☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Cayman Islands | 001-40741 | 98-1592043 | ||||
(State or other jurisdiction | ( | |||||
Identification No.) |
1400 Old Country Road ,Suite 301 | 11590 | |
Westbury ,New York | (Zip Code) | |
(Address of Principal Executive Offices) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Units, each consisting of one Class A ordinary share, $0.0001 par value, and three-fourths of one redeemable warrant | KCGI.U | The New York Stock Exchange | ||
Class A ordinary shares | KCGI | The New York Stock Exchange | ||
Redeemable warrants, each whole warrant exercisable for one Class A ordinary share at an exercise price of $11.50 | KCGI WS | The New York Stock Exchange |
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☒ | Smaller reporting company | ☒ | |||
Emerging growth company | ☒ |
KENSINGTON CAPITAL ACQUISITION CORP. V
Quarterly Report on Form
Table of Contents
i
September 30, 2023 | December 31, 2022 | |||||||
(Unaudited) | ||||||||
Assets | ||||||||
Current assets: | ||||||||
Cash | $ | 1,392,181 | $ | 1,235,676 | ||||
Prepaid expenses | 176,642 | 142,668 | ||||||
Total current assets | 1,568,823 | 1,378,344 | ||||||
Investments held in Trust Account | 48,576,551 | 283,042,286 | ||||||
Total Assets | $ | 50,145,374 | $ | 284,420,630 | ||||
Liabilities, Class A Ordinary Shares Subject to Possible Redemption and Shareholders’ Deficit | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 139,877 | $ | 18,507 | ||||
Accrued expenses | 2,130,238 | 657,627 | ||||||
Working Capital Loan -current related party | 950,250 | — | ||||||
Total current liabilities | 3,220,365 | 676,134 | ||||||
Working Capital Loan -related party | 150,000 | 150,000 | ||||||
Deferred underwriting commissions in connection with the initial public offering | 9,660,000 | 9,660,000 | ||||||
Derivative warrant liabilities | 4,730,400 | 6,075,800 | ||||||
Total Liabilities | 17,760,765 | 16,561,934 | ||||||
Commitments and Contingencies (Note 5) | ||||||||
Class A ordinary shares subject to possible redemption, 4,542,733 and 27,600,000 shares at redemption value of approximately $10.67 and $10.25 per share at September 30, 2023 and December 31, 2022, respectively | 48,476,551 | 282,942,286 | ||||||
Shareholders’ Deficit | ||||||||
Preference shares, $0.0001 par value; 1,000,000 shares authorized; none issued or outstanding at September 30, 2023 and December 31, 2022 | — | — | ||||||
Class A ordinary shares, $0.0001 par value; 100,000,000 shares authorized; no non-redeemable shares issued or outstanding at September 30, 2023 and December 31, 2022 | — | — | ||||||
Class B ordinary shares, $0.0001 par value; 10,000,000 shares authorized; 6,900,000 | 690 | 690 | ||||||
Additional paid-in capital | — | — | ||||||
Accumulated deficit | (16,092,632 | ) | (15,084,280 | ) | ||||
Total shareholders’ deficit | (16,091,942 | ) | (15,083,590 | ) | ||||
Total Liabilities, Class A Ordinary Shares Subject to Possible Redemption and Shareholders’ Deficit | $ | 50,145,374 | $ | 284,420,630 | ||||
For the three months ended June 30, 2021 | For the period from March 19, 2021 (inception) through June 30, 2021 | |||||||
General and administrative expenses | $ | 15,535 | $ | 34,107 | ||||
Loss from operations | (15,535 | ) | (34,107 | ) | ||||
Net loss | $ | (15,535) | $ | (34,107) | ||||
Weighted average shares outstanding, basic and diluted (1)(2) | 6,000,000 | 6,000,000 | ||||||
Basic and diluted net loss per share | $ | (0.00) | $ | (0.01) | ||||
For The Three Months Ended September 30, | For The Nine Months Ended September 30, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
General and administrative expenses | $ | 387,426 | $ | 156,734 | $ | 2,293,752 | $ | 913,658 | ||||||||
Administrative expenses—related party | 40,000 | 60,000 | 60,000 | 180,000 | ||||||||||||
Loss from operations | (427,426 | ) | (216,734 | ) | (2,353,752 | ) | (1,093,658 | ) | ||||||||
Other income: | ||||||||||||||||
Change in fair value of derivative warrant liabilities | (1,576,800 | ) | 1,529,400 | 1,897,400 | 26,970,400 | |||||||||||
Change in fair value of Working Capital Loan—related party | — | — | — | 50,000 | ||||||||||||
Income from investments held in Trust Account | 3,482,834 | 1,258,734 | 8,737,614 | 1,758,581 | ||||||||||||
Total other income | 1,906,034 | 2,788,134 | 10,635,014 | 28,778,981 | ||||||||||||
Net income | $ | 1,478,608 | $ | 2,571,400 | $ | 8,281,262 | $ | 27,685,323 | ||||||||
Weighted average shares outstanding of Class A ordinary share, basic and diluted | 15,820,744 | 27,600,000 | 23,630,434 | 27,600,000 | ||||||||||||
Basic and diluted net income per share, Class A ordinary share | $ | 0.07 | $ | 0.07 | $ | 0.27 | $ | 0.80 | ||||||||
Weighted average shares outstanding of Class B ordinary share, basic and diluted | 6,900,000 | 6,900,000 | 6,900,000 | 6,900,000 | ||||||||||||
Basic and diluted net income per share, Class B ordinary share | $ | 0.07 | $ | 0.07 | $ | 0.27 | $ | 0.80 | ||||||||
Class A Ordinary Shares | Class B Ordinary Shares | Additional Paid-in Capital | Accumulated Deficit | Total Shareholders’ Deficit | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Balance—December 31, 2022 | — | $ | — | 6,900,000 | $ | 690 | $ | — | $ | (15,084,280 | ) | $ | (15,083,590 | ) | ||||||||||||||
Excess of cash received over fair value of Additional Private Placement Warrants | — | — | — | — | 2,208,000 | — | 2,208,000 | |||||||||||||||||||||
Remeasurement of redemption value of Class A ordinary shares subject to possible redemption | — | — | — | — | (2,208,000 | ) | (3,284,154 | ) | (5,492,154 | ) | ||||||||||||||||||
Net loss | — | — | — | — | — | (1,537,711 | ) | (1,537,711 | ) | |||||||||||||||||||
Balance—March 31, 2023 (unaudited) | — | $ | — | 6,900,000 | $ | 690 | $ | — | $ | (19,906,145 | ) | $ | (19,905,455 | ) | ||||||||||||||
Remeasurement of redemption value of Class A ordinary shares subject to possible redemption | — | — | — | — | — | (2,522,626 | ) | (2,522,626 | ) | |||||||||||||||||||
Net income | — | — | — | — | — | 8,340,365 | 8,340,365 | |||||||||||||||||||||
Balance—June 30, 2023 (unaudited) | — | $ | — | 6,900,000 | $ | 690 | $ | — | $ | (14,088,406 | ) | $ | (14,087,716 | ) | ||||||||||||||
Remeasurement of redemption value of Class A ordinary shares subject to possible redemption | — | — | — | — | — | (3,482,834 | ) | (3,482,834 | ) | |||||||||||||||||||
Contribution—Shareholder non-redemption agreement | — | — | — | — | 550,421 | — | 550,421 | |||||||||||||||||||||
Shareholder non-redemption agreement | — | — | — | — | (550,421 | ) | — | (550,421 | ) | |||||||||||||||||||
Net income | — | — | — | — | — | 1,478,608 | 1,478,608 | |||||||||||||||||||||
Balance—September 30, 2023 (unaudited) | — | $ | — | 6,900,000 | $ | 690 | $ | — | $ | (16,092,632 | ) | $ | (16,091,942 | ) | ||||||||||||||
Class A Ordinary Shares | Class B Ordinary Shares | Additional Paid-in Capital | Accumulated Deficit | Total Shareholders’ Deficit | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Balance—December 31, 2021 | $ | 6,900,000 | $ | 690 | $ | — | $ | (39,628,234 | ) | $ | (39,627,544 | ) | ||||||||||||||||
Net income | — | — | — | — | — | 12,415,743 | 12,415,743 | |||||||||||||||||||||
Balance—March 31, 2022 (unaudited) | — | $ | — | 6,900,000 | $ | 690 | $ | — | $ | (27,212,491 | ) | $ | (27,211,801 | ) | ||||||||||||||
Remeasurement of redemption value of Class A ordinary shares subject to possible redemption | — | — | — | — | — | (457,180 | ) | (457,180 | ) | |||||||||||||||||||
Net income | — | — | — | — | — | 12,698,180 | 12,698,180 | |||||||||||||||||||||
Balance—June 30, 2022 (unaudited) | — | $ | — | 6,900,000 | $ | 690 | $ | — | $ | (14,971,491 | ) | $ | (14,970,801 | ) | ||||||||||||||
Excess of cash received over fair value of Private Placement Warrants | — | — | — | — | 2,281,600 | — | 2,281,600 | |||||||||||||||||||||
Remeasurement of redemption value of Class A ordinary shares subject to possible redemption | — | — | — | — | (2,281,600 | ) | 1,022,866 | (1,258,734 | ) | |||||||||||||||||||
Net income | — | — | — | — | — | 2,571,400 | 2,571,400 | |||||||||||||||||||||
Balance—September 30, 2022 (unaudited) | — | $ | — | 6,900,000 | $ | 690 | $ | — | $ | (11,377,225 | ) | $ | (11,376,535 | ) | ||||||||||||||
Class B Ordinary Shares (1)(2) | Additional Paid-in Capital | Accumulated Deficit | Total Shareholder’s Equity (Deficit) | |||||||||||||||||
Shares | Amount | |||||||||||||||||||
Balance—March 19, 2021 (inception) | 0— | $ | 0— | $ | 0— | $ | 0— | $ | 0— | |||||||||||
Issuance of Class B ordinary shares to Sponsor | 6,900,000 | 690 | 24,310 | — | 25,000 | |||||||||||||||
Net loss | — | — | — | (18,572 | ) | (18,572 | ) | |||||||||||||
Balance—March 31, 2021 (unaudited) | 6,900,000 | 690 | 24,310 | (18,572 | ) | 6,428 | ||||||||||||||
Net loss | — | — | — | (15,535 | ) | (15,535 | ) | |||||||||||||
Balance—June 30, 2021 (unaudited) | 6,900,000 | $ | 690 | $ | 24,310 | $ | (34,107 | ) | $ | (9,107 | ) | |||||||||
For The Nine Months Ended September 30, | ||||||||
2023 | 2022 | |||||||
Cash Flows from Operating Activities: | ||||||||
Net income | $ | 8,281,262 | $ | 27,685,323 | ||||
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
Change in fair value of derivative warrant liabilities | (1,897,400 | ) | (26,970,400 | ) | ||||
Change in fair value of Working Capital Loan—related party | — | (50,000 | ) | |||||
Income from investments held in Trust Account | (8,737,614 | ) | (1,758,581 | ) | ||||
Changes in operating assets and liabilities: | ||||||||
Prepaid expenses | (33,974 | ) | 111,579 | |||||
Accounts payable | 121,370 | (30,339 | ) | |||||
Accrued expenses | 1,472,611 | 421,758 | ||||||
Net cash used in operating activities | (793,745 | ) | (590,660 | ) | ||||
Cash Flows from Investing Activities: | ||||||||
Cash deposited in Trust Account | (2,760,000 | ) | (2,760,000 | ) | ||||
Cash withdrawn from Trust Account in connection with redemption | 245,963,349 | — | ||||||
Net cash provided by (used in) investing activities | 243,203,349 | (2,760,000 | ) | |||||
Cash Flows from Financing Activities: | ||||||||
Proceeds received from private placement | 2,760,000 | 2,760,000 | ||||||
Proceeds from note payable to related parties | 950,250 | — | ||||||
Redemption of Class A ordinary shares | (245,963,349 | ) | — | |||||
Net cash (used in) provided by financing activities | (242,253,099 | ) | 2,760,000 | |||||
Net change in cash | 156,505 | (590,660 | ) | |||||
Cash—beginning of the period | 1,235,676 | 2,014,340 | ||||||
Cash—end of the period | $ | 1,392,181 | $ | 1,423,680 | ||||
Supplemental disclosure of non-cash activities: | ||||||||
Remeasurement of redemption value of Class A ordinary shares subject to possible redemption | $ | 8,737,614 | $ | 1,715,914 |
Cash Flows from Operating Activities: | ||||
Net loss | $ | (34,107) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||
General and administrative expenses paid by Sponsor in exchange for issuance of Class B ordinary shares | 25,000 | |||
Changes in operating assets and liabilities: | ||||
Accounts payable | 2,273 | |||
Accrued expenses | 6,834 | |||
Net cash used in operating activities | 0— | |||
Cash Flows from Financing Activities: | ||||
Proceeds received note payable from related party | 100,000 | |||
Offering costs paid | (55,665 | ) | ||
Net cash provided by financing activities | 44,335 | |||
Net change in cash | 44,335 | |||
Cash - beginning of the period | 0 | |||
Cash - end of the period | $ | 44,335 | ||
Supplemental disclosure of non-cash operating activities: | ||||
Offering costs included in accounts payable | $ | 34,876 | ||
Offering costs included in accrued expenses | $ | 204,840 | ||
For the Three Months Ended September 30, 2023 | For the Three Months Ended September 30, 2022 | |||||||||||||||
Class A | Class B | Class A | Class B | |||||||||||||
Basic and Diluted net income per ordinary share: | ||||||||||||||||
Numerator: | ||||||||||||||||
Allocation of net income | $ | 1,029,574 | $ | 449,034 | $ | 2,057,120 | $ | 514,280 | ||||||||
Denominator: | ||||||||||||||||
Basic and Diluted weighted average ordinary shares outstanding | 15,820,744 | 6,900,000 | 27,600,000 | 6,900,000 | ||||||||||||
Basic and Diluted net income per ordinary share | $ | 0.07 | $ | 0.07 | $ | 0.07 | $ | 0.07 | ||||||||
For the Nine Months Ended September 30, 2023 | For the Nine Months Ended September 30, 2022 | |||||||||||||||
Class A | Class B | Class A | Class B | |||||||||||||
Basic and Diluted net income per ordinary share: | ||||||||||||||||
Numerator: | ||||||||||||||||
Allocation of net income | $ | 6,409,664 | $ | 1,871,598 | $ | 22,148,258 | $ | 5,537,065 | ||||||||
Denominator: | ||||||||||||||||
Basic and Diluted weighted average ordinary shares outstanding | 23,630,434 | 6,900,000 | 27,600,000 | 6,900,000 | ||||||||||||
Basic and Diluted net income per ordinary share | $ | 0.27 | $ | 0.27 | $ | 0.80 | $ | 0.80 | ||||||||
August 15, 2023 | ||||
Risk-free interest rate | 5.36 | % | ||
Remaining life of SPAC | 0.62 | |||
Underlying stock price | $ | 10.00 | ||
Probability of transaction | 10 | % |
Class A ordinary shares subject to possible redemption, December 31, 2021 | $ | 276,000,000 | ||
Plus: | ||||
Increase redemption value of Class A ordinary shares subject to possible redemption in connection with extension payment made by the Sponsor | 2,760,000 | |||
Remeasurement of Class A ordinary shares subject to possible redemption amount | 4,182,286 | |||
Class A ordinary shares subject to possible redemption, December 31, 2022 | 282,942,286 | |||
Plus: | ||||
Increase redemption value of Class A ordinary shares subject to possible redemption in connection with extension payment made by the Sponsor | 2,760,000 | |||
Remeasurement of Class A ordinary shares subject to possible redemption amount | 2,732,154 | |||
Class A ordinary shares subject to possible redemption, March 31, 2023 | 288,434,440 | |||
Remeasurement of Class A ordinary shares subject to possible redemption amount | 2,522,626 | |||
Class A ordinary shares subject to possible redemption, June 30, 2023 | 290,957,066 | |||
Redemption of Class A ordinary shares subject to possible redemption | (245,963,349 | ) | ||
Remeasurement of Class A ordinary shares subject to possible redemption amount | 3,482,834 | |||
Class A ordinary shares subject to possible redemption, September 30, 2023 | $ | 48,476,551 | ||
Description | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | |||||||||
Assets: | ||||||||||||
Investments held in Trust Account-Money Market Funds | $ | 48,576,551 | $ | — | $ | — | ||||||
Liabilities: | ||||||||||||
Derivative Warrant Liabilities-Public Warrants | $ | 2,484,000 | $ | — | $ | — | ||||||
Derivative Warrant Liabilities-Private Warrants | $ | — | $ | $ | 2,246,400 | |||||||
Working Capital Loan—Related Party | $ | — | $ | — | $ | 1,100,250 |
Description | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | |||||||||
Assets: | ||||||||||||
Investments held in Trust Account-Money Market Funds (1) | $ | 283,041,710 | $ | — | $ | — | ||||||
Liabilities: | ||||||||||||
Derivative Warrant Liabilities-Public Warrants | $ | 3,519,000 | $ | — | $ | — | ||||||
Derivative Warrant Liabilities-Private Warrants | $ | — | $ | — | $ | 2,556,800 | ||||||
Working Capital Loan—Related Party | $ | — | $ | — | $ | 150,000 |
(1) | Excludes $576 of cash balance held within the Trust Account as of December 31, 2022 |
As of September 30, 2023 | As of December 31, 2022 | |||||||
Exercise price | $ | 11.50 | $ | 11.50 | ||||
Stock price | $ | 10.57 | $ | 10.20 | ||||
Volatility | 6.9 | % | 4.40 | % | ||||
Term (years) | 5.50 | 5.42 | ||||||
Risk-free rate | 4.50 | % | 3.91 | % | ||||
Dividend yield | 0.00 | % | 0.00 | % |
Derivative warrant liabilities as of December 31, 2021 | $ | 11,360,000 | ||
Issuance of Additional Private Placement Warrants | 478,400 | |||
Change in fair value of derivative warrant liabilities | (9,281,600 | ) | ||
Derivative warrant liabilities as of December 31, 2022 | 2,556,800 | |||
Issuance of Additional Private Placement Warrants | 552,000 | |||
Change in fair value of derivative warrant liabilities | 1,571,200 | |||
Derivative warrant liabilities as of March 31, 2023 (unaudited) | $ | 4,680,000 | ||
Change in fair value of derivative warrant liabilities | (3,182,400 | ) | ||
Derivative warrant liabilities as of June 30, 2023 (unaudited) | $ | 1,497,600 | ||
Change in fair value of derivative warrant liabilities | 748,800 | |||
Derivative warrant liabilities as of September 30, 2023 (unaudited) | $ | 2,246,400 | ||
Working Capital Loan—related party as of December 31, 2021 | $ | 200,000 | ||
Change in fair value of Working Capital Loan—related party | (50,000 | ) | ||
Working Capital Loan—related party as of December 31, 2022 | 150,000 | |||
Change in fair value of Working Capital Loan—related party | — | |||
Working Capital Loan—related party as of March 31, 2023 (unaudited) | 150,000 | |||
Change in fair value of Working Capital Loan—related party | — | |||
Working Capital Loan—related party as of June 30, 2023 (unaudited) | 150,000 | |||
Additional Working Capital Loan—related party | 950,250 | |||
Change in fair value of Working Capital Loan—related party | — | |||
Working Capital Loan—related party as of September 30, 2023 (unaudited) | $ | 1,100,250 | ||
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
References to the “Company,” “Kensington Capital Acquisition Corp. V,” “Kensington,” “our,” “us” or “we” refer to Kensington Capital Acquisition Corp. V. 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
Overview
We are a blank check company incorporated as a Cayman Islands exempted company on March 19, 2021. We were incorporated for the purpose of effecting a Business Combination.
As of JuneSeptember 30, 2021,2023, we havehad not yet commenced operations. All activity for the period from March 19, 2021 (inception) through JuneSeptember 30, 20212023 relates to our formation and the initial public offering (the “Initial Public Offering”), which is described below. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. We will generate
Our sponsor is Kensington Capital Sponsor V LLC, a Delaware limited liability company (the “Sponsor”). The registration statement for our Initial Public Offering was declared effective on August 12, 2021. On August 17, 2021, we consummated the Initial Public Offering of 27,600,000 units (the “Units” and, with respect to the Class A ordinary shares included in the Units being offered, the “Public Shares”), which includesincluded the exercise in full of the underwriters’ option to purchase 3,600,000 Units, at $10.00 per Unit, generating gross proceeds of $276.0 million, and incurring offering costs of approximately $15.7 million, of which approximately $9.7 million and approximately $889,000 was for deferred underwriting commissions and offering costs allocated to derivate warrant liabilities, respectively.
Simultaneously with the closing of the Initial Public Offering, we consummated the private placement (“(the “Initial Private Placement” and together with the Additional Private Placements (as defined below), the “Private Placements”) of 11,360,000 warrants (each, a “Private Placement Warrant” and collectively with the Additional Private Placement Warrants ( as defined below), the “Private Placement Warrants”) at a price of $0.75 per Private Placement Warrant to our Sponsor, generating proceeds of approximately $8.5 million.
Upon closing of the Initial Public Offering and the Initial Private Placement, $276.0 million ($10.00 per Unit) of the net proceeds of the sale of the Units in the Initial Public Offering and of the Private Placement Warrants in the Initial Private Placement were placed in a trust account (“Trust(the “Trust Account”) located in the United States with Continental Stock Transfer & Trust Company acting as trustee, and invested only in U.S. “government securities,” within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 185 days or less, or in money market funds meeting certain conditions under Rule
24
On August 11, 2023 and August 14, 2023, the Sponsor and the Company entered into agreements (the “Non-Redemption Agreements”) with several unaffiliated third parties in exchange for them agreeing not to redeem an aggregate of 2,600,000 Class A ordinary shares (the “Non-Redeemed Shares”) of the Company at the extraordinary general meeting called by the Company (the “Extraordinary General Meeting”) to approve, among other proposals, an extension of time for the Company to consummate an initial business combination from August 17, 2023 to August 17, 2024 (the“ Extension”). In exchange for the foregoing commitment not to redeem such shares, the Sponsor has agreed to transfer to such investors an aggregate of 568,750 Class B ordinary shares of the Company held by the Sponsor immediately following the consummation of an initial business combination if they continue to hold such Non-Redeemed Shares through the Extraordinary General Meeting. The extension to consummate a business combination from August 17, 2023 to August 17, 2024 was approved by the Company’s shareholders on August 15, 2023 and the investors subject to the Non-Redemption Agreements did not redeem their shares. The Company estimated the aggregate fair value of the Sponsor shares attributable to the Non-Redemption Agreements to be $0.6 million or $0.97 per share. In connection with the Extraordinary General Meeting, holders of 23,057,267 Class A ordinary shares exercised their right to redeem their shares for cash at a redemption price of approximately $10.67 per share, for an aggregate redemption amount of approximately $246.0 million.
The terms of the Non-Redemption Agreements are further described in the Company’s Current Report on Form 8-K filed with the SEC on August 14, 2023. The foregoing description of the Non-Redemption Agreements is qualified in its entirety by reference to the form thereof, a copy of which is filed as Exhibit 10.4 to this Quarterly Report on Form 10-Q and incorporated herein by reference.
Our management has broad discretion with respect to the specific application of the net proceeds of its Initial Public Offering and the sale of Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination.
We initially had 12 months from the closing of the Initial Public Offering or August 17, 2022, which is extendableto consummate the initial Business Combination. However, we were able, by resolution of our board of directors at the option of our Sponsor’s optionSponsor, to extend the period of time we had to consummate an initial Business Combination up to 24two times, each by an additional 6 months as describe above (the “Combination Period”)(for a total of up to an additional 12 months from the closing of the Initial Public Offering), we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a
The foregoing description of the amendment to the Company’s Memorandum and Articles does not purport to be complete and is qualified in its entirety by reference to the full text of such amendment, a copy of which is attached as Exhibit 3.1 hereto and incorporated by reference herein.
Termination of Business Combination
On April 6, 2023, we entered into a business combination agreement (the “Business Combination Agreement”) with Arrival, a joint stock company (société anonyme) governed by the laws of the Grand Duchy of Luxembourg, having its registered office at 60A, rue des Bruyères, L-1274 Howald, Grand Duchy of Luxembourg and registered with the RCS under number B248209 (“Arrival”).
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Effective as of July 3, 2023 and in accordance with Section 9.01(a) of the Business Combination Agreement, the Company and Arrival mutually agreed to terminate the Business Combination Agreement, pursuant to a letter agreement between Arrival and the Company (the “Termination Letter”). Under the Termination Letter, the Company waived and released all claims or causes of action against Arrival and its Non-Party Affiliates (as defined in the Trust Account and not previously released to us to pay our taxes, net of taxes payable (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish Public Shareholders’ rights as shareholders (including the right to receive further liquidating distributions, if any)Termination Letter), and (iii) as promptly as reasonably possible following such redemption, subjectArrival waived and released all claims or causes of action against the Company and its Non-Party Affiliates, that have been or could have been, could now be, or could in the future be based upon, in respect of, arise under, out or by reason of, be connected with, or relate in any manner to the approval of our remaining shareholders and board of directors, dissolve and liquidate, subject in each case to our obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to our warrants, which will expire worthless if the Company fails to complete its initial Business Combination withinAgreement or any other Transaction Document (as defined in the Business Combination Period.
The terms of the Termination Letter are further described in the Company’s Current Report on Form 8-K filed with the SEC on July 3, 2023. The foregoing description of the Termination Letter is qualified in its entirety by reference to the full text of such agreement, a copy of which is filed as Exhibit 10.3 to this Quarterly Report on Form 10-Q and incorporated herein by reference.
Liquidity and Capital Resources
As of JuneSeptember 30, 2021,2023, we had approximately $44,000$1.4 million in itsour operating bank account and a working capital deficit of approximately $304,000.
Our liquidity needs through June 30, 2021prior to the consummation of the Initial Public Offering were satisfied through the payment of $25,000 from theour Sponsor to cover for certain expenses on behalf of us in exchange for issuance of Founder Shares (as defined in Note 4)4 to Unaudited Condensed Financial Statements), and the loan from the Sponsor of approximately $100,000$150,000 under the Note (as defined in Note 4)4 to Unaudited Condensed Financial Statements), which was converted into a Working Capital Loan (as defined in Note 4)4 to Unaudited Condensed Financial Statements) on August 17, 2021. Subsequent to the consummation of the Initial Public Offering, our liquidity has been satisfied through the net proceeds from the consummation of the Initial Public Offering and the Initial Private Placement held outside of the Trust Account. In addition, in order to finance transaction costs in connection with a Business Combination, theour Sponsor or an affiliate of theour Sponsor, or certain of our officers and directors may, but are not obligated to, provide us Working Capital Loans (see Note 4)4 to Unaudited Condensed Financial Statements). As of JuneSeptember 30, 2021, there were no balance outstanding under2023 and December 31, 2022, the fair value of the Working Capital Loan.
On August 29, 2023, the Sponsor agreed to loan to us, an aggregate of up to $950,250 to cover expenses related to the Company’s initial business combination pursuant to a promissory note (the “Second Note”). The Second Note is noninterest bearing and payable on the earliest of: (i) the consummation of the Company’s initial business combination unless converted into working capital warrants at the option of the Sponsor, at a price of $0.75 per warrant, as described in the registration statement that the Company filed in connection with the initial public offering of its securities, (ii) August 17, 2024, and (iii) the liquidation of the Company. Such working capital warrants would be identical to the private placement warrants issued to the Sponsor in a private placement in connection with the Company’s initial public offering. The Company drew down $950,250 of the Second Note on August 29, 2023. As of September 30, 2023 and December 31, 2022, the fair value of the Second Note was $950,250 and $0, respectively.
The terms of the Second Note are further described in the Company’s Current Report on Form 8- K filed with the SEC on August 29, 2023. The foregoing description of the Second Note is qualified in its entirety by reference to the full text thereof, a copy of which is filed as Exhibit 10.2 to this Quarterly Report on Form 10-Q and incorporated herein by reference.
Based upon the analysis above, management has determined that we do not have sufficient liquidity to meet our management believesanticipated obligations through the liquidation date or consummation of a merger. The Company must consummate a business combination by August 17, 2024. It is uncertain that we will be able to consummate a Business Combination by this time. If a Business Combination is not consummated by this date, there will be a mandatory liquidation and subsequent dissolution of our company. In connection with the Company’s assessment of going concern considerations in accordance with the ASC 205-40, our management has determined that the liquidity condition and mandatory liquidation, should a Business Combination not occur, and potential subsequent dissolution raise substantial doubt about our ability to continue as a going concern.
Risks and Uncertainties
In February 2022, the Russian Federation and Belarus commenced a military action with the country of Ukraine. As a result of this action, various nations, including the United States, have sufficient working capitalinstituted economic sanctions against the
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Russian Federation and borrowing capacity to meet our needs throughBelarus. Further, the earlierimpact of this action and related sanctions on the world economy are not determinable as of the consummationdate of these unaudited condensed financial statements. The specific impact on our financial condition, results of operations, and cash flows is also not determinable as of the date of these unaudited condensed financial statements.
On August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things, a new U.S. federal 1% excise tax on certain repurchases of stock by publicly traded U.S. domestic corporations and certain U.S. domestic subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023. The excise tax is imposed on the repurchasing corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is generally 1 % of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. The U.S. Department of the Treasury (the “Treasury”) has been given authority to provide regulations and other guidance to carry out and prevent the abuse or avoidance of the excise tax. Any share redemption or other share repurchase that occurs after December 31, 2022, in connection with a Business Combination, extension vote or otherwise, may be subject to the excise tax. Whether and to what extent we would be subject to the excise tax in connection with a Business Combination, extension vote or otherwise will depend on a number of factors, including (i) the fair market value of the redemptions and repurchases in connection with the Business Combination, extension or otherwise, (ii) the structure of a Business Combination, (iii) the nature and amount of any private investment in public equity (PIPE) financing or oneother equity issuances in connection with a Business Combination ( or otherwise issued not in connection with a Business Combination but issued within the same taxable year of a Business Combination) and (iv) the content of regulations and other guidance from this filing. Over this time period, we willthe Treasury. In addition, because the excise tax would be usingpayable by us and not by the funds held outsideredeeming holder, the mechanics of any required payment of the Trust Account for paying existing accounts payable, identifying and evaluating prospective initialexcise tax have not been determined. The foregoing could cause a reduction in the cash available on hand to complete a Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selectingand in our ability to complete a Business Combination.
On December 27, 2022, the target businessTreasury and Internal Revenue Service (“IRS”) issued a Notice 2023-2 (‘‘Notice”), which provided interim guidance regarding the application of the corporate stock repurchase excise tax until the issuance of proposed regulations. The Notice excluded the distributions complete liquidation of a corporation from the base of the excise tax. The Notice also excludes from the scope of the excise tax any distribution made during the taxable year in which a corporation fully liquidates and dissolves, even if a distribution precedes the formal decision to merge with or acquire, and structuring, negotiating and consummating the Business Combination.
Results of Operations
Our entire activity from March 19, 2021 (inception) through JuneSeptember 30, 2021,2023 was in preparation for anthe Initial Public Offering.Offering and the search for a prospective initial Business Combination. We will not generate any operating revenues until the closing and completion of our initial Business Combination, at the earliest.
For the three months ended JuneSeptember 30, 2021,2023, we had net income of approximately $1.5 million, which consisted of approximately $3.5 million of income from investments held in the Trust Account, partly offset by approximately $387,000 in general and administrative expenses, $40,000 in administrative expenses-related party, and a non-cash loss of approximately $1.6 million for the change in fair value of derivative warrant liabilities.
For the three months ended September 30, 2022, we had net income of approximately $2.6 million, which consisted of a non-cash gain of approximately $1.5 million for the change in fair value of derivative warrant liabilities, and approximately $1.3 million of income from investments held in the Trust Account, partly offset by approximately $157,000 in general and administrative expenses, and $60,000 in administrative expenses-related party.
For the nine months ended September 30, 2023, we had net income of approximately $8.3 million, which consisted of a non-cash gain of approximately $1.9 million for the change in fair value of derivative warrant liabilities and approximately $8.7 million of income from investments held in the Trust Account, partly offset by approximately $2.3 million in general and administrative expenses, and $60,000 in administrative expenses-related party.
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For the nine months ended September 30, 2022, we had a lossnet income of approximately $16,000,$27.7 million, which consisted solely of a non-cash gain of approximately $27.0 million for the change in fair value of derivative warrant liabilities, $50,000 in change in fair value of Working Capital Loan – related party and approximately $1.8 million of income from investments held in the Trust Account, partly offset by approximately $914,000 in general and administrative expenses.
Contractual Obligations
Registration Rights
The holders of Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans, if any, and any Class A ordinary shares issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans and upon conversion of the Founder Shares are entitled to registration rights pursuant to a registration rights agreement signed upon the consummation of the Initial Public Offering. These holders are entitled to certain demand and “piggyback” registration rights. We will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
We granted the underwriters a
The underwriters were entitled to an underwriting discount of $0.20 per unit, or approximately $5.5 million in the aggregate, paid upon the closing of the Initial Public Offering. $0.35 per unit, or approximately $9.7 million in the aggregate will be payable to the underwriters for deferred underwriting commissions. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that we complete a Business Combination, subject to the terms of the underwriting agreement.
Contingent Fee Arrangement
On August 3, 2023, the Company entered into an arrangement with J.V.B Financial Group, acting through its Cohen & Company Capital Markets division (“CCM”) to obtain capital market advisory services and to act as the Company’s placement agent in connection with raising capital with a specific target in its search for a Business Combination with an unaffiliated third party (“Target”). CCM would be entitled to an advisor fee of $2.0 million and a transaction fee of an amount equal to 5% of the sum of the gross proceeds raised from investors and received by the Company and Target plus proceeds released from the Trust Account without restriction with respect to any of the Class A ordinary shares that did not redeem such shares in connection with the Extension or the Business Combination (“Arrangement”). The Company may pay CCM a discretionary fee of $1.0 million if the Company determines in its sole discretion that the performance of CCM warrants such additional fee. Per the Arrangement, the fees for these services is contingent upon the closing of a Business Combination and therefore not included as liabilities on the accompanying balance sheets. Under the arrangement, the Company will also reimburse CCM for reasonable expenses. As of September 30, 2023 and December 31, 2022, no expenses have been claimed.
Service and Administrative Fees
On August 12, 2021, we entered into an agreement with DEHC LLC, an affiliate the Company’s Chief Financial Officer, pursuant to which we agreed to pay for service and administrative fees of $20,000 per month for 18 months (upon completion(or February 12, 2023). On August 29, 2023, the agreement was amended to extend the services to begin on August 17, 2023 through August 17, 2024 with the same monthly payment. For the three months ended September 30, 2023 and 2022, the Company incurred $40,000 and $60,000, respectively, for such expenses, included as general and administrative expenses-related party on the statements of operations contained herein. For the nine months ended September 30, 2023 and 2022, the Company incurred $60,000 and $180,000, respectively, for such expenses, included as general and administrative expenses-related party on the statements of operations contained herein. As of September 30, 2023 and 2022, we had paid in full for such services.
The terms of the initial Business Combination, any portionamendment to the services agreement are further described in the Company’s Current Report on Form 8-K filed with the SEC on August 29, 2023. The foregoing description of the amounts due that have not yet been paid will accelerate).amendment to the services agreement is qualified in its entirety by reference to the full text thereof, a copy of which is filed as Exhibit 10.3 to this Quarterly Report on Form 10-Q and incorporated herein by reference.
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Critical Accounting Policies and Estimates
This management’s discussion and analysis of our financial condition and results of operations is based on our unaudited condensed financial statements, which have been prepared in accordance with U.S. 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 condensed 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. We have identified the following as our critical accounting policies:
Derivative Financial Instruments
We evaluate our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging.” For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value on the grant date and is then re-valued at each reporting date, with changes in the fair value reported in the statementcondensed statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. The determination of the fair value of the warrant liabilities may be subject to change as more current information becomes available and accordingly the actual results could differ significantly. Derivative warrant liabilities are classified as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.
Class A Ordinary Shares Subject to Possible Redemption
The Company accounts for ourits Class A ordinary shares subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.”480. Class A ordinary shares subject to mandatory redemption (if any) isare classified as liability instruments and are measured at fair value. Conditionally redeemable Class A ordinary shares (including Class A ordinary shares that featuresfeature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within ourthe Company’s control) areis classified as temporary equity. At all other times, Class A ordinary shares isare classified as shareholders’ equity. OurThe Company’s Class A ordinary shares feature certain redemption rights that are considered to be outside of ourthe Company’s control and subject to the occurrence of uncertain future events. Accordingly, 4,542,733 and 27,600,000 Class A ordinary shares subject to possible redemption will beare presented at redemption value as temporary equity, outside of the shareholders’ equitydeficit section of ourthe Company’s condensed balance sheet.
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of the Class A ordinary shares subject to possible redemption to equal the redemption value at the end of each reporting period. This method would view the end of the reporting period as if it were also the redemption date for the security. Effective with the closing of the Initial Public Offering, costs associatedthe Company recognized the remeasurement from initial book value to redemption amount, which resulted in charges against additional paid-in capital (to the extent available) and accumulated deficit.
Offering Costs Associated with Initial Public Offering
Offering costs consistconsisted of legal, accounting, underwriting fees and other costs incurred through the balance sheet dateInitial Public Offering that were directly related to the Initial Public Offering. Offering costs arewere allocated to the separable financial instruments issued in the Initial Public Offering based on a relative fair value basis, compared to total proceeds received. Offering costs allocated toassociated with derivative warrant liabilities arewere expensed as incurred and presented as
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Net lossIncome per ordinary share
The Company complies with accounting and disclosure requirements of FASB ASC Topic 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 lossincome per ordinary share is computedcalculated by dividing the net lossincome by the weighted average numbershares of ordinary shares outstanding duringfor the period, excluding ordinary shares subject to forfeiture by the Sponsor. Weighted average numberrespective period.
The calculation of ordinary shares as of June 30, 2021 were reduced fordiluted net income does not consider the effect of the warrants underlying the Units sold in the Initial Public Offering (including the consummation of the over-allotment) and the Private Placement Warrants to purchase an aggregate of 900,00039,420,000 Class A ordinary shares in the calculation of diluted income (loss) per share, because their exercise is contingent upon future events and their inclusion would be anti-dilutive under the treasury stock method. The Company has considered the effect of Class B ordinary shares that were subject to forfeiture ifexcluded from the weighted average number of basic shares outstanding as they were contingent on the exercise of over-allotment option was not exercised in full or in part by the underwriters (see Note 5). Asunderwriters. Since the contingency was satisfied, the Company has included these shares in the weighted average number as of June 30, 2021, we did not have anythe beginning of the period to determine the dilutive securities and other contracts that could, potentially, be exercised or converted intoimpact of these shares. Remeasurement of the redeemable Class A ordinary shares and thenis excluded from net income per share inas the earnings. As a result, diluted loss per ordinary share is the same as basic loss per ordinary share for the period presented.
Recent Accounting Pronouncements
In August 2020,June 2022, the FASB issued ASU
Our management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on our unaudited condensed financial statements.
Off-Balance
As of JuneSeptember 30, 2021,2023, we did not have any
JOBS Act
On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We will qualify as an “emerging growth company” and under the JOBS Act will be allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for
Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of
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performance and comparisons of the CEO’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our Initial Public Offering or until we are no longer an “emerging growth company,” whichever is earlier.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting company as defined by Rule
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended September 30, 2023, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial officer has concluded that during the period covered by this report, our disclosure controls and procedures were effective as of September 30, 2023.
Disclosure controls areand procedures that are designed with the objective of ensuringto ensure that information required to be disclosed by us in our reports filed under the Exchange Act such as this Quarterly Report on Form
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended September 30, 2023 covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II—II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
As of the date of this Quarterly Report on Form
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
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Item 5. Other Information
None.
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Item 6. Exhibits
* | Filed herewith. |
** | These certifications are furnished to the SEC pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing. |
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SIGNATURES
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 hereuntothereunto duly authorized.
KENSINGTON CAPITAL ACQUISITION CORP. V | ||||||||
Date: | /s/ Justin Mirro | |||||||
Name: | Justin Mirro | |||||||
Title: | Chief Executive Officer (Principal Executive Officer) |
Date: November 13, 2023 | ||||||||||
/s/ Daniel Huber | ||||||||||
Name: | Daniel Huber | |||||||||
Title: | Chief Financial Officer (Principal |
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