UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For
the quarterly period ended
or
For the transition period from to
Commission
File No.
(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, including zip code)
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 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 the 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): Yes
As
of November 24, 2023, there were
10X
CAPITAL VENTURE ACQUISITION CORP. III
QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2023
TABLE OF CONTENTS
Page | |||
PART I – FINANCIAL INFORMATION | |||
Item 1. | Condensed Consolidated Financial Statements | 1 | |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 23 | |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 31 | |
Item 4. | Controls and Procedures | 31 | |
PART II – OTHER INFORMATION | |||
Item 1. | Legal Proceedings | 33 | |
Item 1A. | Risk Factors | 33 | |
Item 2. | Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities | 33 | |
Item 3. | Defaults Upon Senior Securities | 33 | |
Item 4. | Mine Safety Disclosures | 33 | |
Item 5. | Other Information | 33 | |
Item 6. | Exhibits | 34 | |
SIGNATURES | 35 |
i
PART I – FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
10X CAPITAL VENTURE ACQUISITION CORP. III
CONDENSED CONSOLIDATED BALANCE SHEETS
September
30, 2023 | December
31, 2022 | |||||||
(Unaudited) | ||||||||
Assets: | ||||||||
Current assets: | ||||||||
Cash | $ | $ | ||||||
Prepaid expenses | ||||||||
Total current assets | ||||||||
Investments held in Trust Account | ||||||||
Total Assets | $ | $ | ||||||
Liabilities, Class A Ordinary Shares Subject to Possible Redemption and Shareholders’ Deficit: | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | $ | ||||||
Accrued legal expenses | ||||||||
Accrued expenses - other | ||||||||
Promissory note - related party | ||||||||
Class A ordinary shares tendered for redemption | ||||||||
Total current liabilities | ||||||||
Deferred underwriting commissions | ||||||||
Total Liabilities | ||||||||
Commitments and Contingencies | ||||||||
Class A ordinary shares subject to possible redemption; | ||||||||
Shareholders’ Deficit: | ||||||||
Preference shares, $ | ||||||||
Class A ordinary shares, $ | ||||||||
Class B ordinary shares, $ | ||||||||
Additional paid-in capital | ||||||||
Accumulated deficit | ( | ) | ( | ) | ||||
Total Shareholders’ Deficit | ( | ) | ( | ) | ||||
Total Liabilities, Class A Ordinary Shares Subject to Possible Redemption and Shareholders’ Deficit | $ | $ |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
1
10X CAPITAL VENTURE ACQUISITION CORP. III
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three
Months Ended September 30, 2023 | Three
Months Ended September 30, 2022 | Nine
Months Ended September 30, 2023 | Nine
Months Ended September 30, 2022 | |||||||||||||
General and administrative expenses | $ | $ | $ | $ | ||||||||||||
Administrative expenses - related party | ||||||||||||||||
Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Other income (loss): | ||||||||||||||||
Gain on settlement agreement | ||||||||||||||||
Income from investments held in Trust Account | ||||||||||||||||
Change in fair value of non-redemption agreement liabilities | ( | ) | ( | ) | ||||||||||||
Loss in connection with non-redemption agreement | ( | ) | ||||||||||||||
Total other income | ||||||||||||||||
Net (loss) income | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
$ | ( | ) | $ | $ | ( | ) | $ | |||||||||
Weighted average Class B ordinary shares - basic | ||||||||||||||||
Weighted average Class B ordinary shares - diluted | ||||||||||||||||
$ | ( | ) | $ | $ | ( | ) | $ |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
10X CAPITAL VENTURE ACQUISITION CORP. III
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023
Ordinary Shares | Additional | Total | ||||||||||||||||||||||||||
Non-redeemable Class A | Class B | Paid-in | Accumulated | Shareholders’ | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
Balance - January 1, 2023 (unaudited) | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
Accretion for Class A ordinary shares to redemption amount | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
Net income | — | — | ||||||||||||||||||||||||||
Balance - March 31, 2023 (unaudited) | ( | ) | ( | ) | ||||||||||||||||||||||||
Accretion for Class A ordinary shares to redemption amount | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
Balance - June 30, 2023 (unaudited) | ( | ) | ( | ) | ||||||||||||||||||||||||
Shareholder non-redemption agreement | — | — | ||||||||||||||||||||||||||
Accretion for Class A ordinary shares to redemption amount | — | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
Balance - September 30, 2023 (unaudited) | $ | $ | $ | $ | ( | ) | $ | ( | ) |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
10X CAPITAL VENTURE ACQUISITION CORP. III
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022
Ordinary Shares | Additional | Total | ||||||||||||||||||||||||||
Non-redeemable Class A | Class B | Paid-in | Accumulated | Shareholders’ | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
Balance - January 1, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
Sale of private placement units in private placement | ||||||||||||||||||||||||||||
Fair value of warrants included in the Units sold in the Initial Public Offering | — | — | ||||||||||||||||||||||||||
Offering costs associated with issuance of warrants as part of the Units in the Initial Public Offering | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
Forfeiture of Class B ordinary shares | ( | ) | ( | ) | ||||||||||||||||||||||||
Accretion for Class A ordinary shares to redemption amount | — | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
Balance - March 31, 2022 (unaudited) | ( | ) | ( | ) | ||||||||||||||||||||||||
Accretion for Class A ordinary shares to redemption amount | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
Balance - June 30, 2022 (unaudited) | ( | ) | ( | ) | ||||||||||||||||||||||||
Accretion for Class A ordinary shares to redemption amount | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
Net loss | — | — | ||||||||||||||||||||||||||
Balance - September 30, 2022 (unaudited) | $ | $ | $ | $ | ( | ) | $ | ( | ) |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
10X CAPITAL VENTURE ACQUISITION CORP. III
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine
Months Ended September 30, 2023 | Nine
Months Ended September 30, 2022 | |||||||
Cash Flows from Operating Activities: | ||||||||
Net income (loss) | $ | ( | ) | $ | ||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||
Income from investments held in Trust Account | ( | ) | ( | ) | ||||
Change in fair value of non-redemption agreement liabilities | ||||||||
Loss in connection with non-redemption agreement | ||||||||
Changes in operating assets and liabilities: | ||||||||
Prepaid expenses | ( | ) | ( | ) | ||||
Accounts payable | ||||||||
Accrued legal expenses | ||||||||
Accrued expenses - other | ( | ) | ||||||
Net cash provided by (used in) operating activities | ( | ) | ||||||
Cash Flows from Investing Activities: | ||||||||
Cash deposited in Trust Account | ( | ) | ||||||
Cash withdrawn from trust for payment to redeeming shareholders | ||||||||
Net cash provided by (used in) investing activities | ( | ) | ||||||
Cash Flows from Financing Activities | ||||||||
Repayment of note payable to related party | ( | ) | ||||||
Proceeds received from initial public offering, gross | ||||||||
Proceeds received from private placement | ||||||||
Proceeds received from promissory note - related party | ||||||||
Repayment of promissory note - related party | ( | ) | ||||||
Payment to redeeming shareholders | ( | ) | ||||||
Offering costs paid | ( | ) | ||||||
Net cash (used in) provided by financing activities | ( | ) | ||||||
Net Change in Cash | ||||||||
Cash - Beginning of period | ||||||||
Cash - End of period | $ | $ | ||||||
Supplemental disclosure of noncash investing and financing | ||||||||
Offering costs included in accounts payable | $ | $ | ( | ) | ||||
Offering costs included in accrued expenses | $ | $ | ( | ) | ||||
Offering costs paid by related party under promissory note | $ | $ | ||||||
Deferred underwriting commissions | $ | $ | ||||||
Shareholder non-redemption agreement | $ | $ | ||||||
Accretion of Class A ordinary shares to redemption value | $ | $ |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
10X CAPITAL VENTURE ACQUISITION CORP. III
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
NOTE 1. DESCRIPTION OF ORGANIZATION, BUSINESS OPERATIONS AND ONGOING CONCERN
10X Capital Venture Acquisition Corp. III (the “Company” or “10X III”) is a blank check company incorporated as a Cayman Islands exempted company on February 10, 2021. The Company was formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses or entities (the “Business Combination”).
As of September 30, 2023, the Company had not commenced any operations. All activities through September 30, 2023 related to the Company’s formation and the initial public offering (“Initial Public Offering”), which is described below, and, subsequent to the Initial Public Offering, the search for a Business Combination. 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 held in the Trust Account (as defined below).
The
Company’s Sponsor is 10X Capital SPAC Sponsor III LLC, a Cayman Islands limited liability company (the “Sponsor”).
The registration statement for the Company’s Initial Public Offering was declared effective on January 11, 2022. On January 14,
2022, the Company consummated its Initial Public Offering of
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the private placement (“Private Placement”) of
Upon
the closing of the Initial Public Offering and the Private Placement, $
6
10X CAPITAL VENTURE ACQUISITION CORP. III
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
The
Company will provide the holders of the Company’s outstanding Public Shares (the “Public Shareholders”) with the opportunity
to redeem all or a portion of their Public Shares upon the completion of the Business Combination either (i) in connection with a shareholder
meeting called to approve the Business Combination or (ii) without a shareholder vote 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. The Public Shareholders are entitled to redeem their Public Shares 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 (which interest shall be net of taxes payable),
divided by the number of then outstanding Public Shares, subject to the limitations and on the conditions described herein. The amount
in the Trust Account was initially $
All of the Public Shares contain a redemption feature which allows for the redemption of such Public Shares in connection with the liquidation, if there is a shareholder vote or tender offer in connection with the initial Business Combination and in connection with certain amendments to the Amended and Restated Memorandum and Articles of Association. In accordance with U.S. Securities and Exchange Commission (the “SEC”) and its guidance on redeemable equity instruments, which has been codified in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 480, “Distinguishing Liabilities from Equity” (“ASC 480”), paragraph 10-S99, redemption provisions not solely within the control of a company require ordinary shares subject to possible redemption to be classified outside of permanent equity. Accordingly, all of the Public Shares are presented as temporary equity, outside of the shareholders’ deficit section of the Company’s consolidated balance sheets. Given that the Public Shares were issued with other freestanding instruments (i.e., public warrants), the initial carrying value of Class A ordinary shares classified as temporary equity will be the allocated proceeds determined in accordance with ASC 470-20. The Class A ordinary shares will be subject to ASC 480-10-S99. If it is probable that the equity instrument will become redeemable, the Company has the option to either (i) accrete changes in the redemption value over the period from the date of issuance (or from the date that it becomes probable that the instrument will become redeemable, if later) to the earliest redemption date of the instrument or (ii) recognize changes in the redemption value immediately as they occur and adjust the carrying amount of the instrument to equal the redemption value at the end of each reporting period. The Company elected to recognize the changes in redemption value immediately. The changes in redemption value were recognized as a one-time charge against additional paid-in capital (to the extent available) and accumulated deficit. While in no event will the Company redeem the Public Shares if such redemption would cause the Company’s Class A ordinary shares to be considered “penny stock” (as such term is defined in Rule 3a51-1 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), the Public Shares are redeemable and will be classified as redeemable on the consolidated balance sheets until such date that a redemption event takes place.
If
the Company is unable to complete the Business Combination within the Combination Period, the Company will (i) cease all operations except
for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public
Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest
earned on the funds held in the Trust Account (which interest shall be net of taxes payable and up to $
The holders of the Founder Shares (as defined in Note 5) prior to the Initial Public Offering (the “Initial Shareholders”) agreed to (i) waive their redemption rights with respect to any Founder Shares and Public Shares they hold in connection with the completion of the initial Business Combination, (ii) waive their redemption rights with respect to any Founder Shares and Public Shares they hold in connection with a shareholder vote to approve an amendment to the Company’s Amended and Restated Memorandum and Articles of Association, and (iii) waive 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 or any extended period of time that the Company may have to consummate the initial Business Combination as a result of an amendment to the Company’s Amended and Restated Memorandum and Articles of Association (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 Combination Period).
7
10X CAPITAL VENTURE ACQUISITION CORP. III
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
The
Company’s Sponsor agreed that it will be liable to the Company if and to the extent any claims by a third party for services rendered
or products sold to the Company, or a prospective target business with which the Company has entered into a written letter of intent,
confidentiality or other similar agreement or Business Combination agreement, reduce the amount of funds in the Trust Account to below
the lesser of (i) $
First Extension
On
December 28, 2022, the Company held an extraordinary general meeting of shareholders (the “First Extraordinary General Meeting”),
where the Company’s shareholders voted to approve, by special resolution, the proposal to amend and restate the Company’s
amended and restated memorandum and articles of association to extend the date by which the Company must (1) consummate an initial business
combination, (2) cease all operations except for the purpose of winding up if it fails to complete such initial business combination,
and (3) redeem all of the Class A ordinary shares included as part of the Units sold in the Initial Public Offering from January 14,
2023 to July 14, 2023 (the “First Extended Date”), and to allow the Company’s board of directors (the “Board”),
without another shareholder vote, to elect to further extend the date to consummate an initial business combination after the First Extended
Date up to three times, by an additional month each time, upon two days’ advance notice prior to the applicable deadline, up to
October 14, 2023 (the “First Extension). In connection with the First Extraordinary General Meeting, holders of
On July 10, 2023, the Board approved the extension of the date by which the Company is required to complete an initial Business Combination until October 14, 2023.
On October 12, 2023, the Board approved a proposal to extend the date by which the Company is required to complete an initial business combination until January 14, 2024 and to allow the Board, without another shareholder vote, to elect to further extend the date to consummate an initial business combination after January 14, 2024 for up to six additional months, by one or more months each time, upon two days’ advance notice prior to the applicable deadline, up to July 14, 2024, unless the closing of an initial business combination should have occurred prior thereto (see Note 11).
Proposed Business Combination and Termination
On December 20, 2022, the Company entered into an Agreement and Plan of Merger (as amended, supplemented or otherwise modified from time to time, the “Sparks Merger Agreement”) by and among the Company, 10X Sparks Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Sparks Merger Sub”), and Sparks Energy, Inc., a Delaware corporation (“Sparks”).
8
10X CAPITAL VENTURE ACQUISITION CORP. III
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
The Company was subsequently informed by the management of Sparks that it was their belief that the Sparks Merger Agreement did not constitute a binding contract. In response, on January 30, 2023, the Company filed a complaint in the Delaware Court of Chancery (the “Delaware Action”) to obtain a declaratory judgment that the Sparks Merger Agreement constitutes a binding and enforceable contract between the Company, Sparks Merger Sub and Sparks, requiring Sparks to take certain steps as may be reasonably necessary to consummate the business combination pursuant to the Sparks Merger Agreement as soon as practicable.
On February 2, 2023, the Company entered into a Settlement Agreement and Mutual Release (the “Settlement Agreement”), with Sparks Merger Sub, Sparks and Ottis Jarrada Sparks, pursuant to which the parties thereto (i) mutually agreed to terminate the Sparks Merger Agreement and (ii) agreed to a mutual release of all claims related to the Sparks Merger Agreement, the transactions contemplated thereby, and the Delaware Action.
As
a result of the Settlement Agreement, the Company recorded a $
Merger Agreement
On August 9, 2023, the Company entered into an Agreement and Plan of Merger (as it may be amended, supplemented or otherwise modified from time to time, the “AGT Merger Agreement”) with 10X AGT Merger Sub, LLC, a Delaware limited liability company and wholly owned subsidiary of the Company (“AGT Merger Sub”), and American Gene Technologies International Inc., a Delaware corporation (“AGT”).
Pursuant to the AGT Merger Agreement, AGT (or, should AGT elect to undergo the F-Reorganization (as defined in the AGT Merger Agreement), a newly formed parent of AGT) will merge with and into AGT Merger Sub (the “Merger”), with AGT Merger Sub surviving the Merger as a wholly owned subsidiary of the Company.
The AGT Merger Agreement may be terminated under certain customary and limited circumstances prior to the closing of the Business Combination.
Concurrently with the execution of the AGT Merger Agreement, the Company entered into the Acquiror Support Agreement (the “Acquiror Support Agreement”) with AGT, the Sponsor, and the Company’s directors and officers (the Sponsor and the Company’s directors and officers are collectively referred to as the “Class B Holders”), pursuant to which the Class B Holders agreed to, among other things, (1) vote at any meeting or pursuant to any action of written resolution of the Company’s shareholders all of their Class B ordinary shares held of record or thereafter acquired in favor of the Business Combination, the Redomicile and the other Proposals (each as defined in the AGT Merger Agreement) and (2) be bound by certain other covenants and agreements related to the Business Combination, in each case, on the terms and subject to the conditions set forth in the Acquiror Support Agreement.
Additionally, pursuant to the Acquiror Support Agreement, the Class B Holders agreed not to Transfer (as defined in the Acquiror Support Agreement) any Lock-Up Shares (as defined in the Acquiror Support Agreement) during the period beginning on the date of the closing of the Business Combination (the “Closing Date”) and ending on the date that is thirty-six (36) months after the Closing Date, with certain exceptions.
Concurrently with the execution of the AGT Merger Agreement, certain stockholders of AGT representing the requisite votes necessary to approve the Business Combination and the Preferred Stock Conversion (as defined in the AGT Merger Agreement) entered into support agreements (the “AGT Support Agreements”) with the Company and AGT, pursuant to which such stockholders agreed to (i) to the extent such stockholder holds preferred stock of AGT (“AGT Preferred Stock”), to vote in favor of or consent to the Preferred Stock Conversion, (ii) to vote in favor of or consent to the Distribution (as defined in the Separation Agreement) and the other transactions contemplated by that certain Separation Agreement by and between AGT and a newly formed, wholly owned, direct subsidiary of AGT (the “Separation Agreement”), (iii) vote at any meeting of the stockholders of AGT all shares of common stock of AGT or AGT Preferred Stock held of record or thereafter acquired in favor of the Business Combination and the other transactions contemplated by the AGT Merger Agreement, (iv) be bound by certain other covenants and agreements related to the Business Combination and (v) be bound by certain transfer restrictions with respect to such securities, prior to the closing of the Business Combination, in each case, on the terms and subject to the conditions set forth in the AGT Support Agreements.
9
10X CAPITAL VENTURE ACQUISITION CORP. III
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
On
August 9, 2023, the Company and AGT entered into a non-binding letter of intent with CF Principal Investments LLC, an affiliate of Cantor,
related to a committed equity facility. Upon negotiation and execution of a definitive purchase agreement between the parties with respect
to the proposed transaction, the Company (or any successor entity to the Company following the Business Combination, as applicable) will
have the right, from time to time at its option, to sell to Cantor up to $
Liquidity and Going Concern
As
of September 30, 2023, the Company had approximately $
The
Company’s liquidity needs prior to the consummation of the Initial Public Offering were satisfied through the payment of $
Based upon the analysis above, management has determined that the Company does not have sufficient liquidity to meet its anticipated obligations for at least twelve months after the unaudited condensed consolidated financial statements are issued, as such, the events and circumstances raise substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after January 14, 2024.
In connection with the Company’s assessment of going concern considerations in accordance with the ASC 205-40, the Company has until January 14, 2024, or until up to July 14, 2024 upon approval by the Board, to consummate a Business Combination. It is uncertain that the Company will be able to consummate a Business Combination by this time. If a Business Combination is not consummated by this date, there will be a mandatory liquidation and subsequent dissolution of the Company. Management has determined that the liquidity condition and mandatory liquidation, should a Business Combination not occur, and potential subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern. The Company intends to complete a Business Combination before the mandatory liquidation date.
Risks and Uncertainties
In addition to the risks noted above, management continues to evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of these unaudited condensed consolidated financial statements. The unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
In February 2022, the Russian Federation and Belarus commenced a military action with the country of Ukraine. As a result of this action, various nations, including the United States, have instituted economic sanctions against the Russian Federation and Belarus. Further, the impact of this action and related sanctions on the world economy is not determinable as of the date of these unaudited condensed consolidated financial statements, and the specific impact on the Company’s financial condition, results of operations, and cash flows is also not determinable as of the date of these unaudited condensed consolidated financial statements.
In October 2023, the military conflict between Israel and militant groups led by Hamas has also caused uncertainty in the global markets. The full impact of the war between Israel and Hamas and related global economic disruptions on the Company’s financial condition and results of operations, as well as the Company’s ability to consummate an initial Business Combination, also remains uncertain. The Company’s management will continuously evaluate the effect of the conflict on the Company. The unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
10
10X CAPITAL VENTURE ACQUISITION CORP. III
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
NOTE 2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X and pursuant to the rules and regulations of the SEC. Accordingly, certain disclosures included in the annual financial statements have been condensed or omitted from these financial statements as they are not required for interim financial statements under U.S. GAAP and the rules of the SEC. In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the period presented. Operating results for the three and nine months ended September 30, 2023, are not necessarily indicative of the results that may be expected through December 31, 2023, or any future period.
The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Amended Annual Report on Form 10-K/A filed by the Company with the SEC on May 22, 2023.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All significant intercompany accounts and transactions have been eliminated in consolidation.
Emerging Growth Company
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”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s unaudited condensed consolidated financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
11
10X CAPITAL VENTURE ACQUISITION CORP. III
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
Use of Estimates
The preparation of unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires the Company’s 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 consolidated financial statements and the reported amounts of expenses during the reporting periods.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the unaudited condensed consolidated financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates. The initial valuation of the Public Warrants (as defined in Note 3) and Class A ordinary shares subject to possible redemption, the initial valuation of the Private Placement Shares and Private Placement Warrants (as defined in Note 4), and the valuations for the shares associated with the First Extension Non-Redemption Agreements (as defined in Note 5) required management to exercise significant judgement in its estimates.
Reclassification
Certain
prior period amounts have been reclassified to conform to the current period financial statement presentation, including accrued legal
expenses of $
Cash
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company had no cash equivalents as of September 30, 2023 and December 31, 2022.
Investments Held in Trust Account
The Company’s portfolio of investments is comprised of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or investments in money market funds that invest in U.S. government securities and generally have a readily determinable fair value, or a combination thereof. When the Company’s investments held in the Trust Account are comprised of U.S. government securities, the investments are classified as trading securities. When the Company’s investments held in the Trust Account are comprised of money market funds, the investments are recognized at fair value. Trading securities and investments in money market funds are presented on the consolidated balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these securities are included in income from investments held in the Trust Account in the accompanying unaudited condensed consolidated statements of operations. The estimated fair values of investments held in the Trust Account are determined using available market information.
Concentration of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution,
which, at times, may exceed the Federal Deposit Insurance Corporation Coverage limit of $
12
10X CAPITAL VENTURE ACQUISITION CORP. III
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
Fair Value Measurements
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. U.S. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers consist of:
● | 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 some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.
Promissory Note - Related Party
On
November 14, 2022, the Company issued an unsecured promissory note (as amended and restated on November 14, 2022 and as may be further
amended from time to time, the “New Note”) to the Sponsor for an aggregate principal amount of up to $
Derivative Financial Instruments
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and FASB ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.
Each whole warrant of the Company, the “Public Warrants,” and one-half of one redeemable warrant, the “Private Placement Warrants,” are classified in accordance with ASC 480 and ASC 815, which provides that the warrants are not precluded from equity classification. Equity-classified contracts were initially measured at fair value (or allocated value). Subsequent changes in fair value will not be recognized as long as the contracts continue to be classified in equity in accordance with ASC 480 and ASC 815.
The transfer to certain investors of the Company of ordinary shares in connection with the approval of the First Extension Non-Redemption Agreements (see Note 5) are classified in accordance with ASC 480 and ASC 815, which provides that such ordinary shares are not precluded from equity classification. Equity-classified contracts were initially measured at fair value (or allocated value). Subsequent changes in fair value will not be recognized as long as the contracts continue to be classified in equity in accordance with ASC 480 and ASC 815.
The transfer to certain investors of the Company of ordinary shares in connection with the Optional Extensions (defined below) (see Note 5) is recognized as a derivative liability in accordance with ASC 815. Accordingly, the Company recognizes the instrument as an asset or liability at fair value and with changes in fair value recognized in the Company’s unaudited condensed consolidated statements of operations.
13
10X CAPITAL VENTURE ACQUISITION CORP. III
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
Offering Costs Associated with the Initial Public Offering
The Company complies with the requirements of FASB ASC 340-10-S99-1. Offering costs consisted of legal, accounting, and other costs incurred that were directly related to the Initial Public Offering. Offering costs associated with the warrants were charged to shareholders’ equity upon the completion of the Initial Public Offering. Offering costs associated with the Class A ordinary shares were charged against the carrying value of Class A ordinary shares subject to possible redemption upon the completion of the Initial Public Offering.
Class A Ordinary Shares Subject to Possible Redemption
Class
A ordinary shares subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Conditionally
redeemable Class A ordinary shares (including Class A ordinary shares that feature redemption rights that are either within the control
of the holder or subject to possible redemption upon the occurrence of uncertain events not solely within the Company’s control)
are classified as temporary equity. At all other times, Class A ordinary shares are classified as shareholders’ equity. The Company’s
Class A ordinary shares feature certain redemption rights that are considered to be outside of the Company’s control and subject
to occurrence of uncertain future events. Accordingly, all outstanding Class A ordinary shares subject to possible redemption are presented
at redemption value as temporary equity, outside of the shareholders’ deficit section of the Company’s consolidated balance
sheets. On December 28, 2022,
Under ASC 480, the Company has elected to recognize changes in the redemption value immediately as they occur and adjust the carrying value of the security to equal the redemption value at the end of each reporting period. This method would view the end of the reporting period as if it were also the redemption date for the security. Immediately upon the closing of the Initial Public Offering, the Company recognized the accretion from initial book value to redemption amount value. The change in the carrying value of the redeemable Class A ordinary shares resulted in charges against additional paid-in capital (to the extent available) and accumulated deficit.
Income Taxes
FASB 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’s management determined that the Cayman Islands is the Company’s only major tax jurisdiction. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of September 30, 2023 and December 31, 2022. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
The Company is considered to be an exempted Cayman Islands company with no connection to any other taxable jurisdiction and is presently not subject to income taxes or income tax filing requirements in the Cayman Islands or the United States. As such, the Company’s tax provision was zero for the periods presented.
Net (Loss) Income per Ordinary Share
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” The Company has two classes of shares, which are referred to as Class A ordinary shares and Class B ordinary shares. Income and losses are shared pro rata between the two classes of shares. This presentation assumes a business combination as the most likely outcome. Net (loss) income per ordinary share is calculated by dividing the net (loss) income by the weighted average shares of ordinary shares outstanding for the respective period.
The
calculation of diluted net (loss) income per ordinary shares does not consider the effect of the Public Warrants and the Private Placement
Warrants to purchase an aggregate of
14
10X CAPITAL VENTURE ACQUISITION CORP. III
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
The Company has considered the effect of Class B ordinary shares that were excluded from the weighted average number as they were contingent on the exercise of over-allotment option by the underwriter. Since the contingency was satisfied, with respect to the portion of the over-allotment exercised by the underwriter, the Company included these shares in the weighted average number as of the beginning of the reporting period to determine the dilutive impact of these shares.
For the Three Months Ended September 30, 2023 | For the Three Months Ended September 30, 2022 | For the Nine Months Ended September 30, 2023 | For the Nine Months Ended September 30, 2022 | |||||||||||||||||||||||||||||
Class A | Class B | Class A | Class B | Class A | Class B | Class A | Class B | |||||||||||||||||||||||||
Basic and diluted net (loss) income per ordinary share: | ||||||||||||||||||||||||||||||||
Numerator: | ||||||||||||||||||||||||||||||||
Allocation of net (loss) income - basic | $ | ( | ) | $ | ( | ) | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||
Allocation of net (loss) income - diluted | $ | ( | ) | $ | ( | ) | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||
Denominator: | ||||||||||||||||||||||||||||||||
Weighted average ordinary shares outstanding - basic | ||||||||||||||||||||||||||||||||
Weighted average ordinary shares outstanding - diluted | ||||||||||||||||||||||||||||||||
Basic net (loss) income per ordinary share | $ | ( | ) | $ | ( | ) | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||
Diluted net (loss) income per ordinary share | $ | ( | ) | $ | ( | ) | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ |
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 the Company’s unaudited condensed consolidated financial statements.
NOTE 3. INITIAL PUBLIC OFFERING
On
January 14, 2022, the Company consummated its Initial Public Offering of
Each
Unit consists of one Class A ordinary share and one-half of one redeemable warrant. Each whole warrant will entitle the holder to purchase
one Class A ordinary share at a price of $
NOTE 4. PRIVATE PLACEMENT
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the Private Placement of
If the Company does not complete the initial Business Combination within the Combination Period, the Private Placement Units will expire worthless. The Private Placement Units, Private Placement Shares and Private Placement Warrants are subject to the transfer restrictions described below. The Private Placement Units have terms and provisions that are identical to those of the Units sold in the Initial Public Offering.
15
10X CAPITAL VENTURE ACQUISITION CORP. III
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
In
February 2021, the Company’s Sponsor paid $
The Company’s Initial Shareholders agreed not to transfer, assign or sell any of their Founder Shares until consummation of the initial Business Combination. Any permitted transferees will be subject to the same restrictions and other agreements of the Initial Shareholders with respect to any Founder Shares (the “Lock-up”).
In December 2022, in connection with the First
Extension, certain investors of the Company (“First Extension 10X III Investors”) entered into non-redemption agreements
with the Company and Sponsor (“First Extension Non-Redemption Agreements”). Pursuant to the First Extension Non-Redemption
Agreements, such First Extension 10X III Investors agreed, for the benefit of the Company, to vote certain ordinary shares of the Company
now owned or acquired (the “First Extension Investor Shares”), representing
The Company estimated the fair value of the investor
interests attributable to such ordinary shares to be $
On October 12, 2023, the Board approved a proposal to extend the date by which the Company is required to complete an initial business combination until January 14, 2024 and to allow the Board, without another shareholder vote, to elect to further extend the date to consummate an initial business combination after January 14, 2024 for up to six additional months, by one or more months each time, upon two days’ advance notice prior to the applicable deadline, up to July 14, 2024, unless the closing of an initial business combination should have occurred prior thereto (see Note 11).
16
10X CAPITAL VENTURE ACQUISITION CORP. III
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
Due from Sponsor
During
January 2023, the Company received a settlement pursuant to the terms of the Settlement Agreement in the amount of $
Promissory Note - Related Party
The
Sponsor agreed to loan the Company up to $
Related Party Loans
In
order to finance transaction costs in connection with an intended initial Business Combination, the Sponsor or an affiliate of the Sponsor
or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (the
“Working Capital Loans”). If the Company completes the initial Business Combination, the Company will repay the Working Capital
Loans. 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 Support Agreement
On
January 11, 2022, the Company entered into an agreement with the Sponsor, pursuant to which the Company agreed to pay the Sponsor a total
of $
The Sponsor, executive officers and directors, or any of their respective affiliates, will be reimbursed for any out-of-pocket expenses incurred in connection with activities on the Company’s behalf such as identifying potential target businesses and performing due diligence on suitable Business Combinations. The Company’s audit committee will review on a quarterly basis all payments that were made by the Company to the Sponsor, officers, directors or their affiliates. For the three and nine months ended September 30, 2023 and 2022, the Company did not incur or reimburse any Business Combination costs to the Sponsor. There were no outstanding amounts as of September 30, 2023 and December 31, 2022.
17
10X CAPITAL VENTURE ACQUISITION CORP. III
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
NOTE 6. COMMITMENTS AND CONTINGENCIES
Registration and Shareholder Rights
The holders of the Founder Shares, Private Placement Units, Private Placement Shares underlying the Private Placement Units, Private Placement Warrants underlying the Private Placement Units, the Class A ordinary shares underlying such Private Placement Warrants, and Units that may be issued upon conversion of the Working Capital Loans will have registration rights which will require the Company to register a sale of any of the aforementioned securities of the Company held by them pursuant to a registration rights agreement signed upon the effective date of the Initial Public Offering. The holders of these securities are entitled to make up to three demands, excluding short form demands, that the Company registers such securities. In addition, the holders have certain “piggyback” registration rights with respect to registration statements filed subsequent to the completion of the initial Business Combination. Notwithstanding the foregoing, Cantor may not exercise its demand and “piggyback” registration rights after five (5) and seven (7) years, respectively, after the effective date of the registration statement and may not exercise its demand rights on more than one occasion. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The
Company granted the underwriter a 45-day option from the date of the Initial Public Offering to purchase up to an additional
The
underwriter was entitled to a cash underwriting discount of approximately $
NOTE 7. CLASS A ORDINARY SHARES SUBJECT TO POSSIBLE REDEMPTION
The
Company’s Class A ordinary shares contain certain redemption rights that are considered to be outside of the Company’s control
and subject to the occurrence of future events. The Company is authorized to issue
18
10X CAPITAL VENTURE ACQUISITION CORP. III
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
Gross proceeds | $ | |||
Less: | ||||
Proceeds allocated to Public Warrants | ( | ) | ||
Class A ordinary shares issuance costs | ( | ) | ||
Redemption of shares | ( | ) | ||
Plus: | ||||
Accretion of carrying value to redemption value | ||||
Increase in redemption value of Class A ordinary shares subject to possible redemption | ||||
Class A ordinary shares subject to possible redemption at December 31, 2022 | ||||
Plus: | ||||
Accretion of carrying value to redemption value | ||||
Class A ordinary shares subject to possible redemption at March 31, 2023 (unaudited) | ||||
Plus: | ||||
Accretion of carrying value to redemption value | ||||
Class A ordinary shares subject to possible redemption at June 30, 2023 (unaudited) | ||||
Plus: | ||||
Accretion of carrying value to redemption value | ||||
Class A ordinary shares subject to possible redemption at September 30, 2023 (unaudited) | $ |
NOTE 8. SHAREHOLDERS’ DEFICIT
Preference
Shares - The Company is authorized to issue a total of
Class
A Ordinary Shares - The Company is authorized to issue a total of
Class
B Ordinary Shares - The Company is authorized to issue a total of
The
Founder Shares will automatically convert into Class A ordinary shares concurrently with or immediately following the consummation of
the initial Business Combination on a one-for-one basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations
and the like, and subject to further adjustment as provided herein. In the case that additional Class A ordinary shares or equity-linked
securities are issued or deemed issued in connection with the initial Business Combination, the number of Class A ordinary shares issuable
upon conversion of all Founder Shares will equal, in the aggregate, on an as-converted basis,
19
10X CAPITAL VENTURE ACQUISITION CORP. III
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
NOTE 9. WARRANTS
As
of September 30, 2023 and December 31, 2022, the Company had
Public
Warrants may only be exercised for a whole number of shares. No fractional Public Warrants will be issued upon separation of the Units
and only whole Public Warrants will trade. The Public Warrants will become exercisable
The
warrants have an exercise price of $
The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants and 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 a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be non-redeemable so long as they are held by the initial purchasers or such purchasers’ permitted transferees. If the Private Placement Warrants are held by someone other than the Initial Shareholders or their 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.
Redemption of warrants for cash: Once the warrants become exercisable, the Company may redeem the outstanding warrants (except as described herein with respect to the Private Placement Warrants):
● | in whole and not in part; |
● | at a price of $0.01 per warrant; |
● | upon a minimum of 30 days’ prior written notice of redemption to each warrant holder; and |
● | if, and only if, the last reported sale price of Class A ordinary shares equals or exceeds $18.00 per share (as adjusted) for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders. |
20
10X CAPITAL VENTURE ACQUISITION CORP. III
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
The Company will not redeem the warrants as described above unless a registration statement under the Securities Act covering the Class A ordinary shares issuable upon exercise of the warrants is then effective and a current prospectus relating to those Class A ordinary shares is available throughout the 30-day redemption period.
In no event will the Company be required to net cash settle any warrant. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.
NOTE 10. FAIR VALUE MEASUREMENTS
Description | Amount
at Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||
September 30, 2023 (Unaudited) | ||||||||||||||||
Assets | ||||||||||||||||
Investments held in Trust Account: | ||||||||||||||||
U.S. Treasury Securities | $ | $ | $ | $ | ||||||||||||
December 31, 2022 | ||||||||||||||||
Assets | ||||||||||||||||
Investments held in Trust Account: | ||||||||||||||||
Money Market investments | $ | $ | $ | $ |
Subsequent to the redemption of Class A ordinary shares in January 2023, all of the funds transferred into the Trust Account were invested into U.S. Treasury Securities.
Transfers to/from Levels 1, 2, and 3 are recognized at the beginning of the reporting period. There were transfers to/from Levels 1, 2, and 3 for the three and nine months ended September 30, 2023 and 2022.
Level 1 instruments include investments in mutual funds invested in government securities. The Company uses inputs such as actual trade data, benchmark yields, quoted market prices from dealers or brokers, and other similar sources to determine the fair value of its investments.
Derivative liabilities at December 31, 2022 | $ | |||
Change in fair value of non-redemption agreement liability | ||||
Derivative liabilities at March 31, 2023 (unaudited) | ||||
Loss on entry into non-redemption agreement | ||||
Change in fair value of non-redemption agreement liability | ( | ) | ||
Derivative liabilities at June 30, 2023 (unaudited) | ||||
Non-redemption agreement liability transferred to equity | ( | ) | ||
Change in fair value of non-redemption agreement liability | ||||
Derivative liabilities at September 30, 2023 (unaudited) | $ |
21
10X CAPITAL VENTURE ACQUISITION CORP. III
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
NOTE 11. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred up to the date unaudited condensed consolidated financial statements were issued. Based upon this review, other than described below, the Company determined that there have been no events that have occurred that would require adjustments to the disclosures in the unaudited condensed consolidated financial statements.
Transfer to NYSE American
On October 3, 2023, the Board authorized the transfer of the listing of the Company’s Class A ordinary shares, Public Warrants and Units (collectively, the “Listed Securities”), from the New York Stock Exchange (the “NYSE”) to the NYSE American LLC (the “NYSE American”). The listing and trading of the Listed Securities on the NYSE ended at market close on October 6, 2023, and the trading of the Listed Securities on the NYSE American commenced at market open on October 9, 2023. The Class A ordinary shares, Public Warrants and Units each continue to be traded under the ticker symbols VCXB, VCXB WS and VCXB.U, respectively.
Second Extension
On
October 5, 2023, certain of the Company’s investors (the “Second Extension 10X III Investors”) entered into non-redemption
agreements (the “Second Extension Non-Redemption Agreements”) with the Company and the Sponsor. Pursuant to the Second Extension
Non-Redemption Agreements, the Second Extension 10X III Investors agreed for the Company’s benefit to, among other things, (i)
vote certain 10X III ordinary shares owned (the “Second Extension Investor Shares”) in favor of the Second Extension Proposal
(as defined below) and (ii) not redeem the Second Extension Investor Shares in connection with the Second Extension Proposal. In exchange
for these commitments from the Second Extension 10X III Investors, the Sponsor agreed to transfer to the Second Extension 10X III Investors
(a) an aggregate of
On
October 12, 2023, the Company held an extraordinary general meeting at which the Company’s shareholders voted to, among other things,
approve an amendment to the Company’s Amended and Restated Memorandum and Articles of Association to further extend the date by
which the Company must (1) consummate an initial business combination, (2) cease operations except for the purpose of winding up if it
fails to complete such initial business combination, and (3) redeem all of the Class A ordinary shares included as part of the Units
sold in the Initial Public Offering, from October 14, 2023 to January 14, 2024 (the “Second Extended Date”) and
to allow the Board, without another shareholder vote, to elect to further extend the date to consummate an initial business combination
after the Second Extended Date for up to six additional months, by one or more months each time, upon two days’
advance notice prior to the applicable deadline, up to July 14, 2024 (the “Additional Extension Date”), unless the closing
of an initial business combination should have occurred prior thereto (the “Second Extension” and such proposal, the “Second
Extension Proposal”). In connection with the Second Extension, holders of an aggregate of
Additionally,
pursuant to the terms of the Amended and Restated Memorandum and Articles of Association, as amended in connection with the Second Extension,
on October 17, 2023, the Sponsor elected to convert
22
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
References in this Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2023 (the “Quarterly Report”) to “we,” “us,” “our” or the “Company” refer to 10X Capital Venture Acquisition Corp. III. References to our “management” or our “management team” refer to our officers and directors. The following discussion and analysis our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated 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 of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (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 Quarterly Report including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding our 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 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 our Amended Annual Report on Form 10-K/A for the year ended December 31, 2022 filed with the U.S. Securities and Exchange Commission (the “SEC”) on May 22, 2023 (the “Amended Annual Report”), the preliminary prospectus/proxy statement included in the Registration Statement on Form S-4 (File No. 333-275504) filed with the SEC on November 13, 2023 (the “Registration Statement”) and elsewhere in our filings with the SEC. Our 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, we disclaim 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 on February 10, 2021 as a Cayman Islands exempted company and formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses or entities, which we refer to as our “initial business combination.”
Our sponsor is 10X Capital SPAC Sponsor III LLC, a Cayman Islands limited liability company (the “Sponsor”). The registration statement for our initial public offering (the “Initial Public Offering”) was declared effective on January 11, 2022. On January 14, 2022, we consummated our Initial Public Offering of 30,000,000 units (the “Units”), including the issuance of 3,900,000 Units as a result of the underwriter’s partial exercise of its over-allotment option. Each Unit consists of one Class A ordinary share, par value $0.0001 per share, of the Company (“Class A ordinary shares” and, with respect to the Class A ordinary shares included in the Units offered in the Initial Public Offering, the “Public Shares”) and one-half of one redeemable warrant of the Company (each whole warrant, a “Public Warrant”), with each Public Warrant entitling the holder thereof to purchase one Class A ordinary share for $11.50 per share, subject to adjustment. The Units were sold at a price of $10.00 per Unit, generating gross proceeds to us of $300.0 million. In connection with the Initial Public Offering, we incurred offering costs of approximately $20.2 million, of which approximately $14.3 million was for deferred underwriting commissions.
Simultaneously with the closing of the Initial Public Offering, we consummated the private placement (the “Private Placement”) of 1,153,000 units (each, a “Private Placement Unit” and collectively, the “Private Placement Units”) at a price of $10.00 per Private Placement Unit to the Sponsor and Cantor Fitzgerald & Co. (“Cantor”), generating proceeds of approximately $11.5 million. Each Private Placement Unit consists of one Class A ordinary share (the “Private Placement Shares”) and one-half of one redeemable warrant (the “Private Placement Warrants”).
23
Upon the closing of the Initial Public Offering and the Private Placement, $304.5 million ($10.15 per Unit) of net proceeds, including the net proceeds of the Initial Public Offering and certain of the proceeds of the Private Placement, was placed in a trust account (the “Trust Account”) and invested only in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act of 1940, as amended (the “Investment Company Act”), which invest only in direct U.S. government treasury obligations. Except with respect to interest earned on the funds held in the Trust Account that may be released to us to pay our taxes, the proceeds from the Initial Public Offering and the sale of the Private Placement Units will not be released from the Trust Account until the earliest of (i) the completion of the initial business combination, (ii) the redemption of the Public Shares if we are unable to complete the initial business combination by July 14, 2024 (the “Combination Period”), subject to applicable law, and (iii) the redemption of the Public Shares properly submitted in connection with a shareholder vote to amend our second amended and restated memorandum and articles of association (the “Charter”) to modify the substance or timing of our obligation to redeem 100% of the Public Shares if we have not consummated the initial business combination within the Combination Period or with respect to any other material provisions relating to shareholders’ rights or pre-initial business combination activity. See “— Second Extension.” The proceeds deposited in the Trust Account could become subject to the claims of our creditors, if any, which could have priority over the claims of holders of Public Shares.
Our management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the Private Placement, although substantially all of the net proceeds (less deferred underwriting commissions) are intended to be generally applied toward consummating an initial business combination. Our initial business combination must be with one or more target businesses that together have a fair market value equal to at least 80% of the net balance in the Trust Account (excluding the amount of deferred underwriting discounts held and taxes payable on the income earned on the Trust Account) at the time of the signing an agreement to enter into an initial business combination. However, we will only complete an initial business combination if the post-business combination company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act. There is no assurance that we will be able to successfully effect an initial business combination.
On December 28, 2022, a total of 186 shareholders elected to redeem an aggregate of 25,943,810 Class A ordinary shares. The payment in connection with the redemption of these shares took place on January 18, 2023, whereby a total value of $266.7 million was paid out to shareholders from the Trust Account. Following such redemptions, there were 4,056,190 Class A ordinary shares subject to possible redemption outstanding.
On October 12, 2023, certain shareholders elected to redeem an aggregate of 2,014,907 Class A ordinary shares. The payment in connection with the redemption of these shares took place on October 19, 2023, whereby a total value of $21.5 million was paid out to shareholders from the Trust Account. Following such redemptions, there were 2,041,283 Class A ordinary shares subject to possible redemption outstanding.
Termination of Sparks Merger Agreement
On December 20, 2022, we entered into an Agreement and Plan of Merger (as amended, supplemented or otherwise modified from time to time, the “Sparks Merger Agreement”) with 10X Sparks Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Sparks Merger Sub”), and Sparks Energy, Inc., a Delaware corporation (“Sparks”).
We were subsequently informed by the management of Sparks that it was their belief that the Sparks Merger Agreement did not constitute a binding contract. In response, on January 30, 2023, we filed a complaint in the Delaware Court of Chancery (the “Delaware Action”) to obtain a declaratory judgment that the Sparks Merger Agreement constitutes a binding and enforceable contract between us, Sparks Merger Sub and Sparks, requiring Sparks to take certain steps as may be reasonably necessary to consummate the business combination pursuant to the Sparks Merger Agreement as soon as practicable.
On February 2, 2023, we entered into the Settlement Agreement with Sparks Merger Sub, Sparks and Ottis Jarrada Sparks, pursuant to which the parties thereto (i) mutually agreed to terminate the Sparks Merger Agreement and (ii) agreed to a mutual release of all claims related to the Sparks Merger Agreement, the transactions contemplated thereby, and the Delaware Action.
By virtue of the termination of the Sparks Merger Agreement, the Ancillary Agreements (as defined in the Sparks Merger Agreement) were terminated in accordance with their terms.
24
First Extension
On December 28, 2022, we held an extraordinary general meeting of shareholders, at which our shareholders approved, by special resolution, the proposal to amend and restate our amended and restated memorandum and articles of association to extend the date by which we must (1) consummate an initial business combination, (2) cease all operations except for the purpose of winding up if we fail to complete such initial business combination, and (3) redeem all of the Class A ordinary shares included as part of the Units sold in the Initial Public Offering from January 14, 2023 to July 14, 2023 (the “First Extended Date”) and to allow our board of directors (the “Board”), without another shareholder vote, to elect to further extend the date to consummate an initial business combination after the First Extended Date up to three times, by an additional month each time, upon two days’ advance notice prior to the applicable deadline, up to October 14, 2023 (the “First Extension”). In connection with the First Extension, a total of 186 shareholders elected to redeem an aggregate of 25,943,810 Class A ordinary shares, representing approximately 83.28% of the issued and outstanding Class A ordinary shares. As a result, an aggregate of $266.7 million (or approximately $10.28 per share) was released from the Trust Account to pay such shareholders.
On July 10, 2023, our Board approved the extension of the date by which we are required to complete an initial business combination until October 14, 2023.
Proposed Business Combination
On August 9, 2023, we entered into an Agreement and Plan of Merger (as it may be amended, supplemented or otherwise modified from time to time, the “AGT Merger Agreement”) with 10X AGT Merger Sub, LLC, a Delaware limited liability company and wholly owned subsidiary of the Company (“AGT Merger Sub”), and American Gene Technologies International Inc., a Delaware corporation (“AGT”), which provides for, among other things, our deregistration under the Companies Act (as revised) of the Cayman Islands and our domestication as a Delaware corporation (the “Redomicile”) and, following the Redomicile, the merger of AGT with and into AGT Merger Sub (the “Merger”), with AGT Merger Sub surviving the Merger as our wholly owned subsidiary. In connection with the closing of the Merger (the “Closing”), we intend to change our name to “Addimmune Inc.” (“Addimmune”). The Redomicile, the Merger and the other transactions contemplated by the AGT Merger Agreement are referred to herein as the “Business Combination.”
Prior to the Closing, AGT’s non-human immunodeficiency virus (“HIV”) assets will spin-off into an entity that will retain the American Gene Technologies name, and AGT’s business will consist solely of the business involving researching, developing, manufacturing and commercializing pharmaceuticals and other products for the diagnosis, treatment, management or prevention of HIV.
In accordance with the terms and subject to the conditions of the AGT Merger Agreement, at the effective time of the Merger (the “Effective Time”), each share of common stock, par value $0.0001 per share, of AGT (“AGT Common Stock”) (including shares of preferred stock of AGT (“AGT Preferred Stock”) converted into AGT Common Stock in connection with the Business Combination as set forth in the AGT Merger Agreement (the “Preferred Stock Conversion”)) issued and outstanding immediately prior to the Effective Time, shall be converted into the right to receive the number of shares of duly authorized, validly issued, fully paid and nonassessable shares of common stock of Addimmune (“Addimmune Common Stock”) equal to the quotient obtained by dividing (x) the quotient obtained by dividing (1) $500.0 million by (2) ten dollars and fifteen cents ($10.15) by (y) the sum, without duplication, of the aggregate number of shares of AGT Common Stock that are (i) issued and outstanding immediately prior to the Effective Time (after giving effect to the Preferred Stock Conversion and including shares of AGT Common Stock subject to a grant of an award in respect of a share of AGT Common Stock subject to vesting, repurchase, forfeiture or other lapse restrictions granted under an AGT equity incentive plan) or (ii) issuable upon the exercise or settlement of options or warrants of AGT (whether or not then vested or exercisable) that are outstanding immediately prior to the Effective Time.
25
At the Closing, and as additional consideration for the Merger and the other transactions contemplated by the AGT Merger Agreement, in accordance with the terms and subject to the conditions of the AGT Merger Agreement, holders of AGT Common Stock shall receive up to $300 million of Addimmune Common Stock, subject to the achievement of various clinical and priced-based milestones.
The AGT Merger Agreement may be terminated under certain customary and limited circumstances prior to the closing of the Business Combination, including, but not limited to, (i) by our and AGT’s mutual written consent, (ii) by us, subject to certain exceptions, if any of the representations and warranties of AGT are not true and correct or if AGT fails to perform any of its respective covenants or agreements set forth in the AGT Merger Agreement such that certain conditions to our obligations cannot be satisfied and the breach (or breaches) of such representations or warranties or failure (or failures) to perform such covenants or agreements, as applicable, are not cured or cannot be cured within certain specified time periods, (iii) by AGT, subject to certain exceptions, if any of the representations and warranties made by us are not true and correct or if we fail to perform any of our covenants or agreements set forth in the AGT Merger Agreement such that the condition to the obligations of AGT cannot be satisfied and the breach (or breaches) of such representations or warranties or failure (or failures) to perform such covenants or agreements, as applicable, are not cured or cannot be cured within certain specified time periods, (iv) by either us or AGT if the Closing has not occurred within the Combination Period; provided that, if we seek and obtain any additional extensions of the Combination Period, we shall have the right by providing written notice thereof to AGT to extend the Combination Period for an additional period equal to the shortest of (x) the period ending on the last date for us to consummate our initial business combination pursuant to such extension(s) and (y) such period as determined by us, (v) by either us or AGT if the consummation of the Merger is permanently enjoined, prohibited or made illegal by the terms of a final, non-appealable governmental order or other law; (vi) prior to obtaining the required approvals by our shareholders, by AGT if our Board changes its recommendation that our shareholders approve the proposals included in the proxy statement/prospectus or fails to include such recommendation in the proxy statement/prospectus, (vii) by AGT if certain required approvals are not obtained by our shareholders after the conclusion of a meeting of our shareholders held for the purpose of voting on such approvals, and (viii) by us if the required approvals by AGT stockholders have not been obtained within ten (10) business days following the date that the Registration Statement (as defined in the AGT Merger Agreement) is disseminated by AGT to its stockholders.
In connection with the execution of the AGT Merger Agreement, we, our Sponsor and our directors and officers (our Sponsor and our directors and officers are collectively referred to herein as the “Class B Holders”) entered into an Acquiror Support Agreement (the “Acquiror Support Agreement”) with AGT, pursuant to which the Class B Holders agreed to, among other things, (i) vote at any meeting or pursuant to any action of written resolution of our shareholders all of their Class B ordinary shares, par value $0.0001 per share, of the Company (“Class B ordinary shares”) held of record or thereafter acquired in favor of the Business Combination, the Redomicile and the other Proposals (as defined in the AGT Merger Agreement), (ii) be bound by certain other covenants and agreements related to the Business Combination and (iii) be bound by certain transfer restrictions with respect to certain securities held by them, in each case, on the terms and subject to the conditions set forth in the Acquiror Support Agreement.
In connection with the execution of the AGT Merger Agreement, certain stockholders of AGT representing the requisite votes necessary to approve the Business Combination and the Preferred Stock Conversion entered into support agreements (the “AGT Support Agreements”) with us and AGT, pursuant to which such stockholders agreed to, among other things, (i) vote in favor of the Business Combination and the other transactions contemplated by the AGT Merger Agreement, (ii) be bound by certain other covenants and agreements related to the Business Combination and (iii) be bound by certain transfer restrictions with respect to certain securities held by them, prior to the closing of the Business Combination, in each case, on the terms and subject to the conditions set forth in the AGT Support Agreements.
The summaries of the AGT Merger Agreement and the other agreements entered into by the parties are qualified in their entirety by reference to the text of the AGT Merger Agreement and agreements entered into in connection therewith.
26
For more information about the AGT Merger Agreement and the proposed Business Combination, see the Registration Statement. Unless specifically stated, this Quarterly Report does not give effect to the proposed Business Combination and does not contain the risks associated with the proposed Business Combination. Such risks and effects relating to the proposed Business Combination are included in the Registration Statement.
Committed Equity Facility
On August 9, 2023, we and AGT entered into a non-binding letter of intent with CF Principal Investments LLC, an affiliate of Cantor, related to a committed equity facility. Upon negotiation and execution of a definitive purchase agreement between the parties with respect to the proposed transaction, we (or any successor entity to us following the Business Combination, as applicable) will have the right, from time to time at our option, to sell to Cantor up to $50 million shares of Addimmune Common Stock. We, AGT and Cantor intend to negotiate and execute a definitive purchase agreement to reflect the above terms; however, until such purchase agreement is signed by all the parties, with the exception of a three-month exclusivity arrangement that expired on November 9, 2023, no party will have any liability to any other party with respect to the proposed transaction.
Recent Developments
Transfer to NYSE American
On October 3, 2023, our Board authorized the transfer of the listing of our Class A ordinary shares, Public Warrants and Units (collectively, the “Listed Securities”), from the New York Stock Exchange (the “NYSE”) to the NYSE American LLC (the “NYSE American”). The listing and trading of the Listed Securities on the NYSE ended at market close on October 6, 2023, and the trading of the Listed Securities on the NYSE American commenced at market open on October 9, 2023. The Class A ordinary shares, Public Warrants and Units each continue to be traded under the ticker symbols VCXB, VCXB WS and VCXB.U, respectively.
Second Extension
On October 5, 2023, certain of our investors (the “Second Extension 10X III Investors”) entered into non-redemption agreements (the “Second Extension Non-Redemption Agreements”) with us and our Sponsor. Pursuant to the Second Extension Non-Redemption Agreements, the Second Extension 10X III Investors agreed for our benefit to, among other things, (i) vote certain 10X III ordinary shares owned (the “Second Extension Subject 10X III Equity Securities”) in favor of the Second Extension Proposal (as defined below) and (ii) not redeem the Second Extension Subject 10X III Equity Securities in connection with the Second Extension Proposal. In exchange for these commitments from the Second Extension 10X III Investors, the Sponsor agreed to transfer to the Second Extension 10X III Investors (a) an aggregate of 210,000 Class B ordinary shares in connection with an extension until the Second Extended Date (as defined below) and (b) to the extent the Board agrees to further extend the date to consummate an initial business combination to the Additional Extension Date (as defined below), an aggregate amount of up to 630,000 Class B ordinary shares, which includes the Class B ordinary shares referred to in clause (a), on or promptly after the consummation of the Business Combination.
On October 12, 2023, we held an extraordinary general meeting at which our shareholders voted to, among other things, approve an amendment to our Charter to further extend the date by which we must (1) consummate our initial business combination, (2) cease our operations except for the purpose of winding up if we fail to complete such initial business combination, and (3) redeem all of the Class A ordinary shares included as part of the Units sold in the Initial Public Offering, from October 14, 2023 to January 14, 2024 (the “Second Extended Date”) and to allow the Board, without another shareholder vote, to elect to further extend the date to consummate an initial business combination after the Second Extended Date for up to six additional months, by one or more months each time, upon two days’ advance notice prior to the applicable deadline, up to July 14, 2024 (the “Additional Extension Date”), unless the closing of an initial business combination should have occurred prior thereto (the “Second Extension” and such proposal, the “Second Extension Proposal”). In connection with the Second Extension, holders of an aggregate of 2,014,907 Class A ordinary shares, representing approximately 38.7% of the issued and outstanding Class A ordinary shares, properly exercised their right to redeem their shares for cash at a redemption price of approximately $10.68 per share. As a result, an aggregate of $21,514,603 million was released from the Trust Account to pay such shareholders.
Additionally, pursuant to the terms of the Charter, as amended in connection with the Second Extension, on October 17, 2023, the Sponsor elected to convert 9,999,999 Class B ordinary shares held by it on a one-for-one basis into Class A ordinary shares (such shares, the “Converted Shares”). The Sponsor will not have any redemption rights in connection with the Converted Shares, and the Converted Shares will be subject to the restrictions on transfer included in the letter agreement entered into by the Sponsor in connection with the Initial Public Offering. Following such conversion, and as a result of the redemptions described above, there were an aggregate of 13,194,282 Class A ordinary shares issued and outstanding, of which 2,041,283 Class A ordinary shares issued and outstanding will have redemption rights, and one Class B ordinary share issued and outstanding.
27
Liquidity, Capital Resources, and Going Concern
For the nine months ended September 30, 2023, net cash provided by operating activities was $829,754, which was due to our net loss of $1,298,287, a loss in connection with the non-redemption agreement of $41,161 and changes in working capital accounts of $3,115,418, partially offset by income from investments held in the Trust Account of $1,210,332 and a change in fair value of non-redemption liabilities of $181,794.
For the nine months ended September 30, 2022, net cash used in operating activities was $1,050,949, which was due to income from investments held in the Trust Account of $1,855,099 and our net loss of $652,006, offset in part by changes in working capital of $152,144.
For the nine months ended September 30, 2023, net cash provided by investing activities was $266,701,252, which was due to cash withdrawn from the Trust Account for payment to redeeming shareholders in connection with the First Extension.
For the nine months ended September 30, 2022, net cash used in investing activities of $304,500,000 was the result of the amount of net proceeds from our Initial Public Offering being deposited into the Trust Account.
For the nine months ended September 30, 2023, net cash used in financing activities of $266,951,252 was a result of a payment to redeeming shareholders of $266,701,252 and the repayment of the promissory note – related party in the amount of $896,657, offset by proceeds received from the promissory note – related party of $646,657.
For the nine months ended September 30, 2022, net cash provided by financing activities of $305,678,803 was comprised of $300,000,000 in proceeds from the issuance of Units in our Initial Public Offering, and proceeds from the Private Placement of $11,530,000, partially offset by the repayment of the promissory note with our Sponsor of $136,617 and payment of offering costs of $5,714,580.
As of September 30, 2023, we had approximately $646,847 held outside of the Trust Account and a working capital deficit of approximately $4.7 million.
Our liquidity needs prior to the consummation of the Initial Public Offering were satisfied through the payment of $25,000 from the Sponsor to cover certain expenses on our behalf in exchange for issuance of Class B ordinary shares of the Company and loan proceeds from the Sponsor of approximately $137,000 under a promissory note, dated February 18, 2021 (as amended on December 31, 2021, the “Pre-IPO Promissory Note”). We fully repaid the Pre-IPO Promissory Note on January 14, 2022. Subsequent to the consummation of the Initial Public Offering, our liquidity has been satisfied through the net proceeds from the consummation of the Initial Public Offering and the Private Placement held outside of the Trust Account and a Working Capital Loan (as defined below) under an unsecured promissory note from the Sponsor of $2,500,000. In addition, in order to finance transaction costs in connection with a business combination, the Sponsor, members of our founding team or any of their affiliates may provide us with additional Working Capital Loans. As of September 30, 2023 and December 31, 2022, there was $0 and $250,000 outstanding under the Working Capital Loans, respectively.
Based upon the analysis above, our management has determined that we do not have sufficient liquidity to meet our anticipated obligations for at least twelve months after the financial statements are available to be issued, and as such, the events and circumstances raise substantial doubt about our ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after January 14, 2024.
We have until January 14, 2024, with the option to extended up to six additional months upon approval by the Board, up until July 14, 2024, to consummate an initial business combination. It is uncertain that we will be able to consummate an initial business combination by this time. If an initial business combination is not consummated by the applicable date, and a further extension is not approved by our shareholders, there will be a mandatory liquidation and subsequent dissolution. In connection with our assessment of going concern considerations in accordance with FASB Accounting Standards Update 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” our management has determined that the liquidity condition and mandatory liquidation, should a business combination not occur, and potential subsequent dissolution raises substantial doubt about our ability to continue as a going concern. We intend to complete a business combination before the mandatory liquidation date. Over this time period, we will be using the funds outside of the Trust Account for paying existing accounts payable, identifying and evaluating prospective initial business combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating an initial business combination.
28
Results of Operations
Our entire activity since inception up to September 30, 2023 related to our formation, the preparation for the Initial Public Offering, and since the closing of the Initial Public Offering, the search for a prospective initial business combination and expenses related to consummating an initial business combination. We will not generate any operating revenues until after the completion of our initial business combination. We generate non-operating income in the form of investment income from the Trust Account. We will continue to incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses and transaction expenses.
For the three months ended September 30, 2023, we incurred a net loss of $2,291,057, which consisted of $2,534,363 in general and administrative expense, $112,500 in administrative expenses – related party, and change in fair value of non-redemption agreement liabilities of $188,654, partially offset by $544,460 in income from investments held in the Trust Account.
For the three months ended September 30, 2022, we had net income of $1,111,967, which consisted of $1,448,249 in income from investments held in Trust Account, partially offset by $223,782 in general and administrative expense and $112,500 in administrative expenses – related party.
For the nine months ended September 30, 2023, we incurred a net loss of $1,298,287, which consisted of $5,948,164 in general and administrative expense, $337,500 in administrative expenses - related party, $41,161 loss in connection with the non-redemption agreement, and a change in the fair value of non-redemption agreement liabilities of $181,794, partially offset by $1,210,332 in income from investments held in the Trust Account and a gain from a settlement agreement of $4,000,000.
For the nine months ended September 30, 2022, we had a net income of $652,006, which consisted of $1,855,099 in income from investments held in Trust Account, partially offset by $865,593 in general and administrative expense and $337,500 in administrative expense – related party.
Contractual Obligations
Promissory Notes – Related Party
The Sponsor agreed to loan us up to $300,000 pursuant to the Pre-IPO Promissory Note to be used for a portion of the expenses of the Initial Public Offering. The Pre-IPO Promissory Note was non-interest bearing, unsecured and due upon the closing of the Initial Public Offering. We borrowed approximately $137,000 under the Pre-IPO Promissory Note and fully repaid the balance of the Pre-IPO Promissory Note on January 14, 2022. Subsequent to the repayment, the facility was no longer available to the Company.
29
Related Party Loans
In order to finance transaction costs in connection with an intended initial business combination, the Sponsor or an affiliate of the Sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required for working capital purposes (“Working Capital Loans”). If we complete an initial business combination, we will repay the Working Capital Loans. In the event that the initial business combination does not close, we 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 $1,500,000 of such loans may be convertible into units of the post-business combination entity (the “Working Capital Units”) at a price of $10.00 per unit at the option of the lender. The Working Capital Units would be identical to the Private Placement Units. Each Working Capital Unit would consist of one Class A ordinary share and one-half of one redeemable warrant (the “Working Capital Warrants”). On November 14, 2022, we issued an unsecured promissory note (as amended and restated on November 14, 2022) to our Sponsor for an aggregate principal amount of up to $250,000 for working capital purposes. On May 17, 2023, we amended and restated such unsecured promissory note issued to our Sponsor (as amended and restated on May 17, 2023, the “New Note” ). The New Note is for an aggregate principal amount of up to $2,500,000 for working capital purposes. The New Note bears no interest and is repayable in full upon the earlier of the consummation of our initial business combination and the day prior to the date we elect to liquidate and dissolve in accordance with the provisions of the Charter (such earlier date, the “Maturity Date”). Up to $1,500,000 of the principal amount of the New Note may also be converted into additional private placement-equivalent units, at a price of $10.00 per unit, at the option of the holder of the New Note at any time on or prior to the Maturity Date. During the nine months ended September 30, 2023, we repaid $896,657 outstanding under the New Note. As of September 30, 2023 and December 31, 2022, we had $0 and $250,000 of such Working Capital Loans outstanding, respectively.
Registration and Shareholder Rights
The holders of the Class B ordinary shares, Private Placement Units, Private Placement Shares and Private Placement Warrants and the Class A ordinary shares underlying the Working Capital Units and Working Capital Warrants will have registration rights to require us to register a sale of any of our securities held by them pursuant to a registration rights agreement signed upon the effective date of the Initial Public Offering. The holders of these securities are entitled to make up to three demands, excluding short form demands, that we register such securities. In addition, the holders have certain “piggyback” registration rights with respect to registration statements filed subsequent to the completion of the initial business combination. Notwithstanding the foregoing, Cantor may not exercise its demand and “piggyback” registration rights after five (5) and seven (7) years, respectively, after the effective date of the registration statement filed in connection with the Initial Public Offering and may not exercise its demand rights on more than one occasion. We will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
We granted the underwriter a 45-day option from the date of the Initial Public Offering to purchase up to an additional 3,915,000 Units to cover over-allotments, if any, at the Initial Public Offering price less the underwriting discounts and commissions. On January 14, 2022, the underwriter partially exercised the over-allotment option to purchase an additional 3,900,000 Units.
The underwriter was entitled to a cash underwriting discount of approximately $5.2 million in the aggregate paid upon the closing of the Initial Public Offering. An additional fee of approximately $14.3 million in the aggregate will be payable to the underwriter for deferred underwriting commissions. The deferred fee will become payable to the underwriter from the amounts held in the Trust Account solely in the event that we complete an initial business combination, subject to the terms of the underwriting agreement for the Initial Public Offering.
Non-Redemption Agreements
In December 2022, certain of our investors (the “First Extension 10X III Investors”) entered into non-redemption agreements (the “First Extension Non-Redemption Agreements”) with us and our Sponsor. Pursuant to the First Extension Non-Redemption Agreements, such First Extension 10X III Investors agreed, for our benefit, to vote certain ordinary shares owned or acquired, representing 4 million ordinary shares in the aggregate (the “First Extension 10X III Investor Shares”), in favor of a proposal to amend our Charter to extend the time we are permitted to close a business combination from January 14, 2023 to the First Extended Date (the “Initial Extension”) and to allow the Board, without another shareholder vote, to elect to further extend the date to consummate an initial business combination after the First Extended Date up to three times, by an additional month each time, upon two days’ advance notice prior to the applicable deadline, up to October 14, 2023 (the “Optional Extensions”) and not to redeem the First Extension 10X III Investor Shares in connection with such proposal. In connection with these commitments from the First Extension 10X III Investors, Sponsor has agreed to transfer to each First Extension 10X III Investor an amount of its Class B ordinary shares on or promptly after the closing of our initial business combination. The Sponsor will transfer to each First Extension 10X III Investor 85,750 fully paid, non-assessable Class B ordinary shares (857,500 in the aggregate) plus 14,292 additional fully paid, non-assessable Class B ordinary shares (428,760 in the aggregate) per month for the three one-month Optional Extensions to the extent the Board elects to extend for those periods; provided that if there are less than 400,000 First Extension 10X III Investor Shares, the amount of Class B ordinary shares will be reduced proportionally. On July 10, 2023, the Board approved the Optional Extensions.
30
We estimated the fair value of the investor interests attributable to such Class B ordinary shares to be $41,161, or $0.06 per share and $0.10 per share as of December 8, 2022 and December 20, 2022, respectively. Each First Extension 10X III Investor acquired from the Sponsor an indirect economic interest in such Class B ordinary shares. The indirect economic interests were evaluated under ASC 480 and ASC 815. The value of the shares in the Initial Extension, and the shares eligible to be earned in the Optional Extensions will be treated as an expense. The shares that have been earned in the Initial Extension with a fixed-for-fixed value will be credited to additional paid-in-capital. The remaining shares affiliated with the Optional Extensions will be treated as a derivative liability as a result of the variability in the value of shares due to the amount of shares held by the First Extension 10X III Investor (can be reduced proportionally when the First Extension 10X III Investors hold less than 400,000 shares). As the shares in the Optional Extensions become determinable and therefore fixed-for-fixed, the value of those shares will be transferred from a liability to equity. Any changes in the fair value of the shares will be recognized as an expense in the period of remeasurement.
Critical Accounting Estimates
The preparation of 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 the reported amounts of income and expenses during the periods reported. Actual results could materially differ from those estimates. Refer to our Amended Annual Report for our critical accounting policies. There have been no changes in our critical accounting policies during the period covered by this Quarterly Report.
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 unaudited condensed consolidated financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.
Item 4. Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
31
Evaluation of Disclosure Controls and Procedures
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2023. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of the period covered in this Quarterly Report, our disclosure controls and procedures (as defined in Rules 13a-15 (e) and 15d-15 (e) under the Exchange Act) were not effective.
Management concluded that a material weakness in internal controls over financial reporting existed relating to the accounting treatment for complex accounting applications. A material weakness is a deficiency, or combination of deficiencies, in internal controls over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Changes in Internal Controls Over Financial Reporting
There has been no change in our internal control over financial reporting (as defined in Rules 13 a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting. Management will enhance our processes to identify and appropriately apply applicable accounting requirements to better evaluate and understand the nuances of the complex accounting standards that apply to our financial statements. Our updated processes will include providing enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third-party professionals with whom we consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects.
32
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
There are certain risks and uncertainties in our business that could cause our actual results to differ materially from those anticipated. A detailed discussion of such risks was included in Part I, Item 1A, “Risk Factors” of our Amended Annual Report and in the Registration Statement. These risk factors should be read carefully in connection with evaluating our business and in connection with the forward-looking statements and other information contained in this Quarterly Report. Any of the risks described in the Amended Annual Report could materially affect our business, financial condition or future results and the actual outcome of matters as to which forward-looking statements are made.
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities
Unregistered Sales
None.
Use of Proceeds
On January 14, 2022, we consummated our Initial Public Offering of 30,000,000 Units, at an offering price to the public of $10.00 per Unit, for an aggregate offering price of $300.0 million, with each Unit consisting of one Class A ordinary share and one-half of one Public Warrant. Each Public Warrant entitles the holder thereof to purchase one Class A ordinary share at a price of $11.50 per share. Cantor acted as the sole bookrunning manager for the Initial Public Offering. Our Initial Public Offering did not terminate before all of the securities registered in our registration statement were sold. The securities sold in the Initial Public Offering were registered under the Securities Act on a registration statement on Form S-1 (File No. 333-253868), which was declared effective by the SEC on January 11, 2022.
Net proceeds of $304.5 million, comprised of $294.8 million of the proceeds from the Initial Public Offering (which amount includes $14.3 million of the underwriter’s deferred discount) and $9.7 million of the proceeds of the sale of the Private Placement Units, were deposited in the Trust Account upon closing of the Initial Public Offering. We paid a total of $5.2 million in underwriting discounts and commissions and $741,000 for other offering costs related to the Initial Public Offering. In addition, the underwriter agreed to defer approximately $14.3 million in underwriting discounts, which amount will be payable when and if an initial business combination is consummated. No payments were made by us to directors, officers or persons owning ten percent or more of our ordinary shares or to their associates, or to our affiliates. There has been no material change in the planned use of proceeds from the Initial Public Offering as described in our final prospectus related to the Initial Public Offering, dated January 11, 2022, which was filed with the SEC on January 14, 2022.
In connection with the shareholder vote to approve the First Extension, the holders of 25,943,810 Class A ordinary shares exercised their right to redeem such shares at a per share redemption price of approximately $10.28 for an aggregate redemption amount of approximately $266.7 million.
In connection with the shareholder vote to approve the Second Extension, the holders of 2,014,907 Class A ordinary shares exercised their right to redeem such shares at a per share redemption price of approximately $10.68 for an aggregate redemption amount of approximately $21.5 million.
Issuer Purchases of Equity Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
(a) None.
(b) None.
(c) Not appliable.
33
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. |
** | Furnished herewith. |
34
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
10X CAPITAL VENTURE ACQUISITION CORP. III | ||
Date: November 27, 2023 | By: | /s/ Hans Thomas |
Name: | Hans Thomas | |
Title: | Chief Executive Officer | |
(Principal Executive Officer) | ||
Date: November 27, 2023 | By: | /s/ Guhan Kandasamy |
Name: | Guhan Kandasamy | |
Title: | Chief Financial Officer | |
(Principal Financial and Accounting Officer) |
35