UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For
the quarterly period ended
OR
| Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from _________ to _________.
Commission
file number
(Exact name of registrant as specified in Its Charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
+
(Issuer’s telephone number)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol(s) | Name of each exchange on which registered | ||
| The
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| The
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| The
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Check
whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
As of August 14, 2023, there were Class A ordinary shares, par value $0.0001 per share, and Class B ordinary shares, par value $0.0001 per share, issued and outstanding.
TABLE OF CONTENTS
| i |
PART I. FINANCIAL INFORMATION
ITEM 1. INTERIM CONDENSED FINANCIAL STATEMENTS
SHUAA PARTNERS ACQUISITION CORP I
CONDENSED BALANCE SHEETS
(UNAUDITED)
| June 30, 2023 | December 31, 2022 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses- short term | ||||||||
| Due from related party | ||||||||
| Total current assets | ||||||||
| Marketable securities held in Trust Account | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities, Ordinary Shares Subject to Possible Redemption and Shareholders’ Deficit | ||||||||
| Current liabilities: | ||||||||
| Accrued expenses | $ | $ | ||||||
| Due to related party | ||||||||
| Total current liabilities | ||||||||
| Deferred underwriting commissions | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies (Note 6) | ||||||||
| Class A ordinary shares subject to possible redemption, and shares at redemption value of $ and $ as of June 30, 2023 and December 31, 2022, respectively | ||||||||
| Shareholders’ Deficit | ||||||||
| Preference shares, $ par value; shares authorized; issued and outstanding | ||||||||
| Class A ordinary shares, $ par value; shares authorized; and shares issued and outstanding (excluding and shares subject to possible redemption) as of June 30, 2023 and December 31, 2022, respectively | ||||||||
| Class B ordinary shares, $ par value; shares authorized; and shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total shareholders’ deficit | ( | ) | ( | ) | ||||
| Total Liabilities, Ordinary Shares Subject to Possible Redemption and Shareholders’ Deficit | $ | $ | ||||||
The accompanying notes are an integral part of the condensed financial statements.
| 1 |
SHUAA PARTNERS ACQUISITION CORP I
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| General & Administrative costs | $ | $ | $ | $ | ||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income | ||||||||||||||||
| Interest earned on marketable securities held in Trust Account | ||||||||||||||||
| Total other income | ||||||||||||||||
| Net income (loss) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Weighted average shares outstanding, Class A ordinary shares subject to possible redemption | ||||||||||||||||
| Basic and diluted net income (loss) per share, Class A ordinary shares subject to possible redemption | $ | $ | ) | $ | $ | |||||||||||
| Weighted average shares outstanding, non-redeemable Class A ordinary shares and Class B ordinary shares | ||||||||||||||||
| Basic and diluted net loss per share, non-redeemable Class A ordinary shares and Class B ordinary shares | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
| 2 |
SHUAA PARTNERS ACQUISITION CORP I
CONDENSED STATEMENTS OF ORDINARY SHARES SUBJECT TO POSSIBLE REDEMPTION
AND CHANGES IN SHAREHOLDERS’ DEFICIT
(UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023
Class A Ordinary Share | Non-Redeemable Class A Ordinary Share | Class B Ordinary Share | Additional Paid-in | Accumulated | Shareholders’ | |||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||||||||
| Balance as of December 31, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| Accretion of Class A ordinary shares to redemption value | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Net income | — | — | — | |||||||||||||||||||||||||||||||||
| Balance as of March 31, 2023 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Accretion of Class A ordinary shares to redemption value | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Class A shares redemption | ( | ) | ( | ) | — | — | ||||||||||||||||||||||||||||||
| Additional deposit into trust account for extension | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Conversion of Class B ordinary shares to non-redeemable Class A ordinary shares | — | (2,716,250 | ) | ( | ) | |||||||||||||||||||||||||||||||
| Net income | — | — | — | |||||||||||||||||||||||||||||||||
| Balance as of June 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
| 3 |
SHUAA PARTNERS ACQUISITION CORP I
CONDENSED STATEMENTS OF ORDINARY SHARES SUBJECT TO POSSIBLE REDEMPTION
AND CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT)
(UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022
Class A Ordinary Share | Class B Ordinary Share | Additional Paid-in | Accumulated | Shareholders | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance as of December 31, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Issuance of Units through public offering net of issuance costs | — | |||||||||||||||||||||||||||
| Forfeiture of Class B ordinary shares | ( | ) | ( | ) | ||||||||||||||||||||||||
| Issuance of Private warrants | — | — | ||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | ||||||||||||||||||||||||||
| Accretion of Class A ordinary shares to redemption value | — | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Net loss | — | — | — | — | — | (604,695 | ) | (604,695 | ) | |||||||||||||||||||
| Balance as of March 31, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Accretion of Class A ordinary shares to redemption value | ( | ) | ( | ) | ||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance as of June 30, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
| 4 |
SHUAA PARTNERS ACQUISITION CORP I
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Six Months Ended June 30, | ||||||||
| 2023 | 2022 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||
| Operating costs paid by related party under promissory note | ||||||||
| Interest earned on investments held in Trust Account | ( | ) | ||||||
| Stock-based compensation | ||||||||
| Changes in current assets and current liabilities: | ||||||||
| Prepaid expenses | ( | ) | ||||||
| Due from related party | ( | ) | ||||||
| Accrued offering costs and expenses | ( | ) | ||||||
| Net cash provided by (used in) operating activities | ( | ) | ||||||
| Cash Flows from Investing Activities: | ||||||||
| Investment in marketable securities held in Trust account | ( | ) | ||||||
| Reinvestment of interest income in Trust Account | ( | ) | ||||||
| Additional deposits into Trust Account | ( | ) | ||||||
| Proceeds from sale of investment held in Trust Account | ||||||||
| Net cash provided by (used in) investing activities | ( | ) | ||||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from initial public offering, net of costs | ||||||||
| Proceeds from private placement | ||||||||
| Payment of deferred offering costs | ( | ) | ||||||
| Payment of promissory note | ( | ) | ||||||
| Redemption of Class A ordinary shares | ( | ) | ||||||
| Net cash (used in) provided by financing activities | ( | ) | ||||||
| Net Change in Cash | ( | ) | ||||||
| Cash – Beginning | ||||||||
| Cash – Ending | $ | $ | ||||||
| Supplemental Disclosure of Non-cash Financing Activities: | ||||||||
| Deferred underwriters’ commissions payable charged to additional paid-in capital | $ | $ | ||||||
| Forfeiture of Class B ordinary shares | $ | $ | ||||||
| Accretion of Class A ordinary shares to redemption value | $ | $ | ||||||
| Conversion of Class B ordinary shares to Class A ordinary shares | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
| 5 |
SHUAA PARTNERS ACQUISITION CORP I
NOTES TO CONDENSED FINANCIAL STATEMENT
(Unaudited)
NOTE 1. ORGANIZATION AND BUSINESS OPERATION
SHUAA Partners Acquisition Corp I (the “Company”) was incorporated as a Cayman Islands exempted company on August 24, 2021. The Company was incorporated for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (“Business Combination”).
As of June 30, 2023, the Company had not commenced any operations. All activity for the period from August 24, 2021 (inception) through June 30, 2023 relates to the Company’s formation, the initial public offering (“IPO”) and searching for a Business Combination target. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income from the proceeds derived from the IPO. The Company has selected December 31 as its fiscal year end.
The Company’s Sponsor is SHUAA SPAC Sponsor I LLC, a Cayman Islands limited liability company (the “Sponsor”).
The
registration statement for the Company’s IPO was declared effective on March 1, 2022 (the “Effective Date”). On
March 4, 2022, the Company consummated the IPO of units at $ per unit (each, a “Unit” and,
with respect to the Class A ordinary shares included in the Units, the “Public Shares”), generating gross proceeds to
the Company of $
Simultaneously
with the consummation of the IPO, the Company consummated the sale of warrants (the “IPO Private Placement Warrants”),
of which (i) IPO Private Placement Warrants were purchased by the Sponsor, (ii) IPO Private Placement Warrants were
purchased by BTIG, LLC (“BTIG”) and (iii) IPO Private Placement Warrants were purchased by I-Bankers Securities, Inc.
(“IBS”), in each case at a price of $ per IPO Private Placement Warrant, generating gross proceeds to the Company of
$
On
March 7, 2022, the Underwriters partially exercised the Option by providing notice of their intent to purchase additional Units
(the “Over-Allotment Units”). On March 8, 2022, the Company and Underwriters consummated the sale of the Over-Allotment Units,
generating additional gross proceeds of $
Transaction
costs amounted to $
Following
the closing of the IPO on March 4, 2022 and the partial exercise of the Option on March 8, 2022, $
| 6 |
The Company will provide its holders of the outstanding Public Shares (the “public shareholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of the initial Business Combination either (1) in connection with a general meeting called to approve the Business Combination or (2) by means of a tender offer. The decision as to whether the Company will seek shareholder approval of a proposed Business Combination or conduct a tender offer will be made by the Company, solely in its discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would require the Company to seek shareholder approval under applicable law or stock exchange listing requirement.
The Company will provide its public shareholders with the opportunity to redeem all or a portion of their Public Shares upon the completion of the initial Business Combination at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account calculated as of two business days prior to the consummation of the initial Business Combination, including interest earned on the funds held in the Trust Account and not previously released to the Company to pay its franchise and income taxes, divided by the number of then issued and outstanding Public Shares, subject to the limitations described herein. The amount in the Trust Account was initially anticipated to be $ per Public Share and may be increased by any pro rata interest earned on the funds held in the Trust Account and not released to the Company to pay its tax obligations. The per share amount the Company will distribute to investors who properly redeem their shares will not be reduced by the deferred underwriting commissions the Company will pay to the representative of the Underwriters.
The
Public Shares subject to redemption are recorded at a redemption value and classified as temporary equity upon the completion of the
IPO, in accordance with Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”)
Topic 480 “Distinguishing Liabilities from Equity”, and subsequently accreted to redemption value. In such case, the Company
will proceed with a Business Combination if the Company’s net tangible assets are not less than $
The
Company has until September 4, 2023 (or until June 4, 2024 if it extends the period of time to consummate its initial Business Combination)
to consummate the initial Business Combination (the “Combination Period”). If the Company has not completed its initial Business
Combination within the Combination Period, it will: (i) cease all operations except for the purpose of winding up; (ii) as promptly as
reasonably possible but not more than 10 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 the Company to pay its franchise and income taxes (less up to $
On June 1, 2023, the Company held an extraordinary general meeting of shareholders (the “Extension Meeting”), at which the Company’s shareholders approved a proposal to amend the Company’s amended and restated memorandum and articles of association (the “Articles”) to extend the date (the “Termination Date”) by which the Company has to consummate a Business Combination (the “Articles Extension”) from June 4, 2023 to September 4, 2023 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 nine times by an additional one month each time after the Articles Extension Date (the “Extension Amendment Proposal”). The Extension Amendment Proposal is described in more detail in the definitive proxy statement of the Company, which was filed with the U.S. Securities and Exchange Commission (the “SEC”) on May 15, 2023 (as supplemented to date, the “Proxy Statement”).
On June 1, 2023, based on the results of the Extension Meeting, the holders of the Company’s outstanding Class B ordinary shares, par value $ per share (the “Founder Shares”), converted all outstanding Founder Shares into Class A ordinary shares. Notwithstanding the conversions, such holders will not be entitled to receive any monies held in the Trust Account as a result of their ownership of any Class A ordinary shares issued upon conversion of the Founder Shares.
In
connection with the Extension Meeting, holders of Public Shares exercised their right to redeem their shares for cash at a
redemption price of approximately $ per share, for an aggregate redemption amount of approximately $
Following
approval of the Extension Proposal, the Company deposited $
The Sponsor, the other initial shareholders, directors and officers have agreed to waive: (i) their redemption rights with respect to any Founder Shares and Public Shares held by them, as applicable, in connection with the completion of the initial Business Combination; (ii) their redemption rights with respect to any Founder Shares and Public Shares held by them in connection with a shareholder vote to amend the Company’s amended and restated memorandum and articles of association (A) to modify the substance or timing of the Company’s obligation to allow redemption in connection with the initial Business Combination or to redeem % of the Public Shares if the Company does not complete the initial Business Combination within the Combination Period or (B) with respect to any other provision relating to shareholders’ rights or pre-initial Business Combination activity; and (iii) their rights to liquidating distributions from the Trust Account with respect to any Founder Shares they hold if the Company fails to complete the initial Business Combination within the Combination Period (although they will be entitled to liquidating distributions from the Trust Account with respect to any Public Shares they hold if the Company fails to complete the initial Business Combination within the applicable Combination Period).
| 7 |
The Sponsor has agreed that it will be liable to the Company if and to the extent any claims by a third party (other than its independent auditors) for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below (1) $ per Public Share or (2) such lesser amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay taxes, except as to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims under the Company’s indemnity of the Underwriters of the IPO against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company has not independently verified whether the Sponsor has sufficient funds to satisfy its indemnity obligations and believe that the Sponsor’s only assets are securities of the Company and, therefore, the Sponsor may not be able to satisfy those obligations. The Company has not asked the Sponsor to reserve for such obligations.
Liquidity and Going Concern
As
of June 30, 2023, the Company had $
The
Company’s liquidity needs prior to the IPO had been satisfied through a payment from the Sponsor of $ for the Founder Shares
to cover certain offering costs and the loan under an unsecured promissory note from the Sponsor of $
On
June 1, 2023, the Company issued an unsecured promissory note (the “Extension Promissory Note”) in the total principal amount
of up to $
The Company has incurred and expects to continue to incur significant costs in pursuit of its financing and acquisition plans. The Company may need to raise additional capital through loans or additional investments from its Sponsor, shareholders, officers, directors, or third parties. The Company’s officers, directors and Sponsor may, but are not obligated to, loan the Company funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet the Company’s working capital needs. Accordingly, the Company may not be able to obtain additional financing. If the Company is unable to raise additional capital, it 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, and reducing overhead expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all.
The Company has until September 4, 2023 (unless extended to a latest possible date of June 4, 2024, by extending on a monthly basis for up to nine times by an additional one month) to consummate the initial Business Combination. If the Company is not able to consummate a Business Combination before September 4, 2023 (absent any extensions of such period by the Sponsor), it will commence an automatic winding up, dissolution and liquidation. Management has determined that the automatic liquidation, should a Business Combination not occur, and potential subsequent dissolution, also raise substantial doubt about the Company’s ability to continue as a going concern. While management intends to complete a Business Combination on or before September 4, 2023 (absent any extensions of such period by the Sponsor), it is uncertain whether the Company will be able to do so. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after September 4, 2023 (absent any extensions of such period by the Sponsor).
These conditions raise substantial doubt about the Company’s ability to continue as a going concern.
Risks and Uncertainties
Management continues to evaluate the impact of the Russia-Ukraine war on the industry and has concluded that while it is reasonably possible that such conflict could have negative effects on the Company’s financial position, the results of its operations or its search for a target company, the specific impacts are not readily determinable as of the date of these condensed financial statements. Similarly, we cannot predict the impact that high market volatility and instability in the banking sector could have on economic activity and our business in particular. The failure of banks and financial institutions and measures taken, or not taken, by governments, businesses and other organizations in response to these events could adversely impact our business, financial conditions and results of operations. The condensed financial statements do not include any adjustments that might result from the outcome of these uncertainties.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the Securities and Exchange Commission (the “SEC”). Certain information or footnote disclosures normally included in condensed financial statements prepared in accordance with US GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair statement of the financial position, operating results and cash flows for the periods presented.
The interim results for the three and six months ended June 30, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023 or for any future interim periods.
| 8 |
Emerging Growth Company Status
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As such, the Company is eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies.”
Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company intends to take advantage of the benefits of this extended transition period.
Use of Estimates
The preparation of the unaudited condensed financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
As
of June 30, 2023 and December 31, 2022, the Company had $
Marketable Securities Held in Trust Account
As
of June 30, 2023 and December 31, 2022, the Company had $
Concentration of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of an uninsured cash account with a balance
of $
The Company accounts for its ordinary shares subject to possible redemption in accordance with the guidance enumerated in ASC Topic 480. Ordinary shares subject to mandatory redemption are classified as a liability instrument and are measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, ordinary shares are classified as shareholders’ deficit. The Company’s Class A ordinary shares contain certain redemption rights that are considered by the Company to be outside of the Company’s control and subject to the occurrence of uncertain future events.
In
connection with the Extension Meeting, holders of Class A
ordinary shares exercised their right to redeem their shares for cash at a redemption price of
approximately $ per share, for an aggregate redemption amount of approximately $
The
Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable Class A ordinary
shares to equal the redemption value at the end of each reporting period. Such changes are reflected in additional paid-in capital, or
in the absence of additional paid-in capital, in accumulated deficit. For the six months ended June 30, 2023, the Company recorded an
accretion of $
As of June 30, 2023 and December 31, 2022, the Class A ordinary shares, classified as temporary equity in the balance sheets, are reconciled in the following table:
| Gross proceeds from initial public offering | $ | |||
| Less: | ||||
| Common stock issuance costs | ( | ) | ||
| Offering costs allocated to Class A ordinary shares subject to possible redemption | ( | ) | ||
| Plus: | ||||
| Re-measurement on Class A ordinary shares subject to possible redemption amount | ||||
| Class A ordinary shares subject to possible redemption, December 31, 2022 | ||||
| Less: | ||||
| Redemption of Class A ordinary shares | ( | ) | ||
| Plus: | ||||
| Re-measurement on Class A ordinary shares subject to possible redemption amount | ||||
| Class A ordinary shares subject to possible redemption, June 30, 2023 | $ |
| 9 |
Offering Costs Associated with the IPO
The
Company complies with ASC Topic 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A, “Expenses of Offering.”
Offering costs consist principally of costs incurred in connection with formation of the Company and preparation for the IPO. Offering
costs are charged against the carrying value of Class A ordinary shares and the Public Warrants based on the relative value of those
instruments. Accordingly, on March 31, 2022, offering costs totaling $
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates the carrying amounts represented in the accompanying balance sheets, primarily due to their short-term nature. The fair values of prepaid expenses, accounts payable and accrued expenses, and due from related party were estimated to approximate the carrying values as of June 30, 2023 and December 31, 2022 due to the short maturities of such instruments and were classified as Level 1 (see Note 8 for the classification of fair value hierarchy).
Warrants
The Company accounts for the Public Warrants and Private Placement Warrants as equity-classified instruments as the warrants are indexed to the Company’s own common shares and the warrant holders could not be potentially required to “net cash settle” in a circumstance outside of the Company’s control.
The Statement of Operations includes a presentation of income per redeemable Class A ordinary share and loss per non-redeemable Class A ordinary share and Class B ordinary share following the two-class method of loss per share. In order to determine the net income (loss) attributable to both the redeemable Class A ordinary shares and non-redeemable Class A ordinary shares and Class B ordinary shares, the Company first considered the total income (loss) allocable to both sets of shares. This is calculated using the total net income (loss) less any dividends paid. For purposes of calculating net income (loss) per share, any remeasurement of the accretion to redemption value of the Class A ordinary shares subject to possible redemption was considered to be dividends paid to the public shareholders. Subsequent to calculating the total income (loss) allocable to both sets of shares, the Company split the amount to be allocated in accordance with the weighted average ordinary shares outstanding of each class for the respective periods.
For the Three Months Ended June 30, 2023 | For the Six Months Ended June 30, 2023 | |||||||
| Net income | $ | $ | ||||||
| Accretion of temporary equity to redemption value | ( | ) | ( | ) | ||||
| Net loss including accretion of temporary equity to redemption value | $ | ( | ) | $ | ( | ) | ||
For Three Months Ended June 30, 2023 | For Six Months Ended June 30, 2023 | |||||||||||||||
Redeemable Class A | Non-Redeemable Class A and Class B | Redeemable Class A | Non-Redeemable Class A and Class B | |||||||||||||
| Basic and diluted net income (loss) per share: | ||||||||||||||||
| Numerator: | ||||||||||||||||
| Allocation of net loss including accretion of temporary equity | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Allocation of accretion of temporary equity to redemption value | ||||||||||||||||
| Allocation of net income (loss) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Denominator: | ||||||||||||||||
| Weighted-average shares outstanding | ||||||||||||||||
| Basic and diluted net income (loss) per share | $ | $ | ) | $ | $ | ) | ||||||||||
| 10 |
For the Three Months Ended June 30, 2022 | For the Six Months Ended June 30, 2022 | |||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Accretion of temporary equity to redemption value | ( | ) | ( | ) | ||||
| Net loss including accretion of temporary equity to redemption value | $ | ( | ) | $ | ( | ) | ||
For the Three Months Ended June 30, 2022 | For the Six Months Ended June 30, 2022 | |||||||||||||||
Redeemable Class A | Non-Redeemable Class A and Class B | Redeemable Class A | Non-Redeemable Class A and Class B | |||||||||||||
| Basic and diluted net income (loss) per share: | ||||||||||||||||
| Numerator: | ||||||||||||||||
| Allocation of net loss including accretion of temporary equity | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Allocation of accretion of temporary equity to redemption value | ||||||||||||||||
| Allocation of net income (loss) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
| Denominator: | ||||||||||||||||
| Weighted-average shares outstanding | ||||||||||||||||
| Basic and diluted net income (loss) per share | $ | ) | $ | ) | $ | $ | ) | |||||||||
In connection with the Underwriters’ partial exercise of their over-allotment option on March 8, 2022, Founder Shares were no longer subject to forfeiture. These shares were excluded from the calculation of weighted average shares outstanding until they were no longer subject to forfeiture.
As of June 30, 2023 and December 31, 2022, the Company did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into ordinary shares and then share in the Company’s earnings. As a result, diluted loss per share is the same as basic loss per share for the periods presented.
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under ASC Topic 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the condensed financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC
Topic 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax
positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than
not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized
tax benefits as income tax expense. There were
There is currently no taxation imposed on income by the Government of the Cayman Islands. In accordance with Cayman income tax regulations, income taxes are not levied on the Company. U.S. taxation could be imposed if the Company is engaged in a U.S. trade or business. The Company is not expected to be treated as engaged in a U.S. trade or business at this time. Additionally, given the nature of the investment income generated from the funds held in the Trust Account, it is not subject to tax withholdings in the U.S. Moreover, the Company determined that no income tax liability would arise from any other jurisdictions outside of the Cayman Islands. Consequently, income taxes are not reflected in the Company’s condensed financial statements.
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Recent Accounting Pronouncements
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective January 1, 2024 and should be applied on a full or modified retrospective basis, with early adoption permitted. The Company is currently assessing the impact, if any, that ASU 2020-06 would have on its financial position, results of operations or cash flows.
Management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s condensed financial statements.
NOTE 3. INITIAL PUBLIC OFFERING
On
March 4, 2022, the Company sold Units, at a price of $ per Unit, generating gross proceeds of $
On
March 7, 2022, the Underwriters partially exercised the over-allotment option, and, on March 8, 2022, purchased Over-Allotment
Units, generating aggregate gross proceeds of $
NOTE 4. PRIVATE PLACEMENT
Simultaneously
with the closing of the IPO, the Company consummated the sale of IPO Private Placement Warrants, of which (i) IPO
Private Placement Warrants were purchased by the Sponsor, (ii) IPO Private Placement Warrants were purchased by BTIG and (iii)
IPO Private Placement Warrants were purchased by IBS, in each case at a price of $ per IPO Private Placement Warrant, generating
gross proceeds to the Company of $
On
March 8, 2022, simultaneously with the sale of the Over-Allotment Units, the Company consummated the private sale of an additional
Over-Allotment Private Placement Warrants, of which (i) Over-Allotment Private Placement Warrants were purchased by the Sponsor,
(ii) Over-Allotment Private Placement Warrants were purchased by BTIG and (iii) Over-Allotment Private Placement Warrants
were purchased by IBS, in each case at a price of $ per Over-Allotment Private Placement Warrant, generating gross proceeds to the
Company of $
The Private Placement Warrants are not transferable, assignable or salable until 30 days after the completion of the initial Business Combination, except in certain circumstances.
If the Company does not complete the initial Business Combination within the Combination Period, the proceeds of the sale of the Private Placement Warrants held in the Trust Account will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Private Placement Warrants will expire worthless. The Private Placement Warrants are not redeemable by the Company.
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NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
On October 8, 2021, the Sponsor paid $, or approximately $ per share, to cover certain offering costs in consideration for Founder Shares, par value $. On February 22, 2022, the Sponsor surrendered an aggregate of Founder Shares, thereby resulting in remaining Founder Shares held by the Sponsor.
On March 1, 2022, the Sponsor approved the transfer of Founder Shares at their original purchase price to each of Mr. Ojjeh, Mr. Siddiqui, Mr. Al Hameli and Dr. Al Hashemi (collectively, the “Independent Directors”). The Founder Shares held by the Independent Directors, which were not subject to forfeiture in the event the Underwriters’ over-allotment option was not exercised, were accounted for by the Company in accordance with ASC 718 Stock-Based Compensation. Under ASC 718, stock-based compensation associated with equity-classified awards is measured at fair value upon the grant date. The fair value of the shares transferred to the Independent Director Nominees was approximately $ or $ per share. The Company recognized $ stock-based compensation expenses for the year ended December 31, 2022, as these Founder Shares transferred to Independent Director Nominees are not subject to any performance obligations.
On March 15, 2022, following the partial exercise of the Option, the Underwriters forfeited the balance of the Option, resulting in the forfeiture of Founder Shares by the Sponsor. As described in Note 7, in connection with the Extension Meeting on June 1, 2023, the holders of the Company’s Founder Shares converted all outstanding Founder Shares into Class A ordinary shares and as of June 30, 2023, no Founder Shares were outstanding.
The
Company’s initial shareholders have agreed not to transfer, assign or sell any of their Founder Shares (or Class A ordinary shares
issuable upon the conversion thereof) until the earlier to occur of: (A) one year after the completion of the initial Business Combination;
and (B) subsequent to the initial Business Combination (x) if the last reported sale price of the Class A ordinary shares equals or exceeds
$ per share (as adjusted for share sub-divisions, share dividends, rights issuances, consolidations, reorganizations, recapitalizations
and other similar transactions) for any 20 trading days within any 30 trading day period commencing at least
Promissory Note-Related Party
On
October 8, 2021, the Sponsor agreed to loan the Company up to $
On
June 1, 2023, the Company issued the Extension Promissory Note in the total principal amount of up to $
Working Capital Loans
In
order to finance transaction costs in connection with an intended Business Combination, the Sponsor or an affiliate of the Sponsor, or
certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working
Capital Loans”). If the Company completes the initial Business Combination, the Company may repay the Working Capital Loans out
of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans may be repaid only out of funds held
outside the Trust Account. In the event that the initial Business Combination does not close, the Company may use a portion of the working
capital held outside the Trust Account to repay the Working Capital Loans but no proceeds from the Trust Account would be used to repay
the Working Capital Loans. Up to $
Administrative Services Agreement
The
Company entered into an administrative services agreement pursuant to which they will pay the Sponsor a total of $
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NOTE 6. COMMITMENTS & CONTINGENCIES
Registration Rights
The holders of the Founder Shares, Private Placement Warrants and any warrants that may be issued upon conversion of Working Capital Loans (and any Class A ordinary shares issuable upon the exercise of the Private Placement Warrants or warrants issued upon conversion of Working Capital Loans or upon conversion of the Founder Shares) will be entitled to registration rights pursuant to a registration rights agreement signed on the Effective Date requiring the Company to register such securities for resale (in the case of the Founder Shares, only after conversion to the Class A ordinary shares). The holders of these securities will be entitled to make up to three demands, excluding short form registration demands, that the Company register such securities under the Securities Act. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of the initial Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. The Company will bear the expenses incurred in connection with the filing of any such registration statements. Notwithstanding the foregoing, the Underwriters or their respective designees may not exercise their demand and “piggy-back” registration rights after five years after the Effective Date and may not exercise their demand rights on more than one occasion.
Underwriting Agreement
The Company granted the Underwriters a 45-day option from the Effective Date to purchase up to an additional units to cover over-allotments, if any.
On
March 4, 2022, the Company paid a cash underwriting commission of $
On
March 7, 2022, the Underwriters partially exercised the over-allotment option and, on March 8, 2022, purchased Units, generating
aggregate gross proceeds of $
NOTE 7. SHAREHOLDER’S DEFICIT
Preferred Shares
The Company is authorized to issue preference shares with a par value of $ per share with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. As of June 30, 2023 and December 31, 2022, there were preference shares issued or outstanding.
Class A Ordinary Shares
The
Company is authorized to issue Class A ordinary shares with a par value of $ per share. Holders of Class A ordinary
shares are entitled to
Class B Ordinary Shares
The
Company is authorized to issue Class B ordinary shares with a par value of $ per share. Holders of Class B ordinary
shares are entitled to
Warrants
As
of June 30, 2023 and December 31, 2022, there were
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Redemption of warrants. Once the warrants become exercisable, the Company may redeem the outstanding warrants (except for the Private Placement Warrants):
| ● | in whole and not in part; | |
| ● | at a price of $ per warrant; | |
| ● | upon
not less than | |
| ● | if,
and only if, the reported last sale price of the Company’s Class A ordinary shares equals or exceeds $ per share (as adjusted
for stock splits, stock dividends, reorganizations and recapitalizations) for any |
The right to exercise will be forfeited unless the warrants are exercised prior to the Redemption Date. On and after the Redemption Date, a record holder of a warrant will have no further rights except to receive the redemption price for such holder’s warrant upon surrender of such warrant.
In
addition, if (x) the Company issues additional ordinary shares or equity-linked securities for capital raising purposes in
connection with the closing of its initial Business Combination at an issue price or effective issue price of less than $ per
ordinary share (with such issue price or effective issue price to be determined in good faith by the Company’s board of
directors, and in the case of any such issuance to the Company’s initial shareholders or their affiliates, without taking into
account any of the Founder Shares issued prior to the Company’s IPO and held by the Company’s initial shareholders or
their affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds
from such issuances represent more than
NOTE 8. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company follows the guidance in ASC Topic 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually. The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
| ● | Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; | |
| ● | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and | |
| ● | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
In many cases, a valuation technique used to measure fair value includes inputs from multiple levels of the fair value hierarchy described above. The lowest level of significant input determines the placement of the entire fair value measurement in the hierarchy. The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2023 and December 31, 2022, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
June 30, 2023 | Quoted Prices In Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | |||||||||||||
| Assets | ||||||||||||||||
| Investments held in Trust Account: Money Market Funds | $ | $ | $ | $ | ||||||||||||
| Total Assets | $ | $ | $ | $ | ||||||||||||
December 31, 2022 | Quoted Prices In Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | |||||||||||||
| Assets | ||||||||||||||||
| Investments held in Trust Account: Money Market Funds | $ | $ | $ | $ | ||||||||||||
| Total Assets | $ | $ | $ | $ | ||||||||||||
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In order to calculate the fair value of the warrants at the IPO date for purposes of establishing the initial allocation of costs, the Company utilized the following inputs to the Black-Scholes model for the initial measurement:
| March 4, 2022 | ||||
| Underlying common stock price | $ | |||
| Cash flow discount rate | % | |||
| Unit purchase price | $ | |||
| Estimated term | ||||
| Volatility | % | |||
The Company is not required to re-measure the fair value of the warrants since they are an equity-classified instrument.
NOTE 9. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred up to the date the condensed financial statements were issued. Based upon this review, except for the below, the Company did not identify any subsequent events that have occurred that would require adjustment or disclosures in the condensed financial statements.
On
July 6, 2023, the Sponsor funded the initial principal amount of $
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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References in this report (this “Quarterly Report”) to “we,” “us” or the “Company” refer to SHUAA Partners Acquisition Corp I. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to SHUAA SPAC Sponsor I LLC, a Cayman Islands limited liability company. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the condensed financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form 10-Q including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors, including, but not limited to, possible business combinations and the financing thereof, and related matters, as well as all other statements other than statements of historical fact included in this Quarterly Report, could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s Annual Report on Form 10-K filed with the SEC on March 31, 2023. The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Overview
We are a blank check company incorporated in the Cayman Islands on August 24, 2021, formed for the purpose of effecting a merger, amalgamation, share exchange, asset acquisition, share purchase, reorganization or other similar Business Combination with one or more businesses. We intend to effectuate our Business Combination using cash derived from the proceeds of the IPO and the sale of the Private Placement Warrants, our shares, debt or a combination of cash, shares and debt.
We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a Business Combination will be successful.
We have until September 4, 2023 (or until June 4, 2024 if we extend the period of time to consummate our initial Business Combination) to consummate the initial Business Combination (the “Combination Period”). If we have not completed our initial Business Combination within the Combination Period, we will: (i) cease all operations except for the purpose of winding up; (ii) as promptly as reasonably possible but not more than 10 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 our franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then issued and 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, liquidate and dissolve, subject in each case to our obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law.
On June 1, 2023, we held an extraordinary general meeting of shareholders (the “Extension Meeting”), at which the Company’s shareholders approved a proposal to amend the Company’s amended and restated memorandum and articles of association (the “Articles”) to extend the date (the “Termination Date”) by which we have to consummate a Business Combination (the “Articles Extension”) from June 4, 2023 to September 4, 2023 and to allow us, without another shareholder vote, to elect to extend the Termination Date to consummate a Business Combination on a monthly basis for up to nine times by an additional one month each time after the Articles Extension Date (the “Extension Amendment Proposal”). The Extension Amendment Proposal is described in more detail in the definitive proxy statement of the Company, which was filed with the SEC on May 15, 2023.
On June 1, 2023, based on the results of the Extension Meeting, the holders of the Company’s outstanding Class B ordinary shares, par value $0.0001 per share (the “Founder Shares”), converted all outstanding Founder Shares into Class A ordinary shares. Notwithstanding the conversions, such holders will not be entitled to receive any monies held in the Trust Account as a result of their ownership of any Class A ordinary shares issued upon conversion of the Founder Shares.
In connection with the Extension Meeting, holders of 8,299,638 Public Shares exercised their right to redeem their shares for cash at a redemption price of approximately $10.59 per share, for an aggregate redemption amount of approximately $87.89 million. As a result, such amount was removed from the Trust Account to pay the redeeming holders and 2,565,362 Public Shares remain outstanding (such Public Shares exclude the 2,716,250 Class A ordinary shares issued upon conversion of the Founder Shares, which converted Class A ordinary shares do not entitle their holders to any monies held in the Trust Account as a result of their ownership). The remaining amount in the Trust Account immediately following the redemption payments was approximately $27.17 million.
Following approval of the Extension Proposal, on June 1, 2023, we issued an unsecured promissory note (the “Extension Promissory Note”) in the total principal amount of up to $840,000 to the Sponsor and, on June 8, 2023, we deposited $210,000 into the Trust Account to extend the Termination Date to September 4, 2023. In addition, in the event we do not consummate an initial Business Combination by September 4, 2023, the Sponsor (or one or more of its affiliates, members or third-party designees) may contribute to the Company $70,000, as a loan to be deposited into the Trust Account, for each of nine one-month extensions following the Articles Extension Date.
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Results of Operations
We have neither engaged in any operations nor generated any operating revenues to date. Our only activities from August 24, 2021 (inception) through June 30, 2023 were organizational activities, those necessary to prepare for the IPO, described below, and identifying a target company for a Business Combination. We do not expect to generate any operating revenues until after the completion of our Business Combination. We generate non-operating income in the form of interest income on marketable securities held in the Trust Account. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.
For the three months ended June 30, 2023, we had net income of $479,270, consisting of interest on investments held in the Trust Account of $1,036,262, offset by general and administrative costs of $556,992.
For the six months ended June 30, 2023, we had net income of $1,377,004, consisting of interest on investments held in the Trust Account of $2,244,443, offset by general and administrative costs of $867,439.
For the three months ended June 30, 2022, we had net loss of $119,425, consisting of general and administrative costs of $277,593, partially offset by interest on investment held in the Trust Account of $158,168.
For the six months ended June 30, 2022, we had net loss of $724,120, consisting of general and administrative costs of $889,861, partially offset by interest on investment held in the Trust Account of $165,741.
Liquidity, Capital Resources and Going Concern
For the six months ended June 30, 2023, net cash provided by operating activities was $1,922,999, consisting of net income of $1,377,004 and changes in operating assets and liabilities, which provided $545,995 of cash from operating activities.
For the six months ended June 30, 2022, net cash used in operating activities was $1,308,845. The net loss of $724,120, consisted of operating costs paid by related party under promissory note of $393, stock-based compensation of $560,000, offset by interest earned on investments held in Trust Account of $165,741 and changes in operating assets and liabilities, which used $979,377 of cash from operating activities.
As of June 30, 2023, we had cash outside our Trust Account of $112,379 and had a working capital deficit of $68,148. All remaining cash from the IPO is held in the Trust Account and is generally unavailable for use prior to an initial Business Combination. In addition, in order to finance transaction costs in connection with a Business Combination, our Sponsor or an affiliate of the Sponsor or certain of our officers and directors may, but are not obligated to, provide us Working Capital Loans. As of June 30, 2023, there were no amounts outstanding under any Working Capital Loans.
In connection with the Extension Meeting, holders of 8,299,638 Public Shares exercised their right to redeem their shares for cash at a redemption price of approximately $10.59 per share, for an aggregate redemption amount of approximately $87.89 million. As a result, such amount was removed from the Trust Account to pay the redeeming holders and 2,565,362 Public Shares remain outstanding (such Public Shares exclude the 2,716,250 Class A ordinary shares issued upon conversion of the Founder Shares, which converted Class A ordinary shares do not entitle their holders to any monies held in the Trust Account as a result of their ownership). The remaining amount in the Trust Account immediately following the redemption payments was approximately $27.17 million.
On June 1, 2023, we issued the Extension Promissory Note in the total principal amount of up to $840,000 to the Sponsor. The Sponsor funded the initial principal amount of $210,000 on July 6, 2023.
We have incurred and expect to continue to incur significant costs in in connection with our search for a Business Combination target. We may need to raise additional capital through loans or additional investments from our Sponsor, shareholders, officers, directors, or third parties. Our officers, directors and Sponsor 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, and reducing overhead expenses. We cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all.
We have until September 4, 2023 (or until June 4, 2024, if we extend the period of time to consummate our initial Business Combination) to consummate the initial Business Combination (the “Combination Period”). If we are not able to consummate a Business Combination before September 4, 2023 (absent any extensions of such period by the Sponsor), we will commence an automatic winding up, dissolution and liquidation. Management has determined that the automatic liquidation, should a Business Combination not occur, and potential subsequent dissolution, also raise substantial doubt about our ability to continue as a going concern. While management intends to complete a Business Combination on or before September 4, 2023 (absent any extensions of such period by the Sponsor), it is uncertain whether we will be able to do so. No adjustments have been made to the carrying amounts of assets or liabilities should we be required to liquidate after September 4, 2023 (absent any extensions of such period by the Sponsor).
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Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to the Sponsor a monthly fee of $10,000 for office space and administrative and support services. We began incurring these fees on March 1, 2022 and will continue to incur these fees monthly until the earlier of the completion of the Business Combination and our liquidation.
The Underwriters are entitled to a deferred fee of $0.40 per Unit, or $4,346,000 in the aggregate. The deferred fee will become payable to the Underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.
Critical Accounting Estimates
The preparation of condensed financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management 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 financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have not identified any critical accounting estimates other than those disclosed on the Company’s Annual Report on Form 10-K filed with the SEC on March 31, 2023.
Recent Accounting Standards
See “Note 2 — Summary of Significant Accounting Policies” to the condensed financial statements included with this report for a discussion of recent accounting standards.
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our condensed financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required for smaller reporting companies.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended June 30, 2023, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial and accounting officer have concluded that during the period covered by this report, our disclosure controls and procedures were not effective due to the material weakness described below.
During the preparation of our financial statements for the year ended December 31, 2022, we identified a material weakness in internal controls over financial reporting related to our financial close process, as previously identified and discussed in our Annual Report on Form 10-K filed with the SEC on March 31, 2023. Specifically, errors were identified in the classification of cash received and reinvested in the Trust Account in the statement of cash flows.
Changes in Internal Control over Financial Reporting
Other than the remediation plan described in our Annual Report on Form 10-K filed with the SEC on March 31, 2023, there has been no change in our internal control over financial reporting for the most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 1A. RISK FACTORS
Except as set forth below, as of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K, filed with the SEC on March 31, 2023. We may disclose changes to such risk factors or disclose additional risk factors from time to time in future filings with the SEC.
A financial crisis or deterioration in general economic, business or industry conditions could adversely affect our business, including our ability to negotiate and complete our initial Business Combination, and results of operations.
Concerns over global economic conditions, instability in the banking sector, stock market volatility, energy costs, geopolitical issues, inflation and U.S. Federal Reserve interest rate increases in response, the availability and cost of credit, and slowing of economic growth in the United States and fears of a recession have contributed and may continue to contribute to economic uncertainty and diminished expectations for the global economy. We cannot predict the impact that high market volatility and instability in the banking sector could have on economic activity generally, or our ability to negotiate and complete our initial Business Combination and results of operations. The failure of banks and financial institutions and measures taken, or not taken, by governments, businesses and other organizations in response to these events could adversely impact our ability to negotiate and complete our initial Business Combination and results of operations.
To mitigate the risk that we might be deemed to be an investment company for purposes of the Investment Company Act, we may, at our discretion instruct the trustee of the Trust Account to liquidate the investments held in the Trust Account and instead to hold the funds in the Trust Account in cash items until the earlier of the consummation of our initial Business Combination or our liquidation. As a result, following the liquidation of investments in the Trust Account, we would likely receive minimal interest on the funds held in the Trust Account, which would reduce the dollar amount our public shareholders would receive upon any redemption or liquidation of the Company.
The funds in the Trust Account have, since our IPO, been held only in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds investing solely in U.S. government treasury obligations and meeting certain conditions under Rule 2a-7 under the Investment Company Act. However, to mitigate the risk of us being deemed to be an unregistered investment company (including under the subjective test of Section 3(a)(1)(A) of the Investment Company Act) and thus subject to regulation under the Investment Company Act, the Company may determine, at its discretion, to instruct the trustee of the Trust Account to liquidate the U.S. government treasury obligations or money market funds held in the Trust Account and thereafter to maintain the funds in the Trust Account in cash in an interest-bearing demand deposit account at a bank until the earlier of the consummation of our initial Business Combination or the liquidation of the Company. Following such liquidation, we would likely receive minimal interest on the funds held in the Trust Account. However, interest previously earned on the funds held in the Trust Account still may be released to us to pay our taxes, if any. As a result, any decision to liquidate the investments held in the Trust Account and thereafter to hold all funds in the Trust Account in cash items would reduce the dollar amount our public shareholders would receive upon any redemption or liquidation of the Company.
In addition, even prior to the 24-month anniversary of the effective date of the registration statement relating to our IPO, we may be deemed to be an investment company. The longer that the funds in the Trust Account are held in short-term U.S. government treasury obligations or in money market funds invested exclusively in such securities, even prior to the 24-month anniversary, the greater the risk that we may be considered an unregistered investment company, in which case we may be required to liquidate the Company. Were we to liquidate, our warrants would expire worthless, and our securityholders would lose the investment opportunity associated with an investment in the combined company, including any potential price appreciation of our securities.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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ITEM 5. OTHER INFORMATION
On May 8, 2023, the Company applied to transfer the listing of its Class A ordinary shares, units and redeemable warrants from The Nasdaq Global Market tier to The Nasdaq Capital Market tier, which requires a minimum of 300 public shareholders (the “Transfer”). Subsequently, on May 17, 2023, the Company received confirmation that Nasdaq Stock Market LLC (“Nasdaq”) had approved the Transfer. The Company’s ordinary shares, units and redeemable warrants began trading on The Nasdaq Capital Market on May 24, 2023 under the symbols “SHUA,” “SHUAU” and “SHUAW,” respectively.
Also on May 17, 2023, as disclosed on a Current Report on Form 8-K filed with the SEC on May 22, 2023, the Company received a notice (the “Notice) from Nasdaq notifying the company that it was not in compliance with applicable continued listing requirements under Nasdaq Listing Rule 5450(a)(2). Subsequent to the Transfer, on July 11, 2023, the Company received notice from Nasdaq that it was in compliance with applicable continued listing requirements of The Nasdaq Capital Market.
ITEM 6. EXHIBITS
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
* Filed herewith.
(1) Previously filed as an exhibit to our Current Report on Form 8-K filed on March 4, 2022 and incorporated by reference herein.
(2) Previously filed as an exhibit to our Current Report on Form 8-K filed on June 5, 2023 and incorporated by reference herein.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| SHUAA PARTNERS ACQUISITION CORP I | ||
| Date: August 14, 2023 | By: | /s/ Fawad Tariq Khan |
| Name: | Fawad Tariq Khan | |
| Title: | Chief Executive Officer and Director | |
| (Principal Executive Officer) | ||
| Date: August 14, 2023 | By: | /s/ Mohammad El Beitam |
| Name: | Mohammad El Beitam | |
| Title: | Chief Financial Officer | |
| (Principal Financial and Accounting Officer) | ||
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