UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
For the quarterly period ended
OR
For the transition period from to
Commission File Number:
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(State or other jurisdiction of incorporation or organization) |
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(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: ( |
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class |
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| Name Of Each Exchange On Which Registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of August 12, 2022, the registrant had
ENDURANCE ACQUISITION CORP.
Table of Contents
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ENDURANCE ACQUISITION CORP.
CONDENSED BALANCE SHEETS
| June 30, 2022 |
| December 31, 2021 | |||
(Unaudited) | (Audited) | |||||
Assets: | ||||||
Current assets: | ||||||
Cash | $ | | $ | | ||
Prepaid expenses |
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Total current assets |
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Prepaid expenses, non-current |
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Investments held in Trust Account |
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Total assets | $ | | $ | |||
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Liabilities and Shareholders’ Deficit |
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Current liabilities: |
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Accrued expenses | $ | | $ | | ||
Total current liabilities | | | ||||
Warrant liabilities | | | ||||
Deferred underwriting commissions | | | ||||
Total liabilities |
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Commitments and Contingencies (Note 6) |
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Class A ordinary shares subject to possible redemption, |
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Shareholders’ Deficit |
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Preference shares, $ |
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Class A ordinary shares, $ |
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Class B ordinary shares, $ |
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Additional paid-in capital |
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Accumulated deficit |
| ( |
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Total shareholders’ deficit |
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Total Liabilities and Shareholders’ Deficit | $ | | $ | | ||
The accompanying notes are an integral part of these unaudited condensed financial statements.
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ENDURANCE ACQUISITION CORP.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the | |||||||||
period from | |||||||||
For the three | For the six | April 23, 2021 | |||||||
months ended | months ended | (inception) through | |||||||
June 30, | June 30, | June 30, | |||||||
| 2022 |
| 2022 |
| 2021 | ||||
Formation and operating costs | $ | | $ | | $ | | |||
Loss from operations | ( | ( | ( | ||||||
Other income | |||||||||
Change in fair value of warrant liabilities | | | — | ||||||
Interest income | | | — | ||||||
Total other income | | | — | ||||||
Net income (loss) | $ | | $ | | $ | ( | |||
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Basic and diluted weighted average shares outstanding, Class A ordinary shares subject to possible redemption |
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Basic and diluted net income (loss), Class A ordinary shares subject to possible redemption | | | $ | — | |||||
Basic and diluted, weighted average shares outstanding - Class B ordinary shares |
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Basic and diluted net income (loss), Class B ordinary shares | | | ( | ||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
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ENDURANCE ACQUISITION CORP.
CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ (DEFICIT) EQUITY
(UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022
Class A | Class B | Additional | |||||||||||||||||
Ordinary Share | Ordinary Share | Paid-in | Accumulated | Shareholders’ | |||||||||||||||
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Deficit |
| Deficit | ||||||
Balance as of January 1, 2022 | | $ | | $ | | $ | $ | ( | $ | ( | |||||||||
Accretion of Class A ordinary shares subject to possible redemption | — | — | — | — | — | ( | ( | ||||||||||||
Net income | — |
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Balance – March 31, 2022 | — | $ | — | | $ | | $ | — | $ | ( | $ | ( | |||||||
Accretion of Class A ordinary shares subject to possible redemption | — | — | — | — | — | ( | ( | ||||||||||||
Net income | — | — | — | — | — | | | ||||||||||||
Balance – June 30, 2022 | — | $ | — | | $ | | $ | — | $ | ( | $ | ( | |||||||
FOR THE PERIOD FROM APRIL 23, 2021 (INCEPTION) TO JUNE 30, 2021
Class A | Class B | Additional | |||||||||||||||||
Ordinary Share | Ordinary Share | Paid-in | Accumulated | Shareholders’ | |||||||||||||||
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Deficit |
| Equity | ||||||
Balance as of April 23, 2021 (Inception) |
| | $ | |
| | $ | | $ | | $ | | $ | | |||||
Class B ordinary shares issued to initial shareholder (1) |
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| | $ | | $ | | $ | — | $ | | |||||
Net loss |
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Balance – June 30, 2021 |
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| | $ | | $ | | $ | ( | $ | | |||||
| (1) | Includes up to |
The accompanying notes are an integral part of these unaudited condensed financial statements.
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ENDURANCE ACQUISITION CORP.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the | ||||||
period from | ||||||
For the six | April 23, 2021 | |||||
months ended | (inception) through | |||||
| June 30, 2022 |
| June 30, 2021 | |||
Cash flows from operating activities: |
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Net income (loss) | $ | | $ | ( | ||
Adjustments to reconcile net income (loss) to net cash used in operating activities: |
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Formation Cost Paid by related party | — | | ||||
Interest earned on investments held in Trust Account | ( | — | ||||
Change in fair value of warrant liabilities | ( | — | ||||
Changes in operating assets and liabilities: | ||||||
Prepaid assets | | — | ||||
Accrued expenses | |
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Net cash used in operating activities |
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Cash flows from financing activities | ||||||
Proceeds from issuance of promissory note to related party | — | | ||||
Net cash provided by financing activities | — | | ||||
Net change in cash | ( |
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Cash, beginning of the period | |
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Cash, end of the period | $ | | $ | | ||
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Supplemental disclosure of non-cash investing and financing activities |
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Accretion of Class A ordinary shares subject to possible redemption | $ | | $ | — | ||
Deferred offering costs paid by Sponsor in exchange for issuance of Class B ordinary shares | $ | — | $ | | ||
Deferred offering costs paid by Sponsor under the promissory note | $ | — | $ | | ||
Deferred offering costs included in accrued offerings costs and expenses | $ | — | $ | | ||
The accompanying notes are an integral part of these unaudited condensed financial statements.
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ENDURANCE ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1— Organization, Business Operations, Liquidity and Going Concern
Endurance Acquisition Corp. (the “Company”) is a blank check company incorporated as a Cayman Islands exempted company on April 23, 2021. The Company was incorporated for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with
As of June 30, 2022, the Company had not commenced any operations. All activity for the period from April 23, 2021 (inception) through June 30, 2022 relates to the Company’s formation, search for a target business and the Initial Public Offering (the “IPO”), and subsequent to the IPO, identifying a target company for a Business Combination and activities in connection with the proposed business combination with SatixFy Communications Ltd., a limited liability company organized under the laws of the State of Israel (“SatixFy”). The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income on cash and cash equivalents and securities from the proceeds derived from the IPO and will recognize changes in the fair value of warrant liabilities as other income (expense).
The Company’s sponsor is Endurance Antarctica Partners, LLC, a Cayman Islands limited liability company (the “Sponsor”).
Financing
The registration statement for the Company’s IPO was declared effective on September 14, 2021 (the “Effective Date”). On September 17, 2021, the Company’s consummated the IPO of
Simultaneously with the consummation of the IPO, the Company consummated the private placement of
Transaction costs amounted to $
Trust Account
Following the closing of the IPO on September 17, 2021, $
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the closing of the IPO, subject to applicable law. The proceeds deposited in the Trust Account could become subject to the claims of the Company’s creditors, if any, which would have priority over the claims of the public shareholders.
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the IPO and the Private Placement Warrants, although substantially all of the net proceeds are intended to be generally applied toward consummating a Business Combination (less deferred underwriting commissions).
The Company’s Business Combination must be with one or more operating businesses or assets with a fair market value equal to at least
Initial Business Combination
The Company will provide the holders of Class A ordinary shares with the opportunity to redeem all or a portion of their public shares upon the completion of the initial Business Combination either: (1) in connection with a general meeting called to approve the Business Combination or (2) by means of a tender offer. The decision as to whether the Company will seek shareholder approval of a proposed Business Combination or conduct a tender offer will be made by the Company, solely in its discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would require the Company to seek shareholder approval under applicable law or Nasdaq listing requirement. The shareholders will be entitled to redeem their shares at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account calculated as of two business days prior to the consummation of its initial Business Combination, including interest (which interest shall be net of taxes payable), divided by the number of then issued and outstanding public shares, subject to the limitations described herein. The amount in the Trust Account is initially $
The Class A ordinary shares subject to redemption are recorded at a redemption value and classified as temporary equity, in accordance with Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.”
The Company will have
The initial shareholders, directors, officers and advisors have entered into a letter agreement with the Company, pursuant to which they have agreed to waive: (i) their redemption rights with respect to any founder shares and public shares held by them, as applicable, in connection with the completion of the initial Business Combination; (ii) their redemption rights with respect to any founder shares and public shares held by them in connection with a shareholder vote to amend the amended and restated memorandum and articles of association (A) to modify the substance or timing of the Company’s obligation to allow redemption in connection with the initial Business Combination or to redeem
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they hold if the Company fails to complete the initial Business Combination within 18 months from the closing of the IPO or during any Extension Period (although they will be entitled to liquidating distributions from the trust account with respect to any public shares they hold if the Company fails to complete the initial Business Combination within the prescribed time frame). Each of the Company’s anchor investors has entered into an investment agreement with the Company pursuant to which they have agreed that any founder shares held by them are (i) not entitled to redemption rights in connection with the completion of the initial Business Combination or in connection with a shareholder vote to amend the amended and restated memorandum and articles of association and (ii) not entitled to liquidating distributions from the trust account with respect to any founder shares the anchor investor holds in the event the Company fails to complete the initial Business Combination within 18 months from the closing of the IPO or during any Extension Period.
The Sponsor has agreed that it will be liable to the Company if and to the extent any claims by a third party (other than its independent registered public accounting firm) for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below (1) $
Risks and Uncertainties
Management is currently evaluating the impact of the COVID-19 pandemic and Russia-Ukraine war and has concluded that while it is reasonably possible that the virus and war could have a negative effect on the Company’s financial position, results of its operations, search for a target company or ability to close the proposed business combination with SatixFy, the specific impact is not readily determinable as of the date of these unaudited condensed financial statements. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Liquidity and Going Concern
As of June 30, 2022, the Company had $
As of June 30, 2022, the Company has neither engaged in any operations nor generated any revenues to date. The Company’s only activities since inception have been organizational activities, those necessary to prepare for the Company’s IPO, search for a target business and activity in connection with consummating the proposed business combination with SatixFy. Following the IPO, the Company will not generate any operating revenues until after completion of its initial business combination. The Company has generated non-operating income in the form of interest income earned on the trust account balance in the amount of $
Based on the foregoing, management believes that the Company will not have sufficient working capital and borrowing capacity to meet its needs through the earlier of the consummation of a Business Combination or one year from this filing which raises substantial doubt about the Company’s ability to continue as a going concern.
Management has determined that the mandatory liquidation, should a business combination not occur, and potential subsequent dissolution, raises substantial doubt about the Company’s ability to continue as a going concern.
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Note 2— Significant Accounting Policies and Basis of Presentation
Basis of Presentation
The accompanying unaudited condensed financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the U.S. Securities and Exchange Commission (“SEC”). Certain information or footnote disclosures normally included in unaudited condensed financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.
The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on March 31, 2022. The interim results for the three and six months ended June 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any future periods.
Emerging Growth Company Status
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012, (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
Further, Section102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s unaudited condensed financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of unaudited condensed financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
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Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company had $
Investments Held in Trust Account
As of June 30, 2022 and December 31, 2021, the assets held in the Trust Account were held in a money market fund invested in U.S. Treasury Securities. At June 30, 2022 and December 31, 2021, the Company had $
Concentration of credit risk
Financial instruments that potentially subject the Company to concentration of credit risk consist of a cash account in a financial institution which, at times may exceed the Federal depository insurance coverage of $
Offering Costs associated with the Initial Public Offering
Offering costs consist of underwriting, legal, accounting and other expenses incurred through the balance sheet date that are directly related to the IPO. The Company complies with the requirements of the ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A—”Expenses of Offering”. Offering costs are allocated to the separable financial instruments issued in the IPO based on a relative fair value basis compared to total proceeds received. Offering costs associated with warrant liabilities are expensed, and offering costs associated with the Class A ordinary shares are charged to temporary equity. The Company incurred offering costs amounting to $
The Company recorded $
Ordinary Shares Subject to Possible Redemption
The Company accounts for its ordinary shares subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Ordinary shares subject to mandatory redemption (if any) are classified as a liability instrument and measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, ordinary shares are classified as shareholders’ equity. The Company’s Class A ordinary shares feature certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. As a result of recent guidance to Special Purpose Acquisition Companies by the SEC regarding redeemable equity instruments, the Company revisited its application of ASC 480-10-S99 on the Company’s condensed financial statements. Subsequent to the re-evaluation, the Company’s management concluded that all of its Public Shares should be classified as temporary equity. Accordingly,
Income Taxes
The Company accounts for income taxes in accordance with the provisions of ASC Topic 740, “Income Taxes” (“ASC 740”). Under the asset and liability methods, as required by this accounting standard, deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities in the unaudited condensed financial statements and their respective tax basis. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to the period when assets are realized, or liability is settled. Any effect on deferred tax assets and liabilities of a change in tax rates is recognized in the operation of statement in the period that includes the enactment date. Deferred tax assets are reduced by
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a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Current income taxes are provided for in accordance with the laws of the relevant taxing authorities. ASC 740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their unaudited condensed financial statements uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the unaudited condensed financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than
Net Income (Loss) Per Ordinary Share
The Company has two classes of shares, which are referred to as Class A ordinary shares and Class B ordinary shares. Earnings and losses are shared pro rata between the two classes of shares. The
For the Period from | ||||||||||||||||||
For the | For the |
| April 23, 2021 | |||||||||||||||
Three Months Ended | Six Months Ended | (inception) Through | ||||||||||||||||
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Basic and diluted net income (loss) per share: | ||||||||||||||||||
Numerator: | ||||||||||||||||||
Allocation of net income (loss) | $ | | $ | | $ | | $ | | $ | — | $ | ( | ||||||
Denominator: |
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Basic and diluted weighted-average shares outstanding |
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Basic and diluted net income (loss) per share | | | | | $ | — | ( | |||||||||||
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”. Derivative instruments are initially recorded at fair value on the grant date and re-valued at each reporting date, with changes in the fair value reported in the condensed statements of operations. Derivative assets and liabilities are classified in the balance sheets as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date.
FASB ASC 470-20, Debt with Conversion and Other Options addresses the allocation of proceeds from the issuance of convertible debt into its equity and debt components. The Company applies this guidance to allocate IPO proceeds from the Units between Class A ordinary shares and warrants, using the residual method by allocating IPO proceeds first to fair value of the warrants and then the Class A ordinary shares.
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The Company granted the underwriters a
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates the carrying amounts represented in the accompanying balance sheets, primarily due to their short-term nature, except for the Warrants (see Note 9).
Recent Accounting Standards
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective January 1, 2022 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The guidance was adopted starting January 1, 2022. Adoption of the ASU did not impact the Company’s financial position, results of operations or cash flows.
Management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s condensed financial statements.
Note 3— Initial Public Offering
On September 17, 2021, the Company consummated its IPO of
Following the closing of the IPO on September 17, 2021, $
All of the
The Class A ordinary share is subject to SEC and its staff’s guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99. If it is probable that the equity instrument will become redeemable, the Company has the option to either accrete changes in the redemption value over the period from the date of issuance (or from the date that it becomes probable that the instrument will become redeemable, if later) to the earliest redemption date of the instrument or to recognize changes in the redemption value
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immediately as they occur and adjust the carrying amount of the instrument to equal the redemption value at the end of each reporting period. The Company recognizes changes in redemption value immediately as they occur. Immediately upon the closing of the IPO, the Company recognized the accretion from initial book value to redemption amount value. The change in the carrying value of redeemable ordinary share resulted in charges against additional paid-in capital and accumulated deficit.
As of June 30, 2022 and December 31, 2021, the ordinary share reflected on the balance sheets are reconciled in the following table:
Gross proceeds from IPO |
| $ | |
Less: | |||
Proceeds allocated to Public Warrants |
| ( | |
Ordinary shares issuance costs |
| ( | |
Plus: |
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Remeasurement of carrying value to redemption value |
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Interest income |
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Contingently redeemable ordinary shares as of December 31, 2021 | | ||
Plus: | |||
Interest income | | ||
Contingently redeemable ordinary shares as of March 31, 2022 | | ||
Plus: | |||
Interest income | | ||
Contingently redeemable ordinary shares as of June 30, 2022 | $ |
Note 4— Private Placement
Simultaneously with the closing of the IPO, the Company’s Sponsor and Cantor purchased an aggregate of
The Private Placement Warrants will not be redeemable by the Company (except as described in Note 1) so long as they are held by the Sponsor, Cantor or their permitted transferees. If the Private Placement Warrants are held by holders other than the Sponsor, Cantor or their permitted transferees, the Private Placement Warrants will be redeemable by the Company in all redemption scenarios and exercisable by the holders on the same basis as the warrants included in the units being sold in the IPO. The Sponsor, as well as its permitted transferees, have the option to exercise the Private Placement Warrants on a cashless basis.
A portion of the proceeds from the Private Placement Warrants were added to the proceeds from the IPO to be held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period or during any Extension Period, the proceeds of the sale of the Private Placement Warrants will be used to fund the redemption of the public shares (subject to the requirements of applicable law), and the Private Placement Warrants will expire worthless.
The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the IPO, except that the Private Placement Warrants and the Class A ordinary shares issuable upon exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, except as described above, the Private Placement Warrants are non-redeemable so long as they are held by the initial purchasers or such purchasers’ permitted transferees. If the Private Placement Warrants are held by someone other than the Initial Shareholders or Cantor or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
Note 5—Related Party Transactions
Founder Shares
On April 26, 2021, the Sponsor purchased
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number of founder shares issued. On June 7, 2021, the Sponsor transferred
In connection with the IPO, the anchor investors, collectively, acquired from the Sponsor an aggregate of
Promissory Note—Related Party
The Sponsor issued a promissory note allowing the Company to borrow up to $
Working Capital Loans
In addition, in order to fund any working capital deficiencies or finance transaction costs in connection with an intended initial Business Combination, the Sponsor or an affiliate of the Sponsor or certain of the Company’s directors and officers may, but are not obligated to, loan the Company funds as may be required. If the Company completes its initial Business Combination, it may repay such loaned amounts out of the proceeds of the trust account released to the Company. Otherwise, such loans may be repaid only out of funds held outside the trust account. In the event that the initial Business Combination does not close, the Company may use a portion of the working capital held outside the trust account to repay such loaned amounts but no proceeds from the trust account would be used to repay such loaned amounts. Up to $
Consulting and Management Fees
After the initial Business Combination, members of the Company’s management team who remain with the Company may be paid consulting, management or other fees from the combined company with any and all amounts being fully disclosed to the shareholders, to the extent then known, in the tender offer or proxy solicitation materials, as applicable, furnished to the shareholders. It is unlikely the amount of such compensation will be known at the time of distribution of such tender offer materials or at the time of a general meeting held to consider the initial Business Combination, as applicable, as it will be up to the directors of the post-combination business to determine executive officer and director compensation.
Secretarial and Administrative Services
On September 14, 2021, the Company entered into an Administrative Services Agreement pursuant to which it will also pay an affiliate of the Sponsor a total of $
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Note 6— Commitments and Contingencies
Registration Rights
The holders of the founder shares, Private Placement Warrants and any warrants that may be issued on conversion of Working Capital Loans (and any Class A ordinary shares issuable upon the exercise of the Private Placement Warrants or warrants issued upon conversion of the Working Capital Loans and upon conversion of the founder shares) will be entitled to registration rights pursuant to a registration rights agreement signed on the effective date of the IPO requiring the Company to register such securities for resale (in the case of the founder shares, only after conversion to the Class A ordinary shares). The holders of these securities will be entitled to make up to
Underwriting Agreement
The underwriters had a -day option from the date of the IPO to purchase up to an additional
On September 17, 2021, the Company paid a cash underwriting discount of
Business Combination Agreement
On March 8, 2022, the Company entered into a business combination agreement (the “Business Combination Agreement”) with SatixFy and SatixFy MS, a Cayman Islands exempted company and a direct, wholly owned subsidiary of SatixFy (“Merger Sub”). Pursuant to the Business Combination Agreement, Merger Sub will merge with and into the Company, with the Company surviving the Business Combination as a wholly-owned subsidiary of SatixFy.
At the effective time of the Business Combination (the “Effective Time”), (i) each Company Class A ordinary share, par value $
Prior to the Effective Time, each preferred share of SatixFy will be converted into
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immediately prior to the Effective Time by the Exchange Ratio. In addition, immediately following the Pre-Closing Recapitalization but prior to the Effective Time, each SatixFy warrant will be adjusted by multiplying the number of SatixFy ordinary shares subject to such warrant by the Exchange Ratio and the per share exercise price will be determined by dividing the per share exercise price of such warrant immediately prior to the Effective Time by the Exchange Ratio. Each SatixFy warrant issued and outstanding will be exercised on a cashless basis assuming a then price per share equal to $
Prior to the execution of the Business Combination Agreement, SatixFy entered into a credit facility pursuant to which SatixFy borrowed $
Further, prior to the execution of the Business Combination Agreement, SatixFy entered into an equity line of credit purchase agreement and related registration rights agreement with CF Principal Investments LLC, a Delaware limited liability company and an affiliate of Cantor Fitzgerald & Co (“CF Principal Investments”), pursuant to which SatixFy may issue up to $
On June 13, 2022, we entered into Amendment No. 1 to the Business Combination Agreement (the “BCA Amendment”). The BCA Amendment amends the Business Combination Agreement to (1) change the earliest date upon which the measurements may be taken for determining the vesting of the Price Adjustment Shares from
Unless specifically stated, this Form 10-Q does not give effect to the proposed Business Combination and does not contain a description of the risks associated with the Business Combination. Such risks and effects relating to the proposed Business Combination will be described in a Form F-4 registration statement to be filed by SatixFy. The registration statement on Form F-4 will also contain a description of the business, operations, financial condition, management, governance, capitalization and other materials terms of the combined company following the business combination as well as information on the redemption process and the shareholders’ meeting to approve the transaction.
On March 6, 2022, the Company entered into a side letter to the underwriting agreement with Cantor and Truist Securities, Inc. (“Truist Securities”) pursuant to which the deferred underwriting commission was changed to $
In connection with the Business Combination Agreement, the Company and SatixFy entered into a variety of different advisory arrangements with investments banks including Cantor, Truist Securities and Barclays Capital Inc. (“Barclays”). Pursuant to the placement agent engagement letter between Cantor, SatixFy and the Company, $
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Consulting Agreements
On May 27, 2022 (the “Third Addendum Effective Date”), that certain Consulting Agreement, commencing as of September 14, 2021, as amended by the First Addendum on December 2, 2021 and further amended by the Second Addendum on April 1, 2022, by and between ICR, LLC (the “Consultant”) and the Company was amended as follows: “Commencing on the Third Addendum Effective Date, the Twenty Thousand Dollar ($
Note 7— Warrant Liabilities
At June 30, 2022 and December 31, 2021, the Company had
Each whole warrant entitles the holder to purchase one Class A ordinary share at a price of $
The Company will not be obligated to deliver any Class A ordinary shares pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act covering the issuance of the Class A ordinary shares issuable upon exercise of the warrants is then effective and a current prospectus relating thereto is current, subject to the Company’s satisfying its obligations described below with respect to registration, or a valid exemption from registration is available, including in connection with a cashless exercise permitted as a result of a notice of redemption described below under “Redemption of warrants when the price per Class A ordinary share equals or exceeds $
The Company has agreed that as soon as practicable, but in no event later than
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registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption.
Redemption of warrants when the price per Class A ordinary share equals or exceeds $
Once the warrants become exercisable, the Company may redeem the warrants (except as described herein with respect to the private placement warrants):
| ● | in whole and not in part; |
| ● | at a price of $ |
| ● | upon not less than |
| ● | if, and only if, the closing price of the Class A ordinary shares equals or exceeds $ |
Redemption of warrants when the price per Class A ordinary share equals or exceeds $
Once the warrants become exercisable, the Company may redeem the outstanding warrants (except as described herein with respect to the Private Placement Warrants):
| ● | in whole and not in part; |
| ● | at $ |
| ● | if, and only if, the Reference Value equals or exceeds $ |
| ● | if the Reference Value is less than $ |
The “fair market value” of the Class A ordinary shares shall mean the volume weighted average price of the Class A ordinary shares as reported during the
The Company accounted for the Public Warrants and Private Placement Warrants as liabilities in accordance with the guidance contained in ASC 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity. Because the Company does not control the occurrence of events, such as a tender offer or exchange that may trigger cash settlement of the warrants where not all of the shareholders also receive cash, the warrants do not meet the criteria for equity treatment thereunder, and as such, the warrants must be recorded as derivative liability.
Additionally, certain adjustments to the settlement amount of the Private Placement Warrants are based on a variable that is not an input to the fair value of a “fixed-for-fixed” option as defined under ASC 815—40, and thus the Private Placement Warrants are not considered indexed to the Company’s own stock and not eligible for an exception from derivative accounting.
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The accounting treatment of derivative financial instruments requires that the Company record a derivative liability upon issuance of the warrants at the closing of the IPO. Accordingly, the Company classified each warrant as a liability at its fair value. The Public Warrants were allocated a portion of the proceeds from the issuance of the Units equal to its fair value determined with the assistance of a professional independent valuation firm. The warrant liabilities are subject to re-measurement at each balance sheet date. With each such re-measurement, the warrant liabilities will be adjusted to fair value, with the change in fair value recognized in the Company’s condensed statements of operations. The Company will reassess the classification of the warrants at each balance sheet date. If the classification changes as a result of events during the period, the warrants will be reclassified as of the date of the event that causes the reclassification.
The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the IPO, except that the Private Placement Warrants and the Class A ordinary shares issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or salable until
Note 8— Shareholders’ Deficit
Preference Shares
The Company is authorized to issue
Class A Ordinary Shares
The Company is authorized to issue
Class B Ordinary Shares
The Company is authorized to issue
The Sponsor, officers, directors, advisors and anchor investors have agreed not to transfer, assign or sell any of their founder shares until the earlier to occur of: (1) one year after the completion of the initial Business Combination; and (2) subsequent to the initial Business Combination (x) if the last reported sale price of the Class A ordinary shares equals or exceeds $
The founder shares will automatically convert into Class A ordinary shares at the time of the initial Business Combination, or earlier at the option of the holder, on a one-for-one basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like, and subject to further adjustment as provided herein. In the case that additional Class A ordinary shares, or equity-linked securities, are issued or deemed issued in excess of the amounts issued in the IPO and related to the closing of the initial Business Combination, the ratio at which the Class B ordinary shares will convert into Class A ordinary shares will be adjusted (unless the holders of a majority of the issued and outstanding Class B ordinary shares agree to waive such anti-dilution adjustment with respect to any such
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issuance or deemed issuance) so that the number of Class A ordinary shares issuable upon conversion of all Class B ordinary shares will equal, in the aggregate, on an as-converted basis,
Note 9— Fair Value of Financial Instruments
The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually. The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets;
Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and
Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
In many cases, a valuation technique used to measure fair value includes inputs from multiple levels of the fair value hierarchy described above. The lowest level of significant input determines the placement of the entire fair value measurement in the hierarchy.
The fair value of the Company’s prepaid expenses and accrued offering costs and expenses approximate the carrying amounts represented in the balance sheets, primarily due to their short-term nature.
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The following table presents information about the Company’s liabilities that are measured at fair value on a recurring basis at June 30, 2022 and December 31, 2021, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
|
| Quoted Prices In |
| Significant Other | Significant Other | |||||||
Active Markets | Observable Inputs | Unobservable Inputs | ||||||||||
| June 30, 2022 |
| (Level 1) |
| (Level 2) |
| (Level 3) | |||||
Assets: | ||||||||||||
Marketable securities held in Trust Account |
| $ | | $ | |
| $ | $ | — | |||
$ | | $ | | $ | $ | |||||||
Liabilities: | ||||||||||||
Warrant liabilities – Public Warrants | $ | | $ | | $ | $ | — | |||||
Warrant liabilities – Private Placement Warrants | | — | | — | ||||||||
$ | | $ | | $ | | $ | — | |||||
|
| Quoted Prices In |
| Significant Other |
| Significant Other | ||||||
Active Markets | Observable Inputs | Unobservable Inputs | ||||||||||
December 31, 2021 | (Level 1) | (Level 2) | (Level 3) | |||||||||
Assets: |
| |||||||||||
Marketable securities held in Trust Account | $ | |
| $ | | $ | — | $ | — | |||
$ | | $ | | $ | — | $ | — | |||||
Liabilities: |
| |||||||||||
Warrant liabilities – Public Warrants | $ | | $ | | $ | — | $ | — | ||||
Warrant liabilities – Private Placement Warrants |
| |
| — |
| — |
| | ||||
$ | | $ | | $ | — | $ | | |||||
The Warrants were accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on the balance sheet. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the consolidated statements of operations. The Private Warrants were initially valued and continue to be valued using a Monte Carlo model.
The following table provides quantitative information regarding Level 3 fair value measurements as of June 30, 2022 and December 31, 2021:
Input |
| June 30, 2022 |
| December 31, 2021 | |||
Exercise price | $ | — | $ | | |||
Unit price | $ | — | $ | | |||
Volatility | — | % | | % | |||
Expected term of the warrants | — | ||||||
Risk-free rate | — | % | | % | |||
Dividend yield | — | | |||||
The Company’s Public Warrants began separately trading on November 5, 2021. After this date, the Public Warrant values per share were based on the observed trading prices of the public warrants as of each balance sheet date. The fair value of the Public Warrant liability is classified as level 1 as of June 30, 2022 and December 31, 2021.
Initially and through to December 31, 2021, the Private Warrants were valued using a Monte Carlo model, which is considered to be a Level 3 fair value measurement due to the use of unobservable inputs. The subsequent measurement of the Private Placement Warrants is classified as Level 2 due to the use of an observable market quote for a similar asset in an active market. The estimated fair value of the Private Warrants transferred from a Level 3 measurement to a Level 2 fair value measurement during the three and six months ended June 30, 2022 was $
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The following table presents the changes in the fair value of Level 3 warrant liabilities:
|
| ||||||||
Private Placement | Public | Total Warrant | |||||||
Warrants |
| Warrants |
| Liabilities | |||||
Fair value as of January 1, 2022 | $ | | $ | — | $ | | |||
Change in fair value of warrant liabilities | ( | — | ( | ||||||
Transfer from level 3 to level 2 | ( | — | ( | ||||||
Change in fair value of warrant liabilities | — | — | — | ||||||
Transfer from level 3 to level 2 | — | — | — | ||||||
Fair value as of June 30, 2022 | $ | — | $ | — | $ | — | |||
Note 10— Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date the condensed financial statements was issued. Based upon this review, other than as described below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the condensed financial statements.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
References in this quarterly report on Form 10-Q (the “Quarterly Report”) to “we,” “our,” “us,” and “Company” refer to Endurance Acquisition Corp. References to our “management” or our “management team” refer to our officers and directors, and references to our “Sponsor” refer to Endurance Antarctica Partners, LLC. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Quarterly Report including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding our financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and variations thereof and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of our Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2022. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
Overview
We are a blank check company incorporated as a Cayman Islands exempted company on April 23, 2021 for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses, which we refer to as a Business Combination. We completed our IPO on September 17, 2021, which is described below under “Liquidity and Capital Resources.”
While we may pursue an initial business combination target in any industry, we intend to focus our search on companies that meet our acquisition target characteristics within the space and wireless technologies industries, specifically sectors that support data infrastructure, data analytics and big data. Sectors that are reflective of these themes include Platforms and Sensors, Mobile Communications, Internet of Things and AI and Big Data Analytics sectors, which we refer to collectively as our target sectors. We believe there are dozens of companies within our target sectors that could benefit from access to the public markets, fit our investment criteria and could benefit from our management team’s global relationships and decades of sector expertise.
Since completing our IPO, we have reviewed, and continue to review, a number of opportunities to enter into a Business Combination with an operating business, but we are not able to determine at this time whether we will complete a Business Combination with any of the target businesses that we have reviewed or with any other target business. We intend to effectuate a Business Combination using cash from the proceeds of our IPO and the sale of the Private Placement Warrants (as defined below), our shares, debt, or a combination of cash, shares and debt.
Recent Developments
On March 8, 2022, we entered into a business combination agreement (the “Business Combination Agreement”) with SatixFy Communications Ltd., a limited liability company organized under the laws of the State of Israel (“SatixFy”), and SatixFy MS, a Cayman Islands exempted company and a direct, wholly owned subsidiary of SatixFy (“Merger Sub”). Pursuant to the Business Combination Agreement, Merger Sub will merge with and into us (the “Business Combination”), with us surviving the Business Combination as a wholly-owned subsidiary of SatixFy.
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At the effective time of the Business Combination (the “Effective Time”), (i) each Company Class A ordinary share, par value $0.0001 per share (excluding treasury shares, redeeming shares and dissenting shares), will be exchanged for one ordinary share of SatixFy and (ii) each outstanding warrant of us will be assumed by SatixFy and will become a warrant exercisable for one ordinary share of SatixFy (subject the terms and conditions of the Warrant Assumption Agreement).
Prior to the Effective Time, each preferred share of SatixFy will be converted into one ordinary share of SatixFy. Immediately following such preferred share conversion but prior to the Effective Time, each issued and outstanding ordinary share of SatixFy will be converted into a number of SatixFy ordinary shares (the “Pre-Closing Recapitalization”) determined by multiplying each then issued and outstanding ordinary share by the quotient of (a) the Adjusted Equity Value Per Share and (b) $10.00 (the “Exchange Ratio”). Additionally, immediately following the Pre-Closing Recapitalization but prior to the Effective Time, each SatixFy option outstanding and unexercised immediately prior to the Effective Time, will be adjusted by multiplying the number of SatixFy ordinary shares subject to such option by the Exchange Ratio and the per share exercise price will determined by dividing the exercise price of such option immediately prior to the Effective Time by the Exchange Ratio. In addition, immediately following the Pre-Closing Recapitalization but prior to the Effective Time, each SatixFy warrant will be adjusted by multiplying the number of SatixFy ordinary shares subject to such warrant by the Exchange Ratio and the per share exercise price will be determined by dividing the per share exercise price of such warrant immediately prior to the Effective Time by the Exchange Ratio. Each SatixFy warrant issued and outstanding will be exercised on a cashless basis assuming a then price per share equal to $10.00, and no SatixFy warrants shall survive after the Effective Time.
Prior to the execution of the Business Combination Agreement, SatixFy entered into a credit facility pursuant to which SatixFy borrowed $55,000,000 (the “Debt Financing”). Substantially contemporaneously with the Effective Time, SatixFy will issue securities to certain investors (the “PIPE Investors”) pursuant to the unit subscription agreements (the “PIPE Financing” or the “Unit Subscription Agreements”).
Further, prior to the execution of the Business Combination Agreement, SatixFy entered into an equity line of credit purchase agreement and related registration rights agreement with CF Principal Investments LLC, a Delaware limited liability company and an affiliate of Cantor Fitzgerald & Co (“CF Principal Investments”), pursuant to which SatixFy may issue up to $75,000,000 of ordinary shares of SatixFy following the closing of the Business Combination (the “Equity Line of Credit”).
On June 13, 2022, we entered into Amendment No. 1 to the Business Combination Agreement (the “BCA Amendment”). The BCA Amendment amends the Business Combination Agreement to (1) change the earliest date upon which the measurements may be taken for determining the vesting of the Price Adjustment Shares from 150 days after the closing to 30 days after the date on which the resale registration statement covering the securities issued to the Subscribers of the PIPE Financing is declared effective and (2) allow for up to $200,000 of working capital loans to be converted into warrants or other securities. Additionally, on June 13, 2022, we entered into Amendment No. 1 to the Sponsor Letter Agreement (the “Sponsor Letter Amendment”), to allow for up to $200,000 of working capital loans to be converted into warrants or other securities.
The consummation of the proposed Business Combination is subject to certain conditions as further described in the Business Combination Agreement.
Unless specifically stated, this Form 10-Q does not give effect to the proposed Business Combination and does not contain a description of the risks associated with the Business Combination. Such risks and effects relating to the proposed Business Combination will be described in a Form F-4 registration statement to be filed by SatixFy. The registration statement on Form F-4 will also contain a description of the business, operations, financial condition, management, governance, capitalization and other materials terms of the combined company following the business combination as well as information on the redemption process and the shareholders’ meeting to approve the transaction.
Results of Operations
For the three months ended June 30, 2022, we had a net income of $1,332,966 which consists of interest income from marketable securities of $244,969 and change in fair value of warrants of $2,378,580, offset by operating costs of $1,290,583.
For the six months ended June 30, 2022, we had a net income of $4,445,794 which consists of interest income from marketable securities of $260,583 and change in fair value of warrants of $7,304,607, offset by operating costs of $3,119,396.
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For the April 23, 2021 (inception) through June 30, 2021, we had a net loss of $6,800 which consists of only formation costs.
Our business activities during the quarter consisted primarily of organizational activities and those necessary to identifying and evaluating prospective acquisition candidates for a Business Combination, including pursuing the consummation of the business combination with SatixFy. However, if our estimates of the costs of identifying a target business, undertaking in-depth due diligence and negotiating a Business Combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our Business Combination.
We do not expect to generate any operating revenues until after the completion of our Business Combination. We generate non-operating income in the form of interest income on marketable securities held in the Trust Account. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence and other expenses in connection with searching for a target and completing a Business Combination.
Liquidity and Capital Resources
As of June 30, 2022, we had $49,254 in our operating bank account, and working capital deficit of $3,095,928.
For the six months ended June 30, 2022, cash used in operating activities was $460,911.
For the period from April 23, 2021 (inception) through June 30, 2021, cash used in operating activities was $0.
Our liquidity needs up to the completion of our IPO on September 17, 2021 had been satisfied through a payment from our Sponsor of $25,000 for 5,750,000 Founder Shares (as defined below) and the loan under an unsecured promissory note from the Sponsor of $148,372. The promissory note was fully repaid as of September 17, 2021.
On September 17, 2021, we consummated our IPO of 20,000,000 units (the “Units”). The Units were sold at a price of $10.00 per Unit, generating aggregate gross proceeds of $200,000,000. Simultaneously with the closing of our IPO, we consummated the sale of 7,630,000 warrants (the “Private Placement Warrants”) to our Sponsor and Cantor, one of the underwriters for our IPO. The Private Placement Warrants were sold at a price of $1.00 per Private Placement Warrant, generating aggregate gross proceeds of $7,630,000.
Following the IPO and the sale of the Private Placement Warrants, a total of $201,000,000 of the net proceeds from the sale of the Units and Private Placement Warrants was deposited in a U.S.-based trust account (the “Trust Account”) established for the benefit of our public shareholders maintained by Continental Stock Transfer & Trust Company, acting as trustee. Transaction costs of the IPO amounted to $13,810,289 consisting of $4,000,000 of underwriting discounts and commissions, $9,000,000 of deferred underwriting discounts commissions and $810,289 of other cash offering costs, including $148,372 in repayment of the unsecured promissory note to our Sponsor. In addition, as of June 30, 2022 and December 31, 2021, $49,254 and $510,165 of cash was held outside of the Trust Account and is available for working capital purposes, respectively. The funds in the trust account are invested only in U.S. government treasury bills with a maturity of 185 days or less or in money market funds investing solely in U.S. Treasuries.
We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account, which interest shall be net of taxes payable and excluding deferred underwriting commissions, to complete our Business Combination. Our annual income tax obligations will depend on the amount of interest and other income earned on the amounts held in the Trust Account. We expect the only taxes payable by us out of the funds in the Trust Account will be income and franchise taxes, if any. To the extent that our share capital or debt is used, in whole or in part, as consideration to complete our Business Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
We have used the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, structure, negotiate and complete a business combination, and to pay taxes to the extent the interest earned on the Trust Account is not sufficient to pay our taxes.
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In order to fund working capital deficiencies or finance transaction costs in connection with an intended Business Combination, our Sponsor or an affiliate of our Sponsor or certain of our directors and officers may, but are not obligated to, loan us funds as may be required. If we complete our Business Combination, we may repay such loaned amounts out of the proceeds of the Trust Account released to us. Otherwise, such loans may be repaid only out of funds held outside the Trust Account. In the event that our Business Combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from our Trust Account would be used to repay such loaned amounts. Up to $1,500,000 of such loans may be convertible into warrants at a price of $1.00 per warrant at the option of the lender. The warrants would be identical to the Private Placement Warrants issued to our Sponsor and Cantor. Except for the foregoing, the terms of such loans, if any, have not been determined and no written agreements exist with respect to such loans. We do not expect to seek loans from parties other than our Sponsor or an affiliate of our Sponsor or certain of our directors and officers as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our Trust Account. As of June 30, 2022 and December 31, 2021, there were no amounts outstanding under any such working capital loans.
If our estimates of the costs of identifying a target business, undertaking in-depth due diligence and negotiating a Business Combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our Business Combination. Moreover, we may need to obtain additional financing either to complete our Business Combination or because we become obligated to redeem a significant number of our public shares upon completion of our Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination.
Going Concern
As of June 30, 2022, we have neither engaged in any operations nor generated any revenues to date. Our only activities since inception have been organizational activities and those necessary to prepare for our IPO. Following the IPO, we will not generate any operating revenues until after completion of its initial business combination. We have generated non-operating income in the form of interest income earned on the trust account balance in the amount of $268,266 which cannot used for working capital.
We expect to incur increased expenses since becoming a public company (for legal, financial reporting, accounting and auditing compliance), as well as expenses as it conducts due diligence on prospective business combination candidates. Our Sponsor, or an affiliate of the Sponsor, or certain of our officers and directors may, but are not obligated to, loan our funds as may be required (see Note 5 to the Financial Statements).
Based on the foregoing, management believes that we will not have sufficient working capital and borrowing capacity to meet its needs through the earlier of the consummation of a Business Combination or one year from this filing.
In connection with our assessment of going concern considerations in accordance with Financial Accounting Standard Board’s Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” we have until March 17, 2023 to consummate the proposed Business Combination. It is uncertain that we will be able to consummate the proposed Business Combination by this time. If a Business Combination is not consummated by March 17, 2023, there will be a mandatory liquidation and our subsequent dissolution. Management has determined that the mandatory liquidation, should a business combination not occur, and potential subsequent dissolution, raises substantial doubt about our ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should we be required to liquidate after March 17, 2023. We intend to complete the proposed Business Combination before the mandatory liquidation date. However, there can be no assurance that we will be able to consummate any business combination by March 17, 2023.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of June 30, 2022 and December 31, 2021. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
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Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay an affiliate of our Sponsor a monthly fee of $10,000 for office space, administrative and support services, provided to us. We began incurring these fees on September 15, 2021 and will continue to incur these fees monthly until the earlier of the completion of a Business Combination and our liquidation.
The underwriters are entitled to a deferred discount of $0.45 per unit, or $9,000,000 in the aggregate. The deferred discount will become payable to the underwriters from the amounts held in the Trust Account after redemptions solely in the event that we complete a Business Combination, subject to the terms of the underwriting agreement and the side letter agreements.
Consulting Agreements
On May 27, 2022 (the “Third Addendum Effective Date”), that certain Consulting Agreement, commencing as of September 14, 2021, as amended by the First Addendum on December 2, 2021 and further amended by the Second Addendum on April 1, 2022, by and between ICR, LLC (the “Consultant”) and the Company was amended as follows: “Commencing on the Third Addendum Effective Date, the Twenty Thousand Dollar ($20,000.00) monthly fees for the months of April, May, June, July, August, and September 2022 listed in Section IV.B.i of the Agreement shall be deferred and payable upon the Transaction Date. If the Transaction occurs after September 30, 2022, twenty-five percent (25%) of the discretionary bonus shall become non-discretionary and be paid to the Consultant on the Transaction Date. As of June 30, 2022, $60,000 is included in accrued expenses.”
Critical Accounting Policies
Warrant Liability
We evaluate our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”. Derivative instruments are recorded at fair value on the grant date and re-valued at each reporting date, with changes in the fair value reported in the condensed statements of operations. Derivative assets and liabilities are classified in the balance sheets as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date.
Financial Accounting Standards Board (“FASB”) ASC 470-20, Debt with Conversion and Other Options addresses the allocation of proceeds from the issuance of convertible debt into its equity and debt components. We apply this guidance to allocate IPO proceeds from the Units between Class A ordinary shares and warrants, using the residual method by allocating IPO proceeds first to fair value of the warrants and then the Class A ordinary shares.
We account for the Public Warrants and Private Placement Warrants as liabilities in accordance with the guidance contained in ASC 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity. Because we do not control the occurrence of events, such as a tender offer or exchange that may trigger cash settlement of the warrants where not all of the shareholders also receive cash, the warrants do not meet the criteria for equity treatment thereunder, and as such, the warrants are recorded as derivative liabilities.
Net Income (Loss) Per Share
We have two classes of shares, which are referred to as Class A ordinary shares and Class B ordinary shares. Earnings and losses are shared pro rata between the two classes of shares. The 17,630,000 potential ordinary shares for outstanding warrants to purchase our shares were excluded from diluted earnings per share for the three and six months ended June 30, 2022 because the warrants are contingently exercisable, and the contingencies have not yet been met. As a result, diluted net income (loss) per ordinary shares is the same as basic net income (loss) per ordinary shares for the periods.
Ordinary Shares Subject to Possible Redemption
We account for our ordinary shares subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Ordinary shares subject to mandatory redemption (if any) are classified as a liability instrument and measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares that feature redemption rights that are
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either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) are classified as temporary equity. At all other times, ordinary shares are classified as shareholders’ equity. Our Class A ordinary shares feature certain redemption rights that are considered to be outside of our control and subject to the occurrence of uncertain future events. As a result of recent guidance to Special Purpose Acquisition Companies by the SEC regarding redeemable equity instruments, we revisited its application of ASC 480-10-S99 on our condensed financial statements. Subsequent to the re-evaluation, our management concluded that all of its Public Shares should be classified as temporary equity. Accordingly, 20,000,000 Class A ordinary shares subject to possible redemption are presented at redemption value as temporary equity, outside of the shareholders’ deficit section of our balance sheets.
Recent Accounting Standards
In August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective January 1, 2022 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The guidance was adopted starting January 1, 2022. Adoption of the ASU did not impact our financial position, results of operations or cash flows.
Management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on our condensed financial statements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2022. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we may be involved in various claims and legal actions in the ordinary course of business. We are not currently involved in any material legal proceedings outside the ordinary course of our business.
Item 1A. Risk Factors
Factors that could cause our actual results to differ materially from those in this Quarterly Report are any of the risks described in our Annual Report for the year ended December 31, 2021. As of the date of this Quarterly Report, there have been no material changes to the risk factors described in the Annual Report for the year ended December 31, 2021. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Unregistered Sales
On April 26, 2021, our Sponsor subscribed for an aggregate of 5,750,000 Class B ordinary shares (the “Founder Shares”), par value $0.0001 per share, for an aggregate purchase price of $25,000 or approximately $0.004 per share. On June 7, 2021, our Sponsor transferred 25,000 Founder Shares to Mitsui & Co., LTD, an advisory board member. On August 13, 2021, our Sponsor transferred 35,000 Founder Shares to each of Gary D. Begeman, Henry E. Dubois and Michael Leitner, our independent directors, and 25,000 Founder Shares to each of Eddie Kato and Simon Cathcart, our advisory board members. Up to 750,000 Founder Shares are subject to forfeiture by our Sponsor depending on the extent to which the underwriters’ over-allotment option is exercised. On September 17, 2021, our Sponsor sold 1,250,000 Founder Shares to the anchor investors who purchased units in the IPO at their original purchase price of approximately $0.004 per share. On October 29, 2021, our Sponsor forfeited 750,000 Founder Shares following the expiration of the underwriters’ over-allotment option, which was not exercised.
On September 17, 2021, simultaneously with the closing of the IPO, the Company completed the private sale of an aggregate of 7,630,000 Private Placement Warrants at a purchase price of $1.00 per Private Placement Warrant, to the Sponsor, which purchased 6,630,000 Private Placement Warrants, and Cantor, the representative of the underwriters, which purchased 1,000,000 Private Placement Warrants, generating gross proceeds to the Company of $7,630,000 in the aggregate.
The sales of the Founder Shares and Private Placement Warrants by the Company were exempt from registration in reliance on Section 4(a)(2) of the Securities Act as transactions by an issuer not involving a public offering.
No underwriting discounts or commissions were paid with respect to such sales.
Use of Proceeds
On September 17, 2021, we consummated our IPO of 20,000,000 Units. We also granted the underwriters a 45-day over-allotment option to purchase 3,000,000 additional Units at the initial public offering price, which was not exercised. Each Unit consists of one Class A ordinary share and one-half of one warrant of the Company, with each whole warrant entitling the holder thereof to purchase one whole Class A ordinary share at a price of $11.50 per share, subject to certain adjustments. The Units were sold at a price of $10.00 per unit, generating aggregate gross proceeds to the Company of $200,000,000. Cantor acted as the sole book-running manager, and Truist Securities acted as the lead manager, for our IPO. The securities sold in our IPO were registered under the Securities Act on a registration statement on Form S-1 (File No. 333-259098). The registration statement became effective on September 14, 2021.
Following the IPO and the sale of the Private Placement Warrants, a total of $201,000,000 of the net proceeds from the sale of the Units and Private Placement Warrants was deposited in the Trust Account. Transaction costs of the IPO amounted to $13,810,289, consisting of $4,000,000 of underwriting discounts and commissions, $9,000,000 of deferred underwriting discounts and commissions and $810,289 of other cash offering costs. In addition, as of June 30, 2022, $49,254 of cash was held outside of the Trust Account and is available for working capital purposes.
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For a description of the use of the net proceeds from our IPO, see Part I, Item 2 of this Quarterly Report.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits
Exhibit Number |
| Description |
2.1 | ||
10.1 | ||
31.1* | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
31.2* | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
32.1** | ||
32.2** | ||
101 | The following financial information from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) Condensed Balance Sheet; (ii) Condensed Statements of Operations; (iii) Condensed Statements of Changes in Shareholders’ Equity; (iv) Condensed Statements of Cash Flows; and (v) Notes to Interim Condensed Financial Statements | |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* | Filed herewith |
** | Furnished herewith |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Endurance Acquisition Corp. | ||
Date: August 12, 2022 | By: | /s/ Richard C. Davis |
Richard C. Davis | ||
Chief Executive Officer | ||
(principal executive officer) | ||
Date: August 12, 2022 | By: | /s/ Romeo A. Reyes |
Romeo A. Reyes | ||
Chief Financial Officer | ||
(principal financial and accounting officer) | ||
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