UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(MARK ONE)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarter ended
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number:
| (Exact Name of Registrant as Specified in Its Charter) |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices)
(Issuer’s telephone number)
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered | ||
| Units, each consisting of one Ordinary Share, par value $0.001 per share, and one Redeemable Warrant entitling the holder to receive one Ordinary Share | ACBAU | Nasdaq Capital Market | ||
| Warrants | ACBAW | Nasdaq Capital Market |
Check whether the issuer (1) filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 ☐
Indicate by check mark whether the
registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to
submit such files).
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 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
Indicate the number of shares outstanding of
each of the registrant’s classes of ordinary shares, as of the latest practicable date: As of November 11, 2021, there were
ACE GLOBAL BUSINESS ACQUISITION LIMITED
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2021
TABLE OF CONTENTS
i
FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, or the “Securities Act,” and Section 21E of the Securities Exchange Act of 1934, or the Exchange Act. The statements contained in this report that are not purely historical are forward-looking statements. Our forward-looking statements include, but are not limited to, statements regarding our or our management’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipates,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predicts,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this Form 10-Q may include, for example, statements about our:
| ● | ability to complete our initial business combination; |
| ● | success in retaining or recruiting, or changes required in, our officers, key employees or directors following our initial business combination; |
| ● | officers and directors allocating their time to other businesses and potentially having conflicts of interest with our business or in approving our initial business combination, as a result of which they would then receive expense reimbursements; |
| ● | potential ability to obtain additional financing to complete a business combination; |
| ● | pool of prospective target businesses; |
| ● | ability of our officers and directors to generate a number of potential investment opportunities; |
| ● | potential change in control if we acquire one or more target businesses for shares; |
| ● | public securities’ potential liquidity and trading; |
| ● | the lack of a market for our securities; |
| ● | expectations regarding the time during which we will be an “emerging growth company” under the JOBS Act; |
| ● | use of proceeds not held in the trust account or available to us from interest income on the trust account balance; or |
| ● | financial performance following our IPO. |
The forward-looking statements contained in this Form 10-K are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. 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.
ii
PART I - FINANCIAL INFORMATION
ACE GLOBAL BUSINESS ACQUISITION LIMITED
UNAUDITED CONDENSED BALANCE SHEETS
| September 30, 2021 | December 31, 2020 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Prepayment | ||||||||
| Deferred offering costs | ||||||||
| Total current assets | ||||||||
| Cash and investments held in trust account | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES, TEMPORARY EQUITY AND SHAREHOLDERS’ (DEFICIT) EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accrued liabilities and other payable | $ | $ | ||||||
| Advances from a related party | ||||||||
| Total current liabilities | ||||||||
| Warrant liabilities | ||||||||
| Deferred underwriting compensation | ||||||||
| TOTAL LIABILITIES | ||||||||
| Commitments and contingencies | ||||||||
| Ordinary shares, subject to possible redemption | ||||||||
| Shareholders’ equity (deficit): | ||||||||
| Ordinary shares, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total shareholders’ (deficit) equity | ( | ) | ||||||
| TOTAL LIABILITIES, TEMPORARY EQUITY AND SHAREHOLDERS’ (DEFICIT) EQUITY | $ | $ | ||||||
See accompanying notes to unaudited condensed financial statements.
1
ACE GLOBAL BUSINESS ACQUISITION LIMITED
UNAUDITED CONDENSED STATEMENT OF OPERATIONS
| Three months ended September 30, | Nine months ended September 30, | |||||||
| 2021 | 2021 | |||||||
| Formation, general and administrative expenses | $ | ( | ) | $ | ( | ) | ||
| Total operating expenses | ( | ) | ( | ) | ||||
| Other income | ||||||||
| Change fair value of warrant liabilities | ||||||||
| Dividend income | ||||||||
| Interest income | ||||||||
| Total other income, net | ||||||||
| Loss before income taxes | ( | ) | ( | ) | ||||
| Income taxes | ||||||||
| NET LOSS | ( | ) | ( | ) | ||||
| Basic and diluted weighted average shares outstanding, common stock subject to possible redemption | ||||||||
| Basic and diluted net income (loss) per share, common stock subject to possible redemption | $ | ( | ) | $ | ||||
| Basic and diluted weighted average shares outstanding, common stock attributable to Ace Global Business Acquisition Limited | ||||||||
| Basic and diluted net loss per share, common stock attributable to Ace Global Business Acquisition Limited | $ | ( | ) | $ | ( | ) | ||
See accompanying notes to unaudited condensed financial statements.
2
ACE GLOBAL BUSINESS ACQUISITION LIMITED
UNAUDITED CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS’ (DEFICIT) EQUITY
| Nine months ended September 30, 2021 | ||||||||||||||||||||
| Ordinary shares | Additional paid-in | Accumulated | Total shareholders’ Equity | |||||||||||||||||
| No. of shares | Amount | capital | deficit | (deficit) | ||||||||||||||||
| Balance as of January 1, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Sale of units in initial public offering | ||||||||||||||||||||
| Sale of units to the founder in private placement | ||||||||||||||||||||
| Initial classification of ordinary shares subject to possible redemption | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Allocation of offering costs to common stock subject to redemption | - | |||||||||||||||||||
| Accretion of carrying value to redemption value | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance as of September 30, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Three months ended September 30, 2021 | ||||||||||||||||||||
| Ordinary shares | Additional paid-in | Accumulated | Total shareholders’ | |||||||||||||||||
| No. of shares | Amount | capital | deficit | deficit | ||||||||||||||||
| Balance as of July 1, 2021 (revised) | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance as of September 30, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
See accompanying notes to unaudited condensed financial statements.
3
ACE GLOBAL BUSINESS ACQUISITION LIMITED
UNAUDITED CONDENSED STATEMENT OF CASH FLOWS
| Nine months
ended September 30, 2021 | ||||
| Cash flows from operating activities | ||||
| Net loss | $ | ( | ) | |
| Adjustments to reconcile net loss to net cash used in operating activities | ||||
| Change in fair value of warrant liabilities | ( | ) | ||
| Interest income and dividend income earned in cash and investments income held in trust account | ( | ) | ||
| Change in operating assets and liabilities: | ||||
| Increase in prepayment | ( | ) | ||
| Increase in accrued liabilities | ||||
| Net cash used in operating activities | ( | ) | ||
| Cash flows from investing activities | ||||
| Proceeds deposited in Trust Account | ( | ) | ||
| Net cash used in investing activities | ( | ) | ||
| Cash flows from financing activities | ||||
| Proceeds from public offering | ||||
| Proceeds from private placements | ||||
| Advances from a related party | ||||
| Net cash provided by financing activities | ||||
| Net change in cash | ||||
| Cash, beginning of period | ||||
| Cash, end of period | $ | |||
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:
| Initial classification of ordinary shares subject to possible redemption | $ | |||
| Allocation of offering costs to common stock subject to redemption | $ | |||
| Accretion of carrying value to redemption value | ( | ) | ||
| Accrued underwriting compensation | $ | |||
| Initial recognition of warrant liabilities | $ |
See accompanying notes to unaudited condensed financial statements.
4
ACE GLOBAL BUSINESS ACQUISITION LIMITED
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 1 – ORGANIZATION AND BUSINESS BACKGROUND
Ace Global Business Acquisition Limited (the “Company”) is a newly organized blank check company incorporated on November 2, 2020, under the laws of the British Virgin Islands for the purpose of acquiring, engaging in a share exchange, share reconstruction and amalgamation, purchasing all or substantially all of the assets of, entering into contractual arrangements, or engaging in any other similar business combination with one or more businesses or entities (Business Combination”). Although the Company is not limited to a particular industry or geographic region for purposes of consummating a Business Combination, the Company intends to focus on opportunities in the artificial intelligence and any other related technology innovations market in North America.
As of September 30, 2021, the Company had not commenced any operations. All activity through September 30, 2021 relates to the Company’s formation and the initial public offering as described below. The Company has selected December 31 as its fiscal year end.
Financing
The registration statement for the Company’s
Initial Public Offering became effective on April 5, 2021. On April 8, 2021, the Company consummated the Initial Public Offering of
Subsequently, the underwriters exercised their
over-allotment option in full, and the closing of the issuance and sale of the additional Public Units occurred on April 9, 2021. The
total aggregate issuance by the Company of
Simultaneously with the closing of the Initial
Public Offering on April 8, 2021, the Company consummated the sale of
Transaction costs amounted to $
Trust Account
Following the closing of the Initial Public Offering
on April 8, 2021 and exercise of the over-allotment option on April 9, 2021, an aggregate amount of $
Business Combination
The Company’s management has broad discretion
with respect to the specific application of the net proceeds of the Initial Public Offering and sale of the Private Units, although substantially
all of the net proceeds are intended to be applied generally toward consummating a Business Combination. NASDAQ rules provide that the
Business Combination must be with one or more target businesses that together have a fair market value equal to at least
The Company will provide its 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 shareholder meeting called to approve the Business Combination or (ii) by means of a tender offer. In connection with an Initial
Business Combination, the Company may seek shareholder approval of a Business Combination at a meeting called for such purpose at which
shareholders may seek to redeem their shares, regardless of whether they vote for or against a Business Combination. The Company will
proceed with a Business Combination only if the Company has net tangible assets of at least $
5
ACE GLOBAL BUSINESS ACQUISITION LIMITED
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
If a shareholder vote is not required and the Company does not decide to hold a shareholder vote for business or other legal reasons, the Company will, pursuant to its Amended and Restated Memorandum and Articles of Association, offer such redemption pursuant to the tender offer rules of the Securities and Exchange Commission (“SEC”), and file tender offer documents containing substantially the same information as would be included in a proxy statement with the SEC prior to completing a Business Combination.
The shareholders will be entitled to redeem
their Public Shares for a pro rata portion of the amount then in the Trust Account (initially $
The sponsor and any of the Company’s officers or directors that may hold Founder Shares (as defined in Note 5) (the “shareholders”) and the underwriters will agree (a) to vote their Founder Shares, the ordinary shares included in the Private Units (the “Private Shares”) and any Public Shares purchased during or after the Initial Public Offering in favor of a Business Combination, (b) not to propose an amendment to the Company’s Amended and Restated Memorandum and Articles of Association with respect to the Company’s pre-Business Combination activities prior to the consummation of a Business Combination unless the Company provides dissenting public shareholders with the opportunity to redeem their Public Shares in conjunction with any such amendment; (c) not to redeem any shares (including the Founder Shares) and Private Shares into the right to receive cash from the Trust Account in connection with a shareholder vote to approve a Business Combination (or to sell any shares in a tender offer in connection with a Business Combination if the Company does not seek shareholder approval in connection therewith) or a vote to amend the provisions of the Amended and Restated Memorandum and Articles of Association relating to shareholders’ rights of pre-Business Combination activity and (d) that the Founder Shares and Private Shares shall not participate in any liquidating distributions upon winding up if a Business Combination is not consummated. However, the shareholders will be entitled to liquidating distributions from the Trust Account with respect to any Public Shares purchased during or after the Initial Public Offering if the Company fails to complete its Business Combination.
On August 23, 2021,
The Company will have to consummate a Business
Combination until April 8, 2022. However, if the Company anticipates that it may not be able to consummate a Business Combination within
12 months, the Company may extend the period of time to consummate a Business Combination up to three times, each by an additional three
months (for a total of 21 months to complete a Business Combination (the “Combination Period”). In order to extend the time
available for the Company to consummate a Business Combination, the sponsor or its affiliate or designees must deposit into the Trust
Account $
Liquidation
If the Company is unable to complete a Business
Combination within the Combination Period, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly
as reasonably possible but no more than ten business days thereafter, redeem
6
ACE GLOBAL BUSINESS ACQUISITION LIMITED
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The sponsor has agreed that it will be liable
to the Company, if and to the extent any claims by a vendor 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 amounts in the Trust Account to below
$
NOTE 2. REVISION OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
On April 12, 2021, the Acting Director of the Division of Corporation Finance and Acting Chief Accountant of the SEC together issued a statement regarding the accounting and reporting considerations for warrants issued by special purpose acquisition companies entitled “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”)” (the “SEC Statement”). Specifically, the SEC Statement focused on certain provisions that provided for potential changes to the settlement amounts dependent upon the characteristics of the holder of the warrant, which terms are similar to those contained in the warrant agreement governing the Company’s warrants.
The Company’s management evaluated the
warrants under Accounting Standards Codification (“ASC”) Subtopic 815-40, Contracts in Entity’s Own Equity.
ASC Section 815-40-15 addresses equity versus liability treatment and classification of equity-linked financial instruments, including
warrants, and states that a warrant may be classified as a component of equity only if, among other things, the warrant is indexed to
the issuer’s common stock. Under ASC Section 815-40-15, a warrant is not indexed to the issuer’s common stock if the terms
of the warrant require an adjustment to the exercise price upon a specified event and that event is not an input to the fair value of
the warrant. The Company’s Private Placement Warrants are not indexed to the Company’s common shares in the manner contemplated
by ASC Section 815-40-15 because the holder of the instrument is not an input into the pricing of a fixed-for-fixed option on equity
shares. In addition, the tender offer provision included in the warrant agreement fails the “classified in shareholders’
equity” criteria as contemplated by ASC Section 815-40-25. As a result, the only Private Warrants shall be classified as liabilities
and the Public Warrants shall be classified as equity and the Company reevaluated the accounting treatment of the
In further consideration of the guidance in Accounting Standards Codification (“ASC”) 815-40, Derivatives and Hedging — Contracts in Entity’s Own Equity (“ASC 815”), the Company concluded that a provision in the warrant agreement related to certain transfer provisions precludes the Private Warrants from being accounted for as components of equity. As the Private Warrants meet the definition of a derivative as contemplated in ASC 815, the Private Warrants should be recorded as derivative liabilities on the balance sheet and measured at fair value at inception (on the date of the Initial Public Offering) and at each reporting date in accordance with ASC 820, Fair Value Measurement, with changes in fair value recognized in the Statements of Operations in the period of change.
In Addition, in preparation of the Company’s
unaudited condensed financial statements as of and for the period ended September 30, 2021, the Company concluded it should revise its
consolidated financial statements to classify all common stock subject to possible redemption in temporary equity. In accordance with
the SEC and its staff’s guidance on redeemable equity instruments, ASC Topic 480, Distinguishing Liabilities from Equity
(ASC 480), paragraph 10-S99, redemption provisions not solely within the control of the Company require common stock subject to redemption
to be classified outside of permanent equity. The Company had previously classified a portion of its common stock in permanent equity.
Although the Company did not specify a maximum redemption threshold, its charter provides that currently, the Company will not redeem
its public shares in an amount that would cause its net tangible assets to be less than $
7
ACE GLOBAL BUSINESS ACQUISITION LIMITED
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The following tables summarize the effect of the revision on each financial statement line item as of the dates, and for the period, indicated:
| As Previously Reported | Adjustments #1 | Adjustments #2 | As Revised | |||||||||||||
| Balance sheet as of April 9, 2021 | ||||||||||||||||
| Warrant Liabilities | ( | ) | ||||||||||||||
| Total Liabilities | ( | ) | ||||||||||||||
| Ordinary Shares Subject to Possible Redemption | ||||||||||||||||
| Ordinary Shares | ( | ) | ( | ) | ||||||||||||
| Additional Paid-in Capital | ( | ) | ||||||||||||||
| Accumulated deficit | ( | ) | ( | ) | ( | ) | ||||||||||
| Total shareholders’ equity (deficit) | ( | ) | ( | ) | ||||||||||||
| Balance sheet as of June 30, 2021 (Unaudited) | ||||||||||||||||
| Ordinary Shares Subject to Possible Redemption | ||||||||||||||||
| Ordinary Shares | ( | ) | ||||||||||||||
| Additional Paid-in Capital | ( | ) | ||||||||||||||
| Accumulated deficit | ( | ) | ( | ) | ( | ) | ||||||||||
| Total shareholders’ equity (deficit) | ( | ) | ( | ) | ||||||||||||
Adjustment #1 refer to reclassification of public warrants from warrant liabilities to equity component.
Adjustment #2 refer to reclassification of all public shares to temporary equity.
NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES
| ● | Basis of presentation |
These accompanying financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The interim financial information provided is unaudited, but includes all adjustments which management considers necessary for the fair presentation of the results for these periods. Operating results for the interim period ended September 30, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2021. The information included in this Form 10-Q should be read in conjunction with Management’s Discussion and Analysis, and the financial statements and notes thereto included in the Company’s Form S-1 for the fiscal year ended December 31, 2020, filed with the SEC on January 22, 2021.
| ● | Emerging growth company |
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 independent registered public accounting firm 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.
8
ACE GLOBAL BUSINESS ACQUISITION LIMITED
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Further, Section 102(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 an 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 a comparison of the Company’s 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 |
In preparing these financial statements in conformity with U.S. GAAP, management makes 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 and the reported expenses during the reporting period.
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, Actual results may differ from these estimates.
| ● | Cash |
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents as of September 30, 2021 and December 31, 2020.
| ● | Cash and investment held in trust account |
At September 30, 2021, the assets held in the
Trust Account are held in cash and US Treasury securities. Investment securities in the Company’s Trust Account consisted of $
The Company classifies marketable securities as available-for-sale at the time of purchase and reevaluates such classification as of each balance sheet date. All marketable securities are recorded at their estimated fair value. Unrealized gains and losses for available-for-sale securities are recorded in other comprehensive income. The Company evaluates its investments to assess whether those with unrealized loss positions are other than temporarily impaired. Impairments are considered other than temporary if they are related to deterioration in credit risk or if it is likely the Company will sell the securities before the recovery of the cost basis. Realized gains and losses and declines in value determined to be other than temporary are determined based on the specific identification method and are reported in other income (expense), net in the statements of operations.
| ● | Deferred Offering Costs |
Deferred offering costs consist of underwriting, legal, accounting and other expenses incurred through the balance sheet date that are directly related to the Initial public Offering and that were charged to shareholders’ equity upon the completion of the Initial Public Offering.
| ● | Warrant liabilities |
The Company accounts for the Warrants in accordance with the guidance contained in ASC 815-40-15-7D and 7F under which the Private Warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, the Company classifies the Private Warrants as liabilities at their fair value and adjusts the Private Warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our statement of operations. The Private Warrants are valued using a Black Scholes model.
9
ACE GLOBAL BUSINESS ACQUISITION LIMITED
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
| ● | 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 are 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 ordinary shares feature certain redemption rights that are subject to the occurrence
of uncertain future events and considered to be outside of the Company’s control. Accordingly, at September 30, 2021,
| ● | Offering costs |
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 consist principally of professional and registration fees incurred through the balance sheet date that are related to the Public Offering and that were charged to shareholders’ equity upon the completion of the Public Offering.
| ● | Fair value of financial instruments |
FASB ASC Topic 820 Fair Value Measurements and Disclosures defines fair value, the methods used to measure fair value and the expanded disclosures about fair value measurements. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between the buyer and the seller at the measurement date. In determining fair value, the valuation techniques consistent with the market approach, income approach and cost approach shall be used to measure fair value. FASB ASC Topic 820 establishes a fair value hierarchy for inputs, which represents the assumptions used by the buyer and seller in pricing the asset or liability. These inputs are further defined as observable and unobservable inputs. Observable inputs are those that buyer and seller would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs reflect the Company’s assumptions about the inputs that the buyer and seller would use in pricing the asset or liability developed based on the best information available in the circumstances.
The fair value hierarchy is categorized into three levels based on the inputs as follows:
| Level 1 — | Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments and block discounts are not being applied. Since valuations are based on quoted prices that are readily and regularly available in an active market, the valuation of these securities does not entail a significant degree of judgment. |
| Level 2 — | Valuations based on (i) quoted prices in active markets for similar assets and liabilities, (ii) quoted prices in markets that are not active for identical or similar assets, (iii) inputs other than quoted prices for the assets or liabilities, or (iv) inputs that are derived principally from or corroborated by the market through correlation or other means. |
| Level 3 — | Valuations based on inputs that are unobservable and significant to the overall fair value measurement. |
The fair value of the Company’s certain assets and liabilities, which qualify as financial instruments under ASC 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the balance sheet. The fair values of cash and cash equivalents, and other current assets, accrued expenses, due to the sponsor are estimated to approximate the carrying values as of September 30, 2021 due to the short maturities of such instruments. See Note 9 for the disclosure of the Company’s assets and liabilities that were measured at fair value on a recurring basis.
| ● | 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. The Company has not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.
10
ACE GLOBAL BUSINESS ACQUISITION LIMITED
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
| ● | Income taxes |
Income taxes are determined in accordance with the provisions of ASC Topic 740, Income Taxes (“ASC 740”). Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Any effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
ASC 740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their 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 financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. The Company’s management determined that the British Virgin Islands is the Company’s major tax jurisdiction. The Company recognizes accrued interest and penalties related to unrecognized tax benefits, if any, as an income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of September 30, 2021 or December 31, 2020. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
The Company may be subject to potential examination by foreign taxing authorities in the area of income taxes. These potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with foreign tax laws.
The Company’s tax provision is
The Company is considered to be an exempted British Virgin Islands Company, and is presently not subject to income taxes or income tax filing requirements in the British Virgin Islands or the United States.
| ● | Net loss per share |
The Company calculates net loss per share in
accordance with ASC Topic 260, Earnings per Share. In order to determine the net income (loss) attributable to both the
redeemable shares and non-redeemable shares, the Company first considered the undistributed income (loss) allocable to both the
redeemable common stock and non-redeemable common stock and the undistributed income (loss) is calculated using the total net loss
less any dividends paid. The Company then allocated the undistributed income (loss) ratably based on the weighted average number of
shares outstanding between the redeemable and non-redeemable common stock. Any remeasurement of the accretion to the redemption
value of the common stock subject to possible redemption was considered to be dividends paid to the public stockholders. As of
September 30, 2021, the Company has not considered the effect of the warrants sold in the Initial Public Offering to purchase an
aggregate of
The net income (loss) per share presented in the unaudited condensed statement of operations is based on the following:
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||
| 2021 | 2021 | |||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Accretion of carrying value to redemption value | ( | ) | ||||||
| Net loss including accretion of carrying value to redemption value | $ | ( | ) | $ | ( | ) | ||
| For the Three Months Ended September 30, 2021 | For the Nine Months Ended September 30, 2021 | |||||||||||||||
| Redeemable Common Stock | Non- Redeemable Common Stock | Redeemable Common Stock | Non-Redeemable Common Stock | |||||||||||||
| Basic and diluted net loss per share: | ||||||||||||||||
| Numerators: | ||||||||||||||||
| Allocation of net loss including carrying value to redemption value | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Accretion of carrying value to redemption value | ||||||||||||||||
| Allocation of net income (loss) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
| Denominators: | ||||||||||||||||
| Weighted-average shares outstanding | ||||||||||||||||
| Basic and diluted net income (loss) per share | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
11
ACE GLOBAL BUSINESS ACQUISITION LIMITED
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
| ● | Related parties |
Parties, which can be a corporation or individual, are considered to be related if the Company has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operational decisions. Companies are also considered to be related if they are subject to common control or common significant influence.
| ● | Recent accounting pronouncements |
The Company has considered all new accounting pronouncements and has concluded that there are no new pronouncements that may have a material impact on the results of operations, financial condition, or cash flows, based on the current information.
NOTE 4 — CASH AND INVESTMENT HELD IN TRUST ACCOUNT
As of September 30, 2021, investment securities
in the Company’s Trust Account consisted of $
| Carrying Value as of September 30, 2021 (Unaudited) | Gross Unrealized Holding Gain | Fair Value as of September 30, 2021 (Unaudited) | ||||||||||
| Available-for-sale marketable securities: | ||||||||||||
| U.S. Treasury Securities | $ | $ | $ | |||||||||
NOTE 5 – INITIAL PUBLIC OFFERING
On April 8, 2021, the Company sold
The Company paid an upfront underwriting discount
of $
NOTE 6 – PRIVATE PLACEMENT
Simultaneously with the closing of the Initial
Public Offering, the Company consummated a private placement of
The Private Units are identical to the units sold in the Initial Public Offering except that the warrants included in the Private Units (the “Private Warrants”) are non-redeemable and may be exercised on a cashless basis so long as the Private Warrants continue to be held by the initial purchasers of the Placement Units or their permitted transferees.
NOTE 7 – RELATED PARTY TRANSACTIONS
Founder Shares
In November 2020, the Company issued an aggregate
of
In December 2020, the Company issued an aggregate
of
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ACE GLOBAL BUSINESS ACQUISITION LIMITED
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Advance from Related Parties
As of September 30, 2021, the Company had a temporary advance from a shareholder and related party for its deferred cost of the Initial Public Offering. The balance is unsecured, interest-free and has no fixed terms of repayment.
Administrative Services Agreement
The Company is obligated, commencing from January
1, 2021, to pay Ace Global Investment Limited a monthly fee of $
Related Party Extensions Loan
The Company will have until 12 months from the
consummation of the Initial Public Offering to consummate the initial Business Combination. However, if the Company anticipates that
the Company may not be able to consummate the initial Business Combination within 12 months, the Company may, but is not obligated to,
extend the period of time to consummate a Business Combination three times by an additional three months each time (for a total of up
to 21 months to complete a Business Combination).
NOTE 8 – SHAREHOLDER’S (DEFICIT) EQUITY
Ordinary shares
The Company is authorized to issue
On April 2021, the Company sold
In April, 2021, the Company issued
As of September 30, 2021 and December 31, 2021,
Public Warrants
Each public warrant entitles the holder thereof
to purchase one-half (1/2) of one ordinary share at a price of $
No public warrants will be exercisable for cash unless the Company has an effective and current registration statement covering the ordinary shares issuable upon exercise of the warrants and a current prospectus relating to such ordinary shares. It is the Company’s current intention to have an effective and current registration statement covering the ordinary shares issuable upon exercise of the warrants and a current prospectus relating to such ordinary shares in effect promptly following consummation of an initial business combination.
Notwithstanding the foregoing, if a registration
statement covering the ordinary shares issuable upon exercise of the public warrants is not effective within 90 days following the consummation
of our initial business combination, public warrant holders may, until such time as there is an effective registration statement and
during any period when we shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant
to an available exemption from registration under the Securities Act. In such event, each holder would pay the exercise price by surrendering
the warrants for that number of ordinary shares equal to the quotient obtained by dividing (x) the product of the number of ordinary
shares underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market value”
(defined below) by (y) the fair market value. The “fair market value” shall mean the average reported last sale price of
the ordinary shares for the 10 trading days ending on the day prior to the date of exercise.
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ACE GLOBAL BUSINESS ACQUISITION LIMITED
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The warrants will become exercisable on the later of the completion of an initial business combination and March 31, 2022. The warrants will expire at 5:00 p.m., New York City time, on the fifth anniversary of our completion of an initial business combination, or earlier upon redemption.
The Company may redeem the outstanding warrants
(including any outstanding warrants issued upon exercise of the unit purchase option issued to Ladenburg Thalmann & Co., Inc.,),
in whole and not in part, at a price of $
| ● | at any time while the Public Warrants are exercisable, |
| ● | upon not less than 30 days’ prior written notice of redemption to each Public Warrant holder, |
| ● | if, and only if, there is a current registration statement in effect with respect to the issuance of the ordinary shares underlying such warrants at the time of redemption and for the entire 30-day trading period referred to above and continuing each day thereafter until the date of redemption. |
If the foregoing conditions are satisfied and
the Company would issue a notice of redemption, each warrant holder can exercise his, her or its warrant prior to the scheduled redemption
date. However, the price of the ordinary shares may fall below the $
The redemption criteria for the warrants have been established at a price which is intended to provide warrant holders a reasonable premium to the initial exercise price and provide a sufficient differential between the then-prevailing share price and the warrant exercise price so that if the share price declines as a result of our redemption call, the redemption will not cause the share price to drop below the exercise price of the warrants.
If the Company calls the warrants for redemption as described above, our management will have the option to require all holders that wish to exercise warrants to do so on a “cashless basis.” In such event, each holder would pay the exercise price by surrendering the whole warrants for that number of ordinary shares equal to the quotient obtained by dividing (x) the product of the number of ordinary shares underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair market value” shall mean the average reported last sale price of the ordinary shares for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants. Whether the Company will exercise our option to require all holders to exercise their warrants on a “cashless basis” will depend on a variety of factors including the price of our ordinary shares at the time the warrants are called for redemption, the Company’s cash needs at such time and concerns regarding dilutive share issuances.
NOTE 9 – FAIR VALUE MEASUREMENTS
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: Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2: Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.
Level 3: Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.
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ACE GLOBAL BUSINESS ACQUISITION LIMITED
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The following table presents information about the Company’s assets and liabilities that were measured at fair value on a recurring basis as of September 30, 2021, and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.
| September 30, | Quoted Prices In Active Markets | Significant Other Observable Inputs | Significant Other Unobservable Inputs | |||||||||||||
| Description | 2021 | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
| Assets: | ||||||||||||||||
| U.S. Treasury Securities held in Trust Account* | $ | $ | $ | $ | ||||||||||||
| Liabilities: | ||||||||||||||||
| Warrant liabilities – Private Warrants | $ | $ | $ | $ | ||||||||||||
| * |
The private warrants are accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on the consolidated balance sheets.
The Company established the initial fair value
for the private warrants at $
The key inputs into the binomial model and Black-Scholes model were as follows at their measurement dates:
| September 30, 2021 | April 9, 2021 (Initial measurement) | |||||||
| Input | ||||||||
| Share price | $ | $ | ||||||
| Risk-free interest rate | % | % | ||||||
| Volatility | % | % | ||||||
| Exercise price | $ | $ | ||||||
| Warrant life | ||||||||
As of September 30, 2021, the aggregate value
of the Private Warrants was $
To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Because of the inherent uncertainty of valuation, those estimated values may be materially higher or lower than the values that would have been used had a ready market for the investments existed. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for investments categorized in Level 3. Level 3 financial liabilities consist of the Private Warrant liability for which there is no current market for these securities such that the determination of fair value requires significant judgment or estimation. Changes in fair value measurements categorized within Level 3 of the fair value hierarchy are analyzed each period based on changes in estimates or assumptions and recorded as appropriate.
15
ACE GLOBAL BUSINESS ACQUISITION LIMITED
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 10 – COMMITMENTS AND CONTINGENCIES
Risks and Uncertainties
Management is currently evaluating 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 future financial position, results of its operations and/or search for a target company, there has been a significant impact as of the date of these financial statements. The financial statements do not include any adjustments that might result from the future outcome of this uncertainty.
Registration Rights
The holders of the Founder Shares, the Private Warrants (and their underlying securities) and the warrants that may be issued upon conversion of the Working Capital Loans (and their underlying securities) will be 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 a majority of these securities will be entitled to make up to two demands that the Company registers such securities. The holders of the majority of the Founder Shares can elect to exercise these registration rights at any time commencing three months prior to the date on which these ordinary shares are to be released from escrow. The holders of a majority of the Private Warrants and warrants issued in payment of Working Capital Loans made to the Company (or underlying securities) can elect to exercise these registration rights at any time after the Company consummates a Business Combination. In addition, the holders will have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of a Business Combination. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriter Agreement
The underwriters are entitled to a deferred fee
of
NOTE 11 – SUBSEQUENT EVENTS
In accordance with ASC Topic 855, “Subsequent Events”, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before these unaudited financial statements are issued, the Company has evaluated all events or transactions that occurred after the balance sheet date, up through the date was the Company issued the unaudited condensed financial statements. During the period, the Company did not have any material subsequent events other than disclosed above.
16
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to Ace Global Acquisition Corporation. References to our “management” or our “management team” refer to our officers and directors, references to the “Sponsor” refer to Ace Global Investment Limited. 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 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 and Section 21E of the Exchange Act that is not historical facts and involves 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 the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations 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 the Registration Statement on Form S-1 (Registration No. 333-252878) filed with the SEC and declared effective on April 5, 2021. The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Overview
We are a blank check company formed under the laws of the British Virgin Islands on November 2, 2020 as a blank check company for the purpose of engaging in a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination, with one or more target businesses or entities. Our efforts to identify a prospective target business will not be limited to a particular industry or geographic region, although the Company intends to focus on operating businesses in the gaming and e-commerce sectors in the Greater China, Japan and Southeast Asia regions. We believe that we will add value to these businesses primarily by providing them with access to the U.S. capital markets.
On April 8, 2021, we consummated our initial public offering (“IPO”) of 4,600,000 units (the “Units”), inclusive of the over-allotment option of 600,000 Units. Each unit consisted of one ordinary share, par value $0.001 and one redeemable warrant, upon consummation of a business combination. The Company’s Registration Statement on Form S-1 was declared effective by the SEC on April 5, 2021. Ladenburg Thalmann & Co., Inc., acted as an underwriter for the IPO. The units were sold at an offering price of $10.00 per unit, generating gross proceeds of $46,000,000.
Since our IPO, our sole business activity has been identifying and evaluating suitable acquisition transaction candidates and engaging in non-binding discussions with potential target entities. To date, we have not entered into any binding agreement with any target entity. We presently have no revenue and have had losses since inception from incurring formation and operating costs since the completion of our IPO.
We will seek to capitalize on the strength of our management team. Our team consists of experienced professionals and senior operating executives. Collectively, our officers and directors have decades of experience in mergers and acquisitions, and operating companies, in Asia. We believe we will benefit from their accomplishments, and specifically their current and recent activities with companies that have a connection to the Asian market, in identifying attractive acquisition opportunities. However, there is no assurance that we will complete a business combination.
We expect that we will issue additional equity securities or will issue debt securities, or a combination of equity and debt securities, in connection with the acquisition of a target business. The issuance of additional shares of our stock in a Business Combination:
| ● | may significantly reduce the equity interest of our stockholders; | |
| ● | may subordinate the rights of holders of shares of common stock if we issue preference shares with rights senior to those afforded to our shares of common stock; | |
| ● | will likely cause a change in control if a substantial number of our shares of common stock are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and most likely will also result in the resignation or removal of our present officers and directors; and | |
| ● | may adversely affect prevailing market prices for our securities. |
17
Similarly, if we issue debt securities or otherwise incur significant indebtedness, it could result in:
| ● | default and foreclosure on our assets if our operating revenues after a business combination are insufficient to pay our debt obligations; | |
| ● | acceleration of our obligations to repay the indebtedness even if we have made all principal and interest payments when due if the debt security contains covenants that required the maintenance of certain financial ratios or reserves and we breach any such covenant without a waiver or renegotiation of that covenant; | |
| ● | our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand; and | |
| ● | our inability to obtain additional financing, if necessary, if the debt security contains covenants restricting our ability to obtain additional financing while such security is outstanding. |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to Venus Acquisition Corporation. References to our “management” or our “management team” refer to our officers and directors, references to the “Sponsor” refer to Yolanda Management Corporation. 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 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 and Section 21E of 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 Form 10-Q including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations 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 the Company’s registration statement on Form S-1 filed with the U.S. Securities and Exchange Commission (the “SEC”). The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Overview
We were formed on November 2, 2020 formed under the laws of the British Virgin Islands, as a blank check company for the purpose of engaging in a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination, with one or more target businesses or entities. Our efforts to identify a prospective target business will not be limited to a particular industry or geographic region, although we intend to focus on businesses that have a connection to the Asian market. We believe that we will add value to these businesses primarily by providing them with access to the U.S. capital markets.
We presently have no revenue, have had losses since inception from incurring formation costs and have had no operations other than the active solicitation of a target business with which to complete a business combination. We have relied upon the sale of our securities and loans from our officers and directors to fund our operations.
On April 8, 2021, the Company consummated the Initial Public Offering of 4,000,000 ordinary units (the “Public Units”). Each Public Unit consists of one ordinary share (“Ordinary Share”) and one warrant (“Warrant”) entitling its holder to purchase one Ordinary Share at a price of $11.50 per whole share. The Units were sold at an offering price of $10.00 per Unit, generating gross proceeds of $40,000,000.
18
Subsequently, on April 7, 2021, the underwriters exercised their over-allotment option in full, and the closing of the issuance and sale of the additional Public Units occurred on April 9, 2021. The total aggregate issuance by the Company of 600,000 units at a price of $10.00 per unit resulted in gross proceeds of $6,000,000.
Simultaneously with the closing of the Initial Public Offering on April 8, 2021, the Company consummated the sale of 280,000 units (the “Private Units”) at a price of $10.00 per Private Unit in a private placement, generating gross proceeds of $2,800,000, which is described in Note 4. On April 9, 2021, simultaneously with the sale of the over-allotment units, the Company consummated the private sale of an additional 24,000 Private Units, generating gross proceeds of $240,000.
Transaction costs amounted to $1,125,000, consisting of $920,000 of underwriter’s fees and $205,000 of other offering costs.
As a result of the IPO, the Private Placement and sale of units to our underwriter, assuming the units were split into its component parts, we had: (i) 4,904,000 units, (ii) 4,904,000 ordinary shares, (iii) 4,904,000 warrants to acquire 4,904,000 ordinary shares issued and outstanding as of April 9, 2021. We have not issued any securities since such date.
Our management has broad discretion with respect to the specific application of the net proceeds of the initial business combination and the Private Placement, although substantially all of the net proceeds are intended to be applied generally towards consummating a business combination.
The outbreak of the COVID-19 coronavirus has resulted in a widespread health crisis that has adversely affected the economies and financial markets worldwide, and potential target companies may defer or end discussions for a potential business combination with us whether or not COVID-19 affects their business operations. The extent to which COVID-19 impacts our search for a business combination will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. We may be unable to complete a business combination if continued concerns relating to COVID-19 restrict travel, limit the ability to have meetings with potential investors or the target company’s personnel, vendors and services providers are unavailable to negotiate and consummate a transaction in a timely manner.
Results of Operations
Our entire activity from inception up to February 9, 2021 was in preparation for the initial public offering. Since the initial public offering, our activity has been limited to the evaluation of business combination candidates, and we will not be generating any operating revenues until the closing and completion of our initial business combination. We expect to incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses. We expect our expenses to increase substantially after this period.
For the three and nine months ended September 30, 2021, we had a net loss of $324,393 and $660,931, respectively, which was comprised of interest and dividend income and general and administrative expenses and a gain from change in fair value of warrant liabilities.
Liquidity and Capital Resources
As of September 30, 2021, we had cash of $316,825. Until the consummation of the initial public offering, the Company’s only source of liquidity was an initial purchase of ordinary shares by the Sponsor, monies loaned by the Sponsor under a certain unsecured promissory note and advances from the Sponsor.
On April 8, 2021, the Company consummated its initial public offering (“IPO”) of 4,000,000 units (the “Units”) and the full exercise of the underwriter’s over-allotment option of 600,000 Units on April 9, 2021 respectively, Each Unit consists of one ordinary share (“Ordinary Share”) and one warrant (“Warrant”) entitling its holder to purchase one Ordinary Share at a price of $11.50 per whole share. The Units were sold at an offering price of $10.00 per Unit, generating gross proceeds of $46,000,000.
As of April 9, 2021, a total of $46,920,000 of the net proceeds from the public offering and the private placement consummated simultaneously with the closing of the IPO and the over-allotment option were deposited in a trust account established for the benefit of the Company’s public stockholders.
We intend to use substantially all of the net proceeds of the initial public offering, including the funds held in the Trust Account, to acquire a target business or businesses and to pay our expenses relating thereto. To the extent that our capital stock is used in whole or in part as consideration to effect our business combination, the remaining proceeds held in the Trust Account, as well as any other net proceeds not expended, will be used as working capital to finance the operations of the target business. Such working capital funds could be used in a variety of ways including continuing or expanding the target business’ operations, for strategic acquisitions and for marketing, research and development of existing or new products. Such funds could also be used to repay any operating expenses or finders’ fees which we had incurred prior to the completion of our business combination if the funds available to us outside of the Trust Account were insufficient to cover such expenses.
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We intend to use 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, and structure, negotiate and complete a business combination.
We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. This belief is based on the fact that while we may begin preliminary due diligence of a target business in connection with an indication of interest, we intend to undertake in-depth due diligence, depending on the circumstances of the relevant prospective acquisition, only after we have negotiated and signed a letter of intent or other preliminary agreement that addresses the terms of our initial business combination. However, if our estimate of the costs of undertaking in-depth due diligence and negotiating our initial business combination is less than the actual amount necessary to do so, or the amount of interest available to use from the trust account is minimal as a result of the current interest rate environment, we may be required to raise additional capital, the amount, availability and cost of which is currently unascertainable. In this event, we could seek such additional capital through loans or additional investments from members of our management team, but such members of our management team are not under any obligation to advance funds to, or invest in, us. In the event that the 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 for such repayment. Such loans would be evidenced by promissory notes. The notes would either be paid upon consummation of our business combination, without interest, or, at the lender’s discretion, up to $500,000 of the notes may be converted upon consummation of our business combination into additional Private Units at a price of $10.00 per unit. The terms of such loans by our initial shareholders, officers and directors, if any, have not been determined and no written agreements exist with respect to such loans.
Off-balance sheet financing arrangements
We have no obligations, assets or liabilities which would be considered off-balance sheet arrangements as of September 30, 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.
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 our Sponsor a monthly fee of $10,000 for general and administrative services, including office space, utilities and administrative services to the Company. We began incurring these fees on February 8, 2021 and will continue to incur these fees monthly until the earlier of the completion of the business combination and the Company’s liquidation.
Registration Rights
The holders of our insider shares issued and outstanding prior to our initial public offering, as well as the holders of the Private Units (and all underlying securities) and any securities our initial shareholders, officers, directors or their affiliates may be issued in payment of working capital loans made to us, are entitled to registration rights pursuant to a registration rights agreement entered into concurrently without an initial public offering. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to our consummation of a business combination. We will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The underwriters are entitled to a deferred fee of 4.0% of the gross proceeds of the Initial Public Offering, or $1,840,000 until the closing of the Business Combination. The deferred fee can be paid in cash, stock or a combination of both (at the underwriter’s discretion). Any stock issued as a part of the deferred fee will be issued to the underwriters at the value per share in the Company’s Trust Account, subject to any additional increases in the amount in trust per the Company’s trust extensions. Stock to be issued to the underwriters will have unlimited piggyback registration rights and the same rights afforded other holders of the Company’s common stock.
Private Warrants
The Company classifies the Private Warrants as liabilities at their fair value and adjusts the Private Warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our statement of operations. The Private Warrants are valued using a Black Scholes model.
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Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. The Company has not identified any significant accounting policies.
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 share subject to mandatory redemption (if any) is classified as a liability instrument and is 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 ordinary shares feature certain redemption rights that are subject to the occurrence of uncertain future events and considered to be outside of the Company’s control.
Net Income (Loss) Per Share
The Company calculates net loss per share in accordance with ASC Topic 260, Earnings per Share. In order to determine the net income (loss) attributable to both the redeemable shares and non-redeemable shares, the Company first considered the undistributed income (loss) allocable to both the redeemable common stock and non-redeemable common stock and the undistributed income (loss) is calculated using the total net loss less any dividends paid. The Company then allocated the undistributed income (loss) ratably based on the weighted average number of shares outstanding between the redeemable and non-redeemable common stock. Any remeasurement of the accretion to the redemption value of the common stock subject to possible redemption was considered to be dividends paid to the public stockholders.
Warrant liabilities
The Company accounts for the Warrants in accordance with the guidance contained in ASC 815-40-15-7D and 7F under which the Private Warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, the Company classifies the Private Warrants as liabilities at their fair value and adjusts the Private Warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our statement of operations. The Private Warrants are valued using a Black Scholes model.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As of September 30, 2021, we were not subject to any market or interest rate risk. Following the consummation of our Initial Public Offering, the net proceeds of our Initial Public Offering, including amounts in the Trust Account, have been invested in U.S. government treasury bills, notes or bonds with a maturity of 180 days or less or in certain money market funds that invest solely in U.S. treasuries. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
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 September 30, 2021. In connection with the preparation of this Form 10-Q, we revised our prior position on accounting for private warrants. Based upon their evaluation, and in light of the SEC Staff Statement, 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 not effective as a result of our revisions of our balance sheet as of April 9, 2021 to reclassify our warrants accounting position and our revision of our balance sheet as of April 9, 2021 and June 30, 2021 to reclassify all public shares to temporary equity.
Revisions of Previously Issued Financial Statements
We revised our prior position on accounting for public and private warrants and concluded that our previously issued balance as of April 9, 2021 should be revised because of a misapplication in the guidance on warrant accounting. However, the non-cash adjustments to the balance do not impact the amounts previously reported for our cash and cash equivalents, and total assets. We revisited our financial statements to classify all public shares subject to redemption in temporary equity as of April 9, 2021. The Company had previously classified a portion of its ordinary shares in permanent equity. Although the Company did not specify a maximum redemption threshold, its charter provides that currently, the Company will not redeem its public shares in an amount that would cause its net tangible assets to be less than $5,000,001. However, the Company considered that the threshold would not change the nature of the underlying shares as redeemable and thus would be required to be disclosed outside equity. The non-cash adjustments to the balance do not impact the amounts previously reported for our cash and cash equivalents, and total assets.
Changes in Internal Control over Financial Reporting
Other than the matter disclosed above, there was no change in our internal control over financial reporting that occurred during the fiscal quarter of September 30, 2021 covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1A Legal Proceedings
The Company is not party to any legal proceedings as of the filing date of this Form 10-Q.
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 final prospectus for our Initial Public Offering filed with the SEC on April 5, 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. As of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in our final prospectus dated April 5, 2021 other than as stated below.
Changes in the accounting treatment of the warrants issued in our IPO and private warrants issued to our sponsor which may require that the warrants be classified as equity and are classified as a liability, we will have to incur significant expenses in valuing such liabilities on a quarterly and annual basis, such liability would be reflected on our financial statements, and such classification may make it more difficult for us to complete an initial business combination.
On April 12, 2021, the staff of the SEC issued a public statement entitled “Staff Statement on Accounting and Reporting Considerations for Warrants issued by Special Purpose Acquisition Companies (“SPACs”). In the statement, the SEC staff expressed its view that certain terms and conditions common to SPAC warrants may require the warrants to be classified as liabilities on the SPAC’s balance sheet as opposed to equity. If applicable, the warrants should be classified as a liability measured at fair value, with changes in fair value required to be reflected in the SPACs quarterly and annual financial statements. It is possible that our public warrants and private warrants would therefore be classified as a liability. If we determine that our public warrants and private warrants would be classified as liabilities, prior to the effective date of the registration statement of which this prospectus forms a part, we may amend the terms of the public warrants and the private warrants in order that they may be classified as equity, however, there can be no assurance that such changes will result in the classification of the public warrants and private warrants as equity. If the warrants are not classified as equity and are classified as a liability, we will have to incur significant expenses in valuing such liabilities on a quarterly and annual basis, such liability would be reflected on our financial statements, and such classification and ongoing expense may make it more difficult for us to complete an initial business combination.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On April 8, 2021, we consummated our initial public offering (“IPO”) of 4,000,000 units (the “Units”). Subsequently, on April 7, 2021, the underwriters exercised the option in full, and the closing of the issuance and sale of the additional Units occurred on April 9, 2021. The total aggregate issuance by the Company of 4,600,000 units at a price of $10.00 per unit resulted in gross proceeds of $46,000,000. Each unit consisted of one ordinary share, par value $0.001, and one redeemable warrant. The Company’s Registration Statement on Form S-1 was declared effective by the SEC on April 5, 2021. Ladenburg Thalmann & Co., Inc., acted as an underwriter for the IPO.
Simultaneously with the closing of the IPO on April 8, 2021, the Company consummated the private placement (“Private Placement”) with Ace Global Investment Limited, its sponsor, of 280,000 units (the “Private Units”) at a price of $10.00 per Private Unit, generating total proceeds of $2,800,000. On April 9, 2021, simultaneously with the sale of the over-allotment units, the Company consummated the private sale of an additional 24,000 Private Units, generating gross proceeds of $240,000. These securities (other than our IPO securities) were issued pursuant to an exemption from registration under the Securities Act of 1933, as amended pursuant to Section 4(2) of the Securities Act.
As of April 9, 2021, a total of $46,920,000 of the net proceeds from the public offering and the private placement consummated simultaneously with the closing of the IPO and the over-allotment option were deposited in a trust account established for the benefit of the Company’s public stockholders. The proceeds held in the trust account may be invested by the trustee only in U.S. government treasury bills with a maturity of 180 days or less or in money market funds investing solely in U.S. government treasury obligations and meeting certain conditions under Rule 2a-7 under the Investment Company Act.
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As a result of the IPO, the Private Placement and sale of units to our underwriter, assuming the units were split into its component parts, we had: (i) 4,904,000 units, (ii) 4,904,000 ordinary shares, (iii) 4,904,000 warrants to acquire 4,904,000 ordinary shares issued and outstanding as of April 9, 2021. We have not issued any securities since such date.
We paid a total of $920,000 in underwriting discounts and commissions (not including the 4.0% deferred underwriting commission payable at the consummation of initial business combination) and approximately $205,000 for other costs and expenses related to our formation and the initial public offering.
For a description of the use of the proceeds generated in our Initial Public Offering, see Part I, Item 2 of this Form 10-Q.
Item 3. Defaults Upon Senior Securities.
None
Item 4. Mine Safety Disclosures.
Not Applicable.
Item 5. Other Information.
None.
Item 6. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
| * | Filed herewith. |
| (1) | Previously filed as an exhibit to our Current Report on Form 8-K filed on February 11, 2021 and incorporated by reference herein. |
| (2) | Previously filed as an exhibit to our Registration Statement on Form S-1 declared effective on February 8, 2021. |
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| ACE GLOBAL BUSINESS ACQUISITION LIMITED | ||
| Date November 16, 2021 | By: | /s/ Eugene Wong |
| Name: | Eugene Wong | |
| Title: | Chief Executive Officer | |
| (Principal Executive Officer) | ||
| Date: November 16, 2021 | By: | /s/ Nicholas Xue Wei Tan |
| Name: | Nicholas Xue Wei Tan | |
| Title: | Chief Financial Officer | |
| (Principal Financial and Accounting Officer) | ||
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