Related Party Transactions

6 Months Ended

Jun. 30, 2024

Related Party Transactions [Abstract]

Related Party Transactions

Note 6—Related Party Transactions

Founder Shares:

On February 10, 2021, the Former Sponsor purchased 6,468,750 Class B Ordinary Shares (the “Founder Shares”) for $25,000 or approximately $0.004 per share (up to 843,750 of which were subject to forfeiture to the extent the underwriters’ over-allotment option was not exercised in full). The Founder Shares are substantially identical to the Class A Ordinary Shares included in the Units sold in the Public Offering except that the Founder Shares automatically convert into Class A Ordinary Shares at the time of the initial business combination, or at any time prior thereto at the option of the holder, and are subject to certain transfer restrictions, as described in more detail below. On September 30, 2021, the Former Sponsor surrendered 2,156,250 Class B Ordinary Shares for no consideration, resulting in 4,312,500 shares outstanding of which 562,500 were subject to forfeiture in the event the underwriters’ over-allotment option was not exercised. On October 21, 2021, the Company executed a share capitalization that increased the number of Class B Ordinary Shares outstanding to 5,031,250, 656,250 of which were subject to forfeiture to the extent the underwriters’ over-allotment option was not exercised in full. After the closing of the Public Offering on October 25, 2021, 31,250 of such shares remained forfeitable and were forfeited in December 2021.

The Company’s initial shareholders and the New Sponsor have agreed not to transfer, assign or sell any of their Founder Shares until the earlier of (A) one year after the completion of the Company’s initial business combination, or (B), subsequent to the Company’s initial business combination, if (x) the last sale price of the Class A Ordinary Shares equals or exceeds $12.00 per share (as adjusted for share splits, share dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the Company’s initial business combination or (y) the date on which the Company completes a liquidation, merger, share exchange or other similar transaction after the initial business combination that results in all of the Company’s shareholders having the right to exchange their ordinary shares for cash, securities or other property.

Private Placement Warrants:

In connection with the closing of the Public Offering on October 25, 2021 (Note 4), the Former Sponsor purchased from the Company an aggregate of 10,500,000 Private Placement Warrants. Each Private Placement Warrant entitles the holder to purchase one Class A Ordinary Share at $11.50 per share. The purchase price of the Private Placement Warrants was added to the proceeds from the Public Offering, net of expenses of the offering and working capital to be available to the Company, to be held in the Trust Account pending completion of the Company’s initial business combination. The Private Placement Warrants (including the Class A Ordinary Shares issuable upon exercise of the Private Placement Warrants) will not be transferable, assignable or salable until 30 days after the completion of the initial business combination and they will be non-redeemable so long as they are held by the Former Sponsor or its permitted transferees. If the Private Placement Warrants are held by someone other than the Former Sponsor or its permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants. Otherwise, the Private Placement Warrants have terms and provisions that are identical to those of the Public Warrants and have no net cash settlement provisions.

If the Company does not complete a business combination, then the proceeds from the sale of the Private Placement Warrants will be part of the liquidating distribution to the holders of Public Shares, and the Private Placement Warrants issued to the Former Sponsor will expire worthless.

In addition, if (x) the Company issues additional Class A Ordinary Shares or equity-linked securities for capital raising purposes in connection with the closing of the initial business combination at an issue price or effective issue price of less than $9.20 per share of Class A Ordinary Share (with such issue price or effective issue price to be determined in good faith by the Board of Directors and, in the case of any such issuance to the Company’s initial shareholders or their affiliates, without taking into account any Founder Shares or warrants held by the Company’s initial shareholders or such affiliates as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of the initial business combination on the date of the consummation of the initial business combination (net of redemptions), and (z) the volume weighted average trading price of Class A Ordinary Shares during the 20 trading day period starting on the trading day prior to the day on which the Company consummates its initial business combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the greater of the Market Value and the Newly Issued Price, the $18.00 per share redemption trigger price will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price, and the $10.00 per share redemption trigger price will be adjusted (to the nearest cent) to be equal to the higher of the Market Value and the Newly Issued Price.

Registration Rights:

The Company’s initial shareholders and the holders of the Private Placement Warrants are entitled to registration rights pursuant to the Registration Rights Agreement executed in connection with the closing of the Public Offering on October 25, 2021. These holders are entitled to make up to three demands, excluding short form registration demands, that the Company register such securities for sale under the Securities Act. In addition, these holders will have “piggy-back” registration rights to include their securities in other registration statements filed by the Company. The Company will bear the expenses incurred in connection with the filing of any such registration statements. There will be no penalties associated with delays in registering the securities under the Registration Rights Agreement. On April 19, 2024, the New Sponsor entered into a joinder to the Registration Rights Agreement.

Related Party Loans:

In February 2021, the Former Sponsor agreed to loan the Company an aggregate of $300,000 by drawdowns of not less than $10,000 each against the issuance of an unsecured promissory note (the “Initial Note”) to cover expenses related to the Public Offering. The Initial Note was non-interest bearing and payable on the earlier of December 31, 2021 or the completion of the Public Offering. The Company borrowed a total of $240,000 under the Initial Note prior to October 25, 2021. Upon the closing of the Public Offering on October 25, 2021, the Initial Note was repaid in full and there was no amount outstanding at June 30, 2024 or December 31, 2023.

Working Capital Loans:

If the Former Sponsor, an affiliate of the Former Sponsor or certain of the Company’s officers and directors make any working capital loans, up to $1,500,000 of such loans may be converted into warrants, at the price of $1.00 per warrant, at the option of the lender. Such warrants would be identical to the Private Placement Warrants.

On June 29, 2023, the Company entered into an unsecured convertible promissory note (the “Note”) with the Former Sponsor, providing for an aggregate amount of loans up to $1,500,000 to fund the Company’s operating expenses. During January 2024, the Company borrowed $275,000 under the Note. In November 2023, the Company borrowed $250,000 under the Note. In April 2024, in connection with the Purchase Agreement defined and discussed in Note 1, the Note was terminated. As of June 30, 2024 and December 31, 2023, $0 and $250,000, respectively, was outstanding under the Note. The elimination of this liability was credited to equity in the three and six months ended June 30, 2024 because it was payable to a related party.

The Note bore no interest. All unpaid principal under the Note was to be payable on the earliest to occur of (i) the date on which the Company consummates an initial business combination or (ii) the date of the liquidation of the Company (such date, the “Note Maturity Date”). In the event the Company consummates its initial business combination, the Former Sponsor had the option on the Note Maturity Date to convert up to an aggregate of $1,500,000 of the principal outstanding under the Note into that number of warrants (“Working Capital Warrants”) equal to the portion of the principal amount of the Note being converted divided by $1.00. The terms of the Working Capital Warrants, if any, would be identical to the terms of the Private Placement Warrants. The Note was subject to customary events of default, the occurrence of certain of which automatically triggers the unpaid principal balance of the Note, and all other sums payable with regard to the Note becoming immediately due and payable. The option to convert the working capital loans into warrants qualifies as an embedded derivative under FASB ASC 815 and is required to be recognized at fair value with subsequent changes in fair value recognized in the Company’s statements of income each reporting period until the loan is repaid or converted. As of December 31, 2023, the fair value of this conversion option was not material.

Promissory Note with New Sponsor:

On April 24, 2024, the Company issued the Promissory Note to the New Sponsor, which provides for borrowings from time to time of up to an aggregate of $2,500,000 for working capital purposes and/or to finance additional deposits into the Trust Account established by the Company upon the consummation of its Public Offering in connection with the extension of the date by which the Company must consummate an initial business combination as set forth in the Articles. The Promissory Note does not bear interest and is repayable in full by the Company upon the earlier of: (i) the date that the Company consummates a business combination and (ii) the date on which the Company liquidates the Trust Account upon the failure of the Company to consummate a business combination within the time period set forth in the Articles (each such date, the “Maturity Date”). The Promissory Note may be drawn down by the Company from time to time prior to the Maturity Date. Upon the consummation of a business combination, the New Sponsor will have the option (but not the obligation) to convert all or any portion of the principal balance of the Promissory Note into private placement warrants to purchase Class A Ordinary Shares of the Company at a price of $1.00 per warrant. The terms of such private placement warrants (if issued) will be identical to the private placement warrants issued by the Company to the Former Sponsor in a private placement concurrent with the consummation of the Public Offering. In the event the Company does not consummate a business combination, the Promissory Note will be repaid only to the extent that the Company has funds available to it outside of the Trust Account. The Promissory Note is subject to customary events of default, the occurrence of which automatically trigger the unpaid principal balance of the Promissory Note and all other sums payable with regard to the Promissory Note becoming immediately due and payable.

During the three and six months ended June 30, 2024, the Company drew down $1,750,000, in four installments, under the Promissory Note and that amount is outstanding at June 30, 2024.

The option to convert the working capital loans into Private Placement Warrants qualifies as an embedded derivative under FASB ASC 815 and is required to be recognized at fair value with subsequent changes in fair value recognized in the Company’s statements of income each reporting period until the loan is repaid or converted. The derivative is recorded as a debt discount and amortized over the life of the loan, in this instance to October 25, 2024. The fair value of the conversion feature into the Private Placement Warrants is determined by reference to the public trading of the nearly identical Public Warrants, considered a Level 2 observable input due to the low volume of trading activity.

The following table presents information about the conversion feature of the Company’s Promissory Note that are measured at fair value on a recurring basis as of June 30, 2024 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value. There was no such conversion feature to report as of December 31, 2023.

Description	June 30, 2024		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
Warrant liabilities at June 30, 2024	$	88,000	$	—	$	88,000	$	—

At inception of each of the four drawdowns under the Promissory Note, the fair value of the derivative liability and debt discount was approximately $160,000 at prices ranging from $0.10 to $0.07. During the three and six months ended June 30, 2024, approximately $45,000 was charged to amortization of debt discount, reducing the debt discount to approximately $115,000 at June 30, 2024. The derivative liability is required to be remeasured at June 30, 2024 and the value at that date at $0.05 per warrant was approximately $88,000. As a result, the Promissory Note is presented in the balance sheet at June 30, 2024 as follows:

Face amount of Promissory Note	$	1,750,000
Less: debt discount at June 30, 2024		(115,000	)
Subtotal	$	1,635,000
Add: derivative liability at market at June 30, 2024		88,000
Promissory Note, net	$	1,723,000

Administrative Services Agreement:

The Company has agreed to pay $10,000 a month to the Former Sponsor under the Administrative Services Agreement for the services to be provided by one or more investment professionals, creation and maintenance of the Company’s website, and miscellaneous additional services. Services commenced on October 21, 2021, the date the Company’s securities were first listed on the Nasdaq Global Market and will terminate upon the earlier of the consummation by the Company of an initial business combination or the liquidation of the Company. The Company charged $30,000 and $60,000 to operations in each of the three and six months ended June 30, 2024 and 2023, respectively, under this agreement. There was $30,000 included in accrued liabilities at December 31, 2023.

In April 2024, in connection with the Purchase Agreement defined and discussed in Note 1, the Administrative Services Agreement was assigned to the New Sponsor and approximately $30,000 of accrued but unpaid Former Sponsor fees were credited (together with the termination of the Sponsor loan discussed above) to deemed capital contribution on forgiveness of Former Sponsor fee accrual in the accompanying unaudited statements of operations at June 30, 2024.

The Company pays the New Sponsor $10,000 per month (which is a portion of the amounts of operating costs referenced above) for office space, utilities, secretarial and administrative services provided to members of its management team, as well as the services provided by one or more investment professionals, creation and maintenance of its website, and miscellaneous additional services and other expenses and obligations of the New Sponsor.

Agreements with Management:

In April 2024, in connection with the Purchase Agreement defined and discussed in Note 1, all of the members of the Board of Directors and officers of the Company resigned. Also in April 2024, the Company appointed new officers and directors including a Chief Financial Officer and retained his services to be paid at the rate of $5,500 per month. Further, two additional staff members were also engaged for an aggregate of approximately $270,000 per year plus certain identified benefits. The above agreements are informal, at will, understandings. The Company charged approximately $92,000 to operations in the three and six months ended June 30, 2024 and no amounts in the three and six months ended June 30, 2023.

Previously, effective November 27, 2022, the Board of Directors appointed its Chief Financial Officer and Secretary (“CFO”). Prior to his appointment as CFO, the CFO served as a paid consultant to the Company. The CFO was not a full-time employee and devoted time to the Company’s affairs on a part-time basis under a consulting agreement with the Company calling for compensation of approximately $100,000 per year. An aggregate of approximately $25,000 and $50,000, respectively, was charged to operations for the three and six months ended June 30, 2023, and approximately $0 and 25,000, respectively, was charged to operations for the three and six months ended June 30, 2024, for his services.