Zapata Quantum, Inc 10-Q for FY2023 Q2
Zapata Quantum, Inc. (ZPTA)
About this 10-Q
Zapata Quantum, Inc filed this 10-Q on August 3, 2023, covering the quarter ended June 30, 2023 (FY2023 Q2).
Headline figures
Quarter ended June 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net income
- $1.53M
- compared with a net loss of $47.56K a year earlier
Table of Contents
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
Units, each consisting of one Class A ordinary share, $0.0001 par value, and one-half of oneredeemable public warrant |
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Public warrants, each whole warrant exercisable for one Class A ordinary share, each at an exercise price of $11.50 per share |
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
| ☒ | Smaller reporting company | |||||
| Emerging growth company | ||||||
Table of Contents
ANDRETTI ACQUISITION CORP.
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2023
TABLE OF CONTENTS
| Page | ||||
| Part I. Financial Information |
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| Item 1. Financial Statements |
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| Condensed Balance Sheets as of June 30, 2023 (Unaudited) and December 31, 2022 |
1 | |||
| 2 | ||||
| 3 | ||||
| Condensed Statements of Cash Flows for the Six Months ended June 30, 2023 and 2022 (Unaudited) |
4 | |||
| 5 | ||||
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
17 | |||
| Item 3. Quantitative and Qualitative Disclosures Regarding Market Risk |
20 | |||
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| Part II. Other Information |
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| Item 2. Unregistered Sales of Equity Securities and Use of Proceeds |
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i
Table of Contents
June 30, 2023 |
December 31, 2022 |
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(Unaudited) |
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ASSETS |
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Current assets |
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Cash |
$ | $ | ||||||
Prepaid expenses and other current assets |
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Total Current Assets |
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Prepaid insurance, long-term |
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Marketable securities held in Trust Account |
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TOTAL ASSETS |
$ |
$ |
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LIABILITIES AND SHAREHOLDERS’ DEFICIT |
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Current liabilities |
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Accounts payable and accrued expenses |
$ | $ | ||||||
Accrued interest payable – related party |
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Accrued offering costs |
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Total Current Liabilities |
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Convertible note—related party |
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Deferred legal fee |
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Deferred underwriting fee payable |
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Total Liabilities |
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Commitments and Contingencies (see Note 6) |
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Class A ordinary shares subject to possible redemption; $ |
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Shareholders’ Deficit |
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Preference shares, $ |
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Class A ordinary shares, $ |
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Class B ordinary shares, $ |
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Additional paid-in capital |
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Accumulated deficit |
( |
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Total Shareholders’ Deficit |
( |
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TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT |
$ |
$ |
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For the Three Months Ended June 30, |
For the Six Months Ended June 30, |
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2023 |
2022 |
2023 |
2022 |
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| Formation costs, professional fees and general and administrative costs |
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| Loss from operations |
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| Other income (expense): |
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| Interest earned on marketable securities held in Trust Account |
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| Change in fair value of Convertible Promissory Notes – Related Party |
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| Interest expense – Convertible Promissory Notes – Related Party |
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| Other income, net |
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| Net income (loss) |
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$ |
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$ |
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| Basic and diluted weighted average shares outstanding, Class A ordinary shares |
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| Basic and diluted net income (loss) per share, Class A ordinary shares |
$ |
$ |
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| Basic and diluted weighted average shares outstanding, Class B ordinary shares |
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| Basic and diluted net income (loss) per share, Class B ordinary shares |
$ |
$ |
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$ |
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Class B Ordinary Shares |
Additional Paid-in Capital |
Accumulated Deficit |
Total Shareholders’ Deficit |
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Shares |
Amount |
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| Balance – January 1, 2023 |
$ |
$ | $ |
( |
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$ |
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| Proceeds received in excess of fair value of convertible promissory notes |
— | — | — | |||||||||||||||||
| Accretion for Class A ordinary shares to redemption amount |
— | — | ( |
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| Net income |
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| Balance – March 31, 2023 |
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| Proceeds received in excess of fair value of convertible promissory notes |
— | — | — | |||||||||||||||||
| Accretion for Class A ordinary shares to redemption amount |
— | — | ( |
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| Net income |
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| Balance – June 30, 2023 |
$ |
$ |
$ |
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Class B Ordinary Shares |
Additional Paid-in Capital |
Accumulated Deficit |
Total Shareholders’ Equity (Deficit) |
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Shares |
Amount |
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| Balance – January 1, 2022 |
$ |
$ |
$ |
( |
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$ |
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| Sale of |
— | — | — | |||||||||||||||||
| Proceeds allocated to Public Warrants |
— | — | — | |||||||||||||||||
| Forfeiture of Class B shares by Sponsor for reissuance to Anchor Investor |
( |
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| Purchase of Class B shares by Anchor Investor including excess fair value over purchase price |
— | |||||||||||||||||||
| Value of transaction costs allocated to fair value equity instruments |
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| Accretion for Class A ordinary shares to redemption amount |
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| Net loss |
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| Balance – March 31, 2022 |
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| Accretion for Class A ordinary shares to redemption amount |
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| Net loss |
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| Balance – June 30, 2022 |
$ |
$ |
$ |
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For the Six Months Ended June 30, |
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2023 |
2022 |
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Cash Flows from Operating Activities: |
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Net income (loss) |
$ | $ | ( |
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Adjustments to reconcile net income (loss) to net cash used in operating activities: |
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Change in fair value of Convertible Promissory Notes – Related Party |
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Interest earned on marketable securities held in Trust Account |
( |
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Changes in operating assets and liabilities: |
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Prepaid expenses and other current assets |
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Prepaid insurance, long-term |
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Due from Sponsor |
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Deferred legal fee payable |
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Accrued interest payable |
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Accrued expenses |
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Net cash used in operating activities |
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Cash Flows from Investing Activities: |
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Investment of cash in Trust Account |
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Net cash used in investing activities |
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Cash Flows from Financing Activities: |
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Proceeds from issuance of Class B ordinary shares to Anchor Investor |
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Proceeds from sale of Units, net of underwriting discounts paid |
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Proceeds from sale of Private Placement Warrants |
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Proceeds from promissory note – Related Party |
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Proceeds from convertible promissory notes— Related Party |
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Repayment of promissory note – Related Party |
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| Payment of offering costs |
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Net cash provided by financing activities |
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| Net Change in Cash |
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| Cash – Beginning of period |
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| Cash – End of period |
$ |
$ |
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Non-Cash investing and financing activities: |
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Accretion of Class A ordinary shares to redemption amount |
$ | |||||||
Proceeds received from convertible promissory notes in excess of initial fair value |
$ | |||||||
Offering costs included in accrued offering costs |
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Excess fair value of Founder shares attributable to Anchor Investor |
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Initial classification of ordinary shares subject to possible redemption |
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Deferred underwriting fee payable |
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For the Three Months Ended June 30, |
For the Six Months Ended June 30, |
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2023 |
2022 |
2023 |
2022 |
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Class A |
Class B |
Class A |
Class B |
Class A |
Class B |
Class A |
Class B |
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Basic and diluted net income (loss) per ordinary share |
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Numerator: |
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Allocation of net income (loss), as adjusted |
$ | $ | $ | ( |
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Denominator: |
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Basic and diluted weighted average shares outstanding |
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Basic and diluted net income (loss) per ordinary share |
$ | $ | $ | ( |
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) | $ | $ | $ | ( |
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| • | 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 has been at least $ |
| Level 1: | Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. | |
| Level 2: | Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active. | |
| Level 3: | Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability. | |
Description |
Level |
June 30, 2023 |
December 31, 2022 |
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Assets: |
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Marketable securities held in Trust Account |
1 | $ | $ | |||||||||
Liabilities: |
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Convertible promissory notes – related party |
3 | |||||||||||
June 30, 2023 |
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Risk-free interest rate |
% | |||
Time to Expiration (in years) |
$ | |||
Expected volatility |
% | |||
Exercise price |
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Dividend yield |
% | |||
Share Price |
$ | |||
Probability of transaction |
% | |||
Fair value as of January 1, 2023 |
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Borrowings |
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Proceeds received in excess of initial fair value of convertible promissory notes |
( |
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Change in fair value |
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Fair value as of March 31, 2023 |
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Borrowings |
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Proceeds received in excess of initial fair value of convertible promissory notes |
( |
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Change in fair value |
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Fair value as of June 30, 2023 |
$ | |||
Table of Contents
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to Andretti Acquisition Corp. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to Andretti Sponsor LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 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 completion of the Proposed Business Combination (as defined below), the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “predict,” “project,” “target,” “goal,” “shall,” “should,” “will,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. 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, including that the conditions of the Proposed Business Combination are not satisfied. 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”). The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Overview
We are a blank check company incorporated in the Cayman Islands on January 20, 2021 formed for the purpose of effecting a merger, consolidation share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses or entities (a “Business Combination”). We intend to effectuate our Business Combination using cash derived from the proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, our shares, debt or a combination of cash, shares and debt.
We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a Business Combination will be successful.
Results of Operations
We have neither engaged in any operations nor generated any operating revenues to date. Our only activities from January 20, 2021 (inception) through June 30, 2023 were organizational activities and those necessary to prepare for the Initial Public Offering, described below. We do not expect to generate any operating revenues until after the completion of our initial Business Combination. We expect to generate non-operating income in the form of interest income on marketable securities held after the Initial Public Offering. We expect that we will incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses in connection with searching for, and completing, a Business Combination.
For the three months ended June 30, 2023, we had a net income of $1,533,246, which consists of interest earned on marketable securities held in the Trust Account of $2,881,840, offset by change in fair value of convertible promissory notes related party of $15,381, interest expense on the related party convertible promissory notes of $15,558, and operating costs of $1,317,655 which mainly consists of $502,466 in legal fees, $449,870 in consulting services related to the business combination, $146,813 in prepaid insurance amortization and $218,506 in other various expenses.
For the three months ended June 30, 2022, we had a net loss of $47,560, which consists of operating costs of $360,040 offset by interest earned on marketable securities held in the Trust Account of $312,480.
For the six months ended June 30, 2023, we had a net income of $1,800,354, which consists of interest earned on marketable securities held in the Trust Account of $5,419,504, offset by change in fair value of convertible promissory notes related party of $15,989, interest expense on the related party convertible promissory notes of $17,139, and operating costs of $3,586,022 which mainly consists of $1,659,022 in legal fees, $1,236,424 in consulting services related to the business combination, $293,625 in prepaid insurance amortization and $396,951 in other various expenses.
For the six months ended June 30, 2022, we had a net loss of $324,013, which consists of operating costs of $658,252 offset by interest earned on marketable securities held in the Trust Account of $334,239.
Liquidity and Capital Resources
Until the consummation of the Initial Public Offering, our only source of liquidity was an initial purchase of founder shares.
On January 18, 2022, we consummated the Initial Public Offering of 23,000,000 Units, which includes the full exercise by the underwriters of its over-allotment option in the amount of 3,000,000 Units at $10.00 per Unit, generating gross proceeds of $230,000,000. Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 13,550,000 Private Placement Warrants at a price of $1.00 per Private Placement in a private placement to the Sponsor and the Sponsor Co-Investor, generating gross proceeds of $13,550,000.
Following the Initial Public Offering, the full exercise of the over-allotment option, and the sale of Private Placement Warrants, a total of $235,750,000 was placed in the Trust Account. We incurred $23,807,600 in Initial Public Offering related costs, including $4,600,000 of underwriting fees and $754,790 of other offering costs.
As of June 30, 2023, the Company had $415,845 in its operating bank account, $244,569,240 in marketable securities held in the Trust Account, including $8,819,240 of interest income, and working capital of $366,915. We may withdraw interest from the Trust Account to pay taxes, if any. We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (less income taxes payable), to complete our Business Combination. To the extent that our share capital or debt is used, in whole or in part, as consideration to complete our 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.
For the six months ended June 30, 2023, cash used in operating activities was $2,189,227. Net income of $1,800,354 was affected by interest earned on marketable securities held in the Trust Account of $5,419,504 and changes in related party convertible promissory notes of $15,989. Changes in operating assets and liabilities provided $1,413,934 of cash for operating activities.
For the six months ended June 30, 2023, net cash provided by financing activities was $1,988,952 as a result of the drawdowns on the related party convertible promissory notes partially offset by the payment of offering costs of $85,000.
For the six months ended June 30, 2022, cash used in operating activities was $1,586,216. Net loss of $324,013 was affected by interest earned on marketable securities held in the Trust Account of $334,239. Changes in operating assets and liabilities used $927,964 of cash for operating activities.
For the six months ended June 30, 2022, net cash provided by financing activities was $238,298,521 which consisted of $225,400,000 from the proceeds from sale of units, $6,221 from the issuance of Class B ordinary shares, $13,550,000 from the sale of private placement warrants, and $75 as a result of draws on the promissory note partially offset by the payment of offering costs of $417,146 and payment of promissory note of $240,629.
17
Table of Contents
We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account, which interest shall be net of taxes payable and excluding deferred underwriting commissions, to complete our Business Combination. We may withdraw interest from the Trust Account to pay taxes, if any. To the extent that our share capital or debt is used, in whole or in part, as consideration to complete a Business Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, structure, negotiate and complete a Business Combination.
In order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, our Sponsor or an affiliate of our Sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete a Business Combination, we may repay such loaned amounts out of the proceeds of the Trust Account released to us. In the event that a Business Combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts, but no proceeds from our Trust Account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into warrants, at a price of $1.00 per warrant, at the option of the lender. The warrants would be identical to the Private Placement Warrants.
We will need to raise additional capital through loans or additional investments from the Sponsor, shareholders, officers, directors, or third parties. Our officers and directors and the Sponsor may, but are not obligated to, loan us funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet our working capital needs. On January 26, 2023, the Sponsor agreed to lend the Company an aggregate of up to $375,000 for working capital purposes pursuant to a convertible promissory note. On March 29, 2023 Michael M. Andretti, William J. Sandbrook, and William M. Brown agreed to lend the Company an aggregate of up to $500,000, $500,000, and $100,000, respectively, pursuant to individual convertible promissory notes. We had drawn an aggregate of $2,073,952 under the convertible promissory notes as of June 30, 2023, which includes drawdowns of $175,000 on January 26, 2023, $725,555 on March 29, 2023, $225,001 on April 27, 2023, $234,869 on May 19, 2023 and $713,527 on June 2, 2023. Accordingly, we may not be able to obtain additional financing. If we are unable to raise additional capital, we may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses. We cannot provide any assurance that new financing will be available to us on commercially acceptable terms, if at all. These conditions raise substantial doubt about our ability to continue as a going concern one year from the date that these financial statements are issued.
In connection with the Company’s assessment of going concern considerations in accordance with the Financial Accounting Standards Board’s (“FASB’s”) Accounting Standards Update (“ASU”)2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that if the Company is unable to raise additional funds to alleviate liquidity needs as well as complete a Business Combination by April 18, 2024 (or such earlier date as determined by the Company’s board of directors in its sole and absolute discretion), then the Company will cease all operations except for the purpose of liquidating. The liquidity condition and the date for mandatory liquidation and subsequent dissolution raise substantial doubt about the Company’s ability to continue as a going concern. Management plans to consummate a business combination prior to the mandatory liquidation date. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after April 18, 2024 (or such earlier date as determined by the Company’s board of directors in its sole and absolute discretion).
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of June 30, 2023. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
Contractual obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay an affiliate of the Sponsor a sum of up to $15,000 per month for office space and secretarial and administrative services. We began incurring these fees on January 12, 2022 and will continue to incur these fees monthly until the earlier of the completion of the Business Combination or our liquidation.
As of June 30, 2023, we had a total of $940,000 of deferred legal fees to be paid to our legal advisors upon consummation of the Business Combination, which is included in the accompanying balance sheet as of June 30, 2023. As of December 31, 2022 we had a total of $160,000.
On December 22, 2022, the Company entered into an engagement letter with KPMG LLP (“KPMG”), pursuant to which KPMG will assist the Company in performing due diligence in connection with the initial Business Combination. The Company paid a $275,000 fee in January 2023 to KPMG in connection with this arrangement. The fees in connection with the services rendered are expensed as incurred and are payable upon the earlier of the termination of KPMG’s engagement and the closing of the Initial Business Combination. As of June 30, 2023 the Company made a second and final payment of $450,554.
On January 24, 2023, the Company entered into a letter agreement with Kroll, LLC (“Duff & Phelps”), pursuant to which Duff & Phelps will serve as an independent financial advisor to the Board of the Company and will provide a fairness opinion regarding the initial Business Combination. The Company paid a $50,000 non-refundable retainer fee in January 2023 to Duff & Phelps in connection with this arrangement. The Company has agreed to pay Duff & Phelps an additional (i) $150,000 fee payable upon Duff & Phelps informing the Company that it is prepared to deliver a fairness opinion in connection with the initial Business Combination and (ii) $400,000 fee payable upon closing of the initial Business Combination. As of June 30, 2023, the Company incurred fees totaling $51,000.
On January 24, 2023, the Company entered into an engagement letter with Cassels Brock & Blackwell LLP (“Cassels”), pursuant to which Cassels will represent the Company as Canadian counsel in connection with the initial Business Combination. The fees in connection with the services rendered are expensed as incurred. As of June 30, 2023 the Company recorded $200,000 to accounts payable on the condensed balance sheet.
On February 3, 2023, the Company entered into an engagement letter with Macfarlanes LLP (“Macfarlanes”), pursuant to which Macfarlanes will represent the Company as English law counsel in connection with the initial Business Combination. The fees in connection with the services rendered are expensed as incurred. As of June 30, 2023 the Company had paid Macfarlanes $472,526. The Company does expect to incur any additional costs from this agreement.
On April 12, 2023, the Company entered into an engagement letter with KPMG LLP (“KPMG”), pursuant to which KPMG will assist the Company in performing due diligence in connection with a prospective initial Business Combination. The Company paid a total of $459,870 in fees in April and May 2023 to KPMG in connection with this arrangement. In connection with the engagement letter, an additional $919,740 is due and payable upon successful completion of the Business Combination with a specified target company. The fees in connection with the services rendered are expensed as incurred.
On June 12, 2023, the Company entered into a letter agreement with MacKenzie Partners, Inc. (“MacKenzie”), pursuant to which MacKenzie provided advisory, consulting and proxy solicitation services for the Extraordinary General Meeting. The Company agreed to pay MacKenzie a fee of $15,000 plus expenses, payable following the conclusion of the Extraordinary General Meeting. As of June 30, 2023 the Company had not incurred any fees from MacKenzie.
On June 26, 2023, the Company entered into an engagement letter with Bass, Berry & Sims PLC (“Bass, Berry & Sims”), pursuant to which Bass, Berry & Sims will represent the Company as outside counsel in connection with the initial Business Combination. The fees in connection with the services rendered are expensed as incurred. As of June 30, 2023 the Company recorded $7,175 to accrued expenses on the condensed balance sheet.
The underwriters are entitled to a deferred fee of $0.35 per Unit, or $8,050,000 in the aggregate. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.
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Critical Accounting Policies
The preparation of condensed financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:
Class A Ordinary Shares Subject to Possible Redemption
We account for our shares of Class A ordinary shares subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Shares of Class A ordinary shares subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares that features redemption rights that are 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 ordinary shares feature certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, all of the Class A ordinary shares subject to possible redemption is presented as temporary equity, outside of the shareholders’ deficit section of our balance sheets.
Net Income (Loss) Per Ordinary Share
Net income (loss) per share is computed by dividing net income (loss) by the weighted average number of ordinary shares outstanding during the period, excluding ordinary shares subject to forfeiture. At June 30, 2023 and 2022, the Company did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into ordinary shares and then share in the earnings of the Company. As a result, diluted income (loss) per share is the same as basic income (loss) per share for the period presented.
Warrant Instruments
We account for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to our own Class A ordinary shares, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations.
Convertible Promissory Notes—Related Party
The Company accounts for its convertible promissory notes under ASC 815, Derivatives and Hedging (“ASC 815”). Under ASC 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 notes. Using the fair value option, the convertible promissory notes are required to be recorded at their initial fair value on the date of issuance, each drawdown date, and each balance sheet date thereafter. Differences between the face value of the notes and fair value at each drawdown date are recognized as either an expense in the condensed statements of operations (if issued at a premium) or as a capital contribution (if issued at a discount). Changes in the estimated fair value of the notes are recognized as non-cash gains or losses in the condensed statements of operations. Changes in the estimated fair value of the notes are recognized as non-cash change in the fair value of the convertible promissory notes in the condensed statements of operations. The fair value of the option to convert into private warrants was valued utilizing the closed-form model.
Share-Based Compensation
The Company adopted ASC Topic 718, Compensation—Stock Compensation, guidance to account for its share-based compensation. It defines a fair value-based method of accounting for an employee share option or similar equity instrument. The Company recognizes all forms of share-based payments, including share option grants, warrants and restricted share grants, at their fair value on the grant date, which are based on the estimated number of awards that are ultimately expected to vest. Share-based payments, excluding restricted shares, are valued using a Black-Scholes option pricing model. Grants of share-based payment awards issued to nonemployees for services rendered have been recorded at the fair value of the share-based payment, which is the more readily determinable value. The grants are amortized on a straight-line basis over the requisite service periods, which is generally the vesting period. If an award is granted, but vesting does not occur, any previously recognized compensation cost is reversed in the period related to the termination of service. Share-based compensation expenses are included in costs and operating expenses depending on the nature of the services provided in the statements of operations.
Recent Accounting Standards
In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13 – Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). This update requires financial assets measured at amortized cost basis to be presented at the net amount expected to be collected. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. Since June 2016, the FASB issued clarifying updates to the new standard including changing the effective date for smaller reporting companies. The guidance is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years, with early adoption permitted. The Company adopted ASU 2016-13 on January 1, 2023. The adoption of ASU 2016-13 did not have a material impact on its financial statements.
Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our condensed financial statements.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not required for smaller reporting companies.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended June 30, 2023, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial and accounting officer have concluded that during the period covered by this report, our disclosure controls and procedures were effective. Accordingly, management believes that the unaudited 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 period presented.
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the fiscal quarter of 2023 covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II—OTHER INFORMATION
Item 1. Legal Proceedings
None
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Item 1A: Risk Factors
Factors that could cause the Company’s actual business, financial condition and/or results of operations to differ materially from those in this Quarterly Report are any of the risk factors described in our annual report on Form 10-K for the fiscal year ended December 21, 2022 filed with the SEC on March 22, 2023 (the “Annual Report”). Any of these risk factors could result in a significant or material adverse effect on the Company’s business, financial condition and/or results of operations. Additional risk factors not presently known to the Company or that the Company currently deems immaterial may also impair the Company’s business, financial condition and/or results of operations. As of the date of this report, there have been no material changes to the risk factors disclosed in the Annual Report.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On January 18, 2022, we consummated the Initial Public Offering of 23,000,000 Units. The Units were sold at an offering price of $10.00 per unit, generating total gross proceeds of $230,000,000. RBC Capital Markets acted as sole book-running manager of the Initial Public Offering. The securities in the offering were registered under the Securities Act on registration statement on Form S-1(No. 333-254627). The Securities and Exchange Commission declared the registration statements effective on January 12, 2022.
Simultaneous with the consummation of the Initial Public Offering, the Sponsor consummated the private placement of an aggregate of 13,550,000 Units at a price of $1.00 per Private Unit, generating total proceeds of $13,550,000. Each Unit consists of one Class A Ordinary Share and one-half of one redeemable public warrant (“Public Warrant”). Each Private Placement Warrant is exercisable to purchase one Class A Ordinary Share at a price of $11.50 per share, subject to adjustment. The issuance was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
The Private Warrants are identical to the warrants underlying the Units sold in the Initial Public Offering, except that the Private Warrants are not transferable, assignable or salable until after the completion of a Business Combination, subject to certain limited exceptions.
Of the gross proceeds received from the Initial Public Offering, the exercise of the over-allotment option and the Private Placement Warrants, an aggregate of $235,750,000 was placed in the Trust Account.
We paid a total of $4,600,000 in underwriting discounts and commissions and $754,790 for other costs and expenses related to the Initial Public Offering.
For a description of the use of the proceeds generated in our Initial Public Offering, see Part I, Item 2 of this Form 10-Q.
Item 3. Defaults Upon Senior Securities
None
Item 4. Mine Safety Disclosures
None
Item 5. Other Information
None
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Item 6. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
| * | Filed herewith. |
| ** | Incorporated by reference to Exhibit 10.1 filed with the Company’s current report on Form 8-K filed by the Registrant on March 27, 2023. |
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| ANDRETTI ACQUISITION CORP. | ||||||
| Date: August 3, 2023 | By: | /s/ William J. Sandbrook | ||||
| Name: | William J. Sandbrook | |||||
| Title: | Co-Chief Executive Officer (Principal Executive Officer) | |||||
| Date: August 3, 2023 | By: | /s/ William M. Brown | ||||
| Name: | William M. Brown | |||||
| Title: | President and Chief Financial Officer | |||||
| (Principal Financial and Accounting Officer) | ||||||
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EXHIBIT 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO RULE 13A-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, William J. Sandbrook, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Andretti Acquisition Corp.; |
| 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 officer(s) 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)) for the registrant and internal control over financial reporting (as defined in 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 my supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared; and |
| 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 my 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(s) 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. |
Date: August 3, 2023
| /s/ William J. Sandbrook |
| William J. Sandbrook Co-Chief Executive Officer (Principal Executive Officer) |
EXHIBIT 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO RULE 13A-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, William M. Brown, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Andretti Acquisition Corp.; |
| 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 officer(s) 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)) for the registrant and internal control over financial reporting (as defined in 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 my supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared; and |
| 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 my 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(s) 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. |
Date: August 3, 2023
| /s/ William M. Brown |
| William M. Brown President and 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 of Andretti Acquisition Corp. (the “Company”) on Form 10-Q for the quarterly period ended June 30, 2023, as filed with the Securities and Exchange Commission (the “Report”), I, William J. Sandbrook, Co-Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, to the best of 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. |
Dated: August 3, 2023
| /s/ William J. Sandbrook |
| William J. Sandbrook Co-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 of Andretti Acquisition Corp. (the “Company”) on Form 10-Q for the quarterly period ended June 30, 2023, as filed with the Securities and Exchange Commission (the “Report”), I, William M. Brown, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, to the best of 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. |
Dated: August 3, 2023
| /s/ William M. Brown |
| William M. Brown President and Chief Financial Officer (Principal Financial and Accounting Officer) |