REG - Financials Acqn.Corp Financials Acqn-FNWR - Annual Report for the period to 31 December 2022
28/04/2023 18:15
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RNS Number : 9560X Financials Acquisition Corp 28 April 2023
Financials Acquisition Corp
Annual Report for the period to 31 December 2022
Page(s)
Directors' Report 1-4
Chairman's Statement 5
Board of Directors 6-8
Corporate Governance Statement 9-13
Report of the Audit Committee 14-15
Independent Auditor's Report 16-22
Statement of Financial Position 23
Statement of Comprehensive Income 24
Statement of Changes in Equity 25
Statement of Cash Flows 26
Notes to the Financial Statements 27-47
Company Summary
The Directors of Financials Acquisition Corp (the "Company") are pleased to
submit their Annual Report and Audited Financial Statements (the "Financial
Statements") for the period from date of incorporation to 31 December 2022.
Financials Acquisition Corp (the "Company"), is an exempted company with
limited liability, incorporated under the laws of the Cayman Islands on 31
August 2021. The Company is registered with the Registrar of Companies in the
Cayman Islands under incorporation number 380273 and has its registered office
at SIX, Cricket Square, Hutchins Drive, PO Box 2681, Grand Cayman, KY1-1111,
Cayman Islands.
Principal Activity
The Company is a special purpose acquisition company (a "SPAC"), formed for
the purpose of effecting a merger, share exchange, asset acquisition, share
purchase, reorganisation or similar business combination (a "Business
Combination"). The Company aims to identify and acquire a company or business
operating principally (or adjacent to) the insurance or broader financial
services industry.
The Company was admitted to trading on the main market of the London Stock
Exchange on 13 April 2022, having raised £150,000,000 in its initial public
offering (the "IPO") of 15,000,000 Class A Ordinary Shares ("Ordinary Shares")
at £10.00 per share (the "Offering") with matching warrants being issued
concurrently with the delivery of the Ordinary Shares to subscribers of
Ordinary Shares in the Offering on the basis of one-half (1/2) of one (1)
warrant per Ordinary Share ("Public Warrants"). Additionally, £4,500,000 was
raised via the Company's Overfunding Subscription of 450,000 Ordinary Shares
which were issued to the Overfunding Sponsor Entity.
The proceeds of the Offering were placed in an escrow account as outlined in
the prospectus for the IPO (the "Prospectus"). At the same time as the
Offering the Company raised £3,875,000 from the private placement of
3,875,000 Sponsor Warrants at £1.00 per Sponsor Warrant, the proceeds of
which were held outside of the escrow account to cover the costs relating to
the IPO and running costs as outlined in the Prospectus.
Business Combination
Since the completion of its IPO, the Company's leadership team has been
focused on identifying a potential target for the business combination within
the meaning of the Prospectus (the "Business Combination"). This process is
ongoing and the Company will continue its search with the aim to complete a
business combination within 15 months following the Admission Date (13 April
2022), subject to two three-month extension periods under conditions outlined
in the Prospectus.
The proceeds of the Company's IPO, £154,500,000, were placed in its escrow
account held at HSBC Bank plc (the "Escrow Account"). All amounts contributed
to the Escrow Account are held for the benefit of the Company and the Ordinary
Shareholders as further described in the Prospectus
Principal Risks and Uncertainties
Please refer to the following sections of the Prospectus for the Company's
principal risks and uncertainties.
- Risk Factors (pages 9 to 39)
The Company's risk management objectives and policies are consistent with
those disclosed in the Prospectus. Additional risks or circumstances not known
to the Company, or currently believed not to be material, could individually
or cumulatively, later turn out to have a material impact on the Company's
business, revenue, assets, liquidity, capital resources or net income.
Going concern
The Company's operation is restricted to structuring and completing its
Business Combination, the Board have assessed the viability of the Company
until the Business Combination Deadline, taking account of the Company's
current position and the potential impact of the principal risks outlined in
this statement.
The Company has 15 months from the admission date to complete a business
combination, subject to two three-month extension periods if approved (the
"Business Combination Deadline"). The Company currently believes it has
sufficient funds to cover operating costs through to the initial deadline. If
the board were to seek an extension then additional funds would need to be
raised to cover operating costs. The costs related to the Company are expected
to be covered by the proceeds of the issuance of the Sponsor Warrants as part
of the Offering process.
The Sponsor Entity, the Overfunding Sponsor Entity (as defined in the
Prospectus) or their affiliates may provide up to £1,500,000 of additional
funds to the Company through the issuance of debt instruments, such as
promissory notes, to fund excess costs, which may be converted into additional
Sponsor Warrants (as defined in the Prospectus) at a price of £1.00 per
Sponsor Warrant at the option of the lender.
The Company will have until the Business Combination Deadline to complete a
Business Combination, subject to any extension period being granted. If the
Company has not completed a Business Combination by such time (or the expiry
of any extension period), it will: cease all operations except for the purpose
of winding up; as promptly as reasonably possible, redeem the Ordinary Shares,
and as promptly as reasonably possible following such redemption, subject to
the approval of the remaining shareholders and the Directors, liquidate and
dissolve.
The events and conditions that management considers relevant to the Company's
ability to continue as a going concern include the limited time frame
remaining to the Business Combination Deadline and market conditions inclusive
of competition and potential geopolitical events.
Management remain focused on completing a Business Combination by the Business
Combination Deadline. Having considered all relevant information, management
have concluded that there are no material uncertainties related to the
identified events or conditions that may cast significant doubt on the
Company's ability to continue as a going concern. Reaching the conclusion that
there is no material uncertainty involves significant judgement.
Going concern (continued)
In addition, such opinion is not dependent on the Company completing a
Business Combination by the Business Combination Deadline. It is important to
note that nothing in this analysis implies that the Company would be unable to
meet its debts as they fall due or to fulfil the above mentioned redemptions
of redeemable Ordinary Shares should the Company not complete a Business
Combination by the Business Combination Deadline.
Corporate Governance
As an exempted company incorporated under the laws of the Cayman Islands with
a standard listing on the London Stock Exchange's main market, the Company has
no statutory obligation or listing requirement to adopt a corporate governance
code. However, the Company has to voluntarily observe the requirements of the
UK Corporate Governance Code insofar as appropriate for a SPAC in its
pre-merger stage.
· The Directors' Corporate Governance Statement in respect of its
governance obligations can be found on pages 8 to 9.
· The Board has established an Audit Committee, comprised of two
independent directors, to provide oversight and preserve the integrity of the
Company's financial reporting process and internal controls and risk
management systems, and to monitor the statutory audit of the Company's annual
financial statements. The Report of the Audit Committee can be found on pages
11 to 14.
Related Party Transactions
The main related party transactions are outlined in the "Related Party
Transactions" section of the Prospectus. Refer to note 10 - Related party
transactions for disclosure within the Financial Statements.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Annual Report and Financial
Statements in accordance with applicable laws and regulations. The Board
confirms that to the best of their knowledge:
- the Financial Statements, prepared in accordance with IFRS as issued
by IASB, give a true and fair view of the assets, liabilities, financial
position and profit of the Company, as required by Disclosure and Transparency
Rule ("DTR") 4.1.12R;and
- the Director's Report includes a fair review of the development and
performance of the business during the period, and the position of the Company
at the end of the year, together with a description of the principal risks and
uncertainties that the Company faces, as required by DTR 4.1.8R and DTR
4.1.9R.
The Board is responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy, at any time, the financial position of the Company, and
that enable them to ensure that the Financial Statements comply with the
Companies Act (As Revised) of the Cayman Islands. The Board is also
responsible for the maintenance and integrity of the corporate and financial
information included on the Company's website. Legislation in the Cayman
Islands governing the preparation and dissemination of Financial Statements
may differ from legislation in other jurisdictions.
Signed on behalf of the Board by:
Andrew Rear (Executive Chairman)
28 April 2023
Chairman's Statement
Dear Shareholders,
It is with pleasure that I present the Financial Statements of Financials
Acquisition Corp. (the "Company") for the period from 31 August 2021 (date of
incorporation) to 31 December 2022.
The highlight of the period was the Company's admission to trading on the main
market of the London Stock Exchange on 13 April 2022 raising £154,500,000
million from an offer of new shares. Our ability to raise this capital during
one of the quietest markets for equity capital market ("ECM") activity both in
London and globally vindicated the strength of our investment case.
The capital markets volatility created by inflationary concerns, central bank
response, the impact of the COVID-19 pandemic and of course, the continuing
geopolitical tension has created both headwinds and volatility. The
competition for and hence the valuation of assets in the private markets has
continued to decline during our search period. We are mindful of the impact of
the above factors (especially inflation) on the fundamentals of the assets in
our target universe. Despite this we continue to find exciting opportunities
that meet our criteria and which we believe would be received well by the
public markets.
We remain confident that we will be able to announce a business combination
within the time constraints referred to in the Prospectus.
Andrew Rear (Executive Chairman)
28 April 2023
Board of Directors
The Board is responsible for leading and controlling the Company and has
overall authority for the management and conduct of its business, strategy and
development. The Board is also responsible for ensuring the maintenance of a
sound system of internal controls and risk management (including financial,
operational and compliance controls) and for reviewing the overall
effectiveness of systems in place as well as for the approval of any changes
to the capital, corporate and/or management structure of the Company.
The Board comprises six members, details of which are set out below.
Notwithstanding the acquisition of indirect interests in Class B Ordinary
shares ("Sponsor Shares") by acquiring participating interests in the
membership capital of the Sponsor, Mr William Allen is considered to be
independent as the level of his interests in the share capital of the Company
is not sufficiently material to his personal circumstances to exert any
material influence over his actions, nor is his shareholdings material to the
Company. Mr Paul Jardine, Mr Nic Gorey, Ms Shobha Frey and Mr David Morant are
also considered to be independent. Mr Andrew Rear is not considered to be
independent.
Andrew Rear holds a directorship in Medgulf, a company listed on the Saudi
Arabian stock exchange. Other than that, none of the directors holds a
directorship position in other public companies.
Andrew Rear, Executive Chairman
Andrew Rear is the Executive Chairman of the Company and a member of the
Sponsor Entity's Management Team. Mr. Rear is an insurance industry executive
with over 20 years' experience in the global insurance industry. From 2010 to
2020 Mr Rear was an executive at Munich Re. In 2016 Mr Rear set up Munich Re
Digital Partners a separate operating division tasked with investing in the
Insurtech industry and supporting the industry with reinsurance capacity.
Prior to this Mr Rear was an operating chief executive across the life
reinsurance operations in the UK, Ireland, Africa and Asia Pacific for Munich
Re. From 2000 to 2010 Mr Rear was part of the team that built Oliver Wyman's
insurance consulting business in Europe and from 2008 until his departure Mr
Rear was in charge of this business.
At Munich Re Digital Partners Mr Rear was responsible for investments
totalling almost US$400m in 11 Insurtech startups. The highest profile
investments include Bought By Many, Next Insurance, Ticker and Hippo with
growth rates between first investment and latest or exit valuations of 65x,
32x, 16x and 15x respectively. The Next Insurance investment was made in its
2017 Series A at a valuation of $120m and upsized in 2019, investing a further
$250m at $875m. In the last Series E capital raise in March 2021, Next
Insurance was valued at $4bn post-money. The Hippo investment was made in its
2018 Series C at a $315m valuation. In March 2021 Hippo announced a business
combination with Reinvent Technology Partners Z at a valuation of $5bn. The
Bought By Many investment was made in its Series A at a $35.9m valuation. In
its Series D capital raise in June 2021, Bought By Many was valued at $2.35bn
post-money. Other investments include Spruce, Wrisk and Acko with growth rates
between first investment and latest exit valuation of 11.7x, 5.5x and 1.3x
respectively. Further investments made include Trov, Inshur, Slice, and Neos.
Munich Re Digital Partners also supported these operations with reinsurance
capital which allowed a deeper understanding of the particular businesses.
Since leaving Munich Re Digital Partners in March 2021, Mr Rear has continued
to be heavily involved in the Insurtech industry. He is Non-Executive Chairman
at Buckle and a Non-Executive Director at Ticker. He is also an industry
partner at the private equity firm Motive Partners.
Board of Directors (continued)
William Allen, Chief Executive Officer
William Allen is the Chief Executive Officer of the Company and a member of
the Sponsor Entity's Management Team. Mr Allen is an experienced capital
markets executive focused on the global insurance industry. From 2012 to 2020
Mr Allen was a Managing Director at Keefe, Bruyette & Woods covering
institutional accounts across North America. From 2008 to 2012, Mr Allen
performed a similar role at Fox-Pitt Kelton during which time it was acquired
by the Macquarie Group. Prior to this Mr Allen was an Insurance Analyst in
London focusing on the reinsurance and Lloyd's of London market with Bear
Stearns International.
At Keefe, Bruyette & Woods, Mr Allen was involved in capital market
transactions across the financial sector. This included numerous IPOs, private
capital raises and M&A situations. Mr Allen's regular commentary on the
sector was highly respected and distributed extensively across the buy-side
and corporations. Mr Allen continued to be heavily involved in the insurance
sector, advising chief executives and boards on capital raising activity and
speaking at industry conferences. Mr Allen helped corporations with marketing
activities to buy-side investors and led trips to the UK, Monte Carlo, Asia
and the U.S. to meet industry professionals. Mr Allen has an extensive network
of industry and buy-side contacts which will aid the capital raising and
access to target companies.
At Bear Stearns, Mr Allen was a highly rated Insurance Analyst and became
Managing Director at the age of 25. Mr Allen's contacts within the industry
and latterly in the insurance linked securities market helped him develop a
reputation as a leading expert on the industry.
In July 2020 Mr Allen left Keefe, Bruyette & Woods to establish WFSA
Capital which is an advisory boutique established to take advantage of the
rising prices in the traditional insurance industry and the capital
dislocation post COVID-19, the rise of Insurtech and alternative capital.
During this time Mr Allen has worked with several of the 'Class of 2020'
speciality insurers, Insurtechs and SPACs on their capital raising strategies.
Paul Jardine, Senior Independent Non-Executive Director
Paul Jardine is the Senior Independent Non-Executive Director of the Company.
Mr Jardine is an experienced public company insurance executive. As Chief
Operating Officer of Catlin from 2004 to 2015 Mr Jardine performed many
investor and public markets duties. Mr Jardine also led Catlin through the
acquisition by AXA XL of the XL Group. Mr Jardine is currently a Non-Executive
Chairman of Asta and Chaucer as well as a Non-Executive Director at Akinova
and an advisor for ECMS. Prior to Catlin, Mr Jardine was chief actuary of
Equitas and a partner of PWC.
Nic Gorey, Independent Non-Executive Director
Nic Gorey is an Independent Non-Executive Director of the Company. Mr Gorey is
a serial entrepreneur and a recognised leader in digital marketing. In 2009 Mr
Gorey was approached by Facebook to partner in building a platform to optimise
advertising campaigns via Facebook advertising's application programming
interface. Mr Gorey founded Rocketer, which runs online advertising campaigns
and lead generation through artificial intelligence and machine learning
processes to optimise conversion. Rocketer works globally with 70 financial
services partners.
Board of Directors (continued)
Shobha Frey, Independent Non-Executive Director
Shobha Frey is an Independent Non-Executive Director of the Company. Ms Frey
is a private growth investor with expertise in insurance investing. Prior to
this Ms Frey was an Equity Analyst and Portfolio Manager focused on the global
insurance industry at Putnam. Ms Frey managed a financials sleeve at K-Capital
and international equities for the Harvard Management Company.
David Morant, Independent Non-Executive Director
David Morant is an Independent Non-Executive Director of the Company. Prior to
this, he was Managing Director within two NYSE listed companies - Eneti and
Scorpio Tankers. He enjoyed a long career as a Portfolio Manager at both CQS
and SAC Global. He started his career as an analyst at Soros Fund Management
after graduate training in Investment Banking and Equity Research at
JPMorgan in London.
Directors' Meetings and Attendance
The Board conducts Board meetings and committee meetings in accordance with
the articles of incorporation of the Company. Attendance at ad hoc meetings
via telephone or video conference links will be permitted where due notice is
given in accordance with the articles of incorporation and all participants
can hear each other clearly. Board packs will be circulated prior to the
meeting unless circumstances dictate otherwise. The Board will ensure that
minutes are taken at each meeting and subsequently approved by the Board.
Name Board - formal meetings Board - additional meetings Audit Committee Other Committee
Number of meeting held in the period 9 - - -
Andrew Rear, Executive Chairman 9 - - -
Paul Jardine 7 - - -
Nic Gorey 6 - - -
Shobha Frey 9 - - -
David Morant 8 - - -
Corporate Governance Statement
Compliance
As an exempted company incorporated under the laws of the Cayman Islands with
a standard listing on the London Stock Exchange's main market, the Company has
no statutory obligation or listing requirement to adopt a corporate governance
code. However, the Company intends to voluntarily observe the requirements of
the UK Corporate Governance Code insofar as appropriate for a SPAC in its
pre-merger stage.
Therefore, the Company does not comply with the Governance Code in the
following respects:
- the Executive Chairman and Chief Executive Officer will not be paid
a fee for their services and, as is customary for SPACs, will be wholly
incentivised by their interest in the Sponsor Shares and Sponsor Warrants and
accordingly the Board considers provisions relating to executive compensation
to be inapplicable to the Company;
- the Company's Executive Chairman, Mr. Rear, is not considered to be
independent and therefore the Company does not comply with the requirements of
the UK Corporate Governance Code in relation to the requirement for the
chairman to be independent on appointment. The Board considers that this is
reflective of his importance to the Company at this stage and is not
detrimental to the Board's overall effectiveness or role in promoting the
long-term sustainable success of the Company;
- the Company may only enter into an agreement in respect of a
Business Combination with the prior approval of a majority of those Directors
the Board considers independent for the purposes of the UK Corporate
Governance Code and for the purposes of such approval, the following Directors
shall be excluded from voting and taking part in the Board's consideration of
the Business Combination: (i) any Director who is, or an associate of whom is,
a director of the target entity that is the subject of the Business
Combination or of a subsidiary undertaking of such target entity; and (ii) any
Director who has a conflict of interest in relation to such target entity or a
subsidiary undertaking of such target entity;
- the Independent Non-Executive Directors will not be paid a fee for
their services and instead, in return for an investment by each of them of
£100,000, they hold 66,262 Sponsor Shares and 57,767 Sponsor Warrants
directly in their own names, an interest which has been deemed by the Board to
be non-material for the purposes of establishing their independence;
- upon completion of the Business Combination, the Independent
Non-Executive Directors are each entitled to be awarded 10,000 ordinary shares
in the post-Business Combination entity for nominal value, an interest which,
together with their holding of Sponsor Shares and Sponsor Warrants, has been
deemed by the Board to be nonmaterial for the purposes of establishing their
independence;
- the UK Corporate Governance Code also recommends the submission of
all directors for re-election at annual intervals. No Director will be
required to submit for re-election until the first annual general meeting of
the Company following the Business Combination;
- until the Business Combination is made the Company will not have
nomination or remuneration or risk committees. Following the Business
Combination, the Board intends to put in place nomination, remuneration and
risk committees; and
- prior to a Business Combination, only holders of the Sponsor Shares
will be entitled to vote on the appointment or removal of directors. Holders
of Ordinary Shares will not be entitled to vote on the appointment (and/or
removal) of directors during such time. In addition, prior to a Business
Combination, holders of a majority of the Sponsor Shares may remove a member
of the Board for any reason.
Climate Related Emissions and Energy Performance
The Company is currently considered a low energy user, with energy consumption
being below the minimum for disclosure (below 40,000 kwh). The Board
recognises its responsibility and is committed to monitor its energy usage as
its activities continue to scale. The Company shall collect, collate and
openly disclose the Company's energy usage and impact on climate and
environmental conditions.
Committees
If the need should arise in the future, for example following the Business
Combination, the Board may set up committees as it deems appropriate to the
size and nature of the Company.
Share dealing
As at the date of the Prospectus the Board has adopted a share dealing code
which is consistent with the rules of the UK Market Abuse Regulation. The
Board is responsible for taking all proper and reasonable steps to ensure
compliance with such share dealing code by the Directors.
Composition and Independence of the Board
As at 31 December 2022, the Board comprised six Directors who are listed
above. The Company has no employees. The biographies of the Board members can
be found on pages 4 to 6.
The number of the Directors shall be not less than two and there shall be no
maximum number unless otherwise determined by the Company by Ordinary
Resolution.
The Role of the Board
The Board is the Company's governing body and has overall responsibility for
maximising the Company's performance by directing and supervising the affairs
of the business and meeting the appropriate interests of shareholders and
relevant stakeholders, while enhancing the value of the Company and ensuring
protection of investors. A summary of the Board's responsibilities is as
follows:
- statutory obligations and public disclosure
- strategic matters and financial reporting
- appointment and removal of Directors and setting Directors
remuneration
- risk assessment and management including reporting compliance,
governance, monitoring and control and other matters having a material effect
on the Company.
The Board's responsibilities for the Annual Report and Financial Statements
are set out in the Statement of Directors' Responsibilities on page 2.
Directors' Remuneration
It is the responsibility of the Board as a whole to determine and approve the
Directors' remuneration, having regard to the level of fees payable to
non-executive Directors in the industry generally, the role that individual
Directors fulfil in respect of Board, Committee responsibilities and the time
committed to the Company's affairs. No individual Director is entitled to vote
in relation to his own remuneration.
Directors undertake to provide services to the Company and be paid an annual
fee for such services in accordance with each Directors letter of appointment.
No director emoulments have been paid during the year
Section 172 statement
Although the Company is not domiciled in the UK, the Company is voluntarily
meeting any obligations under the 2018 UK Corporate Governance Code, including
section 172 of the Companies Act 2006.
The Directors recognise their individual and collective duty to act in good
faith and in a way that is most likely to promote the success of the Company
for the benefit of its members as a whole, whilst also having regard, amongst
other matters, to the Company's key stakeholders and the likely consequences
of any decisions taken during the year, as set out below:
The interests of the Company's employees
The Company has no direct employees and maintains close working relationships
with the employees of the Adviser, Administrator and Custodian who undertake
the Company's main functions.
The need to foster the Company's business relationships with suppliers,
customers and others
The Board maintains close working relationships with all key suppliers and
those responsible for delivering the Company's strategy. The contractual
relationship with each supplier and their performance is formally reviewed
each year.
The impact of the Company's operations on the community and the environment
Objective of the Company is to deliver a private company into the public
domain that has strong corporate governance, is environmentally focused and
socially responsible. Identifying a target company is key to the decision
making process of the Board when reviewing target companies.
The desirability of the Company maintaining a reputation for high standards of
business conduct
The Chair is responsible for setting expectations concerning the Company's
culture and the Board ensures that its core values of integrity and
accountability are demonstrated in all areas of the Company's operations.
The need to act fairly between Shareholders of the Company
The Board, in conjunction with the Adviser, will engage actively with
Shareholders, most significantly in their consultations relating to the
Business Combination, which can only be approved by a majority vote of the
Public Shareholders.
Anti-bribery and Corruption
The Board has adopted an anti-bribery and anti-corruption policy designed to
ensure that the Company complies with all applicable laws, standards and
expectations in relation to anti-bribery and anti-corruption matters.
Criminal Finances Act
The Board of the Company has a zero-tolerance commitment to preventing persons
associated with it from engaging in criminal facilitation of tax evasion. The
Board has satisfied itself in relation to its key service providers that they
have reasonable provisions in place to prevent the criminal facilitation of
tax evasion by their own associated persons and will not work with service
providers who do not demonstrate the same zero tolerance commitment to
preventing persons associated with it from engaging in criminal facilitation
of tax evasion.
Board Committees
Audit Committee
The Audit Committee will assist the Board in discharging its responsibilities
with regard to financial reporting, external and internal audits and controls,
including reviewing and monitoring the integrity of the Company's annual and
interim financial statements, reviewing and monitoring the extent of the
non-audit work undertaken by external auditors, advising on the appointment of
external auditors, overseeing the Company's relationship with its external
auditors, reviewing the effectiveness of the external audit process and
reviewing the effectiveness of the Company's risk management and internal
control review function. The ultimate responsibility for reviewing and
approving the annual report and accounts and half-yearly reports will remain
with the Board. The Audit Committee will give due consideration to all
applicable laws and regulations, including the provisions of the UK Corporate
Governance Code and the requirements of the Listing Rules.
The Audit Committee is chaired by David Morant and its other members are
Shobha Frey and Paul Jardine. The Disclosure Guidance and Transparency Rules
require that a majority of members of the Audit Committee be independent and
that at least one member has competence in accounting and/or auditing.
Furthermore, the members of the Audit Committee must have competence relevant
to the sector that the issuer is operating. In addition, the UK Governance
Code recommends that the Audit Committee should comprise at least three
independent non-executive directors and that at least one member has recent
and relevant financial experience. The Board considers that the Company
complies with the requirements of the UK Corporate Governance Code in these
respects. The Audit Committee will meet at least three times a year.
Market Disclosure Committee
The Board has established a Market Disclosure Committee in order to ensure
timely and accurate disclosure of all information that is required to be so
disclosed to the market to meet the legal and regulatory obligations and
requirements arising from the listing of the Company's securities on the
London Stock Exchange, including the Listing Rules, the Disclosure Guidance
and Transparency Rules and the UK Market Abuse Regulation. The market
disclosure committee will meet as often as necessary to fulfil its
responsibilities. Meetings may be called by the Company Secretary at the
request of any member of the market disclosure committee. The market
disclosure committee must have at least three members. Members of the market
disclosure committee are appointed by the Board.
Nomination and Remuneration Committees
No remuneration committee or nomination committee will be constituted prior to
any Business Combination. The Board as a whole will instead review its size,
structure and composition and the scale and structure of the Directors' fees
(taking into account the interests of Shareholders and the performance of the
Company).
The Directors are aware that a nomination committee is recommended by the
Governance Code to lead the process for Board appointments and that the
Governance Code recommends that the majority of the committee be independent
non-executive directors. To the extent that additional individuals may be
added to the Board, the Company may consider setting up a nomination
committee.
Conflicts
It has not been deemed necessary to establish a conflicts committee. Conflicts
procedures relating to the Directors and the Sponsor are set out in the
Articles of Incorporation. To the extent issues arise, these will be dealt
with by the Board on a case-by-case basis.
The Company is not prohibited from pursuing a Business Combination with a
target company that is affiliated with the Sponsor Entity, the Overfunding
Sponsor Entity and any of their respective affiliates.
In the event the Company seeks to complete the Business Combination with a
Target Business that is affiliated with any of the Directors, the Company's
Memorandum and Articles of Association provide that where a Director has a
conflict of interest in relation to the target or a subsidiary undertaking of
the target, the Company must publish, in sufficient time before the Business
Combination General Meeting, a statement by the Board that the proposed
Business Combination is fair and reasonable as far as the Ordinary
Shareholders are concerned and that in making such statement the Directors
have been so advised by an appropriately qualified and independent adviser.
In addition, the Company's Articles of Association provide that the Company
may only enter into a Business Combination, including any definitive agreement
in respect of a Business Combination with the prior approval of its Board and
for the purposes of such approval by board resolution, the following Directors
shall be excluded from voting and taking part in the Board's consideration of
the Business Combination: (i) any Director who is, or an associate of whom is,
a director of the target entity that is the subject of the Business
Combination or of a subsidiary undertaking of such target entity; and (ii) any
Director who has a conflict of interest in relation to such target entity or a
subsidiary undertaking of such target entity.
Internal Control Review and Risk Management System
The Board proposes to follow the guidance published by the UK's Financial
Reporting Council on internal controls, which sets out that, in determining
what constitutes a sound system of internal controls, a board should consider:
- the nature and extent of the risks which they regard as acceptable
for the Company to bear within its particular business;
- the threat of such risks becoming reality;
- the Company's ability to reduce the incidence and impact on business
if the risk crystallises; and
- the costs and benefits resulting from operating relevant controls.
The Board is aware of the need to conduct regular risk assessments to identify
any deficiencies in the controls currently operating over all aspects of the
Company. The Board is responsible for a formal risk assessment on an annual
basis but will also report by exception of any material changes during the
year.
Report of the Audit Committee
Pursuant to a resolution of the Board, the Company has established an Audit
Committee comprising David Morant, Shobha Frey and Paul Jardine as its
members. The members of the Audit Committee are appointed, suspended and
dismissed by the Non-Executive Directors. Executive Directors shall not be
members of the Audit Committee.
The duties of the Audit Committee include:
- informing the Board of the results of the statutory audit and
explaining how the statutory audit has contributed to the integrity of the
financial reporting and the role the Audit Committee has fulfilled in this
process;
- monitoring the financial reporting process and making proposals to
safeguard the integrity of the process;
- monitoring the effectiveness of the internal control systems and the
risk management system with respect to financial reporting;
- monitoring the statutory audit of the annual financial statements,
and in particular the process of such audit;
- monitoring the independence of the external Auditor; and
- adopting procedures with respect to the selection of the external
Auditor.
The Audit Committee shall meet as often as is deemed necessary, and at least
three times in each full financial year. Any member of the Committee may
request a meeting, as may the Company's external Auditor.
Financial Reporting and Audit
The Audit Committee has reviewed, considered and recommended to the Board, the
approval of the contents of the Audited Financial Statements and Annual
Report, together with the external Auditor's report thereon. The Audit
Committee focused on compliance with legal requirements, accounting standards
and the relevant Listing Rules, with specific consideration given to the
accurate classification of the Company's share capital and warrants. The
ultimate responsibility for reviewing and approving the Audited Financial
Statements and Annual Report remains with the Board.
External Auditor
The Audit Committee is responsible for making recommendations on the
appointment, re-appointment or removal of the Auditor. PKF Littlejohn LLP, was
appointed as the first Auditor of the Company following a tender process.
Subsequent to the period end, the Audit Committee received and reviewed the
audit plan and report from the Auditor. Periodically, the Audit Committee may
meet privately with the Auditor without the Company's advisers being present.
To assess the effectiveness of the Auditor, the Audit Committee reviewed:
- The Auditor's fulfilment of the agreed audit plan and variations
from it;
- The Auditor's report to the Audit Committee highlighting the major
issues that arose during the course of the audit; and
- Feedback from the Company's Adviser and Administrator evaluating the
performance of the audit team.
External Auditor (continued)
The remuneration to PKF Littlejohn LLP and to other PKF Littlejohn LLP member
firms for the audit of the Company's annual financial statements amounts to
£60,000.
Internal controls
The Audit Committee is responsible for ensuring that an effective system of
internal financial and non-financial controls and risk management is
maintained, and for reviewing and monitoring the effectiveness of those
controls. The controls are designed to ensure proper accounting records are
maintained, that the financial information on which the business decisions are
made and which is issued for publication is reliable, and that the assets of
the Company are safeguarded. Such a system of internal financial controls can
only provide reasonable and not absolute assurance against misstatement or
loss. The Adviser, Administrator and Custodian together will maintain a system
of internal control on which they will report to the Audit Committee. The
Audit Committee has considered the need for an internal audit function, and
has concluded that, given that the Company has no employees and little
activity as it is currently constituted, such a level of oversight is not
currently required. The Committee notes that the Adviser, Administrator and
Custodian maintain systems of internal control on which they will be required
to report to the Board, in order to provide sufficient assurance to the
Company that a sound system of risk management and internal control, which
safeguards Shareholders' investment and the Company's assets, is maintained.
The Audit Committee has considered non-financial areas of risk such as
disaster recovery and staffing levels of its service providers, and considers
that adequate arrangements are in place.
On behalf of the Audit Committee
David Morant
Audit Committee Chair
28 April 2023
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF FINANCIALS ACQUISITION CORP
Opinion
We have audited the financial statements of Financials Acquisition Corp (the
'company') for the period ended 31 December 2022 which comprise the Statement
of Financial Position, the Statement of Comprehensive Income, the Statement of
Changes in Equity, the Statement of Cash Flows and notes to the financial
statements, including significant accounting policies. The financial reporting
framework that has been applied in their preparation is applicable law and
International Financial Reporting Standards as issued by the International
Accounting Standards Board ("IFRS").
In our opinion, the financial statements:
· give a true and fair view of the state of the company's affairs
as at 31 December 2022 and of its loss for the period then ended; and
· have been properly prepared in accordance with IFRS as issued by
the International Accounting Standards Board.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(ISAs) and applicable law. Our responsibilities under those standards are
further described in the Auditor's responsibilities for the audit of the
financial statements section of our report. We are independent of the company
in accordance with the ethical requirements that are relevant to our audit of
the financial statements in the, including the FRC's Ethical Standard as
applied to listed entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors'
use of the going concern basis of accounting in the preparation of the
financial statements is appropriate. Our evaluation of the directors'
assessment of the company's ability to continue to adopt the going concern
basis of accounting included:
· Reviewing management's formal assessment of the company's going
concern status which included cash flow forecasts for the period up to the
business combination deadline and checking the arithmetical accuracy of the
cash flow forecast model;
· Challenged management over whether there would still be
sufficient funds remaining to continue as a going concern after settling any
costs related to an aborted transaction in such a scenario ;
· Obtained management's downside scenarios to consider the
possibilities that would result in a nil cash position during the going
concern period and evaluated the impact and availability of mitigating actions
available to management to avoid this outcome; and
· Assessed if the going concern disclosures in the financial
statements were sufficient and appropriately reflect the going concern
assessment.
Based on the work we have performed, we have not identified any material
uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the company's ability to continue
as a going concern for a period of at least twelve months from when the
financial statements are authorised for issue.
In relation to the entity's reporting on how they have applied the UK
Corporate Governance Code, we have nothing material to add or draw attention
to in relation to the directors' statement in the financial statements about
whether the director's considered it appropriate to adopt the going concern
basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to
going concern are described in the relevant sections of this report.
Our application of materiality
The scope of our audit was influenced by our application of materiality. The
quantitative and qualitative thresholds for materiality determine the scope of
our audit and the nature, timing and extent of our audit procedures. We
determined materiality for the financial statements as a whole to be
£385,700.
The benchmark for materiality was selected as 5% of net assets. Net assets was
deemed to be the most appropriate metric for materiality because the entity is
a special purpose acquisition company, established to enact business
combination. We believe that the main focus of the users of the financial
statements is the recoverability of the assets invested in the company. The
percentage applied to this benchmark has been selected to bring into scope all
significant classes of transactions, account balances and disclosures relevant
to the shareholders, and also to ensure that matters that would have a
significant impact on the results during the period were appropriately
considered.
We use performance materiality to reduce to an appropriately low level the
probability that the aggregate of uncorrected and undetected misstatements
exceeds overall materiality. Specifically, we use performance materiality in
determining the nature and extent of our testing of account balances, classes
of transactions and disclosures. We have used 60% of materiality as
performance materiality since this is our first period of audit and the first
set of financial statements prepared by the company, hence there was limited
expectation on the number or quantum of potential misstatements. This resulted
in a performance materiality threshold of £269,900.
We agreed with the audit committee that we would report to the committee all
individual audit differences identified during our audit in excess of £19,200
in addition to other audit misstatements below that threshold that we believe
warrant reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative
measures of materiality discussed above and in light of other relevant
qualitative considerations in forming our opinion.
Our approach to the audit
Our audit is risk based and is designed to focus our efforts on the areas at
greatest risk of material misstatement, aspects subject to significant
management judgement as well as greatest complexity, risk and size.
As part of designing our audit, we determined materiality, as above, and
assessed the risk of material misstatement in the financial statements. In
particular, we looked at areas involving significant accounting estimates and
judgement by the directors and considered future events that are inherently
uncertain. These areas of estimation and judgement included the valuation of
public and private warrants and Class B ordinary shares, covered in the Key
audit matters section of our report below.
We also addressed the risk of management override of internal controls,
including among other matters consideration of whether there was evidence of
bias that represented a risk of material misstatement due to fraud.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were
of most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) we identified, including those
which had the greatest effect on: the overall audit strategy, the allocation
of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
Key Audit Matter How the scope of our audit responded to the key audit matter
Accounting treatment and valuation of complex financial instruments (Notes 2
and 7)
On 13 April 2022, the company was admitted to trading on the main market of As part of our audit, we have performed the following procedures:
the London Stock Exchange having raised a total of £154.5 million to be used
in a future business combination. In relation to this, the company issued the Class A ordinary shares
following:
· Reviewed the appropriateness of the accounting policy for the
· 15,000,000 Class A Ordinary shares of the company at a price of public shares through a review of the terms of the share agreement and checked
£10.00 per share, with matching warrants being issued concurrently with the whether it is in accordance with IAS 32. We also challenged management's
delivery of the Ordinary Shares to subscribers of Ordinary Shares in the treatment of the issue of public shares as a financial liability rather than
Offering on the basis of one-half (1/2) of one (1) warrant per Ordinary Share an equity instrument, as well as challenging key assumptions such as the
("Public Warrants"); timing of the cash payment in relation to the redemption of the ordinary
shares and corroborated our findings against the prospectus.
· 3,862,500 Class B Ordinary shares (comprising 1,931,250 B1
Shares, 965,625 B2 Shares and 965,625 B3) Sponsor Shares at a price of · Challenged management on the classification of the financial
£0.0001 per share; and liability as a liability measured at amortised cost and confirmed whether this
was in line with the requirements of IFRS 9 Financial Instruments.
· 3,875,000 Sponsor Warrants at a price of £1 per warrant.
· Recalculated the carrying amount of the liability as at 31
The following are the accounting judgments in relation to the financial December 2022 and the interest expense for the period then ended.
instruments above:
Class B Ordinary shares ('Sponsor shares')
· Class A Ordinary shares
· Reviewed the sponsor purchase agreement to assess whether the
Holders of redeemable Class A ordinary shares are entitled to redeem all or a issue of shares to the sponsors constitutes share-based payments, representing
portion of their ordinary shares upon the completion of the business the issue of shares for services relating to the acquisition, or the advice
combination. Furthermore, they are also mandatorily redeemable if an and research provided in advance of an acquisition. We assessed the
acquisition is not completed within the prescribed period. Redemption features appropriateness of the accounting policy for the sponsor shares by checking
result in an outflow and the company has no unconditional liability to avoid whether it is in accordance with IFRS 2;
such an outflow hence management classified the financial instrument as
financial liability under IAS 32 Financial Instruments: Presentation. · Obtained management's valuation report performed by their
expert and assessed the competence and independence of management's expert;
· Challenged management on the fair value of the options as at
grant date. Specialists within the audit team were used to review the
appropriateness of the fair value of the options as at the grant date;
· Class B Ordinary Shares ('Sponsor shares') · Tested the option calculations and computation of the annual
charge for mathematical accuracy. This included agreeing the fair value of
The Sponsor Entity has provided services in the form of expertise and guidance options issued and the associated charge over the appropriate vesting period;
to assist the company in achieving the business combination, in exchange for and
the trading of its sponsor shares hence management accounted for the shares
in accordance with IFRS 2 Share-based Payments. The difference between the · Reviewed the disclosures in the financial statements to ensure
total consideration received by the company for the sponsor shares and their that they are appropriate.
fair value at the grant date will be pro-rated over the period to the business
combination deadline. Public and sponsor warrants
· Public and sponsor warrants · Reviewed the appropriateness of the accounting policy for the
public and sponsor warrants through a review of the terms of the warrants
Management considered sponsor warrants as a puttable financial instrument that agreement and comparing the policy with the requirements of IAS 32. We also
includes a contractual obligation for the issuer to redeem that instrument for challenged management's treatment of the issue of warrants as a financial
cash or another financial asset (in this case, an ordinary share) upon liability rather than an equity instrument, as well as challenging key
exercise. The sponsor and public warrants do not entitle the holder to a pro assumptions such as the timing of the cash payment in relation to the
rata share of the entity's assets in the event of the entity's liquidation and redemption of the ordinary shares and corroborated our findings against the
are therefore classified as a financial liability in accordance with section prospectus;
16 of IAS 32.
· Challenged management on the classification of the financial
Due to the complexity and judgment involved in the determination of the liability as liability measured at FVPL and check whether it is in line with
valuation and accounting treatment of financial instrument, the ordinary the requirements of IFRS 9;
shares, public warrants, sponsor warrants and sponsor shares, there is a risk
that these are not accounted for in line with required accounting standards. · Obtained management's valuation report performed by their expert
and assessed the competence and independence of management's expert;
· Challenged management on the fair value of the public and
sponsor warrants. Specialists within the audit team were used to review the
appropriateness of the fair value of the options as at the issue date and
period-end date;
· Recalculated the unrealised gains and losses recognised during
the period using the fair value of the warrants determined by our valuations
team; and
· Reviewed the disclosures in the financial statements to ensure
that they are appropriate.
Observations
Based on our audit procedures we were satisfied that the accounting treatment
and valuation of these complex financial instruments was reasonable.
Other information
The other information comprises the information included in the annual report,
other than the financial statements and our auditor's report thereon. The
directors are responsible for the other information contained within the
annual report. Our opinion on the fiinancial statements does not cover the
other information and we do not express any form of assurance conclusion
thereon. Our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the
financial statements or our knowledge obtained in the course of the audit, or
otherwise appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to
determine whether this gives rise to a material misstatement in the financial
statements themselves. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we are
required to report that fact.
We have nothing to report in this regard.
Corporate governance statement
We have reviewed the directors' statement in relation to going concern,
longer-term viability and that part of the Corporate Governance Statement
relating to the company's compliance with the provisions of the UK Corporate
Governance Code specified for our review by the Listing Rules.
Based on the work undertaken as part of our audit, we have concluded that each
of the following elements of the Corporate Governance Statement is materially
consistent with the financial statements or our knowledge obtained during the
audit:
· Directors' statement with regards the appropriateness of adopting
the going concern basis of accounting and any material uncertainties
identified set out on page 2;
· Directors' explanation as to their assessment of the entity's
prospects, the period this assessment covers and why the period is appropriate
set out on page 2;
· Directors' statement on whether they have a reasonable
expectation that the company will be able to continue in operation and meet
its liabilities set out on page 2;
· Directors' statement that they consider the annual report and the
financial statements, taken as a whole, to be fair, balanced and
understandable set out on page 3;
· Board's confirmation that it has carried out a robust assessment
of the emerging and principal risks set out on page 9;
· The section of the annual report that describes the review of
effectiveness of risk management and internal control systems set out on page
12; and
· The section describing the work of the audit committee set out on
page 13.
Responsibilities of directors
As explained more fully in the statement of directors' responsibilities, the
directors are responsible for the preparation of the financial statements and
for being satisfied that they give a true and fair view, and for such internal
control as the directors determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the directors are responsible for
assessing the company's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the company or
to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance but is not a guarantee that
an audit conducted in accordance with ISAs will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
Audit Report
Irregularities, including fraud, are instances of non-compliance with laws and
regulations. We design procedures in line with our responsibilities, outlined
above, to detect material misstatements in respect of irregularities,
including fraud. The extent to which our procedures are capable of detecting
irregularities, including fraud is detailed below:
· We obtained an understanding of the company and the sector in
which it operates to identify laws and regulations that could reasonably be
expected to have a direct effect on the financial statements. We obtained our
understanding in this regard through discussions with management and our
expertise in the sector
· We determined the principal laws and regulations relevant to the
company in this regard to be those arising from IFRS as issued by the
International Accounting Standards Board, FCA Rules and the relevant laws and
regulations in Cayman Islands.
· We designed our audit procedures to ensure the audit team
considered whether there were any indications of non-compliance by the company
with those laws and regulations. These procedures included, but were not
limited to:
o conducting enquiries of management regarding potential instances of
non-compliance;
o reviewing RNS announcements;
o reviewing legal and professional fees ledger accounts; and
o reviewing board minutes and other correspondence from management.
· We also identified the risks of material misstatement of the
financial statements due to fraud. We considered, in addition to the
non-rebuttable presumption of a risk of fraud arising from management override
of controls, that the potential for management bias existed in relation to key
management judgements such as the valuation of public and private warrants and
Class B ordinary shares. We addressed these as outlined in the Key audit
matters section of our report above.
· As in all of our audits, we addressed the risk of fraud arising
from management override of controls by performing audit procedures which
included, but were not limited to: the testing of journals; reviewing
accounting estimates for evidence of bias; and evaluating the business
rationale of any significant transactions that are unusual or outside the
normal course of business.
Because of the inherent limitations of an audit, there is a risk that we will
not detect all irregularities, including those leading to a material
misstatement in the financial statements or non-compliance with regulation.
This risk increases the more that compliance with a law or regulation is
removed from the events and transactions reflected in the financial
statements, as we will be less likely to become aware of instances of
non-compliance. The risk is also greater regarding irregularities occurring
due to fraud rather than error, as fraud involves intentional concealment,
forgery, collusion, omission or misrepresentation.
A further description of our responsibilities for the audit of the financial
statements is located on the Financial Reporting Council's website at:
www.frc.org.uk/auditorsresponsibilities
(http://www.frc.org.uk/auditorsresponsibilities) . This description forms part
of our auditor's report.
Use of our report
This report is made solely to the company's members, as a body, in accordance
with our engagement letter dated 26 October 2022. Our audit work has been
undertaken so that we might state to the company's members those matters we
are required to state to them in an auditor's report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone, other than the company and the company's members as
a body, for our audit work, for this report, or for the opinions we have
formed.
Signature
Mark Ling (Engagement Partner)
15 Westferry Circus
For and on behalf of PKF Littlejohn LLP
Canary Wharf
Registered Auditor
London E14 4HD
28(th) April 2023
31 December
2022
Note £
Assets
Current assets
Cash and cash equivalents 5 203,264
Restricted cash 5 155,984,100
Trade and other receivables 74,191
Total assets 156,261,555
Liabilities and shareholders' equity
Non-current liabilities
Redeemable ordinary shares 7 148,214,847
Current liabilities
Derivative liabilities 3 305,000
Accrued expenses 1,109
Due to related party 10 26,060
Total liabilities 148,547,016
Shareholders' equity
Issued share capital 7 4,494,614
Other reserves 22,419,507
Accumulated loss (19,199,582)
Total shareholders' equity 7,714,539
Total liabilities and shareholders' equity 156,261,555
The Financial Statements were approved and authorised for issue by the Board
of Directors on 28 April 2023 and signed on its behalf by:
Andrew Rear
Executive Chairman
For the period from 31 August 2021 (date of incorporation) to 31 December 2022
Note £
Income
Interest income 1,484,100
1,484,100
Total income
Expenses
Share-based payment expense 8 19,862,007
Professional fees 483,320
Listing and regulatory fees 211,864
Directors and officers insurance fees 56,351
Share issue costs 7 24,372
Other expenses 478
20,638,392
Total expenses
(19,154,292)
Net investment loss
Net change in unrealized gain on financial liabilities
Net change in unrealized gain on financial liabilities 3 2,287,500
(16,866,792)
Net loss before finance expense
Finance expense 7 2,332,790
(19,199,582)
Total comprehensive loss for the period
Basic and dilutive net loss per share 9 (5.64)
All items in the above statement derive from continuing operations.
Accumulated loss Total shareholders' equity
Other reserves*
Share capital
£ £ £ £
As at 31 August 2021 (date of incorporation) - - - -
Issued share capital and sponsor warrants 4,500,305 - - 4,500,305
Share cancellation (5,691) - - (5,691)
Share based payment reserve - 22,419,507 22,419,507
Total comprehensive loss for the period - - (19,199,582) (19,199,582)
As at 31 December 2022 4,494,614 22,419,507 (19,199,582) 7,714,539
* Sponsor Warrants have been accounted for as a capital contribution in other
reserves. Please see notes 2 and 7 for further details.
For the period from
31 August 2021 (date of incorporation) to
31 December 2022
£
Cash flows from operating activities
Total comprehensive loss for the period (19,199,582)
Adjustments to reconcile total comprehensive loss for the period to net cash
provided by operating activities:
Net change in unrealised gain on financial liabilities (2,287,500)
Share-based payment expense 19,862,007
Finance expense 2,332,790
Changes in:
Trade and other receivables (74,191)
Accrued expenses 1,109
Due to related party 186,252
Net cash provided by operating activities 820,885
Cash flows from investing activities
Increase in restricted cash (155,984,100)
Net cash used in investing activities (155,984,100)
Cash flows from financing activities
Proceeds from sponsor and overfunding shares 4,494,614
Proceeds from issued share capital and public warrants 150,000,000
Proceeds from issuance of sponsor warrants (including other reserves) 3,714,808
Payment of share issue costs (2,842,943)
Net cash provided by financing activities 155,366,479
Net change in cash and cash equivalents 203,264
Cash and cash equivalents at beginning of the period -
Cash and cash equivalents at end of the period 203,264
1. General information
Financials Acquisition Corp (the "Company"), is an exempted company
with limited liability, incorporated under the laws of the
Cayman Islands on 31 August 2021. The Company is registered with the
Registrar of Companies in the Cayman Islands under
incorporation number 380273 and has its registered office in Grand
Cayman, Cayman Islands.
The Company is a special purpose acquisition company (a "SPAC"), formed for
the purpose of effecting a merger, share exchange, asset acquisition, share
purchase, reorganisation or similar business combination (a "Business
Combination"). The Company aims to identify and acquire a company or business
operating principally (or adjacent to) the insurance or broader financial
services industry.
The Company is sponsored by FINSAC LLP (the "Sponsor Entity") and FINSAC II
LLP (the "Overfunding Sponsor Entity").
The Company was admitted to trading on the main market of the London Stock
Exchange on 13 April 2022, having raised £150,000,000 in its initial public
offering (the "IPO") of 15,000,000 Class A Ordinary Shares ("Ordinary Shares")
at £10.00 per share (the "Offering") with matching warrants being issued
concurrently with the delivery of the Ordinary Shares to subscribers of
Ordinary Shares in the Offering on the basis of one-half (1/2) of one (1)
warrant per Ordinary Share ("Public Warrants"). Additionally, £4,500,000 was
raised via the Company's Overfunding Subscription of 450,000 Ordinary Shares
which were issued to the Overfunding Sponsor Entity.
The proceeds of the Offering were placed in an escrow account as outlined in
the Prospectus for the IPO (the "Prospectus"). At the same time as the
Offering, the Company raised £3,875,000 from the private placement of
3,875,000 Sponsor Warrants(as defined in the Prospectus) at £1.00 per Sponsor
Warrant the proceeds of which were held outside of the escrow account to cover
the costs relating to the IPO and running costs as outlined in the Prospectus.
Since the completion of its IPO, the Company's leadership team has been
focused on identifying a potential target for the Business Combination. This
process is ongoing and the Company will continue its search with the aim to
complete a Business Combination within 15 months following the admission date
of 13 April 2022, subject to two three-month extension periods under
conditions outlined in the Prospectus.
2. Principal accounting policies
The Company is not presently engaged in any activities other than those which
are required in connection with the selection, structuring and completion of a
Business Combination.
The Financial Statements have been prepared in accordance with applicable law,
the Company's principal documents and International Financial Reporting
Standards ("IFRS") as issued by the International Accounting Standards Board
("IASB"). This is the first year of audit and no historic audited financial
information is available other than the prospectus.
The Company had no operations and therefore no segmental information is
presented.
The following accounting policies have been applied consistently in dealing
with items which are considered material in relation to the Company's
Financial Statements:
2. Principal accounting policies (continued)
Basis of presentation
The Financial Statements have been prepared in accordance with applicable law,
the Company's principal documents and International Financial Reporting
Standards ("IFRS").
The Financial Statements are presented in British Pounds ("GBP" or "£"),
which is the Company's presentation and functional currency.
Going concern
The Financial Statements have been prepared on a going concern basis.
Following the Offering and prior to the completion of any Business
Combination, the Company will not engage in any operations, other than in
connection with the selection, structuring and completion of a Business
Combination.
The Company has 15 months from the admission date to complete a business
combination, subject to two three-month extension periods if approved (the
"Business Combination Deadline"). The Company currently believes it has
sufficient funds to cover operating costs through to the initial deadline. If
the board were to seek an extension then additional funds would need to be
raised to cover operating costs. The costs related to the Company are expected
to be covered by the proceeds of the issuance of the Sponsor Warrants as part
of the Offering process, as disclosed in note 7.
The Sponsor Entity, the Overfunding Sponsor Entity (as defined in the
Prospectus) or their affiliates may provide up to £1,500,000 of additional
funds to the Company through the issuance of debt instruments, such as
promissory notes, to fund excess costs, which may be converted into additional
Sponsor Warrants (as defined in the Prospectus) at a price of £1.00 per
Sponsor Warrant at the option of the lender.
The Company will have until the Business Combination Deadline to complete a
Business Combination, subject to any extension period being granted. If the
Company has not completed a Business Combination by such time (or the expiry
of any extension period), it will: cease all operations except for the purpose
of winding up; as promptly as reasonably possible, redeem the Ordinary Shares,
and as promptly as reasonably possible following such redemption, subject to
the approval of the remaining shareholders and the Directors, liquidate and
dissolve.
The events and conditions that management considers relevant to the Company's
ability to continue as a going concern include the limited time frame
remaining to the Business Combination Deadline and market conditions inclusive
of competition and potential geopolitical events.
Management remain focused on completing a Business Combination by the Business
Combination Deadline. Having considered all relevant information, management
have concluded that there are no material uncertainties related to the
identified events or conditions that may cast significant doubt on the
Company's ability to continue as a going concern. Reaching the conclusion that
there is no material uncertainty involves significant judgement.
In addition, such opinion is not dependent on the Company completing a
Business Combination by the Business Combination Deadline. It is important to
note that nothing in this analysis implies that the Company would be unable to
meet its debts as they fall due or to fulfill the above mentioned redemptions
of redeemable Ordinary Shares should the Company not complete a Business
Combination by the Business Combination Deadline.
2. Principal accounting policies (continued)
New and amended standards and interpretations applied
The following accounting standards and updates were applicable in the
reporting period but did not have a material impact on the Company:
- Amendments to IFRS 1 and IFRS 9 Annual Improvements to IFRS
2018-2020
- Amendments to IFRS 3: Business Combinations
- Amendments to IAS 16: Property, Plant and Equipment
- Amendments to IAS 37: Provisions, Contingent Liabilities and
Contingent Assets
New and amended standards and interpretations not applied
The following new and amended standards and interpretations in issue are
applicable to the Company but are not yet effective and therefore, have not
been adopted by the Company:
- IFRS 17: Insurance Contracts (effective 1 January 2023)
- Amendments to IAS 17: Insurance Contracts (effective 1 January 2023)
- Amendments to IAS 8: Accounting Policies, Changes in Accounting
Estimates and Errors
(effective 1 January 2023)
- Amendments to IAS 12: Income Taxes (effective 1 January 2023)
- Amendments to IAS 1: Presentation of Financial Statements (effective
1 January 2023)
The Company has considered the IFRS's in issue but not yet effective and do
not consider any to have a material impact on the Company.
Financial assets and liabilities
(i) Recognition and initial measurement
The Company initially recognises financial assets and financial liabilities on
the date it becomes a party to the contractual provisions of the instrument.
Any gains and losses arising from changes in fair value of the financial
assets or financial liabilities at fair value through profit or loss ("FVTPL")
are recorded in the statement of comprehensive income.
Financial assets and financial liabilities are measured initially at fair
value plus or minus, for an item not at FVTPL, transaction costs that are
directly attributable to its acquisition or issue.
(ii) Classification and subsequent measurement
Financial assets
On initial recognition, the Company classifies financial assets as measured at
amortised cost or FVTPL.
A financial asset is measured at amortised cost if it meets both of the
following conditions and is not designated as at FVTPL:
- It is held within a business model whose objective is to hold assets
to collect contractual cash flows; and
2. Principal accounting policies (continued)
Financial assets and liabilities (continued)
(ii) Classification and subsequent measurement (continued)
Financial assets (continued)
- Its contractual terms give rise on the specified dates to cash flows
that are solely payments of principal and interest.
All financial assets not classified as measured at amortised cost as described
above are measured at FVTPL.
Financial assets classified at amortised cost are subsequently measured at
amortised cost using the effective interest method. The amortised cost is
reduced by impairment losses. Interest income, foreign exchange gains and
losses and impairment are recognised in profit or loss. Any gain or loss on
derecognition is recognised in profit or loss.
Financial assets classified at FVTPL are subsequently measured at fair value.
Net gains and losses, including any interest income and foreign exchange gains
and losses, are recognised in profit or loss.
Financial liabilities
Financial liabilities are classified as measured at amortised cost or FVTPL.
A financial liability is classified as at FVTPL if it is classified as
held-for-trading, it is a derivative or it is designated as such on initial
recognition. Financial liabilities at FVTPL are measured at fair value and net
gains or losses, including any interest, are recognised in profit or loss.
Other financial liabilities are subsequently measured at amortised cost using
the effective interest method. Interest expense and foreign exchange gains and
losses are recognised in profit or loss. Any gain or loss on derecognition is
also recognised in profit or loss.
(iii) Amortised cost
The amortised cost of a financial asset or financial liability is the amount
at which the financial asset or financial liability is measured on initial
recognition minus the principal repayments, plus or minus the cumulative
amortisation using the effective interest method of any difference between
that initial amount and the maturity amount and, for financial assets,
adjusted for any loss allowance.
(iv) Fair value measurement
'Fair value' is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at
the measurement date in the principal or, in its absence, the most
advantageous market to which the Company has access at that date. The fair
value of a liability reflects its non-performance risk.
2. Principal accounting policies (continued)
Financial assets and liabilities (continued)
(iv) Fair value measurement (continued)
When available, the Company measures the fair value of an instrument using the
quoted price in an active market for that instrument. A market is regarded as
'active' if transactions for the asset or liability take place with sufficient
frequency and volume to provide pricing information on an ongoing basis. The
Company measures instruments quoted in an active market at a mid-price,
because this price provides a reasonable approximation of the exit price.
If there is no quoted price in an active market, then the Company uses
valuation techniques that maximise the use of relevant observable inputs and
minimise the use of unobservable inputs. The chosen valuation technique
incorporates all of the factors that market participants would take into
account in pricing a transaction.
The Company recognises transfers between levels of the fair value hierarchy as
at the end of the reporting period during which the change has occurred.
(v) Impairment
The Company recognises loss allowances for Expected Credit Losses ("ECLs") on
financial assets measured at amortised cost.
The Company measures loss allowances at an amount equal to lifetime ECLs,
except for the following, which are measured at 12-month ECLs:
- financial assets that are determined to have low credit risk at the
reporting date; and
- other financial assets for which credit risk has not increased
significantly since initial recognition.
When determining whether the credit risk of a financial asset has increased
significantly since initial recognition and when estimating ECLs, the Company
considers reasonable and supportable information that is relevant and
available without undue cost or effort. This includes both quantitative and
qualitative information and analysis, based on the Company's historical
experience and informed credit assessment and including forward-looking
information.
The Company assumes that the credit risk on a financial asset has increased
significantly if it is more than 30 days past due.
The Company considers a financial asset to be in default when:
- the borrower is unlikely to pay its credit obligations to the
Company in full, without recourse by the Company to actions such as realising
security (if any is held); or
- the financial asset is more than 90 days past due.
The Company considers a financial asset to have low credit risk when the
credit rating of the counter party is equivalent to the globally understood
definition of 'investment grade'. The Company considers this to be BBB or
higher per Standard and Poor's.
2. Principal accounting policies (continued)
Financial assets and liabilities (continued)
(v) Impairment (continued)
Lifetime ECLs are the ECLs that result from all possible default events over
the expected life of a financial instrument. 12-month ECLs are the portion of
ECLs that result from default events that are possible within the 12 months
after the reporting date (or a shorter period if the expected life of the
instrument is less than 12 months). The maximum period considered when
estimating ECLs is the maximum contractual period over which the Company is
exposed to credit risk.
Measurement of ECLs
ECLs are a probability-weighted estimate of credit losses. Credit losses are
measured as the present value of all cash shortfalls (i.e. the difference
between the cash flows due to the entity in accordance with the contract and
the cash flows that the Fund expects to receive). ECLs are discounted at the
effective interest rate of the financial asset.
Credit-impaired financial assets
At each reporting date, the Company assesses whether financial assets carried
at amortised cost are credit-impaired. A financial asset is 'credit-impaired'
when one or more events that have a detrimental impact on the estimated future
cash flows of the financial asset have occurred.
Evidence that a financial asset is credit-impaired includes the following
observable data:
- significant financial difficulty of the borrower or issuer;
- a breach of contract such as a default or being more than 90 days
past due; or
- it is probable that the borrower will enter bankruptcy or other
financial reorganisation.
Presentation of allowance for ECLs in the statement of financial position
Loss allowances for financial assets measured at amortised cost are deducted
from the gross carrying amount of the assets.
Write-off
The gross carrying amount of a financial asset is written off when the Company
has no reasonable expectations of recovering a financial asset in its entirety
or a portion thereof.
(vi) Derecognition
The Company derecognises a financial asset when the contractual rights to the
cash flows from the asset expire, or it transfers the rights to receive the
contractual cash flows in a transaction in which substantially all of the
risks and rewards of ownership of the financial asset are transferred or in
which the Company neither transfers nor retains substantially all of the risks
and rewards of ownership and does not retain control of the financial asset.
2. Principal accounting policies (continued)
Financial assets and liabilities (continued)
(vi) Derecognition (continued)
On derecognition of a financial asset, the difference between the carrying
amount of the asset (or the carrying amount allocated to the portion of the
asset that is derecognised) and the consideration received (including any new
asset obtained less any new liability assumed) is recognised in the statement
of comprehensive income. Any interest in such transferred financial assets
that is created or retained by the Company is recognised as a separate asset
or liability.
The Company derecognises a financial liability when its contractual
obligations are discharged or cancelled, or expire. On derecognition of a
financial liability, the difference between the carrying amount extinguished
and the consideration paid (including any non-cash assets transferred or
liabilities assumed) is profit or loss.
Expenses
All expenses are accounted for on an accrual basis and are presented as
expense items, except for expenses that are incidental to the disposal of an
investment which are deducted from the disposal proceeds, and expenses related
to the issue of shares which are netted against the financial instruments they
are allocated to. For equity instruments, these reduce share capital, for
derivative liabilities these are expensed immediately and for liabilities
these initially reduce the liability and are subsequently accreted to the
Statement of Comprehensive Income over time.
Prepayments
These represent assets for amounts paid prior to the end of the financial
period, for which services are yet to be provided to the Company.
Accrued expenses
These amounts represent liabilities for services provided to the Company prior
to the end of the financial period, which are unpaid. Accrued expenses are
recognised initially at fair value. The best evidence of the fair value of a
financial instrument at initial recognition is normally the transaction price.
Subsequent measurement is at amortised cost using the effective interest
method.
Share issue costs
Share issue cost have been incurred in relation to the issue of the share
capital encompassing Ordinary Shares, Public Shares and Warrants. Where shares
are classified as equity, share issue costs are recognised in equity. Ordinary
Shares not subject to the Inside Letter (as per the Prospectus) have been
classified as liabilities, due to the redemption facility attached to these
Shares. Share issue costs attributed to these shares are amortised to the
Statement of Comprehensive Income using the effective interest method. For
warrants the share issue costs are recognised immediately in the Statement of
Comprehensive Income.
2. Principal accounting policies (continued)
Cash and restricted cash
Cash represents cash deposits held at financial institutions. Cash is held for
meeting short-term liquidity requirements, rather than for investment
purposes. Cash is held at major financial institutions.
Use of judgements and estimates
The preparation of Financial Statements in accordance with IFRS requires the
Board to make judgements, estimates and assumptions that affect the
application of policies and the reported amounts of assets and liabilities and
income and expenses. The estimates and associated assumptions are based on
various factors that are believed to be reasonable under the circumstances,
the results of which form the basis of making the judgements about carrying
values of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on a semi-annual basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period, or in the period
of the revision and future periods if the revision affects both current and
future periods.
The principal judgements and estimates are as follows:
Share-based payments
Regarding the Sponsor Shares issued by the Company, the Board has exercised
judgement in determining whether the Sponsor Shares should be treated as a
financial instrument (IAS 32) or share based payments (IFRS 2).
IFRS 2 applies to any transaction in which an entity receives goods or
services as part of a share based payment arrangement. Careful consideration
of all facts and circumstances, such as whether the rights of the Sponsor
Shareholders differ from those of the Ordinary Shareholders, is required to
determine if IFRS 2 applies. In making this determination, the following
factors have been considered.
- Should a Business Combination be successfully achieved, a proportion
of the Sponsor Shares will automatically convert into Ordinary Shares at no
further cost to the Sponsor Shareholders. As the aggregate issue price of the
Sponsor Shares was £25,000, this represents a considerable discount to the
price paid by Ordinary Shareholders for their Ordinary Shares;
- The number of Sponsor Shares that may be converted to Ordinary
Shares may increase further, subject to certain performance-related conditions
subsequent to the Business Combination;
- Notwithstanding that the Sponsor Entity is providing its services to
the Company in an equivalent capacity to an employment relationship, the
conversion of the Sponsor Shares to Ordinary Shares is entirely contingent on
the successful consummation of a Business Combination, and no reward will
accrue to the Sponsor Entity for its services in the event that a Business
Combination is not consummated.
Accordingly, the Board has exercised judgement in determining that the Sponsor
Shares fall under the scope of IFRS 2 as equity-settled share based payments.
The fair value at the grant date of equity-settled share based payments is
generally recognised as an expense with a corresponding increase in equity
over the vesting period.
2. Principal accounting policies (continued)
Use of judgements and estimates (continued)
Share based payment (continued)
The deemed grant date of the Ordinary Shares will determine the point at which
the Ordinary Shares will be accounted for under IFRS 2. The Board has
determined that the effective grant date for the Ordinary Shares is the point
of consummation of a Business Combination, and not the original date of issue
of the Sponsor Shares for the following reasons:
- No contractual obligation on the part of the Company to deliver cash
or any other financial asset to holders of the Sponsor Shares exists prior to
a Business Combination, and the Sponsor Shareholders are not entitled to any
preferential terms over holders of Ordinary Shares;
- Should the Sponsor Entity fail to successfully achieve a Business
Combination, then the Sponsor Shares will not be eligible for conversion to
Ordinary Shares and the Sponsor Entity will receive no material compensation
for their work in attempting to identify a target acquisition;
- Under the Insider Letters, the Sponsor Entity has agreed to waive
its right to any liquidating distributions from the Escrow Account; and
The Sponsor Entity has provided services in the form of expertise and guidance
to assist the Company in achieving the Business Combination, in exchange for
the trading of its Sponsor Shares which has been recorded as share-based
payments. The difference between the total consideration received by the
Company for the Sponsor Shares and their fair value at the grant date will be
pro-rated over the period to the Business Combination deadline.
Sponsor Warrants
Similarly to Sponsor Shares, the Board has exercised judgement in determining
whether the Sponsor Warrants should be treated as a financial instrument (IAS
32) or share based payments (IFRS 2). IFRS 2 applies to any transaction in
which an entity receives goods or services as part of a share-based payment
arrangement. That determination requires careful consideration of all the
facts and circumstances, such as whether the rights of the Sponsor Warrant
holders differ from those of the Public Warrant holders. The board have
determined that Sponsor Warrants do not fall within the scope of IFRS 2 for
the following reasons:
- The Sponsor Warrants were issued at a price of £1.00 per warrant
and are exercisable at a price of £11.50 per Ordinary Share, which do not
represent preferential terms to those afforded to Public Warrant holders;
- No further Sponsor Warrants are receivable for zero or discounted
consideration;
- The commercial basis for the issue of Sponsor Warrants is to provide
sufficient capital to cover the Company's listing costs and operating expenses
until the achievement of a Business Combination, without diluting the value of
the Ordinary Shareholders' shares;
- There are no service conditions attached to the Sponsor Warrants;
- Sponsor Warrant holders have no different rights from Public Warrant
holders in the event of a successful Business Combination or the failure to
achieve such a combination.
The Board's judgement is that the Sponsor Warrants are a puttable financial
instrument that includes a contractual obligation for the issuer to redeem
that instrument for cash or another financial asset (in this case, an Ordinary
Share) upon exercise. The Sponsor Warrants do not entitle the holder to a pro
rata share of the entity's assets in the event of the entity's liquidation and
are therefore classified as a financial liability in accordance with section
16 of IAS 32.
2. Principal accounting policies (continued)
Use of judgements and estimates (continued)
Deferred underwriting fee
Barclays Bank PLC, HSBC Bank plc and Numis Securities Limited ("the
Underwriters" of the Company's Placing) are potentially entitled to a deferred
underwriting fee. The Board has exercised judgement in determining that at the
period-end no liability in relation to this fee exists as IAS 32 requires the
recognition of the worst-case liability which would be to repay the funds
raised to shareholders if no business combination is completed. This
underwriting fee is only payable on the completion of a Business Combination
and will be paid from the funds held in the Escrow account.
Fair value of derivative financial instruments at fair value through profit or
loss
The Company recognises its investment in derivative instruments (Public
Warrants and Sponsor Warrants) initially at fair value at date of issuance
with any subsequent movement in fair value between the issuance date and the
reporting date being recognised as a fair value movement through profit and
loss. A third party valued the warrants using an appropriate valuation model
and determined the fair value at the date of issuance to be £0.17 per warrant
for the Public Warrants and £0.34 per warrant for the Sponsor Warrants, and
determined the fair value at period end to be £0.02 and £0.04 respectively.
Judgements were required for the inputs into the valuation model specifically
volatility rates of suitable comparable companies and estimated life of the
warrants.
3. Fair value measurement
A number of the Company's accounting policies and disclosures require the
measurement of fair values for financial assets and liabilities.
The Board has overall responsibility for overseeing all significant fair value
measurements, including Level 3 fair values. If the inputs used to measure the
fair value of an asset or a liability fall into different levels of the fair
value hierarchy, then the fair value measurement is categorised in its
entirety in the same level of the fair value hierarchy as the lowest level
input that is significant to the entire measurement.
The Board periodically reviews significant unobservable inputs and valuation
adjustments. If third party information, such as broker quotes or pricing
services, is used to measure fair values, then the Board assesses the evidence
obtained from the third parties to support the conclusion that these
valuations meet the requirements of the Standards, including the level in the
fair value hierarchy in which the valuations should be classified.
The Company measures fair values using the following fair value hierarchy that
reflects the significance of the inputs used in making the measurements.
Level 1 ‑ Quoted prices (unadjusted) in active markets for identical assets or
liabilities.
Level 2 ‑ Inputs other than quoted prices included within Level 1 that are observable
for the asset or liability, either directly (that is, as prices) or indirectly
(that is, derived from prices).
Level 3 ‑ Inputs for the asset or liability that are not based on observable market data
(that is, unobservable inputs).
3. Fair value measurement (continued)
Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at
the measurement date in the principal or, in its absence, the most
advantageous market to which the Company has access at that date. The fair
value of a liability reflects its non‑performance risk.
When measuring the fair value of an asset or liability, the Company uses
observable market data as far as possible. The determination of what
constitutes "observable" requires significant judgment by management. Fair
values of financial assets and liabilities that are traded in active markets
are based on quoted market prices or price quotations from a broker that
provides an unadjusted price from an active market for identical instruments.
A market is regarded as "active" if transactions for the asset or liability
take place with sufficient frequency and volume to provide pricing information
on an on‑going basis.
The determination of fair value for financial assets and financial liabilities
for which there is no observable market price requires the use of valuation
techniques. For financial instruments that trade infrequently and have little
price transparency, fair value is less objective, and requires varying degrees
of judgment depending on liquidity, concentration, uncertainty of market
factors, pricing assumptions and other risks affecting the specific
instrument.
The objective of valuation techniques is to arrive at a fair value measurement
that reflects the price that would be received to sell the asset or paid to
transfer the liability in an orderly transaction between market participants
at the measurement date.
3.1 Valuation techniques
To value the warrant liabilities, the valuation specialist uses proprietary
valuation models such as Black Scholes Pricing Model. Judgement and estimation
are usually required for the selection of the appropriate valuation model to
be used.
Valuation models that employ significant unobservable inputs require a high
degree of judgement and estimation in the determination of fair value. Some or
all of the significant inputs into these models may not be observable in the
market and are derived from market prices or rates or are estimated based on
assumptions. Assumptions and inputs used in the valuation models include a
risk-free interest rate, time to business combination deadline, probability of
business combination and volatility. In order to estimate volatility,
valuation techniques include comparison with similar instruments for which
observable market prices exist.
3.2 Fair value hierarchy
The following table summarises the valuation of the Company's financial
instruments within the fair value hierarchy levels at 31 December 2022:
Level 1 Level 2 Level 3 Total
£ £ £ £
Derivative liabilities - - 305,000 305,000
- - 305,000 305,000
3. Fair value measurement (continued)
3.3 Changes in level 3 measurement
The following table presents the changes in the Company's financial
instruments classified in level 3 of the fair value hierarchy for the period
ended 31 December 2022:
31 December 2022
£
Beginning of period -
Proceeds from Sponsor Warrants and Public Warrants 2,592,500
Net change in unrealised gain on financial liabilities (2,287,500)
End of period 305,000
There were no transfers between levels for the period.
3.4 Significant unobservable inputs
The following table summarises the valuation techniques and significant
unobservable inputs used for the Company's financial instruments classified in
level 3 as of 31 December 2022, and also provides information about the
sensitivity of the year end fair value measurement to changes in the most
significant inputs:
Fair value Valuation technique Unobservable inputs Range of inputs (weighted average)
£
Derivative liabilities - Sponsor warrants 155,000 Black-Scholes Pricing Model Expected volatility 2.9%
Risk free rate 3.9%
Derivative liabilities - Public warrants 150,000 Binomial Option Pricing Model Expected volatility 2.9%
Risk free rate 3.9%
305,000
The fair value of sponsor warrant and public warrants liabilities are
determined by the Board upon consultation with a valuation specialist with
reference to significant unobservable inputs. The valuation specialist has
used the Black-Scholes Pricing Model and Binomial Option Pricing Model
respectively, incorporating expected volatility, expected term and the
risk-free rate, to value the warrant liabilities. Warrants are accounted for
as derivative liabilities measured at FVTPL at each reporting period, in
accordance with IFRS 9 and IAS 32. Changes in the fair value of the warrants
are recorded in the Statement of Comprehensive Income.
4. Acquisition
The Company made no acquisitions during the period from 31 August 2021 (date
of incorporation) to 31 December 2022.
5. Cash
The amounts available to the Company in the current accounts are used to cover
the costs relating to the offering and admission, search for a company or
business for a Business Combination and other running costs.
31 December 2022
£
Restricted cash 155,984,100
Cash and cash equivalents 203,264
Total 156,187,364
The Escrow Agent may only release the funds within the Escrow Account in
accordance with the terms of the Escrow Agreement, which meets the
requirements set out in Listing Rule 5.6.18AG(2) (save for the minor
departures from this rule which are disclosed in the Prospectus).
The Escrow Agreement provides that the Company and a trustee, which was
appointed by the Company to provide escrow trustee services in connection with
the Escrow Account, will jointly deliver an instruction to the Escrow Agent to
release the funds in escrow only in the event that circumstances described in
the Prospectus for the release of the funds in escrow have occurred, and that
as requested by the Escrow Agent the Company will deliver evidence of the
circumstances for release having occurred to the Escrow Agent prior to
delivering an instruction for release to the Escrow Agent. Such circumstances
are, in accordance with LR 5.6.18AG(2) (save for the minor departures from
this rule which are disclosed in the Prospectus): (i) to provide consideration
for a Business Combination that has been approved by the Directors of the
Company and the Ordinary Shareholders (excluding the Excluded Persons), in
accordance with the requirements of the Articles of Association and the
Listing Rules; (ii) to repurchase the Ordinary Shares for which a redemption
right was validly exercised; and (iii) to repurchase the Ordinary Shares and
Public Warrants and commence liquidation.
6. Financial risk management
The Company is exposed to market risk, credit risk and liquidity risk. The
risk management policies employed by the Company to manage these risks are
discussed below:
(a) Market risk
Market risk is the risk that changes in market factors such as foreign
exchange rates, interest rates and equity prices will affect the Company's
income and/or the value of its holdings in financial instruments.
6. Financial risk management (continued)
(a) Market risk (continued)
Foreign currency risk
Currency risk is the risk that the fair value or future cash flows of a
financial instrument will fluctuate because of changes in foreign exchange
rates. During the period ended 31 December 2022, the Company had no financial
instrument denominated in a currency other than its operational and reporting
currency, and therefore was not exposed to foreign currency risk.
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a
financial instrument will fluctuate because of changes in market interest
rates. The Company's cash and cash equivalents are non-interest-bearing,
however the restricted cash balance consists of amounts held in an Escrow
account which accrue interest at a variable rate and therefore exposed to
interest rate risk.
As at 31 December 2022, if interest rates had been 0.5% higher/lower, with all
other variables held constant, the Company's bank interest received for the
period would have been £772,500 higher or lower.
As at end of the reporting period, the Company's exposure to interest rate
risk is considered to be for £154,500,000. The Company is exposed to risks
associated with the effects of fluctuations in the prevailing levels of
interest rates on its financial position and cash flows. Although these
interest are not hedged however the Company regularly monitors the cash
balances for any adverse interest rate fluctuations.
Price risk is the risk that changes in market prices will affect the value of
the Company's financial assets or liabilities at fair value through profit or
loss. The Company is exposed to price risk in respect of its Public Warrants
and Sponsor Warrants, which are measured at fair value using an appropriate
valuation model.
As at 31 December 2022, if prices had been 5% higher/lower, the net fair value
of the Company's financial assets or liabilities at fair value through profit
or loss subject to price risk would increase/decrease by £15,250.
The Company will analyse the risk of individual assets and evaluate the market
risk through its daily operation, by reviewing the latest development of
financial markets and the release of economic data.
The Company's overall exposures to financial asset values are monitored on an
on going basis.
(b) Credit risk
Credit risk is the risk that a counterparty to a financial instrument will
fail to discharge an obligation or commitment that it has entered into with
the Company, resulting in a financial loss to the Company. The Company is
exposed to credit risk arising from its restricted cash, cash and cash
equivalents and other receivables.
6. Financial risk management (continued)
(a) Credit risk (continued)
The maximum credit risk exposure in relation to the Company's cash balances is
best represented by the carrying value of the cash and cash equivalents,
amounts held in escrow balances and other receivables in the Statement of
Financial Position.
The Company seeks to mitigate the credit risk attached to its cash and cash
equivalents and amounts held in escrow by placing all cash with reputable
banking institutions with a credit rating of A (or equivalent) or higher as
determined by an internationally recognised rating agency.
Cash and cash equivalents are held with Barclays Bank plc, which has a Fitch
long-term credit rating of A+, a Moody's long-term credit rating of A1 and an
S&P long-term credit rating of A.
Amounts held in escrow are held with HSBC Bank plc, which has a Fitch
long-term credit rating of A+, a Moody's long-term credit rating of A3 and an
S&P long-term credit rating of A-.
(b) Liquidity risk
Liquidity risk is the risk that an entity will encounter difficulty in meeting
obligations associated with its financial liabilities. The table below
analyses how quickly the Company's assets can be liquidated to meet the
obligation of maturing liabilities.
Maturity Analysis
As at 31 December 2022 < 1 month >12 months No stated maturity Total
£ £ £ £
Assets
Restricted cash - 155,984,100 - 155,984,100
Cash and cash equivalents 203,264 - - 203,264
Trade and other receivables 74,191 - - 74,191
277,455 155,984,100 - 156,261,555
Liabilities
Redeemable ordinary shares - 148,214,847 - 148,214,847
Derivative liabilities - 305,000 - 305,000
Due to related party 26,060 - - 26,060
Accrued expense 1,109 - - 1,109
27,169 148,519,847 148,547,016
The Company is exposed to liquidity risk as the positions in which the company
invests may not be able to get liquidated quickly without negatively affecting
the share prices. It is the Companies policy to maintain conservative levels
of liquidity to ensure it has the ability to meet its obligations as they fall
due
6. Financial risk management (continued)
(c) Capital risk management
The capital structure of the Company consists of equity attributable to
holders of Sponsor Shares and non-redeemable Public Shares, redeemable Public
Shares issued (see note 7) and retained earnings.
7. Capital instruments
The following summarises the issued share capital as at 31 December 2022.
No. of shares £
Redeemable Class A ordinary shares of £10 par value ("Ordinary Shares") 15,000,000
150,000,000
Non-redeemable Class A ordinary shares of £10 par value ("Ordinary Shares") 450,000
4,475,304
Class B ordinary shares of £0.0001 par value, issued at £0.005 ("Sponsor 3,862,500
Shares")
19,310
19,312,500
154,494,614
Class A ordinary shares ("Ordinary Shares")
Further to publication of its Prospectus on 7 April 2022, the Company
completed the placing of 15,000,000 Ordinary Shares of the Company at a price
of £10.00 per share, with matching warrants being issued concurrently with
the delivery of the Ordinary Shares to subscribers of Ordinary Shares in the
Offering on the basis of one-half (1/2) of one (1) warrant per Ordinary Share
("Public Warrants"). Additionally, 450,000 Ordinary Shares were issued to the
Overfunding Sponsor Entity via the Company's Overfunding Subscription.
On 13 April 2022, the Company announced the admission of 154,500,000 Ordinary
Shares to trading on the London Stock Exchange's main market for listed
securities ("LSE").
As at 31 December 2022, the 450,000 Ordinary shares issued to the Overfunding
Sponsor Entity, these share are subject to the Insider Letter (see
Prospectus), in which, inter alia, removes the right of redemption attached to
these Ordinary Shares, which are accordingly classified as equity. These
shares 450,000 Ordinary Shares alongside with the 3,682,500 Class B Ordinary
shares make up share capital net of issuance costs of £24,696.
Ordinary Shares carry the right to receive dividends and other distributions
declared on them, and (save as provided in the Prospectus) holders of Ordinary
Shares are entitled to one vote per share at a general shareholders' meeting
of the Company, including a vote on the proposed business combination.
7. Capital instruments (continued)
Class A ordinary shares ("Ordinary Shares") (continued)
Holders of redeemable Ordinary Shares are entitled to redeem all or a portion
of their Ordinary Shares upon the completion of the business combination.
Accordingly, these Ordinary Shares are classified as liabilities in the
Company's Statement of Financial Position and are measured at amortised cost.
Ordinary Shares 31 December 2022
£
Opening balance -
Proceeds of issue of Ordinary Shares 150,000,000
Less: initial recognition of Public Warrants (1,275,000)
Less: share issue costs (2,842,943)
Effective interest accretion 2,332,790
148,214,847
Class B ordinary shares ("Sponsor Shares")
During the period, the Sponsor and the Directors subscribed to a total of
3,862,500 (comprising 1,931,250 B1 Shares, 965,625 B2 Shares and 965,625 B3)
Sponsor Shares at a price of £0.0001 per share.
Upon completion of the Business Combination, the entire sub-class of B1 Shares
shall automatically convert on a one-for-one basis (subject to adjustment in
certain circumstances) into such number of Ordinary Shares as will be equal,
in the aggregate, on an as-converted basis, to 10% of the total number of
Ordinary Shares issued and outstanding immediately following the completion of
the Offering. In addition, the entire sub-class of B2 Shares and the entire
sub-class of B3 Shares shall automatically convert on a one-for-one basis
(subject to adjustment in certain circumstances) into Ordinary Shares in two
further tranches (each of which shall equal 5% of the total number of Ordinary
Shares issued and outstanding immediately following the completion of the
Offering) after the Business Combination subject to certain
performance-related conditions.
Subject to the variation of certain voting rights and powers in respect of the
Business Combination, Sponsor Shares carry the same shareholder rights as
Ordinary Shares. However, the Company's Sponsor and Directors have entered
into an Inside Letter with the Company, under which they have agreed to waive
their redemption rights in respect of the Sponsor Shares or any Ordinary
Shares acquired as a result of conversion in connection with the Business
Combination. Accordingly, the Sponsor Shares are classified as equity in the
Company's Statement of Financial Position.
Public warrants
On 13 April 2022, 7,500,000 Public Warrants, the right to which was included
in the issue of Ordinary Shares in the Company, were admitted to trading on
LSE.
7. Capital instruments (continued)
Public warrant (continued)
Each Public Warrant gives the holder the right to subscribe for one Ordinary
Share at a price of £11.50 at any time commencing 30 days following the
completion of the Business Combination.
Accordingly, the Public Warrants are classified as derivative liabilities and
were initially recognised at their fair value of £0.17 per warrant at the
admission date of 13 April 2022.
As at 31 December 2022, the Public Warrants have been valued using an
appropriate valuation model at £.02 per warrant and are recognised in these
Financial Statements at a fair value of £150,000 The movement in fair value
of £1,125,000 from the admission date and period end has been recognised
through profit and loss.
Sponsor
warrants
During the period, the Sponsor and the Directors subscribed to a total of
3,875,000 Sponsor Warrants at a price of £1 per warrant. Of the £3,875,000
raised from the issue of the Sponsor Warrants, a derivative liability was
recognised at the admission date of 13 April 2022 amounting to £1,317,500.
The remainder has been allocated to other reserves as a capital contribution
to the company amounting to £2,557,500.
As at 31 December 2022, the Sponsor Warrants have been valued at £.04 per
warrant and are recognised in these Financial Statements at a total value of
£155,000. The movement in fair value of £1,162,500 between the admission
date and period end has been recognised through profit and loss.
Each Sponsor Warrant gives the holder the right to subscribe for one Ordinary
Share at a price of £11.50 following the completion of the Business
Combination.
8. Share based expense
The Sponsor Entity has provided services in the form of expertise and guidance
to assist the Company in achieving the Business Combination, in exchange for
the trading of its sponsor shares which has been recorded as share based
payments.
The valuation specialist has used a Monte Carlo simulation to estimate the
fair value of the sponsor shares. Non-market performance conditions have not
been taken into account when estimating the fair value such as the probability
of Business Combination. The key inputs used in the measurement of the fair
value at grant date of the sponsor shares were the initial stock price,
volatility, expected term and the restriction period after the initial
Business Combination.
As of grant date the fair value of each sponsor share is estimated. The
difference between the total consideration received by the Company for the
sponsor shares and their fair value at the grant date is. This will be
pro-rated over the period to the Business Combination Deadline and recognised
in equity as a share-based payment reserve with the associated expense
reflected in the statement of comprehensive income as share based payment
expense.
8. Share based expense (continued)
Share Class Number of Shares FV per share (£) Fair Value (£) Share base payment (£)
B-1 1,931,250 9.80 18,926,057 10,874,182
B-2 965,625 8.53 8,236,685 4,732,481
B-3 965,625 7.67 7,406,247 4,255,344
19,862,007
9. Earnings per share
9.1 Basic loss per share
For the period from
31 August 2021
(date of incorporation) to 31 December 2022
£
Numerator
Net loss for the period and earnings used in basic loss per share (19,199,582)
Total loss for the period used in basic loss per share (19,199,582)
Denominator
Weighted average number of shares used in basic loss per share 3,406,905
Total weighted average number of shares used in basic loss per share 3,406,905
Basic loss per share (5.64)
The weighted average number of Ordinary Shares is determined by reference to
the 3,862,500 Class B Ordinary Shares and 450,000 non-redeemable Class A
Ordinary Shares. Public and Sponsor Warrants are deemed to be anti-dilutive as
the average market price of Ordinary Shares during the period did not exceed
the £11.50 exercise price of the warrants and they are therefore out of the
money and excluded from the diluted earnings per share calculation. The
15,000,000 redeemable Class A Ordinary Shares under IAS 33 are deemed to be
contingently issuable shares issuable only upon a Business Combination so
under IAS 33.24 will be excluded from the earnings per share calculations
until the Business Combination has occurred.
9. Earnings per share
9.2 Diluted loss per share
The Company has reviewed the dilution factors and concluded that there are no
instruments that have dilutive potential as at 31 December 2022. As there is
uncertainty as to the likelihood of an initial Business Combination, the
potential dilutive effects of redeemable Ordinary Shares, Sponsor Warrants and
Public Warrants have not been factored into the weighted average number of
shares. The conditions for conversion of these instruments to equity have not
been satisfied at the reporting date. When the Business Combination has
occurred, the redeemable Ordinary Shares will become equity and will no longer
be a financial liability, hence the dilutive effect is not considered in the
diluted earnings per share calculation. As a result, diluted earnings per
share is deemed to be the same as basic earnings per share as at 31 December
2022.
10. Related party transactions
All legal entities that can be controlled, jointly controlled or significantly
influenced by the Company are considered to be a related party. Also, entities
which can control, jointly control or significantly influence the Company are
considered a related party. In addition, statutory and supervisory directors
and close relatives are regarded as related parties.
The Sponsor Entity made payments of £158,703 related to expenses paid on
behalf of the Company, of which £26,060 is still outstanding as of 31
December 2022.
Administration expense paid to the sponsor entity £ 135,000 for the year
ended 31 December 2022.
Other than the issuance of Sponsor Shares and Sponsor Warrants to the Sponsor
Entity and non-executive directors, there have been no related party
transactions.
11. Income tax
The Company is domiciled in the Cayman Islands. Under the current laws of the
Cayman Islands, there is no income, estate, corporation, capital gains or
other taxes payable by the Company. As a result, no provision for Cayman
Islands' taxes has been made in the Financial Statements.
Overseas withholding taxes may be charged on certain investment income and
capital gains of the Company. No withholding taxes have been incurred or paid
during the period ended 31 December 2022.
The Company has concluded that there was no impact on the results of its
operations relating to taxation for the period ended 31 December 2022.
12. Contingencies and commitments
As disclosed in the Prospectus, the underwriters of the Company's Offering are
entitled to a deferred underwriting fee payable from the Escrow account upon
the successful completion of a Business Combination. In addition, certain fees
and expenses of certain professional advisers to the Company that were
incurred upon IPO have been deferred until successful completion of a Business
Combination.
13. Subsequent events
There were no significant period and events that require disclosure or
adjustment in these financial statements.
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