NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1 — Organization and Business Operations
Organization and General
Sports Ventures Acquisition
Corp. (the “Company”) was incorporated as a Cayman Islands exempted company on September 24, 2020. The Company was incorporated
for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination
with one or more businesses (the “Business Combination”).
The Company is an early stage
and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of September 30, 2022, the
Company had not commenced any operations. All activity for the period from September 24, 2020 (inception) through September 30, 2022 relates
to the Company’s formation and the initial public offering (“IPO” or “Initial Public Offering”), which is
described below and since the IPO, searching for a target to complete its Business Combination. The Company will not generate any operating
revenues until after the completion of a Business Combination, at the earliest. The Company generates non-operating income in the form
of interest income on investments in the Company’s trust account and recognizes changes in the fair value of the derivative warrant
liabilities as other income (expense).
The Company’s sponsor
is AKICV LLC, a Delaware limited liability company (the “Sponsor”).
Financing
The Registration Statement
on Form S-1 for the Company’s IPO, initially filed with the SEC (as defined below) on October 9, 2020, as amended, was declared
effective January 5, 2021 (File No. 333-249392) (the “Registration Statement”). On January 8, 2021, the Company consummated
its IPO of 23,000,000 units (“Units”), including 3,000,000 Units issued pursuant to the full exercise
of the underwriters’ over-allotment option. Each Unit consists of one Class A ordinary share of the Company, par value $0.0001 per
share, and one-third of one redeemable warrant of the Company (each whole warrant, a “Public Warrant”), with each Public Warrant
entitling the holder thereof to purchase one Class A Ordinary Share for $11.50 per share. The Units were sold at a price of $10.00 per
Unit, generating gross proceeds to the Company of $230,000,000.
Simultaneously with the closing
of the IPO, pursuant to the Unit Subscription Agreement, the Company completed the private sale of 660,000 Units (the “Private
Placement Units”) to the Sponsor at a purchase price of $10.00 per Private Placement Units, generating gross proceeds to the
Company of $6,600,000. The Private Placement Units include 220,000 warrants to purchase an aggregate of 220,000 Class
A ordinary shares of the Company (the “Private Placement Warrants”). The Private Placement Units are identical to the Units
sold in the IPO, except as otherwise disclosed in Note 4. No underwriting discounts or commissions were paid with respect to such sale. Each
Unit consists of one share of Class A ordinary shares, and one-third redeemable warrant to purchase one share of Class A
ordinary shares at a price of $11.50 per whole share, generating gross proceeds of $6,600,000, which is described in Note 3.
Trust Account
Following the closing of
the IPO on January 8, 2021, $230,000,000 (approximately $10.00 per Unit) from the net offering proceeds of the sale of the Units
in the IPO and the sale of the Private Placement Units was placed in a trust account (the “Trust Account”) and invested in
U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment
Company Act”), with a maturity of 185 days or less or in any open-ended investment company that holds itself out as a
money market fund meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company. Except with respect
to interest earned on the funds held in the Trust Account that may be released to the Company to pay its taxes (less up to $100,000 of
interest to pay dissolution expenses), the proceeds from this IPO and the Private Placement Units will not be released from the Trust
Account until the earliest of (i) the completion of the initial Business Combination, (ii) the redemption of any public shares properly
submitted in connection with a shareholder vote to amend the Company’s amended and restated certificate of incorporation and (iii)
the redemption of all of its public shares if the Company is unable to complete the initial Business Combination within 24 months from
the closing of this IPO, subject to applicable law. The proceeds deposited in the Trust Account could become subject to the claims of
the Company’s creditors, if any, which could have priority over the claims of the public shareholders.
Initial Business Combination
The Company will provide
its public shareholders with the opportunity to redeem all or a portion of their public shares upon the completion of the initial Business
Combination either (i) in connection with a shareholder meeting called to approve the initial Business Combination or (ii) by
means of a tender offer. The decision as to whether the Company will seek shareholder approval of a proposed initial Business Combination
or conduct a tender offer will be made by the Company, solely in its discretion. The shareholders will be entitled to redeem their shares
for a pro rata portion of the amount then on deposit in the Trust Account (initially approximately $10.00 per share, plus any pro
rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations).
The Company’s Business
Combination must be with one or more target businesses that together have a fair market value equal to at least 80% of the balance
in the Trust Account (as defined below) (net of taxes payable) at the time of the signing an agreement to enter into a Business Combination.
However, the Company will only complete a Business Combination if the post-Business Combination company owns or acquires 50% or more
of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to
be required to register as an investment company under the Investment Company Act. There is no assurance that the Company will be able
to successfully effect a Business Combination.
The Company will have until January
8, 2023 to consummate a Business Combination (the “Combination Period”). However, if the Company is unable to complete a Business
Combination within the Combination Period, the Company will redeem 100% of the outstanding public shares for a pro rata portion of
the funds held in the Trust Account, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the
funds held in the Trust Account and not previously released to the Company to pay taxes, divided by the number of then outstanding public
shares, subject to applicable law and as further described in registration statement, and then seek to dissolve and liquidate.
The Company’s Sponsor,
officers and directors have entered into a letter agreement with the Company, pursuant to which they have agreed (i) to waive their
redemption rights with respect to their founder shares and public shares in connection with the completion of the initial Business Combination
and (ii) to waive their rights to liquidating distributions from the Trust Account with respect to their founder shares if the Company
fails to complete its initial Business Combination by January 8, 2023 (although they will be entitled to liquidating distributions from
the Trust Account with respect to any public shares they hold if the Company fails to complete the initial Business Combination within
the prescribed time frame).
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 auditors)
for services rendered or products sold to us, 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 (i) $10.00 per public share or (ii) such lesser amount per public
share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets,
in each case net of the interest which may be withdrawn to pay taxes, except as to any claims by a third party who executed a waiver of
any and all rights to seek access to the Trust Account and except as to any claims under the Company’s indemnity of the underwriters
of this offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities
Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, The Sponsor will not
be responsible to the extent of any liability for such third-party claims. The Company has not independently verified whether the Sponsor
has sufficient funds to satisfy their indemnity obligations and believe that the Sponsor’s only assets are securities of the Company.
We have not asked the Sponsor to reserve for such obligations.
Liquidity, Capital Resources and Going Concern
As of September 30, 2022,
the Company had cash outside the Trust Account of $29,585 available for working capital needs and a working capital deficit of $768,199.
All investments held in the Trust Account are generally unavailable for the Company’s use, prior to an initial Business Combination,
and is restricted for use either in a Business Combination, to pay tax obligations or to redeem ordinary shares. In order to finance transaction
costs in connection with a Business Combination, the Company’s Sponsor or an affiliate of the Sponsor or certain of the Company’s
officers and directors may, but are not obligated to, provide the Company Working Capital Loans (as defined in Note 5).
Until consummation of its
Business Combination, the Company will be using the funds not held in the Trust Account, and may use Working Capital Loans (as defined
in Note 5) from the Sponsor, the Company’s officers and directors, or their respective affiliates (which is described in Note 5),
for identifying and evaluating prospective acquisition candidates, performing business due diligence on prospective target businesses,
traveling to and from the offices, plants or similar locations of prospective target businesses, reviewing corporate documents and material
agreements of prospective target businesses, selecting the target business to acquire and structuring, negotiating and consummating the
Business Combination.
If the Company’s estimates
of the costs of undertaking in-depth due diligence and negotiating the Business Combination is less than the actual amount necessary to
do so, the Company may have insufficient funds available to operate its business prior to the Business Combination. Moreover, the Company
will need to raise additional capital through loans from its Sponsor, officers, directors, or third parties. None of the Sponsor, officers
or directors are under any obligation to advance funds to, or to invest in, the Company. If the Company is unable to raise additional
capital, it 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 its business plan, and reducing overhead expenses. The Company cannot provide any assurance
that new financing will be available to it on commercially acceptable terms, if at all.
In connection with the Company’s
assessment of going concern considerations in accordance with Financial Accounting Standards Board’s (“FASB”) Accounting
Standards Update (“ASU”) Topic 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as
a Going Concern” (“ASU 2014-14”), the Company’s management has determined that its liquidity and the mandatory
liquidation and subsequent dissolution, should the Company be unable to complete a Business Combination, raises substantial doubt about
the Company’s ability to continue as a going concern. The Company has until January 8, 2023 to consummate a Business Combination.
It is uncertain that the Company will be able to consummate a Business Combination by this time. If a Business Combination is not consummated
by this date, there will be a mandatory liquidation and subsequent dissolution. No adjustments have been made to the carrying amounts
of assets or liabilities should the Company be required to liquidate after January 8, 2023. Management continues to evaluate potential
Business Combination opportunities and will continue to do so.
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited
condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of
America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation
S-X of the U.S. Securities and Exchange Commission (the “SEC”). Certain information or footnote disclosures normally included
in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the
SEC for interim financial reporting. Accordingly, they 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 the Company’s 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 Annual Report on Form 10-K for the year ended December
31, 2021 as filed with the SEC on March 1, 2022, which contains the audited financial statements and notes thereto. The interim results
for the three and nine months ended September 30, 2022 is not necessarily indicative of the results to be expected for the year ending
December 31, 2022 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 (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 of 2002, reduced
disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements
of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously
approved.
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 Securities Exchange Act of 1934, as amended, 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 unaudited
condensed financial statements in conformity with 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 financial
statements and the reported amounts of revenues and expenses during the reporting period.
Making estimates requires
the Company’s 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 financial statements, which the Company’s management
considered in formulating its estimate, could change in the near term due to one or more future confirming events. One of the more significant
accounting estimates included in these unaudited condensed financial statements is the determination of the fair value of the derivative
warrant liabilities. Such estimates may be subject to change as more current information becomes available and accordingly the actual
results could differ significantly from those estimates.
Investments Held in Trust Account
The Company’s portfolio
of investments held in the Trust Account is comprised of U.S. government securities, within the meaning set forth in Section 2(a)(16)
of the Investment Company Act, with a maturity of 185 days or less, or investments in money market funds that invest in U.S. government
securities, or a combination thereof. The Company’s investments held in the Trust Account are classified as trading securities.
Trading securities are presented on the condensed balance sheets at fair value at the end of each reporting period. Gains and losses resulting
from the change in fair value of these securities is included in income from investments held in Trust Account in the accompanying unaudited
condensed statements of operations. The estimated fair values of investments held in the Trust Account are determined using available
market information
Offering Costs Associated with IPO
The Company complies with
the requirements of the Accounting Standards Codification (“ASC”) Topic 340-10-S99-1 and SEC Staff Accounting Bulletin Topic
5A — “Expenses of Offering.” Offering costs consist principally of professional and registration fees incurred through
the balance sheet date that are related to the IPO. Offering costs amounted to $13,083,943 of which $658,002 were allocated
to the warrant liabilities and expensed immediately and $12,425,941 were charged to temporary equity upon completion of the IPO and
the exercise of the over-allotment option.
Class A Ordinary Shares Subject to Possible
Redemption
The Company accounts for
its Class A ordinary shares subject to possible redemption in accordance with the guidance in FASB ASC Topic 480 “Distinguishing
Liabilities from Equity” (“ASC 480”). Class A ordinary shares subject to mandatory redemption (if any) are classified
as liability instruments and are measured at fair value. Conditionally redeemable Class A ordinary shares (including Class A ordinary
shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of
uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, Class A ordinary
shares are classified as shareholders’ deficit. The Company’s Class A ordinary shares feature certain redemption rights that
are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, as
of September 30, 2022 and December 31, 2021, 23,000,000 shares of Class A ordinary shares subject to possible redemption are
presented at redemption value as temporary equity, outside of the shareholders’ deficit section of the Company’s condensed
balance sheets.
The Company recognizes changes
in redemption value immediately as they occur and adjusts the carrying value of redeemable ordinary shares to equal the redemption value
at the end of each reporting period.
At September 30, 2022 and
December 31, 2021, the Class A ordinary shares subject to possible redemption reflected in the condensed balance sheets are reconciled
in the following table:
Gross proceeds from IPO | | $ | 230,000,000 | |
Less: | | | | |
Proceeds allocated to Public Warrants | | | (11,577,774 | ) |
Class A ordinary share issuance costs | | | (12,425,941 | ) |
Plus: | | | | |
Accretion of carrying value to redemption value | | | 24,003,715 | |
Class A ordinary shares subject to possible redemption as of December 31, 2021 | | $ | 230,000,000 | |
Plus: | | | | |
Accretion of carrying value to redemption value | | | 1,398,529 | |
Class A ordinary shares subject to possible redemption as of September 30, 2022 | | $ | 231,398,529 | |
Income Taxes
ASC Topic 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 no unrecognized tax benefits and no amounts accrued for interest and penalties as of September 30, 2022
and December 31, 2021. The Company is currently not aware of any issues under review that could result in significant payments, accruals
or material deviation from its position.
The Company is considered
to be an exempted Cayman Islands company with no connection to any other taxable jurisdiction and is presently not subject to income taxes
or income tax filing requirements in the Cayman Islands or the United States.
Net Income Per Ordinary Share
The Company has two classes
of shares, which are referred to as Class A ordinary shares and Class B ordinary shares. Earnings and losses are shared pro rata between
the two classes of shares. The 7,886,667 potential ordinary shares for outstanding warrants to purchase the Company’s
shares were excluded from diluted earnings per share for the three and nine months ended September 30, 2022 and 2021 because the warrants
are contingently exercisable, and the contingencies have not yet been met. As a result, diluted net income per ordinary share is the same
as basic net income per ordinary share for the periods presented. The table below presents a reconciliation of the numerator and denominator
used to compute basic and diluted net income per share for each class of ordinary shares:
| |
For the Three Months Ended
September 30, 2022 | | |
For the Three Months Ended September 30, 2021 | |
| |
Class A | | |
Class B | | |
Class A | | |
Class B | |
Basic and diluted net income per share: | |
| | |
| | |
| | |
| |
Numerator: | |
| | |
| | |
| | |
| |
Allocation of net income | |
$ | 3,048,770 | | |
$ | 740,931 | | |
$ | 2,367,100 | | |
$ | 575,267 | |
| |
| | | |
| | | |
| | | |
| | |
Denominator: | |
| | | |
| | | |
| | | |
| | |
Weighted-average shares outstanding | |
| 23,660,000 | | |
| 5,750,000 | | |
| 23,660,000 | | |
| 5,750,000 | |
| |
| | | |
| | | |
| | | |
| | |
Basic and diluted net income per share | |
$ | 0.13 | | |
$ | 0.13 | | |
$ | 0.10 | | |
$ | 0.10 | |
| | For the Nine Months Ended September 30, 2022 | | | For the Nine Months Ended September 30, 2021 | |
| | Class A | | | Class B | | | Class A | | | Class B | |
Basic and diluted net income per share: | | | | | | | | | | | | |
Numerator: | | | | | | | | | | | | |
Allocation of net income | | $ | 4,060,951 | | | $ | 986,918 | | | $ | 4,767,753 | | | $ | 1,193,668 | |
| | | | | | | | | | | | | | | | |
Denominator: | | | | | | | | | | | | | | | | |
Weighted-average shares outstanding | | | 23,660,000 | | | | 5,750,000 | | | | 23,053,333 | | | | 5,730,769 | |
| | | | | | | | | | | | | | | | |
Basic and diluted net income per share | | $ | 0.17 | | | $ | 0.17 | | | $ | 0.21 | | | $ | 0.21 | |
Fair Value of Financial Instruments
The fair value of the Company’s
assets and liabilities (excluding the warrant liability), which qualify as financial instruments under the FASB ASC Topic 820, “Fair
Value Measurements and Disclosures,” approximates the carrying amounts represented in the condensed balance sheets primarily due
to their short-term nature.
Derivative Warrant Liabilities
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” (“ASC 815”). The Company’s derivative instruments are recorded
at fair value as of the IPO (January 8, 2021) and re-valued at each reporting date, with changes in the fair value reported in the unaudited
condensed statements of operations. Derivative assets and liabilities are classified on the condensed balance sheets 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 warrants are a derivative instrument. As the warrants meet the definition of a derivative, the warrants
are measured at fair value at issuance and at each reporting date in accordance with ASC Topic 820, Fair Value Measurement, with changes
in fair value recognized in the unaudited condensed statements of operations in the period of change. In accordance with ASC Topic 825-10
“Financial Instruments”, the Company has concluded that a portion of the transaction costs which directly related to the IPO
and the Private Placement should be allocated to the Warrants based on their relative fair value against total proceeds, and recognized
as transaction costs in the unaudited condensed statements of operations.
Fair Value Measurements
Fair value is defined as
the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants
at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.
The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements)
and the lowest priority to unobservable inputs (Level 3 measurements). These tiers 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. |
Recent Accounting Pronouncements
The Company’s management
does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect
on the accompanying unaudited condensed financial statements.
Risks and Uncertainties
The Company’s management
continues to evaluate the impact of the COVID-19 pandemic and Russia-Ukraine war on the industry and has concluded that while it is reasonably
possible that the virus and war could have a negative effect on the Company’s financial position, results of its operations and/or
search for a target company, the specific impact is not readily determinable as of the date of these unaudited condensed financial statements.
The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
The Company’s results
of operations and ability to complete an initial Business Combination may be adversely affected by various factors that could cause economic
uncertainty and volatility in the financial markets, many of which are beyond the Company’s control. The Company’s business
could be impacted by, among other things, downturns in the financial markets or in economic conditions, increases in oil prices, inflation,
increases in interest rates, supply chain disruptions, declines in consumer confidence and spending, the ongoing effects of the COVID-19
pandemic, including resurgences and the emergence of new variants, and geopolitical instability, such as the military conflict in the
Ukraine. The Company cannot at this time fully predict the likelihood of one or more of the above events, their duration or magnitude
or the extent to which they may negatively impact our business and the Company’s ability to complete an initial Business Combination.
NOTE 3 — INITIAL PUBLIC OFFERING
Pursuant to the IPO, the
Company sold 23,000,000 Units, including 3,000,000 Units issued pursuant to the exercise of the underwriters’
over-allotment option in full, at a price of $10.00 per Unit. Each Unit consists of one Class A ordinary share and one-third of one
redeemable warrant. Each whole warrant entitles the holder to purchase one Class A ordinary share at a price of $11.50 per share,
subject to adjustment. Only whole warrants are exercisable. No fractional warrants will be issued upon separation of the units and only
whole warrants will trade. The warrants will become exercisable on the later of 30 days after the completion of the initial Business
Combination or January 8, 2022 and will expire five years after the completion of the initial Business Combination or earlier upon redemption
or liquidation. (See Note 9)
All of the 23,000,000 Class
A ordinary shares sold as part of the Units in the IPO 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 Business Combination
and in connection with certain amendments to the Company’s Amended and Restated Articles of Association. In accordance with GAAP,
which has been codified in ASC Topic 480-10-S99, redemption provisions not solely within the control of the Company require ordinary shares
subject to redemption to be classified outside of permanent equity.
If it is probable that the
equity instrument will become redeemable, the Company has the option to either 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 to 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 recognizes changes in redemption value
immediately as they occur. Immediately upon the closing of the IPO, the Company recognized the accretion from initial book value to redemption
amount value. The change in the carrying value of redeemable ordinary shares resulted in charges against additional paid-in capital and
accumulated deficit.
NOTE 4 — PRIVATE PLACEMENT
Simultaneously with the closing
of the IPO, the Sponsor purchased an aggregate of 660,000 Private Placement Units, at a price of $10.00 per Private
Placement Unit, for an aggregate purchase price of $6,600,000. A portion of the purchase price of the Private Placement Units were added
to the proceeds from the IPO held in the Trust Account.
Each Private Placement Unit
was identical to the Units sold in the IPO, except for the Class A shares in these units which are non-redeemable and the Private Placement
Warrants (see Note 9). If the Company does not complete its initial Business Combination by January 8, 2023, the proceeds from the sale
of the Private Placement Units held in the Trust Account will be used to fund the redemption of its public shares (subject to the requirements
of applicable law) and the Private Placement Warrants will expire worthless.
NOTE 5 — RELATED PARTY TRANSACTIONS
Founder Shares
In October 2020, the Company
issued 5,750,000 Class B ordinary shares to the Sponsor for $25,000, or approximately $0.004 per share. Up to 750,000 shares
were subject to forfeiture by the Sponsor depending on the extent to which the underwriter’s over-allotment option is exercised.
In connection with the underwriters’ full exercise of their over-allotment option on January 8, 2021, the 750,000 founder
shares were no longer subject to forfeiture.
The Sponsor has agreed not
to transfer, assign or sell any of their founder shares until the earliest of (a) one year after the completion of an initial Business
Combination and (b) subsequent to the initial Business Combination, (x) if the closing price of the Company’s Class A
ordinary shares equals or exceeds $12.00 per share (as adjusted for share subdivisions, share capitalizations, reorganizations, recapitalizations
and the like) for any 20 trading days within any 30-trading-day period commencing at least 150 days after the initial Business Combination
or (y) the date on which the Company completes a liquidation, merger, share exchange or other similar transaction that results in
all of its public shareholders having the right to exchange their Class A ordinary shares for cash, securities or other property.
Administrative Service Fee
The Company has agreed, commencing
on January 6, 2021, to pay the Sponsor or its affiliate a monthly fee of an aggregate of $10,000 for office space, administrative
and shared personnel support services. This arrangement will terminate upon completion of a Business Combination or liquidation. For the
three and nine months ended September 30, 2022, the Company recognized $30,000 and $90,000 expenses, respectively, in administrative service
fee expense in the unaudited condensed statements of operations. For the three and nine months ended September 30, 2021, the Company recognized
$30,000 and $88,387 expenses, respectively, in administrative service fee expense in the unaudited condensed statements of operations.
Amounts due for the administrative service fee are included in due to related parties on the unaudited condensed balance sheets. At September
30, 2022 and December 31, 2021, the Company owed $90,000 and $118,387 for the administrative service fee, respectively.
Promissory Note — Related Party
On October 5, 2020, the Company
issued an unsecured promissory note to the Sponsor, pursuant to which the Company may borrow up to an aggregate principal amount of $300,000 to
be used for a portion of the expenses of this IPO. This loan is non-interest bearing, unsecured and due at the earlier of September 30,
2021 or the closing of this IPO. The promissory note of $204,123 was repaid upon closing of the IPO and borrowings under this promissory
note are no longer available.
Due to Related Parties
At September 30, 2022 and
December 31, 2021, the Company owed $332,453 and $117,453, respectively, to related parties for the administrative service fee and borrowings
from the Sponsor after a payment of $934 was made in March 2021. These amounts are non-interest bearing and are due on demand.
Related Party Loans
In order to finance transactions
costs in connection with a Business Combination, post the Company’s IPO, the Sponsor or an affiliate of the Sponsor, or certain
of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required. If the Company
completes a Business Combination, the Company would repay the working capital loans. In the event that a Business Combination does not
close, the Company may use a portion of proceeds held outside the Trust Account to repay the working capital loans but no proceeds held
in the Trust Account would be used to repay the working capital loans. Up to $1,500,000 of such loans may be convertible into Units
at a price of $10.00 per Unit at the option of the lender at the time of the Business Combination. The Units would be identical to
the Private Placement Units sold in the private placement. At September 30, 2022 and December 31, 2021, there were no amounts of working
capital loans outstanding.
NOTE 6 — RECURRING FAIR VALUE MEASUREMENTS
Investments Held in Trust Account
As of September 30, 2022
and December 31, 2021, the investments in the Company’s Trust Account consisted of $231,398,529 and $230,026,577, respectively, invested
in U.S. Money Market funds. The Company considers all investments with original maturities of more than nine months but less than one
year to be short-term investments.
Fair values of the Company’s
investments in the Trust Account are classified as Level 1 utilizing quoted prices (unadjusted) in active markets for identical assets.
Derivative Warrant Liabilities
At September 30, 2022 and
December 31, 2021, the Company’s warrant liability was valued at $315,467 and $4,811,441, respectively. Under the guidance in ASC
Topic 815-40 the warrants do not meet the criteria for equity treatment. As such, the warrants must be recorded on the condensed balance
sheets at fair value. This valuation is subject to re-measurement at each balance sheet date. With each re-measurement, the warrant valuation
will be adjusted to fair value, with the change in fair value recognized in the Company’s unaudited condensed statements of operations.
Recurring Fair Value Measurements
Since all of the Company’s
permitted investments consist of U.S. money market funds, fair values of these investments are determined by Level 1 inputs utilizing
quoted prices (unadjusted) in active markets for identical assets.
The Company’s warrant liability
at December 31, 2021 for the Public Warrants was based on unadjusted quoted prices in an active market (i.e. The Nasdaq Stock Market LLC,
(“Nasdaq”)) for identical assets or liabilities that the Company has the ability to access. The fair value of the Public Warrant
liability was classified within Level 1 of the fair value hierarchy. The Company’s warrant liability as of September 30, 2022 for
the Public Warrants was based on quoted prices in a market that was not active for identical or similar assets (Nasdaq) or liabilities
that the Company has the ability to access. The fair value of the Public Warrant liability is classified within Level 2 of the fair value
hierarchy. On September 30, 2022 there was no activity for the Company’s Public Warrants on Nasdaq. As such, valuation for the public
warrants was based on the Nasdaq closing price as of September 27, 2022.
The Company’s Private Placement
Warrants are economically equivalent to the Company’s Public Warrants. For the period ended September 30, 2021 the Private Placement
Warrants were reclassified from a Level 3 to a Level 2 classification.
The following table presents
fair value information as of September 30, 2022 and December 31, 2021 of the Company’s financial assets and liabilities that were
accounted for at fair value on a recurring basis and indicates the fair value hierarchy of the valuation techniques the Company utilized
to determine such fair value.
| |
| | |
September 30, | | |
December 31, | |
Description | |
Level | | |
2022 | | |
2021 | |
Assets: | |
| | |
| | |
| |
Investments held in Trust – U.S. Money Market | |
| 1 | | |
$ | 231,398,529 | | |
$ | 230,026,577 | |
Liabilities: | |
| | | |
| | | |
| | |
Public Warrants | |
| (A) | | |
$ | 306,667 | | |
$ | 4,676,667 | |
Private Placement Warrants | |
| 2 | | |
$ | 8,800 | | |
$ | 134,774 | |
(A) | Level 2 at September 30, 2022 and Level 1 at December 31, 2021. |
The following table provides
a reconciliation of changes in fair value of the beginning and ending balances for our Warrants classified as Level 3:
Fair value at December 31, 2020 | |
$ | — | |
Initial value at January 8, 2021 | |
| 11,910,336 | |
Public Warrants reclassified to Level 1 | |
| (6,976,667 | ) |
Change in fair value | |
| (4,798,895 | ) |
Private placement warrants transfer to Level 2 | |
| (134,774 | ) |
Fair value at December 31, 2021 | |
$ | — | |
Transfers to/from Levels
1, 2 and 3 were recognized at the end of the reporting period in which a change in valuation technique or methodology occurs. The Public
Warrants transferred from a Level 3 measurement to a Level 1 fair value measurement at March 31, 2021 and the Private Placement Warrants
transferred from a Level 3 measurement to a Level 2 fair value measurement at December 31, 2021. The Public Warrants transferred from
Level 1 to Level 2 at September 30, 2022. There were no transfers to/from Level 3 during the three and nine months ended September 30,
2022.
NOTE 7 — COMMITMENTS AND CONTINGENCIES
Registration Rights
The holders of the (i) founder
shares, which were issued in a private placement prior to the closing of the IPO, (ii) Private Placement Warrants which were issued in
a private placement simultaneously with the closing of the IPO and the Class A ordinary shares underlying such Private Placement Warrants
and (iii) Private Placement Warrants that may be issued upon conversion of Working Capital Loans will have registration rights to require
the Company to register a sale of any of its securities held by them pursuant to a registration rights agreement. The holders of these
securities are entitled to make up to three demands, excluding short form demands, that the Company registers such securities. In addition,
the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the
Company’s completion of the initial Business Combination. The Company will bear the expenses incurred in connection with the filing
of any such registration statements.
Underwriting Agreement
The Company granted the underwriters
a 45-day option from the date of the prospectus to purchase up to additional 3,000,000 units to cover over-allotments, if any,
at $10.00 per Unit. Simultaneously with the closing of the IPO on January 8, 2021, the underwriters fully exercised the over-allotment
option to purchase 3,000,000 Units, generating an aggregate of gross proceeds of $30,000,000.
On January 8, 2021, the Company
paid a fixed underwriting discount of $0.20 per Unit, $4,600,000 in the aggregate, in connection with the IPO. Additionally,
the underwriters will be entitled to a deferred underwriting discount of 3.5%, or $8,050,000, of the gross proceeds of the IPO upon
the completion of the Company’s initial Business Combination.
Business Combination Agreement
On January 25, 2022, the
Company entered into a business combination agreement (the “Prime Focus Business Combination Agreement) with Prime Focus World N.V.,
a public limited liability company incorporated in the Netherlands (“DNEG”), PF Overseas Limited, a limited liability company
incorporated in Mauritius, Prime Focus 3D Cooperatief U.A., a Dutch cooperative association and the Sponsor (collectively, the “Parties”).
On June 15, 2022, the Parties
entered into a termination and settlement Agreement (the “Termination Agreement”), pursuant to which, the Parties mutually
agreed to terminate the Prime Focus Business Combination Agreement. The termination of the Prime Focus Business Combination Agreement
became effective as of such date.
As a result of the Termination
Agreement, the Prime Focus Business Combination Agreement is of no further force and effect, the Parties have released all existing claims
that they may presently have against one another arising out of the Prime Focus Business Combination Agreement, and the agreements entered
into in connection with the Prime Focus Business Combination Agreement, including, but not limited to, (i) the amended and restated registration
rights agreement, by and among the Company and holders set forth on Exhibit A thereto, (ii) the sponsor support agreement, by and among
the Company, DNEG and the Sponsor, (iii) the backstop agreement, by and among the Company, DNEG and the Sponsor, (iv) the Stockholder
support agreements, (v) the PFL agreement and (vi) the subscription agreements by and among the Company and certain institutional and
private investors, in each case as defined in the Prime Focus Business Combination Agreement, have also been terminated and are no longer
be effective, as applicable, in accordance with their respective terms. In connection with the execution of the Termination Agreement,
DNEG has paid a fee equal to $1,500,000 to the Sponsor.
The Company will consider
other acquisition opportunities, while recognizing existing market conditions and the limited remaining time for the Company to consummate
a Business Combination, which must occur by January 5, 2023.
Associated with the Termination
Agreement, the Company settled amounts owed to certain vendors for a reduced amount. As such, other income (expense) for the three and
nine months ended September 30, 2022 include a reduction of liabilities of $2,683,352.
NOTE 8 — SHAREHOLDERS’ DEFICIT
Preference Shares
The Company is authorized
to issue 5,000,000 preference shares with a par value of $0.0001 per share. with such designations, voting and other rights
and preferences as may be determined from time to time by the Company’s board of directors. As of September 30, 2022 and December
31, 2021, there were no preference shares issued or outstanding.
Class A Ordinary Shares
The Company is authorized
to issue 500,000,000 Class A ordinary shares with a par value of $0.0001 per share. At September 30, 2022 and December
31, 2021, there were 23,660,000 shares issued and outstanding, including 23,000,000 shares subject to redemption at
September 30, 2022 and December 31, 2021.
Class B Ordinary Shares
The Company is authorized
to issue 50,000,000 Class B ordinary shares with a par value of $0.0001 per share. Holders are entitled to one vote for
each share of Class B ordinary shares. There were 5,750,000 shares of Class B ordinary shares issued and outstanding at September
30, 2022 and December 31, 2021.
Class A ordinary shareholders
and Class B ordinary shareholders of record are entitled to one vote for each share held on all matters to be voted on by shareholders
and vote together as a single class, except as required by law; provided, that holders of the Class B ordinary shares will have the
right to appoint all of the Company’s directors prior to the initial Business Combination and holders of the Class A ordinary
shares will not be entitled to vote on the appointment of directors during such time.
The Class B ordinary
shares will automatically convert into Class A ordinary shares at the time of the initial Business Combination on a one-for-one basis,
subject to adjustment for share sub-divisions, share capitalizations, reorganizations, recapitalizations and the like.
NOTE 9 — WARRANTS
At September 30, 2022 and
December 31, 2021, there were 7,666,667 Public Warrants outstanding and 220,000 Private Placement Warrants outstanding.
Each whole warrant entitles
the holder to purchase one share of the Company’s Class A ordinary shares at a price of $11.50 per share, subject to adjustment
as discussed herein. In addition, if (x) the Company issues additional shares of Class A ordinary shares or equity-linked securities
for capital raising purposes in connection with the closing of its initial Business Combination at an issue price or effective issue price
of less than $9.20 per share of Class A ordinary shares (with such issue price or effective issue price to be determined in
good faith by the Company’s board of directors and, in the case of any such issuance to the Company’s Sponsor or its affiliates,
without taking into account any founder shares held by the Company’s Sponsor or its affiliates, prior to such issuance) (the “Newly
Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds,
and interest thereon, available for the funding of the initial Business Combination on the date of the consummation of the initial Business
Combination (net of redemptions), and (z) the volume weighted average trading price of the Company’s ordinary shares during
the 20-trading-day period starting on the trading day prior to the day on which the Company consummates the initial Business Combination
(such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the
nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, and the $18.00 per share redemption
trigger price, described below, will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and
the Newly Issued Price.
The warrants will become
exercisable on the later of January 8, 2022 or 30 days after the completion of its initial Business Combination, and will expire five
years after the completion of the Company’s initial Business Combination, at 5:00 p.m., New York City time, or earlier
upon redemption or liquidation.
The Company will not be obligated
to deliver any shares of Class A ordinary shares 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 with respect to the shares of Class A ordinary shares underlying
the warrants is then effective and a prospectus is current. No warrant will be exercisable and the Company will not be obligated to issue
shares of Class A ordinary shares upon exercise of a warrant unless Class A ordinary shares issuable upon such warrant exercise
has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of
the warrants. In no event will the Company be required to net cash settle any warrant. In the event that a registration statement is not
effective for the exercised warrants, the purchaser of a unit containing such warrant will have paid the full purchase price for the unit
solely for the share of Class A ordinary shares underlying such unit.
Once the warrants become
exercisable, the Company may call the warrants for redemption:
|
● |
in whole and not in part; |
|
● |
at a price of $0.01 per warrant; |
|
● |
upon not less than 30 days’ prior written notice of redemption to each warrant holder; and |
|
● |
if, and only if, the reported last sale price of the Class A ordinary shares equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading-day period ending three business days before the Company sends the notice of redemption to the warrant holders. |
The Private Placement Warrants
will be identical to the Public Warrants underlying the Units being sold in the IPO, 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 salable until
after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will
be exercisable on a cashless basis and be non-redeemable so long as they are held by the initial purchasers or their permitted transferees.
If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement
Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
If the Company calls the
warrants for redemption as described above, the Company will have the option to require any holder that wishes to exercise its warrant
to do so on a “cashless basis.” If the Company takes advantage of this option, all holders of warrants would pay the exercise
price by surrendering their warrants for that number of shares of Class A ordinary shares equal to the quotient obtained by dividing
(x) the product of the number of shares of Class A ordinary shares underlying the warrants, multiplied by the excess of the
“fair market value” over the exercise price of the warrants by (y) the fair market value. The “fair market value”
shall mean the average reported last sale price of the Class A ordinary shares for the 10 trading days ending on the third trading
day prior to the date on which the notice of redemption is sent to the holders of warrants.
NOTE 10 — SUBSEQUENT EVENTS
The Company evaluated subsequent
events and transactions that occurred after the condensed balance sheet date up to the date that the unaudited condensed financial statements
were issued. Based upon this review the Company did not identify any subsequent events that would have required adjustment or disclosure
in the unaudited condensed financial statements.