References to the "Company," "our," "us" or "we" refer to Catalyst Partners
Acquisition Corp. The following discussion and analysis of the Company's
financial condition and results of operations should be read in conjunction with
the financial statements and the notes thereto contained elsewhere in this
report. Certain information contained in the discussion and analysis set forth
below includes forward- looking statements that involve risks and uncertainties.
Overview
Catalyst Partners Acquisition Corp. is a blank check company incorporated as a
Cayman Islands exempted company on February 10, 2021 (inception). The Company
was incorporated for the purpose of effecting a merger, share exchange, asset
acquisition, share purchase, reorganization or similar business combination with
one or more businesses that the Company has not yet identified ("Business
Combination"). The Company is an early stage and emerging growth company and, as
such, the Company is subject to all of the risks with early stage and emerging
growth companies.
As of December 31, 2021, the Company had not yet commenced operations. All
activity for the period from February 10, 2021 (inception) through December 31,
2021 related to the Company's formation the initial public offering (the
"Initial Public Offering"), which is described below, and since the Initial
Public Offering, the search for a business combination target. The Company will
not generate any operating revenues until after the completion of its initial
Business Combination, at the earliest. The Company expects to generate
non-operating income in the form of interest income from the proceeds derived
from the Initial Public Offering (as defined below).
The Company's sponsor is CAT Sponsor LLC, a Delaware limited liability company
("Sponsor"). The registration statement for the Company's Initial Public
Offering was declared effective on May 17, 2021. On May 20, 2021, the Company
consummated its Initial Public Offering of 30,000,000 units (the "Units" and,
with respect to the Class A ordinary shares included in the Units being offered,
the "Public Shares"), at $10.00 per Unit, generating gross proceeds of $300.0
million, and incurring offering costs of approximately $17.3 million, of which
$10.5 million was for deferred underwriting commissions (see Note 6). The
Company granted the underwriter a 45-day option to purchase up to an additional
4,500,000 Units at the Initial Public Offering price to cover over-allotments.
On June 3, 2021, the underwriters partially exercised the over-allotment option
to purchase an additional 4,360,391 Units generating gross proceeds of
approximately $43.6 million (the "Over-Allotment"). The underwriters forfeited
the balance of the option. The Company incurred additional offering costs of
approximately $2.4 million in connection with the Over- Allotment (of which
approximately $1.5 million was for deferred underwriting fees).
Simultaneously with the closing of the Initial Public Offering, the Company
consummated the private placement ("Private Placement") of 18,666,667 warrants
(each, a "Private Placement Warrant" and collectively, the "Private Placement
Warrants") at a price of $0.60 per Private Placement Warrant to the Sponsor,
generating proceeds of $11.2 million (see Note 5). On June 3, 2021,
simultaneously with the issuance and sale of the Over-Allotment Units, the
Company consummated the sale of an additional 1,453,464 Private Warrants at
$0.60 per Private Placement Warrant (the "Additional Private Placement
Warrants"), generating additional gross proceeds of approximately $872,000.
Upon the closing of the Initial Public Offering and the Private Placement,
$300.0 million ($10.00 per Unit) of the net proceeds of the sale of the Units in
the Initial Public Offering and of the Private Placement Warrants in the Private
Placement were placed in a trust account ("Trust Account") with Continental
Stock Transfer & Trust Company acting as trustee and will be invested in United
States government treasury bills with a maturity of 185 days or less or in money
market funds investing solely in U.S. Treasuries and meeting certain conditions
under Rule 2a-7 under the Investment Company Act of 1940, as amended, or the
Investment Company Act, as determined by the Company, until the earlier of:
(i) the completion of a Business Combination and (ii) the distribution of the
Trust Account as described below.
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The Company's management has broad discretion with respect to the specific
application of the net proceeds of its Initial Public Offering and the sale of
Private Placement Warrants, although substantially all of the net proceeds are
intended to be applied generally toward consummating a Business Combination. The
Company's initial Business Combination must be with one or more operating
businesses or assets with a fair market value equal to at least 80% of the net
assets held in the Trust Account (excluding the deferred underwriting
commissions and taxes payable on the interest earned on the Trust Account) at
the time the Company signs a definitive agreement in connection with the initial
Business Combination. However, the Company will only complete a Business
Combination if the post-transaction company owns or acquires 50% or more of the
outstanding voting securities of the target or otherwise acquires a controlling
interest in the target sufficient for it not to be required to register as an
investment company under the Investment Company Act.
The Company will provide its holders of Public Shares (the "Public
Shareholders") with the opportunity to redeem all or a portion of their Public
Shares upon the completion of a Business Combination either (i) in connection
with a general meeting called to approve the Business Combination or (ii) by
means of a tender offer. The decision as to whether the Company will seek
shareholder approval of a Business Combination or conduct a tender offer will be
made by the Company, solely in its discretion. The Public Shareholders will be
entitled to redeem their Public Shares for a pro rata portion of the amount then
in the Trust Account (initially at $10.00 per share, plus any pro rata interest
earned on the funds held in the Trust Account and not previously released to the
Company to pay its tax obligations). The per-share amount to be distributed to
Public Shareholders who redeem their Public Shares will not be reduced by the
deferred underwriting commissions the Company will pay to the underwriters (as
discussed in Note 6). These Public Shares were recorded at a redemption value
and classified as temporary equity, in accordance with Accounting Standards
Codification ("ASC") Topic 480 "Distinguishing Liabilities from Equity." In such
case, the Company will proceed with a Business Combination if the Company has
net tangible assets of at least $5,000,001 upon such consummation of a Business
Combination and a majority of the shares voted are voted in favor of the
Business Combination. If a shareholder vote is not required by law and the
Company does not decide to hold a shareholder vote for business or other
reasons, the Company will, pursuant to the amended and restated memorandum and
articles of association which will be adopted by the Company upon the
consummation of the Initial Public Offering (the "Amended and Restated
Memorandum and Articles of Association"), conduct the redemptions pursuant to
the tender offer rules of the U.S. Securities and Exchange Commission (the
"SEC"), and file tender offer documents with the SEC prior to completing a
Business Combination. If, however, a shareholder approval of the transactions is
required by law, or the Company decides to obtain shareholder approval for
business or other reasons, the Company will offer to redeem shares in
conjunction with a proxy solicitation pursuant to the proxy rules and not
pursuant to the tender offer rules. Additionally, each Public Shareholder may
elect to redeem their Public Shares irrespective of whether they vote for or
against the proposed transaction. If the Company seeks shareholder approval in
connection with a Business Combination, the holders of the Founder Shares prior
to this Initial Public Offering (the "Initial Shareholders") agreed to vote
their Founder Shares (as defined in Note 5) and any Public Shares purchased
during or after the Initial Public Offering in favor of a Business Combination.
In addition, the Initial Shareholders agreed to waive their redemption rights
with respect to their Founder Shares and Public Shares in connection with the
completion of a Business Combination. In addition, the Company has agreed not to
enter into a definitive agreement regarding an initial Business Combination
without the prior consent of the Sponsor.
Notwithstanding the foregoing, the Company's Amended and Restated Memorandum and
Articles of Association provides that a Public Shareholder, together with any
affiliate of such shareholder or any other person with whom such shareholder is
acting in concert or as a "group" (as defined under Section 13 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), will be restricted from
redeeming its shares with respect to more than an aggregate of 15% of the
Class A ordinary shares sold in the Initial Public Offering, without the prior
consent of the Company.
The Company's Sponsor, executive officers and directors agreed not to propose an
amendment to the Company's Amended and Restated Memorandum and Articles of
Association that would affect the substance or timing of the Company's
obligation to provide for the redemption of its Public Shares in connection with
a Business Combination or to redeem 100% of its Public Shares if the Company
does not complete a Business Combination, unless the Company provides the Public
Shareholders with the opportunity to redeem their Class A ordinary shares in
conjunction with any such amendment.
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If the Company is unable to complete a Business Combination within 24 months
from the closing of the Initial Public Offering, or May 20, 2023 (the
"Combination Period"), or during any extended time that the Company has to
consummate a Business Combination beyond 24 months as a result of a shareholder
vote to amend its amended and restated memorandum and articles of association
(an "Extension Period"), the Company will (i) cease all operations except for
the purpose of winding up; (ii) as promptly as reasonably possible but not more
than ten business days thereafter, redeem the Public Shares, at a per-share
price, payable in cash, equal to the aggregate amount then on deposit in the
Trust Account, including interest earned on the funds held in the Trust Account
and not previously released to the Company to pay its taxes, if any (less up to
$100,000 of interest to pay dissolution expenses), divided by the number of the
then-outstanding Public Shares, which redemption will completely extinguish
Public Shareholders' rights as shareholders (including the right to receive
further liquidating distributions, if any); and (iii) as promptly as reasonably
possible following such redemption, subject to the approval of the remaining
shareholders and the board of directors, liquidate and dissolve, subject in the
case of clauses (ii) and (iii), to our obligations under Cayman Islands law to
provide for claims of creditors and the requirements of other applicable law.
The Initial Shareholders agreed to waive their liquidation rights with respect
to the Founder Shares if the Company fails to complete a Business Combination
within the Combination Period or during any Extension Period. However, if the
Initial Shareholders should acquire Public Shares in or after the Initial Public
Offering, they will be entitled to liquidating distributions from the Trust
Account with respect to such Public Shares if the Company fails to complete a
Business Combination within the Combination Period. The underwriters agreed to
waive their rights to their deferred underwriting commission (see Note 6) held
in the Trust Account in the event the Company does not complete a Business
Combination within the Combination Period and, in such event, such amounts will
be included with the funds held in the Trust Account that will be available to
fund the redemption of the Company's Public Shares. In the event of such
distribution, it is possible that the per share value of the residual assets
remaining available for distribution (including Trust Account assets) will be
only $10.00 per share initially held in the Trust Account. In order to protect
the amounts held in the Trust Account, the Sponsor agreed that it will be liable
to the Company if and to the extent any claims by a third party for services
rendered or products sold to the Company, or a prospective target business with
which the Company has entered into a written letter of intent, confidentiality
or other similar agreement or business combination agreement, reduce the amount
of funds in the Trust Account to below the lesser of (i) $10.00 per Public Share
and (ii) the actual amount per Public Share held in the Trust Account as of the
date of the liquidation of the Trust Account, if less than $10.00 per share due
to reductions in the value of the trust assets, less taxes payable, provided
that such liability will not apply to any claims by a third party or prospective
target business who executed a waiver of any and all rights to the monies held
in the Trust Account (whether or not such waiver is enforceable) nor will it
apply to any claims under the Company's indemnity of the underwriters of the
Initial Public Offering against certain liabilities, including liabilities under
the Securities Act of 1933, as amended (the "Securities Act"). In the event that
an executed waiver is deemed to be unenforceable against a third party, the
Sponsor will not be responsible to the extent of any liability for such
third-party claims. The Company will seek to reduce the possibility that the
Sponsor will have to indemnify the Trust Account due to claims of creditors by
endeavoring to have vendors, service providers (except the Company's independent
registered public accounting firm), prospective target businesses or other
entities with which the Company does business, execute agreements with the
Company waiving any right, title, interest or claim of any kind in or to monies
held in the Trust Account. There can be no guarantee that the Company will be
successful in obtaining such waivers from its targeted vendors and service
providers.
Results of Operations
Our entire activity since inception up to December 31, 2021 was in preparation
for our formation and the Initial Public Offering, and, subsequent to the
Initial Public Offering, identifying a target company for a Business
Combination. We will not be generating any operating revenues until the closing
and completion of our initial Business Combination at the earliest.
For the period from February 10, 2021 (inception) through December 31, 2021, we
had a net income of approximately $7,481,000, which consisted of approximately
$48,000 income from investments held in the Trust Account and $13,558,000
non-operating gain resulting from the change in fair value of derivative warrant
liabilities, which was offset by approximately $1,232,000 of general and
administrative expenses, $70,000 of general and administrative expenses -
related party, approximately $799,000 in offering costs associated with
derivative warrant liabilities and loss upon issuance of private placement
warrants of approximately $4,024,000.
Liquidity
As of December 31, 2021, the Company had approximately $3.0 million in its
operating bank account and working capital of approximately $3.1 million.
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The Company's liquidity needs prior to the consummation of the Initial Public
Offering were satisfied through the payment of $25,000 from the Sponsor to
purchase Founder Shares (as defined in Note 5), proceeds of $300,000 under the
Note (as defined in Note 5) and proceeds of $900,000 under the Second Note (as
defined in Note 5). The Company repaid the Note balance of $300,000 upon closing
of the Initial Public Offering. On June 3, 2021, simultaneously with the
issuance and sale of the Over-Allotment Units, the Company consummated the sale
of an additional 1,453,464 Private Warrants. The purchase price of approximately
$872,000 for the additional Private Warrants offset a portion of the $900,000
outstanding under the Second Note, and the remainder of the balance under the
Second Note was repaid on June 3, 2021. Subsequent to the consummation of the
Initial Public Offering, the Company's liquidity has been satisfied through the
net proceeds from the Private Placement held outside of the Trust Account. In
addition, in order to finance transaction costs in connection with a Business
Combination, the Sponsor or an affiliate of the Sponsor, or certain of the
Company's officers and directors may, but are not obligated to, provide the
Company Working Capital Loans (as defined in Note 5). As of December 31, 2021,
there were no amounts outstanding under any Working Capital Loan.
Based on the foregoing, management believes that the Company will 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. Over this time period, the Company will be using the funds held outside
of the Trust Account for paying existing accounts payable, identifying and
evaluating prospective initial Business Combination candidates, performing due
diligence on prospective target businesses, paying for travel expenditures,
selecting the target business to merge with or acquire, and structuring,
negotiating and consummating the Business Combination.
Other Contractual Obligations
Administrative Services Agreement
Commencing on the date that the Company's securities were first listed on the
Nasdaq through the earlier of consummation of the initial Business Combination
or its liquidation, the Company agreed to reimburse the Sponsor or an affiliate
of the Sponsor for office space, secretarial and administrative services
provided to us in the amount of $10,000 per month. For the period from
February 10, 2021 (inception) through December 31, 2021, the Company incurred
expenses of $70,000, respectively, under this agreement. As of December 31,
2021, the Company had $70,000 accrued for services in connection with such
agreement on the accompanying balance sheet.
In addition, the Sponsor, officers and directors, or any of their respective
affiliates will be reimbursed for any out-of-pocket expenses incurred in
connection with activities on the Company's behalf such as identifying potential
target businesses and performing due diligence on suitable Business
Combinations. The Company's audit committee will review on a quarterly basis all
payments that were made to the Sponsor, officers or directors, or the Company's
or their affiliates. Any such payments prior to an initial Business Combination
will be made from funds held outside the Trust Account. No such amounts were
reimbursed or accrued for as of December 31, 2021.
Registration and Shareholder Rights
The holders of the Founder Shares, Private Placement Warrants and any warrants
that may be issued upon conversion of Working Capital Loans (and any Class A
ordinary shares issuable upon the exercise of the Private Placement Warrants or
warrants issued upon conversion of the Working Capital) were entitled to
registration rights pursuant to a registration rights agreement to be signed
prior to or on the effective date of the Initial Public Offering. The holders of
these securities were entitled to make up to three demands, excluding short form
demands, that the Company registered such securities. In addition, the holders
have certain "piggy-back" registration rights with respect to the registration
statements to be filed subsequent to the completion of the initial Business
Combination. The Company will bear the expenses incurred in connection with the
filing of any such registration statements.
Underwriting Agreement
The underwriters were entitled to an underwriting discount of $0.20 per unit, or
approximately $6.9 million in the aggregate, in connection with the closing of
the Initial Public Offering and the issuance and sale of the Over-Allotment
Units. In addition, $0.35 per unit, or approximately $12.0 million in the
aggregate will be payable to the underwriters for deferred underwriting
commissions in connection with the Initial Public Offering and the issuance and
sale of the Over-Allotment Units. The deferred fee will become payable to the
underwriters from the amounts held in the Trust Account solely in the event that
the Company completes a Business Combination, subject to the terms of the
underwriting agreement.
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Risk and Uncertainties
Management continues to evaluate the impact of the COVID-19 pandemic on the
industry and has concluded that while it is reasonably possible that the virus
could have a negative effect on the Company's financial position, results of its
operations, and/or search for a target company, the specific impact is not
readily determinable as of the date of the financial statements. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Critical Accounting Policies and Estimates
This management's discussion and analysis of our financial condition and results
of operations is based on our financial statements, which have been prepared in
accordance with U.S. GAAP. The preparation of these financial statements
requires us to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses and the disclosure of contingent
assets and liabilities in our financial statements. On an ongoing basis, we
evaluate our estimates and judgments, including those related to fair value of
financial instruments and accrued expenses. We base our estimates on historical
experience, known trends and events and various other factors that we believe to
be reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. We have identified the
following as our critical accounting policies:
Derivative warrant liabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or
foreign currency risks. We evaluate all of our financial instruments, including
issued stock purchase warrants, to determine if such instruments are derivatives
or contain features that qualify as embedded derivatives, pursuant to ASC 480
and FASB ASC Topic 815, "Derivatives and Hedging" ("ASC 815"). The
classification of derivative instruments, including whether such instruments
should be recorded as liabilities or as equity, is re-assessed at the end of
each reporting period.
The warrants issued in connection with the Initial Public Offering (the "Public
Warrants") and the Private Placement Warrants are recognized as derivative
liabilities in accordance with ASC 815. Accordingly, we recognize the warrant
instruments as liabilities at fair value and adjusts the carrying value of the
instruments to fair value at each reporting period until they are exercised. The
fair value of the Public Warrants issued in connection with the Initial Public
Offering were estimated using an Option Pricing Method, whereas the fair value
of the Private Placement Warrants issued in conjunction with Initial Public
Offering were estimated using Black-Scholes option pricing model. The
determination of the fair value of the warrant liability may be subject to
change as more current information becomes available and accordingly the actual
results could differ significantly. Derivative warrant liabilities are
classified as non-current liabilities as their liquidation is not reasonably
expected to require the use of current assets or require the creation of current
liabilities.
Class A Ordinary Shares Subject to Possible Redemption
We account for our Class A ordinary shares subject to possible redemption in
accordance with the guidance in ASC Topic 480 "Distinguishing Liabilities from
Equity." Class A ordinary shares subject to mandatory redemption (if any) is
classified as liability instruments and are measured at fair value.
Conditionally redeemable Class A ordinary shares (including Class A ordinary
shares that features redemption rights that are 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, Class A ordinary shares is 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. Accordingly, 34,360,391 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.
We recognize changes in redemption value immediately as they occur and adjusts
the carrying value of the Class A ordinary shares subject to possible redemption
to equal the redemption value at the end of each reporting period. This method
would view the end of the reporting period as if it were also the redemption
date for the security. Effective with the closing of the Initial Public
Offering, we recognized the accretion from initial book value to redemption
amount, which resulted in charges against additional paid-in capital (to the
extent available) and accumulated deficit.
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Net Income (Loss) per Ordinary Share
We comply with accounting and disclosure requirements of FASB ASC Topic 260,
"Earnings Per Share." We have two classes of shares, which are referred to as
Class A ordinary shares and Class B ordinary shares. Income and losses are
shared pro rata between the two classes of shares. Net income (loss) per
ordinary share is calculated by dividing the net income (loss) by the weighted
average shares of ordinary shares outstanding for the respective period.
The calculation of diluted net income (loss) per ordinary shares does not
consider the effect of the warrants issued in connection with the Initial Public
Offering and the Private Placement to purchase an aggregate of 26,992,209
Class A ordinary shares since their inclusion would be anti- dilutive under the
treasury stock method. As a result, diluted net income (loss) per share is the
same as basic net income (loss) per share for the three and nine months ended
December 31, 2021. Accretion associated with the redeemable Class A ordinary
shares is excluded from earnings per ordinary share as the redemption value
approximates fair value.
We have considered the effect of Class B ordinary shares that were excluded from
weighted average number as they were contingent on the exercise of
over-allotment option by the underwriters. Since the contingency was satisfied,
we included these shares in the weighted average number as of the beginning of
the period to determine the dilutive impact of these shares. Off-Balance Sheet
Arrangements
Off-Balance Sheet Financing Arrangements
As of December 31, 2021, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any commitments
or contractual obligations.
JOBS Act
On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains
provisions that, among other things, relax certain reporting requirements for
qualifying public companies. We will qualify as an "emerging growth company" and
under the JOBS Act will be allowed to comply with new or revised accounting
pronouncements based on the effective date for private (not publicly traded)
companies. We are electing to delay the adoption of new or revised accounting
standards, and as a result, we may not comply with new or revised accounting
standards on the relevant dates on which adoption of such standards is required
for non-emerging growth companies. As such, our financial statements may not be
comparable to companies that comply with public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the
other reduced reporting requirements provided by the JOBS Act. Subject to
certain conditions set forth in the JOBS Act, if, as an "emerging growth
company," we choose to rely on such exemptions we may not be required to, among
other things, (i) provide an auditor's attestation report on our system of
internal controls over financial reporting pursuant to Section 404, (ii) provide
all of the compensation disclosure that may be required of non-emerging growth
public companies under the Dodd-Frank Wall Street Reform and Consumer Protection
Act, (iii) comply with any requirement that may be adopted by the PCAOB
regarding mandatory audit firm rotation or a supplement to the auditor's report
providing additional information about the audit and the financial statements
(auditor discussion and analysis) and (iv) disclose certain executive
compensation related items such as the correlation between executive
compensation and performance and comparisons of the CEO's compensation to median
employee compensation. These exemptions will apply for a period of five years
following the completion of our Initial Public Offering or until we are no
longer an "emerging growth company," whichever is earlier.
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