UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
OR
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 Number) |
(Address of principal executive offices)
Registrant’s Telephone Number, Including Area Code
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered | ||
| Units, each consisting of one Class A ordinary share, $0.0001 par value, and one-half of one redeemable warrant | PLAOU | The Nasdaq Stock Market LLC | ||
| The | ||||
| Redeemable warrants, included as part of the units, each whole warrant exercisable for one Class A ordinary share at an exercise price of $11.50 | PLAOW | The Nasdaq Stock Market LLC |
Indicate by check mark whether the Registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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.
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 the 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
As of November 10, 2022, there were
PATRIA LATIN AMERICAN OPPORTUNITY ACQUISITION CORP.
table of contents
| Page | ||
| PART I – FINANCIAL INFORMATION | 1 | |
| Item 1. | Condensed Financial Statements | 1 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 21 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 24 |
| Item 4. | Controls and Procedures | 24 |
| PART II - OTHER INFORMATION | 25 | |
| Item 1. | Legal Proceedings | 25 |
| Item 1A. | Risk Factors | 25 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 25 |
| Item 3. | Defaults Upon Senior Securities | 25 |
| Item 4. | Mine Safety Disclosures | 25 |
| Item 5. | Other Information | 25 |
| Item 6. | Exhibits | 26 |
i
PART I – FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
1
PATRIA LATIN AMERICAN OPPORTUNITY ACQUISITION
CORP.
CONDENSED BALANCE SHEETS
(Unaudited)
| September 30, 2022 | December 31, 2021 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Marketable securities held in Trust Account | — | |||||||
| Total current assets | ||||||||
| Deferred offering costs | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES, ORDINARY SHARES SUBJECT TO POSSIBLE REDEMPTION, AND SHAREHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Due to related party | $ | $ | ||||||
| Deferred underwriting fees payable | ||||||||
| Derivative warrant liabilities | ||||||||
| Accrued expenses | ||||||||
| Total current liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies (Note 5) | ||||||||
| Class A ordinary shares subject to possible redemption, | ||||||||
| Shareholders’ deficit | ||||||||
| Preferred shares, $ | ||||||||
| Class A ordinary shares, $ | ||||||||
| Class B ordinary shares, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total shareholders’ deficit | ( | ) | ( | ) | ||||
| Total Liabilities, Ordinary Shares Subject to Possible Redemption, and Shareholders’ Deficit | $ | $ | ||||||
The accompanying notes are an integral part of these condensed financial statements.
2
PATRIA LATIN AMERICAN OPPORTUNITY ACQUISITION
CORP
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
| For The Three Months Ended September 30, 2022 | For The Three Months Ended September 30, 2021 | For The Nine Months Ended September 30, 2022 | For The Period from February 25, 2021 (Inception) Through September 30, 2021 | |||||||||||||
| Formation costs | $ | $ | $ | $ | ||||||||||||
| General and administrative expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Change in fair value of derivative warrant liabilities | ( | ) | ||||||||||||||
| Unrealized gain on investments held in Trust Account | ||||||||||||||||
| Transaction costs allocation to derivative warrant liabilities | ( | ) | ||||||||||||||
| Net income (loss) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
| $ | ( | ) | $ | $ | $ | |||||||||||
| $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | |||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
3
PATRIA LATIN AMERICAN OPPORTUNITY ACQUISITION
CORP
CONDENSED STATEMENTS OF CHANGES IN ORDINARY SHARES SUBJECT TO POSSIBLE REDEMPTION AND SHAREHOLDERS’ DEFICIT
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022
(Unaudited)
| Ordinary Shares Subject to Possible Redemption | Ordinary Shares | Additional | Total | |||||||||||||||||||||||||
| Class A | Class B | Paid-in | Accumulated | Shareholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance as of January 1, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Proceeds from the sale of Class A Units | ||||||||||||||||||||||||||||
| Paid underwriters fees | — | ( | ) | — | ||||||||||||||||||||||||
| Deferred underwriting fees payable | — | ( | ) | — | ||||||||||||||||||||||||
| Fair value of Public Warrants | — | ( | ) | — | ||||||||||||||||||||||||
| Other offering costs | — | ( | ) | — | ||||||||||||||||||||||||
| Excess cash received over fair value of Private Placement Warrants | — | — | ||||||||||||||||||||||||||
| Accretion of Class A ordinary shares in redemption value | — | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance as of March 31, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Remeasurement of Class A ordinary shares to redemption value | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Net income | — | — | ||||||||||||||||||||||||||
| Balance as of June 30, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Remeasurement of Class A ordinary shares to redemption value | — | — | — | — | ( | ) | ( | ) | ||||||||||||||||||||
| Net loss | — | — | — | — | — | ( | ) | ( | ) | |||||||||||||||||||
| Balance as of September 30, 2022 | $ | $ | $ | — | $ | ( | ) | $ | ( | ) | ||||||||||||||||||
| PATRIA LATIN AMERICAN OPPORTUNITY ACQUISITION CORP CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT) FOR THE PERIOD FROM FEBRUARY 25, 2021 THROUGH SEPTEMBER 30, 2021 (Unaudited) | ||||||||||||||||||||||||||||
| Ordinary Shares Subject to Possible Redemption | Ordinary Shares | Additional | Total | |||||||||||||||||||||||||
| Class A | Class B | Paid-in | Accumulated | Shareholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance as of February 25, 2021 (inception) | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Insurance of ordinary shares to Sponsor | ||||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance as of March 31, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Net loss | — | — | ||||||||||||||||||||||||||
| Balance as of June 30, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Net loss | — | — | — | — | — | ( | ) | ( | ) | |||||||||||||||||||
| Balance as of September 30, 2021 | — | $ | — | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
4
PATRIA LATIN AMERICAN OPPORTUNITY ACQUISITION
CORP
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
| For The Nine Months Ended September 30, 2022 |
For The Period from February 25, 2021 (inception) Through September 30, 2021 |
|||||||
| Cash Flows from Operating Activities | ||||||||
| Net income (loss) | $ | $ | ( |
) | ||||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Unrealized gain on investments held in Trust Account | ( |
) | ||||||
| Transaction costs allocation to derivative warrant liabilities | ||||||||
| Formation and operating expenses funded by note payable through Sponsor | ||||||||
| Change in fair value of derivative warrant liabilities | ( |
) | ||||||
| Formation and operating expenses paid in exchange for Founder Shares | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses and other assets | ( |
) | ||||||
| Accrued expenses | ||||||||
| Net cash used in operating activities | ( |
) | ||||||
| Cash Flows from Investing Activities | ||||||||
| Proceeds from redemption of marketable securities held in Trust Account | ||||||||
| Purchase of marketable securities held in Trust Account | ( |
) | ||||||
| Investment of cash into Trust Account | ( |
) | ||||||
| Net cash used in investing activities | ( |
) | ||||||
| Cash Flows from Financing Activities | ||||||||
| Repayment of note payable | ( |
) | ||||||
| Repayment of amount due to related party | ( |
) | ||||||
| Proceeds from sale of Class A ordinary shares subject to possible redemption, gross | ||||||||
| Proceeds from sale of Private Placement Warrants | ||||||||
| Offering costs paid | ( |
) | ||||||
| Net cash provided by financing activities | ||||||||
| — | ||||||||
| Net increase in cash | ||||||||
| Cash — beginning of period | ||||||||
| Cash — end of period | $ | $ | ||||||
| Supplemental disclosure of noncash investing and financing activities: | ||||||||
| Initial Class A ordinary shares subject to possible redemption | $ | $ | ||||||
| Immediate accretion of Class A ordinary shares to redemption value | $ | $ | ||||||
| Subsequent accretion of Class A ordinary shares to redemption value | $ | $ | ||||||
| Offering costs included in accrued expenses | $ | $ | ||||||
| Offering costs paid through promissory note — related party | $ | $ | ||||||
| Offering costs paid through prepaid legal expense funded by sponsor | $ | $ | ||||||
| Deferred underwriting fees payable | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
5
PATRIA LATIN AMERICAN OPPORTUNITY ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 1 — Description of Organization, Business Operations, Liquidity and Going Concern Considerations
Patria Latin American Opportunity Acquisition Corp. (the “Company”) is a blank check company incorporated in Cayman Islands on February 25, 2021. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, ordinary shares purchase, reorganization, or similar business combination with one or more businesses (the “Business Combination”). The Company is an emerging growth company and, as such, the Company is subject to all of the risks associated with emerging growth companies.
As of September 30, 2022, the Company had not commenced any operations. All activities for the period from February 25, 2021 (inception), through September 30, 2022, relates to the Company’s formation, and the initial public offering (“IPO”) described below, and post-IPO expenses. The Company will not generate any operating revenues until after the completion of a Business Combination, at the earliest. The Company will generate non-operating income in the form of realized and unrealized gains on investments from the proceeds derived from the IPO.
On March 14, 2022, the Company consummated its
IPO of
The Company’s sponsor is Patria SPAC LLC,
a Cayman Islands exempted limited partnership (the “Sponsor”). Simultaneously with the closing of the IPO and pursuant to
the private placement warrants purchase agreement, the Company completed the private sale of
Transaction costs amounted to $
Following the closing of the IPO on March 14,
2022, an amount of $
6
Initial Business Combination
The Company’s management has broad discretion
with respect to the specific application of the net proceeds of the IPO, although substantially all of the net proceeds are intended to
be applied generally toward consummating a Business Combination. There is no assurance that the Company will be able to complete a Business
Combination successfully. The Company must complete one or more initial Business Combinations having an aggregate fair market value of
at least
The Articles of Association will provide that
a Public Shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert
or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)),
will be restricted from redeeming its shares with respect to more than an aggregate of
7
If the Company is unable to complete a Business
Combination within 15 months from the closing of the IPO (or up to within 21 months if the Company extends the period of time to consummate
the Initial Business Combination in accordance with the terms described in the Company’s final prospectus) of the IPO (the “Combination
Period”) and the Company’s shareholders have not amended the Articles of Association to extend such 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 subject to lawfully available funds therefor, redeem the Public Shares, at a per-share price, payable in cash,
equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and
not previously released to the Company to pay its taxes, if any (less up to $
The initial shareholders have agreed to waive
their rights to liquidating distributions from the Trust Account with respect to the Founder Shares if the Company fails to complete a
Business Combination within the Combination Period. However, if the initial shareholders acquire Public Shares in or after the IPO, they
will be entitled to liquidating distributions from the Trust if the Company fails to complete a Business Combination within the Combination
Period. The underwriters have agreed to waive their rights to the deferred underwriting commission held in the Trust Account in the event
the Company does not complete a Business Combination within in the Combination Period and, in such event, such amounts will be included
with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such
distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account
assets) will be only $
Liquidity and Going Concern Consideration
As of September 30, 2022, the Company had a working
capital of $
8
The Company anticipates that the cash held outside of the Trust Account as of September 30, 2022 will not be sufficient to allow the Company to operate for at least the next 12 months from the issuance of the condensed financial statements, assuming that a Business Combination is not consummated during that time. Over this time period, the Company will be using the funds held outside of the Trust Account for paying existing accounts payable and accrued liabilities, identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of time within one year after the date that the condensed financial statements are issued. Management plans to address this uncertainty through the Business Combination as discussed above. In addition, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required under the Working Capital Loans. There is no assurance that the Company’s plans to consummate the Business Combination will be successful or successful within the Combination Period or that the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors will loan the Company funds as may be required under the Working Capital Loans.
The condensed 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.
Risks and Uncertainties
Management continues to evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations, and/or search for a target company, the specific impact is not readily determinable as of the date of these condensed financial statements. The condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
The credit and financial markets have experienced extreme volatility and disruptions due to the current conflict between Ukraine and Russia. The conflict is expected to have further global economic consequences, including but not limited to the possibility of severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in inflation rates and uncertainty about economic and political stability. In addition, the United States and other countries have imposed sanctions on Russia which increases the risk that Russia, as a retaliatory action, may launch cyberattacks against the United States, its government, infrastructure and businesses. Any of the foregoing consequences, including those we cannot yet predict, may cause our business, financial condition, results of operations and the price of our ordinary shares to be adversely affected.
Note 2 — Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the Securities and Exchange Commission (the “SEC”). Certain information or footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair statement of the financial position, operating results and cash flows for the periods presented.
9
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 of 2002, 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 an emerging growth 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 an 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 condensed financial statements with another public company that 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
The preparation of unaudited condensed financial statements in conformity with U.S. GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements and the reported amounts of 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 condensed financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
Cash Equivalents
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, 2022 and December 31, 2021.
Investments Held in Trust Account
The assets held in the Trust Account were held in U.S. government treasury obligations with maturities of 185 days or less, which were invested in U.S. Treasury securities. Trading securities are presented on the condensed balance sheet at fair value at the end of each reporting period. Earnings on these securities is included in unrealized gain on investments held in Trust Account in the accompanying condensed statements of operations.
Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under Accounting Standards Codification (“ASC”) 820, “Fair Value Measurement,” approximates the carrying amounts represented in the balance sheet.
10
Fair Value Measurements
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. U.S. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
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, 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 of liabilities, or (iv) inputs that are derived principally from or corroborated by market through correlation or other means.
Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
Net Income (Loss) per Ordinary Share
The Company complies with accounting and disclosure requirements of ASC 260, “Earnings Per Share.” Net income (loss) per ordinary share is computed by dividing net income (loss) by the weighted average number of ordinary share outstanding during the period. The Company has not considered the effect of the warrants sold in the Initial Public Offering and Private Placements to purchase Class A Ordinary Shares in the calculation of diluted income (loss) per share, since their inclusion would be anti-dilutive under the treasury stock method. As a result, diluted income (loss) per share is the same as basic income (loss) per share for the periods presented.
A reconciliation of the income (loss) per share is below:
| For the Nine Months Ended September 30, 2022 | For the Period From February 25 2021 (Inception) through September 30, 2021 | |||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Less: Accretion of temporary equity to redemption value | ( | ) | ||||||
| Net income (loss) including accretion of temporary equity to redemption value | $ | ( | ) | $ | ( | ) | ||
| For the Six Months Ended September 30, 2022 | For the Period from February 25, 2021 (Ineption) through Septembeer 30, 2021 | |||||||||||
| Class A | Class B | Class B | ||||||||||
| Basic and diluted net income (loss) per share | ||||||||||||
| Numerator | ||||||||||||
| Allocation net income (loss) including accretion of temporary equity to redemption value | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Deemed dividend for accretion of temporary equity to redemption value | ||||||||||||
| Allocation of net income (loss) and deemed dividend | $ | $ | ( | ) | $ | ( | ) | |||||
| Denominator | ||||||||||||
| $ | $ | ( | ) | $ | ( | ) | ||||||
11
| For the Three Months Ended September 30, 2022 | For the Three Months Ended September 30, 2021 | |||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Less: Accretion of temporary equity to redemption value | ( | ) | ||||||
| Net income including accretion of temporary equity to redemption value | $ | ( | ) | $ | ( | ) | ||
| For theThree Months Ended September 30, 2022 | For the Three Months Ended September 30, 2021 | |||||||||||
| Class A | Class B | Class B | ||||||||||
| Basic and diluted net income per share | ||||||||||||
| Numerator | ||||||||||||
| Allocation net income including accretion of temporary to redemption value | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Deemed dividend for accretion of temporary equity to redemption value | ||||||||||||
| Allocation of net income and deemed dividend | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Denominator | ||||||||||||
| $ | ( | ) | $ | ( | ) | $ | — | |||||
The Company’s unaudited condensed statements of operations include a presentation of loss per share for shares of ordinary shares subject to possible redemption in a manner similar to the two-class method of loss per share. With respect to the accretion of the Class A Ordinary Shares subject to possible redemption and consistent with ASC 480, “Distinguishing Liabilities from Equity,” in accordance with ASC 480-10-S99-3A, the Company has treated the accretion to redemption value in the same manner as a dividend, to the extent the redemption value exceeds the fair value, in the calculation of the net loss per ordinary share. The Company did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into ordinary shares and then share in the earnings of the Company. As a result, diluted loss per share is the same as basic loss per share for the periods presented.
Class A Ordinary Shares Subject to Possible Redemption
The Company accounts for its Class A Ordinary Shares subject to possible redemption in accordance with the guidance in ASC 480.
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 Class A Ordinary Shares feature contains certain redemption rights that
are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, Class A
Ordinary Shares subject to possible redemption are classified as temporary equity, outside of the shareholders’ equity section of
the Company’s balance sheets. Accordingly, as of September 30, 2022,
The Class A Ordinary Shares subject to possible
redemption are subject to the subsequent measurement guidance in ASC 480-10-S99. Under such guidance, the Company must subsequently measure
the shares to their redemption amount because, as a result of the allocation of net proceeds to transaction costs, the initial carrying
amount of the ordinary shares is less than $
12
At September 30, 2022,
| Gross proceeds | $ | |||
| Less: | ||||
| Class A Ordinary Shares issuance costs | ( | ) | ||
| Fair value of Public Warrants at issuance | ( | ) | ||
| Plus: | ||||
| Accretion of carrying value to redemption value | ||||
| Class A Ordinary Shares subject to possible redemption at March 31, 2022 | $ | |||
| Remeasurement of carrying value to redemption value | ||||
| Class A Ordinary Shares subject to possible redemption at June 30, 2022 | $ | |||
| Remeasurement of carrying value to redemption value | ||||
| Class A Ordinary Shares subject to possible redemption at September 30, 2022 | $ |
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC 815, “Derivatives and Hedging.” For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value on the issuance date and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the balance sheet as current or non-current based on whether or not net- cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date.
Derivative Warrant Liabilities
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 ASC 480 and 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, 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 additional paid-in capital 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 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 statements of operations. The fair value of warrants issued in connection with the Initial Public Offering were initially measured at fair value using a Monte Carlo simulation model for the Public Warrants and Private Placement Warrants.
The Class A Ordinary Shares and warrants comprising the units began separate trading on the 52nd day following the date of the IPO. Holders have the option to continue to hold units or separate their units into the component securities. Holders will need to have their brokers contact the Company’s transfer agent in order to separate the units into Class A Ordinary Shares and warrants. No fractional warrants will be issued upon separation of the units and only whole warrants will trade. Accordingly, unless you purchase a multiple of two units, the number of warrants issuable to you upon separation of the units will be rounded down to the nearest whole number of warrants.
Additionally, the units will automatically separate into their component parts and will not be traded after completion of the Initial Business Combination.
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Share-based Compensation
The Company accounts for Founder Shares issued to its independent directors in accordance with SEC Staff Accounting Bulletin 5T and ASC 718, “Compensation-Stock Compensation.” The fair value of the Founder Shares issued in this arrangement was determined using the implied stock price as of the date of Initial Public Offering of the Company’s Class A ordinary shares and the probability of the success of the Business Combination.
Offering Costs
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company’s management determined that the Cayman Islands is the Company’s only major tax jurisdiction. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. As of September 30, 2022 and December 31, 2021, there were no unrecognized tax benefits and no amounts were accrued for the payment of interest and penalties.
There is currently no taxation imposed on income by the Government of the Cayman Islands. In accordance with Cayman income tax regulations, income taxes are not levied on the Company. Consequently, income taxes are not reflected in the Company’s condensed financial statements. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times, may exceed the Federal Depository Insurance Coverage. The Company has not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.
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Recent Accounting Pronouncements
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020- 06”), which simplifies accounting for convertible instruments by removing major separation models required under current U.S. GAAP. As a result of ASU 2020 – 06, more convertible debt instruments will be accounted for as a single liability measured at its amortized cost and more convertible preferred shares will be accounted for as a single equity instrument measured at its historical cost, as long as no features require bifurcation and recognition as derivatives. The amendments are effective for smaller reporting companies for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is evaluating the impact of ASU 2020-06 on its financial statements.
The Company’s management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the accompanying condensed financial statements.
Note 3 – Initial Public Offering
Pursuant to the IPO, the Company sold
The Company had granted the Underwriters in the
IPO (the “Underwriters”) a 45-day option to purchase up to
Note 4 – Private Placement Warrants
Simultaneously with the closing of the IPO, the
Sponsor purchased an aggregate of
Note 5 – Related Party Transactions
Founder Shares
On March 3, 2021, one of our officers paid $
On March 14, 2022, the underwriters fully exercised
the over-allotment option; thus, the
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The Sponsor has agreed not to transfer, assign
or sell any of their founder shares and any Class A Ordinary Shares issued upon conversion thereof until the earlier to occur of (A) one
year after the completion of our initial business combination; or (B) subsequent to our initial business combination, (x) if the last
reported sale price of the Class A Ordinary Shares equals or exceeds $
The Founder Shares will automatically convert
into Class A Ordinary Shares concurrently with or immediately following the consummation of the Company’s Initial Business
Combination on a one-for-one basis, subject to adjustment for share sub-divisions, share capitalizations, reorganizations, recapitalizations
and the like, and subject to further adjustment as provided herein. In the case that additional Class A Ordinary Shares or equity-linked
securities are issued or deemed issued in connection with the Company’s Initial Business Combination, the number of Class A
Ordinary Shares issuable upon conversion of all Founder Shares will equal, in the aggregate,
Promissory Note – Related Party
On March 3, 2021, the Company issued an unsecured
promissory note (the “Promissory Note”) to the Sponsor, pursuant to which the Company may borrow up to an aggregate principal
amount of $
Due to Related Party
As of September 30, 2022, the Company had an
outstanding balance of $
Administrative Services Agreement
Commencing on the date of the IPO, the Company
pays the Sponsor or an affiliate a monthly fee of $
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Working Capital Loans
In order to finance transaction costs in connection
with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may,
but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a
Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company.
Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination
does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds
held in the Trust Account would be used to repay the Working Capital Loans. The Working Capital Loans would either be repaid upon consummation
of a Business Combination or, at the lender’s discretion, up to $
Note 6 – Commitments and Contingencies
Registration Rights
The holders of Founder Shares and Private Placement Warrants, including any that may be issued upon conversion of Working Capital Loans, if any (and any Class A Ordinary Shares issuable upon the exercise of the Private Placement Warrants, including any that may be issued upon conversion of the Working Capital Loans), will be entitled to registration rights pursuant to a registration rights agreement entered into prior to the consummation of the IPO. These holders will be entitled to certain demand and “piggyback” registration rights. However, the registration rights agreement provides that the Company is not required to effect or permit any registration or cause any registration statement to become effective until termination of the applicable lock-up period. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The Company granted the underwriter a 45-day option
from the date of the IPO to purchase up to an additional
Note 7 – Derivative Warrant Liabilities
The Company accounted for the
Each whole Warrant entitles the holder thereof
to purchase one Class A Ordinary Share at a price of $
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Public Warrants may only be exercised for a whole
number of shares. No fractional Public Warrants will be issued upon separation of the Units and only whole Public Warrants will trade.
The Public Warrants will become exercisable 30 days after the completion of an Initial Business Combination provided that the Company
has an effective registration statement under the Securities Act covering the Class A Ordinary Shares issuable upon exercise of the
Public Warrants and a current prospectus relating to them is available and such shares are registered, qualified or exempt from registration
under the securities, or blue sky, laws of the state of residence of the holder (or holders are permitted to exercise their Public Warrants
on a cashless basis under certain circumstances as a result of (i) the Company’s failure to have an effective registration
statement by the 60th business day after the closing of the Initial Business Combination or (ii) a notice of redemption
described under “Redemption of Warrants when the price per Class A Ordinary Share equals or exceeds $
The Warrants have an exercise price of $11.50 per share, subject to adjustments, and will expire five years after the completion of an Initial Business Combination or earlier upon redemption or liquidation. In addition, if (x) the Company issues additional Class A Ordinary Shares or equity-linked securities for capital raising purposes in connection with the closing of the Initial Business Combination at an issue price or effective issue price of less than $9.20 per Class A Ordinary Share (with such issue price or effective issue price to be determined in good faith by the board of directors and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of the Initial Business Combination on the date of the consummation of the Initial Business Combination (net of redemptions) and (z) the volume weighted average trading price of Class A Ordinary Shares during the 20 trading day period starting on the trading day prior to the day on which the Company consummates the Initial Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the Warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, and the $10.00 and $18.00 per share redemption trigger prices described under “Redemption of Warrants when the price per Class A Ordinary Share equals or exceeds $10.00” and “Redemption of Warrants when the price per Class A Ordinary Share equals or exceeds $18.00” will be adjusted (to the nearest cent) to be equal to 100% and 180% of the higher of the Market Value and the Newly Issued Price, respectively.
The Private Placement Warrants are identical to the Public Warrants, except that, so long as they are held by the Sponsor or its permitted transferees, (i) they will not be redeemable by the Company, (ii) they (including the Class A Ordinary Shares issuable upon exercise of these Warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold by the Sponsor until 30 days after the completion of the Initial Business Combination, (iii) they may be exercised by the holders on a cashless basis, (iv) are subject to registration rights and (v) use a different Black-Scholes Warrant Model for purposes of calculating the Black-Scholes Warrant Value (as defined in the warrant agreement).
On the exercise of any Warrant, the Warrant exercise price will be paid directly to us and not placed in the Trust Account.
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Redemption of Warrants when the price per Class
A Ordinary Share equals or exceeds $
| ● | in whole and not in part; |
| ● | at a price of $ |
| ● | upon a minimum of 30 days’ prior written notice of redemption; and |
| ● | if, and only if, the last reported sale price of Class A Ordinary Shares equals or exceeds $ |
The Company will not redeem the Warrants as described above unless an effective registration statement under the Securities Act covering the Class A Ordinary Shares issuable upon exercise of the Warrants is effective and a current prospectus relating to those Class A Ordinary Shares is available throughout the 30-day redemption period. Any such exercise would not be on a cashless basis and would require the exercising warrant holder to pay the exercise price for each Warrant being exercised.
Redemption of Warrants when the price per Class A Ordinary Share equals or exceeds $10.00: Once the Warrants become exercisable, the Company may redeem the outstanding Warrants:
| ● | in whole and not in part; |
| ● | at a price of $0.10 per Warrant upon a minimum of 30 days’ prior written notice of redemption; provided that holders will be able to exercise their Warrants on a cashless basis prior to redemption and receive that number of shares determined by reference to the table set forth in the warrant agreement based on the redemption date and the “redemption fair market value” of Class A Ordinary Shares (as defined below) except as otherwise described in the warrant agreement; |
| ● | if, and only if, the closing price of Class A Ordinary Shares equals or exceeds $10.00 per Public Share (as adjusted) for any 20 trading days within the 30-trading day period ending three trading days before the Company sends the notice of redemption to the warrant holders; and |
| ● | if the closing price of the Class A Ordinary Shares for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders is less than $18.00 per share (as adjusted), the Private Placement Warrants must also be concurrently called for redemption on the same terms as the outstanding Public Warrants, as described above. |
Solely for the purposes of this redemption provision, the “redemption fair market value” of the Company’s Class A Ordinary Shares shall mean the volume weighted average price of the Class A Ordinary Shares for the ten (10) trading days immediately following the date on which notice of redemption is sent to the holders of Warrants.
No fractional Class A Ordinary Shares will be issued upon redemption. If, upon redemption, a holder would be entitled to receive a fractional interest in a share, the Company will round down to the nearest whole number of the number of Class A Ordinary Shares to be issued to the holder.
Note 8 – Shareholder’s Deficit
Preferred Shares – The
Company is authorized to issue
Class A Ordinary Shares –
The Company is authorized to issue
Class B Ordinary Shares –
The Company is authorized to issue
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Holders of the Class A Ordinary Shares and holders of the Class B ordinary shares will vote together as a single class on all matters submitted to a vote of the Company’s shareholders, except as required by law or stock exchange rule; provided that only holders of the Class B ordinary shares shall have the right to vote on the appointment and removal of the Company’s directors prior to the Initial Business Combination or continuing the Company in a jurisdiction outside the Cayman Islands (including any special resolution required to amend the constitutional documents of the Company or to adopt new constitutional documents of the Company, in each case, as a result of the Company approving a transfer by way of continuation in a jurisdiction outside the Cayman Islands).
Note 9 – Fair Value Measurements
The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2022, including the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value.
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets | ||||||||||||||||
| Marketable securities held in Trust Account | $ | $ | $ | $ | ||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Liabilities | ||||||||||||||||
| Public Warrants | $ | $ | $ | $ | ||||||||||||
| Private Placement Warrants | ||||||||||||||||
| Total liabilities | $ | $ | $ | $ | ||||||||||||
The Warrants are accounted for as liabilities pursuant to ASC 815-40 and are measured at fair value as of each reporting date. Changes in the fair value of the Warrants are recorded in the statements of operations each period.
Transfers to/from Levels 1, 2, and 3 are recognized at the end of the reporting period. During the nine months ended September 30, 2022, the public and private warrants were transferred out of level 3 into level 1 and level 2, respectively.
The fair value of the Public Warrants issued in
connection with the Initial Public Offering and Private Placement Warrants were initially measured at fair value using a Monte Carlo simulation
model. The fair value of Public Warrants issued in connection with the Initial Public Offering have been measured based on the listed
market price of such warrants, a Level 1 measurement, since May 4, 2022. The fair value of the Private Placement Warrants has subsequently
been measured by reference to the trading price of the Public Warrants, which is considered to be a Level 2 fair value measurement. The
Company recognized a charge resulting from a decrease in the fair value of warrant liabilities of $
The table below shows the change in fair value of the derivative warrant liabilities as of September 30, 2022:
| Public Warrant | Private Warrant | Total | ||||||||||
| Fair value at January 1, 2022 | $ | $ | $ | |||||||||
| Fair value at March 14, 2022 | ||||||||||||
| Change in fair value | ( | ) | ( | ) | ( | ) | ||||||
| Fair value as of March 31, 2022 | ||||||||||||
| Change in fair value | ||||||||||||
| Fair value as of June 30, 2022 | $ | $ | $ | |||||||||
| Change in fair value | ||||||||||||
| Fair value as of September 30, 2022 | $ | $ | $ | |||||||||
Note 10 — Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date financial statements were issued. The Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.
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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 Patria Latin American Opportunity Acquisition Corp. References to our “management” or our “management team” refer to our officers and directors, references to the “Sponsor” refer to Patria SPAC LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the condensed financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this 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 final prospectus for its Initial Public Offering 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 are a blank check company incorporated in Cayman Islands on February 25, 2021. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, ordinary share purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). The Company is an emerging growth company and, as such, the Company is subject to all of the risks associated with emerging growth companies.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities from February 25, 2021 (inception) through September 30, 2022 were organizational activities, those necessary to prepare for the Initial Public Offering, described below, and the Company’s search for a target business with which to complete a Business Combination. We do not expect to generate any operating revenues until after the completion of our initial Business Combination. We generate non-operating income in the form of interest income on the investments held in the Trust Account. We are incurring expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses in connection with completing a Business Combination.
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For the nine months ended September 30, 2022 we had a net income of $5,080,880 which consists of general and administrative expenses of $728,577 (made up of professional services fees of $305,111 and other general and administrative fees of $423,466), change in fair value of derivative warrant liabilities of $4,720,500, gain on the investments held in the Trust Account of $1,403,465, and transaction costs allocated to derivative warrant liabilities of $314,508.
For the period from February 25, 2021 (inception) through September 30, 2021 we had a net loss of $49,308 which consisted of formation costs.
For the three months ended September 30, 2022 we had a net loss of $438,683 which consists of general and administrative expenses of $240,538 (made up of professional services fees of $145,488, and other general and administrative fees of $95,050), change in fair value of derivative warrant liabilities of $1,300,000, gain on the investments held in the Trust Account of $1,101,855.
For the three months ended September 30, 2021 we had a net loss of $3,185 which consisted of formation costs.
Liquidity and Going Concern Consideration
As of September 30, 2022, the Company had a working capital of $226,690,355 including the Trust Account, deferred underwriting fees payable and Derivative warrant liabilities. Working capital was $1,116,890 when marketable securities held in Trust Account, deferred underwriting fees payable and Derivative warrant liabilities were excluded from the calculation. Of the net proceeds from the IPO and associated sale of Private Placement Warrants, $236,900,000 of cash was placed in the Trust Account. The working capital surplus includes the amount of restricted marketable securities held in the Trust Account, deferred underwriting fees payable and derivative warrant liabilities, all of which have been classified as current at September 30, 2022 as a result of the Company being less than 12 months away from consuming the assets held in the Trust Account to either consummate a business combination or to liquidate. During the nine months ended September 30, 2022, net cash used in investing activities was $236,900,000 which included the redemption of U.S. government treasury obligations of $475,200,000, fully offset by the purchase of U.S. government treasury obligations of $475,200,000. Cash of $806,558 was held outside of the Trust Account and is available for the Company’s working capital purposes.
For the nine months ended September 30, 2022, cash used in operating activities was $1,057,441 which is made up of a net income of $5,080,880 and changes in operating assets and liabilities, which used $328,864. These amounts were offset by unrealized gain on investments held in trust account of $1,403,465, transaction costs allocated to derivative warrant liabilities of $314,508 and the change in fair value of derivative warrant liabilities of $4,720,500.
As of September 30, 2022, we had cash of $806,558. 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, structure, negotiate and complete a Business Combination.
In order to finance transaction costs in connection with an Initial Business Combination, the Company’s Sponsor, or an affiliate of the Sponsor or certain of the Company’s officers and directors may, but are not obligated to, provide Working Capital Loans to the Company. As of September 30, 2022, there were no amounts outstanding under any Working Capital Loans.
If the Company’s estimates of the costs of identifying a target business, undertaking due diligence and negotiating an Initial Business Combination are less than the actual amount necessary to do so, the Company may have insufficient funds available to operate its business prior to an Initial Business Combination. Moreover, the Company may need to obtain additional financing either to complete an Initial Business Combination or because it becomes obligated to redeem a significant number of its Public Shares upon completion of an Initial Business Combination, in which case the Company may issue additional securities or incur debt in connection with such Initial Business Combination.
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The Company anticipates that the cash held outside of the Trust Account as of September 30, 2022 will not be sufficient to allow the Company to operate for at least the next 12 months from the issuance of the condensed financial statements, assuming that a Business Combination is not consummated during that time. Over this time period, the Company will be using the funds held outside of the Trust Account for paying existing accounts payable and accrued liabilities, identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of time within one year after the date that the condensed financial statements are issued. Management plans to address this uncertainty through the Business Combination as discussed above. In addition, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required under the Working Capital Loans. There is no assurance that the Company’s plans to consummate the Business Combination will be successful or successful within the Combination Period or that the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors will loan the Company funds as may be required under the Working Capital Loans.
The condensed 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.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities.
The underwriters are entitled to a deferred fee of $0.35 per Unit, or $8,050,000 in the aggregate. The deferred fee will be waived by the underwriters in the event that the Company does not complete a Business Combination, subject to the terms of the underwriting agreement.
Critical Accounting Estimates
The preparation of condensed financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America 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 condensed financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have not identified any critical accounting estimates other than the following.
Derivative Warrant Liabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. We evaluate all of our financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480, “Distinguishing Liabilities from Equity” and ASC 815-40, “Derivatives and Hedging”. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.
We issued 13,000,000 Public Warrants to purchase Class A ordinary shares to investors in our Initial Public Offering and issued 14,500,000 Private Placement Warrants. All of our outstanding Public Warrants are recognized as derivative liabilities in accordance with ASC 815-40. Accordingly, we recognize the warrant instruments as liabilities at fair value and adjust the instruments to fair value at each reporting period. The liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our statements of operations.
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Additionally, the units will automatically separate into their component parts and will not be traded after completion of our initial business combination.
Transfers to/from Levels 1, 2 and 3 are recognized at the end of the reporting period in which a change in valuation technique or methodology occurs. During the nine months ended September 30, 2022, the public and private warrants were transferred out of level 3 into level 1 and level 2, respectively.
Recent Accounting Standards
See “Recent Accounting Pronouncements” in Note 2 of the accompanying condensed financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As of September 30, 2022, 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 185 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 and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of September 30, 2022, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial and accounting officer have concluded that during the period covered by this report, our disclosure controls and procedures were effective at a reasonable assurance level and, accordingly, provided reasonable assurance that the information required to be disclosed by us in reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended September 30, 2022 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 1. Legal Proceedings
None.
Item 1A. Risk Factors
Factors that could cause our actual results to differ materially from those in this report include the risk factors described in our final prospectus filed with the SEC on March 10, 2022. As of the date of this Report, there have been no material changes to the risk factors disclosed in our final prospectus filed with the SEC other than the additional risk factor set forth in our quarterly report on Form 10-Q filed with the SEC on May 5, 2022.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On March 14, 2022, we consummated the Initial Public Offering of 23,000,000 Units, including 3,000,000 Units sold pursuant to the full exercise of the underwriters’ option to purchase additional Units to cover over-allotments. The Units sold were sold at an offering price of $10.00 per unit, generating total gross proceeds of $230,000,000. JP Morgan Securities LLC and Citigroup Global Markets Inc. JP Morgan Securities LLC and Citigroup Global Markets Inc. acted as joint book-running managers for the offering. The securities in the offering were registered under the Securities Act on a registration statement on Form S-1 (No. 333-254498). The Securities and Exchange Commission declared the registration statement effective on March 9, 2022.
Simultaneously with the consummation of the Initial Public Offering and the full exercise of the over-allotment option, we consummated the private placement of an aggregate of 14,500,000 warrants at a price of $1.00 per Private Placement Warrant, generating total proceeds of $14,500,000 The issuance was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
The Private Placement Warrants are identical to the warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants are not transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions.
Of the gross proceeds received from the Initial Public Offering, the full exercise of the over-allotment option and the sale of the Private Placement Warrants, $236,900,000 was placed in the Trust Account.
We accrued a total of $13,779,665 in transaction costs, including $8,050,000 in deferred underwriting fees, $4,600,000 in upfront underwriting fees, and other offering costs of $1,129,665 related to 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 Quarterly Report.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable
Item 5. Other Information
None.
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Item 6. Exhibits
| * | Filed herewith. |
| ** | These certifications are furnished to the SEC pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing. |
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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.
| PATRIA LATIN AMERICAN OPPORTUNITY ACQUISITION CORP. | |||
| Date: November 10, 2022 | By: | /s/ José Augusto Gonçalves de Araújo Teixeira | |
| Name: | José Augusto Gonçalves de Araújo Teixeira | ||
| Title: | Chief Executive Officer | ||
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