NOTES TO CONDENSED FINANCIAL
STATEMENTS (UNAUDITED)
NOTE 1 - DESCRIPTION OF ORGANIZATION AND BUSINESS
OPERATIONS:
| a. | Organization and General |
Cactus Acquisition Corp. 1 Limited
(hereafter – the Company) is a blank check company, incorporated on April 19, 2021 as a Cayman Islands exempted company, formed
for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination
(hereafter – the Business Combination).
Although the Company is not limited
to a particular industry or geographic region for the purpose of consummating a Business Combination, the Company intends to focus its
search on Israeli technology-based life science businesses or industries, that are domiciled in Israel, that carry out all or a substantial
portion of their activities in Israel, or that have some other significant Israeli connection.
The Company is an early stage and
an emerging growth company, and as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
All activity for the period from inception through March
31, 2022 relates to the Company’s formation, its initial public offering (the “Public Offering”) described below and
its search for a target company. The Company generates interest income on proceeds held in the trust account derived from the Public
Offering and the private placement (as defined below in Note 3).
The Company’s sponsor is Cactus
Healthcare Management, L.P., a Delaware limited partnership (the “Sponsor”).
The registration statement relating
to the Company’s Public Offering was declared effective by the United States Securities and Exchange Commission (the “SEC”)
on October 28, 2021. The initial stage of the Company’s Public Offering— the sale of 12,650,000 Units — closed on November
2, 2021. Upon that closing $129.03 million was placed in a trust account (the “Trust Account”) (see also note 1(c) below).
Out of the $129.03 million placed in the trust account, the Company raised a total of $126.5 million, inclusive of the exercise of the
over-allotment option and an additional $2.53 million were invested by the Company’s Sponsor for the benefit of the Public to preserve
a redemption value of $10.20. The Company intends to finance its initial Business Combination with the net proceeds from the Public Offering
and the Private Placement.
The proceeds held in the Trust Account
are invested in money market funds registered under the Investment Company Act and compliant with Rule 2a-7 thereof that maintain a stable
net asset value of $1.00. Unless and until the Company completes the Initial Business Combination, it may pay its expenses only from the
net proceeds of the Public Offering held outside the Trust Account.
CACTUS ACQUISITION CORP. 1 LIMITED
NOTES TO CONDENSED FINANCIAL
STATEMENTS (UNAUDITED) (continued)
NOTE 1 - DESCRIPTION OF ORGANIZATION AND
BUSINESS OPERATIONS: (continued):
| d. | Initial Business Combination |
The Company’s management has
broad discretion with respect to the specific application of the net proceeds of the Public Offering, although substantially all of the
net proceeds of the Public Offering are intended to be generally applied toward consummating an initial Business Combination. The initial
Business Combination must occur with one or more operating businesses or assets with a fair market value equal to at least 80% of the
net assets held in the Trust Account (excluding taxes payable on the income accrued in the Trust Account). There is no assurance that
the Company will be able to successfully consummate an initial Business Combination.
The Company, after signing a definitive agreement for an
Initial Business Combination, will provide its public shareholders the opportunity to redeem all or a portion of their shares upon the
completion of the initial Business Combination, either (i) in connection with a shareholder meeting called to approve the business combination
or (ii) by means of a tender offer. However, in no event will the Company redeem its public shares in an amount that would cause its net
tangible assets to be less than $5 million following such redemptions. In such case, the Company would not proceed with the redemption
of its public shares and the related initial Business Combination, and instead may search for an alternate initial Business Combination.
If the Company holds a shareholder
vote or there is a tender offer for shares in connection with an initial Business Combination, a public shareholder will have the right
to redeem its shares for an amount in cash equal to its pro rata share of the aggregate amount then on deposit in the Trust Account, calculated
as of two days prior to the general meeting or commencement of the Company’s tender offer, including interest but less taxes payable.
As a result, the Company’s Class A ordinary shares are recorded at redemption amount and classified as temporary equity upon the
completion of the Public Offering, in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards
Codification (“ASC”) 480, “Distinguishing Liabilities from Equity.”
| e. | Substantial Doubt about the Company’s Ability to Continue as a Going Concern |
The Company has until May 2, 2023
(hereafter – the Mandatory Liquidation Date) to consummate an Initial Business Combination. If a business combination is not consummated
by this date, there will be a mandatory liquidation and subsequent dissolution of the Company. The Company intends to complete an
Initial Business Combination before the Mandatory Liquidation Date. However, there can be no assurance that the Company will be able to
consummate any business combination ahead of the Mandatory Liquidation Date, nor that they will be able to raise sufficient funds to complete
an Initial Business Combination. These matters raise substantial doubt about the Company’s ability to continue as a going concern,
for the subsequent twelve months following the issuance date of these financial statements.
No adjustments have
been made to the carrying amounts of assets or liabilities should the Company fail to obtain financial support in its search for an Initial
Business Combination, nor if it is required to liquidate after the Mandatory Liquidation Date.
CACTUS ACQUISITION CORP. 1 LIMITED
NOTES TO CONDENSED FINANCIAL
STATEMENTS (UNAUDITED) (continued)
NOTE 1 - DESCRIPTION OF ORGANIZATION AND
BUSINESS OPERATIONS: (continued):
| f. | Emerging Growth Company |
Section 102(b)(1) of the JOBS Act
exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies
(that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered
under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company
can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but
any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that
when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging
growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.
This may make a 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.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES:
The financial statements have been
prepared in accordance with accounting principles generally accepted in the United States of America (hereafter – U.S. GAAP) and
the regulations of the Securities Exchange Commission (hereafter – SEC). The significant accounting policies used in the preparation
of the financial statements are as follows:
Basis of Presentation
The
Company’s unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted
in the United States of America (“U.S. GAAP”) and the rules and regulations of the SEC for interim financial information and
the instructions to Form 10-Q.
Certain
disclosures included in the financial statements as of, and for the period from April 19, 2021 to, December 31, 2021, have been condensed
or omitted from these financial statements as they are not required for interim financial statements under U.S. GAAP and the rules of
the SEC. These unaudited condensed financial statements reflect all adjustments that are, in the opinion of management, necessary for
a fair statement of the results for the interim periods presented. These adjustments are of a normal, recurring nature. Interim period
operating results may not be indicative of the operating results for a full year.
These
unaudited condensed financial statements should be read in conjunction with the Company’s audited financial statements.
The
accounting policies applied in the preparation of the unaudited condensed financial statements are consistent with those applied in the
preparation of the annual financial statements as of December 31, 2021.
CACTUS ACQUISITION CORP. 1 LIMITED
NOTES TO CONDENSED FINANCIAL
STATEMENTS (UNAUDITED) (continued)
NOTE 3 - PUBLIC OFFERING
In the Initial Public Offering, the
Company issued and sold 12,650,000 units at an offering price of $10.00 per unit (the “Units”). The Sponsor purchased an aggregate
of 4,866,667 Private Warrants (as defined below) at a price of $1.50 per Private Warrant, approximately $7,300,000 in the aggregate.
Each Unit consists of one Class A ordinary
share, $0.0001 par value, and one-half of one warrant, with each whole warrant exercisable for one Class A ordinary share (each,
a “Warrant” and, collectively, the “Warrants”). Each Warrant entitles the holder thereof to purchase one whole
Class A ordinary share at a price of $11.50 per share, subject to adjustment. No fractional shares will be issued upon exercise of the
Warrants and only whole Warrants will trade. Each Warrant will become exercisable 30 days after the completion of the Company’s
initial Business Combination and will expire at 5:00 p.m., New York City time, five years after the completion of the initial Business
Combination or earlier upon redemption (only in the case of the Warrants sold in the Public Offering, or the “Public Warrants”)
or liquidation.
Once the Public Warrants become exercisable,
the Company may redeem them in whole and not in part at a price of $0.01 per Warrant upon a minimum of 30 days’ prior written notice
of redemption, if and only if the last reported sale price of the Company’s Class A ordinary shares equals or exceeds $18.00
per share (as adjusted) for any 20 trading days within a 30-trading day period ending on the third trading day prior to the
date on which the Company sends the notice of redemption to the Warrant holders.
The Warrants sold in the Private Placement
(the “Private Warrants”) are identical to the Public Warrants except that the Private Warrants, for so long as they are held
by the Sponsor or its respective affiliates: (1) will not be redeemable by the Company; (2) may not (including the Class A ordinary shares
issuable upon exercise of those warrants), subject to certain limited exceptions, be transferred, assigned or sold by the holders thereof
until 30 days after the completion of the Company’s initial Business Combination; (3) they (including the Class A ordinary shares
issuable upon exercise thereof) are entitled to registration rights with respect to the resale thereof.
The Company paid an underwriting commission of 2.0% of
the gross proceeds of the Public Offering, or $2.53 million, in the aggregate, to the underwriters at the closings of the Public Offering.
Refer to Note 6 for more information regarding an additional fee payable to the underwriters upon the consummation of an Initial Business
Combination.
NOTE 4 - CAPITAL DEFICIENCY:
Class A ordinary shares
The Company is authorized to issue up to 500,000,000 Class
A ordinary shares of $0.0001 par value each. Pursuant to the initial Public Offering, as of March 31, 2022, the Company issued and sold
an aggregate of 12,650,000 Class A ordinary shares as part of the Units sold in the respective transaction. The Units (which also included
Warrants) were sold at a price of $10 per Unit, and for an aggregate consideration of $126,500,000, to the Public. See Note 3 above for
further information regarding those share issuances.
CACTUS ACQUISITION CORP. 1 LIMITED
NOTES TO CONDENSED FINANCIAL
STATEMENTS (UNAUDITED) (continued)
NOTE 4 - CAPITAL DEFICIENCY (continued):
Class B ordinary shares
The Company is authorized to issue up to 50,000,000 Class
B ordinary shares of $0.0001 par value each. On May 14, 2021 the Company issued 2,875,000 Class B ordinary shares of $0.0001 par value
each, for a total consideration of $25,000, to the Sponsor. In October 2021, the Company effected a stock share dividend of 0.1 shares
for each founder share outstanding, resulting in an aggregate of 3,162,500 founder shares outstanding and held by the Sponsor and the
Company’s directors.
Class B ordinary shares are convertible
into Class A ordinary shares, on a one-to-one basis, at any time and from time to time at the option of the holder, or automatically on
the day of the business combination. Class B ordinary shares also possess the sole right to vote for the election or removal of directors,
until the consummation of an initial business combination.
The Company is authorized to issue up to 5,000,000 preference
shares of $0.0001 par value each. As of March 31, 2022, the Company has no preference shares issued and outstanding.
NOTE 5 - LOSS PER SHARE:
As of March 31,
2022, the Company had two classes of ordinary shares, Class A ordinary shares and Class B ordinary shares. Earnings or losses are shared
pro rata between the two classes of ordinary shares, based on the weighted average number of shares issued outstanding for the period
ended March 31, 2022, as follows:
| |
Three months ended
March 31,
2022 | |
| |
U.S. dollars in thousands (except share data) | |
Loss attributable to Class A ordinary shareholders | |
| (215 | ) |
Weighted average of class A ordinary shares subject to possible redemption | |
| 12,650,000 | |
Basic and diluted loss per Class A ordinary share | |
| 0.02 | |
| |
| | |
Loss attributable to Class B ordinary shareholders | |
| (53 | ) |
Weighted average of Class B ordinary shares outstanding | |
| 3,162,500 | |
Basic and diluted loss per Class B ordinary share | |
| 0.02 | |
For the calculation of loss per share, the Company used
the weighted average number of each of the Company’s classes of ordinary shares issued and outstanding, divided by the loss attributable
to the shareholders of each class. The number of shares used in the calculation is the weighted average number of each class’ shares
issued and outstanding for the period ended March 31, 2022.
CACTUS ACQUISITION CORP. 1 LIMITED
NOTES TO CONDENSED FINANCIAL
STATEMENTS (UNAUDITED) (continued)
NOTE 5 - LOSS PER SHARE (continued):
As of March 31,
2022, the Company did not have any dilutive securities or any other contracts which could, potentially, be exercised or converted into
ordinary shares and then share in the earnings of the Company.
NOTE 6 - RELATED PARTY TRANSACTIONS:
Administrative Services Agreement
On
May 21, 2021, the Company signed an agreement with the Sponsor, under
which the Company shall pay the Sponsor a fixed $10 thousand per month for office space, utilities and other administrative expenses.
The monthly payments under this administrative services agreement commenced on the effective date of the registration statement for the
IPO and will continue until the earlier of (i) the consummation of the Company’s initial Business Combination, or (ii) the Company’s
liquidation.
Promissory note
On March 16,
2022, the Company signed a convertible promissory note under which it can borrow up to a $450 thousand principal amount from three
members ($150 thousand each) of the Sponsor or its registered assigns or successors in interest (the “Payee”). The Company
shall draw amounts to finance costs and expenses related to its Business Combination. The promissory note bears no interest and is
payable on the earlier of (i) the date on which the Company ceases operations for the purpose of winding up, or (ii) the date
on which the Company consummates a Business Combination. In lieu of repayment by the Company, the Payee may elect at least five days prior
to the Maturity Date to convert, on the Maturity Date, any unpaid principal amounts outstanding hereunder into warrants to purchase Class
A ordinary shares, par value $0.0001 of the Company, at a conversion price of $1.50 per warrant. Each such warrant will have an exercise
price of $11.50 per underlying share of the Company and will otherwise be identical to the private warrants sold by the Company to the
Sponsor concurrently with the Company’s initial public offering.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
Underwriters’ Deferred Compensation
Under the Underwriting Agreement, the Company shall pay
an additional fee (the “Deferred Underwriting Compensation”) of 3.5% ($4,428,000) of the gross proceeds of the Public Offering.
payable upon the Company’s completion of the initial Business Combination. The Deferred Underwriting Compensation will become payable
to the underwriters from the amounts held in the Trust Account solely in the event the Company completes the Initial Business Combination.
The Underwriting Compensation has been recorded as a deferred liability on the balance sheet as of March 31, 2022 as management has deemed
the consummation of a Business Combination to be probable.