REG - Financials Acqn.Corp Financials Acqn-FNWR - Interim Report for the period ended 30 June 2022
30/09/2022 15:15
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RNS Number : 4077B Financials Acquisition Corp 30 September 2022
Financials Acquisition Corp
Unaudited Condensed Interim Financial Report
For the period from 31 August 2021 (date of incorporation) to 30 June 2022
Page(s)
Interim Board Report 1-3
Unaudited Condensed Statement of Financial Position 4
Unaudited Condensed Statement of Comprehensive Income 5
Unaudited Condensed Statement of Changes in Equity 6
Unaudited Condensed Statement of Cash Flows 7
Notes to the Unaudited Condensed Interim Financial Statements 8-25
Overview
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.
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 8 April 2022, having raised £154,500,000 in its initial public
offering (the "IPO") of 15,450,000 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").
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 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 of 13 April
2022 (the "Admission Date"), 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.
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 30 June 2022.
The highlight of the period was the Company's admission to trading on the main
market of the London Stock Exchange on 8 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)
30 September 2022
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.
Related Party Transactions
The main related party transactions are outlined in the "Related Party
Transactions" section of the Prospectus. Refer to note 9 - Related party
transactions for disclosure within the Financial Statements.
Responsibility Statement
The Directors are responsible for preparing the Interim Report and Financial
Statements in accordance with applicable laws and regulations. The Board
confirms that to the best of their knowledge:
§ The condensed set of Financial Statements has been prepared in accordance
with IAS 34 'Interim Financial Reporting';
§ The interim management report includes a fair review of the information
required by DTR 4.2.7R (indication of important events during the first six
months and their impact on the condensed Financial Statements and description
of principal risks and uncertainties for the remaining six months of the
year); and
§ The interim management report includes a fair review of the information
required by DTR 4.2.8R (disclosure of related parties transactions and changes
therein); and
§ The condensed set of Financial Statements, which has been prepared in
accordance with the applicable set of accounting standards, gives a true and
fair view of the assets, liabilities, financial position and profit or loss of
the issuer as required by DTR 4.2.10R.
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)
30 September 2022
30 June
2022
(unaudited)
Note £
Assets
Current assets
Cash and cash equivalents 5 445,958
Restricted cash 5 154,653,051
Trade and other receivables 172,191
Total assets 155,271,200
Liabilities and shareholder's equity
Non-current liabilities
Redeemable ordinary shares 6 146,573,669
Current liabilities
Derivative liabilities 3 3,660,000
Trade and other payables 50,712
Due to related party 9 26,060
Total liabilities 150,310,441
Shareholder's equity
Share capital 6 4,494,614
Other reserves 8,470,617
Accumulated loss (8,004,472)
Total shareholder's equity 4,960,759
Total liabilities and shareholder's equity 155,271,200
The Condensed Interim Financial Statements were approved and authorized for
issue by the Board of Directors on 30 September 2022 and signed on its behalf
by:
Andrew Rear
Executive Chairman
For the period from 31 August 2021 (date of incorporation) to 30 June 2022
(unaudited)
Note £
Income
Interest income 153,051
153,051
Total income
Expenses
Share-based payment expense 5,913,117
Professional fees 216,688
Listing and regulatory fees 187,580
Directors and officers insurance 56,351
Share issue costs 24,372
Other expenses 303
6,398,411
Total expenses
(6,245,360)
Net investment loss
Net change in unrealised loss on financial liabilities
Net change in unrealised loss on financial liabilities (1,067,500)
(1,067,500)
Net loss on financial liabilities
Finance expense 6 (691,612)
(8,004,472)
Total comprehensive loss for the period
Basic and dilutive net loss per share 8 (2.80)
All items in the above statement derive from continuing operations.
Accumulated loss Total shareholder's equity
Other reserves*
Share capital
£ £ £ £
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
As at --31 August 2021 (date of incorporation) - - - -
Issued share capital and sponsor warrants 4,500,305 8,470,617 - 12,970,922
Share cancellation (5,691) - - (5,691)
Total comprehensive loss for the period - - (8,004,472) (8,004,472)
As at 30 June 2022 4,494,614 8,470,617 (8,004,472) 4,960,759
* Sponsor Warrants have been accounted for as a capital contribution in other
reserves. Please see notes 2 and 6 for further details.
For the period from
31 August 2021 (date of incorporation) to
30 June 2022
(Unaudited)
£
Cash flows from operating activities
Total comprehensive loss for the period (8,004,472)
Adjustments to reconcile net loss for the period to net cash used in operating
activities:
Net change in unrealised loss on financial liabilities 1,067,500
Share-based payment expense 5,913,117
Finance expense 691,612
Changes in:
Trade and other receivables (172,191)
Trade and other payables 50,712
Due to related party 26,060
Net cash used in operating activities (427,662)
Cash flows from investing activities
Increase in restricted cash (154,653,051)
Net cash used in investing activities (154,653,051)
Cash flows from financing activities
Proceeds from sponsor and overfunding shares 4,494,614
Shares forfeited at no consideration (5,691)
Proceeds from Ordinary Shares 145,887,748
Proceeds from issuance of sponsor warrants (including other reserves) 3,875,000
Proceeds from issuance of public warrants 1,275,000
Net cash generated from financing activities 155,526,671
Net change in cash and cash equivalents 445,958
Cash and cash equivalents at beginning of the period -
Cash and cash equivalents at end of the period 445,958
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 8 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 (the "Admission Date"), subject to two three-month extension
periods under conditions outlined in the Prospectus.
These Financial Statements have not been audited or reviewed by our auditors.
As this is the first period prepared, these financial statements do not
contain comparative historical information.
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").
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 Condensed Interim Financial Statements have been prepared in accordance
with IAS 34 (Interim Financial Reporting). They do not include all of the
information required for a complete set of Financial Statements prepared in
accordance with IFRS. However, selected explanatory notes are included to
explain events and transactions that are significant to an understanding of
the changes in the Company's financial position and performance during the
period.
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 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 6.
The Sponsor Entity, the Overfunding Sponsor Entity 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 fulfil 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)
- 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
Profit and Loss over time.
Prepayments
Prepayments are expenses paid in advance that are amortised on a straight-line
basis over the period to which they are applicable.
Share issue costs
Share issue cost have been incurred in relation to the issue of the Sponsor
Shares, Ordinary Shares and warrants. Where shares are classified as equity,
share issue costs are recognised in equity. Ordinary Shares not subject to the
Insider 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.
Share-based payments (equity-settled)
The grant of the Sponsor Shares is recognised as equity-settled share-based
payments under IFRS 2. Services received in exchange for the grant of any
share-based payments are measured by reference to the fair value of the
instruments at the grant date, which is determined to be the date of
consummation of the Business Combination. Share-based payments are recognised
as an expense in the Statement of Comprehensive Income.
2. Principal Accounting Policies (continued)
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)
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. The Company
has recognized an expense of £6,120,639 for the period in the statement of
comprehensive income and recognised the same amount in equity as a share-based
payment within other reserves.
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, a 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 £0.24 and £0.48, 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.
Valuation techniques
The following table summarises the valuation of the Company's financial
instruments within the fair value hierarchy levels at 30 June 2022:
Level 1 Level 2 Level 3 Total
£ £ £ £
Private equity investments
Derivative instruments - - 3,660,000 3,660,000
- - 3,660,000 3,660,000
Investments whose values are based on quoted market prices in active markets
are classified within level 1. As at 30 June 2022, it was the opinion of the
board that no financial instruments were categorised at level 1.
Financial instruments that trade in markets that are not considered to be
active but are valued based on quoted market prices, dealer quotations or
alternative pricing sources supported by observable inputs would be classified
within level 2. As level 2 investments include positions that are not traded
in active markets, and/or are subject to transfer restrictions, valuations are
discounted to reflect illiquidity and/or non-transferability, which are
generally based on available market information. As at 30 June 2022, it was
the opinion of the board that no financial instruments were categorised at
level 2.
3. Fair value measurement (continued)
Investments classified within level 3 have significant unobservable inputs as
they trade infrequently. As observable prices are not available for the
investments, the Investment Manager uses valuation techniques to derive their
fair value. As at 30 June 2022, it was the opinion of the Board that the both
sponsor and public warrants should be categorised as level 3.
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.
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 30 June 2022:
30 June 2022
£
Beginning of period -
Warrant proceeds from sponsor and public warrants 2,592,500
Net change in unrealised loss on financial liabilities 1,067,500
End of period 3,660,000
There were no transfers between levels for the period.
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 2021, 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 3,660,000 Binomial Pricing Model Expected volatility 2.66%
Risk free rate 2.45%
The fair value of sponsor warrant liabilities are determined by the Board upon
consultation with a valuation specialist with reference to significant
unobservable inputs. The valuation specialist has used the Binomial Option
Pricing Model, 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 30 June 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.
30 June 2022
£
Restricted cash 154,653,051
Cash and cash equivalents 445,958
Total 155,099,009
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. Capital instruments
The following summarises the issued share capital as at 30 June 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 19,310
Shares")
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 8 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 30 June 2022, the 450,000 Ordinary shares issued to the Overfunding
Sponsor Entity 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 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.
6. Capital instruments (continued)
Class A ordinary shares ("Ordinary Shares") (continued)
Holders of 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 30 June 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 691,612
146,573,669
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 Insider 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.
6. Capital instruments (continued)
Public Warrants
On 8 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.
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
settlement date of 13 April 2022.
As at 30 June 2022, the Public Warrants have been valued using an appropriate
valuation model at £0.24 per warrant and are recognised in these Financial
Statements at a fair value of £1,800,000. The movement in fair value of
£525,000 from the settlement 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 settlement 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 30 June 2022, the Sponsor Warrants have been valued at £0.13 per
warrant and are recognised in these Financial Statements at a total value of
£1,860,000. The movement in fair value of £542,500 between the settlement
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.
7. Dividends
No dividends were paid or declared by the Company during the period ended 30
June 2022.
8. Earnings per share
8.1 Basic loss per share
For the period from
31 August 2021
(date of incorporation) to 30 June 2022
£
Numerator
Net loss for the period and earnings used in basic loss per share (8,004,472)
Total loss for the period used in basic loss per share (8,004,472)
Denominator
Weighted average number of shares used in basic loss per share 2,856,972
Total weighted average number of shares used in basic loss per share 2,856,972
Basic loss per share (2.80)
The weighted average number of Ordinary Shares is determined by reference to
the 19,210 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.
8.2 Diluted loss per share
The Company has reviewed the dilution factors and concluded that there are no
instruments that have dilutive potential as at 30 June 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 30 June 2022.
9. 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 £184,673 related to expenses paid on
behalf of the Company, of which £26,060 is still outstanding as of 30 June
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.
10. 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 30 June 2022.
The Company has concluded that there was no impact on the results of its
operations relating to taxation for the period ended 30 June 2022.
11. 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.
12. Subsequent events
There were no significant period and events that require disclosure or
adjustment in these financial statements.
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