UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
OR
For the transition period from __________ to __________
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) |
(Commission File Number) |
(IRS Employer Identification No.) |
| (Address Of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code
Not Applicable
(Former name or former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| The Stock Market LLC | ||||
| The Stock Market LLC | ||||
| The Stock Market LLC |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
As of August 19, 2024, there were of the Registrant’s Class A ordinary shares, par value $0.0001 per share, and of the Registrant’s Class B ordinary shares, par value $0.0001 per share, issued and outstanding.
PEARL HOLDINGS ACQUISITION CORP
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2024
Table of Contents
i
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
PEARL HOLDINGS ACQUISITION CORP
CONDENSED BALANCE SHEETS
| June 30, 2024 |
December 31, 2023 |
|||||||
| (unaudited) | ||||||||
| Assets | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Investments held in Trust Account | ||||||||
| Cash held in Trust Account | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities, Redeemable Ordinary Shares and Shareholders’ Deficit | ||||||||
| Accrued expenses | $ | $ | ||||||
| Due to related party | ||||||||
| Financial liability – subscription shares | ||||||||
| Financial liability – capital contributions | ||||||||
| Total current liabilities | ||||||||
| Deferred underwriters’ discount | ||||||||
| Total liabilities | ||||||||
| Commitments & Contingencies (See Note 6) | ||||||||
| Class A ordinary shares subject to possible redemption, shares at redemption value at June 30, 2024 and December 31, 2023, respectively | ||||||||
| Shareholders’ Deficit: | ||||||||
| Preference shares, $ par value; shares authorized; issued and outstanding at June 30, 2024 and December 31, 2023 | ||||||||
| Class A ordinary shares, $ par value; shares authorized; shares and issued and outstanding (excluding 2,167,693 shares subject to possible redemption) at June 30, 2024 and December 31, 2023, respectively | ||||||||
| Class B ordinary shares, $ par value; shares authorized; shares and shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively | ||||||||
| Accumulated deficit | ( |
) | ( |
) | ||||
| Total Shareholders’ Deficit | ( |
) | ( |
) | ||||
| Total Liabilities, Redeemable Ordinary Shares and Shareholders’ Deficit | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
1
PEARL HOLDINGS ACQUISITION CORP
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
| For the Three Months Ended June 30, | For the | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Formation and operating costs | $ | $ | $ | $ | ||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense) | ||||||||||||||||
| Interest earned on cash and investment held in Trust Account | ||||||||||||||||
| Change in fair value of Subscription Agreement derivatives | ( | ) | ( | ) | ||||||||||||
| Total other income (expense), net | ( | ) | ||||||||||||||
| Net (loss) income | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Weighted average shares outstanding, Class A ordinary shares subject to possible redemption | ||||||||||||||||
| Basic and diluted net income per share, Class A ordinary shares subject to possible redemption | $ | $ | $ | $ | ||||||||||||
| Weighted average shares outstanding, Non-redeemable Class B ordinary shares | ||||||||||||||||
| Basic and diluted net loss per share, Non-redeemable B ordinary shares | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average shares outstanding, Non-redeemable Class A ordinary shares | ||||||||||||||||
| Non-redeemable Basic and Diluted loss per ordinary share, Non-redeemable Class A ordinary shares | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
2
PEARL HOLDINGS ACQUISITION CORP
UNAUDITED CONDENSED STATEMENTS OF CLASS A ORDINARY SHARES SUBJECT TO
POSSIBLE REDEMPTION AND CHANGES IN SHAREHOLDER’S DEFICIT
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024
| Class A Ordinary shares subject to possible redemption |
Class A Ordinary Shares |
Class B Ordinary shares |
Additional Paid-In |
Accumulated | Shareholders’ | |||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||||||||
| Balance as of January 1, 2024 | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | ||||||||||||||||||||||||||
| Accretion of Class A ordinary shares to redemption value | - | - | - | ( |
) | ( |
) | |||||||||||||||||||||||||||||
| Conversion of Class B to Class A | - | ( |
) | ( |
) | |||||||||||||||||||||||||||||||
| Net Loss | - | - | - | ( |
) | ( |
) | |||||||||||||||||||||||||||||
| Balance as of March 31, 2024 | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | ||||||||||||||||||||||||||
| Accretion of Class A ordinary shares to redemption value | - | - | - | ( |
) | ( |
) | |||||||||||||||||||||||||||||
| Net loss | - | - | - | ( |
) | ( |
) | |||||||||||||||||||||||||||||
| Balance as of June 30, 2024 | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | ||||||||||||||||||||||||||
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023
| Class A Ordinary shares subject to possible redemption |
Class B Ordinary Shares |
Additional Paid-In |
Accumulated | Shareholder’s | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance as of January 1, 2023 | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||
| Accretion of Class A ordinary shares to redemption value | - | - | ( |
) | ( |
) | ||||||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||
| Balance as of March 31, 2023 | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||
| Accretion of Class A ordinary shares to redemption value | - | - | ( |
) | ( |
) | ||||||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||
| Balance as of June 30, 2023 | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
3
PEARL HOLDINGS ACQUISITION CORP
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
| For the Six Months Ended June 30, |
||||||||
| 2024 | 2023 | |||||||
| Cash flows from operating activities: | ||||||||
| Net (loss) income | $ | ( |
) | $ | ||||
| Adjustments to reconcile net (loss) income to net cash used in operating activities: | ||||||||
| Change in fair value of Subscription Agreement derivatives | ||||||||
| Changes in current assets and liabilities: | ||||||||
| Prepaid expenses | ( |
) | ||||||
| Accrued expenses | ( |
) | ( |
) | ||||
| Due to related party | ( |
) | ||||||
| Net cash (used in) provided by operating activities | ( |
) | ||||||
| Cash flows from investing activities: | ||||||||
| Reinvestment of interest and dividends into marketable securities | ( |
) | ( |
) | ||||
| Proceeds from sale of marketable securities | ||||||||
| Net cash provided by (used in) investing activities | ( |
) | ||||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from Subscription Agreements | ||||||||
| Net cash provided by financing activities | ||||||||
| Net change in cash and cash held in trust account | ( |
) | ||||||
| Cash and cash held in Trust Account, beginning of the period | ||||||||
| Cash and cash held in Trust Account, end of the period | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Non-cash financing transaction: | ||||||||
| Accretion of Class A ordinary shares to redemption value | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
4
PEARL HOLDINGS ACQUISITION CORP
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2024
NOTE 1 — Organization, Business Operations and Liquidity
Pearl Holdings Acquisition Corp (the “Company”) is a blank check company incorporated as a Cayman Islands exempted company on March 23, 2021. The Company was incorporated for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (the “Initial Business Combination”). While the Company may pursue an Initial Business Combination target in any industry or geographic location, the Company intends to focus its search for a target business operating in the lifestyle, health and wellness and technology sectors.
As of June 30, 2024, the Company had not commenced any operations. All activity for the period from March 23, 2021 (inception) through June 30, 2024 relates to the Company’s formation and the initial Public Offering (as defined below) and since the offering, identifying and evaluating prospective acquisition targets for an Initial Business Combination. The Company will not generate any operating revenues until after the completion of the Initial Business Combination, at the earliest. The Company generates non-operating income in the form of interest income on cash and investments held in Trust Account from the proceeds derived from the Public Offering (as defined below).
The Company’s Sponsor is Pearl Holdings Sponsor LLC, a Cayman Islands limited liability company (the “Sponsor”).
The registration statement for the Company’s the IPO was declared effective on December 14, 2021 (the “Effective Date”). On December 17, 2021, we consummated our Initial Public Offering of units at $ per unit (the “Units” and, with respect to the Class A ordinary shares, par value $0.0001 per share, included in the Units offered, the “Public Shares,” or the “Class A ordinary shares”), and the sale of Private Placement Warrants (the “Private Placement Warrants”) to our Sponsor, at a price of $
Transaction costs related to the Public Offering amounted to $
Following the closing of the Initial Public Offering and the over-allotment, $
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Public Offering and the Private Placement Warrants, although substantially all of the net proceeds are intended to be generally applied toward consummating the Initial Business Combination (less deferred underwriting commissions).
The Initial Business Combination must be with one or more target businesses that together have a fair market value equal to at least 80% of the net assets held in the Trust Account (as defined below) (net of amounts disbursed to management for working capital purposes, if permitted, and excluding the amount of any deferred underwriting discount held in trust) at the time of the signing a definitive agreement in connection with the Initial Business Combination. However, the Company will only complete the Initial Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”). There is no assurance that the Company will be able to successfully effect the Initial Business Combination.
5
The funds held in the Trust Account will not otherwise be released from the Trust Account until the earliest of: (1) the completion of the Initial Business Combination; (2) the redemption of any Public Shares properly submitted in connection with a shareholder vote to amend its amended and restated memorandum and articles of association (A) to modify the substance or timing of the Company’s obligation to allow redemption in connection with the Initial Business Combination or to redeem 100% of the Company’s Public Shares if the Company do not complete the Initial Business Combination within 24 months from the closing of the Public Offering, or (B) with respect to any other provision relating to shareholders’ rights or pre Initial Business Combination activity; and (3) the redemption of the public shares if the Company has not completed the Initial Business Combination within 24 months from the closing of the Public Offering, subject to applicable law. The proceeds deposited in the trust account could become subject to the claims of the Company’s creditors, if any, which could have priority over the claims of the public shareholders.
The Company will provide the public shareholders with the opportunity to redeem all or a portion of their Public Shares upon the completion of the Initial Business Combination either: (1) in connection with a general meeting called to approve the Initial Business Combination or (2) by means of a tender offer. The decision as to whether the Company will seek shareholder approval of a proposed business combination or conduct a tender offer will be made by the Company, solely in its discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would require the Company to seek shareholder approval under applicable law or stock exchange listing requirement. The shareholders will be entitled to redeem their shares at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account calculated as of two business days prior to the consummation of the Initial Business Combination, including interest (net of taxes payable), divided by the number of then issued and outstanding Public Shares, subject to the limitations described herein. The amount in the Trust Account immediately following the closing of the Initial Public Offering was $ per Public Share. The per-share amount the Company will distribute to investors who properly redeem their shares will not be reduced by the deferred underwriting commissions the Company may pay to the underwriters.
The ordinary shares subject to redemption were recorded at a redemption value and classified as temporary equity pursuant to the completion of the Public Offering and immediately accreted to redemption value, in accordance with Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 480 “Distinguishing Liabilities from Equity.” The Company will proceed with the Initial Business Combination if the Company has net tangible assets of at least $
The Company initially had until June 17, 2023 (18 months after the closing of its Public Offering) to complete the Initial Business Combination, unless the Sponsor elected to exercise its extension options which would provide for up to 24 months from the closing of the Public Offering to complete the Initial Business Combination (the “Combination Period”). In June 2023 and September 2023, pursuant to its amended and restated memorandum and articles of association, the Company was afforded automatic three-month extensions of the Combination Period, as a result of entering into a non-binding letter of intent with respect to a potential Initial Business Combination, pursuant to which the Combination Period was extended until December 17, 2023.
On June 14, 2023, the Company received a written
notice from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”)
indicating that the Company was not in compliance with Listing Rule 5452(b)(C), due to our failure to maintain the minimum of $
On December 8, 2023, the Company held an extraordinary general meeting of shareholders (the “Extraordinary General Meeting”), at which the holders of Class A ordinary shares exercised their right to redeem their shares for cash at a redemption price of approximately $ per share, for an aggregate of approximately $ million. The Company also voted and passed proposals to extend the Combination Period during the Extraordinary General Meeting in which the Company must consummate the Initial Business Combination from December 17, 2023 to December 17, 2024, and to amend the Charter and the Trust Agreement (as defined below) to allow the Company to extend the date by which it must complete the Initial Business Combination from December 17, 2023 to December 17, 2024.
6
On January 5, 2024, upon receipt of a notice of conversion from the Sponsor pursuant to Article 17.2 of the Company’s amended and restated articles of association, the Company converted of its Class B ordinary shares, par value $0.0001 per share (the “Class B ordinary shares”), to Class A ordinary shares on a one-for-one basis. The Sponsor waived any right to receive funds from the Trust Account with respect to the Class A ordinary shares received upon such conversion and no additional amounts were deposited into the Trust Account in respect of any of those Class A ordinary shares. It is stipulated that the newly converted Class A ordinary shares shall be subject to the same lock-up provisions as the Class B ordinary shares.
The initial shareholders, directors and officers have entered into a letter agreement with the Company, pursuant to which they have agreed to waive their redemption rights with respect to any Founder Shares and Public Shares held by them in connection with the completion of the Initial Business Combination or certain amendments to the amended and restated memorandum and articles of association as described elsewhere in this prospectus. In addition, the initial shareholders have agreed to waive their rights to liquidating distributions from the Trust Account with respect to their Founder Shares if the Company fails to complete the Initial Business Combination within the prescribed time frame. However, if the initial shareholders acquire Public Shares, they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if the Company fails to complete the Initial Business Combination within the prescribed time frame.
The Sponsor has agreed that it will be liable to the Company if and to the extent any claims by a third party (other than its independent registered public accounting firm) for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below (1) $10.20 per Public Share or (2) such lesser amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the Trust Assets, in each case net of interest which may be withdrawn to pay taxes, except as to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims under the Company’s indemnity of the underwriters of the Public Offering against certain liabilities, including liabilities under the Securities Act. Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the sponsor will not be responsible to the extent of any liability for such third-party claims. The Company has not independently verified whether the Sponsor has sufficient funds to satisfy its indemnity obligations and believe that the Sponsor’s only assets are securities of the Company and, therefore, the Sponsor may not be able to satisfy those obligations. The Company has not asked the Sponsor to reserve for such obligations.
On May 13, 2024, the Company received a written notice from the Listing Qualifications Department of Nasdaq that trading of the Company’s (i) Class A ordinary shares, (ii) Warrants, each exercisable for one Class A ordinary share at an exercise price of $11.50 per share (the “Warrants”), and (iii) Units (collectively with the Class A ordinary shares and the Warrants, the “Securities”), would be suspended from The Nasdaq Global Market on May 22, 2024, pursuant to Nasdaq Listing Rule 5815(a)(1)(B)(ii)(C), and a Form 25 would be filed with the Securities and Exchange Commission, which would remove the Securities from listing and registration on Nasdaq.
Nasdaq’s basis for the determination was
that the Company’s average Market Value of Publicly Held Shares was below $
On May 17, 2024, the Company filed a hearing request with Nasdaq. Filing the hearing request stayed the suspension and delisting until the hearing panel’s determination.
On May 21, 2024, the Staff determined that the Company demonstrated compliance with the initial listing requirements under Listing Rule 5405, with respect to the Class A Ordinary Shares. Accordingly, the Company has regained compliance with the Nasdaq Listing Rules, with respect to the Class A Ordinary Shares. As a result, the Company’s Class A Ordinary Shares will remain listed on The Nasdaq Global Market, subject to the Company’s continued compliance with the applicable listing standards.
On June 26, 2024, the Staff approved the Company’s application to list its warrants on The Nasdaq Capital Market (the “Capital Market”). Consequently the Company’s warrants have traded since June 28, 2024 on NASDAQ’s Capital Market.
7
The Company and the Sponsor entered into non-redemption agreements (the “Non-Redemption Agreements”) with certain existing shareholders (the “Shareholders”), pursuant to which the Shareholders have, in connection with the Extraordinary General Meeting, on December 8, 2023, agreed not to redeem, or to reverse and revoke any prior redemption election with respect to an aggregate of of their Class A ordinary shares (the “Non-Redeemed Shares”). Pursuant to the Non-Redemption Agreements, the Company will issue to such Shareholders an aggregate of additional Class A ordinary shares immediately following the consummation of the Initial Business Combination if they continue to hold such Non-Redeemed Shares through the Extraordinary General Meeting.
In connection with the vote which occurred at the Extraordinary General Meeting on December 8, 2023, the holders of Class A ordinary shares exercised their right to redeem their shares for cash at a redemption price of approximately $per share, for an aggregate of approximately $million.
Going Concern
As of June 30, 2024, the Company had $
The Company has incurred and expects to continue to incur significant costs in pursuit of its financing and acquisition plans. The Company lacks the financial resources it needs to sustain operations for a reasonable period of time, which is considered to be one year from the issuance date of the unaudited condensed financial statements. Although no formal agreement exists, the Sponsor may extend Working Capital Loans as needed (defined in Note 5 below).
The Company is less than one year from its mandatory liquidation. Management has determined that the liquidity condition due to cash and insufficient working capital, described above, and mandatory liquidation raises substantial doubt about the Company’s ability to continue as a going concern for at least one year from the date the unaudited condensed financial statements are issued.
These conditions raise substantial doubt about the Company’s ability to continue as a going concern. These unaudited condensed 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 should the Company be unable to continue as a going concern.
Risks and Uncertainties
Management continues to evaluate the impact of ongoing geopolitical instability events, including the Russia-Ukraine conflict and the Israel-Hamas conflict, and has concluded that while it is reasonably possible that the war could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of these unaudited condensed financial statements. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
The credit and financial markets have experienced extreme volatility and disruptions due to ongoing geopolitical instability events and other economic factors. Such volatility is expected to have further global economic consequences, including but not limited to the possibility of severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in inflation rates and uncertainty about economic and political stability. In addition, the United States and other countries have imposed sanctions on Russia which increases the risk that Russia, as a retaliatory action, may launch cyberattacks against the United States, its government, infrastructure and businesses. Any of the foregoing consequences, including those we cannot yet predict, may cause our business, financial condition, results of operations and the price of our ordinary shares to be adversely affected.
8
Note 2 — Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the U.S. Securities and Exchange Commission (the “SEC”). Certain information or footnote disclosures normally included in unaudited condensed financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.
The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 as filed with the SEC on April 16, 2024, which contains the audited financial statements and notes thereto. The interim results for the three and six months ended June 30, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or for any future interim periods.
Emerging Growth Company Status
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies.
The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s unaudited condensed financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of these unaudited condensed financial statements is in conformity with U.S. GAAP which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements and the reported amounts of expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the unaudited condensed financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
9
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company had $
Cash and Investments Held in Trust Account
At December 31, 2023, the assets held in the Trust Account were held in money market mutual funds which invest in U.S. Treasury securities. On March 26, 2024, the Company transferred substantially all the assets held in the Trust Account to a demand deposit account held by the Trustee. At June 30, 2024, the assets held in the Trust Account were held in a demand deposit account held by the Trustee. From inception through June 30, 2024, the Company did not withdraw any of the interest income from the Trust Account to pay any tax obligations.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed the federal depository insurance coverage of $
Offering Costs Associated with IPO
The Company complies with the requirements of the ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A— “Expenses of Offering”. Offering costs consist principally of professional and registration fees incurred through the balance sheet date that are related to the IPO. Offering costs are charged against the carrying value of Class A shares and the Public Warrants based on the relative value of those instruments. Accordingly, on December 17, 2021, offering costs totaling $
The Company complies with accounting and disclosure requirements of ASC 260, Earnings Per Share. The Company has two classes of shares, which are referred to as Class A ordinary shares and Class B ordinary shares. Income and losses are shared pro rata between the two classes of shares. Net income per ordinary share is calculated by dividing the net income by the weighted average ordinary shares outstanding for the respective period. Diluted net income per share attributable to ordinary shareholders adjust the basic net income per share attributable to ordinary shareholders and the weighted-average ordinary shares outstanding for the potentially dilutive impact of outstanding warrants. However, because the warrants are anti-dilutive, diluted income per ordinary share is the same as basic income per ordinary share for the periods presented.
With respect to the accretion of Class A ordinary shares subject to possible redemption and consistent with ASC Topic 480-10-S99-3A, the Company treated accretion in the same manner as a dividend, paid to the shareholder in the calculation of the net income per ordinary share.
10
The following table reflects the calculation of basic and diluted net income/(loss) per ordinary share:
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Net (loss) income | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Accretion of temporary equity to redemption value | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss including accretion of temporary equity to redemption value | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| For the Three Months Ended June 30, | ||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||
| Redeemable | Non-Redeemable | Non-Redeemable | Redeemable | Non-Redeemable | ||||||||||||||||
| Class A | Class B | Class A | Class A | Class B | ||||||||||||||||
| Basic and diluted net loss per share: | ||||||||||||||||||||
| Numerator: | ||||||||||||||||||||
| Allocation of net income (loss)including accretion of temporary equity | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||||
| Deemed dividend for accretion of temporary equity to redemption value | ||||||||||||||||||||
| Allocation of net income (loss) | $ | $ | ( |
) | $ | ( |
) | $ | $ | ( |
) | |||||||||
| Denominator: | ||||||||||||||||||||
| Weighted-average shares outstanding | ||||||||||||||||||||
| Basic and diluted income (loss) per share | $ | $ | ( |
) | $ | ( |
) | $ | $ | ( |
) | |||||||||
| For the Six Months Ended June 30, | ||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||
| Redeemable | Non-Redeemable | Non-Redeemable | Redeemable | Non-Redeemable | ||||||||||||||||
| Class A | Class B | Class A | Class A | Class B | ||||||||||||||||
| Basic and diluted net loss per share: | ||||||||||||||||||||
| Numerator: | ||||||||||||||||||||
| Allocation of net loss including accretion of temporary equity | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
| Deemed dividend for accretion of temporary equity to redemption value | ||||||||||||||||||||
| Allocation of net income (loss) | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | |||||||||
| Denominator: | ||||||||||||||||||||
| Weighted-average shares outstanding | ||||||||||||||||||||
| Basic and diluted income (loss) per share | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | |||||||||
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Fair Value of Financial Instruments
FASB ASC 820, “Fair value Measurement,” defines fair value as the amount that would be received to sell an asset or paid to transfer a liability, in an orderly transaction between market participants.
Fair value measurements are classified on a three-tier hierarchy as follows:
| ● | Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; |
| ● | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
| ● | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
In many cases, a valuation technique used to measure fair value includes inputs from multiple levels of the fair value hierarchy described above. The lowest level of significant input determines the placement of the entire fair value measurement in the hierarchy.
The fair value of the Company’s assets and liabilities, which qualify as financial instruments approximates the carrying amounts represented in the unaudited condensed balance sheets, primarily due to its short-term nature.
Derivative Financial Instruments
The Company accounts for derivative financial instruments as either equity-classified or liability-classified instruments based on an assessment of the instruments’ specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the instruments are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the instruments meet all of the requirements for equity classification under ASC 815, including whether the instruments are indexed to the Company’s own common shares and whether the instrument holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, was conducted at the time of issuance and as of each subsequent quarterly period end date while the instruments are outstanding. Management concluded that the Public Warrants and Private Placement Warrants issued pursuant to the warrant agreement qualify for equity accounting treatment. In addition, management concluded that the Subscription agreement, the Subscription Shares to be issued as part of the bundled transaction are classified and accounted for as equity; whereas the Capital Contributions are to be recognized as a financial liability which will be measured at fair value on a recurring basis.
The Company accounts for its ordinary shares subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Ordinary shares subject to mandatory redemption (if any) is classified as a liability instrument and is 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’s control) is classified as temporary equity. At all other times, ordinary shares are classified as shareholders’ deficit. The Company’s ordinary shares feature certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, at June 30, 2024 and December 31, 2023, Class A ordinary shares subject to possible redemption are presented, at redemption value, as temporary equity outside of the shareholders’ deficit section of the Company’s unaudited condensed balance sheets.
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The Company recognizes changes in redemption
value immediately as they occur and adjusts the carrying value of redeemable ordinary shares to equal the redemption value at the
end of each reporting period. Such changes are reflected in additional paid-in capital, or in the absence of additional capital, in
accumulated deficit. During the six months ended June 30, 2024, the Company recorded an accretion of $
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under FASB ASC 740, “Income Taxes” (“ASC 740”). Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company’s management determined that the Cayman Islands is the Company’s major tax jurisdiction. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. As of June 30, 2024 and December 31, 2023, there were no unrecognized tax benefits and no amounts accrued for interest and penalties. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
The Company is considered to be an exempted Cayman Islands company with no connection to any other taxable jurisdiction and is presently not subject to income taxes or income tax filing requirements in the Cayman Islands or the United States. As such, the Company’s tax provision was zero for the periods presented.
Recent Accounting Pronouncements
Management does not believe that any other recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s unaudited condensed financial statements.
Note 3 — Public Offering
On December 17, 2021, the Company consummated its Public Offering of Units and on December 22, 2021 additional Units were placed as a result of exercise of the overallotment option by the underwriters. Each Unit had a price of $ and consists of one Class A ordinary share, and one-half of one redeemable warrant. Each whole warrant entitles the holder to purchase one Class A ordinary share at a price of $
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Note 4 — Private Placement
Simultaneously with the closing of the IPO Company’s Sponsor purchased an aggregate of
A portion of the proceeds from the Private Placement Warrants was added to the proceeds from the Public Offering and deposited in the Trust Account. If the Company does not complete the Initial Business Combination within the Combination Period, the proceeds of the sale of the Private Placement Warrants will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law), and the Private Placement Warrants will expire worthless.
The Sponsor, officers and directors of the Company have entered into a letter agreement with the Company, pursuant to which they have agreed (A) to waive their redemption rights with respect to any Founder Shares and Public Shares they hold in connection with the completion of the Initial Business Combination, (B) to waive their redemption rights with respect to any Founder Shares and Public Shares they hold in connection with a shareholder vote to approve an amendment to the Company’s amended and restated certificate of incorporation to modify the substance or timing of the Company’s obligation to allow redemption in connection with the Initial Business Combination or to redeem 100% of the Company’s Public Shares if the Company has not consummated the Initital Business Combination within 18 months (or up to 24 months if our sponsor exercises its extension options) from the closing of the Public Offering or with respect to any other provisions relating to shareholders’ rights or pre Initial Business Combination activity and (C) to waive their rights to liquidating distributions from the trust account with respect to any Founder Shares they hold if the Company fails to complete the Initial Business Combination within 18 months (or up to 24 months if our sponsor exercises its extension options) from the closing of the Public Offering or during any Extension Period, although they will be entitled to liquidating distributions from the trust account with respect to any Public Shares they hold if the Company fails to complete the Initial Business Combination within such time period, and (iii) the Founder Shares are automatically convertible into Class A ordinary shares concurrently with or immediately following the consummation of the Initial Business Combination on a one-for-one basis, subject to adjustment as described in the Company’s amended and restated certificate of incorporation. If the Company submits the Initial Business Combination to the Company’s public shareholders for a vote, the Company’s initial shareholders have agreed to vote their Founder Shares and any Public Shares purchased during or after the Public Offering in favor of the Initial Business Combination.
Note 5 — Related Party Transactions
Founder Shares
On April 3, 2021, the Sponsor paid $
The initial shareholders have agreed not to transfer, assign or sell any of their Founder Shares until the earlier to occur of: (1) one year after the completion of the Initial Business Combination; or (2) subsequent to the Initial Business Combination (i) if the last reported sale price of the Class A ordinary shares equals or exceeds $12.00 per share (as adjusted for share sub-divisions, share dividends, rights issuances, consolidations, reorganizations, recapitalizations and other similar transactions) for any 20 trading days within any 30-trading day period commencing at least 150 days after the Initial Business Combination or (y) the date on which the Company complete a liquidation, merger, share exchange, reorganization or other similar transaction that results in all of the public shareholders having the right to exchange their ordinary shares for cash, securities or other property. Any permitted transferees would be subject to the same restrictions and other agreements of the initial shareholders with respect to any Founder Shares.
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Working Capital Loans
In order to fund working capital deficiencies or finance transaction costs in connection with the Initial Business Combination, the Sponsor or an affiliate of the Sponsor or the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (the “Working Capital Loans”). If the Company completes the Initial Business Combination, the Company will repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the as Loans may be repaid only out of funds held outside the trust account. Up to $
Administrative Service Fee
Commencing on the date that the Company’s securities are first listed on the Nasdaq through the earlier of consummation of the Initial Business Combination and the liquidation, the Company has agreed to pay the Sponsor a total of $
Due to Related Party
During the quarter ended March 31, 2024, a related party of the Sponsor deposited $
Note 6 — Commitments & Contingencies
Registration Rights
The holders of the Founder Shares, Private Placement Warrants and any warrants that may be issued on conversion of Working Capital Loans (and any Class A ordinary shares issuable upon the exercise of the Private Placement Warrants or warrants issued upon conversion of the Working Capital Loans and upon conversion of the Founder Shares) will be entitled to registration rights pursuant to a registration rights agreement to be signed prior to or on the effective date of the Public Offering requiring the Company to register such securities for resale (in the case of the Founder Shares, only after conversion to the Class A ordinary shares). The holders of these securities will be entitled to make up to three demands, excluding short form registration demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the Company’s completion of the Initial Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. However, the registration rights agreement provides that the Company will not be required to effect or permit any registration or cause any registration statement to become effective until termination of the applicable lock-up period as described under “Principal Shareholders — Transfers of Founder Shares and Private Placement Warrants.” The Company will bear the expenses incurred in connection with the filing of any such.
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Underwriting Agreement
The underwriters had a 45-day option from the date of the Public Offering to purchase up to an additional Units to cover over-allotments, if any. This option was partially exercised on December 22, 2021, and the remaining over-allotment option expired on March 31, 2022.
The underwriters earned a cash underwriting discount
of two percent (
Additionally, the underwriters will be entitled to a deferred underwriting discount of
Vendor Agreements
As of June 30, 2024, the Company has incurred legal fees of $
Non-Redemption Agreements
The Company and the Sponsor entered into the Non-Redemption Agreements with certain Shareholders, pursuant to which the Shareholders have, in connection with the Extraordinary General Meeting, on December 8, 2023, agreed not to redeem, or to reverse and revoke any prior redemption election with respect to the Non-Redeemed Shares. Pursuant to the Non-Redemption Agreements, the Company will issue to such Shareholders an aggregate of additional Class A ordinary shares immediately following the consummation of the Initial Business Combination.
The Company accounts for the Non-Redemption Agreements in accordance with the guidance in ASC 718 (“Stock Compensation”). The Non-Redemption Agreements are representative of a share-based payment transaction in which the Company is acquiring services to be used within the Company’s operations. The fair value of the Class A ordinary shares granted to the Company’s non-redeeming shareholders is $ or per share. The Class A ordinary shares were granted subject to a performance condition (i.e., the occurrence of the Initial Business Combination). Compensation expense related to the issuance of shares is recognized only when the performance condition is probable of occurrence under the applicable accounting literature in this circumstance. As of June 30, 2024, the Company determined that the Initial Business Combination is not considered probable, and, therefore, no stock-based compensation expense has been recognized. Stock-based compensation would be recognized at the date the Initial Business Combination is considered probable (i.e., upon consummation of the Initial Business Combination) in an amount equal to the number of issued shares times the grant date fair value per share (unless subsequently modified) less the amount initially received for the purchase of the to be issued shares.
Subscription Agreement
On February 22, 2024, The Company entered
into a subscription agreement (the “First Polar Subscription Agreement”) with the Sponsor and Polar Multi-Strategy
Master Fund (“Polar”), pursuant to which, and on the terms and subject to the conditions of which, Polar agreed to
contribute up to $
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During the quarter ended March 31, 2024, the
Company entered into additional subscription agreements (the “Additional Subscription Agreements”) with five other
parties for additional Capital Contributions in the aggregate of $
The Company concluded that two components of the
Subscription Agreements mentioned above, the Capital Contributions and the Subscription Shares (together, the “Financial
Liabilities”) are measured at fair value on a recurring basis as a liability, referring to relevant accounting standards such
as FASB ASC Topic 480 “Distinguishing Liabilities from Equity”, ASC Topic 415 “Derivatives and Hedging” and
ASC Topic 825-10 “Financial Instruments—Overall.” As of June 30, 2024, the Company concluded the Fair Value of
the Financial Liabilities – Subscription Shares and Capital Contributions to be $
and $
On July 8, 2024, The Company entered into a second
subscription agreement (the “Second Polar Subscription Agreement”) with the Sponsor and Polar, pursuant to which, and on the
terms and subject to the conditions of which, Polar agreed to contribute up to an additional $
Investment Management Trust Agreement Amendment
On March 26, 2024, the Company amended its Investment Management Trust Agreement (the “Trust Agreement”), where, Section 1(c) of the Trust Agreement was amended and restated in its entirety. As per the amendment, at the written request of the Company, all amounts held in trust are to be deposited in an interest-bearing bank demand deposit account with a maturity of 185 days or less, or in money market funds governed by the Investment Company Act of 1940. On March 26, 2024, the Company transferred substantially all of the assets held in the Trust Account to a demand deposit account held by the Trustee.
Note 7 — Recurring Fair Value Measurements
As of June 30, 2024 and December 31, 2023, the Company’s marketable securities held in the Trust Account were valued at $
The following table presents fair value information as of June 30, 2024 and December 31, 2023, of the Company’s financial assets that were accounted for at fair value on a recurring basis and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value. The Company’s marketable securities held in the Trust Account are based on interest income and market fluctuations in the value of invested marketable securities, which are considered observable. The fair value of the marketable securities held in trust are classified within Level 1 of the fair value hierarchy.
The following table sets forth the Company’s assets and liabilities that were accounted for at fair value on a recurring basis by level within the fair value hierarchy:
| June 30, 2024 | Level 1 | Level 2 | Level 3 | |||||||||
| Liabilities | ||||||||||||
| Financial liability – subscription shares | $ | $ | $ | |||||||||
| Financial liability – capital contributions | $ | $ | $ | |||||||||
| December 31, 2023 | Level 1 | Level 2 | Level 3 | |||||||||
| Assets | ||||||||||||
| Investments held in Trust Account | $ | $ | $ | |||||||||
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As discussed in Note 6, the Capital Contributions and the Subscription Shares (together, the “Financial Liabilities”) liability are both re-measured at fair value on a recurring basis (one of the instruments is accounted for at fair value on a recurring basis under ASC 480-10, as a derivative instrument under ASC 815, or at fair value under the fair value option in ASC 825-10);
The Financial Liabilities are valued under a Probability Weighted Expected Return Model (“PWERM”) which fair values repayable capital investment and used a Black Scholes Model that fair values the conversion features within the convertible debt. The PWERM is a multistep process in which value is estimated based on the probability-weighted present value of various future outcomes. The estimated fair value of the Financial Liabilities Component is determined using Level 3 inputs. Inherent in the pricing models are assumptions related to expected share-price volatility, expected life and risk-free interest rate.
The key inputs of the models used to value the Company’s Subscription Share and Capital Contribution Financial Liabilities as of June 30, 2024 were:
| Inputs | June 30, 2024 |
|||
| Term Remaining | ||||
| Share Price | $ | |||
| Risk-Free Rate | % | |||
The change in the fair value of Subscription Agreement liabilities, measured using Level 3 inputs is summarized as follows:
| Derivative financial liabilities at December 31, 2023 | $ | |||
| Subscription Agreement Deposits | ||||
| Subscription agreement derivative expense | ||||
| Derivative financial liabilities at March 31, 2024 | ||||
| Subscription Agreement Deposits | ||||
| Subscription agreement derivative expense | ||||
| Derivative financial liabilities at June 30, 2024 | $ |
Note 8 — Shareholders’ Deficit
Preference Shares — The Company is authorized to issue a total of preference shares at par value of $ each. As of June 30, 2024 and December 31, 2023, there were preference shares issued or outstanding.
Class A Ordinary Shares — The Company is authorized to issue a total of Class A ordinary shares. As of June 30, 2024 and December 31, 2023, there were and Class A ordinary shares issued or outstanding, excluding Class A ordinary shares subject to possible redemption, respectively.
Class B Ordinary Shares — The Company is authorized to issue a total of Class B ordinary shares with a par value of $ per share. As of June 30, 2024 and December 31, 2023, the Company had issued and Class B ordinary shares to its initial shareholders for $25,000, or approximately $ per share. On April 3, 2021, the Sponsor paid $
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The Class B ordinary shares will automatically convert into Class A ordinary shares at the time of the Initial Business Combination, or earlier at the option of the holder, on a one-for-one basis, subject to adjustment for share sub-divisions, share dividends, rights issuances, reorganizations, recapitalizations and other similar transactions, and subject to further adjustment as provided herein. In the case that additional Class A ordinary shares, or equity-linked securities, are issued or deemed issued in excess of the amounts issued in the Public Offering and related to the closing of the Initial Business Combination, the ratio at which the Class B ordinary shares will convert into Class A ordinary shares will be adjusted (unless the holders of a majority of the issued and outstanding Class B ordinary shares agree to waive such anti-dilution adjustment with respect to any such issuance or deemed issuance) so that the number of Class A ordinary shares issuable upon conversion of all Class B ordinary shares will equal, in the aggregate, on an as-converted basis, 20% of the sum of all ordinary shares issued and outstanding upon the completion of the Public Offering plus all Class A ordinary shares and equity-linked securities issued or deemed issued in connection with the Initial Business Combination, excluding any shares or equity-linked securities issued, or to be issued, to any seller in the Initial Business Combination. The term “equity-linked securities” refers to any debt or equity securities that are convertible, exercisable or exchangeable for the Class A ordinary shares issued in a financing transaction in connection with the Initial Business Combination, including, but not limited to, a private placement of equity or debt.
Public Warrants — Each whole warrant entitles the holder to purchase one Class A ordinary share at a price of $11.50 per share, subject to adjustment.
In addition, if (x) the Company issues additional ordinary shares or equity-linked securities for capital raising purposes in connection with the closing of the Initial Business Combination at an issue price or effective issue price of less than $9.20 per ordinary share (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of the Initial Business Combination on the date of the completion of the Initial Business Combination (net of redemptions), and (z) the volume weighted average trading price of the Class A ordinary shares during the 20 trading day period starting on the trading day prior to the day on which the Company consummate the Initial Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price described below under “Redemption of warrants when the price per Class A ordinary share equals or exceeds $18.00” will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price.
Redemption of warrants when the price per Class A ordinary share equals or exceeds $.
Once the warrants become exercisable, the Company may redeem the warrants (except as described herein with respect to the private placement warrants):
| ● | in whole and not in part; | |
| ● | at a price of $ per warrant; | |
| ● | upon not less than days’ prior written notice of redemption to each warrant holder; and | |
| ● | if, and only if, the closing price of the Class A ordinary shares equals or exceeds $18.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a warrant as described under the heading “— Anti-dilution Adjustments”) for any trading days within any -trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders. |
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The “fair market value” of the Class A ordinary shares shall mean the volume weighted average price of the Class A ordinary shares as reported during the 10 trading days immediately following the date on which the notice of redemption is sent to the holders of warrants. This redemption feature differs from the warrant redemption features used in some other blank check offerings. The Company will provide its warrant holders with the final fair market value no later than one business day after the 10-trading day period described above ends.
The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Public Offering, except that the Private Placement Warrants and the Class A ordinary shares issuable upon exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of the Initial Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants may be exercised for cash or on a cashless basis and will be non-redeemable so long as they are held by the initial purchasers or such purchasers’ permitted transferees. The Private Placement Warrants shall not become Public Warrants as a result of any transfer of the Private Placement Warrants, regardless of the transferee.
If a tender offer, exchange or redemption offer shall have been made to and accepted by the holders of the Class A ordinary shares and upon completion of such offer, the offeror owns beneficially securities representing more than 50% of the aggregate voting power represented by the issued and outstanding equity securities of the Company, the holder of the warrant shall be entitled to receive the highest amount of cash, securities or other property to which such holder would actually have been entitled as a shareholder if such warrant had been exercised, accepted such offer and all of the Class A ordinary shares held by such holder had been purchased pursuant to the offer. If less than 70% of the consideration receivable by the holders of the Class A ordinary shares in the applicable event is payable in the form of common equity in the successor entity that is listed on a national securities exchange or is quoted in an established over-the-counter market, and if the holder of the warrant exercises the warrant within thirty days following the public disclosure of the consummation of the applicable event by the Company, the warrant price shall be reduced by an amount equal to the difference (but in no event less than zero) of (i) the warrant price in effect prior to such reduction minus (ii) (A) the Per Share Consideration (as defined in the warrant agreement) minus (B) the value of the warrant based on the Black-Scholes Warrant Value (as defined in the warrant agreement).
Note 9 — Subsequent Events
The Company evaluated subsequent events and transactions that occurred up to the date the unaudited consolidated condensed financial statements were issued and has concluded that, all such events, other than below, that would require recognition or disclosure have been recognized or disclosed.
On July 8, 2024, The Company entered into a second subscription agreement (the “Second Polar Subscription Agreement”) with the Sponsor and Polar, pursuant to which, and on the terms and subject to the conditions of which, Polar agreed to contribute up to an additional $500,000 in cash to the Company (the “Second Capital Contribution”) to cover working capital expenses. The terms of the Second Polar Subscription Agreement are identical to those of the First Polar Subscription Agreement. The Company received the first tranche in an amount of $250,000 under the Second Polar Subscription Agreement on July 8, 2024 (see Note 6).
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
References to the “Company,” “Pearl Holdings Acquisition Corp,” “our,” “us” or “we” refer to Pearl Holdings Acquisition Corp. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. 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. 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 our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the U.S. Securities and Exchange Commission (the “SEC”). Our 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, we 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 as a Cayman Islands exempted company for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses. We intend to effectuate the Initial Business Combination using cash from the proceeds of the offering and the sale of the private placement warrants, our shares, debt or a combination of cash, shares and debt.
The issuance of additional ordinary shares or preference shares in a business combination:
| ● | may significantly dilute the equity interest of investors, which dilution would increase if the anti-dilution provisions in the Class B ordinary shares resulted in the issuance of Class A ordinary shares on a greater than one-to-one basis upon conversion of the Class B ordinary shares; |
| ● | may subordinate the rights of holders of ordinary shares if preference shares are issued with rights senior to those afforded our ordinary shares; |
| ● | could cause a change of control if a substantial number of our ordinary shares are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present directors and officers; |
| ● | may have the effect of delaying or preventing a change of control of us by diluting the share ownership or voting rights of a person seeking to obtain control of us; |
| ● | may adversely affect prevailing market prices for our units, ordinary shares and/or warrants; and |
| ● | may not result in adjustment to the exercise price of our warrants. Similarly, if we issue debt or otherwise incur significant indebtedness, it could result in: |
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| ● | default and foreclosure on our assets if our operating revenues after the Initial Business Combination are insufficient to repay our debt obligations; |
| ● | acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant; |
| ● | our immediate payment of all principal and accrued interest, if any, if the debt is payable on demand; |
| ● | our inability to obtain necessary additional financing if the debt contains covenants restricting our ability to obtain such financing while the debt is outstanding; |
| ● | our inability to pay dividends on our ordinary shares; |
| ● | using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our ordinary shares if declared, expenses, capital expenditures, acquisitions and other general corporate purposes; |
| ● | limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate; |
| ● | increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; and |
| ● | limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, execution of our strategy and other purposes and other disadvantages compared to our competitors who have less debt. |
As indicated in the accompanying financial statements, at June 30, 2024 we had cash of $24,851 outside of our trust account and working capital deficit of $2,217,619. Further, we expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to raise capital or to complete the Initial Business Combination will be successful. These factors, among others, raise substantial doubt about our ability to continue as a going concern.
Results of Operations
For the three months ended June 30, 2024, we had a net loss of $445,591 which consists of operating costs amounting to $453,962 and a change in fair value of the Subscription Agreement derivatives of $249,374, offset by earnings on investments held in Trust Account amounting to $257,745.
For the three months ended June 30, 2023, we had a net income of $2,265,547 which consists of earnings on investments held in Trust Account amounting to $2,458,098, offset by operating costs amounting to $192,551.
For the six months ended June 30, 2024, we had a net loss of $766,503 which consists of operating costs amounting to $688,305 and a change in fair value of the Subscription Agreement derivatives of $637,727, offset by earnings on investments held in Trust Account amounting to $559,529.
For the six months ended June 30, 2023, we had a net income of $4,244,449 which consists of earnings on investments held in Trust Account amounting to $4,649,730, offset by operating costs amounting to $405,281.
Our business activities as of June 30, 2024 consisted primarily of identifying and evaluating prospective acquisition targets for the Initial Business Combination.
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Liquidity and Capital Resources
On December 17, 2021 the IPO was completed and the net proceeds from (1) the sale of the units in the offering and the over-allotment, after deducting payment of accrued offering expenses of approximately $712,588 and underwriting commissions of $4,000,000, excluding deferred underwriting commissions of $7,000,000 and (2) the sale of the private placement warrants for a purchase price of $10,000,000 was $205,287,412. Of this amount, $204,000,000 was deposited into the trust account. The funds in the trust account are invested only in U.S. government treasury bills with a maturity of 185 days or less or in money market funds investing solely in U.S. Treasuries. The remaining proceeds of $1,287,412 as of the IPO date were not held in the trust account.
In connection with the vote which occurred at the Extraordinary General Meeting on December 8, 2023, the holders of 17,832,307 Class A ordinary shares exercised their right to redeem their shares for cash at a redemption price of approximately $10.83 per share, for an aggregate of approximately $193.1 million. After the satisfaction of such redemptions, the balance in the Company’s trust account was approximately $23.4 million. On March 26, 2024, the Company transferred substantially all the assets held in the Trust Account to a demand deposit account held by the Trustee. At June 30, 2024, the assets held in the Trust Account were held in a demand deposit account held by the Trustee.
During the six months ended June 30 2024, the Company entered into Subscription Agreements and received total aggregate proceeds from those agreements of $782,000. The Company entered on July 8, 2024 into an additional Subscription Agreement providing for total additional proceeds available of $500,000 and the Company received the first tranche in an amount of $250,000 under the Second Polar Subscription Agreement on July 8, 2024 (see Note 6 - Subscription Agreement).
We intend to use substantially all of the funds held in the trust account, including any amounts representing interest earned on the trust account (which interest shall be net of taxes payable and excluding deferred underwriting commissions) to complete the Initial Business Combination. We may withdraw interest to pay taxes, if any. Our annual income tax obligations will depend on the amount of interest and other income earned on the amounts held in the trust account. We expect the interest earned on the amount in the trust account will be sufficient to pay our taxes. We expect the only taxes payable by us out of the funds in the trust account will be income and franchise taxes, if any. To the extent that our ordinary shares or debt is used, in whole or in part, as consideration to complete the Initial Business Combination, the remaining proceeds held in the trust account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
As of June 30, 2024, we had cash of $24,851 held outside of our trust account. We will use these funds primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, structure, negotiate and complete the Initial Business Combination, and to pay taxes to the extent the interest earned on the trust account is not sufficient to pay our taxes.
In order to fund working capital deficiencies or finance transaction costs in connection with the Initial Business Combination, our sponsor or an affiliate of our sponsor or certain of our directors and officers may, but are not obligated to, loan us funds as may be required. If we consummate the Initial Business Combination, we may repay such loaned amounts out of the proceeds of the trust account released to us. Otherwise, such loans may be repaid only out of funds held outside the trust account. In the event that the Initial Business Combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts but no proceeds from our trust account would be used to repay such loaned amounts. Up to $2,000,000 of such loans may be convertible into warrants at a price of $1.00 per warrant at the option of the lender. The warrants would be identical to the private placement warrants issued to our sponsor. The terms of such loans, if any, have not been determined and no written agreements exist with respect to such loans. We do not expect to seek loans from parties other than our sponsor or an affiliate of our sponsor as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our trust account.
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These amounts are estimates and may differ materially from our actual expenses. In addition, we could use a portion of the funds not being placed in trust to pay commitment fees for financing, fees to consultants to assist us with our search for a target business or as a down payment or to fund a “no-shop” provision (a provision designed to keep target businesses from “shopping” around for transactions with other companies or investors on terms more favorable to such target businesses) with respect to a particular proposed business combination, although we do not have any current intention to do so. If we entered into an agreement where we paid for the right to receive exclusivity from a target business, the amount that would be used as a down payment or to fund a “no-shop” provision would be determined based on the terms of the specific business combination and the amount of our available funds at the time. Our forfeiture of such funds (whether as a result of our breach or otherwise) could result in our not having sufficient funds to continue searching for, or conducting due diligence with respect to, prospective target businesses.
The Company has incurred and expects to continue to incur significant costs in pursuit of its financing and acquisition plans. The Company lacks the financial resources it needs to sustain operations for a reasonable period of time, which is considered to be one year from the issuance date of the financial statements. Although no formal agreement exists, the Sponsor is committed to extend Working Capital Loans as needed. The Company cannot assure that its plans to consummate the Initial Business Combination will be successful.
These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern one year from the date these financial statements are issued. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Related Party Transactions
On April 3, 2021, our sponsor paid $25,000 to cover certain of our offering and formation costs in exchange for the issuance of 7,187,500 founder shares to our sponsor, or approximately $0.003 per share. In November 2021, our sponsor surrendered an aggregate of 2,156,250 founder shares for no consideration, thereby reducing the aggregate number of founder shares outstanding to 5,031,250. On December 22, 2021 our sponsor surrendered an additional 31,250 upon the partial exercise of the underwriter’s over-allotment option, thereby reducing the aggregate number of founder shares to 5,000,000 and resulting in an effective purchase price paid for the founder shares of approximately $0.005 per share. The purchase price of the founder shares was determined by dividing the amount of cash contributed to us by the number of founder shares issued. Our initial shareholders collectively own 20% of our issued and outstanding shares.
We have entered into a support services agreement pursuant to which we will also pay our sponsor a total of $15,000 per month for office space, administrative and support services. Upon consummation of the Initial Business Combination or our liquidation, we will cease paying these monthly fees. As of June 30, 2024 and 2023, the Company incurred $90,000 of administrative services fees. As of June 30, 2024 and December 31, 2023, the amount due to sponsor for these administrative services fees are $113,709 and $143,709 as reflected in Due to Related Party in the accompanying balance sheets, respectively.
Our sponsor, directors and officers, or any of their respective affiliates, will be reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. Our audit committee will review on a quarterly basis all payments that were made by us to our sponsor, directors, officers or our or any of their respective affiliates and will determine which expenses and the amount of expenses that will be reimbursed. There is no cap or ceiling on the reimbursement of out-of-pocket expenses incurred by such persons in connection with activities on our behalf.
In addition, in order to finance transaction costs in connection with an the Initial Business Combination, our sponsor or an affiliate of our sponsor or certain of our directors and officers may, but are not obligated to, loan us funds as may be required. If we consummate the Initial Business Combination, we may repay such loaned amounts out of the proceeds of the trust account released to us. Otherwise, such loans may be repaid only out of funds held outside the trust account. In the event that the Initial Business Combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts but no proceeds from our trust account would be used to repay such loaned amounts. Up to $2,000,000 of such loans may be convertible into warrants at a price of $1.00 per warrant at the option of the lender. The warrants would be identical to the private placement warrants issued to our sponsor. The terms of such loans, if any, have not been determined and no written agreements exist with respect to such loans. We do not expect to seek loans from parties other than our sponsor or an affiliate of our sponsor as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our trust account. As of June 30, 2024 and December 31, 2023, the Company had no borrowings under the Working Capital Loans.
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Our sponsor purchased an aggregate of 10,000,000 private placement warrants at a price of $1.00 per warrant. The private placement warrants are identical to the warrants sold as part of the units in the offering except that: (1) the private placement warrants will not be redeemable by us; (2) the Class A ordinary shares issuable upon exercise of the private placement warrants may be subject to certain transfer restrictions contained in the letter agreement by and among us, the sponsor and any other parties thereto, as amended from time to time; (3) the private placement warrants may be exercised by the holders on a cashless basis; and (4) the holders of private placement warrants (including the ordinary shares issuable upon exercise of such warrants) are entitled to registration rights.
Pursuant to a registration rights agreement that we entered into with our initial shareholders prior to the closing of the offering, we may be required to register certain securities for sale under the Securities Act. These holders, and holders of warrants issued upon conversion of working capital loans, if any, are entitled under the registration rights agreement to make up to three demands that we register certain of our securities held by them for sale under the Securities Act and to have the securities covered thereby registered for resale pursuant to Rule 415 under the Securities Act. In addition, these holders have the right to include their securities in other registration statements filed by us. However, the registration rights agreement provides that we will not be required to effect or permit any registration or cause any registration statement to become effective until the securities covered thereby are released from their lock-up restrictions, as described herein. We will bear the costs and expenses of filing any such registration statements.
Contractual Obligations
Commencing on the date that the Company’s securities were first listed on the NASDAQ through the earlier of consummation of the Initial Business Combination and the liquidation, we agreed to pay our Sponsor a total of $15,000 per month for office space, utilities, administrative and support services.
The holders of Founder Shares, Private Placement Warrants, and any warrant that may be issued upon conversion of Working Capital Loans, if any, will be entitled to registration rights pursuant to a registration rights agreement. These holders will be entitled to make up to three demands, excluding short form demands, that we register such securities. In addition, these holders will have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the Company’s completion of the Initial Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. However, the registration rights agreement provides that the Company will not be required to effect or permit any registration or cause any registration statement to become effective until termination of the applicable lock-up period as described under “Principal Shareholders - Transfers of Founder Shares and Private Placement Warrants.” We will bear the expenses incurred in connection with the filing of any such registration statements.
The underwriters are entitled to a deferred underwriting discount of 3.50% of the gross proceeds of the Initial Public Offering, or $7,000,000. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company consummates the Initial Business Combination, subject to the terms of the underwriting agreement.
JOBS Act
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
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Critical Accounting Estimates
This management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to fair value of financial instruments and accrued expenses. We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Management has not identified any critical accounting estimates.
Recent accounting standards
Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial statements.
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
Evaluation of Disclosure 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 company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2024. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer 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 due to material weaknesses in our internal controls over financial reporting. During the year ended December 31, 2023, the Company previously reported a material weakness in our internal control over financial reporting related to our accounting for complex financial instruments, specifically the Non-Redemption Agreements.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based on the evaluation we conducted, our management has concluded that no such changes have occurred, other than below.
Remediation of previously disclosed material weakness
During the audit of the financial statements for the year ended December 31, 2022, a material weakness was identified related to the fact that we have not designed or maintained controls over the financial reporting close process which resulted in an error in the classification of investing activities in the statement of cash flows. As of March 31, the Company has remediated this material weakness, and the Company will continue to monitor its controls over its financial reporting close process going forward.
To remediate the material weakness, the Company enhanced its processes to identify and appropriately apply applicable accounting requirements to better evaluate and understand the nuances of the cash flow statement standards that apply to its financial statements, including providing enhanced access to accounting literature, research materials and documents and increased communication among the Company’s personnel and third-party professionals with whom management consults on such topics.
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PART II—OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
As of the date of this Quarterly Report on Form 10-Q, there have been no material changes to the risk factors disclosed in our 2023 Annual Report on Form 10-K filed with the SEC on April 16, 2024. Any of those risk 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 factors or disclose additional factors from time to time in our future filings with the SEC.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On December 17, 2021, the Company consummated its Initial Public Offering of 17,500,000 Units at $10.00 per Unit, generating gross proceeds of $175,000,000. Morgan Stanley & Co. LLC acted as sole book-running manager for the Initial Public Offering. The securities sold in the Initial Public Offering were registered under the Securities Act on a registration statement on Form S-1 (No. 333-261319). The SEC declared the registration statements effective on December 14, 2021. On December 20, 2021 the underwriter partially exercised its over-allotment option and stated its intention to purchase an additional 2,500,000 of the 2,625,000 over-allotment Units available, generating gross proceeds of $25,000,000. The over-allotment closed on December 22, 2021.
Simultaneously with the closing of our Initial Public Offering, our Sponsor purchased an aggregate of 9,000,000 Private Placement Warrants, each exercisable to purchase one Class A ordinary share at $11.50 per share, at a price of $1.00 per warrant, or $9,000,000 in the aggregate. In connection with the underwriter’s partial exercise of its option to purchase additional Units, the Sponsor purchased an additional 1,000,000 Private Placement Warrants, generating gross proceeds to the Company of $1,000,000.
In connection with the Initial Public Offering we incurred offering costs of approximately $11,712,588 (including deferred underwriting commissions of $7,000,000). Other incurred offering costs consisted principally of preparation fees related to the Initial Public Offering. After deducting the underwriting discounts and commissions (excluding the deferred portion, which amount will be payable upon consummation of the Initial Business Combination, if consummated) and the Initial Public Offering expenses, $204,000,000 from the net proceeds from our Initial Public Offering and certain of the proceeds from the Private Placement (or $10.20 per Unit sold in the Initial Public Offering) was placed in the Trust Account.
There has been no material change in the planned use of the proceeds from the Initial Public Offering and Private Placement as is described in the Company’s final prospectus related to the Initial Public Offering. For a description of the use of the proceeds generated in our Initial Public Offering, see Part I, Item 2 of this Form 10-Q.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
(a). None.
(b). None.
(c). During the three and six months ended June 30, 2024, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each such term is defined in Item 408(a) of Regulation S-K.
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Item 6. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
| * | Filed herewith. |
| ** | Furnished herewith. |
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Dated: August 19, 2024 | PEARL HOLDINGS ACQUISITION CORP | |
| By: | /s/ Craig E. Barnett | |
| Name: | Craig E. Barnett | |
| Title: | Chief Executive Officer | |
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