On January 12, 2023, we issued an unsecured promissory note in the total principal amount of up to $2,160,000 (the “Extension Funding Promissory Note”) to the Sponsor and the Sponsor funded the initial principal amount of $720,000. The Extension Funding Promissory Note does not bear interest and matures upon closing of our initial business combination. In the event that we do not consummate a business combination, the Promissory Note will be repaid only from amounts remaining outside of the Trust Account, if any. The proceeds of the Extension Funding Promissory Note will be deposited in the Trust Account. Up to $1,500,000 of the total principal amount of the Extension Funding Promissory Note may be converted, in whole or in part, at the option of the Lender into warrants of us at a price of $1.50 per warrant, which warrants will be identical to the private placement warrants issued to the Sponsor at the time of the initial public offering of us. As of September 30, 2022, an aggregate of $1,440,000 has been drawn down on the Promissory Note and deposited into the Trust Account to cover the extension through July 12, 2023. On July 12, 2023 and August 9, 2023, the Company drew an additional $240,000, for an aggregate of $480,000, under the Extension Funding Promissory Note and deposited it into the Trust Account to cover the extension through September 12, 2023.
In connection with the vote to approve the First Extension Amendment Proposal, the holders of 32,924,036 Class A ordinary shares, par value $0.0001 per share, of us properly exercised their right to redeem their shares for cash at a redemption price of approximately $10.15 per share, for an aggregate redemption amount of approximately $334.2 million.
On October 3, 2023, the Company cancelled the Extension Funding Promissory Note.
On October 12, 2023, the Company held the Second Extension Meeting, to amend the Company’s memorandum and articles of association (the “Second Articles Amendment”) to (i) extend Termination Date from October 12, 2023 to November 12, 2023 (the “Second Articles Extension Date”) and to allow the Company, without another shareholder vote, to elect to extend the Termination Date to consummate a business combination on a monthly basis for up to eleven times by an additional one month each time after the Second Articles Extension Date, by resolution of the Company’s board of directors if requested by Leo Investors II Limited Partnership, a Cayman Islands exempted limited partnership, and upon five days’ advance notice prior to the applicable deadlines, until October 12, 2024, or a total of up to twelve months after the Original Termination Date, unless the closing of an initial business combination shall have occurred prior thereto (the “Second Extension Amendment Proposal”) and (ii) remove the limitation that the Company may not redeem public shares to the extent that such redemption would result in the Company having net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act, of less than $5,000,001 (the “Redemption Limitation”) in order to allow the Company to redeem public shares, irrespective of whether such redemption would exceed the Redemption Limitation (the “Redemption Limitation Amendment Proposal”). The shareholders of the Company approved the Second Extension Amendment Proposal and the Redemption Limitation Amendment Proposal at the Second Extension Meeting and on October 12, 2023, the Company filed the Second Articles Amendment with the Registrar of Companies of the Cayman Islands. As disclosed in the proxy statement relating to the Second Extension Meeting, the Lender agreed that if each of the Second Extension Amendment Proposal and the Redemption Limitation Amendment Proposal is approved, it will contribute to the Company as a loan, within ten (10) business days of the date of the Second Extension Meeting, with $240,000 to be deposited into the trust account established in connection with our initial public offering. In addition, in the event we do not consummate an initial business combination by November 12, 2023, the Lender will contribute to us as a loan up to $2,640,000 in eleven equal installments to be deposited into the Trust Account for each of eleven one-month extensions following November 12, 2023.
Accordingly, on October 16, 2023, the Company issued a second extension funding unsecured promissory note in the total principal amount of up to $2,880,000 (the “Second Extension Funding Promissory Note”) to the Sponsor and the Sponsor funded the initial principal amount of $240,000. The Second Extension Funding Promissory Note does not bear interest and matures upon closing of the Company’s initial business combination. In the event that the Company does not consummate a business combination, the Second Extension Funding Promissory Note will be repaid only from amounts remaining outside of the Trust Account, if any. The proceeds of the Second Extension Funding Promissory Note will be deposited in the Trust Account. Up to $1,500,000 of the total principal amount of the Second Extension Funding Promissory Note may be converted, in whole or in part, at the option of the Lender into warrants of the Company at a price of $1.50 per warrant, which warrants will be identical to the private placement warrants issued to the Sponsor at the time of the initial public offering of the Company. To date, the Company has borrowed $240,000 under the Second Extension Funding Promissory Note, which funds have been deposited into the Trust Account.
In connection with the vote to approve the Second Extension Amendment Proposal and the Redemption Limitation Amendment Proposal, the holders of 586,767 Class A Ordinary Shares (12.8% of the Class A Ordinary Shares outstanding prior to the Second Extension Meeting) properly exercised their right to redeem their shares for cash at a redemption price of approximately $10.88 per share, for an aggregate redemption amount of approximately $6,385.788. After giving effect to the Second Articles Amendment Redemptions, there are 3,989,197 Class A Ordinary Shares outstanding.
On November 12, 2023, the Company determined not to extend the Termination Date by another month, and no additional funds were deposited into the Trust Account.
Liquidation, Dissolution and Winding up of the Company and Redemption of Class A Ordinary Shares
As the Company has not consummated an initial business combination by November 12, 2023, pursuant to the Amended and Restated Memorandum and Articles of Association, the Company’s board of directors has determined to (i) cease all operations except for the purpose of winding up; (ii) redeem all outstanding Class A ordinary shares on or about December 4, 2023, at the Per-Share Redemption Amount, payable in cash, based on the amount in the Trust Account as of November 15, 2023, while retaining $100,000 of the interest earned on the Trust Account to pay dissolution expenses; and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the holders of the Company’s Class B ordinary shares and the board of directors, liquidate and dissolve. Following the redemption, the shares of the Class A ordinary shares will no longer be outstanding and the warrants will expire in accordance with their terms upon our liquidation.
On November 17, 2023, trading of the Public Shares was suspended on the NYSE. We expect that the NYSE will thereafter file with the SEC a Form 25 to delist and deregister the Public Shares under Section 12(b) of the Exchange Act. As a result, the Public Shares will no longer be listed on the NYSE. The Company thereafter intends to file a Form 15 Certification and Notice of Termination of Registration with the SEC, requesting that the Company’s reporting obligations under Sections 13 and 15(d) of the Exchange Act be terminated with respect to the Public Shares.
Liquidity and Going Concern
As of September 30, 2023, we had approximately $591 in our operating account and working capital deficit of approximately $3.8 million.
Our liquidity needs had been satisfied through a payment of $25,000 from our Sponsor to cover certain of our expenses in exchange for the issuance of the Founder Shares, a loan of approximately $169,000 from our Sponsor pursuant to a promissory note. We repaid the promissory note in full on January 19, 2021. Subsequent from 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 Private Placement held outside of the Trust Account. In addition, in order to finance transaction costs in connection with a business combination, our Sponsor or an affiliate of our Sponsor, or certain of our officers and directors may, but are not obligated to, provide us Working Capital Loan. As of September 30, 2023 and December 31, 2022, there were no amounts outstanding under any Working Capital Loan.
We may need to raise additional capital through loans or additional investments from our Sponsor, an affiliate of our Sponsor, or our officers or directors. Our officers, directors and Sponsor, or their affiliates, may, but are not obligated to, loan us funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet our working capital needs. Accordingly, we may not be able to obtain additional financing. If we are unable to raise additional capital, we may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, reducing overhead expenses, and extending the terms and due dates of certain accrued expenses and other liabilities. We cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all. Based upon the analysis above, management has determined that the above conditions indicate that it may be probable that we would not be able to meet its obligations within one year after the date that the unaudited condensed consolidated financial statements are available to be issued. In connection with our assessment of going concern considerations in accordance with FASB Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” we have determined that the liquidity condition and mandatory liquidation and subsequent dissolution raises substantial doubt about our ability to continue as a going concern. An initial business combination was not consummated by November 12, 2023, so there will be a mandatory liquidation and subsequent dissolution of the Company. No adjustments have been made to the carrying amounts of assets or liabilities should we be required to liquidate after November 12, 2023 (or October 12, 2024 upon the monthly extension payment as described in Note 1). The unaudited condensed consolidated financial statements do not include any adjustment that might be necessary due to the mandatory liquidation and subsequent dissolution of the Company.
Management continues to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of our operations and/or search for a target company, the specific impact is not readily determinable as of the date of the balance sheet. The unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Results of Operations
Our entire activity since inception up to September 30, 2023 was in preparation for our formation and the Initial Public Offering, and since the closing of the Initial Public Offering, the search for business combination candidates. We will not be generating any operating revenues until the closing and completion of our initial business combination.
For the three months ended September 30, 2023, we had net income of approximately $136,000, which consisted of approximately $389,000 of net gain on the cash and investments held in the Trust Account, partially offset by approximately $224,000 general and administrative expenses and $30,000 in related party general and administrative expenses.
For the three months ended September 30, 2022, we had net income of approximately $1.8 million, which consisted of a gain of approximately $802,000 in change in the fair value of warrant liabilities and approximately $1.2 million of net gain on the investments held in the Trust Account, partially offset by approximately $214,000 general and administrative expenses and $30,000 in related party general and administrative expenses.
For the nine months ended September 30, 2023, we had net income of approximately $421,000, which consisted of approximately $1.5 million of net gain on the cash and investments held in the Trust Account, partially offset by a loss of $461 in change in the fair value of warrant liabilities, approximately $961,000 general and administrative expenses and $90,000 in related party general and administrative expenses.
For the nine months ended September 30, 2022, we had net income of approximately $9.5 million, which consisted of a gain of approximately $8.8 million in change in the fair value of warrant liabilities and approximately $1.5 million of net gain on the investments held in the Trust Account, partially offset by approximately $722,000 general and administrative expenses and $90,000 in related party general and administrative expenses.
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