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.
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