shares. Such circumstances might include a change in control or another deemed liquidation event, as described in ASC 815-40-55-2 through 55-5.
815-40-55-3 However, if a change-in-control provision requires that the counterparty receive, or permits the counterparty to deliver upon settlement, the same form of consideration (for example, cash, debt, or other assets) as holders of the shares underlying the contract, permanent equity classification would not be precluded as a result of the change-in-control provision. In that circumstance, if the holders of the shares underlying the contract were to receive cash in the transaction causing the change in control, the counterparty to the contract could also receive cash based on the value of its position under the contract.
According to the change-in-control provision described in Section 4.5 of the Warrant Agreement, in the case of any merger or consolidation of the Company with or into another corporation, the holders of the Warrant have the right to purchase and receive the kind and amount of shares or stock or other securities or property (including cash) receivable upon such reclassification, reorganization, merger or consolidation, upon the basis and upon the terms and conditions specified in the Warrants and in lieu of the Ordinary Shares of the Company immediately theretofore purchasable and receivable upon the exercise of the rights represented thereby. The holders of the Warrant receive the same form of consideration as holders of the shares underlying the contract, in which circumstance that permanent equity classification would not be precluded.
The consummation of the business combination, and particularly the elimination of the dual class structure of common shares, will not impact analysis under the guidance referenced above.
815-40-55-5 Similarly, a change-in-control provision could specify that if all stockholders receive stock of an acquiring entity upon a change in control, the contract will be indexed to the shares of the purchaser (or issuer in a business combination accounted for as a pooling of interests) specified in the business combination agreement, without affecting classification of the contract.
The elimination of the dual class structure of common shares upon the consummation of the business combination, all stockholders receive stock of Summit upon a change in control, the contract will be indexed to the shares of the purchaser specified in the business combination agreement, without affecting classification of the contract.
You disclose at F-15 that on October 12, 2022, Summit had drawn down $700,000 under the Convertible Promissory Note that may be converted into warrants. Please tell us how you considered its pro forma impact on the balance sheet, as well as the need to disclose it as part of the equity instruments excluded from the pro forma share balances in Note (4) at page 330.
In response to the Staff’s comment, the Company has revised the balance sheet on pages 332 and 338, and accounted $700,000 under the Convertible Promissory Note as equity, based on the assumption that $700,000 will be converted into warrants. The Company has also revised the disclosure in Note (4) on page 338 that the above warrants as part of the equity instruments are excluded from the pro forma share balances.
We note your new risk factor on page 130 where you disclose that the Business Combination may be subject to review and approval by the Committee on Foreign Investment in the United States (“CFIUS”), including your disclosure that certain transactions “may be subject to mandatory pre-closing CFIUS filing requirements.” Please update your risk factor to disclose whether or not the Business Combination is subject to the mandatory pre-closing CFIUS filing requirements or otherwise advise.
In response to the Staff’s comment, the Company has revised the disclosure on page 132 of the Registration Statement.