UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(MARK ONE)
For
the quarter ended
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 | ||||
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 August 14, 2023, there were
ACE GLOBAL BUSINESS ACQUISITION LIMITED
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2023
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-Q 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 CONSOLIDATED BALANCE SHEETS
| June
30, 2023 | December
31, 2022 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Total current assets | ||||||||
| Cash and investments held in trust account | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES, TEMPORARY EQUITY AND SHAREHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accrued liabilities and other payable | $ | $ | ||||||
| Note payable – related party | ||||||||
| 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’ deficit: | ||||||||
| Ordinary shares, $ | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total shareholders’ deficit | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES, TEMPORARY EQUITY AND SHAREHOLDERS’ DEFICIT | $ | $ | ||||||
See accompanying notes to unaudited condensed consolidated financial statements.
1
ACE GLOBAL BUSINESS ACQUISITION LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| Three months ended June 30, | Six months ended June 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Formation, general and administrative expenses | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Total operating expenses | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Other (expense) income | ||||||||||||||||
| Change in fair value of warrant liabilities | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Dividend income | ||||||||||||||||
| Interest income | ||||||||||||||||
| Total other income (expense), net | ( |
) | ||||||||||||||
| Income (loss) before income taxes | ( |
) | ( |
) | ( |
) | ||||||||||
| Income taxes | - | - | ||||||||||||||
| NET INCOME (LOSS) | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||
| $ | $ | $ | $ | ( |
) | |||||||||||
| $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||||
See accompanying notes to unaudited condensed consolidated financial statements.
2
ACE GLOBAL BUSINESS ACQUISITION LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
| Three and Six months ended June 30, 2023 | ||||||||||||||||
| Ordinary shares | Total | |||||||||||||||
| No.
of shares | Amount | Accumulated deficit | shareholders’ deficit | |||||||||||||
| Balance as of January 1, 2023 | $ | $ | ( | ) | $ | ( | ) | |||||||||
| Accretion of carrying value to redemption value | - | ( | ) | ( | ) | |||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||
| Balance as of March 31, 2023 | $ | $ | ( | ) | $ | ( | ) | |||||||||
| Accretion of carrying value to redemption value | - | - | ( | ) | ( | ) | ||||||||||
| Net income | - | - | ||||||||||||||
| Balance as of June 30, 2023 | $ | $ | ( | ) | $ | ( | ) | |||||||||
| Three and Six months ended June 30, 2022 | ||||||||||||||||
| Ordinary shares | Total | |||||||||||||||
| No.
of shares | Amount | Accumulated deficit | shareholders’ deficit | |||||||||||||
| Balance as of January 1, 2022 | $ | $ | ( | ) | $ | ( | ) | |||||||||
| Accretion of carrying value to redemption value | - | - | ( | ) | ( | ) | ||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||
| Balance as of March 31, 2022 | $ | $ | ( | ) | $ | ( | ) | |||||||||
| Accretion of carrying value to redemption value | - | - | ( | ) | ( | ) | ||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||
| Balance as of June 30, 2022 | $ | ( | ) | ( | ) | |||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
3
ACE GLOBAL BUSINESS ACQUISITION LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| Six months ended June 30, | ||||||||
| 2023 | 2022 | |||||||
| 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: | ||||||||
| Prepaid expenses | - | |||||||
| Accrued liabilities and other payable | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities | ||||||||
| Proceeds of promissory notes deposited in trust account by a founder shareholder | ( | ) | ||||||
| Withdraw of investments in Trust Account | ||||||||
| Net cash provided by investing activities | ||||||||
| Cash flows from financing activities | ||||||||
| Proceeds of promissory notes | ||||||||
| Redemption of ordinary shares | ( | ) | ||||||
| Advances from a related party | ||||||||
| Net cash (used in) provided by financing activities | ( | ) | ||||||
| NET CHANGE IN CASH | ( | ) | ( | ) | ||||
| Cash, beginning of period | ||||||||
| Cash, end of period | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES: | ||||||||
| Accretion of carrying value to redemption value | $ | $ | ||||||
See accompanying notes to unaudited condensed consolidated financial statements.
4
ACE GLOBAL BUSINESS ACQUISITION LIMITED
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – ORGANIZATION AND BUSINESS BACKGROUND
Ace Global Business Acquisition Limited (“ACE” and 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.
ACBA Merger Sub I Limited (“PubCo”) is a company incorporated on December 28, 2022, under the laws of the British Virgin Islands for the purpose of effecting the business combination. PubCo is wholly owned by ACE.
ACBA Merger Sub II Limited (“Merger Sub”) is a company incorporated on December 29, 2022, under the laws of the British Virgin Islands for the purpose of effecting the business combination. Merger Sub is wholly owned by PubCo.
The Company’s entire activity from inception up to December 31, 2022 was in preparation for the initial public offering. Since the initial public offering, the Company’s activities have been limited to the evaluation of business combination candidates. 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 $
5
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
$
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 $
6
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 July 11, 2022, the Company and DDC entered into that certain Mutual Termination of Share Exchange Agreement (the “Mutual Termination Agreement”) pursuant to which the Company and DDC mutually agreed to terminate the Share Exchange Agreement pursuant to Section 12.3(a) thereof. Except as otherwise set forth in the Share Exchange Agreement, none of the Contracting Parties shall have any further liability thereunder.
On December 23, 2022, the Company entered into a business combination
agreement (the “Agreement”) with LE Worldwide Limited (“LEW”), a British Virgin Islands business company. Pursuant
to the Agreement, ACE will merge with and into PubCo, a British Virgin Islands business company and wholly owned subsidiary of ACE with
each of the outstanding units, shares and warrants of the Company exchanged on a one for one basis into units, shares and warrants of
PubCo. Merger Sub, a British Virgin Islands business company and wholly owned subsidiary of ACE , was formed for the sole purpose of merging
with and into the LEW, following which the LEW will be the surviving entity and a wholly owned subsidiary of PubCo (the “Acquisition
Merger”). Upon the Acquisition Merger becoming effective, PubCo shall pay an aggregate consideration of $
On January 5, 2023, the Company filed an amended and restated memorandum and articles of association (the “Charter Amendment”), giving the Company the right to extend the date by which it has to complete a business combination up to a total of five (5) times, as follows: (i) two (2) times for an additional three (3) months each time from January 8, 2023 to July 8, 2023, followed by (ii) three (3) times for an additional one (1) month each time from July 8, 2023 to October 8, 2023.
7
On
January 5, 2023,
The Company will have to consummate a Business
Combination by 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 eight times, five times by an additional
three months each time and 3 times by an additional one month each time (for a total of up to 30 months) to complete a Business Combination.
Pursuant to the terms of our memorandum and articles of association and the trust agreement entered into between us and Continental Stock
Transfer & Trust Company, both as amended, in order to extend the time available for the Company to consummate a Business Combination,
the Company’s Sponsor or its affiliate or designees, upon
Liquidation and going concern
The Company initially had 12 months from the consummation
of this offering to consummate the initial business combination. If the Company does not complete a business combination within 12 months
from the consummation of the Public Offering, the Company will trigger an automatic winding up, dissolution and liquidation pursuant to
the terms of the amended and restated memorandum and articles of association. As a result, this has the same effect as if the Company
had formally gone through a voluntary liquidation procedure under the Companies Law. Accordingly, no vote would be required from our shareholders
to commence such a voluntary winding up, dissolution and liquidation. However, the Company may extend the period of time to consummate
a business combination eight times (for a total of up to 30 months from the consummation of the Public Offering to complete a business
combination). As of the date of this report, the Company has extended five times by an additional three months each time (for a total
of up to 27 months from the consummation of the Public Offering to complete a business combination), and so it now has until September
8, 2023 to consummate a business combination. Pursuant to the terms of the current amended and restated memorandum and articles of association
and the trust agreement between the Company and Continental Stock Transfer & Trust Company, LLC, in order to extend the time available
for the Company to consummate our initial business combination, the Company’s insiders or their affiliates or designees, upon five
days advance notice prior to the applicable deadline, must deposit into the Trust Account $
8
Accordingly, the Company may not be able to obtain additional financing. If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all. These conditions raise substantial doubt about the Company’s ability to continue as a going concern if a Business Combination is not consummated by September 8, 2023 or October 8, 2023 if the Company elect to extend the period of time to consummate a Business Combination. These unaudited condensed consolidated financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
| ● | Basis of presentation |
These accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted 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 three and six months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2023. The information included in this Form 10-Q should be read in conjunction with Management’s Discussion and Analysis, and the consolidated financial statements and notes thereto included in the Company’s Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on March 30, 2023.
| ● | 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.
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 extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s consolidated 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 unaudited condensed consolidated 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.
9
| ● | 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 June 30, 2023 and December 31, 2022.
| ● | Cash and investment held in trust account |
| ● | 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. The deferred underwriter’s fee of the gross proceeds of the Initial Public Offering will be paid upon the closing of the Business Combination and will be waived if no Business Combination occurs within the deadline.
| ● | Warrant |
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own ordinary shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of equity at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded as liabilities at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the unaudited condensed consolidated statements of operations. The Company accounts for its Public Warrants as equity and the Private Warrants as liabilities.
10
| ● | Ordinary shares subject to possible redemption |
The
Company accounts for its ordinary shares subject to possible redemption in accordance with the guidance in ASC 480. 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,
as of June 30, 2023 and December 31, 2022,
The Company has made a policy election in accordance with ASC 480-10-S99-3A and recognizes changes in redemption value in accumulated deficit immediately as if the end of the first reporting period after the IPO was the redemption date.
| ● | Fair value of financial instruments |
ASC 820 Fair Value Measurements and Disclosures (“ASC 820”) 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. ASC 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. |
11
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 unaudited condensed consolidated 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 June 30, 2023 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.
| ● | Income taxes |
Income taxes are determined in accordance with the provisions of ASC 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 consolidated 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 consolidated 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 consolidated 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 income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of June 30, 2023 or December 31, 2022. 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 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 Ordinary shares and non-redeemable
Ordinary shares 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
Ordinary shares. Any remeasurement of the accretion to the redemption value of the Ordinary shares subject to possible redemption was
considered to be dividends paid to the public stockholders. As of June 30, 2023, the Company has not considered the effect of the warrants
sold in the Initial Public Offering to purchase an aggregate of
12
| For
the Six Months Ended June 30, | ||||||||
| 2023 | 2022 | |||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Accretion of carrying value to redemption value | ( | ) | ( | ) | ||||
| Net loss including accretion of carrying value to redemption value | $ | ( | ) | $ | ( | ) | ||
| For
the Three Months Ended June 30, | ||||||||
| 2023 | 2022 | |||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Accretion of carrying value to redemption value | ( | ) | ( | ) | ||||
| Net loss including accretion of carrying value to redemption value | $ | ( | ) | $ | ( | ) | ||
For
the six months ended | For
the six months ended | |||||||||||||||
| Redeemable ordinary shares | Non- Redeemable ordinary shares | Redeemable ordinary shares | Non-Redeemable ordinary shares | |||||||||||||
| 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 (loss) income | $ | $ | ( | ) | $ | ( | $ | ( | ) | |||||||
| Denominators: | ||||||||||||||||
| $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||
13
| For the three months ended June 30, 2023 | For the three months ended June 30, 2022 | |||||||||||||||
| Redeemable ordinary shares | Non- Redeemable ordinary shares | Redeemable ordinary shares | Non-Redeemable ordinary shares | |||||||||||||
| 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: | ||||||||||||||||
| $ | $ | ( | ) | $ | $ | ( | ) | |||||||||
| ● | Related parties |
Parties, which can be a corporation or individual, are considered to be related if the Company or the other party has the ability, directly or indirectly, to control the Company or other party or exercise significant influence over the Company or 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 3 – INITIAL PUBLIC OFFERING
On
April 8, 2021, the Company sold
14
The
Company paid an upfront underwriting discount of $
NOTE 4 – 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 5 – RELATED PARTY TRANSACTIONS
Founder Shares
In November 2020, the Company issued an aggregate
of
In December 2020, the Company issued an aggregate
of
Advance from Related Parties
As of June 30, 2023 and December 31, 2022, the
Company had a temporary advance from Sponsor for its deferred cost of the Initial Public Offering. The balance is unsecured, interest-free
and would either be paid upon consummation of the Company’s initial Business Combination or at the lender’s discretion, converted
upon consummation of Business Combination into additional private units at a price of $
Administrative Services Agreement
The Company is obligated, commencing from April
1, 2021, to pay the Sponsor a monthly fee of $
15
Related Party Extensions Loan
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 eight times, five times by an additional three months each time and 3 times by an additional one month each time (for a total of
up to 30 months) to complete a Business Combination. Pursuant to the terms of our memorandum and articles of association and the trust
agreement entered into between us and Continental Stock Transfer & Trust Company, both as amended, in order to extend the time available
for the Company to consummate a Business Combination, the Company’s Sponsor or its affiliates or designees, upon five days advance
notice prior to the applicable deadline, must deposit into the Trust Account the applicable extension fees, on or prior to the date of
the applicable deadline, for each extension. The Company’s Sponsor or its affiliates or designees will receive a non-interest bearing,
unsecured promissory note equal to the amount of any such deposit that will not be repaid in the event that the Company is unable to close
a Business Combination unless there are funds available outside the Trust Account to do so. Such notes would either be paid upon consummation
of our initial Business Combination or at the lender’s discretion, converted upon consummation of our Business Combination into
additional private units at a price of $
On each of April 8, 2022, July 6, 2022 and September
28, 2022, the Company issued an unsecured promissory note in an amount of $
NOTE 6 – SHAREHOLDER’S DEFICIT
Ordinary shares
The
Company is authorized to issue
In
April 2021, the Company sold
In
April 2021, the Company issued
As of June 30, 2023 and December 31, 2022,
16
Public Warrants
As of June 30, 2023, and December 31, 2022,
Each
public warrant entitles the holder thereof to purchase 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 60 days following the consummation of the Company’s initial business combination, public warrant holders may, until such
time as there is an effective registration statement and during any period when the Company 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. For example, if a holder held
The
warrants will become exercisable on the later of the completion of an initial business combination and
The
Company may redeem the outstanding warrants (excluding the private warrants), 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, |
17
| ● | 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 issues 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 the Company’s 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, the Company’s 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 its option to require all holders to exercise their warrants on a “cashless basis” will depend on a variety of factors including the price of the Company’s 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 7 – ORDINARY SHARE SUBJECT TO POSSIBLE REDEMPTION
The
Company accounts for its ordinary shares subject to possible redemption in accordance with the guidance in ASC 480. 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 June 30, 2023 and December 31, 2022,
18
| For the Six Months Ended June 30, | For the Year Ended December 31, | |||||||
| 2023 | 2022 | |||||||
| Total ordinary shares issued | ||||||||
| Share issued classified as equity | ( | ) | ( | ) | ||||
| Share redemption | ( | ) | ||||||
| Ordinary shares, subject to redemption | ||||||||
NOTE 8 – 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).
| June 30, 2023 | Quoted Prices
In Active Markets | Significant
Other Observable Inputs | Significant Other Unobservable Inputs | |||||||||||||
| Description | (Unaudited) | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
| Assets: | ||||||||||||||||
| U.S. Treasury Securities held in Trust Account* | $ | $ | $ | $ | ||||||||||||
| Liabilities: | ||||||||||||||||
| Warrant liabilities – Private Warrants | $ | $ | $ | $ | ||||||||||||
19
| December 31, 2022 | Quoted Prices
In Active Markets | Significant
Other Observable Inputs | Significant Other Unobservable Inputs | |||||||||||||
| Description | (Audited) | (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 unaudited condensed consolidated balance sheets.
The
Company established the initial fair value for the private warrants at $
| June 30, 2023 | December 31, 2022 | |||||||
| Input | ||||||||
| Share price | $ | $ | ||||||
| Risk-free interest rate | % | % | ||||||
| Volatility | % | % | ||||||
| Exercise price | $ | $ | ||||||
| Warrant life | ||||||||
As
of June 30, 2023, the aggregate value of the Private Warrants was $
As
of December 31, 2022, the aggregate value of the Private Warrants was $
20
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.
NOTE 9 – 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 unaudited condensed consolidated 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 Placement 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 register 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 Placement 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 10 – 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 the unaudited condensed consolidated financial statements are issued, the Company has evaluated all events or transactions that occurred after the balance sheet date.
On July 6, 2023, the Company entered into the Amendment No. 1 to the Agreement and Plan of Merger (the “First Amendment”) with Purchaser, Merger Sub and LEW. Pursuant to the First Amendment, the Parties agreed to, among other things, amend (i) Section 11.3 of the Merger Agreement to provide that the Nasdaq listing condition in Section 11.3(f) cannot be waived by the LEW; and (ii) Sections 12.1 through 12.4 of the Merger Agreement to replace the third-party escrow arrangements relating to the indemnification obligations of LEW pursuant to the Merger Agreement with holdback arrangements.
On
July 13, 2023, the Company issued an unsecured promissory note in an amount of $
21
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 Business Acquisition Limited. 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 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 (Registration No. 333-252878) filed with the U.S. Securities and Exchange Commission (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 were formed on November 2, 2020 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 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.
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.
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.
22
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. 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 April 8, 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.
The net loss of $198,099 was decreased for the six months ended June 30, 2023 compared with net loss of $473,536 for the six months ended June 30, 2022. The amount decreased mainly due to an increase in interest rates which increased the dividend earned on marketable securities. This increase was partially offset by an increase in operating costs due to business combination expenses incurred.
The net loss of $117,334 was decreased for the three months ended June 30, 2023 compared with net loss of $164,427 for the three months ended June 30, 2022. The amount decreased mainly due to an increase in interest rates which increased the dividend earned on marketable securities. This increase was partially offset by an increase in operating costs due to business combination expenses incurred.
23
Liquidity and Capital Resources
As of June 30, 2023, we had cash of $65,288. 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.
Following the initial public offering and the exercise of the over-allotment option, a total of $46,920,000 was placed in the Trust Account. We incurred $1,125,000 in initial public offering related costs, including $920,000 of underwriting fees and $205,000 of initial public offering costs.
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.
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 initially had 12 months from the consummation of this offering to consummate the initial business combination. If we do not complete a business combination within 12 months from the consummation of the Public Offering, the Company will trigger an automatic winding up, dissolution and liquidation pursuant to the terms of the amended and restated memorandum and articles of association. As a result, this has the same effect as if we had formally gone through a voluntary liquidation procedure under the Companies Law. Accordingly, no vote would be required from our shareholders to commence such a voluntary winding up, dissolution and liquidation. However, we may extend the period of time to consummate a business combination eight times (for a total of up to 30 months from the consummation of the Public Offering to complete a business combination). As of the date of this report, we have extended seven times (for a total of up to 29 months from the consummation of the Public Offering to complete a business combination), and so it now has until September 8, 2023 to consummate a business combination. Pursuant to the terms of the current amended and restated memorandum and articles of association and the trust agreement between the Company and Continental Stock Transfer & Trust Company, LLC, in order to extend the time available for the Company to consummate our initial business combination, the Company’s insiders or their affiliates or designees, upon five days advance notice prior to the applicable deadline, must deposit into the Trust Account the applicable extension fees, on or prior to the date of the applicable deadline, for each extension. The insider, Ace Global Investment Limited, has received non-interest bearing, unsecured promissory notes equal to the amount of any such deposits (i.e., $455,400 for each of the extension on April 2022, July 2022 and September 2022, $350,332 for each of the extension on January 2023 and March 2023, and $116,777 for each of the extension on June 2023 and July 2023) that will not be repaid in the event that we are unable to close a business combination unless there are funds available outside the Trust Account to do so. Such notes would either be paid upon consummation of the Company’s initial business combination, or, at the lender’s discretion, converted upon consummation of our business combination into additional Private Units at a price of $10.00 per unit. The Company’s shareholders have approved the issuance of the Private Units upon conversion of such notes, to the extent the holder wishes to so convert such notes at the time of the consummation of the Company’s initial business combination. In the event that we receive notice from the Company’s insiders five days prior to the applicable deadline of their intent to effect an extension, the Company intends to issue a press release announcing such intention at least three days prior to the applicable deadline. In addition, the Company intends to issue a press release the day after the applicable deadline announcing whether or not the funds had been timely deposited. If we are unable to consummate the Company’s initial business combination by September 8, 2023, we will, as promptly as possible but not more than ten business days thereafter, redeem 100% of the Company’s outstanding public shares for a pro rata portion of the funds held in the Trust Account, including a pro rata portion of any interest earned on the funds held in the Trust Account and not necessary to pay taxes, and then seek to liquidate and dissolve. However, we may not be able to distribute such amounts as a result of claims of creditors which may take priority over the claims of the Company’s public shareholders. In the event of dissolution and liquidation, the public rights will expire and will be worthless.
Accordingly, the Company may not be able to obtain additional financing. If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all. These conditions raise substantial doubt about the Company’s ability to continue as a going concern if a Business Combination is not consummated by September 8, 2023 or October 8, 2023 if the Company elect to extend the period of time to consummate a Business Combination. These unaudited condensed consolidated financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
24
Off-balance sheet financing arrangements
We have no obligations, assets or liabilities which would be considered off-balance sheet arrangements as of June 30, 2023. 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 or 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 upon 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 critical accounting estimates. The Company have identified the following 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. Basic loss per share is computed by dividing the net loss by the weighted-average number of ordinary shares outstanding during the period, excluding ordinary shares subject to possible redemption. Diluted loss per share is computed by dividing net loss by the weighted average number of ordinary shares outstanding, plus to the extent dilutive, the incremental number of ordinary shares to settle rights and other ordinary share equivalents (currently none outstanding), as calculated using the treasury stock method. Ordinary shares subject to possible redemption as of June 30, 2023 and December 31, 2022, which are not currently redeemable and are not redeemable at fair value, have been excluded from the calculation of basic and diluted loss per share since such shares, if redeemed, only participate in their pro rata share of the Trust Account earnings. The Company has not considered the effect of the warrants sold in the Initial Public Offering to purchase an aggregate of 4,904,000 shares in the calculation of diluted net loss per share, since the exercise of the warrants is contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive and the Company did not have any other dilutive securities and other contracts that could, potentially, be exercised or converted into ordinary shares and then share in the earnings of the Company.
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 June 30, 2023, 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
Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this Report, is recorded, processed, summarized, and reported within the time period specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. Our management evaluated, with the participation of our current chief executive officer and chief financial officer (our “Certifying Officers”), the effectiveness of our disclosure controls and procedures as of June 30, 2023, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our Certifying Officers concluded that, our disclosure controls and procedures were not effective.
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We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Our internal control over financial reporting did not result in the proper classification of our warrants. Since their issuance on April 8, 2021, our warrants have been accounted for as derivative liabilities within our balance sheet. We 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 ordinary shares. Under ASC Section 815-40-15, a warrant is not indexed to the issuer’s ordinary shares 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. As a result, the Public Warrants shall be classified as equity.
In addition, the Company concluded it should restate its financial statements for the period ended June 30, 2021 to classify all ordinary shares 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 ordinary shares subject to redemption to be classified outside of permanent equity. 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. 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. As a result, the Company restated its previously filed financial statements to classify all ordinary shares as temporary equity and to recognize accretion from the initial book value to redemption value at the time of its Initial Public Offering and in accordance with ASC 480. The change in the carrying value of redeemable shares of ordinary shares resulted in charges against additional paid-in capital and accumulated deficit.
Furthermore, the Company failed to maintain effective controls over period-end reconciliation of account level balances that resulted errors in accrued expenses and operating expenses. The Company concluded it should reconcile the balance with vendor during the year end.
As a result, management identified these material weaknesses in our internal control over financial reporting related to the accounting for warrants and ordinary shares subject to possible redemption.
To remediate these material weaknesses, we developed a remediation plan with assistance from our accounting advisors and have dedicated significant resources and efforts to the remediation and improvement of our internal control over financial reporting. While we have processes to identify and appropriately apply applicable accounting requirements, we plan to enhance our system of evaluating and implementing the complex accounting standards that apply to our financial statements. Our plans at this time include providing enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third-party professionals with whom we consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects. For a discussion of management’s consideration of the material weakness identified related to our accounting for a significant and unusual transaction related to the warrants we issued in connection with our initial public offering.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the fiscal quarter of June 30, 2023 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”). 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 and one redeemable warrant. Each redeemable warrant entitles the holder thereof to purchase one ordinary share at an exercise price of $11.50 per share. 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.
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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.
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.
| 31.1 | Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 31.2 | Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 32.1 | Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101.INS | Inline XBRL Instance Document | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document. | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| ACE GLOBAL BUSINESS ACQUISITION LIMITED | ||
| Date: August 14, 2023 | By: | /s/ Eugene Wong |
| Eugene Wong | ||
| Chief Executive Officer | ||
| (Principal executive officer) | ||
| Date: August 14, 2023 | By: | /s/ Nicholas Xue Wei Tan |
| Nicholas Xue Wei Tan | ||
| Chief Financial Officer | ||
| (Principal financial and accounting officer) | ||
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