Only holders of the Class B ordinary shares will have the right to vote on the election of directors prior to the Business Combination. Holders of ordinary shares, holders of Class A ordinary shares and holders of Class B ordinary shares will vote together as a single class on all matters submitted to a vote of the shareholders except as otherwise required by law. In connection with a Business Combination, the Company may enter into a shareholder’s agreement or other arrangements with the shareholders of the target or other investors to provide for voting or other corporate governance arrangements that differ from those in effect upon completion of the Initial Public Offering.
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The shares of Class B ordinary shares will automatically convert into Class A ordinary shares at the time of a Business Combination, or earlier at the option of the holder, on a
NOTE 9 — WARRANTS LIABILITIES
Public Warrants may only be exercised for a whole number of shares. No fractional warrants will be issued upon separation of the Units and only whole warrants will trade. The Public Warrants will become exercisable on the later of (a)
The Company will not be obligated to deliver any shares of Class A ordinary share pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act covering the issuance of the shares of Class A ordinary shares issuable upon exercise of the warrants is then effective and a current prospectus relating to those shares of Class A ordinary shares is available, subject to the Company satisfying its obligations with respect to registration, or a valid exemption from registration is available. No warrant will be exercisable for cash or on a cashless basis, and the Company will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of residence of the exercising holder, or an exemption from registration is available.
The Company has agreed that as soon as practicable, but in no event later than
Redemption of Warrants When the Price per Share of Class A Ordinary Share Equals or Exceeds $
| ● | in whole and not in part; |
| ● | at a price of $ |
| ● | upon a minimum of |
| ● | if, and only if, the last reported sale price of the Class A ordinary shares equals or exceeds $ |
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If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
Redemption of Warrants When the Price per Share of Class A Ordinary Share Equals or Exceeds $
| ● | in whole and not in part; |
| ● | at a price of $ |
| ● | upon a minimum of |
| ● | if, and only if, the last reported sale price of the Class A ordinary share equals or exceeds $ |
The Private Placement Warrants are identical to the Public Warrants underlying the Units, except that the Private Placement Warrants and the Class A ordinary shares issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or saleable until
The Company accounts for the
The accounting treatment of derivative financial instruments requires that the Company record a derivative liability upon the closing of the Initial Public Offering. Accordingly, the Company classified each warrant as a liability at its fair value and the warrants were allocated a portion of the proceeds from the issuance of the Units equal to its fair value determined by the Monte Carlo simulation. This liability is subject to re-measurement at each balance sheet date. With each such re-measurement, the warrant liability will be adjusted to fair value, with the change in fair value recognized in the Company’s statements of operations. The Company will reassess the classification at each balance sheet date. If the classification changes as a result of events during the period, the warrants will be reclassified as of the date of the event that causes the reclassification. As of June 30, 2024 and December 31, 2023, the derivative warrant liability was $
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NOTE 10 — FAIR VALUE MEASUREMENTS
The following table presents information about the Company’s assets and liabilities that are measured at fair value at June 30, 2024 and December 31, 2023, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
|
| |
| June 30, | | | | December 31, | ||
Description |
| Level |
| 2024 |
| Level |
| 2023 | ||
Assets: |
|
|
| | | |
| | |
|
Cash and investments held in Trust Account |
| 1 | | $ | | | 1 | | $ | |
| | | | | | | | | | |
Liabilities: |
|
|
| | | |
| | | |
Warrant liability – Private Placement Warrants | | 3 | | | | | 3 | | | |
Warrant liability – Public Warrants | | 1 | | | | | 1 | | | |
The Public Warrants and the Private Placement Warrants were accounted for as liabilities in accordance with ASC 815-40 and are presented within liabilities on the balance sheet. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the statements of operations.
Upon issuance, the Company used a Monte Carlo simulation model to value the Public Warrants and a modified Black-Scholes model to value the Private Placement Warrants. The Company allocated the proceeds received from (i) the sale of Units (which is inclusive of
The subsequent measurements as of June 30, 2024 of the Public Warrants after the detachment of the Public Warrants from the Units are classified as Level 1 due to the use of an observable market quote in an active market. For periods subsequent to the detachment of the Public Warrants from the Units, the publicly traded closing price of the Public Warrants of $
The table below provides a summary of the changes in fair value, including net transfers in and/or out, of all financial assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the six months ended June 30, 2024:
| | Fair Value | |
| | Measurement | |
| | Using Level 3 | |
|
| Inputs Total | |
Balance, December 31, 2023 | | $ | |
|
| | |
Balance, June 30, 2024 | | $ | |
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The key inputs into the Monte Carlo simulation model and the modified Black-Scholes model to value the derivative warrant liabilities were as follows:
|
| June 30, 2024 |
| December 31, 2023 |
| ||
Share price | | $ | | | $ | | |
Exercise price | | $ | | | $ | | |
Risk-free interest rate | |
| | % |
| | % |
Expected life of warrants | |
| | years |
| | years |
Expected volatility of underlying shares | |
| de minimis | % |
| de minimis | % |
Dividend yield | |
| | % |
| | % |
Probability of business combination | |
| | % |
| | % |
As of June 30, 2024 and December 31, 2023, the derivative warrant liability was $
NOTE 11 — SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to August 16, 2024, the date that the financial statements were available to be issued. Based upon this review, except as noted below and as disclosed as current reports under various Form 8-K filed with the SEC, the Company did not identify any other subsequent events that would have required adjustment to or disclosure in the financial statements.
Promissory Notes
On July 5, 2024, the Company issued unsecured working capital promissory notes to each of CPC Sponsor Opportunities I, LP and CPC Sponsor Opportunities I (Parallel), LP (each a “Lender”), pursuant to which the Company may borrow up to an aggregate principal amount of $
At the Lender’s option, upon consummation of an initial business combination and prior to the Company’s first payment of all or any portion of the unpaid principal balance of the Note in cash, the Lender may elect to convert all (but not less than all) of the unpaid principal balance of the Note into that number of warrants to purchase Class A ordinary shares of the Company (the “Working Capital Warrants”), equal to: (x) the unpaid principal amount of the Note being converted, divided by (y) $1.00, rounded up to the nearest whole number of warrants. The Working Capital Warrants shall be identical to the warrants issued by the Company in the private placement that occurred upon consummation of the IPO. The Working Capital Warrants and their underlying securities are entitled to customary registration rights.
Upon the occurrence of an Event of Default (defined below), the Lender may, by written notice to the Company, declare the Note to be due immediately and payable with respect to the unpaid principal amount of the Note, and all other amounts payable thereunder. An “Event of Default” means (i) failure by the Company to pay the principal amount due pursuant to the Note within five (5) business days of the Maturity Date, (ii) voluntary bankruptcy, or (iii) involuntary bankruptcy. Upon the occurrence of an Event of Default specified in clauses (ii) and (iii) above, the balance of the Note and all other sums payable with regard to the Note, shall automatically and immediately become due and payable, in all cases without any action on the part of the Lender.
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On July 15, 2024, in order to deposit the monthly extension payment to extend the period of time that the Company has to complete its initial business combination by an additional month for the period from July 17, 2024 to August 16, 2024 the Company issued unsecured promissory notes to each of CPC Sponsor Opportunities I, LP and CPC Sponsor Opportunities I (Parallel), LP (the “2024 July Extension Promissory Notes”), pursuant to which the Company was provided $
On July 16, 2024, CPC Sponsor Opportunities I, LP and CPC Sponsor Opportunities I (Parallel), LP provided the Company $
Extensions to Complete the Initial Business Combination
On July 15, 2024, the Company notified Continental Stock Transfer & Trust Company of its intention to extend the period of time that the Company has to complete its initial business combination (the “Termination Date”) by an additional month for the period from July 17, 2024 to August 16, 2024, subject to our sponsor or its affiliates or designees depositing $
On July 16, 2024, the Sponsor or its affiliates or designees deposited the Extension Payment into the trust account and as a result the Termination Date was extended by one month until August 16, 2024.
On August 12, 2024, the Company notified Continental Stock Transfer & Trust Company of its intention to extend the period of time that the Company has to complete its initial business combination (the “Termination Date”) by an additional month for the period from August 17, 2024 to September 16, 2024, subject to our sponsor or its affiliates or designees depositing $
On August 12, 2024, the Sponsor or its affiliates or designees deposited the Extension Payment into the trust account and as a result the Termination Date was extended by one month until September 16, 2024.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
References in this quarterly report (the “Quarterly Report”) on Form 10-Q to “we,” “us” or the “Company” refer to TLGY Acquisition Corporation. References to our “management” or our “management team” refer to our officers and directors, and references to the “sponsor” refer to TLGY Sponsors LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Quarterly Report on Form 10-Q. 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 Exchange Act that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form 10-Q including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s final prospectus for its Initial Public Offering filed with the U.S. Securities and Exchange Commission (the “SEC”) on December 3, 2021 and the Company’s annual report on Form 10-K filed with the SEC on March 26, 2024. 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.
Recent Developments
Overview
We are a blank check company incorporated on May 21, 2021 as a Cayman Islands exempted company and incorporated for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses. We have not entered into a business combination agreement with any specific business combination target. We intend to effectuate our initial business combination using cash from the proceeds of our IPO and the private placement of the private placement warrants, the proceeds of the sale of our shares in connection with our initial business combination (pursuant to forward purchase agreements or backstop agreements we may enter into following the consummation of our IPO or otherwise), shares issued to the owners of the target, debt issued to bank or other lenders or the owners of the target, or a combination of the foregoing. We expect to incur significant costs in the pursuit of our initial business combination. We cannot assure you that our plans to raise capital or to complete our initial business combination will be successful.
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Nasdaq Delisting Notice Update
As previously disclosed, on October 9, 2023, the Company received a written notice from the Listing Qualifications Department of The Nasdaq Global Market (“Nasdaq”) indicating that the Company was not currently in compliance with Listing Rule 5450(a)(2) of the Nasdaq Stock Market LLC Rules (the “Listing Rules”), which requires the Company to maintain a minimum of 400 total shareholders on a continuous basis (the “Minimum Total Holders Rule”). The Company had until April 8, 2024 (the “Extension Period”) to regain compliance with the Listing Rules. On May 1, 2024, the Company received a notice (the “Notice”) from Nasdaq indicating that the Company did not regain compliance with the Minimum Total Holders Rule during the Extension Period. On June 5, 2024, the Company submitted a transfer application to transfer its listing of securities from The Nasdaq Global Market to The Nasdaq Capital Market. On June 26, 2024, the Company had received notice from the Staff of Nasdaq approving the Company’s application to transfer the listing of its securities from The Nasdaq Global Market to The Nasdaq Capital Market. The Company’s securities were transferred to The Nasdaq Capital Market at the open of business on June 28, 2024.
Extensions to Complete the Initial Business Combination
On April 16, 2024, shareholders of the Company held an extraordinary general meeting of shareholders (the “Extraordinary General Meeting”), where the shareholders of the Company approved by special resolution an amendment (the “Charter Amendment”) to the Amended and Restated Memorandum and Articles of Association of the Company (the “Charter”) to modify the monthly amount that its Sponsor or its affiliates or designees must deposit into the Trust Account in order to extend the period of time to consummate a business combination by one month, up to twelve times (starting from the first date on which such modified extension payment is made), if requested by the Sponsor and accepted by the Company, from the lesser of $0.033 per outstanding share and $110,000 to the lesser of (x) $0.02 per outstanding share and (y) $60,000 (“Modified Extension Payment”). Any amount of the $110,000 paid in order to extend the period of time to consummate a Business Combination until May 16, 2024, which is paid but unused (due to an additional extension payment, based on the updated monthly amount, made prior to May 16, 2024) may be deducted, on a pro rata basis, from future extension payments.
In connection with the votes to approve the Charter Amendment Proposal, 2,205,658 ordinary shares of the Company were tendered for redemption. The ordinary shares will be redeemed 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 Trust Account deposits (which interest shall be net of taxes payable and up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding ordinary shares. The per-share redemption amount has been calculated to be approximately $11.33 per share.
Changes in Control of Registrant
On April 16, 2024, the Company, the Sponsor, TLGY Holdings LLC, which is the holding company of the Sponsor, CPC Sponsor Opportunities I, LP and CPC Sponsor Opportunities I (Parallel), LP (CPC Sponsor Opportunities I, LP and CPC Sponsor Opportunities I (Parallel), LP, together, the “CPC Funds”), the CPC Funds being current stakeholders of economic interests in the Sponsor, entered into a securities transfer agreement (“Securities Transfer Agreement”), pursuant to which, at a closing on June 19, 2024 (the “Closing”), CPC Funds, for an aggregate purchase price of $1.00 (the “Purchase Price”), (i) purchased 3,542,305 Class B ordinary shares of the Company (the “Founder Shares”) from the Sponsor, certain investors who held the Founder Shares, and three present or previous independent directors of the Company, and (ii) purchased 3,940,825 warrants, each exercisable to purchase one Class A ordinary share at $11.50 per share (“Private Placement Warrants”) from the Sponsor (the “Securities Transfer Transaction”).
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Following the completion of the Securities Transfer Transaction, CPC Funds held and controlled 4,126,215 Founder Shares and 3,940,825 Private Placement Warrants, which represents approximately 45.0% of the issued and outstanding ordinary shares of the Company, assuming the cancellation of 300,300 Class B ordinary shares held by Mizuho Securities USA LLC as required by the Securities Transfer Agreement, and as such the CPC Funds are able to control the election of the Company’s board of directors, and ultimately, the direction of the Company until its initial business combination, if any.
On June 19, 2024, in connection with the Securities Transfer Transaction, the Company and the Sponsor entered into a letter agreement (the “Termination Letter”) terminating the administrative services agreement (the “Administrative Services Agreement”), dated November 30, 2021, by and between the Company and the Sponsor. Pursuant to the Termination Letter, the Company and the Sponsor agreed to irrevocably release, waive, and forever discharge the Company and its successors or assigns, the Sponsor and its members, directors, advisors, officers and its holding company, from any and all actions, compensations, fees and expenses, obligations and claims of all types and nature, including all sums that may be or have been accrued or outstanding, arising from or in connection with the Administrative Services Agreement.
On June 20, 2024, in connection with the Securities Transfer Transaction, the Company and CPC Funds entered into a joinder to a certain letter agreement, dated November 30, 2021 (the “Letter Agreement Joinder”) and a joinder to a certain registration rights agreement, dated November 30, 2021 (the “Registration Rights Agreement”). In addition, on June 21, 2024, the Company entered into an agreement (the “CPC Funds Indemnification Agreement”) to indemnify CPC Funds and their affiliates (each, a “Indemnitee”) from any claims made by the Company or a third party in respect of any investment opportunities sourced by an Indemnitee, any liability arising with respect to an Indemnitee’s activities in connection with the Company’s affairs, and that are provided without a separate written agreement between the Company and any Indemnitee. Such indemnity will provide that the Indemnitees cannot access the funds held in the Company’s trust account.
On June 20, 2024, in connection with the Closing of the Securities Transfer Transaction, Jin-Goon Kim resigned as the CEO and the interim CFO of the Company, and remained as the chairman of Board of the Company. Vikas Desai was appointed as the CEO and a director of the Company, and Merrick Friedman was appointed as the CFO of the Company. Enrique Klix was appointed as an independent director of the Company, and Young Cho was appointed as an independent director of the Company.
Change in Auditor
On June 27, 2024, the Company dismissed Marcum Asia CPAs LLP (“Marcum Asia”) as its independent registered public accounting firm to audit the Company’s financial statements, to be effective immediately. The dismissal of Marcum Asia was approved by the Audit Committee of the Company’s Board of Directors (the “Audit Committee”). On June 28, 2024, the Company engaged WithumSmith+Brown, PC (“Withum”) as its new independent registered public accounting firm. The engagement of Withum was approved by Audit Committee.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities from inception through June 30, 2024 were organizational activities and those necessary to prepare for the Initial Public Offering, described below, and, since the completion of our Initial Public Offering, searching for a target to consummate an initial business combination. We do not expect to generate any operating revenues until after completion of our initial business combination. We generate non-operating income in the form of interest income on cash and cash equivalents held in the trust account. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.
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For the three months ended June 30, 2024, we had net income of $11,307 which was primarily due to the interest income on funds held in Trust of $663,042 and forgiveness of debt of $608,665, partially offset by a loss in fair value of the derivative liabilities of $817,066, administration fees – related party of $15,000, and general and administrative costs of $428,334.
For the three months ended June 30, 2023, we had net loss of $947,538 which was primarily due to a loss in fair value of the derivative liabilities of $1,548,941 and general and administrative costs of $269,650, partially offset by interest income on funds held in Trust of $871,053.
For the six months ended June 30, 2024, we had net income $302,340 which was primarily due to the interest income on funds held in Trust of $1,527,236 and forgiveness of debt of $608,776 partially offset by a loss in fair value of the derivative liabilities of $1,122,044, administration fees – related party of $60,000, and general and administrative costs of $651,628.
For the six months ended June 30, 2023, we had net loss of $751,393, which was primarily due to a loss in fair value of the derivative liabilities of $3,071,532 and general and administrative expenses of $822,465, partially offset by interest income on funds held in Trust of $3,142,604.
Liquidity and Capital Resources
On December 3, 2021, we consummated our IPO of 20,000,000 units at a price of $10.00 per unit, generating gross proceeds of $200,000,000. Simultaneously with the closing of our IPO, we consummated the sale of 10,659,500 private placement warrants to our sponsor at a price of $1.00 per private placement warrant generating gross proceeds of $10,659,500.
On December 8, 2021, we consummated the closing of the sale of an additional 3,000,000 Option Units at $10.00 per Option Unit, pursuant to the full exercise of over-allotment option by the underwriters of our IPO, generating gross proceeds of $30,000,000. We also consummated the closing of the sale of an additional 600,000 private placement warrants at $1.00 per private placement warrant (“Additional Private Placement Warrants”) to our sponsor, generating gross proceeds of $600,000. An aggregate of $234,600,000 of the proceeds from our IPO (including the Option Units) and the private placement with our sponsor (including the Additional Private Placement Warrants) was placed in the trust account. We incurred $14,183,689 in transaction costs, including $4,000,000 of underwriting fees paid at our IPO, $8,650,000 of deferred underwriting fees (the “Deferred Underwriting Fees”) and $1,533,689 of offering expenses. In May 2024, we entered into a certain waiver with Mizuho Securities USA LLC (“Mizuho Waiver”), pursuant to which Mizuho agreed to waive the Deferred Underwriting Fees and agreed to a forfeiture of all 300,300 Class B ordinary shares acquired by it at the time of, and deemed compensation for, the IPO. We believe that Mizuho was acting as a representative of all of the underwriters on the IPO, however, as a precautionary effort, we are in the process of obtaining a written confirmation from all other underwriters on the IPO, to confirm that the Deferred Underwriting Fees were waived under the Mizuho Waiver. We intend to receive this waiver during the third quarter of 2024. As of the date of this Quarterly Report, the forfeiture of the 300,300 Class B ordinary shares has not yet been completed.
On February 27, 2023, the Company reported in a Form 8-K, amongst others, that following the Extraordinary General Meeting of the Company held on February 23, 2023, approving the amendment to the Amended and Restated Memorandum and Articles of Association of the Company, 15,681,818 ordinary shares of the Company were rendered for redemption. The ordinary shares were redeemed 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 Trust Account deposits (which interest shall be net of taxes payable and up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding ordinary share. The per-share redemption amount has been calculated to be approximately $10.40 per share.
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On October 19, 2023, the Company reported in a Form 8-K that following the Annual General Meeting of the Company held on October 17, 2023, approving a further amendment to the Amended and Restated Memorandum and Articles of Association of the Company, 1,395,317 ordinary shares of the Company were rendered for redemption. The ordinary shares were redeemed 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 Trust Account deposits (which interest shall be net of taxes payable and up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding ordinary share. The per-share redemption amount has been calculated to be approximately $10.96 per share.
On April 16, 2024, the Company reported in a Form 8-K that following the extraordinary general meeting (the “Extraordinary General Meeting”) of the Company held on April 16, 2024, approving a further amendment to the Amended and Restated Memorandum and Articles of Association of the Company, 2,205,658 ordinary shares of the Company were rendered for redemption. The ordinary shares were redeemed 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 Trust Account deposits (which interest shall be net of taxes payable and up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding ordinary share. The per-share redemption amount has been calculated to be approximately $11.33 per share.
As of June 30, 2024, we had cash and investments held in the trust account of $42,901,415. We intend to use substantially all of the funds held in the trust account, including any amounts representing interest earned on the trust account (excluding deferred underwriting commissions), to complete our initial business combination. We may withdraw interest to pay our taxes, if any. To the extent that our equity or debt is used, in whole or in part, as consideration to complete our initial business combination, the remaining proceeds held in the trust account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
As of June 30, 2024, we had cash held outside the trust account of $41,096. We intend to use these funds to primarily identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete a business combination.
As of June 30, 2024, the Company had cash of $41,096 and a working capital deficit of $3,654,956.
Management has determined that the funds held outside the Trust Account, as well as access to funds pursuant to a commitment letter from the Sponsor and a working capital loan, are sufficient to fund the working capital needs of the Company until the consummation of an initial business combination or the winding up of the Company as stipulated in the Company’s amended and restated memorandum and articles of association. Management has determined that if the Company is unsuccessful in consummating an initial business combination by April 16, 2025, the requirement that the Company cease all operations, redeem the public shares and thereafter liquidate and dissolve raises substantial doubt about the ability to continue as a going concern. Additionally, management has determined that the Combination Period is less than one year from the date of the issuance of the financial statements. There is no assurance that the Company’s plans to consummate a Business Combination will be successful within the Combination Period. As a result, this factor raises substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. The accompanying financial statements have been prepared in conformity with GAAP, which contemplate continuation of the Company as a going concern.
Off-balance Sheet Arrangements; Commitments and Contractual Obligations
As of June 30, 2024, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any commitments or contractual obligations other than obligations disclosed herein.
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Contractual Obligations
Registration Rights
The holders of the founder shares, private placement warrants and any warrants that may be issued upon conversion of the working capital loans and loans made to extend our time period for consummating an initial business combination (and in each case holders of their component securities, as applicable) will have registration rights to require us to register a sale of any of our securities held by them pursuant to a registration rights agreement signed on November 30, 2021, as supplemented by a joinder to the registration rights agreement on June 20, 2024, requiring us to register such securities for resale (in the case of the founder shares, only after conversion to our Class A ordinary shares). The holders of these securities are entitled to make up to three demands, excluding short form demands, that we register such securities. In addition, these holders will have “piggy-back” registration rights to include their securities in other registration statements filed by the Company. We will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The underwriters of our IPO were entitled to a cash underwriting discount of 2.0% of the gross proceeds of the IPO, or $4,000,000, which was paid at the closing of the IPO. In addition, the underwriters have agreed to defer underwriting commissions of 3.5% of the gross proceeds of the IPO of 20,000,000 units and underwriting commissions of 5.5% of the gross proceeds of the over-allotment option units of 3,000,000 units, or $8,650,000 in aggregate (the “Deferred Underwriting Fees”), which will be paid to the underwriters from the funds held in the trust account upon and concurrently with the completion of our initial business combination. In May 2024, the Company entered into a certain waiver with Mizuho Securities USA LLC (“Mizuho Waiver”), pursuant to which Mizuho agreed to waive the Deferred Underwriting Fees and agreed to a forfeiture of all 300,300 Class B ordinary shares acquired by it at the time of, and deemed compensation for, the IPO. The Company believes that Mizuho was acting as a representative of all of the underwriters on the IPO, however, as a precautionary effort, the Company is in the process of obtaining a written confirmation from all other underwriters on the IPO, to confirm that the Deferred Underwriting Fees were waived under the Mizuho Waiver. The Company intends to receive this waiver during the third quarter of 2024. As of the date of this Quarterly Report, the forfeiture of the 300,300 Class B ordinary shares has not yet been completed.
Legal Fees
The Company has an agreement in place whereby if its prior legal counsel for the Company’s IPO assists in the initial business combination, payment of their charges plus a success premium to be agreed is contingent on a successful de-SPAC closing or recovery under certain cost coverage provisions in the merger agreement. In connection with the Securities Transfer Transaction, the Company entered into a waiver with the Company’s prior legal counsel. Pursuant to the waiver, the Company shall pay its prior legal counsel a sum of $130,000 as full and final payment for all remaining costs and expenses of all kinds and nature incurred under and pursuant to their engagement, solely in the event of a consummation by the Company of its initial business combination. In accordance with ASC 805, Business Combinations, this fee will not be recorded until such time as a Business Combination is consummated.
Critical Accounting Estimates and Policies:
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. The Company has identified the following as its critical accounting estimates and policies:
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A critical accounting estimate to our financial statements is the estimated fair value of our warrant liability and convertible notes. 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 include:
| ● | 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. |
Warrant Liabilities
We account for the warrants in accordance with the guidance contained in ASC 815-40, under which the warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, we classify the warrants as liabilities at their fair value and adjust the warrants to fair value at each reporting period. These liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the statements of operations. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations.
The public warrants for periods where no observable trade price was available are valued using a Monte Carlo simulation. For periods subsequent to the detachment of the public warrants from the Units, the public warrant quoted market price was used as the fair value as of each relevant date. The fair value of the private placement warrants was determined using a Black-Scholes-Merton model.
Class A Ordinary Shares Subject to Possible Redemption
We account for our ordinary shares subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Class A Ordinary shares subject to mandatory redemption (if any) are classified as a liability instrument and is measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares that features redemption rights that is either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) is classified as temporary equity. At all other times, ordinary shares are classified as shareholders’ equity. Our Class A ordinary shares feature certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, Class A ordinary shares subject to possible redemption is presented as temporary equity, outside of the shareholders’ equity section of our balance sheet.
Net loss per Ordinary Share
Net income (loss) per ordinary share is computed by dividing net loss by the weighted average number of ordinary shares outstanding during the period. We apply the two-class method in calculating earnings per share. The net income (loss) is allocated to each class of shares using an allocation of total shares, which is then divided by the total shares for the respective class.
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We did not consider the effect of the warrants issued in connection with the initial public offering and the private placement in the calculation of diluted loss per share because their exercise is contingent upon future events. As a result, diluted net loss per ordinary share is the same as basic net loss per ordinary share. Accretion associated with the redeemable Class A ordinary shares is excluded from loss per ordinary share as the redemption value approximates fair value.
Recent Accounting Pronouncements
In June 2016, the Financial Accounting Standards Bureau (“FASB”) issued Accounting Standards Update 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 collectability of the reported amount. Since June 2016, 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. We adopted ASU 2016-13 on January 1, 2023. The adoption of ASU 2016-13 did not have a material impact on its financial statements.
Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our financial statements.
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, 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 independent registered public accounting firm’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 report of the independent registered public accounting firm 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 IPO 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 required under this item.
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Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our principal executive officer and principal financial and accounting officer, to allow timely decisions regarding required disclosure.
As of June 30, 2024, as required by Rules 13a-15 and 15d-15 under the Exchange Act, our principal executive officer and principal financial and accounting officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. Based on such evaluation, our CEO and CFO concluded that, as of June 30, 2024, our disclosure controls and procedures were not effective, due to the material weaknesses in our internal control over financial reporting related to our accounting for complex financial instruments, as previously disclosed in our Form 10-K/A. As a result, we performed additional analysis as deemed necessary to ensure that our condensed financial statements were prepared in accordance with GAAP. Accordingly, management believes that the condensed financial statements included in this Quarterly Report present fairly in all material respects our financial position, results of operations and cash flows for the periods presented.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the period covered by the Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
Except as set forth below, as of the date of this Quarterly Report on Form 10-Q, there have been no material changes with respect to those risk factors previously disclosed in our final prospectus related to our Initial Public Offering filed with the SEC on December 3, 2021, our annual report on Form 10-K filed with the SEC on March 26, 2024. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations.
Item 2. Unregistered Sale of Equity Securities and Use of Proceeds
Simultaneously with the closing of our Initial Public Offering on December 3, 2022, our sponsor purchased an aggregate of 10,659,500 private placement warrants, each exercisable to purchase one Class A ordinary share at $11.50 per share, at a price of $1.00 per warrant, or $10,659,500 in the aggregate, in a private placement.
On December 8, 2021, we consummated the closing of the sale of an additional 3,000,000 Option Units at $10.00 per Option Unit, pursuant to the full exercise of over-allotment option by the underwriters of our Initial Public Offering, generating gross proceeds of $30,000,000. We also consummated the closing of the sale of an additional 600,000 Additional Private Placement Warrants at $1.00 per private placement warrant to the sponsor, generating gross proceeds of $600,000.
The private placement warrants are identical to the warrants sold as part of the units sold in our Initial Public Offering, except that the private placement warrants, so long as they are held by our sponsor or its permitted transferees, (i) are not redeemable by us, (ii) may not, subject to certain limited exceptions, be transferred, assigned or sold by such holders until 30 days after the completion of our initial business combination (including the Class A ordinary shares issuable upon exercise of such private placement warrants), (iii) may be exercised by the holders on a cashless basis and (iv) will be entitled to registration rights. No underwriting discounts or commissions were paid with respect to such sales.
We paid a total of $4,000,000 in underwriting fees and $1,533,689 for other costs and expenses related to our Initial Public Offering.
An aggregate of $234,600,000 of the proceeds from our Initial Public Offering (including the Option Units) and the private placement with the Sponsor (including the Additional Private Placement Warrants) was placed in the trust account. There has been no material change in the planned use of proceeds from our Initial Public Offering as described in our final prospectus related to our Initial Public Offering filed with the SEC on December 3, 2021. For a description of the use of the proceeds generated in our Initial Public Offering, see Part I, Item 2 of this Quarterly Report on Form 10-Q.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
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Item 6. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
EXHIBIT INDEX
Exhibit No. |
| Description |
3.1 | | |
3.2 | | |
3.3 | | |
3.4 | | |
10.1 | | |
10.2 | | |
10.3 | | |
10.4 | | |
10.5 | | |
10.6 | | |
31.1* | | |
31.2* | | |
32.1** | | |
32.2** | | |
101.INS* | | XBRL Instance Document |
101.CAL* | | XBRL Taxonomy Extension Calculation Linkbase Document |
101.SCH* | | XBRL Taxonomy Extension Schema Document |
101.DEF* | | XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB* | | XBRL Taxonomy Extension Labels 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) |
*Filed herewith.
**Furnished.
37
SIGNATURES
Pursuant to the requirements of Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| TLGY ACQUISITION CORPORATION | ||
| | | |
Date: August 20, 2024 | By: | /s/ Vikas Desai | |
| | Name: | Vikas Desai |
| | Title: | Chief Executive Officer |
| | | (Principal Executive Officer) |
| TLGY ACQUISITION CORPORATION | ||
| | | |
Date: August 20, 2024 | By: | /s/ Merrick Friedman | |
| | Name: | Merrick Friedman |
| | Title: | Chief Financial Officer |
| | | (Principal Financial and Accounting Officer) |
38
EXHIBIT 31.1
CERTIFICATION
PURSUANT TO RULES 13a-14(a) AND 15d-14(a)
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Vikas Desai, certify that:
1. | I have reviewed this Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2024 of TLGY Acquisition Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in the Exchange Act Rules 13a-15(f) and 15d-15(f))) for the registrant and have: |
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| By: | /s/ Vikas Desai |
Date: August 20, 2024 | | Vikas Desai |
| | Chief Executive Officer |
| | (Principal Executive Officer) |
EXHIBIT 31.2
CERTIFICATION
PURSUANT TO RULES 13a-14(a) AND 15d-14(a)
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Merrick Friedman, certify that:
1. | I have reviewed this Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2024 of TLGY Acquisition Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in the Exchange Act Rules 13a-15(f) and 15d-15(f))) for the registrant and have: |
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| By: | /s/ Merrick Friedman |
Date: August 20, 2024 | | Merrick Friedman |
| | Chief Financial Officer |
| | (Principal Financial and Accounting Officer) |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of TLGY Acquisition Corporation (the “Company”) for the fiscal quarter ended June 30, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Vikas Desai, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
(1) | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| By: | /s/ Vikas Desai |
Date: August 20, 2024 | | Vikas Desai |
| | Chief Executive Officer |
| | (Principal Executive Officer) |
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of TLGY Acquisition Corporation (the “Company”) for the fiscal quarter ended June 30, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Merrick Friedman, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
(1) | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| By: | /s/ Merrick Friedman |
Date: August 20, 2024 | | Merrick Friedman |
| | Chief Financial Officer |
| | (Principal Financial and Accounting Officer) |