| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Cayman Islands | N/A | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
1400 Centrepark Blvd, Ste 810 West Palm Beach, FL | 33401 | |
(Address of principal executive offices) | (Zip Code) | |
1400 Centrepark Blvd, Ste 810
West Palm Beach, FL 33401
(Address of Principal Executive Offices, including zip code)
(561) 712-7860
(
N/A
(Former name, former address and former fiscal year, if changed since last report)
code:
Title of each class | Trading
Symbols | Name of each exchange
| ||
Units, each consisting of one Class A one-fifth of one redeemable warrant | CLAA.U | The New York Stock Exchange | ||
Class A | CLAA | The New York Stock Exchange | ||
Redeemable warrants, each warrant exercisable for one Class A | CLAA WS | The New York Stock Exchange |
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
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| |||||
Non-accelerated filer | ☒ | Smaller reporting company | ☒ | |||
| Emerging growth company | ☒ | |||||
COLONNADE ACQUISITION CORP. II
FORM 10-Q FOR
THE QUARTER ENDED MARCH 31, 2021SEPTEMBER 30, 2022
| Page | ||||||||||
| PART 1 – FINANCIAL INFORMATION | 1 | |||||||||
| Item 1. | 1 | |||||||||
| 1 | ||||||||||
| 2 | ||||||||||
Condensed Consolidated Statements of Changes in Shareholders’ Deficit (unaudited) | 3 | |||||||||
Condensed Consolidated Statements of | 4 | |||||||||
| 5 | ||||||||||
| Item 2. | ||||||||||
Management’s Discussion and Analysis of Financial Condition and Results of Operations | ||||||||||
| Item 3. | ||||||||||
| 28 | ||||||||||
| Item | 28 | |||||||||
| 29 | ||||||||||
| Item | 29 | |||||||||
| Item | 29 | |||||||||
| Item |
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| 30 | ||||||||||
| Item 3. | 30 | |||||||||
| Item 4. | 30 | |||||||||
| Item 5. | 30 | |||||||||
| Item 6. | 31 | |||||||||
| SIGNATURES | 32 | |||||||||
i
Class A ordinary shares, $0.0001 par value; 500,000,000 shares authorized; 3,050,164 shares and 0 shares (excluding 29,949,836 and 0 shares subject to possible redemption) issued and outstanding at March 31, 2021 and December 31, 2020, respectively Class B ordinary shares, $0.0001 par value;50,000,000 shares authorized; 8,250,000 and 8,625,000 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively Total liabilities and shareholders’ equity March 31,
2021
(Unaudited) December 31,
2020 Assets Current assets: Cash $ 724,970 $ 25,000 Prepaid expenses 1,336,212 — Deferred offering costs associated with IPO — 61,814 Total current assets $ 2,061,182 $ 86,814 Cash Held in Trust account 330,005,350 — Total assets 332,066,532 86,814 Liabilities and Shareholders’ Equity Current liabilities: Accounts payable and accrued expenses $ 40,000 $ 35,000 Promissory Note – related party — 30,000 Total current liabilities 40,000 65,000 Warrant Liabilities 16,870,666 — Deferred underwriters’ discount 10,657,500 — Total liabilities 27,568,166 65,000 Commitments Class A ordinary shares subject to possible redemption 29,949,836 shares at redemption value 299,498,363 — Shareholders’ equity: Preference shares, $0.0001 par value; 5,000,000 shares authorized; none issued and outstanding — — 305 — 825 863 Additional paid-in capital 4,967,158 24,137 Accumulated earnings (deficit) 31,715 (3,186 ) Total shareholders’ equity 5,000,003 21,814 $ 332,066,532 $ 86,814 $ 287,611 $ 299,837 317,162 680,813 604,773 980,650 — 125,763 332,011,036 330,082,791 $ 7,092,485 $ 3,313,965 1,225,000 — 8,317,485 3,313,965 1,480,000 9,024,880 — 10,657,500 332,011,036 330,000,000 — — — — 825 825 10,363,353 — (19,556,890 ) (21,807,966 ) )
FOR THE THREE MONTHS ENDED MARCH 31, 2021
(Unaudited)
Formation and operating costs | $ | 46,063 | ||
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| |||
Loss from operations | (46,063 | ) | ||
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| |||
Other Income (Loss) | ||||
Interest income | 5,350 | |||
Change in fair value of warrant liabilities | 550,667 | |||
Offering expenses related to warrant issuance | (475,053 | ) | ||
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| |||
Total other income (loss) | 80,964 | |||
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| |||
Net income | $ | 34,901 | ||
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| |||
Weighted average shares outstanding, Class A ordinary shares subject to possible redemption | 29,900,400 | |||
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| |||
Basic and diluted net income per share, Class A ordinary shares subject to possible redemption | $ | 0.00 | ||
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| |||
Weighted average shares outstanding, Non-redeemable ordinary shares | 9,230,467 | |||
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| |||
Basic and diluted net loss per share, Non-redeemable ordinary shares | $ | 0.00 | ||
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|
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Formation and operating costs | $ | 2,273,045 | $ | 303,083 | $ | 5,505,160 | $ | 742,033 | ||||||||
Loss from operations | (2,273,045 | ) | (303,083 | ) | (5,505,160 | ) | (742,033 | ) | ||||||||
Other income (expense) | ||||||||||||||||
Interest income earned in Trust Account | 1,394,141 | 24,766 | 1,928,245 | 54,458 | ||||||||||||
Change in fair values of Warrant liabilities | 123,333 | 3,378,666 | 7,544,880 | 7,431,333 | ||||||||||||
| Recovery of offering costs allocated to Warrants | 294,147 | — | 294,147 | — | ||||||||||||
Offering costs allocated to Warrants | — | — | — | (475,053 | ) | |||||||||||
Total other income, net | 1,811,621 | 3,403,432 | 9,767,272 | 7,010,738 | ||||||||||||
Net income (loss) | $ | (461,424 | ) | $ | 3,100,349 | $ | 4,262,112 | $ | 6,268,705 | |||||||
Weighted average shares outstanding, Class A Ordinary Shares subject to possible redemption | 33,000,000 | 33,000,000 | 33,000,000 | 24,538,462 | ||||||||||||
Basic and diluted net income (loss) per share, Class A Ordinary Shares subject to possible redemption | $ | (0.01 | ) | $ | 0.08 | $ | 0.10 | $ | 0.19 | |||||||
Weighted average shares outstanding, Class B Ordinary Shares | 8,250,000 | 8,250,000 | 8,250,000 | 8,057,692 | ||||||||||||
Basic and diluted net income (loss) per share, Class B Ordinary Shares | $ | (0.01 | ) | $ | 0.08 | $ | 0.10 | $ | 0.19 | |||||||
DEFICIT
Ordinary Shares | ||||||||||||||||||||||||||||
Class A | Class B | Additional Paid-In | Accumulated | Total Shareholders’ | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
Balance as of January 1, 2022 | — | $ | — | 8,250,000 | $ | 825 | $ | — | $ | (21,807,966 | ) | $ | (21,807,141 | ) | ||||||||||||||
Net income | — | — | — | — | — | 1,727,436 | 1,727,436 | |||||||||||||||||||||
Balance as of March 31, 2022 | — | — | 8,250,000 | 825 | — | (20,080,530 | ) | (20,079,705 | ) | |||||||||||||||||||
Remeasurement of Class A Ordinary Shares to redemption value | — | — | — | — | — | (616,894 | ) | (616,894 | ) | |||||||||||||||||||
Net income | — | — | — | — | — | 2,996,100 | 2,996,100 | |||||||||||||||||||||
Balance as of June 30, 2022 | — | — | 8,250,000 | 825 | — | (17,701,324 | ) | (17,700,499 | ) | |||||||||||||||||||
| Waiver of Deferred Underwriters’ Discount | — | — | — | — | 10,363,353 | — | 10,363,353 | |||||||||||||||||||||
Remeasurement of Class A Ordinary Shares to redemption value | — | — | — | — | — | (1,394,142 | ) | (1,394,142 | ) | |||||||||||||||||||
Net los s | — | — | — | — | — | (461,424 | ) | (461,424 | ) | |||||||||||||||||||
Balance as of September 30, 2022 | — | $ | — | 8,250,000 | $ | 825 | $ | 10,363,353 | $ | (19,556,890 | ) | $ | (9,192,712 | ) | ||||||||||||||
(Unaudited)
| Ordinary Shares | ||||||||||||||||||||||||||||
| Class A | Class B | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Additional Paid-In Capital | Accumulated Earnings (Deficit) | Total Shareholders’ Equity | ||||||||||||||||||||||
Balance as of December 31, 2020 | — | $ | — | 8,625,000 | $ | 863 | $ | 24,137 | $ | (3,186 | ) | $ | 21,814 | |||||||||||||||
Sale of Units in Initial Public Offering, net of underwriter fee | 33,000,000 | 3,300 | — | — | 329,996,700 | — | 330,000,000 | |||||||||||||||||||||
Sale of private placement | — | — | — | — | 8,600,000 | — | 8,600,000 | |||||||||||||||||||||
Initial fair value of warrants accounted for as liabilities | — | — | — | — | (17,421,333 | ) | — | (17,421,333 | ) | |||||||||||||||||||
Underwriter discount | — | — | — | — | (6,090,000 | ) | (6,090,000 | ) | ||||||||||||||||||||
Deferred underwriter discount | — | — | — | — | (10,657,500 | ) | — | (10,657,500 | ) | |||||||||||||||||||
Other offering cost charged to shareholders’ equity | — | — | — | — | (464,569 | ) | — | (464,569 | ) | |||||||||||||||||||
Sponsor forfeiture of shares | — | — | (375,000 | ) | (38 | ) | 38 | — | — | |||||||||||||||||||
Reclassification of offering cost related to warrant issuance | — | — | — | — | 475,053 | — | 475,053 | |||||||||||||||||||||
Class A ordinary shares subject to possible redemption | (29,949,836 | ) | (2,995 | ) | — | — | (299,495,368 | ) | — | (299,498,363 | ) | |||||||||||||||||
Net income | — | — | — | — | — | 34,901 | 34,901 | |||||||||||||||||||||
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Balance as of March 31, 2021 | 3,050,164 | $ | 305 | 8,250,000 | $ | 825 | $ | 4,967,158 | $ | 31,715 | $ | 5,000,003 | ||||||||||||||||
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Ordinary Shares | Total | |||||||||||||||||||||||||||
Class A | Class B | Additional Paid-In | Accumulated | Shareholders’ Equity | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||||||||
Balance as of January 1, 2021 | — | $ | — | 8,625,000 | $ | 863 | $ | 24,137 | $ | (3,186 | ) | $ | 21,814 | |||||||||||||||
Sponsor forfeiture of shares | — | — | (375,000 | ) | (38 | ) | 38 | — | — | |||||||||||||||||||
Remeasurement of Class A Ordinary Shares to redemption value | — | — | — | — | (24,175 | ) | (25,534,174 | ) | (25,558,349 | ) | ||||||||||||||||||
Net income | — | — | — | — | — | 34,901 | 34,901 | |||||||||||||||||||||
Balance as of March 31, 2021 | — | — | 8,250,000 | 825 | — | (25,502,459 | ) | (25,501,634 | ) | |||||||||||||||||||
Net income | — | — | — | — | — | 3,133,455 | 3,133,455 | |||||||||||||||||||||
Balance as of June 30, 2021 | — | — | 8,250,000 | 825 | — | (22,369,004 | ) | (22,368,179 | ) | |||||||||||||||||||
Net income | — | — | — | — | — | 3,100,349 | 3,100,349 | |||||||||||||||||||||
Balance as of September 30, 2021 | — | $ | — | 8,250,000 | $ | 825 | $ | — | $ | (19,268,655 | ) | $ | (19,267,830 | ) | ||||||||||||||
FOR THE THREE MONTHS ENDED MARCH 31, 2021
(Unaudited)
Cash Flows from Operating Activities: | ||||
Net income | $ | 34,901 | ||
Adjustments to reconcile net income to net cash used in operating activities: | ||||
Interest earned on trust account | (5,350 | ) | ||
Change in fair value of warrant liabilities | (550,667 | ) | ||
Offering costs allocated to warrants | 475,053 | |||
Changes in current assets and current liabilities: | ||||
Prepaid assets | (1,336,212 | ) | ||
Accounts payable | 40,000 | |||
|
| |||
Net cash used in operating activities | (1,342,275 | ) | ||
|
| |||
Cash Flows from Investing Activities: | ||||
Investment of cash into trust account | (330,000,000 | ) | ||
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| |||
Net cash used in investing activities | (330,000,000 | ) | ||
|
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Cash Flows from Financing Activities: | ||||
Proceeds from Initial Public Offering, net of underwriters’ discount | 323,910,000 | |||
Proceeds from issuance of Private Placement Warrants | 8,600,000 | |||
Proceeds from issuance of promissory note to related party | 115,824 | |||
Repayment of promissory note to related party | (145,824 | ) | ||
Payments of offering costs | (437,755 | ) | ||
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| |||
Net cash provided by financing activities | 332,042,245 | |||
Net Change in Cash | 699,970 | |||
Cash - Beginning | 25,000 | |||
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| |||
Cash - Ending | $ | 724,970 | ||
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| |||
Supplemental Disclosure of Non-cash Financing Activities: | ||||
Initial value of Class A ordinary shares subject to possible redemption | $ | 298,977,981 | ||
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| |||
Initial value of warrant liabilities | $ | 17,421,333 | ||
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| |||
Change in value of Class A ordinary shares subject to possible redemption | $ | 520,382 | ||
|
| |||
Deferred underwriters’ discount payable charged to additional paid-in capital | $ | 10,657,500 | ||
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For the Nine Months Ended September 30, 2022 | For the Nine Months Ended September 30, 2021 | |||||||
Cash Flows from Operating Activities: | ||||||||
Net income | $ | 4,262,112 | $ | 6,268,705 | ||||
Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
Interest income earned in trust account | (1,928,245 | ) | (54,458 | ) | ||||
Change in fair value of Warrant liabilities | (7,544,880 | ) | (7,431,333 | ) | ||||
Recovery of offering costs allocated to Warrants | (294,147 | ) | — | |||||
Offering costs allocated to Warrants | — | 475,053 | ||||||
Changes in current assets and current liabilities: | ||||||||
Prepaid expenses | 489,414 | (982,931 | ) | |||||
| Accounts payable and accrued expenses | 3,778,520 | 73,520 | ||||||
Net cash used in operating activities | (1,237,226 | ) | (1,651,444 | ) | ||||
Cash Flows from Investing Activities: | ||||||||
Investment of cash into trust account | — | (330,000,000 | ) | |||||
Net cash used in investing activities | — | (330,000,000 | ) | |||||
Cash Flows from Financing Activities: | ||||||||
Proceeds from Initial Public Offering, net of underwriters’ discount | — | 323,910,000 | ||||||
Proceeds from issuance of Private Placement Warrants | — | 8,600,000 | ||||||
Proceeds from issuance of promissory notes to related party | 1,475,000 | 115,824 | ||||||
Repayment of promissory note to related party | (250,000 | ) | (145,824 | ) | ||||
Payments of offering costs | — | (437,755 | ) | |||||
Net cash provided by financing activities | 1,225,000 | 332,042,245 | ||||||
Net Change in Cash | (12,226 | ) | 390,801 | |||||
Cash – Beginning | 299,837 | 25,000 | ||||||
Cash – Ending | $ | 287,611 | $ | 415,801 | ||||
Supplemental Disclosure of Non-cash Financing Activities: | ||||||||
Change in value of Class A Ordinary Shares subject to possible redemption | $ | 2,011,036 | $ | 25,845,016 | ||||
| Initial fair value of Warrant liabilities | $ | — | $ | 17,421,333 | ||||
| Impact of the waiver of deferred underwriters’ discount | 10,657,500 | |||||||
Deferred underwriting commissions payable charged to additional paid in capital | $ | — | $ | 10,657,500 | ||||
IPO, and will recognize other income or expense related to the change in fair value of Warrant liabilities.
Ordinary Shares (as discussed in Note 3).
Liquidity
TheWarrants, as well as funding received under the terms of working capital promissory notes.
business combination. The Company does not believe it will need to raise additional funds in order to meet the expenditures required for operating its business. However, if the Company’s estimates of the costs of undertaking in-depth due diligence and negotiating business combination is less than the actual amount necessary to do so, the Company may have insufficient funds available to operate its business prior to the business combination. Moreover, the Company will need to raise additional capital through loans or additional investments from its Sponsor, shareholders, officers, directors, or third parties. None of theThe Sponsor, officers and directors may, but are not obligated to, loan the Company funds from time to time or directors are underat any obligationtime, in whatever amount they deem reasonable in their sole discretion, to advance fundsmeet the Company’s working capital needs. Accordingly, the Company may not be able to or to invest in, the Company.obtain additional financing. If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of its business plan,a potential transaction, and reducing overhead expenses.
On January 30, 2020,
Note 2 – Correction of An Error In Previously Furnished Financial Statements
On April 12, 2021,Sponsor will not transfer any shares from now until the StaffClosing. Any securities of the Securities and Exchange Commission together issued a statement regardingCompany that the accounting and reporting considerations for warrants issued by special purpose acquisition companies entitled “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”)” (the “SEC Statement”). Specifically, the SEC Statement focused on certain settlement terms and provisions related to certain tender offers following a business combination, which terms are similar to those contained in the warrant agreement, dated as of March 9, 2021, between the Company and Continental Stock Transfer & Trust Company, a New York corporation, as warrant agent (the “Warrant Agreement”). As a result of the SEC Statement, the Company reevaluated the accounting treatment of (i) the 6,600,000 Public Warrants (as defined in Note 4) and (ii) the 5,733,333 Private Placement Warrants. The Company previously accounted for all warrants as components of equity.
In further consideration of the guidance in Accounting Standards Codification 815-40, Derivatives and Hedging; Contracts in Entity’s Own Equity (“ASC 815”), the Company concluded that a provision in the Warrant Agreement related to certain tenderSponsor newly acquires or exchange offers precludes the warrants from being accounted for as components of equity. As the warrants meet the definition of a derivative as contemplated in ASC 815, the warrants should be recorded as derivative liabilities on the balance sheet and measured at fair value at inception (onpurchases after the date of the IPO)Sponsor Support Agreement will also be subject to the terms of the Sponsor Support Agreement. If at least 120 days have elapsed since the Closing and at each reporting date in accordance with ASC 820, Fair Value Measurement, with changes in fair value recognizedthe
After discussion180 days after the Closing, except to certain permitted transferees.
The following summarizes the effect of the revision on each balance sheet line item asfive year anniversary of the date of the Registration Rights Agreement or (b) with respect to any Holder, on the date that such Holder no longer holds any Registrable Securities (as defined therein).
As of March 12, 2021 | As Reported | Adjustment | As Adjusted | |||||||||
Balance Sheet | ||||||||||||
Warrant Liabilities | $ | — | $ | 17,421,333 | $ | 17,421,333 | ||||||
Total Liabilities | 12,507,030 | 17,421,333 | 29,928,363 | |||||||||
Shares Subject to Redemption | 316,399,130 | (17,421,150 | ) | 298,977,980 | ||||||||
Class A Ordinary Shares | 136 | 174 | 310 | |||||||||
Class B Ordinary Shares | 825 | — | 825 | |||||||||
Additional Paid in Capital | 5,012,650 | 474,885 | 5,487,535 | |||||||||
(Accumulated Deficit) | (13,609 | ) | (475,052 | ) | (633,242 | ) | ||||||
Total Shareholders’ Equity | $ | 5,000,002 | $ | 7 | $ | 5,000,009 | ||||||
| As Previously Reported | Adjustment | As Adjusted | ||||||||||
Condensed Unaudited Statements of Operations and Notes to Condensed Unaudited Financial Statements | ||||||||||||
Net income allocable to Class A Ordinary Shares subject to possible redemption | $ | 5,038,453 | $ | (319,357 | ) | $ | 4,719,096 | |||||
Net income allocable to non-redeemable Class B Ordinary Shares | $ | 1,230,252 | $ | 319,357 | $ | 1,549,609 | ||||||
| Weighted average number of Class A ordinary shares subject to possible redemption | 33,000,000 | (8,461,538 | ) | 24,538,562 | ||||||||
| Weighted average number of Class B Shares | 8,057,695 | (3 | ) | 8,057,692 | ||||||||
| Basic and diluted net income per share attributable to Class A Shares | $ | 0.15 | $ | 0.04 | $ | 0.19 | ||||||
| Basic and diluted net income per share attributable to Class B Shares | $ | 0.15 | $ | 0.04 | $ | 0.19 | ||||||
As of September 30, 2022 and December 31, 2021, the Company had $287,611 and $299,837 in cash, respectively. The Company had no cash equivalents as of September 30, 2022 and December 31, 2021.
At March
Carrying Value as of September 30, 2022 | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value as of September 30, 2022 | |||||||||||||
U.S. Treasury Securities | $ | 332,011,036 | $ | — | $ | (2,492 | ) | $ | 332,008,544 | |||||||
Carrying Value as of December 31, 2021 | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value as of December 31, 2021 | |||||||||||||
U.S. Treasury Securities | $ | 330,082,791 | $ | 2,750 | $ | — | $ | 330,085,541 | ||||||||
sheets. The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable ordinary shares to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable ordinary shares are affected by charges against additional
Gross Proceeds | $ | 330,000,000 | ||
Less: | ||||
Proceeds allocated to Public Warrants | (9,108,000 | ) | ||
Issuance costs related to Class A Ordinary Shares | (16,737,016 | ) | ||
Plus: | ||||
Remeasurement of carrying value to redemption value | 25,845,016 | |||
Class A Ordinary Shares subject to redemption, December 31, 2021 | 330,000,000 | |||
Plus: | ||||
Remeasurement of carrying value to redemption value resulting from the interest income accrued in the Trust Account | 2,011,036 | |||
Class A Ordinary Shares subject to redemption, September 30, 2022 | $ | 332,011,036 | ||
inclusion of such Warrants would be anti-dilutive.
For the Three Months Ended September 30, 2022 | For the Three Months Ended September 30, 2021 | |||||||
Redeemable Class A Ordinary Shares | ||||||||
Numerator: | ||||||||
Net income (loss) allocable to Class A Ordinary Shares subject to possible redemption | $ | (369,139 | ) | $ | 2,480,279 | |||
Denominator: | ||||||||
Weighted average redeemable Class A Ordinary Shares, basic and diluted | 33,000,000 | 33,000,000 | ||||||
Basic and diluted net income (loss) per share, redeemable Class A Ordinary Shares | $ | (0.01 | ) | $ | 0.08 | |||
Non-redeemable Class B Ordinary Shares | ||||||||
Numerator: | ||||||||
Net income (loss) allocable to non-redeemable Class B Ordinary Shares | $ | (92,285 | ) | $ | 620,070 | |||
Denominator: | ||||||||
Weighted average non-redeemable Class B Ordinary Shares | 8,250,000 | 8,250,000 | ||||||
Basic and diluted net income (loss) per share, non-redeemable Class B Ordinary Shares | $ | (0.01 | ) | $ | 0.08 | |||
For the Nine Months Ended September 30, 2022 | For the Nine Months Ended September 30, 2021 | |||||||
Redeemable Class A Ordinary Shares | ||||||||
Numerator: | ||||||||
Net income allocable to Class A Ordinary Shares subject to possible redemption | $ | 3,409,690 | $ | 4,719,096 | ||||
Denominator: | ||||||||
Weighted average Redeemable Class A Ordinary Shares, Basic and Diluted | 33,000,000 | 24,538,462 | ||||||
Basic and diluted net income per share, redeemable Class A Ordinary Shares | $ | 0.10 | $ | 0.19 | ||||
Non-redeemable Class B Ordinary Shares | ||||||||
Numerator: | ||||||||
Net income allocable to non-redeemable Class B Ordinary Shares | $ | 852,422 | $ | 1,549,609 | ||||
Denominator: | ||||||||
Weighted Average non-redeemable Class B Ordinary Shares | 8,250,000 | 8,057,692 | ||||||
Basic and diluted net income per share, non-redeemable Class B Ordinary Shares | $ | 0.10 | $ | 0.19 | ||||
Ordinary Shares.
sheets.
date in accordance with ASC 820, Fair Value Measurement, with changes in fair value recognized in the statements of operations in the period of change.
FASB
business combination.
The underwriters forfeited their remaining over-allotment option on the date of the IPO.
Notwithstanding the foregoing, if the closing price of Class A ordinary sharesOrdinary Shares equals or exceeds $12.00 per share (as adjusted for shareBusiness Combinationbusiness combination or (2) if the Company consummates a transaction after the initial Business Combinationbusiness combination which results in the Company’s shareholders having the right to exchange their shares for cash, securities or other property, the Founder Shares will be released from the
For the three and nine months ended September 30, 2022, the Company has incurred $90,000 and $270,000 in expense pursuant to this agreement, respectively. For the three and nine months ended September 30, 2021, the Company has incurred $90,000 and $201,290 in expense pursuant to this agreement, respectively. There are outstanding fees owed and accrued of $180,000 and $0 as of September 30, 2022 and
2022 Note.
This deferred amount is reflected in the condensed consolidated balance sheets as of September 30, 2022 and December 31, 2021.
Deficit
redemption, classified outside of shareholders’ deficit.
and outstanding.
Warrants.
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| March 31, 2021 | Quoted Prices In Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | |||||||||||||
Description | ||||||||||||||||
Warrant liabilities – Public Warrants | 8,844,000 | 8,844,000 | ||||||||||||||
Warrant liabilities – Private Warrants | 8,026,666 | — | — | 8,026,666 | ||||||||||||
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| $ | 16,870,666 | $ | — | $ | — | $ | 16,870,666 | |||||||||
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September 30, 2022 | Quoted Prices In Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | |||||||||||||
Assets: | ||||||||||||||||
| U.S. Treasury Securities | $ | 332,008,544 | $ | 332,008,544 | $ | — | $ | — | ||||||||
Liabilities: | ||||||||||||||||
Public Warrant Liability | $ | 792,000 | $ | 792,000 | $ | — | $ | — | ||||||||
Private Placement Warrant Liability | 688,000 | — | 688,000 | |||||||||||||
$ | 1,480,000 | $ | 792,000 | $ | — | $ | 688,000 | |||||||||
December 31, 2021 | Quoted Prices In Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | |||||||||||||
Assets: | ||||||||||||||||
U.S. Treasury Securitie s | $ | 330,085,541 | $ | 330,085,541 | $ | — | $ | — | ||||||||
Liabilities: | ||||||||||||||||
Public Warrant Liabilit y | $ | 4,750,680 | $ | 4,750,680 | $ | — | $ | — | ||||||||
Private Placement Warrant Liability | 4,274,200 | — | — | 4,274,200 | ||||||||||||
$ | 9,024,880 | $ | 4,750,680 | $ | — | $ | 4,274,200 | |||||||||
There were no transfers between Levels 1, 2 or 3 during the quarter ended March 31, 2021.
| At March 12, 2021 (Initial Measurement) Public Warrants | At March 12, 2021 (Initial Measurement) Private Placement Warrants | |||||||
Share price | $ | 9.70 | $ | 9.70 | ||||
Strike price | $ | 11.50 | $ | 11.50 | ||||
Term (in years) | 5.0 | 5.0 | ||||||
Volatility | 24.0 | % | 24.0 | % | ||||
Risk-free rate | 0.98 | % | 0.98 | % | ||||
Dividend yield | 0.0 | % | 0.0 | % | ||||
Redemption trigger price | $ | 18.00 | $ | 0.00 | ||||
| At March 31, 2021 Public Warrants | At March 31, 2021 Private Placement Warrants | |||||||
Share price | $ | 9.55 | $ | 9.55 | ||||
Strike price | $ | 11.50 | $ | 11.50 | ||||
Term (in years) | 5.0 | 5.0 | ||||||
Volatility | 24.0 | % | 24.0 | % | ||||
Risk-free rate | 1.11 | % | 1.11 | % | ||||
Dividend yield | 0.0 | % | 0.0 | % | ||||
Redemption trigger price | $ | 18.00 | $ | 0.00 | ||||
At September 30, 2022 Private Placement Warrants | At December 31, 2021 Private Placement Warrants | |||||||
Share price | $ | 9.92 | $ | 9.71 | ||||
Strike price | $ | 11.50 | $ | 11.50 | ||||
Term (in years) | 4.84 | 4.25 | ||||||
| Time to announcement of business combination (in years) | 0.00 | 0.13 | ||||||
Volatility | 1.0 | % | 14.0 | % | ||||
Risk-free rate | 4.07 | % | 1.4 | % | ||||
Dividend yield | 0.0 | % | 0.0 | % | ||||
Redemption trigger price | $ | N/A | $ | N/A | ||||
Fair value at December 31, 2021 – Private Placement Warrants | $ | 4,274,200 | ||
Change in fair value | (1,811,160 | ) | ||
Fair Value at March 31, 2022 – Private Placement Warrants | 2,463,040 | |||
Change in fair value | (1,717,707 | ) | ||
Fair Value at June 30, 2022 – Private Placement Warrants | 745,333 | |||
Change in fair value | (57,333 | ) | ||
Fair Value at September 30, 2022 – Private Placement Warrants | $ | 688,000 | ||
Fair value as of December 31, 2020 | $ | — | ||
Initial Measurement on March 12, 2021 | 17,421,333 | |||
Public Warrant reclassified to level 1 (1) | (8,844,000 | ) | ||
Change in fair value | (4,303,133 | ) | ||
Fair value as of December 31, 2021 | $ | 4,274,200 | ||
| (1) | Assumes the Public Warrants were reclassified on March 31, 2021. |
| Public | Private Placement | Warrant Liabilities | ||||||||||
Fair value as of November 24, 2020 | $ | — | $ | — | $ | — | ||||||
Initial measurement on March 12, 2021 | 9,108,000 | 8,313,333 | 17,421,333 | |||||||||
Change in valuation inputs or other assumptions | (264,000 | ) | (286,667 | ) | (550,667 | ) | ||||||
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Fair value as of March 31, 2021 | $ | 8,844,000 | $ | 8,026,666 | $ | 16,870,666 | ||||||
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Public | Private Placement | Warrant Liabilities | ||||||||||
Fair value as of December 31, 2021 | $ | 4,750,680 | $ | 4,274,200 | $ | 9,024,880 | ||||||
Change in valuation inputs or other assumptions | (2,044,680) | (1,811,160 | ) | (3,855,840 | ) | |||||||
Fair value as of March 31, 2022 | 2,706,000 | 2,463,040 | 5,169,040 | |||||||||
Change in valuation inputs or other assumptions | (1,848,000) | (1,717,707 | ) | (3,565,707 | ) | |||||||
Fair value as of June 30, 2022 | 858,000 | 745,333 | 1,603,333 | |||||||||
Change in valuation inputs or other assumptions | (66,000 | ) | (57,333 | ) | (123,333 | ) | ||||||
Fair value as of September 30, 2022 | $ | 792,000 | $ | 688,000 | $ | 1,480,000 | ||||||
Public | Private Placement | Warrant Liabilities | ||||||||||
Fair value as of November 24, 2020 | $ | — | $ | — | $ | — | ||||||
Initial measurement on March 12, 2021 | 9,108,000 | 8,313,333 | 17,421,333 | |||||||||
Change in valuation inputs or other assumptions | (264,001 | ) | (286,666 | ) | (550,667 | ) | ||||||
Fair value as of March 31, 2021 | 8,844,000 | 8,026,667 | 16,870,667 | |||||||||
Change in valuation inputs or other assumptions | (1,782,000 | ) | (1,720,000 | ) | (3,502,000 | ) | ||||||
Fair value as of June 30, 2021 | 7,062,000 | 6,306,667 | 13,368,667 | |||||||||
Change in valuation inputs or other assumptions | (1,716,000 | ) | (1,662,667 | ) | (3,378,667 | ) | ||||||
Fair value as of September 30, 2021 | $ | 5,346,000 | $ | 4,644,000 | $ | 9,990,000 | ||||||
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References in this report (the “Quarterly Report”) to “we,” “us”, “our” or the “Company” refer to Colonnade Acquisition Corp. II References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to Colonnade Sponsor II LLC. The following discussion and analysis of the Company’sour financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated 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.
SpecialCautionary Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Quarterly ReportForm 10-Q including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’scompletion of the proposed business combination, our financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements.statements, including that the conditions of the proposed business combination are not satisfied. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of this Quarterlyour Annual Report and the Risk Factors section of the Registration Statements on Form S-1 (Registration No. 333-253091)10-K filed with the SEC. The Company’sOur securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaimswe disclaim any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Overview
We are a blank check company incorporated in the Cayman Islands on November 24, 2020 formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar Business Combinationbusiness combination with one or more businesses. While we may pursue a business combination target in any business or industry, we intend to focus our search for a business combination on businesses with favorable growth prospects, that provide attractive risk-adjusted returns on invested capital and offer compelling valuations relative to its peers. We intend to effectuate our Business Combinationbusiness combination using cash derived from the proceeds of the IPO, our shares, debt or a combination of cash, shares and debt.
We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a Business Combinationbusiness combination will be successful.
Proposed Business Combination
As more fully described in Note 1 to the financial statements contained as part of this Quarterly Report on Form 10-Q, on August 3, 2022, we entered into the Merger Agreement with Merger Sub and Plastiq, pursuant to which (i) we will migrate to and domesticate as a Delaware corporation in accordance with Section 388 of the Delaware General Corporation Law, as amended, and the Cayman Islands Companies Act (As Revised), and (ii) Merger Sub will merge with and into Plastiq with Plastiq surviving the merger.
For additional information regarding the Merger Agreement, see our Form 8-K filed by us on August 4, 2022.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities from November 24, 2020 (inception) through March 31, 2021September 30, 2022 were organizational activities, those necessary to prepare for the IPO, described below, and after the Company’sIPO, our search for a target business with which to complete a Business Combination.business combination. We do not expect to generate any operating revenues until after the completion of our initial Business Combination. business combination, and will recognize other income or expense related to the change in fair value of Warrant liabilities.
We generate non-operating income in the form of interest income on marketable securities. We are incurring expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses in connection with completing a Business Combination.business combination, and after signing the Merger Agreement described below, completing the transactions contemplated in the Merger Agreement.
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For the three months ended September 30, 2022, we had a net loss of $461,424, which consists of the formation and operating costs of $2,273,045, partially offset by interest income earned on Trust Account of $1,394,141, changes in fair value of Warrant liabilities of $123,333 and recovery of offering costs originally allocated to Warrants of $294,147.
For the nine months ended September 30, 2022, we had a net income of $34,901. We incurred $46,063$4,262,112, which consists of interest income earned on Trust Account of $1,928,245, changes in fair value of Warrant liabilities of $7,544,880 and recovery of offering costs originally allocated to Warrants of $294,147, offset by the formation and operating costs consisting mostly of general and administrative expenses. Weexpenses of $5,505,160.
For the three months ended September 30, 2021, we had a net income of $3,100,349, which consists of unrealized gain from change in fair value of Warrant liabilities of $3,378,666 and investment income of $5,350$24,766 on our amounts held in the Trust Account.Account, partially offset by the formation and operating costs consisting mostly of general and administrative expenses of $303,083.
As a result of the revision described in Note 2 “Correction of An Error In Previously Furnished Financial Statements” to the financial statements included herein, we classify the warrants issued in connection with our IPO and private placement as liabilities at their fair value and adjust the warrant instruments to fair value at each reporting period. These liabilities are subject to remeasurement at each balance sheet date until exercised, and any change in fair value is recognized in our statement of operations. As part of the reclassification to warrant liability,
we reclassed a portion of the offering costs associated with the IPO originally charged to shareholders’ equity, to an expense in the statement of operations in the amount of $475,053 based on a relative fair value basis. For the threenine months ended March 31,September 30, 2021, thewe had a net income of $6,268,705, which consists of unrealized gain from change in fair value of warrants was a decreaseWarrant liabilities of $7,431,333 and investment income of $54,458 on our amounts held in the liabilityTrust Account, partially offset by the formation and operating costs consisting mostly of approximately $550,667.general and administrative expenses of $742,033 and offering costs allocated to Warrants of $475,053.
Liquidity, and Capital Resources and Going Concern
Until the consummation of the IPO, the Company’sour only source of liquidity was an initial purchase of ordinary shares by the Sponsor and loans from our Sponsor.
On March 12, 2021, we consummated the IPO of 33,000,000 Units, at a price of $10.00 per Unit, generating gross proceeds of $330,000,000. Simultaneously with the closing of the IPO, we consummated the sale of 5,733,333 Private Placement Warrants to the Sponsor at a price of $1.50 per warrant,Warrant, generating gross proceeds of $8,600,000.
Following the IPO, and the sale of the Private Placement Warrants, a total of $330,000,000 was placed in the Trust Account. We incurred $17,212,069 in transaction costs, including $6,090,000 of underwriting fees, $10,657,500 of deferred underwriting fees and $464,569 of other costs. Of the total transaction costs, $475,053 was expensed as non-operating expenses in the statements of operations with the rest of the offering cost charged to temporary equity. The transaction costs were allocated between the Public Warrant liabilities, Private Placement Warrant liabilities, and the Class A Ordinary Shares.
For the period from November 24, 2020 (inception) through March 31,nine months ended September 30, 2022, cash used in operating activities was $1,237,226, which consisted of our net income of $4,262,112, interest income earned on marketable securities held in the Trust Account of $1,928,245, changes in the fair value of Warrant liabilities of $7,544,880, recovery of offering costs allocated to Warrants of $294,147 and changes in current assets and current liabilities, which provided $4,267,934 of cash.
For the nine months ended September 30, 2021, cash used in operating activities was $1,342,275,$1,651,444, which consisted of our net lossincome of $34,901,$6,268,705, interest earned on marketable securities held in the Trust Account of $5,350,$54,458, changes in the fair value of warrant liabilities of $550,667,$7,431,333, offering costs allocated to warrants of $475,053 and changes in current assets and current liabilities, which used $1,296,212$909,411 of cash.
As of March 31, 2021,September 30, 2022, we had cash and marketable securities held in the Trust Account of $330,005,350.$332,011,036. We may withdraw interest to pay our taxes, if any. Through March 31, 2021,September 30, 2022, we have not withdrawn any amounts to pay for our tax obligations. We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (which interest shall be net of taxes payable) to complete our Business Combination.business combination. To the extent that our share capital is used, in whole or in part, as consideration to complete a Business Combination,business combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
As of March 31, 2021,September 30, 2022, we had cash outside the trust account of $724,970$287,611, available for working capital needs. All remaining cash held in the trust account are generally unavailable for the Company’s use, prior to an initial business combination, and is restricted for use either in a business combination or to redeem ordinary shares. As of MarchSeptember 30, 2022 and December 31, 2021, none of the amount of the interest earned in the trust accountTrust Account was available to be withdrawn as described above.
Through March 31, 2021, the Company’s liquidity needs were satisfied through receipt of $25,000 from the sale of the Founder Shares, and the remaining net proceeds from the IPO and the sale of Private Placement Warrants.
In order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination,business combination, our Sponsor or an affiliate of our Sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete a Business Combination,business combination, we would repay such loaned amounts. In the event that a Business Combinationbusiness combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts, but no proceeds from our Trust Account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into warrants,Warrants, at a price of $1.50 per warrant unitWarrant at the option of the lender. The warrantsWarrants would be identical to the Private Placement Warrants. On March 24, 2022, $250,000 was drawn under the terms of these Working Capital Loans, which amount was repaid on June 30, 2022. As of September 30, 2022, no amounts were outstanding under the Working Capital Loans.
23
On April 11, 2022, we entered into the 2022 Note with our Sponsor, a related party of us. Pursuant to the 2022 Note we may borrow from the Sponsor, from time to time, up to an aggregate of $1,500,000. Borrowings under the 2022 Note will not bear interest. The Company anticipates that2022 Note will mature on the $724,970 outsideearlier to occur of (i) March 12, 2023 or (ii) the effective date of our initial business combination. Up to $1,500,000 of such loans may be converted into Warrants of the Trust Accountpost-business combination entity, which shall have terms identical to the Private Placement Warrants, at a price of $1.50 per Warrant at the option of the Sponsor. The 2022 Note contains customary events of default, including those relating to our failure to repay the principal amount due upon maturity of the 2022 Note and certain bankruptcy events. $1,225,000 was drawn and outstanding under the 2022 Note as of March 31, 2021, will be sufficient to allowSeptember 30, 2022.
Until the Company to operate for at least the next 12 months, assuming that a Business Combination is not consummated during that time. Until consummation of our Business Combination, the Companya business combination, we will be using the funds not held in the Trust Account and any additional Working Capital Loans (as defined in Note 6 to our financial statements) from the initial shareholders, the Company’s officers and directors, or their respective affiliates (which is described in Note 6 to our financial statements), for identifying and evaluating prospective acquisition candidates, performing business due diligence on prospective target businesses, traveling to and from the offices, plants or similar locations of prospective target businesses, reviewing corporate documents and material agreements of prospective target businesses,paying for travel expenditures, selecting the target business to acquire, and structuring, negotiating and consummating the Business Combination.
The Company does not believe it will need to raise additional funds in order to meet the expenditures required for operating its business. However, if the Company’s estimates of the costs of undertaking in-depth due diligence and negotiating Business Combination is less than the actual amount necessary to do so, the Companybusiness combination. We may have insufficient funds available to operate its business prior to the Business Combination. Moreover, the Company will need to raise additional capital through loans or additional investments from its sponsor,Sponsor, shareholders, officers, directors, or third parties. None ofExcept for amounts that are already committed, the sponsor,Sponsor, officers and directors may, but are not obligated to, loan to us funds from time to time or directorsat any time, in whatever amount they deem reasonable in their sole discretion, to meet our working capital needs. Accordingly, we may not be able to obtain additional financing. If we are under any obligation to advance funds to, or to invest in, the Company. If the Company is unable to raise additional capital, itwe may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of its business plan,a potential transaction, and reducing overhead expenses. The Company
We cannot provide any assurance that new financing will be available to itus on commercially acceptable terms, if at all.
As a result Our amended and restated memorandum and articles of association provide that we will have only 24 months (until March 12, 2023) from the closing of the revision describedIPO to complete a business combination. There is no guarantee that we will be able to complete a business combination within the Combination Period. We have incurred and expect to continue to incur significant costs in Note 2 “Correctionpursuit of An Error In Previously Furnished Financial Statements”our acquisition plans. These conditions raise substantial doubt about our ability to continue as a going concern until the earlier of the consummation of the business combination or the date we are required to liquidate. These unaudited condensed consolidated financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary in case we are unable to continue as a going concern.
Related Party Transactions
Founder Shares
On December 31, 2020, we issued 7,187,500 Class B Ordinary Shares to the Sponsor for an aggregate purchase price of $25,000. On February 24, 2021, we effected a share capitalization of 1,437,500 shares, resulting in 8,625,000 Class B Ordinary Shares being issued and outstanding. The share capitalization was retroactively applied in our financial statementsstatements. Up to 1,125,000 Founder Shares were subject to forfeiture by the Sponsor depending on the extent to which the underwriters’ over-allotment option was exercised. On March 12, 2021, the underwriter partially exercised the over-allotment option and therefore 375,000 Founder Shares were forfeited, and 750,000 Founder Shares were no longer subject to forfeiture, resulting in 8,250,000 Founder Shares outstanding at September 30, 2022 and December 31, 2021. The underwriters forfeited their remaining over-allotment option on the date of the IPO.
The initial shareholders have agreed not to transfer, assign or sell any of their Founder Shares and any Class A Ordinary Shares issuable upon conversion thereof until the earlier to occur of: (i) one year after the completion of the initial business combination, or (ii) the date on which we complete a liquidation, merger, share exchange or other similar transaction after the initial business combination that results in all of our shareholders having the right to exchange their Class A Ordinary Shares for cash, securities or other property; except to certain permitted transferees and under certain circumstances (the “lock-up”).
Notwithstanding the foregoing, if (1) the closing price of Class A Ordinary Shares equals or exceeds $12.00 per share (as adjusted for share sub-divisions, share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the initial business combination or (2) if we consummate a transaction after the initial business combination which results in the our shareholders having the right to exchange their shares for cash, securities or other property, the Founder Shares will be released from the lock-up.
24
Private Placement Warrants
Simultaneously with the closing of the IPO, the Sponsor purchased an aggregate of 5,733,333 Private Placement Warrants at a price of $1.50 per Private Placement Warrant ($8,600,000 in the aggregate), each Private Placement Warrant is exercisable to purchase one Class A Ordinary Share at a price of $11.50 per share. A portion of the purchase price of the Private Placement Warrants was added to the proceeds from the IPO to be held in the Trust Account.
The Private Placement Warrants are identical to the Warrants sold in the IPO except that the Private Placement Warrants, so long as they are held by the Sponsor or its permitted transferees, (i) will not be redeemable by us, (ii) may not (including the Class A Ordinary Shares issuable upon exercise of these Private Placement Warrants), subject to certain limited exceptions, be transferred, assigned or sold by the holders until 30 days after the completion of our initial business combination, (iii) may be exercised by the holders on a cashless basis and (iv) will be entitled to certain registration rights.
If the Private Placement Warrants are held by holders other than the Sponsor or its permitted transferees, the Private Placement Warrants will be redeemable by us and exercisable by the holders on the same basis as the Warrants included herein, we classifyin the warrants issuedUnits being sold in the IPO.
The Sponsor has agreed to (i) waive its redemption rights with respect to its Founder Shares and Public Shares in connection with the completion of the initial business combination, (ii) waive its redemption rights with respect to its Founder Shares and Public Shares in connection with a shareholder vote to approve an amendment to our amended and restated memorandum and articles of association (A) to modify the substance or timing of our obligation to allow redemption in connection with the initial business combination or to redeem 100% of our Public Shares if we have not consummated an initial business combination within the Combination Period or (B) with respect to any other material provisions relating to shareholders’ rights or pre-initial business combination activity, (iii) waive its rights to liquidating distributions from the Trust Account with respect to its Founder Shares if we fail to complete the initial business combination within the Combination Period, and (iv) vote any Founder Shares held by the Sponsor and any Public Shares purchased during or after the IPO (including in open market and private placementprivately-negotiated transactions) in favor of the initial business combination.
Promissory Note—Related Party
On December 17, 2020, the Sponsor agreed to loan us up to $300,000 to be used for a portion of the expenses of the IPO. These loans were non-interest bearing, unsecured and were due at the earlier of December 31, 2021 or the closing of the IPO. The loan was repaid upon the closing of the IPO out of the offering proceeds that were allocated to the payment of offering expenses.
Working Capital Loans
In addition, in order to finance transaction costs in connection with a business combination, the initial shareholders or an affiliate of the initial shareholders or certain of our directors and officers may, but are not obligated to, loan us funds as liabilitiesmay be required. If we complete a business combination, we would repay the Working Capital Loans out of the proceeds of the Trust Account released to us. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a business combination does not close, we may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans, but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. On March 24, 2022, $250,000 was drawn under the terms of these Working Capital Loans, which amount was repaid as of September 30, 2022, and no amounts were outstanding as of September 30, 2022.
On April 11, 2022, we entered into the 2022 Note with our Sponsor, a related party of us. Pursuant to the 2022 Note we may borrow from the Sponsor, from time to time, up to an aggregate of $1,500,000. Borrowings under the 2022 Note will not bear interest. The 2022 Note will mature on the earlier to occur of (i) March 12, 2023 or (ii) the effective date of our initial business combination. Up to $1,500,000 of such loans may be converted into Warrants of the post-business combination entity, which shall have terms identical to the Private Placement Warrants, at their fair valuea price of $1.50 per Warrant at the option of the Sponsor. The 2022 Note contains customary events of default, including those relating to our failure to repay the principal amount due upon maturity of the 2022 Note and adjustcertain bankruptcy events. $1,225,000 was drawn and outstanding under the warrant instruments to fair value2022 Note as of September 30, 2022.
25
The conversion option included in the 2022 Note is considered an embedded derivative and is remeasured at the end of each reporting period. These liabilities are subject to remeasurement at each balance sheet date until exercised, and any change in fairperiod when amounts drawn under the 2022 Note will be outstanding. The value of the conversion option is recognized in our statement of operations.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangementsde minimis as of March 31, 2021. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which wouldSeptember 30, 2022.
Administrative Support Agreement
Commencing on the date of the IPO, we have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreementagreed to pay the Sponsor a monthly feetotal of $30,000 per month for rent of office space, utilities, secretarial and administrative support services provided to the Company. We began incurring these fees on March 10, 2021 and will continue to incur these fees monthly until the earliermembers of our management team. Upon completion of the completioninitial business combination or our liquidation, we will cease paying these monthly fees. For the three and nine months ended September 30, 2022, we have incurred $90,000 and $270,000 in expense pursuant to this agreement, respectively. For the three and nine months ended September 30, 2021, the Company has incurred $90,000 and $201,290 in expense pursuant to this agreement, respectively. There are outstanding fees owed and accrued of $180,000 and $0 as of September 30, 2022 and 2021, respectively.
Other Contractual Obligations
Registration Rights
The holders of the (i) Founder Shares, which were issued in a Business CombinationPrivate Placement prior to the closing of the IPO, (ii) Private Placement Warrants which were issued in a Private Placement simultaneously with the closing of the IPO and the Company’s liquidation.
Class A Ordinary Shares underlying such Private Placement Warrants and (iii) Private Placement Warrants that may be issued upon conversion of Working Capital Loans have registration rights to require us to register a sale of any of its securities held by them pursuant to a registration rights agreement. The underwritersholders of these securities are entitled to make up to three demands, excluding short form demands, that we register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to our completion of the initial business combination. We will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
We granted the underwriters a 45-day option from the final prospectus relating to the IPO to purchase up to 4,500,000 additional Units to cover over-allotments, if any, at the IPO price less the underwriting discounts and commissions. The underwriters partially exercised their over-allotment option on March 12, 2021 and forfeited the remaining over-allotment option.
On March 12, 2021, we paid a fixed underwriting discount of $6,090,000. Additionally, we recorded a deferred feeunderwriting discount of $0.35 per Unit, or $10,657,500 in the aggregate. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that we complete a Business Combination,an initial business combination, subject to the terms of the underwriting agreement. The deferred underwriting discount has subsequently been waived under the specific terms described in Note 7 to the accompanying unaudited condensed consolidated financial statements.
On July 8, 2022, we received a letter providing notice from Barclays, and on July 11, 2022, the Company received a letter providing notice from DBSI, waiving any entitlement to their respective portions of the $10,657,500 deferred underwriting fee that accrued from Barclays’ and DBSI’s participation as the underwriters of the Initial Public Offering and their right of first refusal to act as co-placement agents in connection with any equity or debt financing transaction (including any investment banking and financial advisory services) related to the business combination. Such waiver reduces the estimated expenses of the business combination by $10,675,500. A portion of deferred underwriting discount previously recorded in the additional paid-in capital is recorded as a recovery in the additional paid-in capital and a portion previously expensed is recorded as a recovery in the statement of operations in the three- and nine-month periods ended September 30, 2022.
Critical Accounting Policies and Estimates
The preparation of condensed financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of AmericaGAAP 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 policies:
Class A Ordinary Shares Subject to Possible Redemption
The Company accountsWe account for itsour Class A ordinary sharesOrdinary Shares subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.”480. Class A ordinary sharesOrdinary Shares subject to mandatory redemption (if any) are classified as a liability instrument and are measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares that feature redemption rights that are either within the control of the holder or
subject to redemption upon the occurrence of uncertain events not solely within the Company’sour control) are classified as temporary equity. At all other times, ordinary shares are classified as shareholders’ equity. The Company’sdeficit. Our Class A ordinary sharesOrdinary Shares feature certain redemption rights that are considered to be outside of the Company’sour control and subject to the occurrence of uncertain future events. Accordingly, as of September 30, 2022 and December 31, 2021, 33,000,000 Class A ordinary sharesOrdinary Shares subject to possible redemption are presented at redemption value as temporary equity, outside of the shareholders’ equitydeficit section of our condensed consolidated balance sheets. We recognize changes in redemption value immediately as they occur and adjusts the Company’s condensed balance sheet.carrying value of redeemable ordinary shares to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable ordinary shares are affected by charges against additional paid-in capital (to the extent available) and accumulated deficit.
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Net Income (Loss) Per Ordinary Share
We comply with accounting and disclosure requirements of ASC 260. We apply the two-class method in calculating earnings per share. The contractual formula utilized to calculate the redemption results in a redemption amount that approximates fair value. Remeasurement for Class A Ordinary sharesShares subject to possible redemption which areis not currently redeemable and are not redeemable at fair value, have been excluded fromincluded in the calculation of basic net loss per ordinary share since such shares, if redeemed, only participate in their pro rata share of the Trust Account earnings. Our net income is adjusted for the portiondetermination of income that is attributableor loss allocable to ordinary sharesClass A Ordinary Shares subject to redemption, as theseredemption value approximates fair value. Net income (loss) per ordinary share is computed by dividing the pro rata net income (loss) between the Class A Ordinary Shares and the Class B Ordinary Shares by the weighted average number of ordinary shares only participate in the earningsoutstanding for each of the Trust Account and not ourperiods. The calculation of diluted income or losses.
Recent Accounting Standards
Management(loss) per ordinary share does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a materialconsider the effect on our condensed financial statements.
Warrant Liabilities
We account forof the warrantsWarrants issued in connection with the Initial Public Offering in accordance with ASC 815, under whichIPO since the warrants do not meetexercise of the criteria for equity classificationWarrants are contingent upon the occurrence of future events and mustthe inclusion of such Warrants would be recorded as liabilities. As the warrants meet the definition of a derivative as contemplated in ASC 815, the warrants are measured at fair value at inception and at each reporting date in accordance with ASC 820, Fair Value Measurement, with changes in fair value recognized in the Statement of Operations in the period of change.anti-dilutive.
Derivative Warrant Liabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. We evaluate all of our financial instruments, including issued share purchase warrants,Warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuantderivatives. Pursuant to ASC 480 and ASC 815-15. The classification815, we concluded that a provision in the Warrant Agreement related to certain tender precludes the Warrants from being accounted for as components of equity. As the Warrants meet the definition of a derivative instruments, including whether such instrumentsas contemplated in ASC 815, the Warrants should be recorded as derivative liabilities or as equity, is reassessedon the condensed consolidated balance sheets and measured at the end offair value at each reporting period.date in accordance with ASC 820, with changes in fair value recognized in the statements of operations in the period of change.
We issued an aggregate ofaccount for our 12,333,333 warrantsWarrants, including 6,600,000 Warrants issued in connection with our IPO and private placement, which,5,733,333 Warrants issued as a resultpart of the revision described in Note 2 “Correction of An Error In Previously Furnished Financial Statements” to the financial statements included herein, are recognizedPrivate Placement, as derivative Warrant liabilities in accordance with ASC 815. Accordingly, we recognize the warrantsWarrant instruments as liabilities at fair value and adjust the instruments to fair value at each reporting period. The liabilities are subject to remeasurementre-measurement at each balance sheet date until exercised or modified, and any change in fair value is recognized in the Company’s statementour statements of operations. The fair value of Public Warrants haveissued by us in connection with the IPO and Private Placement has been estimated using Monte Carlo simulationsinitially at Monte-Carlo simulations. Subsequently, at September 30, 2022 and theDecember 31, 2021, Public and Private Placement Warrants were valued using observable market quotes in an active market, and Monte-Carlo simulations, respectively.
Recent Accounting Standards
In August 2020, FASB issued ASU 2020-06 to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective for fiscal years beginning after December 15, 2023 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. We are currently assessing the impact, if any, that ASU 2020-06 would have been estimated using Black Scholes model at each measurement date.on our financial position, results of operations or cash flows.
Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our financial statements.
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JOBS Act
The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an “emerging growth company” and under the JOBS Act will be allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We elected to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be required to, among other things, (i) provide an independent registered public accounting firm’s attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the report of the independent registered public accounting firm providing additional information about the audit and the financial statements (auditor discussion and analysis), and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of the IPO or until we are no longer an “emerging growth company,” whichever is earlier.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under 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 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 Chief Executive Officer, to allow timely decisions regarding required disclosure.
Evaluation of Disclosure Controls and Procedures
As required by Rules 13a-15Under the supervision and 15d-15 underwith the Exchange Act,participation of our Chief Executive Officer carried outmanagement, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2021.September 30, 2022, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based upon hison this evaluation, our Chief Executive Officerprincipal executive officer and principal financial and accounting officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective as of March 31, 2021, due solely to the pre-existing material weakness in our internal control over financial reporting regarding the classification ofrelated to the Company’s warrants as componentsaccounting for complex financial instruments. Also, in the three months ended September 30, 2022 we have identified an additional material weakness related to controls over completeness and accuracy of equity insteadaccruals for various service providers and disclosures of as derivative liabilities. In light of this material weakness,contingent arrangements that the Company has entered into. As a result, we performed additional analysis as deemed necessary to ensure that our unaudited condensed consolidated financial statements were prepared in accordance with GAAP.U.S. generally accepted accounting principles. Accordingly, management believes that the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q present fairly, in all material respects, our financial position, resultsresult of operations and cash flows forof the periodperiods presented.
We do not expect thatManagement intends to implement remediation steps to improve our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Changes in Internal Control Over Financial Reporting
During the most recently completed fiscal quarter, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting, as the circumstances that led to the revision of our financial statements described in this Quarterly Report on Form 10-Q had not yet been identified. Management has implemented remediation steps to address the material weakness and to improve our internal control over financial reporting. Specifically, we expandedintend to expand and improvedimprove our review process for complex securities and related accounting standards. We plan to further improvehave improved this process by enhancing access to accounting literature, identification of third-party professionals with whom to consult regarding complex accounting applications and consideration of additional staff with the requisite experience and training to supplement existing accounting professionals.
Changes in Internal Control Over Financial Reporting
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ITEM 1.ITEM1. LEGAL PROCEEDINGS.
None.
Except as set forth below, asAs of the date of this Quarterly Report, there have been no material changes with respect to those risk factors previously disclosed in our Registration StatementAnnual Report on Form 10-K filed with the SEC.SEC and our Registration Statement on Form S-4 filed by us with the SEC on November 14, 2022, except for the following. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future filings with the SEC.
Our warrantsIf we are accounteddeemed to be an investment company for purposes of the Investment Company Act, we may be forced to abandon our efforts to complete an initial business combination and instead be required to liquidate the Company. To mitigate the risk of that result, on or prior to the 24-month anniversary of the effective date of the registration statement relating to our IPO, we may instruct Continental Stock Transfer & Trust Company to liquidate the securities held in the Trust Account and instead hold all funds in the Trust Account in cash. As a result, following such change, we will likely receive minimal, if any, interest, on the funds held in the Trust Account, which would reduce the dollar amount that our public shareholders would have otherwise received upon any redemption or liquidation of the Company if the assets in the Trust Account had remained in U.S. government securities or money market funds.
On March 30, 2022, the SEC issued proposed rules (the “SPAC Rule Proposals”), relating, among other things, to circumstances in which SPACs such as liabilitiesus could potentially be subject to the Investment Company Act and the changesregulations thereunder. The SPAC Rule Proposals would provide a safe harbor for such companies from the definition of “investment company” under Section 3(a)(1)(A) of the Investment Company Act, provided that a SPAC satisfies certain criteria. To comply with the duration limitation of the proposed safe harbor, a SPAC would have a limited time period to announce and complete a de-SPAC transaction. Specifically, to comply with the safe harbor, the SPAC Rule Proposals would require a company to file a report on Form 8-K announcing that it has entered into an agreement with a target company for an initial business combination no later than 18 months after the effective date of the registration statement for its initial public offering. The company would then be required to complete its initial business combination no later than 24 months after the effective date of the registration statement for its initial public offering. We understand that the SEC has recently been taking informal positions regarding the Investment Company Act consistent with the SPAC Rule Proposals.
There is currently uncertainty concerning the applicability of the Investment Company Act to a SPAC, including a company like ours, that does not complete its initial business combination within the proposed time frame set forth in the proposed safe harbor rule. As indicated above, we completed our IPO on March 12, 2021 and we announced our proposed business combination on Form 8-K filed on August 3, 2022, which date was within 18 months of our IPO, but have not yet completed our initial business combination and may be unable to do so within such 24-month period. If we were deemed to be an investment company for purposes of the Investment Company Act, we might be forced to abandon our efforts to complete an initial business combination and instead be required to liquidate the Company. If we are required to liquidate the Company, our investors would not be able to realize the benefits of owning shares in a successor operating business, including the potential appreciation in the value of our shares and warrants couldfollowing such a transaction, and our warrants would expire worthless.
The funds in the Trust Account have, since our IPO, been held only in U.S. government treasury obligations with a material effectmaturity of 185 days or less or in money market funds investing solely in U.S. government treasury obligations and meeting certain conditions under Rule 2a-7 under the Investment Company Act. As of September 30, 2022, amounts held in Trust Account included approximately $1,394,141 of accrued interest. To mitigate the risk of us being deemed to have been operating as an unregistered investment company under the Investment Company Act, we may, on our financial results.
On April 12, 2021,or prior to the Acting Director24-month anniversary of the Division of Corporation Finance and Acting Chief Accountanteffective date of the SEC together issued aregistration statement regardingrelating to our IPO, or March 9, 2023, instruct Continental Stock Transfer & Trust Company, the accountingtrustee with respect to the Trust Account , to liquidate the U.S. government treasury obligations or money market funds held in the Trust Account and reporting considerations for warrants issued by special purpose acquisition companies entitled “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”)” (the “SEC Statement”). Specifically,thereafter to hold all funds in the SEC Statement focused on certain settlement terms and provisions related to certain tender offers followingTrust Account in cash (i.e., in one or more bank accounts) until the earlier of the consummation of a business combination which terms are similar to those containedor our liquidation. Following such liquidation of the assets in our Trust Account, we will likely receive minimal interest, if any, on the funds held in the warrant agreement governingTrust Account, which would reduce the dollar amount our warrants. As a resultpublic shareholders would have otherwise received upon any redemption or liquidation of the SEC Statement, we reevaluatedCompany if the accounting treatmentassets in the Trust Account had remained in U.S. government securities or money market funds. This means that the amount available for redemption will not increase in the future.
In addition, even prior to the 24-month anniversary of our 6,600,000 Public Warrants and 5,733,333 Private Placement Warrants, and determined to classify the warrants as derivative liabilities measured at fair value, with changes in fair value each period reported in earnings.
As a result, included on our balance sheet aseffective date of March 31, 2021 contained elsewhere in this Quarterly Report are derivative liabilities relatedthe registration statement relating to our warrants. ASC 815 provides forIPO, we may be deemed to be an investment company. The longer that the remeasurementfunds in the Trust Account are held in short-term U.S. government securities or in money market funds invested exclusively in such securities, even prior to the 24-month anniversary, there is a greater risk that we may be considered an unregistered investment company, in which case we may be required to liquidate. Accordingly, we may determine, in our discretion, to liquidate the securities held in the Trust Account at any time, even prior to the 24-month anniversary, and instead hold all funds in the Trust Account in cash, which would further reduce the dollar amount our public shareholders would receive upon any redemption or our liquidation.
We may be subject to a new 1% U.S. federal excise tax in connection with any redemptions of Plastiq Pubco Stock.
On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (the “Inflation Reduction Act”), which, among other things, imposes a 1% excise tax (the “Excise Tax”) on certain repurchases (including certain redemptions) of stock by publicly traded domestic (i.e., U.S.) corporations. The Excise Tax will apply to repurchases occurring in 2023 and beyond. The amount of the Excise Tax is generally 1% of the fair market value of such derivativesthe repurchased stock at each balance sheet date, with a resulting non-cash gain or loss related to the change in the fair value being recognized in earnings in the statement of operations. As a resulttime of the recurring fair value measurement,repurchase. The U.S. Department of the Treasury has authority to provide regulations and other guidance to carry out, and prevent the abuse or avoidance of, the Excise Tax; however, no guidance has been issued to date. Absent such guidance, because we will be a Delaware corporation and our financial statements and resultssecurities are expected to trade on the New York Stock Exchange, if the redemption of operations may fluctuate quarterly, based on factors, which are outsidePublic Shares (the “Redemption”) occurs after the Domestication such that we redeem shares of our control. Due to the recurring fair value measurement,Plastiq Pubco Stock, we currently expect that we will recognize non-cash gains or losseswould be subject to the Excise Tax with respect to redemptions in connection with the Redemption that are treated as repurchases for this purpose if the Redemption occurs on our warrants each reporting perioda date after December 31, 2022. The extent of the Excise Tax that we may incur would depend on a number of factors, including the fair market value of the Plastiq Pubco Stock redeemed, the extent such redemptions could be treated as dividends and not repurchases, and the content of any regulations and other guidance from the U.S. Department of the Treasury that may be issued and applicable to such redemptions. In addition, the amount of Excise Tax imposed with respect to repurchases of stock by a repurchasing corporation may be reduced by the fair market value of stock issued by the repurchasing corporation during the same taxable year. Absent the issuance of applicable guidance to the contrary, we currently expect that this reduction would be available with respect to any redemptions of Plastiq Pubco Stock by us and the issuance of Plastiq Pubco Stock by us to stockholders of Plastiq in connection with the business combination. It is possible, however, that applicable guidance is issued that would prevent or limit the potential application of this rule to such gainsissuance and redemptions or lossesthat the applicable fair market values are such that such issuance may not be able to fully offset the redemptions for purposes of this rule.
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The Excise Tax is imposed on the repurchasing corporation itself, not the shareholders from which shares are repurchased, and the mechanics of any required payment of the Excise Tax have not yet been determined. To the extent the Redemption occurs after the Domestication such that we redeem Plastiq Pubco Stock, the imposition of the Excise Tax, if any, could reduce the amount of cash available to us for effecting the Redemption such that the per-share redemption amount received by redeeming holders of Plastiq Pubco Stock may be material.less than $10.00 per share.
We have identified aadditional material weaknessweaknesses in our internal control over financial reporting as of March 31, 2021.September 30, 2022. If we are unable to develop and maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect our business and operating results.
Following this issuance of the SEC Statement, afterAfter consultation with our independent registered public accounting firm, our management concluded that in light of the SEC Statement, we identified a material weakness in our internal controls over financial reporting.reporting related to our accounting for complex financial instruments and a material weakness in our internal controls over financial reporting related to controls over completeness and accuracy of accruals for various service providers and disclosures of contingent arrangements that we have entered into. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented, or detected and corrected on a timely basis.
Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. We continue to evaluate steps to remediate the material weakness. These remediation measures may be time consuming and costly and there is no assurance that these initiatives will ultimately have the intended effects.
If we identify any new material weaknesses in the future, any such newly identified material weakness could limit our ability to prevent or detect a misstatement of our accounts or disclosures that could result in a material misstatement of our annual or interim financial statements. In such case, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, investors may lose confidence in our financial reporting and our stock price may decline as a result. We cannot assure you that the measures we have taken to date, or any measures we may take in the future, will be sufficient to avoid potential future material weaknesses.
We may face litigation and other risks as a result of the material weakness in our internal control over financial reporting.
As a result of such material weakness, the change in accounting for the warrants, and other matters raised or that may in the future be raised by the SEC, we face potential for litigation or other disputes which may include, among others, claims invoking the federal and state securities laws, contractual claims or other claims arising from the material weaknesses in our internal control over financial reporting and the preparation of our financial statements. As of the date of this Form 10-Q, we have no knowledge of any such litigation or dispute. However, we can provide no assurance that such litigation or dispute will not arise in the future. Any such litigation or dispute, whether successful or not, could have a material adverse effect on our business, results of operations and financial condition or our ability to complete a Business Combination.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
On March 12, 2021, we consummated the IPO of 33,000,000 Units. The Units sold in the IPO were sold at an offering price of $10.00 per unit, generating total gross proceeds of $330,000,000. Barclays Capital Inc. and Deutsche Bank Securities Inc. acted as the joint-book running managers of the IPO. The securities in the offering were registered under the Securities Act on a registration statement on Form S-1 (No. 333-253091). The Securities and Exchange Commission declared the registration statement effective on March 9, 2021.None.
Simultaneously with the consummation of the IPO, the Sponsor consummated the private placement of an aggregate of 5,733,333 warrants at a price of $1.50 per Private Placement Warrant, generating total proceeds of $8,600,000. The issuance was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
The Private Placement Warrants are identical to the warrants underlying the Units sold in the IPO, except that the Private Placement Warrants are not transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions.
Of the gross proceeds received from the IPO and the Private Placement Warrants, $330,000,000 was placed in the Trust Account.
We paid a total of $6,090,000 in underwriting discounts and commissions and $464,569 for other costs and expenses related to the IPO. In addition, the underwriters agreed to defer up to $10,657,500 in underwriting discounts and commissions.
For a description of the use of the proceeds generated in our IPO, see Part I, Item 2 of this Form 10-Q.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
On May 25, 2021,July 8, 2022, the Company received a letter providing notice from the New York Stock Exchange (the “NYSE”) indicating thatBarclays, and on July 11, 2022, the Company is not in compliance with the NYSE’s continued listing requirements under the timely filing criteria set forth in Section 802.01Ereceived a letter providing notice from Deutsche Bank Securities Inc., waiving any entitlement to their respective portions of the NYSE Listed Company Manual since$10,657,500 deferred underwriting fee that accrued from Barclays’ and DBSI’s participation as the Company did not file this Quarterly Report with the SEC on or before May 24, 2021, the extended period provided for the filing under Rule 12b-25(b)underwriters of the Securities Exchange ActInitial Public Offering and their right of 1934,first refusal to act as amended.
The NYSE informedco-placement agents in connection with any equity or debt financing transaction (including any investment banking and financial advisory services) related to the Company that, underbusiness combination. Such waiver reduces the NYSE’s rules, the Company can regain compliance with the NYSE’s continued listing requirements by filing this Quarterly Report with the SEC at any time prior to November 24, 2021.
As previously reported by the Company in its Form 12b-25 filed with the SEC on May 18, 2021, the Company has undergone the process of determining the extent to which the SEC Statement will impact its financial statements as of and for the fiscal quarter ended March 31, 2021, which are included in this Quarterly Report.
The Company filed this Quarterly Report and so has regained compliance with the timely filing criteria set forth in Section 802.01Eestimated expenses of the NYSE Listed Company Manual.business combination by $10,675,500.
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| ITEM 6. |
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
| * | Filed herewith. |
| ** | This certification is furnished to the SEC pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing. |
| † | Certain of the exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5) and 601(b)(2). The Registrant agrees to furnish a copy of all omitted exhibits and schedules to the SEC upon its request. |
| (1) | Previously filed as an exhibit to our Current Report on Form 8-K filed on |
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.
COLONNADE ACQUISITION CORP. II | ||||||
| Date: | /s/ Remy W. Trafelet | |||||
| Name: | Remy W. Trafelet | |||||
| Title: | Chief Executive Officer and Director | |||||
| (Principal Executive Officer and Principal | ||||||
| Financial and Accounting Officer) | ||||||
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