MELI Kaszek Pioneer (MEKA) 10-Q2023 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

__________________

FORM 10-Q

__________________

(Mark One)

For the quarterly period ended March 31, 2023

-OR-

For the transition period from _________ to _________

Commission file number 001-40847

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MELI Kaszek Pioneer Corp

(Exact name of Registrant as specified in its Charter)

__________________

78 SW 7th Street

Individual Office No. 07-156

Miami, Florida 33130

(Former Address) (Zip Code)

(+598) 2927-2770

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

__________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   x     No   ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes   x     No   ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   x     No   ¨

As of May 10, 2023 there were 29,725,000 Class A ordinary shares, $0.0001 par value per share, and 12,739,286 Class L ordinary shares, $0.0001 par value per share, issued and outstanding.

 
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MELI KASZEK PIONERR CORP

FORM 10-Q

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

ITEM 1.      Condensed Financial Statements (unaudited)

MELI KASZEK PIONEER CORP

Condensed Balance Sheets

The accompanying notes are an integral part of these unaudited condensed financial statements.

MELI KASZEK PIONEER CORP

Condensed Statements of Operations

(Unaudited)

The accompanying notes are an integral part of these unaudited condensed financial statements.
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MELI KASZEK PIONEER CORP

Condensed Statements of Changes in Class A Ordinary Shares Subject to Possible Redemption and Shareholders’ Deficit

(Unaudited)

The accompanying notes are an integral part of these unaudited condensed financial statements.

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MELI KASZEK PIONEER CORP

Condensed Statements of Cash Flows

(Unaudited)

The accompanying notes are an integral part of these unaudited condensed financial statements.

Note 1 — Organization and Business Operations

MELI Kaszek Pioneer Corp (the “Company”) is a Cayman Islands exempted company structured as a blank check company incorporated in the Cayman Islands on May 27, 2021. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or similar business combination with one or more businesses (the “Business Combination”). The Company is not limited to a particular industry or sector for purposes of consummating a 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 March 31, 2023, the Company had not commenced any operations. All activity for the period ended March 31, 2023, relates to our search for a target to consummate an initial Business Combination. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of investment income on cash and cash equivalents from the proceeds derived from the Company’s initial public offering (“IPO”).

The Company’s sponsor is MELI Kaszek Pioneer Sponsor LLC (the “Sponsor”), a Cayman Islands limited liability company.

The registration statement for the Company’s IPO was declared effective on September 28, 2021. On October 1, 2021, the Company consummated the IPO of 28,750,000 Class A ordinary shares (the “Class A ordinary shares”), which includes the exercise in full of the underwriters’ option to purchase an additional 3,750,000 Class A ordinary shares, at $10.00 per share, generating gross proceeds of $287,500,000. Simultaneously with the closing of the IPO, the Company consummated the sale of 975,000 Class A ordinary shares (the “Private Placement Shares”), at a price of $10.00 per share, generating aggregate gross proceeds to the Company of $9,750,000 which was received prior to the consummation of the IPO.

Transaction costs of the IPO amounted to $16,709,861 consisting of $5,750,000 of underwriting discounts and commissions, $10,062,500 of deferred underwriting discounts and commissions, and $897,361 of other offering costs. As of December 31, 2022 all four underwriters of the IPO waived their entitlement to the deferred underwriting discounts and commissions. The $10,062,500 waiver was recognized in accumulated deficit.

Following the closing of the IPO on October 1, 2021, $287,500,000 ($10.00 per share) from the net offering proceeds of the sale of the Class A ordinary shares in the IPO and the sale of the Private Placement Shares was placed in a trust account (“Trust Account”) and are invested only in U.S. government securities with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act which invest only in direct U.S. government treasury obligations. The Trust Account is intended as a holding place for funds pending the earliest to occur 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 memorandum and articles of association (as defined below) (A) to modify the substance or timing of the Company’s obligation to redeem 100% of the public shares if the Company does not complete the initial Business Combination within 24 months from the closing of the IPO or (B) with respect to any other provision relating to shareholders’ rights or pre-initial Business Combination activity; or (iii) absent an initial Business Combination within 24 months from the closing of the IPO, the return of the funds held in the Trust Account to the public shareholders as part of redemption of the public shares.

The Company will provide its public shareholders with the opportunity to redeem all or a portion of their shares of Class A ordinary 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 the Company’s discretion. The public shareholders will be entitled to redeem their shares at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of the initial Business Combination including investment income on the funds held in the Trust Account and not previously released to the Company to pay its franchise and income taxes, divided by the number of then outstanding public shares, subject to the limitations. The amount in the Trust Account is initially anticipated to be approximately $10.00 per public share.

The ordinary shares subject to redemption will be recorded at a redemption value and classified as temporary equity upon the completion of the IPO and subsequently accreted to redemption value, in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 480, “Distinguishing Liabilities from Equity”. In such case, the Company will proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 upon such consummation of a Business Combination and, if the Company seeks shareholder approval, a majority of the issued and outstanding shares voted are voted in favor of the Business Combination.

The Company will have only 24 months from the closing of the IPO on October 1, 2021 (the “Combination Period”) to complete the initial Business Combination. If the Company is unable to complete its initial Business Combination within such 24-month period from the closing of the IPO or during any Extension Period, the Company will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including investment income on the funds held in the Trust Account and not previously released to the Company to pay taxes (less up to $100,000 of investment income to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public shareholders’ rights as shareholders (including the right to receive further liquidating distributions, if any), and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining shareholders and the Company’s board of directors, liquidate and dissolve, subject in each case to the Company’s obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law.

The Sponsor has agreed that it will be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has entered into a written letter of intent, confidentiality or other similar agreement or business combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10.00 per public share and (ii) the actual amount per public share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.00 per public share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the Trust Account (whether or not such waiver is enforceable) nor will it apply to any claims under the Company’s indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). However, the Company has not asked the Sponsor to reserve for such indemnification obligations, nor has the Company independently verified whether the Sponsor has sufficient funds to satisfy its indemnity obligations and the Company believes that the Sponsor’s only assets are securities of the Company. Therefore, there is no assurance that the Sponsor would be able to satisfy those obligations. As a result, if any such claims were successfully made against the Trust Account, the funds available for the Company’s initial Business Combination and redemptions could be reduced to less than $10.00 per public share. In such event, the Company may not be able to complete the initial Business Combination, and a public shareholder would receive such lesser amount per share in connection with any redemption of the public shares. None of the Company’s officers or directors will indemnify the Company for claims by third parties including, without limitation, claims by vendors and prospective target businesses.

Emerging Growth Company

The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

Risks and Uncertainties

United States and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions that began in February 2022 from the conflict between Russia and Ukraine that have resulted in the deployment of military forces to eastern Europe, sanctions and other restrictive actions against Russia, Belarus and related individuals and entities. Although the length and impact of the ongoing military conflict in Ukraine is highly unpredictable, the conflict has and could continue to lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain disruptions. Additionally, Russian military actions and the resulting sanctions could adversely affect the global economy and financial markets and lead to instability and lack of liquidity in capital markets.

Any of the abovementioned factors, could adversely affect the search for any target business with which the Company ultimately consummate the initial Business Combination. The extent and duration of conflict, resulting sanctions and any related market disruptions are impossible to predict, but could be substantial, particularly if current or new sanctions continue for an extended period of time or if geopolitical tensions result in expanded military operations on a global scale. Any such disruptions may affect Company’s ability to raise equity or debt financing in connection with any particular Business Combination.

Liquidity and Capital Resources

As of March 31, 2023 and December 31, 2022, the Company had $407,814 and $669,889 in cash held outside of the Trust Account.

As of March 31, 2023 and December 31, 2022, the Company had working capital of $290,443,091 and $289,493,039, respectively. As of March 31, 2023, the working capital calculation includes the investments held in the Trust Account as part of current assets and the Class L ordinary shares derivative liability (see Note 6) as part of the current liabilities. The Company classified the investments held in the Trust Account as a current asset as the Company has less than 12 months from the balance sheet date to consummate an initial Business Combination, at which point, if the Company did not find a target, the Company would cease to exist, and the funds would be liquidated from the Trust Account. The Company classified the Class L ordinary shares derivative liability as current liability as the Company has less than 12 months from the balance sheet date to consummate an initial Business Combination, at which point, if the Company did not find a target, the Company would cease to exist, and the Class L ordinary shares derivative liability would not be converted.

In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor, 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 of March 31, 2023 and December 31, 2022, there were no amounts outstanding under any Working Capital Loans.

In order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, on May 5, 2023, the Sponsor provided a firm commitment to the Company of up to $800,000 to be drawn, as needed, over the course of 13 months from the date of the commitment (see Note 5).

Based on the foregoing, management believes that the Company will have sufficient working capital and funding to meet its needs through the earlier of (i) the consummation of a Business Combination or (ii) the liquidation date of October 1, 2023. Over this time period, the Company will be using the funds held outside of the Trust Account to pay existing accounts payable, identify and evaluate prospective initial Business Combination candidates, perform due diligence on prospective target businesses, pay for travel expenditures, select the target business to merge with or acquire, and structure, negotiate and consummate the Business Combination.

Note 2 — 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 (“US GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the Securities and Exchange Commission (the “SEC”). Certain information or footnote disclosures normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, 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 management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair statement of the financial position, operating results and cash flows for the periods presented.

The results for the period ended March 31, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023 or for any future periods.

Investment income earned on marketable securities held in the Trust Account for the three months ended March 31, 2022 in the amount of $28,951 was reclassified from operating activities to investing activities within the condensed statement of Cash Flows. This reclassification did not impact any other financial statement line items.

Use of Estimates

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash and cash equivalents. As of March 31, 2023 and December 31, 2022, there were no cash equivalents.

Marketable Securities Held in Trust Account

As of March 31, 2023 and December 31, 2022, the Company’s portfolio of investments held in the Trust Account are comprised solely of U.S. government securities with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act which invest only in direct U.S. government treasury obligations. Marketable securities are presented on the balance sheet at fair value at the end of the period. Gains and losses resulting from the change in fair value of these investments are included in investment income on marketable securities held in the Trust Account in the accompanying statements of operations.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed the Federal Depository Insurance Coverage. The Company has not experienced losses on these accounts.

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 ASC 480. Class A ordinary shares subject to mandatory redemption (if any) are classified as a liability instrument and are measured at fair value. Conditionally redeemable Class A 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 the Company’s control) are classified as temporary equity. At all other times, Class A ordinary shares are classified as shareholders' equity. The Company’s Class A ordinary shares feature certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events.

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. Such changes are reflected in additional paid-in capital, or in the absence of additional capital, in accumulated deficit. For the three-month periods ended March 31, 2023 and 2022, the Company recorded an accretion of $3,094,583 and $28,951, respectively, which was recorded in accumulated deficit.
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Financial Instruments

The fair value of the Company’s assets and liabilities, which qualify as financial instruments under the ASC 820, “Fair Value Measurement,” approximates the carrying amounts represented on the balance sheets, primarily due to their short-term nature.

Derivative Financial Instruments

The Company accounts for derivative financial instruments in accordance with ASC 815, “Derivatives and Hedging.” For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value upon issuance and remeasured at each reporting date, with changes in the fair value reported in the statements of operations. The classification of derivative financial instruments is evaluated at the end of each reporting period.

Fair Value Measurements

The fair value of the Company’s assets and liabilities, which qualify as financial instruments under the ASC 820 approximates the carrying amounts represented on the balance sheets.

The fair value hierarchy is categorized into three levels based on the inputs as follows:

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. Example 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 the Company’s assessment of the assumptions that market participants would use in pricing the asset or liability.

Income Taxes

The Company accounts for income taxes under ASC 740, “Income Taxes”. ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.

ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position 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. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition.

There is currently no taxation imposed on income by the Government of the Cayman Islands. In accordance with Cayman income tax regulations, income taxes are not levied on the Company. U.S. taxation could be imposed if the Company is engaged in a U.S. trade or business. The Company is not expected to be treated as engaged in a U.S. trade or business at this time. Additionally, given the nature of the investment income generated from the funds held in the Trust Account, it is not subject to tax withholdings in the U.S. Moreover, the Company determined that no income tax liability would arise from any other jurisdictions outside of the Cayman Islands. Consequently, income taxes are not reflected in the Company’s financial statements.

Net Income (Loss) Per Share

The Company complies with accounting and disclosure requirements of ASC 260, “Earnings per 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.

The statements of operations include a presentation of income (loss) per Class A ordinary shares subject to possible redemption and Class A non-redeemable ordinary shares following the two-class method of income (loss) per share. In order to determine the net income (loss) attributable to Class A ordinary shares subject to possible redemption and Class A non-redeemable ordinary shares, the Company first considered the total income (loss) allocable to the different classes of shares. This is calculated using the total net income (loss) less any dividends paid and deemed dividends. For purposes of calculating net income (loss) per share, any remeasurement of the accretion to redemption value of the Class A ordinary shares subject to possible redemption was considered to be dividends paid to the public stockholders based on ASC 480-10-S99-3A.

As of March 31, 2023 and December 31, 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 net income (loss) per share is the same as basic net income (loss) per share for the period presented.

Class L ordinary shares will convert into Class A ordinary shares after the initial Business Combination only to the extent certain triggering events occur prior to the 5th anniversary of the initial Business Combination, including three equal triggering events based on the Company’s stock trading at $10, $15, $20 per share. The Company has not considered the effect of the Class L ordinary shares in the calculation of diluted loss per share since the conversion of the Class L ordinary shares is contingent upon the occurrence of future events.

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The earnings (loss) per share presented in the statements of operations is based on the following:

Recently Adopted Accounting Standards

The Company has considered all other new accounting standards and has concluded that there are no new standards that may have a material impact on the results of operations, financial condition, or cash flows, based on the current information.  

Note 3 — Initial Public Offering

On October 1, 2021, the Company consummated its IPO of 28,750,000 Class A ordinary shares (including 3,750,000 Class A ordinary shares pursuant to the underwriters’ exercise in full of the over-allotment option) at a purchase price of $10.00 per ordinary share, generating gross proceeds of $287,500,000.

Note 4 — Private Placement Shares

Following the closing of the IPO, the Company received $9,750,000 from the Sponsor for the issuance of the 975,000 Private Placement Shares at a price of $10.00 per share.

The Private Placement Shares will not be transferable, assignable, or salable until 30 days after the completion of the initial Business Combination and they will not be redeemable by the Company so long as they are held by the Sponsor or its permitted transferees. If the Company does not complete a Business Combination the Private Placement Shares will expire worthless.

Note 5 — Related Party Transactions

Founder Shares

On June 17, 2021, the Sponsor paid $25,000 on behalf of the Company to cover Company expenses in consideration for 3,194,444 shares of Class B ordinary shares and 9,126,984 shares of Class L ordinary shares (“founder shares”). On September 10, 2021, the Company passed a special resolution to amend the authorized share capital of the Company to $50,000 divided into 464,000,000 Class A ordinary shares, 35,000,000 Class L ordinary shares and 1,000,000 preference shares by (i) redesignating the 6,805,556 unissued Class B ordinary shares into 6,805,556 Class L ordinary shares and (ii) converting into stock the 3,194,444 issued Class B ordinary shares and reconverting and redesignating into 3,194,444 Class L ordinary shares. On September 10, 2021, the securities subscription agreement was amended to provide for the issuance of an additional 417,858 Class L ordinary shares such that, in the aggregate, our sponsor owns 12,739,286 Class L ordinary shares. The number of Class L ordinary shares issued was determined based on the expectation that the Class L ordinary shares would represent 30% of the ordinary shares upon completion of the IPO.

The Sponsor, officers and directors of the Company have entered into a letter agreement with the Company, pursuant to which they have agreed to (i) waive their redemption rights with respect to any founder shares and public shares they hold in connection with the completion of the initial Business Combination, (ii) waive their redemption rights with respect to any founder shares and public shares they hold in connection with a shareholder vote to approve an amendment to the Company amended and restated memorandum and articles of association (as defined below) to modify the substance or timing of the Company’s obligation to redeem 100% of the Company’s public shares if the Company has not consummated an initial Business Combination within 24 months from the closing of this offering or with respect to any other material provisions relating to shareholders’ rights or pre-initial Business Combination activity and (iii) waive their rights to liquidating distributions from the Trust Account with respect to any founder shares they hold if the

Company fails to complete the initial Business Combination within 24 months from the closing of the IPO or during any Extended Period, although they will be entitled to liquidating distribution from the Trust Account with respect to any public shares they hold if the Company fails to complete an initial Business Combination within such time period. If the Company submits an initial Business Combination to the Company’s public shareholders for a vote, the Company’s initial shareholders have agreed to vote their founder shares, their Private Placement Shares and any public shares purchased during or after the IPO in favor of the initial Business Combination.

On September 10, 2021, the Company also amended its memorandum and articles of association (the “Amended and Restated Memorandum and Articles of Association”). The Company’s Amended and Restated Memorandum and Articles of Association provide that the holders of the founder shares have the right to vote on the appointment of directors. Holders of the public shares are not entitled to vote on the appointment or removal of directors or continuing the Company in a jurisdiction outside the Cayman Islands prior to consummation of the initial Business Combination.

The Sponsor has agreed not to transfer, assign or sell (i) any of their founder shares and any Class A ordinary shares issuable upon conversion thereof until the earlier to occur of: (A) eighteen months after the completion of the initial Business Combination, (B) subsequent to the initial Business Combination, if the last sale price of the Class A ordinary shares equals or exceeds $13.00 per share (as adjusted for share sub-divisions, share dividends, right issuances, subdivisions, 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 (C) the date on which the Company complete a liquidation, merger, share exchange or other similar transaction after the initial Business Combination that results in all of the shareholders having the right to exchange their Class A ordinary shares for cash, securities or other property; provided, that any Class A ordinary shares issued upon conversion of any founder shares will not be subject to such restrictions on transfer.

The Company’s Amended and Restated Memorandum and Articles of Association provide that the founder shares will convert into Class A ordinary shares after the initial Business Combination, only to the extent the trading price of the public shares exceeds certain market price thresholds after the initial Business Combination and before the fifth anniversary of the initial Business Combination, at a ratio such that the number of Class A ordinary shares issuable upon conversion of all founder shares would equal, in the aggregate on an as-converted basis, would represent 10%, 20% or 30% of the sum of (i) the total number of all Class A ordinary shares issued and outstanding upon completion of this offering (including any over-allotment shares if the underwriters exercise their over-allotment and without giving effect to any redemptions of any public shares in connection with the initial Business Combination), plus (ii) the total number of Class A ordinary shares issued or deemed issued or issuable upon conversion of the founder shares, plus (iii) unless waived by the Sponsor, the total number of Class A ordinary shares or equity-linked securities exercisable for or convertible into Class A ordinary shares issued, deemed issued, or to be issued, in connection with or in relation to the consummation of the initial Business Combination, excluding (x) any Class A ordinary shares or equity-linked securities exercisable for or convertible into Class A ordinary shares issued, deemed issued, or to be issued, to any seller in the initial Business Combination, (y) any redemption of public shares in connection with the initial Business Combination or (z) Forward Purchase Shares, based on whether the Class A ordinary shares trade at or above $10.00, $15.00 and $20.00 per share, respectively, for any 20 trading days within a 30-trading day period.

In addition, in the event of any liquidation, merger, share exchange, reorganization or other similar transaction is consummated after our initial Business Combination (“Strategic Transaction”) that results in all of the public shareholders having the right to exchange their Class A ordinary shares for cash, securities or other property, then, immediately before the consummation of such Strategic Transaction, all of the then-outstanding founder shares will automatically convert into Class A ordinary shares, contemporaneously with the closing of such Strategic Transaction, at a ratio such that the aggregate number of Class A ordinary shares issuable upon conversion of all founder shares (including the founder shares) in the aggregate on an as-converted basis, would represent no more than 30% of the sum of (i) the total number of all Class A ordinary shares issued and outstanding upon completion of this offering (including any over-allotment shares if the underwriters exercise their over-allotment option and without giving effect to any redemptions of any public shares in connection with the initial Business Combination), plus (ii) the total number of Class A ordinary shares issued or deemed issued or issuable upon conversion of the founder shares, plus (iii) unless waived by the Sponsor, the total number of Class A ordinary shares or equity-linked securities exercisable for or convertible into Class A ordinary shares issued, deemed issued, or to be issued, in connection with or in relation to the consummation of the initial Business Combination, excluding (x) any Class A ordinary shares or equity-linked securities exercisable for or convertible into Class A ordinary shares issued, deemed issued, or to be issued, to any seller in the initial Business Combination, (y) any redemption of public shares in connection with the initial Business Combination or (z) Forward Purchase Shares.

All founder shares that have not been converted to Class A ordinary shares on the fifth anniversary of the initial Business Combination will be exchanged on such date, at the Company’s election, for an aggregate for all such founder shares of either (i) 100 Class A ordinary shares or (ii) cash, in an amount equal to the value of 100 Class A ordinary shares, based on the average market price of Class A ordinary shares over the period of five trading days ending two trading days before the date of exchange.

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The Company accounts for the founder shares as equity linked instruments. Based on the guidance in ASC 815, certain adjustments to the settlement amount of the founder shares are based on a variable that is not an input to the fair value of a “fixed-for-fixed” option as defined under ASC 815-40. The founder shares are recorded as liabilities as these shares are not considered indexed to the Company’s own stock and not eligible for an exception from derivative accounting.

Related Party Loans

In order to finance working capital deficiencies or transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (the “Working Capital Loans”). If the Company completes an initial Business Combination, the Company will repay such loaned amounts out of the proceeds of the Trust Account released to it. Otherwise, such loans would be repaid only out of funds held outside the Trust Account. In the event that the initial Business Combination does not close, the Company may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from the Trust Account would be used to repay such loaned amounts. Up to $2,000,000 of such loans may be convertible into shares, at a price of $10.00 per share at the option of the lender. Such shares would be identical to the Private Placement Shares. As of March 31, 2023 and December 31, 2022, the Company had no Working Capital Loans.

Additionally, on November 14, 2022, the Sponsor provided a commitment letter for funding of up to $800,000 to the Company (the “2022 Commitment Letter”), which was subsequently terminated on February 9, 2023 whereby the Sponsor provided a new commitment letter (the “February Commitment Letter”) for funding of up to the same dollar amount to the Company. On May 5, 2023, the February Commitment Letter was terminated and the Sponsor provided a new commitment letter for funding of up to $800,000 to the Company (the “Commitment Letter”) to be drawn, as needed, over the course of 13 months from the date of the Commitment Letter to fund working capital deficiencies or finance transaction costs in connection with an initial Business Combination.

Administrative Services Agreement

On October 1, 2021, the Company entered into an agreement that provides that, subsequent to the closing of the IPO and continuing until the earlier of the Company’s consummation of an initial Business Combination or the Company’s liquidation, the Company will pay the Sponsor a total of $10,000 per month for office space, secretarial, due diligence and administrative services. For the three-month periods ended March 31, 2023 and 2022, the Company incurred $30,000 for each period, pursuant to this agreement which has been included in the general and administrative expenses in the accompanying statements of operations. As of March 31, 2023 and December 31, 2022, no liability regarding this agreement was outstanding.

Forward Purchase Agreement

On October 1, 2021, and in connection with the IPO, the Company entered into a Forward Purchase Agreement with the Sponsor, pursuant to which the Sponsor committed to purchase from the Company 5,000,000 forward purchase shares (the “Forward Purchase Shares”), at a price of $10.00 per Forward Purchase Share, for an aggregate purchase price of $50,000,000 in a private placement to close substantially concurrently with the closing of an initial Business Combination. The obligations under the Forward Purchase Agreement will not depend on whether any Class A ordinary shares are redeemed by public shareholders. The Class A ordinary shares issuable pursuant to the Forward Purchase Agreement will be identical to the Class A ordinary shares sold in the IPO, except that the Sponsor will have certain registration rights, and the Class A ordinary shares will not be eligible for redemption in connection with an initial Business Combination.

Note 6 — Derivative Financial Instruments

Class L ordinary shares derivative liability

The Class L ordinary shares are accounted for as a liability in accordance with ASC 815 and presented as a derivative liability on the balance sheets. The derivative liability was measured at fair value as of September 10, 2021 (date on which the Company amended its memorandum and articles of association) and will be evaluated on a recurring basis, with changes in fair value presented within fair value of derivative liability in the statements of operations.

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The following table presents a summary of the changes in the fair value of the Class L ordinary shares derivative liability as of March 31, 2023 and 2022:

The amounts of changes in the fair value on derivative instruments are reported in the statements of operations.

The following table presents the Company's fair value hierarchy for assets and liabilities measured at fair value on a recurring basis as of March 31, 2023 and December 31, 2022:

There were no transfers to and from Levels 1, 2 and 3 during the three-month period ended March 31, 2023 and the year ended December 31, 2022.

The Company measured the Class L ordinary shares derivative liability at fair value determined at Level 3. In order to capture the market conditions associated with the Class L ordinary shares derivative liability, the Company applied an approach that incorporated a Monte Carlo simulation, which involved random iterations of future stock-price paths over the contractual life of the Class L ordinary shares. Based on assumptions regarding potential changes in control of the Company, and the probability distribution of outcomes, the payoff to the holder was determined based on the achievement of the various market thresholds within each simulated path. The present value of the payoff in each simulated trial is calculated, and the fair value of the liability is determined by taking the average of all present values.

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The key inputs into the Monte-Carlo simulation model for Class L ordinary shares derivative liability were as follows, as of March 31, 2023 and December 31, 2022:

(1) Traded stock price adjusted to reflect market expectations of success. 

Note 7 — Commitments and Contingencies

Registration and Shareholder Rights

The holders of the founder shares and Private Placement Shares that may be issued upon conversion of Working Capital Loans have registration rights that require us to register a sale of any of the Company’s securities held by them (in the case of the founder shares, only after conversion to the Class A ordinary shares) pursuant to a registration rights agreement signed at the closing of the IPO (the “Registration Rights Agreement”). These holders are entitled to make up to three demands, excluding short form registration demands, that we register such securities for sale under the Securities Act. In addition, these holders have certain “piggy-back” registration rights to include such securities in other registration statements filed by us and rights to require us to register for resale such securities pursuant to Rule 415 under the Securities Act.

Underwriting Agreement

The Company granted the underwriters a 45-day option to purchase up to 3,750,000 additional Class A ordinary shares to cover any over-allotments, if any, at the IPO price less the underwriting discounts and commissions. On September 29, 2021, the underwriters exercised their over-allotment option in full.

On October 1, 2021, the Company paid underwriting discounts and commissions of $5,750,000 in the aggregate. Additionally, a deferred underwriting discounts and commissions of $10,062,500, will be payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes an initial Business Combination, subject to the terms of the underwriting agreement.

As of December 31, 2022, all four underwriters of the IPO waived their entitlement to deferred underwriting discounts and commissions. The $10,062,500 waiver was recognized in accumulated deficit.

Investment Management Trust Agreement

In connection with the IPO, the Company entered into an investment management trust agreement pursuant to which a portion of the proceeds of the IPO and the sale of the Private Placement Shares were delivered and are to be held in the Trust Account for the benefit of the Company and the holders of the shares issued in connection with the IPO.

Note 8 — Shareholders’ Equity (Deficit)

Preferred Shares

The Company is authorized to issue 1,000,000 shares of preferred stock 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 March 31, 2023 and December 31, 2022, no preferred shares were issued or outstanding.

Class A Ordinary Shares

The Company is authorized to issue 464,000,000 shares of Class A ordinary shares with a par value of $0.0001 per share. Holders of Class A ordinary shares are entitled to one vote for each share. As of March 31, 2023 and December 31, 2022, there were 29,725,000 Class A ordinary shares issued and outstanding, 28,750,000 of which are classified as temporary equity.

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Note 9 — General and administrative expenses

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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 MELI Kaszek Pioneer Corp, references to our “management” or our “management team” refer to our officers, references to the “Sponsor” refer to MELI Kaszek Pioneer Sponsor LLC, a Cayman Islands limited liability company. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report includes “forward-looking statements” 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 Quarterly Report including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “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. The forward-looking statements contained in this Quarterly Report are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors discussed elsewhere in this Quarterly Report on Form 10-Q, including under Part II, Item 1A, “Risk Factors,” as well as those factors described in the section entitled “Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 filed with the Securities and Exchange Commission (the “SEC”) on March 6, 2023, as amended by Amendment No. 1 on Form 10-K/A for the year ended December 31, 2022 on May 8, 2023, and in our other SEC filings. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

Overview

We are a blank check company incorporated on May 27, 2021 under the laws of the Cayman Islands and formed for the purpose of effecting a merger, share exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. We have not identified any business combination target and we have not, nor has anyone on our behalf, initiated any substantive discussions directly or indirectly, with respect to identifying any business combination target. We intend to effectuate our initial Business Combination (the “Business Combination”) using cash from the proceeds of our initial public offering (the “IPO”) and the cash from the private placement of the private placement shares (pursuant to the Private Placement Shares Purchase Agreement entered into in connection with the IPO) (the “Private Placement”), the proceeds of the sale of our securities in connection with our initial Business Combination (pursuant to the forward purchase agreement entered into in connection with the IPO (the “Forward Purchase Agreements”) or other forward purchase agreements or backstop agreements we may enter into following the consummation of our IPO or otherwise), our capital stock, debt or a combination of cash, stock and debt.

The registration statement for our IPO was declared effective by the SEC on September 28, 2021. On October 1, 2021, we consummated our IPO of 28,750,000 Class A ordinary shares (the “Class A ordinary shares”), which includes the exercise in full of the underwriters’ option to purchase an additional 3,750,000 shares at $10.00 per share, generating gross proceeds of $287,500,000. Simultaneously with the consummation of the IPO, we consummated the sale of 975,000 shares (the “Private Placement Shares”), at a price of $10.00 per share, generating aggregate gross proceeds to the Company of $9,750,000 that was received prior to the consummation of the IPO.

Transaction costs of the IPO amounted to $16,709,861 consisting of $5,750,000 of underwriting discounts and commissions, $10,062,500 of deferred underwriting discounts and commissions, and $897,361 of other offering costs. As of December 31, 2022 all four underwriters waived their entitlement to the deferred underwriting discounts and commissions.

Following the closing of the IPO, a total of $287,500,000 was placed in a U.S.-based trust account (the “Trust Account”), with Continental Stock Transfer & Trust Company acting as trustee. The proceeds held in the Trust Account have been invested only in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act of 1940, as amended, which invest only in direct U.S. government treasury obligations. Except for the withdrawal of interest to pay our taxes, none of the funds held in trust will be released from the Trust Account until the earliest of (i) the completion of our initial Business Combination, (ii) the redemption of our public shares if we are unable to complete our initial Business Combination within 24 months from the closing of the IPO, subject to applicable law, and (iii) the redemption of our public shares properly submitted in connection with a shareholder vote to approve an amendment to our amended and restated memorandum and articles of association to modify the substance or timing of our obligation to redeem 100% of our public shares if we have not consummated an initial Business Combination within 24 months from the IPO or with respect to any other material provisions relating to shareholders’ rights or pre-initial Business Combination activity.

Business Combination

If we are unable to complete a Business Combination within 24 months from the closing of the IPO (the “Combination Period”), we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account (as defined below), including investment income on the funds held in the Trust Account (as defined below) and not previously released to us to pay our taxes (less up to $100,000 of investment income to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish public shareholders’ rights as shareholders (including the right to receive further liquidating distributions, if any), and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining shareholders and the board of directors, liquidate and dissolve, subject in each case, to our obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law.

The issuance of additional shares in connection with a Business Combination to the owners of the target or other investors:

may significantly dilute the equity interest of investors in the IPO;

may subordinate the rights of holders of Class A ordinary shares if preferred shares are issued with rights senior to those afforded our Class A ordinary shares;

could cause a change in control if a substantial number of shares of our Class A ordinary shares are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors;

may have the effect of delaying or preventing a change of control of us by diluting the share ownership or voting rights of a person seeking to obtain control of us; and

may adversely affect prevailing market prices for our Class A ordinary shares.

Similarly, if we issue debt securities or otherwise incur significant debt to bank or other lenders or the owners of a target, it could result in:

default and foreclosure on our assets if our operating revenues after an initial Business Combination are insufficient to repay our debt obligations;

acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant;

our immediate payment of all principal and accrued interest, if any, if the debt is payable on demand;

our inability to obtain necessary additional financing if the debt contains covenants restricting our ability to obtain such financing while the debt is outstanding;

our inability to pay dividends on our Class A ordinary shares;

using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our Class A ordinary shares if declared, expenses, capital expenditures, acquisitions and other general corporate purposes;

limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate;

increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; and

limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, execution of our strategy and other purposes and other disadvantages compared to our competitors who have less debt.

We expect 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

As of March 31, 2023, we had not commenced any operations nor generated any revenues. All activity for the period ended March 31, 2023 relates to our search for a target to consummate a Business Combination. We will not generate any operating revenues until after the completion of a Business Combination, at the earliest. We will generate non-operating income in the form of investment income on marketable securities held in the Trust Account (as defined below). We expect to incur increased expenses, as compared to the period before our IPO, as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.

For the three-month period ended March 31, 2023, we had a net income of $950,052, consisting of $3,094,583 of investment income on marketable securities held in Trust Account partially offset by $1,710,592 of changes in the value of the Class L ordinary shares derivative liability and $433,939 of general and administrative expenses ($214,594 of which related to insurance expenses).

For the three-month period ended March 31, 2022, we had a net income of $35,901,386, consisting of changes in the value of the Class L ordinary shares derivative liability of $36,294,697 and $28,951 of investment income on marketable securities held in Trust Account partially offset by $422,262 of general and administrative expenses ($214,594 of which related to insurance expenses).

Liquidity and Capital Resources

On October 1, 2021, we consummated our IPO of 28,750,000 Class A ordinary shares, which includes the exercise in full of the underwriters’ option to purchase an additional 3,750,000 Class A ordinary shares at $10.00 per share, generating gross proceeds of $287,500,000. Simultaneously with the consummation of the IPO, we consummated the sale of 975,000 Private Placement Shares, at a price of $10.00 per share, generating aggregate gross proceeds to the Company of $9,750,000.

Transaction costs of the IPO amounted to $16,709,861 consisting of $5,750,000 of underwriting discounts and commissions, $10,062,500 of deferred underwriting discounts and commissions, and $897,361 of other offering costs. As of December 31, 2022 all four underwriters waived their entitlement to the deferred underwriting discounts and commissions.

Upon closing of the IPO, a total of $287,500,000 was placed in the Trust Account. The proceeds held in the Trust Account have been invested only in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act of 1940, as amended, which invest only in direct U.S. government treasury obligations.

As of March 31, 2023 and December 31, 2022, we had cash outside our Trust Account of $407,814 and $669,889. All remaining cash from the IPO is held in the Trust Account and is generally unavailable for use prior to an initial Business Combination.

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As of March 31, 2023 and December 31, 2022 we had working capital of $290,443,091 and of $289,493,039 (not taking into account any tax obligations), respectively. As of March 31, 2023, the working capital calculation includes the investments held in the Trust Account as part of current assets and the Class L ordinary shares derivative liability as part of the current liabilities. The Company classified the investments held in the Trust Accounts as a current asset as the Company has less than 12 months from the balance sheet date to consummate an initial Business Combination, at which point, if the Company did not find a target, the Company would cease to exist, and the funds would be liquidated from the Trust Account. The Company classified the Class L ordinary shares derivative liability as current liability as the Company has less than 12 months from the balance sheet date to consummate an initial Business Combination, at which point, if the Company did not find a target, the Company would cease to exist, and the Class L ordinary shares derivative liability would not be converted.

We intend to use substantially all of the funds held in the Trust Account, including any amounts representing investment income on the Trust Account and the proceeds from the sale of the Forward Purchase Shares, to complete our initial Business Combination. Our annual income tax obligations will depend on the amount of interest and other income earned on the amounts held in the Trust Account. We expect the investment income on the amount in the Trust Account will be sufficient to pay our income taxes. To the extent that our equity or debt is used, in whole or in part, as consideration to complete our initial Business Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.

In order to finance working capital deficiencies or transaction costs in connection with an intended initial Business Combination, the Sponsor or an affiliate of the Sponsor or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (the “Working Capital Loans”). If the Company completes an initial Business Combination, the Company will repay such loaned amounts out of the proceeds of the Trust Account released to it in accordance with the Company’s amended and restated memorandum and articles of association. Otherwise, such loans would be repaid only out of funds held outside the Trust Account. In the event that the initial Business Combination does not close, the Company may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from the Trust Account would be used to repay such loaned amounts. Up to $2,000,000 of such loans may be convertible into shares at the option of the lender, at a price of $10.00 per share. Such shares would be identical to the Private Placement Shares. Additionally, on November 14, 2022, the Sponsor provided a commitment letter for funding of up to $800,000 to the Company (the “2022 Commitment Letter”), which was subsequently terminated on February 9, 2023 whereby the Sponsor provided a new commitment letter (the “February Commitment Letter”) for funding of up to the same dollar amount to the Company. On May 5, 2023, the February Commitment Letter was terminated and the Sponsor provided a new commitment letter for funding of up to $800,000 to the Company (the “Commitment Letter”) to be drawn, as needed, over the course of 13 months from the date of the Commitment Letter to fund working capital deficiencies or finance transaction costs in connection with an initial Business Combination.

We do not believe we will need to raise additional funds or draw on the Commitment Letter in order to meet the expenditures required for operating our business prior to our initial Business Combination. However, if our estimates of the costs of identifying a target business, undertaking in-depth due diligence and negotiating an initial Business Combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our initial Business Combination.

Moreover, we may need to obtain additional financing to complete our initial Business Combination, either because the transaction requires more cash than is available from the proceeds held in our Trust Account and from the sale of the Forward Purchase Shares or because we become obligated to redeem a significant number of our public shares upon completion of the Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of our initial Business Combination. If we are unable to complete our initial Business Combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the Trust Account. In addition, following our initial Business Combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.

The following table presents our cash flows from operating activities for the following periods:

As of March 31, 2023, the net income of $950,052 was affected by a non-cash loss on the change in fair value of the Class L ordinary shares derivative liability of $1,710,592 and a net increase in operating assets and liabilities of $171,864. Net cash used in investing activities for the three-month period ended March 31, 2023, was $3,094,583, from the reinvestment of the investment income into Trust Account.

As of March 31, 2022, the net income of $35,901,386 was affected by a non-cash gain on the change in fair value of the Class L ordinary shares derivative liability of $36,294,697 and a net increase in operating assets and liabilities of $192,314. Net cash used in investing activities for three-month period ended March 31, 2022, was $28,951, from the reinvestment of the investment income into Trust Account.

Commitments and Contractual Obligations

We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than as described below.

Registration Rights

The holders of the Class L ordinary shares and Private Placement Shares that may be issued upon conversion of Working Capital Loans have registration rights that require us to register a sale of any of our securities held by them (in the case of the Class L ordinary shares, only after conversion to our Class A ordinary shares) pursuant to a registration rights agreement at the closing of the IPO (the “Registration Rights Agreement”). These holders are entitled to make up to three demands, excluding short form registration demands, that we register such securities for sale under the Securities Act. In addition, these holders will have certain “piggy-back” registration rights to include such securities in other registration statements filed by us and rights to require us to register for resale such securities pursuant to Rule 415 under the Securities Act.

Pursuant to the Forward Purchase Agreement, we agreed that we will use our commercially reasonable efforts to file within 30 calendar days after the closing of our initial Business Combination a registration statement with the SEC for a secondary offering of the Forward Purchase Shares (as defined below) owned by our Sponsor or the forward transferees, respectively, and use our commercially reasonable efforts to cause such registration statement to be declared effective as soon as practicable after such completion.

However, the Registration Rights Agreement provides that we will not permit any registration statement filed under the Securities Act to become effective until termination of the applicable lock-up period, which occurs (i) in the case of the Class L ordinary shares, any Class A ordinary shares issuable upon conversion thereof and the Forward Purchase Shares, until the earlier of (A) eighteen months after the completion of our initial Business Combination, or (B) subsequent to our initial Business Combination, if the last sale price of the Class A ordinary shares equals or exceeds $13.00 per share (as adjusted for share sub-divisions, share dividends, right issuances, subdivisions, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after our initial Business Combination, or (C) following the completion of our initial Business Combination, such future date on which we complete a liquidation, merger, share exchange, reorganization or other similar transaction that results in all of our public shareholders having the right to exchange their Class A ordinary shares for cash, securities or other property, and (ii) in the case of the private placement shares, 30 days after the completion of our initial Business Combination. We will bear the costs and expenses of filing any such registration statements.

Administrative Services Agreement

On October 1, 2021, the Company entered into an agreement that provides that, subsequent to the closing of the IPO and continuing until the earlier of the Company’s consummation of an initial Business Combination or the Company’s liquidation, the Company pays the Sponsor a total of $10,000 per month for office space, secretarial, due diligence and administrative services.

Forward Purchase Agreements

In connection with the IPO, we entered into the Forward Purchase Agreement with the Sponsor, pursuant to which the Sponsor committed to purchase from the Company 5,000,000 forward purchase shares (the “Forward Purchase Shares”), at a price of $10.00 per Forward Purchase Share, for an aggregate purchase price of $50,000,000 in a private placement to close substantially concurrently with the closing of an initial Business Combination. The obligations under the Forward Purchase Agreement will not depend on whether any Class A ordinary shares are redeemed by public shareholders. The Class A ordinary shares issuable pursuant to the Forward Purchase Agreement will be identical to the Class A ordinary shares sold in the IPO, except that the Sponsor will have certain registration rights, as described herein, and the Class A ordinary shares will not be eligible for redemption in connection with an initial Business Combination.

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Underwriting Agreement

Upon the closing of the IPO we paid $5,750,000 (accounting for the exercise of the underwriters’ over-allotment option in full) to the underwriters for underwriting discounts and commissions. Additionally, the underwriters were entitled to a deferred fee of $10,062,500 (accounting for the exercise of the underwriters’ over-allotment option in full), which would be payable to the underwriters from the amounts held in the Trust Account solely in the event that we complete an initial Business Combination, subject to the terms of the underwriting agreement.

As of December 31, 2022, all four underwriters of the IPO waived their entitlement to this deferred underwriting discounts and commissions.

Off-Balance Sheet Financing Arrangements

As of March 31, 2023 and December 31, 2022, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.

Critical Accounting Estimates

The preparation of unaudited 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 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 estimates:

Class L ordinary shares derivative liability

The Class L ordinary shares are accounted for as a liability in accordance with Accounting Standards Codification (“ASC”) 815, “Derivatives and Hedging” and presented as a derivative liability on the balance sheets. The derivative liability was measured at fair value as of September 10, 2021 and will be evaluated on a recurring basis, with changes in fair value presented within fair value of derivative liability in the statements of operations. In order to capture the market conditions associated with the Class L ordinary shares liability, the Company applied an approach that incorporated a Monte Carlo simulation, which involved random iterations of future stock-price paths over the contractual life of the Class L ordinary shares. Based on assumptions regarding potential changes in control of the Company, and the probability distribution of outcomes, the payoff to the holder was determined based on the achievement of the various market thresholds within each simulated path. The present value of the payoff in each simulated trial is calculated, and the fair value of the liability is determined by taking the average of all present values.

The inputs used as of March 31, 2023, were as follow: risk-free rate of 3.59%; expected term of 5.25 years; expected volatility of 5.48% and adjusted stock price of $9.92.

The inputs used as of December 31, 2022 were as follow: risk-free rate of 3.98%; expected term of 5.50 years; expected volatility of 5.27% and adjusted stock price of $9.80.

Recent Accounting Standards

The Company has considered all other new accounting standards and has concluded that there are no new standards that may have a material impact on the results of operations, financial condition, or cash flows, based on the current information.

JOBS Act

The Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an “emerging growth company” and under the JOBS Act are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, the financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis) and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our IPO or until we are no longer an “emerging growth company,” whichever is earlier.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide the information required by this Item.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Co-Chief Executive Officers, to allow timely decisions regarding required disclosure.

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our Co-Chief Executive Officers, our management evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this Quarterly Report on Form 10-Q (the “Evaluation Date”). Based upon that evaluation, our Co-Chief Executive Officers concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective.

Remediation of Previously Disclosed Material Weaknesses

As previously reported in our Current Report on Form 8-K filed with the SEC on November 21, 2022, our management identified a material weakness in our internal control over financial reporting due to the improper determination of our Earnings Per Share as of September 30, 2021 and December 31, 2021, which is computed by dividing net income (loss) by the weighted-average number of ordinary shares outstanding during the relevant period.

Since the fourth quarter of 2022, our management implemented our previously disclosed remediation plan which included expanding and improving our review process for complex securities and related accounting standards, enhancing access to accounting literature and identifying third-party professionals with whom to consult regarding complex accounting applications.

Our management completed the testing necessary to conclude that the material weakness was remediated as of March 31, 2023.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the three-month period ended March 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

None.

ITEM 1A. RISK FACTORS.

Except as set forth below, there have been no material changes to the risk factors described in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 6, 2023, as amended by Amendment No. 1 on Form 10-K/A for the year ended December 31, 2022 on May 8, 2023.

Adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults or non-performance by financial institutions or transactional counterparties, could adversely affect our current and projected business operations and financial condition and results of operations.

Events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems. Most recently, on March 10, 2023, Silicon Valley Bank (“SVB”) was closed by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation (“FDIC”) as receiver. Similarly, on March 12, 2023, Signature Bank and Silvergate Capital Corp. were each swept into receivership. Although a statement by the Department of the Treasury, the Federal Reserve and the FDIC indicated that all depositors of SVB would have access to all of their money after only one business day of closure, including funds held in uninsured deposit accounts, borrowers under credit agreements, letters of credit and certain other financial instruments with SVB, Signature Bank or any other financial institution that is placed into receivership by the FDIC may be unable to access undrawn amounts thereunder.

We had immaterial exposure to one of the banks swept into receivership and the related funds were moved into an account at a different financial institution on March 9, 2023. We also continue to regularly assess our banking relationships and the location of the assets held in the Trust Account as we believe necessary or appropriate. However, our access to funding sources and other credit arrangements could be significantly impaired by factors that affect the financial services industry or economy in general. These factors could include, among others, events such as liquidity constraints or failures, the ability to perform obligations under various types of financial, credit or liquidity agreements or arrangements, disruptions or instability in the financial services industry.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

On October 1, 2021, we consummated our IPO of 28,750,000 shares, which includes the exercise in full of the underwriters’ option to purchase an additional 3,750,000 shares at $10.00 per share. Simultaneously with the consummation of the IPO, the Company consummated the sale of 975,000 Private Placement Shares, at a price of $10.00 per share, generating aggregate gross proceeds to the Company of $9,750,000.

The securities sold in our IPO were registered under the Securities Act on a registration statement on Form S-1 (No. 333-259473). The SEC declared the registration statement effective on September 28, 2021.

The Private Placement Shares were issued pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act. The Private Placement Shares are identical to the Class A ordinary shares sold in the Initial Public Offering, except that (x) the Private Placement Shares will not be transferable, assignable or salable until 30 days after the completion of our initial Business Combination, subject to certain limited exceptions, (y) as long as the Private Placement Shares are held by our Sponsor or its permitted transferees, the Private Placement Shares will not be redeemable by us and (z) the Private Placement Shares are entitled to registration rights.

Of the gross proceeds received from the IPO and the sale of Private Placement Shares, $287,500,000 was placed in the Trust Account.

Transaction costs of the IPO amounted to $16,709,861 consisting of $5,750,000 of underwriting discounts and commissions, $10,062,500 of deferred underwriting discounts and commissions, and $897,361 of other offering costs. As of December 31, 2022, all four underwriters of the IPO waived their entitlement to this deferred underwriting discounts and commissions.

For a description of the use of the proceeds generated in our IPO, see Part I, Item 2 of this Quarterly Report on Form 10-Q.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

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.

 
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SIGNATURES

Pursuant to the requirements of Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.