| ☒ | 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 | 001-39814 | 98-1563902 | ||
(State or other jurisdiction of incorporation or organization) | (Commission File Number) | (I.R.S. Employer Identification No.) |
251 Lytton Avenue, Suite 200Palo Alto, CA | 94301 | |
(Address of principal executive offices) | (Zip Code) |
Title of each class | Trading Symbol | Name of each exchange on Which Registered | ||
Units, each consisting of one Class A ordinary share and one-third of one redeemable warrant | COOLU | The Nasdaq Stock Market LLC | ||
| Class A ordinary share, par value $0.0001 per share. | COOL | The Nasdaq Stock Market LLC | ||
| Warrants, each whole warrant exercisable for one Class A ordinary share at an exercise price of $11.50 | COOLW | The Nasdaq Stock Market LLC |
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☒ | Smaller reporting company | ☒ | |||
| Emerging growth company | ☒ | |||||
| • | understatement of total liabilities by approximately $3.0 million as of June 30, 2023; |
| • | understatement of accumulated deficit and total shareholders’ deficit by approximately $3.0 million as of June 30, 2023, respectively; |
| • | understatement of transactions costs and net loss by $102,000 for the three and six months ended June 30, 2023 |
| • | understatement of net loss per Class A redeemable, Class A nonredeemable and Class B ordinary shares by $0.01 for the three and six months ended June 30, 2023. |
CORNER GROWTH ACQUISITION CORP.
Quarterly Report on Form 10-Q/A
TABLE OF CONTENTS
ITEM 1. | CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (RESTATED). |
As of June 30, 2023 | As of December 31, 2022 | |||||||
(unaudited - restated) | ||||||||
ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | 27,132 | $ | 31,547 | ||||
| Prepaid expenses | 116,220 | 268,736 | ||||||
| Total current assets | 143,352 | 300,283 | ||||||
| Cash and marketable securities held in Trust Account | 4,436,155 | 15,489,507 | ||||||
Total Assets | $ | 4,579,507 | $ | 15,789,790 | ||||
LIABILITIES, CLASS A ORDINARY SHARES SUBJECT TO POSSIBLE REDEMPTION AND SHAREHOLDERS’ DEFICIT | ||||||||
Current liabilities | ||||||||
| Due to related party | $ | 1,460,376 | $ | 522,500 | ||||
| Due to shareholders | — | 3,262,655 | ||||||
| Accrued expenses | 1,727,830 | 932,555 | ||||||
| Total current liabilities | 3,188,206 | 4,717,710 | ||||||
| Warrant liabilities | 2,721,333 | 628,000 | ||||||
| Deferred underwriting fee payable | 7,000,000 | 4,000,000 | ||||||
Total Liabilities | 12,909,539 | 9,345,710 | ||||||
COMMITMENTS AND CONTINGENCIES | ||||||||
Class A ordinary shares subject to possible redemption, 419,938 shares at redemption value as of June 30, 2023 and 1,191,437 shares at redemption value as of December 31, 2022 | 4,436,155 | 12,226,852 | ||||||
Shareholders’ Deficit | ||||||||
| Preference Shares, $0.0001 par value, 1,000,000 shares authorized; none issued and outstanding | — | — | ||||||
| Class A ordinary Shares, $0.0001 par value, 300,000,000 shares authorized; 9,825,000 and 0 issued and outstanding (excluding 419,938 and 1,191,437 shares subject to possible redemption as of June 30, 2023 and December 31, 2022, respectively) | 982 | — | ||||||
| Class B ordinary Shares, $0.0001 par value, 30,000,000 shares authorized; 175,000 and 10,000,000 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively | 18 | 1,000 | ||||||
Additional paid-in capital | — | — | ||||||
| Accumulated deficit | (12,767,187 | ) | (5,783,772 | ) | ||||
Total Shareholders’ Deficit | (12,766,187 | ) | (5,782,772 | ) | ||||
TOTAL LIABILITIES, CLASS A ORDINARY SHARES SUBJECT TO POSSIBLE REDEMPTION AND SHAREHOLDERS’ DEFICIT | $ | 4,579,507 | $ | 15,789,790 | ||||
| For the three months ended June 30, 2023 Restated | For the six months ended June 30, 2023 Restated | For the three months ended June 30, 2022 | For the six months ended June 30, 2022 | |||||||||||||
| Operating and formation costs | $ | 1,238,047 | $ | 1,890,082 | $ | 352,417 | $ | 939,368 | ||||||||
Loss from operations | (1,238,047 | ) | (1,890,082 | ) | (352,417 | ) | (939,368 | ) | ||||||||
| Other income (loss) | ||||||||||||||||
| Earnings and realized gain on marketable securities held in Trust Account | 139,599 | 294,382 | 593,071 | 626,823 | ||||||||||||
| Change in fair value of warrant liabilities | (209,333 | ) | (2,093,333 | ) | 5,011,440 | 13,460,773 | ||||||||||
| Transaction costs | (102,000 | ) | (102,000 | ) | — | — | ||||||||||
Net income (loss) | $ | (1,409,781 | ) | $ | (3,791,033 | ) | $ | 5,252,094 | $ | 13,148,228 | ||||||
| Basic and diluted weighted average shares outstanding of Class A redeemable ordinary shares | ||||||||||||||||
| Basic and diluted weighted average shares outstanding of Class A redeemable ordinary shares | 1,106,657 | 1,148,813 | 40,000,000 | 40,000,000 | ||||||||||||
Basic and diluted net income (loss) per Class A redeemable ordinary share | (0.13 | ) | (0.34 | ) | 0.11 | 0.26 | ||||||||||
| Basic and diluted weighted average shares outstanding of Class A nonredeemable ordinary shares and Class B ordinary shares | 10,000,000 | 10,000,000 | 10,000,000 | 10,000,000 | ||||||||||||
Basic and diluted net income (loss) per Class A nonredeemable ordinary share and Class B ordinary share | $ | (0.13 | ) | $ | (0.34 | ) | $ | 0.11 | $ | 0.26 | ||||||
Class A Ordinary Shares | Class B Ordinary Shares | Additional Paid-in Capital | Accumulated Deficit | Total Shareholders (Deficit) | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Balance–January 1, 2023 | — | $ | — | 10,000,000 | $ | 1,000 | $ | — | $ | (5,783,772 | ) | $ | (5,782,772 | ) | ||||||||||||||
| Remeasurement of Class A ordinary shares subject to possible redemption | — | — | (154,783 | ) | (154,783 | ) | ||||||||||||||||||||||
| Net loss | — | — | — | — | — | (2,381,252 | ) | (2,381,252 | ) | |||||||||||||||||||
Balance, March 31, 2023 | — | — | 10,000,000 | 1,000 | — | (8,319,807 | ) | (8,318,807 | ) | |||||||||||||||||||
| Conversion of Class B ordinary shares to Class A nonredeemable ordinary shares | 9,825,000 | 982 | (9,825,000 | ) | (982 | ) | — | — | — | |||||||||||||||||||
| Accrual of deferred underwriting fee payable (restated) | — | — | — | — | (3,000,000 | ) | (3,000,000 | ) | ||||||||||||||||||||
| Transaction cost allocation for change in deferred underwriting fee (restated) | — | — | — | — | — | 102,000 | 102,000 | |||||||||||||||||||||
| Remeasurement of Class A ordinary shares subject to possible redemption | — | — | — | — | — | (139,599 | ) | (139,599 | ) | |||||||||||||||||||
| Net loss (restated) | — | — | — | — | — | (1,409,781 | ) | (1,409,781 | ) | |||||||||||||||||||
Balance, June 30, 2023 (restated) | 9,825,000 | $ | 982 | 175,000 | $ | 18 | $ | — | (12,767,187 | ) | (12,766,187 | ) | ||||||||||||||||
Balance–January 1, 2022 | — | $ | — | 10,000,000 | $ | 1,000 | $ | — | $ | (27,567,744 | ) | $ | (27,566,744 | ) | ||||||||||||||
| Net income | — | — | — | — | — | 7,896,134 | 7,896,134 | |||||||||||||||||||||
Balance, March 31, 2022 | — | — | 10,000,000 | 1,000 | — | (19,671,610 | ) | (19,670,610 | ) | |||||||||||||||||||
| Remeasurement of Class A ordinary shares subject to possible redemption | — | — | — | — | — | (769,393 | ) | (769,393 | ) | |||||||||||||||||||
| Net income | — | — | — | — | — | 5,252,094 | 5,252,094 | |||||||||||||||||||||
Balance, June 30, 2022 | — | $ | — | 10,000,000 | $ | 1,000 | $ | — | $ | (15,188,909 | ) | $ | (15,187,909 | ) | ||||||||||||||
For the six months ended June 30, 2023 | For the six months ended June 30, 2022 | |||||||
(restated) | ||||||||
Cash Flows from Operating Activities | ||||||||
| Net income (loss) | $ | (3,791,033 | ) | $ | 13,148,228 | |||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Earnings and realized gain on marketable securities held in Trust Account | (294,382 | ) | (626,823 | ) | ||||
| Change in fair value of warrant liabilities | 2,093,333 | (13,460,773 | ) | |||||
| Transaction costs attributable to warrant liabilities | 102,000 | — | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses | 152,516 | 185,959 | ||||||
| Due to related party | 937,876 | 115,000 | ||||||
| Accrued expenses | 795,275 | 231,663 | ||||||
Net cash used in operating activities | (4,415 | ) | (406,746 | ) | ||||
Cash Flows from Investing Activities | ||||||||
| Proceeds received from Trust Account | 11,347,734 | — | ||||||
Net cash provided by investing activities | 11,347,734 | — | ||||||
Cash Flows from Financing Activities | ||||||||
| Payments to Class A ordinary shareholders for redemption of shares | (11,347,734 | ) | — | |||||
| Payment of offering costs | — | (70,000 | ) | |||||
Net cash used in financing activities | (11,347,734 | ) | (70,000 | ) | ||||
Net change in cash | (4,415 | ) | (476,746 | ) | ||||
| Cash at beginning of the period | 31,547 | 646,558 | ||||||
Cash at end of the period | $ | 27,132 | $ | 169,812 | ||||
Non-cash financing activities: | ||||||||
| Remeasurement of Class A ordinary shares subject to possible redemption | $ | 294,382 | $ | 769,393 | ||||
| Accrual of deferred underwriting fee payable | $ | 3,000,000 | $ | — | ||||
| Conversion of Class B ordinary shares to Class A nonredeemable ordinary shares | $ | 982 | $ | — | ||||
Unaudited Condensed Consolidated Balance Sheet as of June 30, 2023 | As Previously Reported | Adjustment | As Restated | |||||||||
Deferred underwriting fee payable | $ | 4,000,000 | $ | 3,000,000 | $ | 7,000,000 | ||||||
Total Liabilities | 9,909,539 | 3,000,000 | 12,909,539 | |||||||||
Accumulated deficit | (9,767,187 | ) | (3,000,000 | ) | (12,767,187 | ) | ||||||
Total Shareholders’ Deficit | (9,766,187 | ) | $ | (3,000,000 | ) | $ | (12,766,187 | ) | ||||
Unaudited Condensed Consolidated Statement of Operations for the Three Months Ended June 30, 2023 | As Previously Reported | Adjustment | As Restated | |||||||||
Transaction costs | $ | — | $ | (102,000 | ) | $ | (102,000 | ) | ||||
Net income (loss) | (1,307,781 | ) | (102,000 | ) | (1,409,781 | ) | ||||||
| Basic and diluted net income (loss) per Class A redeemable ordinary share | (0.12 | ) | $ | (0.01 | ) | $ | (0.13 | ) | ||||
Basic and diluted net income (loss) per Class A nonredeemable ordinary shares and Class B ordinary shares | (0.12 | ) | $ | (0.01 | ) | $ | (0.13 | ) | ||||
Unaudited Condensed Consolidated Statement of Operations for the Six Months Ended June 30, 2023 | As Previously Reported | Adjustment | As Restated | |||||||||
Transaction costs | $ | — | $ | (102,000 | ) | $ | (102,000 | ) | ||||
Net income (loss) | (3,689,033 | ) | (102,000 | ) | (3,791,033 | ) | ||||||
| Basic and diluted net income (loss) per Class A redeemable ordinary share | (0.33 | ) | $ | (0.01 | ) | $ | (0.34 | ) | ||||
Basic and diluted net income (loss) per Class A nonredeemable ordinary shares and Class B ordinary shares | (0.33 | ) | $ | (0.01 | ) | $ | (0.34 | ) | ||||
Unaudited Condensed Consolidated Statement of Changes in Shareholders’ Deficit for the Three and Six Months Ended June 30, 2023 | As Previously Reported | Adjustment | As Restated | |||||||||
Remeasurement of deferrred underwriting fee payable | $ | — | $ | (3,000,000 | ) | $ | (3,000,000 | ) | ||||
Transaction costs attributable to warrant liabilities | — | $ | 102,000 | $ | 102,000 | |||||||
Net loss | (1,307,781 | ) | (102,000 | ) | $ | (1,409,781 | ) | |||||
Accumulated deficit | (9,767,187 | ) | (3,000,000 | ) | (12,767,187 | ) | ||||||
Total shareholders’ deficit | (9,766,187 | ) | $ | (3,000,000 | ) | $ | (12,766,187 | ) | ||||
Unaudited Condensed Consolidated Statement of Cash Flows for the Six Months Ended June 30, 2023 | As Previously Reported | Adjustment | As Restated | |||||||||
Cash Flows from Operating Activities | ||||||||||||
| Net income (loss) | $ | (3,689,033 | ) | $ | (102,000 | ) | $ | (3,791,033 | ) | |||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||||||
| Transaction costs attributable to warrant liabilities | — | $ | 102,000 | $ | 102,000 | |||||||
Non-cash financing activities | ||||||||||||
| Non cash accrual of deferred underwriting fee payable | $ | — | $ | 3,000,000 | $ | 3,000,000 | ||||||
Shares | Amounts | |||||||
Class A ordinary shares subject to possible redemption - | 40,000,000 | $ | 400,000,000 | |||||
| Less: | ||||||||
| Payments to Class A ordinary shareholders for redemption of shares | (38,808,563 | ) | (390,414,144 | ) | ||||
| Due to shareholders | — | (3,262,655 | ) | |||||
| Plus: | ||||||||
| Remeasurement of carrying value to redemption value | — | 5,903,651 | ||||||
Class A ordinary shares subject to possible redemption - | 1,191,437 | $ | 12,226,852 | |||||
| Less: | ||||||||
| Payments to Class A ordinary shareholders for redemption of shares | (771,499 | ) | (11,347,734 | ) | ||||
| Plus: | ||||||||
| Due to shareholders paid in 2023 | — | 3,262,655 | ||||||
| Remeasurement of carrying value to redemption value | — | 294,382 | ||||||
| Class A ordinary shares subject to possible redemption - June 30, 2023 | 419,938 | $ | 4,436,155 | |||||
For the Three Months Ended June 30, 2023 | For the Six Months Ended June 30, 2023 | For the Three Months Ended June 30, 2022 | For the Six Months Ended June 30, 2022 | |||||||||||||||||||||||||||||
Class A Redeemable | Class A Nonredeemable and Class B | Class A Redeemable | Class A Nonredeemable and Class B | Class A | Class B | Class A | Class B | |||||||||||||||||||||||||
| Basic and diluted net income (loss) per ordinary share: | ||||||||||||||||||||||||||||||||
Numerator: | ||||||||||||||||||||||||||||||||
| Allocation of net income (loss) (Restated) | $ | (140,469 | ) | $ | (1,269,312 | ) | $ | (390,641 | ) | $ | (3,400,392 | ) | $ | 4,201,675 | $ | 1,050,419 | $ | 10,518,582 | $ | 2,629,646 | ||||||||||||
Denominator : | ||||||||||||||||||||||||||||||||
| Basic and diluted weighted average ordinary shares outstanding | 1,106,657 | 10,000,000 | 1,148,813 | 10,000,000 | 40,000,000 | 10,000,000 | 40,000,000 | 10,000,000 | ||||||||||||||||||||||||
| Basic and diluted net income (loss) per ordinary share (Restated) | $ | (0.13 | ) | $ | (0.13 | ) | $ | (0.34 | ) | $ | (0.34 | ) | $ | 0.11 | $ | 0.11 | $ | 0.26 | $ | 0.26 | ||||||||||||
| 1. | Cantor will irrevocably forfeit $7,000,000 (instead of $10,000,000) of the aggregate $14,000,000 Original Fee that would otherwise be payable to it in cash pursuant to the Underwriting Agreement, resulting in a reduced fee of $7,000,000 (the “Fee”), which shall be payable in cash by the Company to Cantor upon consummation of a Business Combination, as originally set forth in the Underwriting Agreement. |
| 2. | In addition, upon the consummation of the Business Combination, the Company shall pay to the Underwriter a non-refundable cash fee equal to 3.0% of: |
| • | (x) the aggregate maximum gross proceeds received or receivable in connection with any Equity Financing, including, without limitation, aggregate amounts committed by investors to purchase securities, whether or not all securities are issued upon consummation of the Business Combination, plus |
| • | (y) the gross proceeds received by the Company upon exercise of any warrants or other securities issued in connection with such Financing that are convertible into common stock of the Company; |
| • | the aggregate maximum principal amount of debt committed or available to be committed or available in connection with the Debt Financing (including, without limitation, in the case of an offering of debt securities, the aggregate maximum principal amount of securities committed to be purchased by investors), whether or not drawn down (or, in the case of an offering of debt securities, whether or not purchased) upon consummation of the business Combination; and |
| • | any proceeds received from the Trust Account in connection with the Business Combination. |
| • | in whole and not in part; |
| • | at a price of $0.01 per warrant; |
| • | upon a minimum of 30 days’ prior written notice of redemption; and |
| • | if, and only if, the last reported sale price (the “closing price”) of the Class A ordinary shares equals or exceeds $18.00 per share (as adjusted) for any 20 trading days within a 30-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. |
| • | in whole and not in part; |
| • | at $0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of Class A ordinary shares to be determined by reference to an agreed table based on the redemption date and the “fair market value” of the Class A ordinary shares; |
| • | if, and only if, the closing price of the Class A ordinary shares equals or exceeds $10.00 per share (as adjusted) for any 20 trading days within the 30-trading day period ending three trading days before the Company sends the notice of redemption to the warrant holders; and |
| • | if the closing price of the Class A ordinary shares for any 20 trading days within a 30-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 is less than $18.00 per share (as adjusted), the Private Placement Warrants must also be concurrently called for redemption on the same terms as the outstanding Public Warrants, as described above. |
| • | Level 1: Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. |
| • | Level 2: Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active. |
| • | Level 3: Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability. |
| Description | Level | June 30, 2023 | December 31, 2022 | |||||||||
| Assets: | ||||||||||||
| Marketable securities held in Trust Account | 1 | $ | 4,436,155 | $ | ||||||||
Description | Level | June 30, 2023 | Level | December 31, 2022 | ||||||||||||
| Liabilities: | ||||||||||||||||
| Warrant Liability – Public Warrants | 1 | $ | 1,733,333 | 1 | $ | 400,000 | ||||||||||
| Warrant Liability – Private Placement Warrants | 3 | $ | 988,000 | 3 | $ | 228,000 | ||||||||||
| Total Warrant Liabilities | $ | 2,721,333 | $ | 628,000 | ||||||||||||
Input | June 30, 2023 | December 31, 2022 | ||||||
| Risk-free interest rate | 4.13 | % | 3.99 | % | ||||
| Expected term (years) | 5.0 | 5.0 | ||||||
| Expected volatility | 1.0 | % | 0.8 | % | ||||
| Exercise price | $ | 11.50 | $ | 11.50 | ||||
| Fair value of the ordinary share price | $ | 10.70 | $ | 9.89 | ||||
| Redemption threshold price | $ | 18.00 | $ | 18.00 | ||||
| Redemption threshold days | 20 days within any 30-day period | | 20 days within any 30-day period | |||||
| Redemption price | $ | 0.01 | $ | 0.01 | ||||
| Probability of successful acquisition | 90.0 | % | 50.0 | % | ||||
Private Placement | Public | Warrant Liabilities | ||||||||||
Fair value as of December 31, 2022 | $ | 228,000 | $ | 400,000 | $ | 628,000 | ||||||
| Change in valuation inputs or other assumptions | 684,000 | 1,200,000 | 1,884,000 | |||||||||
Fair value as of March 31, 2023 | 912,000 | 1,600,000 | 2,512,000 | |||||||||
| Change in valuation inputs or other assumptions | 76,000 | 133,333 | 209,333 | |||||||||
| Fair value as of June 30, 2023 | $ | 988,000 | $ | 1,733,333 | $ | 2,721,333 | ||||||
Fair value as of December 31, 2021 | $ | 5,320,000 | $ | 9,200,000 | $ | 14,520,000 | ||||||
| Change in valuation inputs or other assumptions | (3,116,000 | ) | (5,333,333 | ) | (8,449,333 | ) | ||||||
Fair value as of March 31, 2022 | 2,204,000 | 3,866,667 | 6,070,667 | |||||||||
| Change in valuation inputs or other assumptions | (1,819,440 | ) | (3,192,000 | ) | (5,011,440 | ) | ||||||
Fair value as of June 30, 2022 | $ | 384,560 | $ | 674,667 | $ | 1,059,227 | ||||||
| ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (RESTATED). |
References to the “company,” “our,” “us” or “we” refer to Corner Growth 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 consolidated financial statements and the notes thereto including, Note 2—Restatement of Previously Issued Financial Statements, contained elsewhere in this Quarterly Report on Form 10-Q/A. 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/A includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). When used in this Quarterly Report on Form 10-Q/A, words such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions, as they relate to us or our management, identify forward looking statements. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other filings with the Securities and Exchange Commission (“SEC”), including our Annual Report on Form 10-K for the year ended December 31, 2022. Such forward looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, our management. No assurance can be given that results in any forward-looking statement will be achieved and actual results could be affected by one or more factors, which could cause them to differ materially. The cautionary statements made in this Quarterly Report on Form 10-Q/A should be read as being applicable to all forward-looking statements whenever they appear in this Quarterly Report. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors detailed in our filings with the SEC. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety by this paragraph.
Overview
We are a blank check company incorporated on October 20, 2020 (inception) 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 (a “Business Combination”). While we may pursue an acquisition opportunity in any business, industry, sector or geographical location, we focus on industries that complement our management team’s background, and in our search for targets for our Business Combination seek to capitalize on the ability of our management team to identify and acquire a business, focusing on the technology industry in the United States and other developed countries.
The registration statement for our initial public offering (the “Initial Public Offering”) was declared effective on December 16, 2020. On December 21, 2020, we consummated our Initial Public Offering of 40,000,000 units, at $10.00 per unit, generating gross proceeds of $400,000,000, and incurring offering costs of approximately $22,766,000, inclusive of $14,000,000 in deferred underwriting commissions. Each unit consists of one
Class A ordinary share, par value $0.0001 per share (the “Class A ordinary shares”) and one-third of one redeemable warrant, each whole public warrant entitling the holder thereof to purchase one Class A ordinary share at a price of $11.50 per share, subject to adjustment.
Simultaneously with the closing of the Initial Public Offering, we consummated the private placement of 7,600,000 private placement warrants at a price of $1.50 per private placement warrant (the “Private Placement”) to our sponsor, CGA Sponsor LLC (the “Sponsor”), generating gross proceeds of $11,400,000. Each private placement warrant is exercisable for one Class A ordinary share at a price of $11.50 per share.
25
Upon the closing of the Initial Public Offering and private placement, $400,000,000 ($10.00 per unit) of the net proceeds of the Initial Public Offering and certain of the proceeds of the private placement were placed in the trust account, located in the United States at UBS Financial Services Inc. and Morgan Stanley, with Continental Stock Transfer & Trust Company acting as trustee, and are only invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less or in any open-ended investment company that holds itself out as a money market fund selected by us meeting the conditions of paragraphs (d)(2), (d)(3) and (d)(4) of Rule 2a-7 of the Investment Company Act, as determined by us, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the assets held in the trust account. Our management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the private placement, although substantially all of the net proceeds are intended to be applied toward consummating an initial Business Combination.
Extraordinary General Meeting
On December 20, 2022, the Company held an extraordinary general meeting (the “Extraordinary General Meeting”), which amended the Company’s Amended and Restated Memorandum and Articles of Association to extend the date by which the Company has to consummate a Business Combination from December 21, 2022 to June 21, 2023. The shareholders approved a proposal to amend the trust agreement to change the date on which Continental Stock Transfer & Trust Company must commence liquidation of the Trust Account from (A) the earlier of the Company’s completion of an initial business combination and December 21, 2022 to (B) the earlier of the Company’s completion of an initial business combination and June 21, 2023. In connection with the Extraordinary General Meeting, shareholders elected to redeem 38,808,563 Class A ordinary shares, resulting in redemption payments out of the trust account totaling $393,676,799, or approximately $10.14 per share which includes $5,591,169 of earnings in the trust account not previously withdrawn. In January 2023, the Company made redemption payments of $3,262,655 out of the Trust Account that were due to the redeeming shareholders who elected to redeem their shares as part of the Extraordinary General Meeting. This amount was reflected as due to shareholders in the accompanying condensed consolidated balance sheet as of December 31, 2022. Subsequent to the redemptions, 1,191,437 Class A ordinary shares remained issued and outstanding.
Business Combination Agreement
On February 9, 2023, the Company issued a press release announcing that the Company has entered into a non-binding letter of intent with Softline Holding plc to proceed with a potential business combination that would result in the combined company being publicly-listed on the Nasdaq. The business combination is subject to the completion of definitive documentation. On May 4, 2023, the Company entered into a definitive business combination agreement with Noventiq Holdings PLC (formerly known as Softline Holding plc), a global provider of IT solutions and services.
As disclosed in a Form 8-K filed with the SEC on May 4, 2023, the Company entered into a business combination agreement (the “Business Combination Agreement”) by and among the Company, Noventiq Holdings PLC, a company organized under the laws of the Cyprus (“Noventiq”), and Corner Growth SPAC Merger Sub, Inc., a Cayman Islands exempted company and a direct wholly owned subsidiary of the Company (“Merger Sub”). The Business Combination Agreement provides, among other things, that on the terms and subject to the conditions set forth therein, Merger Sub will merge with and into Noventiq, with Noventiq surviving as a wholly-owned subsidiary of the Company (the “Merger”). Upon the closing of the business combination (the “Closing”), it is anticipated that the Company will change its name to “Noventiq Holding Company” (“New Noventiq”). The date on which the Closing actually occurs is hereinafter referred to as the “Closing Date.” In accordance with the applicable provisions of the Cayman Companies Act (As Revised) and the Cyprus Companies Law, prior to the approval and adoption of the Business Combination Agreement and transactions contemplated thereby by the requisite vote of Noventiq’s shareholders, Noventiq will re-domicile from Cyprus to the Cayman Islands. The Merger and the other transactions contemplated by the Business Combination Agreement are hereinafter referred to as the “Proposed Business Combination.”
The Business Combination Agreement contains representations and warranties of certain of the parties thereto customary for transactions of this type. The representations and warranties made under the Business Combination Agreement will not survive the Closing.
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The Business Combination is expected to close in the second half of 2023, following the receipt of the required approval by the Company’s and Noventiq’s shareholders and the fulfilment of other customary closing conditions, such as the effectiveness of the Registration Statement on Form F-6 registering the ADSs (as defined in Note 1 to the notes to the unaudited condensed consolidated financial statements). There is no assurance that the Proposed Business Combination will be consummated by the Extended Date (as defined below) (or any such later date of termination approved in accordance with the Amended and Restated Memorandum and Articles of Association).
If we are unable to complete a Business Combination by the Extended Date, we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account including interest earned on the funds held in the trust account and not previously released to us to pay for our income taxes (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), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining shareholders and our board of directors, proceed to commence a voluntary liquidation and thereby a formal dissolution of our company, subject in each case to our obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law.
Extension Meeting
On June 15, 2023, the Company held an extraordinary general meeting of shareholders, which was adjourned and reconvened on June 20, 2023 (the “Extension Meeting”), to amend the Company’s amended and restated memorandum and articles of association (the “Articles Amendment”) to (i) extend the date by which the Company has to consummate a business combination from June 21, 2023 to March 21, 2024 (the “Extended Date”) or such earlier date as shall be determined by the Company’s board of directors in its sole discretion (the “Amended Termination Date” and, such proposal, the “Extension Amendment Proposal”), (ii) eliminate from the amended and restated memorandum and articles of association the limitation that the Company shall not redeem Class A ordinary shares included as part of the units sold in the IPO to the extent that such redemption would cause the Company’s net tangible assets to be less than $5,000,001 (the “Redemption Limitation Amendment Proposal”) and (ii) amend the Company’s amended and restated memorandum and articles of association to provide that Class B ordinary shares may be converted either at the time of the consummation of the Company’s initial business combination or at any earlier date at the option of the holders of Class B ordinary shares (the “Founder Conversion Amendment Proposal”). The shareholders of the Company approved the Extension Amendment Proposal, the Redemption Limitation Amendment Proposal and the Founder Conversion Amendment Proposal at the Extension Meeting and on June 21, 2023, the Company filed the Articles Amendment with the Registrar of Companies of the Cayman Islands.
In connection with the vote to approve the Extension Amendment Proposal, the Redemption Limitation Amendment Proposal and the Founder Conversion Amendment Proposal, shareholders elected to redeem 771,499 Class A ordinary shares, resulting in redemption payments out of the Trust Account totaling $8,085,078, or approximately $10.48 per share which includes $370,088 of earnings in the Trust Account not previously withdrawn. Subsequent to the redemptions, 419,938 Class A ordinary shares remained issued and outstanding.
On June 21, 2023, in connection with the approval of the Founder Conversion Amendment, the Sponsor, the holder of an aggregate of 9,825,001 shares of the Company’s Class B Ordinary Shares, par value $0.0001 per share, elected to convert 9,825,000 shares of the Class B Ordinary Shares held by it on a one-for-one basis into Class A Ordinary Shares of the Company, with immediate effect. Following such conversion, the Sponsor will hold 9,825,000 shares of Class A Ordinary Shares and 1 share of Class B Ordinary Shares and the Company will have an aggregate of 10,244,938 shares of Class A Ordinary Shares issued and outstanding (419,938 of which are subject to possible redemption) and 175,000 shares of Class B Ordinary Shares issued and outstanding. In connection with the conversion, the Sponsor has agreed to certain transfer restrictions, a waiver of redemption rights, a waiver of any right to receive funds from the Trust Account and the obligation to vote in favor of an initial business combination.
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Liquidity, Capital Resources and Going Concern
As indicated in the accompanying condensed consolidated financial statements, at June 30, 2023, we had $27,132 in our operating bank account, and a working capital deficit of $3,044,854, and $236,775 of earnings and realized gains on the amounts remaining in the Trust Account after historical redemptions. We expect to continue to incur significant costs in pursuit of our initial Business Combination plans.
Our liquidity needs prior to the consummation of the Initial Public Offering were satisfied through the proceeds of $25,000 from the sale of the founder shares, and loans from the Sponsor of approximately $120,000. The loan was repaid in full on December 22, 2020. Subsequent from the consummation of the Initial Public Offering, our liquidity has been satisfied through the net proceeds received from the consummation of the Initial Public Offering and the Private Placement.
In order to finance transaction costs in connection with an intended initial Business Combination, the Sponsor or an affiliate of the Sponsor or certain of our officers and directors may, but are not obligated to, loan the Company funds as may be required. The terms of such loans have not been determined and no written agreements exist with respect to such loans. However, as discussed in Note 5 to the notes to the unaudited condensed consolidated financial statements, as of June 30, 2023, the Company is indebted to the Sponsor and its affiliates for $1,460,376, which represents $1,180,376 of operating and formation costs paid by these related parties on the Company’s behalf, along with $280,000 of unpaid administrative fees (see Note 5). The Sponsor is not under any obligation to make additional expenditures on the Company’s behalf.
Based on the foregoing, management believes that we will not have sufficient working capital to meet our needs through the consummation of a Business Combination. Over this time period, we will be using these funds for paying existing accounts payable, identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination.
In connection with our assessment of going concern considerations in accordance with FASB ASC Subtopic 205-40, “Presentation of Financial Statements—Going Concern”, management has determined that the date for mandatory liquidation and dissolution raise substantial doubt about our ability to continue as a going concern through a reasonable period of time, which is considered one year from the issuance of these condensed consolidated financial statements. The Company demonstrates adverse conditions that raise substantial doubt about the Company’s ability to continue as a going concern for one year following the issuance of these condensed consolidated financial statements. These adverse conditions are negative financial trends, specifically working capital deficiency and other adverse key financial ratios. Our scheduled liquidation date is March 20, 2024. No adjustments have been made to the carrying amounts or classification of assets or liabilities should the Company be required to liquidate after March 20, 2024. There is no assurance that the Company will complete the Proposed Business Combination with Noventiq before March 24, 2024, or at all.
Results of Operations (Restated)
Our entire activity since inception through June 30, 2023 related to our formation, Initial Public Offering and, since the closing of our Initial Public Offering, the search for initial Business Combination candidates (see Note 1 to the notes to the unaudited condensed consolidated financial statements). As of June 30, 2023, $27,132 was held outside the Trust Account and was being used to fund the Company’s operating expenses. We are not generating any operating revenues until the closing and completion of our initial Business Combination at the earliest.
For the three and six months ended June 30, 2023, we had a net loss of $1,409,781 and $3,791,033, respectively, which consisted of $139,599 and $294,382 in earnings and realized gains on marketable securities held in the Trust Account, respectively, an increase in the fair value of warrant liabilities of $209,333 and $2,093,333, respectively, $1,238,047 and $1,890,082 in operating and formation costs, respectively, and $102,000 and $102,000 in transaction costs, respectively.
For the three and six months ended June 30, 2022, we had a net income of $5,252,094 and $13,148,228, respectively, which consisted of $593,071 and $626,823 in earnings and realized gains on marketable securities held in the Trust Account, respectively, a decrease in the fair value of warrant liabilities of $5,011,440 and $13,460,773, respectively, partially offset by $352,417 and $939,368 in operating and formation costs, respectively.
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Related Party Transactions
Founder Shares
On October 28, 2020, the Sponsor paid $25,000, or approximately $0.003 per share, to cover certain offering costs in consideration for 8,625,000
Class B ordinary shares, par value $0.0001 per share (the “Founder Shares”). In November 2020, the Sponsor transferred 50,000 Class B ordinary shares to each of the Company’s independent directors. On December 16, 2020, the Company effected a share capitalization, resulting in 10,062,500 Founder Shares issued and outstanding as of such date. The Founder Shares will automatically convert into Class A ordinary shares on the first business day following the completion of a Business Combination, or earlier at the option of the holder, on a one-for-one basis, subject to certain adjustments, as described in Note 8. As a result of the underwriters’ election to partially exercise their over-allotment option, 62,500 Founder Shares were forfeited for no consideration on December 23, 2020, resulting in 10,000,000 Class B ordinary shares outstanding. The per share price of the Founder Shares was determined by dividing the amount contributed to the Company by the number of Founder Shares issued. The Founder Shares will be worthless if we do not complete an initial Business Combination (see Note 1).
The Sponsor has agreed, subject to limited exceptions, not to transfer, assign or sell any of its Founder Shares or Class A ordinary shares received upon conversion thereof until the earlier of: (A) one year after the completion of a Business Combination and (B) subsequent to a Business Combination, (x) if the last reported sale price of the Class A ordinary shares equals or exceeds $12.00 per share (as adjusted for share splits, share dividends, rights issuances, subdivisions, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after a Business Combination, or (y) the date on which the Company completes a liquidation, merger, amalgamation, share exchange, reorganization or other similar transaction that results in all of the Company’s shareholders having the right to exchange their Class A ordinary shares for cash, securities or other property.
The Company’s Founder Shares are subject to transfer restrictions pursuant to lock-up provisions in a letter agreement with the Company entered into by the initial stockholders, and officers and directors. The Sponsor has the right to transfer its ownership in the Founder Shares at any time, and to any transferee, to the extent that the Sponsor determines, in good faith, that such transfer is necessary to ensure that it and/or any of its parents, subsidiaries or affiliates are in compliance with the Investment Company Act of 1940. Any permitted transferees will be subject to the same restrictions and other agreements of the initial stockholders with respect to any Founder Shares. Prior to the closing of the Initial Public Offering, the Sponsor transferred 150,000 Founder Shares to our three independent directors in recognition of and as compensation for their future services to the Company. The transfer of Founder Shares to these directors is within the scope of FASB ASC Topic 718, “Compensation-Stock Compensation” (“ASC 718”). Under ASC 718, stock-based compensation associated with equity-classified awards is measured at fair value upon the grant date. Compensation expense related to the Founder Shares is recognized only when the performance-based vesting condition (i.e. the consummation of the business acquisition) is probable of achievement under the applicable accounting literature. Stock-based compensation would be recognized at the consummation of the business combination, in an amount equal to the number of Founder Shares times the grant date fair value per share (unless subsequently modified) less the amount initially received for the transfer of the Founder Shares. As of June 30, 2023, the Company has entered into a agreement in connection with a potential Business Combination, but the Business Combination has not yet closed, and as such, the lock-up provisions have not been remediated and are not probable to be remediated. Any definitive agreements in connection with a Business Combination may also be subject to certain conditions to closing, such as approval by the Company’s shareholders. As a result, the Company determined that, taking into account that there is a possibility that the Business Combination may not close, no stock-based compensation expense should be recognized through June 30, 2023.
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Related Party Loans
In order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of our officers and directors may, but are not obligated to, loan us funds as may be required (“Working Capital Loans”). If we complete a Business Combination, we would repay the Working Capital Loans out of the proceeds of the trust account released to us. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the trust account. In the event that a Business Combination is not completed, we may use a portion of the proceeds held outside the trust account to repay the Working Capital Loans but no proceeds held in the trust account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of such Working Capital Loans may be convertible into warrants of the post Business Combination entity at a price of $1.50 per warrant. The warrants would be identical to the private placement warrants. As of the date of this filing and June 30, 2023, there were no outstanding Working Capital Loans under this arrangement.
Administrative Services Agreement
We agreed, commencing on the effective date of the Initial Public Offering through the earlier of the Company’s consummation of a Business Combination and its liquidation, to pay the Sponsor a total of $40,000 per month for office space, utilities and secretarial and administrative support services provided to members of the Company’s management team until the earlier of (A) the Company’s completion of the initial Business Combination or December 21, 2022 and (B) on December 21, 2022, an amount equal to $960,000, less the actual amount paid under the Administrative Services Agreement. On November 18, 2021, the Sponsor waived its right to receive any of the Company’s remaining, payment obligations under the Administrative Services Agreement.
For the three and six months ended June 30, 2023, the Company incurred $0 in fees for these services. For the three and six months ended June 30, 2022, the Company incurred $120,000 and $240,000 in fees for these services, respectively, which is included in operating and formation costs on the unaudited condensed consolidated statements of operations. As of June 30, 2023 and December 31, 2022, there were $280,000 and $320,000 in fees outstanding for these services that are included in due to related party on the condensed consolidated balance sheets. Notwithstanding the foregoing, on November 18, 2021, the Sponsor permanently waived its right to receive any of the Company’s outstanding, and all of the Company’s remaining, payment obligations under the Administrative Services Agreement.
Operating and Formation Costs
As of June 30, 2023, the Sponsor and affiliates of the Sponsor also paid operating and formation costs of $1,180,376 on behalf of the Company which are due on demand. These amounts are included in due to related party on the condensed consolidated balance sheet as of June 30, 2023. The Sponsor is not under any obligation to make additional expenditures on the Company’s behalf.
Contractual Obligations
Registration and Shareholder Rights
The holders of founder shares, private placement warrants and warrants that may be issued upon conversion of Working Capital Loans, if any, will be entitled to registration rights (in the case of the founder shares, only after conversion of such shares into Class A ordinary shares) pursuant to a registration and shareholder rights agreement entered into during the consummation of the Initial Public Offering. These holders will be entitled to certain demand and “piggyback” registration and shareholder rights. However, the registration and shareholder rights agreement provides that we will not permit any registration statement filed under the Securities Act to become effective until the termination of the applicable lock-up period for the securities to be registered. We will bear the expenses incurred in connection with the filing of any such registration statements.
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Amended and Restated Registration Rights Agreement
The Business Combination Agreement contemplates that, at or prior to the Closing, the Company, the Sponsor and certain Noventiq shareholders will enter into an Amended and Restated Registration Rights Agreement (the “Registration Rights Agreement”), pursuant to which, among other things, the Sponsor and such Noventiq shareholders will be granted certain registration rights with respect to their respective Ordinary Shares, in each case, subject to the terms and conditions set forth in the Registration Rights Agreement.
Sponsor Support Agreement
Concurrently with the execution of the Business Combination Agreement, the Sponsor entered into a support agreement with the Company and Noventiq (the “Sponsor Support Agreement”), pursuant to which the Sponsor has agreed to, among other things, (i) vote in favor of the Business Combination Agreement and the transactions contemplated thereby; (ii) not to solicit, initiate, submit, facilitate (including by means of furnishing or disclosing information), discuss or negotiate, directly or indirectly, any inquiry, proposal or offer (written or oral) with any third-party with respect to a CGAC Acquisition Proposal (as defined in the Sponsor Support Agreement); (iii) be bound by certain transfer restrictions with respect to its shares in the Company prior to the closing of the Proposed Business Combination; (iv) not to transfer any of the Restricted Securities (as defined in the Sponsor Support Agreement) from and after the Closing and until the earlier of (A) the six (6) month anniversary of the Closing Date and (B) the date following the Closing Date on which the Company completes a Liquidity Event (as defined in the Sponsor Support Agreement).
Underwriting Agreement (Restated)
The underwriter was entitled to underwriting discounts of $0.20 per unit sold in the Initial Public Offering, or $8,000,000 in the aggregate, paid upon the closing of the Initial Public Offering. An additional fee of $0.35 per unit sold in the Initial Public Offering, or $14,000,000 in the aggregate will be payable to the underwriters for deferred underwriting commissions. Effective December 20, 2022, in accordance with a fee reduction agreement, the underwriter agreed to irrevocably forfeit $10,000,000 of the aggregate $14,000,000 deferred fee that would otherwise be payable to it in cash pursuant the underwriting agreement, resulting in a reduced deferred fee of $4,000,000. The deferred underwriting commissions 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. The Company accounted for this forfeiture during the fourth calendar quarter of the year ended December 31, 2022.
On June 23, 2023, the Company and the underwriter agreed to terminate the December 20, 2022 fee reduction agreement solely upon execution of a side letter in accordance with the duly executed Mutual Termination of Initial Fee Reduction Agreement. On June 23, 2023, in accordance with the duly executed Side Letter to Underwriting Agreement, the Company and the underwriter agreed to the following:
| 1. | Cantor will irrevocably forfeit $7,000,000 (instead of $10,000,000) of the aggregate $14,000,000 Original Fee that would otherwise be payable to it in cash pursuant to the Underwriting Agreement, resulting in a reduced fee of $7,000,000 (the “Fee”), which shall be payable in cash by the Company to Cantor upon consummation of a Business Combination, as originally set forth in the Underwriting Agreement. |
| 2. | In addition, upon the consummation of the Business Combination, the Company shall pay to the Underwriter a non-refundable cash fee equal to 3.0% of: |
| • | (x) the aggregate maximum gross proceeds received or receivable in connection with any Equity Financing, including, without limitation, aggregate amounts committed by investors to purchase securities, whether or not all securities are issued upon consummation of the Business Combination, plus |
| • | (y) the gross proceeds received by the Company upon exercise of any warrants or other securities issued in connection with such Financing that are convertible into common stock of the Company; |
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| • | the aggregate maximum principal amount of debt committed or available to be committed or available in connection with the Debt Financing (including, without limitation, in the case of an offering of debt securities, the aggregate maximum principal amount of securities committed to be purchased by investors), whether or not drawn down (or, in the case of an offering of debt securities, whether or not purchased) upon consummation of the business Combination; and |
| • | any proceeds received from the Trust Account in connection with the Business Combination. |
The fees noted in items 1 and 2 above are contingent upon a successful completion of a Business Combination. There is no assurance that a Business Combination will be consummated by the Extended Date (or any such later date of termination approved in accordance with the Amended and Restated Memorandum and Articles of Association). In accordance with the guidance in ASC Topic 450, Contingencies, the Company is required to record its best estimate of the loss if the amount of loss can be reasonably estimated. The fee amount noted in item 2 cannot be reasonably estimated or determinable at this time and as a result, is not recorded in the consolidated condensed unaudited financial statements.
While preparing the attached Form 10-Q/A the Company discovered another previously undisclosed agreement. A portion of the Founder Shares will be distributed under the Finder’s Fee Arrangement. The Finder’s Fee Arrangement provides for the Sponsor to make a $2 million cash payment to the third party and provide an option to purchase an economic interest in 2,000,000 membership units of the Sponsor contingent on the consummation of the business acquisition, which option is accounted for under the guidance in ASC 718. Under ASC 718, stock-based compensation associated with equity-classified awards is measured at fair value upon the grant date. Compensation expense related to such shares is recognized only when the performance-based vesting condition (i.e. the consummation of the business acquisition) is probable of achievement under the applicable accounting literature. Stock-based compensation would be recognized at the consummation of the business combination, in an amount equal to the number of such shares times the grant date fair value per share (unless subsequently modified) less the amount initially received for the transfer of such shares. The Company will reflect the transactions in its financial statements when the business acquisition is consummated as the Sponsor is a principal shareholder in the Company and the Company benefits from the Finder’s Fee Arrangement. The Finder’s Fee Arrangement included potential compensation payable to the third party. Disclosure of this potential compensation arrangement was omitted from the Original Quarterly Report in error.
Critical Accounting Policies
Our management’s discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of income and expenses during the reported period. In accordance with GAAP, we base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.
Starting with the second fiscal quarter of 2023, the Company’s unaudited condensed consolidated financial statements include the results of Merger Sub, a direct wholly owned subsidiary of the Company. Merger Sub is a Cayman Islands exempted company which was incorporated on April 4, 2023. Merger Sub was formed solely for the purpose of effectuating the Merger and has not engaged in any business activities or conducted any operations other than in connection with the Merger and has no, and at all times prior to the Merger’s closing except as expressly contemplated by the Merger documents and the related transactions, will have no, assets, liabilities or obligations of any kind or nature whatsoever other than those incident to its formation. All intercompany balances and transactions have been eliminated in consolidation. For simplicity of presentation, we refer to all accompanying financial statements as condensed consolidated financial statements herein.
Our significant accounting policies are fully described in Note 3 to our condensed consolidated financial statements appearing elsewhere in this Quarterly Report and are fully described in Note 2 in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022. We believe those accounting policies are critical to the process of making significant judgments and estimates in the preparation of our condensed consolidated financial statements. There have been no changes to our significant accounting policies from our Form 10-K.
Recent Accounting Pronouncements
In June 2016, FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 changes the way entities measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. For emerging growth companies, the new guidance is effective for annual periods beginning after January 1, 2023. The Company adopted ASU 2016-13 as of January 1, 2023, with no impact to its condensed consolidated financial statements because the Company does not have financial assets within the scope of ASU 2016-13.
Our management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying condensed consolidated financial statements.
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Off-Balance Sheet Arrangements
For the three and six months ended June 30, 2023, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any commitments or contractual obligations.
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 qualify as an “emerging growth company” and under the JOBS Act are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As such, our condensed consolidated financial statements may not be comparable to companies that comply with public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to
Section 404 of the Sarbanes-Oxley Act, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the condensed consolidated financial statements (auditor discussion and analysis) and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the principal executive officer’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 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.
| ITEM 4. | 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.
Evaluation of Disclosure Controls and Procedures
Our management evaluated, with the participation of our principal executive officer and principal financial and accounting officer (our “Certifying Officers”), the effectiveness of our disclosure controls and procedures as of June 30, 2023, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our Certifying Officers concluded that, as of June 30, 2023, our disclosure controls and procedures were not effective, because of material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim condensed consolidated financial statements will not be prevented or detected on a timely basis. Specifically, the Company’s management has concluded that the controls around the interpretation and accounting for certain complex financial instruments were not effectively designed or maintained. Furthermore, the Company’s management has concluded that the controls around the communication by executive management of all material agreements were not effectively designed or maintained.
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We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
In connection with Note 2—Restatement of Previously Issued Financial Statements to the accompanying financial statements included in this Quarterly Report, management identified a material weakness in our internal control over financial reporting due to a lack of effective controls related to the recording and disclosure of accrued and contingent liabilities and their related expenses. This material weakness resulted in a material misstatement of our deferred underwriting fee payable, accumulated deficit, and transaction costs which affect the total liabilities, total shareholders’ deficit, net income (loss) and basic and diluted net income (loss) per Class A redeemable, Class A nonredeemable and Class B ordinary shares as of and for the three and six months ended June 30, 2023. The Finder’s fee Arrangement dated April 28, 2023 included potential compensation to the third party (see Note 1). In addition, the duly executed Side Letter to Underwriting Agreement dated June 23, 2023 included potential compensation payable to the underwriter (see Note 6). Disclosure of these potential compensation arrangements were both omitted from the Original Quarterly Report in error.
To respond to this material weakness, we have devoted, and plan to continue to devote, significant effort and resources to the remediation and improvement of our internal control over financial reporting. While we have processes to identify and appropriately apply applicable procedures to accrue and record liabilities, we plan to enhance these processes by increasing the communication between executive management and those responsible for accounting and reporting of all executed agreements that apply to our financial statements. Our plans at this time include increased communication among our executive management and accounting personnel through conducting on-site meetings, virtual meetings the execution of meeting minutes and completion of procedural checklists. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d- 15(f) under the Exchange Act) that occurred during the fiscal quarter of 2023 covered by this Quarterly Report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting, as the circumstances that led to the restatement of our financial statements described in this condensed financial statement, had not yet been identified.
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PART II – OTHER INFORMATION
| ITEM 1. | LEGAL PROCEEDINGS |
None.
| ITEM 1A. | RISK FACTORS |
In addition to the other information set forth in this Quarterly Report on Form 10-Q/A, you should carefully consider our risk factors from those disclosed under “Item 1A. Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2022. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.
As of the date of this report, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022. 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 |
None.
| ITEM 3. | DEFAULTS UPON SENIOR SECURITIES |
None.
| ITEM 4. | MINE SAFETY DISCLOSURES |
Not applicable.
| ITEM 5. | OTHER INFORMATION |
During the three months ended June 30, 2023, 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 term is defined in Item 408(a) of Regulation S-K.
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| ITEM 6. | EXHIBITS (RESTATED) |
| * | Filed herewith. |
| ** | Furnished. |
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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 thereunto duly authorized on this 2nd day of January, 2024.
| CORNER GROWTH ACQUISITION CORP. | ||
| By: | /s/ Jerome “Jerry” Letter | |
| Name: | Jerome “Jerry” Letter | |
| Title: | Chief Financial Officer and Chief Operating Officer | |
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