UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For
the fiscal year ended
For the transition period from _____ to _____
Commission
file number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
| (Address of principal executive offices) | (Zip Code) |
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: | ||
Securities registered pursuant to Section 12(g) of the Act: None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.
Yes ☐
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 and post 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 definition 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
The
aggregate market value of the registrants outstanding Class A ordinary shares and units, other than shares and units held by persons
who may be deemed affiliates of the registrant, computed by reference to the closing price for the shares and units on June 30,
2022, the last business day of the registrants second fiscal quarter of 2022, as reported on the Nasdaq Global Market was $
As of February 28, 2023, there were shares of the Company’s Class A Ordinary Shares, $0.0001 par value per share (the “Class A Shares”) and of the Company’s Class B Ordinary Shares, $0.0001 par value per share issued and outstanding (the “Class B Shares”).
TABLE OF CONTENTS
i
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Report (as defined below), including, without limitation, statements under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” includes forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. These forward-looking statements can be identified by the use of forward-looking terminology, including the words “believes,” “estimates,” “anticipates,” “expects,” “intends,” “plans,” “may,” “will,” “potential,” “projects,” “predicts,” “continue,” or “should,” or, in each case, their negative or other variations or comparable terminology. There can be no assurance that actual results will not materially differ from expectations. Such statements include, but are not limited to, any statements relating to our ability to consummate any acquisition or other business combination and any other statements that are not statements of current or historical facts. These statements are based on management’s current expectations, but actual results may differ materially due to various factors, including, but not limited to:
| ● | our ability to complete our initial business combination; |
| ● | our success in retaining or recruiting, or changes required in, our officers, key employees or directors following our initial business combination; |
| ● | our 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; |
| ● | our potential ability to obtain additional financing to complete our initial business combination; |
| ● | the ability of our officers and directors to generate a number of potential acquisition opportunities; |
| ● | our pool of prospective target businesses; |
| ● | the ability of our officers and directors to generate a number of potential acquisition opportunities; |
| ● | our public securities’ potential liquidity and trading; |
| ● | the use of proceeds not held in the trust account or available to us from interest income on the trust account balance; or |
| ● | our financial performance. |
The forward-looking statements contained in this Report are based on our current expectations and beliefs concerning future developments and their potential effects on us. Future developments affecting us may not 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.
Unless otherwise stated in this Report, or the context otherwise requires, references to:
| ● | “amended and restated memorandum and articles of association” are to our Amended and Restated Memorandum and Articles of Association adopted on October 7, 2021 as amended by the First Amendment to our Amended and Restated Memorandum and Articles of Association adopted on January 13, 2023; |
| ● | “Affiliate of our Sponsor” means Fat Ventures Pte. Ltd. |
ii
| ● | “Avanseus” means Avanseus Holdings Pte. Ltd., a Singapore private company limited by shares, with company registration number 201526265R |
| ● | “board of directors” or “board” are to the board of directors of the Company; |
| ● | “Companies Act” means the Companies Act (as amended) of the Cayman Islands. |
| ● | “Continental” are to Continental Stock Transfer & Trust Company, trustee of our trust account (as defined below) and warrant agent of our public warrants (as defined below); |
| ● | “DWAC System” are to the Depository Trust Company’s Deposit/Withdrawal At Custodian System; |
| ● | “Exchange Act” are to the Securities Exchange Act of 1934, as amended; |
| ● | “founder shares” are to our Class B ordinary shares initially purchased by our sponsor in a private placement prior to our initial public offering, and the Class A ordinary shares issuable upon the conversion thereof; |
| ● | “GAAP” are to the accounting principles generally accepted in the United States of America; |
| ● | “IFRS” are to the International Financial Reporting Standards, as issued by the International Accounting Standards Board; |
| ● | “initial business combination” are to a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses; |
| ● | “initial public offering” or “IPO” are to the initial public offering that was consummated by the Company on October 15, 2021; |
| ● | “initial shareholders” are to our sponsor and any other holders of our founder shares prior to our initial public offering (or their permitted transferees); |
| ● | “Investment Company Act” are to the Investment Company Act of 1940, as amended; |
| ● | “JOBS Act” are to the Jumpstart Our Business Startups Act of 2012; |
| ● | “Marcum” are to Marcum LLP, our independent registered public accounting firm. |
| ● | “management” or our “management team” are to our officers and directors |
| ● | “Nasdaq” are to the Nasdaq Stock Market; |
| ● | “New Avanseus” means the Company combined with Avanseus after giving effect to the consummation of the Business Combination contemplated in the Company’s Business Combination Agreement with Avanseus as described below in this Annual Report. |
| ● | “Ordinary shares” means the Class A Shares and the Class B Shares, collectively; |
| ● | “PCAOB” are to the Public Company Accounting Oversight Board (United States); |
| ● | “private placement warrants” are to the warrants purchased by our sponsor in the private placement; |
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| ● | “public shares” are to our Class A ordinary shares sold as part of the units in our initial public offering (whether they are purchased in our initial public offering or thereafter in the open market); |
| ● | “public shareholders” are to the holders of our public shares, including our initial shareholders and members of our management team to the extent our initial shareholders and/or members of our management team purchase public shares; provided that each initial shareholder’s and member of our management team’s status as a “public shareholder” shall only exist with respect to such public shares; |
| ● | “public units” are to the units sold in our initial public offering, which consist of one public share and one public warrant; |
| ● | “public warrants” are to our redeemable warrants sold as part of the units in our initial public offering (whether they were purchased in the initial public offering or thereafter in the open market), to the private placement warrants if held by third parties other than our sponsor (or permitted transferees), and to any private placement warrants issued upon conversion of working capital loans that are sold to third parties that are not initial purchasers of our private placement warrants or executive officers or directors (or permitted transferees); |
| ● | “Registration Statement” are to the Form S-1 filed with the SEC on June 16, 2021, as amended; |
| ● | “Report” are to this Annual Report on Form 10-K for the fiscal year ended December 31, 2022; |
| ● | “Sarbanes-Oxley Act” are to the Sarbanes-Oxley Act of 2002; |
| ● | “SEC” are to the U.S. Securities and Exchange Commission; |
| ● | “Securities Act” are to the Securities Act of 1933, as amended; |
| ● | “sponsor” are to Fat Projects SPAC Pte. Ltd., a corporation registered under the laws of the Republic of Singapore; |
| ● | “trust account” are to the trust account in the United States, with Continental acting as trustee into which an amount of $115,000,000 ($10.00 per unit) from the net proceeds of the sale of the units and private placement warrants in the initial public offering was placed following the closing of the initial public offering; |
| ● | “units” are to the public units; |
| ● | “warrants” are to our redeemable warrants, which includes the public warrants as well as the private placement warrants and any warrants issued upon conversion of working capital loans to the extent they are no longer held by the initial holders or their permitted transferees; |
| ● | “we,” “us,” “Company” or “our Company” are to Fat Projects Acquisition Corp; |
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PART I
Item 1. Business.
Overview
Formation. We are a blank check company incorporated on April 16, 2021 as a Cayman Islands exempted company whose business purpose is to effect a merger, capital share exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses, which we refer to as our initial business combination. To date, our efforts have been limited to organizational activities, activities related to the IPO, searching for a business combination target and conducting due diligence on potential acquisition targets, negotiating a business combination agreement with Avanseus (as defined below), and preparing and filing with the SEC a registration statement on Form S-4 and amendments thereto related to our business combination agreement with Avanseus and other filings with the SEC.
Initial Public Offering. On October 15, 2021 we consummated our initial public offering pursuant to which we issued 11,500,000 public units at a price of $10.00 per unit (after the exercise of the underwriters’ overallotment option). Each public unit is comprised of one of our Class A ordinary shares and one redeemable warrant exercisable for one of our Class A ordinary shares with an exercise price of $11.50 per share. Simultaneously with the consummation of our initial public offering, we issued 2,865,000 private placement warrants to our sponsor at a price of $1.00 per warrant. We also issued 115,000 of our Class A ordinary shares to EF Hutton, the lead underwriter for our initial public offering as compensation for serving as lead underwriter. We deposited $115,000,000 of the proceeds from the initial public offering and the private placement of the private placement warrants into our trust account with Continental for the benefit of the holders of our public shares.
Business Combination Agreement with Avanseus. On August 26, 2022, we entered into a Business Combination Agreement with Avanseus Holdings Pte. Ltd., a Singapore private company limited by shares (“Avanseus”) (as may be amended and/or restated from time to time, the “Business Combination Agreement”). The Business Combination Agreement and the transactions contemplated thereby were approved by our board of directors and the Avanseus board of directors (other than the PIPE Investment as described below which will require further approval of the boards of directors), subject to the approval of our shareholders. The Business Combination Agreement provides for a series of transactions, pursuant to which, among other things, Avanseus’ shareholders will exchange all of their outstanding Avanseus shares in consideration for newly issued Company Class A Ordinary Shares (the “Share Exchange”), subject to the conditions set forth in the Business Combination Agreement, with Avanseus thereby becoming our wholly owned subsidiary (the Share Exchange and the other transactions contemplated by the Business Combination Agreement, together, the “Business Combination” or the “Proposed Transaction”). In connection with the Business Combination, we will change our corporate name to “Avanseus Holdings Corporation” (“New Avanseus”).
The Business Combination Agreement, prior to the Second BCA Amendment described below, provided that the Company will use its commercially reasonable efforts to enter into and consummate subscription agreements in form and substance mutually acceptable to the Company and Avanseus with investors mutually reasonably acceptable to the Company and Avanseus pursuant to which such investors will agree to purchase up to an aggregate of $35 million of (i) the Company’s Series A Convertible Preference Shares, which shares will be convertible into the Company’s Class A Ordinary Shares, and/or (ii) the Company’s Class A Ordinary Shares, with such purchases to be consummated prior to or substantially currently with the closing of the Share Exchange (the “PIPE Investment”).
The Business Combination is expected to close in the first quarter of 2023, following the receipt of the required approval by our shareholders and the fulfillment of other customary closing conditions.
On October 3, 2022, Avanseus and we entered into a First Amendment to Business Combination Agreement (the “First BCA Amendment”) to amend the previously announced Business Combination Agreement dated August 26, 2022 (the “Original Business Combination Agreement”). The First BCA Amendment amends the Original Business Combination Agreement to:
| (1) | add a mutual condition to the obligations of Avanseus and us to close the transactions contemplated in the Business Combination Agreement that holders of the Company’s Class A Ordinary Shares redeem an aggregate of at least 5,200,000 of such shares so that Avanseus will be the acquiror for accounting purposes at both the minimum and maximum redemption levels required to be disclosed in the Registration Statement on Form S-4 to be filed with the Commission pursuant to the Business Combination Agreement; |
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| (2) | replace the form of Incentive Equity Plan attached to the Original Business Combination Agreement with an amended Incentive Equity Plan to conform the eligible participants in the plan to the eligible participants listed in the Original Business Combination Agreement; |
| (3) | improve the description of the Nasdaq listing process in the Business Combination Agreement for our Class A Ordinary Shares to be issued to Avanseus’ shareholders and pursuant to the Incentive Equity Plan; and |
| (4) | provide that subscription agreements for PIPE investors be mutually reasonably acceptable to Avanseus as well as us. |
On February 14, 2023, Avanseus and we entered into a Second Amendment to Business Combination Agreement (the “Second BCA Amendment”) to further amend the Original Business Combination Agreement. The Second BCA Amendment further amends the Original Business Combination Agreement to:
| (1) | Amend the definition of Acquiror Transaction Expenses to exclude expenses that are expressly deferred, waived or converted to equity by written agreement of the parties to which they are owed on terms satisfactory to Avanseus; |
| (2) | Delete provisions related to a PIPE offering by FATP and provisions related to a pool of one million FATP Class A Ordinary Shares to be issued for purposes mutually acceptable to FATP and Avanseus; |
| (3) | Delete a closing condition that required the combined companies to have at least $5,000,001 of net tangible assets at Closing; |
| (4) | Amend the minimum cash closing condition to reduce the amount of cash that the combined companies must have at Closing after the payment of their transaction expenses from $25 million to $4 million; |
| (5) | Add a new closing condition that FATP enter into one or more definitive financing agreements with terms mutually acceptable to FATP and Avanseus with one or more post-closing financing providers acceptable to both FATP and Avanseus, which may include the issuance of up to one millions FATP Class A ordinary shares as origination fees to the post-closing financing providers; |
| (6) | Extend the Agreement End Date, which is the date that either FATP or Avanseus may terminate the Business Combination Agreement without cause (provided that the terminating party is not itself in material breach of the Business Combination Agreement), from February 22, 2023 to July 15, 2023; and |
| (7) | Delete the closing condition added by the First BCA Amendment that holders of at least 5,200,000 publicly held Class A ordinary shares redeem such shares at the closing of the transactions contemplated in the Business Combination since the redemption of 6,058,262 Class A ordinary shares in connection with the January 13, 2023 Charter Amendment rendered such condition unnecessary. |
Charter Amendment. In an extraordinary general meeting held on January 13, 2023, shareholders approved the First Amendment to the Amended and Restated Memorandum and Articles of Association (the “Charter Amendment”), changing the structure and cost of our right to extend the date (the “Termination Date”) by which we must either (i) consummate a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination involving the Company and one or more businesses (a “business combination”), or else (ii) cease our operations if we fail to complete such business combination, and redeem or repurchase 100% of our public shares included as part of the units sold in our initial public offering.
The Charter Amendment allows us to extend the Termination Date by up to six (6) one-month extensions to July 15, 2023 (each of which we refer to as an “Extension”, and such later date, the “Extended Deadline”) provided that if any Extended Deadline ends on a day that is not a business day, such Extended Deadline will be automatically extended to the next succeeding business day. To obtain each 1-month extension, we, our sponsor or any of their affiliates or designees must deposit into our Trust Account with Continental by the deadline applicable prior to the extension $0.0575 per share for each of our public shares outstanding as of the deadline prior to the extension (after giving effect to redemptions in connection with the approval of the Charter Amendment by our shareholders with respect to the first such extension). In connection with the approval of the Charter Amendment on January 13, 2023, holders of 6,058,262 of our public shares exercised their right to redeem those shares for cash at an approximate price of $10.16 per share, for an aggregate of approximately $61.57 million, leaving 5,441,738 of our public shares outstanding after the January 13, 2023 shareholders meeting.
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Extension of Deadline to Complete the Company’s Initial Business Combination. As of the date of this Annual Report, the Company has exercised its right to extend the deadline to complete its initial business combination twice by depositing or causing to be deposited into the trust account $312,900 for each of the two extensions. The current deadline is March 15, 2023. The Company has four remaining 1-month extensions available to it under the Charter Amendment.
Initial Public Offering
On October 15, 2021 we consummated our IPO of 11,500,000 units, including the underwriters over-allotment option of an additional 1,500,000 units. Each unit consists of one Class A ordinary share of the Company, par value $0.0001 per share (our “Class A ordinary shares”), and one redeemable warrant of the Company, with each warrant entitling the holder thereof to purchase one Class A Ordinary share for $11.50 per share. The units were sold at a price of $10.00 per unit, generating gross proceeds to the Company of $115,000,000.
Simultaneously with the closing of the IPO, we completed the private sale of an aggregate of 2,865,000 warrants to our sponsor at a purchase price of $1.00 per private placement warrant, generating gross proceeds of $2,865,000. We also issued 115,000 of our Class A ordinary shares as compensation to EF Hutton, our lead underwriter for our initial public offering.
Business Strategy
Our business strategy is to identify and consummate an initial business combination with a company with operations or prospects in Southeast Asia’s new growth sectors. We have focused and intend to continue to focus (if the Business Combination Agreement with Avanseus is not consummated) on companies that complement the experience of our management team and can benefit from the team’s deep local operational expertise on the ground in Southeast Asia. Our selection process has been leveraged our management team’s and our sponsor’s broad and deep network of relationships, industry expertise and proven deal-sourcing capabilities, providing us with a strong pipeline of potential targets. Our management and sponsor have experience in:
| ● | investing and building businesses in the technology led growth sectors; |
| ● | managing and operating companies, setting and changing strategies, and identifying, mentoring and recruiting top-notch talent; |
| ● | developing and growing companies, both organically and inorganically, and expanding the product ranges and geographic footprints of portfolio businesses; |
| ● | executing multi-billion merger and acquisition projects and implementing strategies and policies to accelerate growth and create integrated value chains; |
| ● | sourcing, structuring, acquiring and selling businesses in various markets; |
| ● | partnering with other industry-leading companies to increase sales and improve the competitive position of companies; |
| ● | fostering relationships with users, sellers, capital providers and target management teams; and |
| ● | accessing the capital markets across various business cycles, including financing businesses and assisting companies with the transition to public ownership. |
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Business Combination Criteria
Consistent with our business strategy, we have identified the following general criteria and guidelines that we believe are important in evaluating prospective target businesses. We have used these criteria and guidelines in evaluating acquisition opportunities, though, if the Business Combination Agreement with Avanseus does not close, we may decide to enter into our initial business combination with a target business that does not meet these criteria and guidelines. We focused on businesses with:
| ● | Operations or prospects in technology led growth sectors in Southeast Asia. Based upon our management team’s experience, we believe we will have increased access to investment opportunities and a competitive advantage in our ability to negotiate a business combination with potential targets in Southeast Asia’s technology led growth sectors. Our management team’s extensive experience and network of contacts provide them with an opportunity to source a target, evaluate a target, consummate a business combination with the target and help grow the target’s business. |
| ● | Strong management team and culture. We intend to acquire one or more businesses that have strong and complimentary management teams with a proven track record of driving sustainable growth, building long-term competitive advantage and making sound strategic decisions, as well as operating with a transparent corporate culture anchored in strong values benefiting shareholders and the communities they engage in. |
| ● | Large addressable markets. We intend to invest in one or more businesses that address a large market that creates the opportunity for attractive long-term growth prospects and focus on targets that have the potential to outperform in growing and evolving total addressable markets (TAMS) and the total desirable markets (TDMS). |
| ● | Scalability. We seek to invest in one or more businesses that will be able to significantly scale their operations to take advantage of their opportunities. We intend to leverage our experience in scaling businesses in order to help accelerate growth. |
| ● | Sound fundamentals with the potential to further improve their performance under our ownership. We believe our management team’s experience in our target sectors as well as their network of industry contacts will create opportunities to enhance the revenue and operational efficiencies of the target business, and potentially generate higher returns for our investors. |
| ● | Market leadership. We intend to seek one or more targets that have a leading presence across an industry or segment or have leading technology or product capabilities. |
| ● | Appropriate valuations. We intend to be a disciplined and valuation-centric investor that will invest on terms that we believe are attractive relative to market comparables and intrinsic value that provide significant upside potential. |
| ● | Opportunities for inorganic growth. We intend to seek companies that can serve as a platform for future synergistic acquisitions, and can benefit from the public currency afforded by access to equity capital markets. |
Initial Business Combination
Nasdaq rules require that we must complete one or more business combinations having an aggregate fair market value of at least 80% of the value of the assets held in the trust account (excluding the deferred underwriting commissions and taxes payable on the interest earned on the trust account) at the time of our signing a definitive agreement in connection with our initial business combination. Our board of directors will make the determination as to the fair market value of our initial business combination. If our board of directors is not able to independently determine the fair market value of our initial business combination, we will obtain an opinion from an independent investment banking firm or another independent entity that commonly renders valuation opinions with respect to the satisfaction of such criteria. While we consider it unlikely that our board of directors will not be able to make an independent determination of the fair market value of our initial business combination, it may be unable to do so if it is less familiar or experienced with the business of a particular target or if there is a significant amount of uncertainty as to the value of a target’s assets or prospects. Additionally, pursuant to Nasdaq rules, any initial business combination must be approved by a majority of our independent directors.
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We anticipate structuring our initial business combination so that the post-transaction company in which our public shareholders own shares will own or acquire 100% of the equity interests or assets of the target business or businesses. We may, however, structure our initial business combination such that the post-transaction company owns or acquires less than 100% of such interests or assets of the target business in order to meet certain objectives of the prior owners of the target business, the target management team or shareholders or for other reasons, but we will only complete such business combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act. Even if the post-transaction company owns or acquires 50% or more of the voting securities of the target, our shareholders prior to the business combination may collectively own a minority interest in the post-transaction company, depending on valuations ascribed to the target and us in the business combination transaction. For example, we could pursue a transaction in which we issue a substantial number of new shares in exchange for all of the outstanding capital stock, shares or other equity interests of a target. In this case, we would acquire a 100% controlling interest in the target. However, as a result of the issuance of a substantial number of new shares, our shareholders immediately prior to our initial business combination could own less than a majority of our issued and outstanding shares subsequent to our initial business combination. If less than 100% of the equity interests or assets of a target business or businesses are owned or acquired by the post-transaction company, the portion of such business or businesses that is owned or acquired is what will be valued for purposes of the 80% of net assets test. If the business combination involves more than one target business, the 80% of net assets test will be based on the aggregate value of all of the target businesses and we will treat the target businesses together as our initial business combination for purposes of a tender offer or for seeking shareholder approval, as applicable.
Our Business Combination Process
In evaluating a prospective target business, we believe we have conducted a thorough due diligence review that encompassed, among other things, meetings with incumbent management and employees, document reviews, interviews of customers and suppliers, inspection of facilities, as well as reviews of financial and other information that were made available to us. We also utilized our operational and capital allocation experience.
Our acquisition criteria, due diligence processes and value creation methods are not intended to be exhaustive. Any evaluation relating to the merits of a particular initial business combination may be based, to the extent relevant, on these general guidelines as well as other considerations, factors and criteria that our management may deem relevant. In the event that the Business Combination Agreement with Avanseus does not close, and we decide to enter into our initial business combination with a target business that does not meet the above criteria and guidelines, we will disclose that the target business does not meet the above criteria in our shareholder communications related to our initial business combination, which would be in the form of tender offer documents or proxy solicitation materials that we would file with the SEC.
Sourcing of Potential Business Combination Targets
We believe that the operational and transactional experience of our management team and our sponsor and their respective affiliates and related entities and the relationships they have developed as a result of such experience, have provided us with a substantial number of potential business combination targets. These individuals and entities have developed a broad network of contacts and corporate relationships around the world. This network has grown through sourcing, acquiring and financing businesses and maintaining relationships with sellers, financing sources and target management teams. Our management team and members of our sponsor and their respective affiliates and related entities have significant experience in executing transactions under varying economic and financial market conditions. We believe that these networks of relationships and this experience have provided us with important sources of investment opportunities. In addition, target business candidates were and may be brought to our attention from various unaffiliated sources, including investment market participants, private equity funds and large business enterprises seeking to divest noncore assets or divisions.
We are not prohibited from pursuing an initial business combination with a business combination target that is affiliated with our sponsor, officers or directors (or their respective affiliates or related entities) or making the acquisition through a joint venture or other form of shared ownership with our sponsor, officers or directors (or their respective affiliates or related entities). In the event we seek to complete our initial business combination with a company that is affiliated with our sponsor, officers or directors (or their respective affiliates or related entities), we, or a committee of independent directors, will obtain an opinion from an independent investment banking firm or another independent firm that commonly renders valuation opinions for the type of company we are seeking to acquire or an independent accounting firm that our initial business combination is fair to our company from a financial point of view. We are not required to obtain such an opinion in any other context. As more fully discussed in the registration statement for our initial public offering (our “IPO Registration Statement”) if any of our officers or directors becomes aware of a business combination opportunity that falls within the line of business of any entity to which he or she has then-current fiduciary or contractual obligations, he or she may be required to present such business combination opportunity to such entity prior to presenting such business combination opportunity to us, subject to his or her fiduciary duties under Cayman Islands law. Our officers and directors currently have certain relevant fiduciary duties or contractual obligations that may take priority over their duties to us.
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Status as a Public Company
We believe our structure will make us an attractive business combination partner to target businesses. As a public company, we offer a target business an alternative to the traditional initial public offering through a merger or other business combination with us. Following an initial business combination, we believe the target business would have greater access to capital and additional means of creating management incentives that are better aligned with shareholders’ interests than it would as a private company. A target business can further benefit by augmenting its profile among potential new customers and vendors and aid in attracting talented employees. In a business combination transaction with us, the owners of the target business may, for example, exchange their shares of stock in the target business for our Class A ordinary shares (or shares of a new holding company) or for a combination of our Class A ordinary shares and cash, allowing us to tailor the consideration to the specific needs of the sellers.
Although there are various costs and obligations associated with being a public company, we believe target businesses will find this method a more expeditious and cost-effective method to becoming a public company than the typical initial public offering. The typical initial public offering process takes a significantly longer period of time than the typical business combination transaction process, and there are significant expenses in the initial public offering process, including underwriting discounts and commissions, marketing and road show efforts that may not be present to the same extent in connection with an initial business combination with us.
Furthermore, once a proposed initial business combination is completed, the target business will have effectively become public, whereas an initial public offering is always subject to the underwriters’ ability to complete the offering, as well as general market conditions, which could delay or prevent the offering from occurring or could have negative valuation consequences. Following an initial business combination, we believe the target business would then have greater access to capital and an additional means of providing management incentives consistent with shareholders’ interests and the ability to use its shares as currency for acquisitions. Being a public company can offer further benefits by augmenting a company’s profile among potential new customers and vendors and aid in attracting talented employees.
While we believe that our structure and our management team’s backgrounds will make us an attractive business partner, some potential target businesses may view our status as a blank check company, such as our lack of an operating history and our ability to seek shareholder approval of any proposed initial business combination, negatively.
We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act. As such, we are eligible to 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 our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the prices of our securities may be more volatile.
In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this extended transition period.
We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following October 15, 2026, the fifth anniversary of the completion of our initial public offering, (b) in which we have total annual gross revenue of at least $1.235 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Class A ordinary shares that are held by non-affiliates exceeds $700 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.
Additionally, we are a “smaller reporting company” as defined in Rule 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our ordinary share held by non-affiliates equals or exceeds $250 million as of the end of the prior June 30th, or (2) our annual revenues equaled or exceeded $100 million during such completed fiscal year and the market value of our ordinary share held by non-affiliates exceeds $700 million as of the prior June 30th.
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Financial Position
With funds available for an initial business combination in the amount of approximately $56.3 million as of February 28, 2023, we offer a target business a variety of options such as creating a liquidity event for its owners, providing capital for the potential growth and expansion of its operations or strengthening its balance sheet by reducing its debt or leverage ratio. Because we are able to complete our initial business combination using our cash, debt or equity securities, or a combination of the foregoing, we have the flexibility to use the most efficient combination that will allow us to tailor the consideration to be paid to the target business to fit its needs and desires. However, we have not secured third party financing and there can be no assurance it will be available to us.
Effecting Our Initial Business Combination
We are not presently engaged in, and we will not engage in, any operations other than the pursuit of our initial business combination, for an indefinite period of time. We intend to effectuate our initial business combination using cash from the proceeds of our initial public offering and the private placement of the private placement warrants, the proceeds of the sale of our shares in connection with our initial business combination (pursuant to backstop agreements we may enter into following the consummation of our initial public offering or otherwise), shares issued to the owners of the target, debt issued to bank or other lenders or the owners of the target, or a combination of the foregoing. We may seek to complete our initial business combination with a company or business that may be financially unstable or in its early stages of development or growth, which would subject us to the numerous risks inherent in such companies and businesses.
If our initial business combination is paid for using equity or debt securities, or not all of the funds released from the trust account are used for payment of the consideration in connection with our initial business combination or used for redemptions of our Class A ordinary shares, we may apply the balance of the cash released to us from the trust account for general corporate purposes, including for maintenance or expansion of operations of the post-transaction company, the payment of principal or interest due on indebtedness incurred in completing our initial business combination, to fund the purchase of other companies or for working capital.
We may seek to raise additional funds through a private offering of debt or equity securities in connection with the completion of our initial business combination, and we may effectuate our initial business combination using the proceeds of such offering rather than using the amounts held in the trust account. In addition, we are targeting businesses larger than we could acquire with the net proceeds of our initial public offering and the sale of the private placement warrants, and may as a result be required to seek additional financing to complete such proposed initial business combination. Subject to compliance with applicable securities laws, we would expect to complete such financing only simultaneously with the completion of our initial business combination. In the case of an initial business combination funded with assets other than the trust account assets, our proxy materials or tender offer documents disclosing the initial business combination would disclose the terms of the financing and, only if required by law, we would seek shareholder approval of such financing. There are no prohibitions on our ability to raise funds privately, or through loans in connection with our initial business combination. Our board of directors has authorized us (1) to raise up to $1 million of funds by the issuance of non-interest bearing notes to fund extensions of the deadline to complete our initial business combination and (2) to raise up to $1,062,500 of funds for working capital (which can also be used to fund extensions of the deadline to complete our initial business combination) through a private offering of promissory notes bearing simple interest at a rate of 15% per annum to prospective investors who are not our sponsor, directors or officers or any of their affiliates. As of February 28, 2023, there was an aggregate principal amount of $200,260 of non-interest-bearing notes and $355,740 of interest-bearing notes outstanding.
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Sources of Target Businesses
Target business candidates are brought to our attention from various unaffiliated sources, including investment bankers and investment professionals. Target businesses are also brought to our attention by such unaffiliated sources as a result of being solicited by us by calls or mailings. These sources introduce us to target businesses in which they think we may be interested on an unsolicited basis, since many of these sources will have read the prospectus of our initial public offering and know what types of businesses we are targeting. Our officers and directors, as well as our sponsor and their affiliates, also bring to our attention target business candidates that they become aware of through their business contacts as a result of formal or informal inquiries or discussions they may have, as well as attending trade shows or conventions. In addition, we expect to receive a number of deal flow opportunities that would not otherwise necessarily be available to us as a result of the business relationships of our officers and directors and our sponsor and their affiliates. While we do not presently anticipate engaging the services of professional firms or other individuals that specialize in business acquisitions on any formal basis, we may engage these firms or other individuals in the future, in which event we may pay a finder’s fee, consulting fee, advisory fee or other compensation to be determined in an arm’s length negotiation based on the terms of the transaction. We will engage a finder only to the extent our management determines that the use of a finder may bring opportunities to us that may not otherwise be available to us or if finders approach us on an unsolicited basis with a potential transaction that our management determines is in our best interest to pursue. Payment of finder’s fees is customarily tied to completion of a transaction, in which case any such fee will be paid out of the funds held in the trust account. In no event, however, will our sponsor or any of our existing officers or directors be paid any finder’s fee, reimbursement, consulting fee, monies in respect of any payment of a loan or other compensation by the company prior to, or in connection with any services rendered for any services they render in order to effectuate, the completion of our initial business combination (regardless of the type of transaction that it is). None of our sponsor, executive officers or directors, or any of their respective affiliates, will be allowed to receive any compensation, finder’s fees or consulting fees from a prospective business combination target in connection with a contemplated initial business combination except as set forth herein. We pay our Sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support and to reimburse our sponsor for any out-of-pocket expenses related to identifying, investigating, and completing an initial business combination. Some of our officers and directors may enter into employment or consulting agreements with the post-transaction company following our initial business combination. The presence or absence of any such fees or arrangements will not be used as a criterion in our selection process of an initial business combination candidate.
We are not prohibited from pursuing an initial business combination with an initial business combination target that is affiliated with our sponsor, officers or directors or making the initial business combination through a joint venture or other form of shared ownership with our sponsor, officers or directors. In the event we seek to complete our initial business combination with an initial business combination target that is affiliated with our sponsor, officers or directors, we, or a committee of independent directors, would obtain an opinion from an independent investment banking firm or another independent entity that commonly renders valuation opinions that such an initial business combination is fair to our company from a financial point of view. We are not required to obtain such an opinion in any other context.
If any of our officers or directors becomes aware of an initial business combination opportunity that falls within the line of business of any entity to which he or she has pre-existing fiduciary or contractual obligations, he or she may be required to present such business combination opportunity to such entity prior to presenting such business combination opportunity to us. Our officers and directors currently have certain relevant fiduciary duties or contractual obligations that may take priority over their duties to us.
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Selection of a Target Business and Structuring of our Initial Business Combination
Nasdaq rules require that we must complete one or more business combinations having an aggregate fair market value of at least 80% of the value of the assets held in the trust account (excluding the deferred underwriting commissions and taxes payable on the interest earned on the trust account) at the time of our signing a definitive agreement in connection with our initial business combination. The fair market value of our initial business combination will be determined by our board of directors based upon one or more standards generally accepted by the financial community, such as discounted cash flow valuation, a valuation based on trading multiples of comparable public businesses or a valuation based on the financial metrics of M&A transactions of comparable businesses. If our board of directors is not able to independently determine the fair market value of our initial business combination, we will obtain an opinion from an independent investment banking firm or another independent entity that commonly renders valuation opinions with respect to the satisfaction of such criteria. While we consider it unlikely that our board of directors will not be able to make an independent determination of the fair market value of our initial business combination, it may be unable to do so if it is less familiar or experienced with the business of a particular target or if there is a significant amount of uncertainty as to the value of a target’s assets or prospects. We do not intend to purchase multiple businesses in unrelated industries in conjunction with our initial business combination. Subject to this requirement, our management will have virtually unrestricted flexibility in identifying and selecting one or more prospective target businesses, although we will not be permitted to effectuate our initial business combination with another blank check company or a similar company with nominal operations.
In any case, we will only complete an initial business combination in which we own or acquire 50% or more of the outstanding voting securities of the target or otherwise acquire a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act. If we own or acquire less than 100% of the equity interests or assets of a target business or businesses, the portion of such business or businesses that are owned or acquired by the post-transaction company is what will be taken into account for purposes of Nasdaq’s 80% fair market value test. There is no basis for our investors to evaluate the possible merits or risks of any target business with which we may ultimately complete our initial business combination.
To the extent we effect our initial business combination with a company or business that may be financially unstable or in its early stages of development or growth we may be affected by numerous risks inherent in such company or business. Although our management will endeavor to evaluate the risks inherent in a particular target business, we cannot assure you that we will properly ascertain or assess all significant risk factors.
In evaluating a prospective business target, we expect to conduct a thorough due diligence review, which may encompass, among other things, meetings with incumbent management and employees, document reviews, interviews of customers and suppliers, inspection of facilities, as well as a review of financial and other information that will be made available to us.
The time required to select and evaluate a target business and to structure and complete our initial business combination, and the costs associated with this process, are not currently ascertainable with any degree of certainty. Any costs incurred with respect to the identification and evaluation of a prospective target business with which our initial business combination is not ultimately completed will result in our incurring losses and will reduce the funds we can use to complete another business combination.
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Lack of Business Diversification
For an indefinite period of time after the completion of our initial business combination, the prospects for our success may depend entirely on the future performance of a single business. Unlike other entities that have the resources to complete business combinations with multiple entities in one or several industries, it is probable that we will not have the resources to diversify our operations and mitigate the risks of being in a single line of business. In addition, we are focusing our search for an initial business combination in a single industry. By completing our initial business combination with only a single entity, our lack of diversification may:
| ● | subject us to negative economic, competitive and regulatory developments, any or all of which may have a substantial adverse impact on the particular industry in which we operate after our initial business combination, and |
| ● | cause us to depend on the marketing and sale of a single product or limited number of products or services. |
Limited Ability to Evaluate the Target’s Management Team
Although we closely scrutinize the management of a prospective target business when evaluating the desirability of effecting our initial business combination with that business, our assessment of the target business’ management may not prove to be correct. In addition, the future management may not have the necessary skills, qualifications or abilities to manage a public company. Furthermore, the future role of members of our management team, if any, in the target business cannot presently be stated with any certainty. We cannot assure you that any of our key personnel will remain in senior management or advisory positions with the combined company. The determination as to whether any of the members of our management team will remain with the combined company will be made at the time of our initial business combination. While it is possible that one or more of our directors will remain associated in some capacity with us following our initial business combination, it is unlikely that any of them will devote their full efforts to our affairs subsequent to our initial business combination. Moreover, we cannot assure you that members of our management team will have significant experience or knowledge relating to the operations of the particular target business.
Following an initial business combination, we may seek to recruit additional managers to supplement the incumbent management of the target business. We cannot assure you that we will have the ability to recruit additional managers, or that additional managers will have the requisite skills, knowledge or experience necessary to enhance the incumbent management.
Shareholders May Not Have the Ability to Approve Our Initial Business Combination
We may conduct redemptions without a shareholder vote pursuant to the tender offer rules of the SEC. However, we will seek shareholder approval if it is required by law or applicable stock exchange rule, or we may decide to seek shareholder approval for business or other legal reasons. Presented in the table below is a graphic explanation of the types of initial business combinations we may consider and whether shareholder approval is currently required under Cayman law for each such transaction.
| Type of Transaction | Whether Shareholder Approval is Required |
||
| Purchase of assets | No | ||
| Purchase of stock of target not involving a merger with the company | No | ||
| Merger of target into a subsidiary of the company | No | ||
| Merger of the company with a target | Yes |
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Under Nasdaq’s listing rules, shareholder approval would be required for our initial business combination if, for example:
| ● | we issue Class A ordinary shares that will be equal to or in excess of 20% of the number of our Class A ordinary shares then outstanding; |
| ● | any of our directors, officers or substantial shareholders (as defined by Nasdaq rules) has a 5% or greater interest (or such persons collectively have a 10% or greater interest), directly or indirectly, in the target business or assets to be acquired or otherwise and the present or potential issuance of ordinary shares could result in an increase in outstanding common shares or voting power of 5% or more; or |
| ● | the issuance or potential issuance of ordinary shares will result in our undergoing a change of control. |
Permitted Purchases of our Securities
If we seek shareholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our sponsor, initial shareholders, directors, officers, or their affiliates may purchase public shares or public warrants in privately negotiated transactions or in the open market either prior to or following the completion of our initial business combination. There is no limit on the number of shares our initial shareholders, directors, officers or their affiliates may purchase in such transactions, subject to compliance with applicable law and Nasdaq rules. However, they have no current commitments, plans or intentions to engage in such transactions and have not formulated any terms or conditions for any such transactions. If they engage in such transactions, they will not make any such purchases when they are in possession of any material nonpublic information not disclosed to the seller or if such purchases are prohibited by Regulation M under the Exchange Act. We do not currently anticipate that such purchases, if any, would constitute a tender offer subject to the tender offer rules under the Exchange Act or a going-private transaction subject to the going-private rules under the Exchange Act; however, if the purchasers determine at the time of any such purchases that the purchases are subject to such rules, the purchasers will comply with such rules. Any such purchases will be reported pursuant to Section 13 and Section 16 of the Exchange Act to the extent such purchasers are subject to such reporting requirements. None of the funds held in the trust account will be used to purchase shares or public warrants in such transactions prior to completion of our initial business combination.
The purpose of any such purchases of shares could be to vote such shares in favor of the initial business combination and thereby increase the likelihood of obtaining shareholder approval of the initial business combination or to satisfy a closing condition in an agreement with a target that requires us to have a minimum net worth or a certain amount of cash at the closing of our initial business combination, where it appears that such requirement would otherwise not be met. The purpose of any such purchases of public warrants could be to reduce the number of public warrants outstanding or to vote such warrants on any matters submitted to the warrant holders for approval in connection with our initial business combination. Any such purchases of our securities may result in the completion of our initial business combination that may not otherwise have been possible. In addition, if such purchases are made, the public “float” of our Class A ordinary shares or warrants may be reduced and the number of beneficial holders of our securities may be reduced, which may make it difficult to maintain or obtain the quotation, listing or trading of our securities on a national securities exchange.
Our sponsor, officers, directors and/or their affiliates anticipate that they may identify the shareholders with whom our sponsor, officers, directors or their affiliates may pursue privately negotiated purchases by either the shareholders contacting us directly or by our receipt of redemption requests submitted by shareholders following our mailing of proxy materials in connection with our initial business combination. To the extent that our sponsor, officers, directors or their affiliates enter into a private purchase, they would identify and contact only potential selling shareholders who have expressed their election to redeem their shares for a pro rata share of the trust account or vote against our initial business combination, whether or not such shareholder has already submitted a proxy with respect to our initial business combination. Our sponsor, officers, directors or their affiliates will only purchase public shares if such purchases comply with Regulation M under the Exchange Act and the other federal securities laws.
Any purchases by our sponsor, officers, directors and/or their affiliates who are affiliated purchasers under Rule 10b-18 under the Exchange Act will only be made to the extent such purchases are able to be made in compliance with Rule 10b-18, which is a safe harbor from liability for manipulation under Section 9(a)(2) and Rule 10b-5 of the Exchange Act. Rule 10b-18 has certain technical requirements that must be complied with in order for the safe harbor to be available to the purchaser. Our sponsor, officers, directors and/or their affiliates will not make purchases of ordinary shares if the purchases would violate Section 9(a)(2) or Rule 10b-5 of the Exchange Act. Any such purchases will be reported pursuant to Section 13 and Section 16 of the Exchange Act to the extent such purchases are subject to such reporting requirements.
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Redemption Rights for Public Shareholders upon Completion of our Initial Business Combination
We will provide our public shareholders with the opportunity to redeem all or a portion of their Class A ordinary shares upon the completion of our initial business combination at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account as of two business days prior to the consummation of the initial business combination including interest earned on the funds held in the trust account and not previously released to us to pay our taxes, divided by the number of then outstanding public shares, subject to the limitations described herein. As of February 28, 2023 after redemptions of our public shares in connection with the First Amendment to our memorandum and articles of association on January 13, 2023, the amount in the trust account was approximately $56.3 million or approximately $10.35 per public share. The per-share amount we will distribute to investors who properly redeem their shares will not be reduced by the deferred underwriting commissions we will pay to the underwriters. Our sponsor, officers and directors have entered into a letter agreement with us, pursuant to which they have agreed to waive their redemption rights with respect to any founder shares and any public shares held by them in connection with the completion of our initial business combination.
Manner of Conducting Redemptions
We will provide our public shareholders with the opportunity to redeem all or a portion of their Class A ordinary shares upon the completion of our initial business combination either (i) in connection with a shareholder meeting called to approve the initial business combination or (ii) by means of a tender offer. The decision as to whether we will seek shareholder approval of a proposed initial business combination or conduct a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would require us to seek shareholder approval under applicable law or stock exchange listing requirements. Under Nasdaq rules, asset acquisitions and stock purchases would not typically require shareholder approval while direct mergers with our company where we do not survive and any transactions where we issue more than 20% of our outstanding ordinary shares or seek to amend our amended and restated memorandum and articles of association would require shareholder approval. If we structure an initial business combination with a target company in a manner that requires shareholder approval, we will not have discretion as to whether to seek a shareholder vote to approve the proposed initial business combination. We may conduct redemptions without a shareholder vote pursuant to the tender offer rules of the SEC unless shareholder approval is required by law or stock exchange listing requirements or we choose to seek shareholder approval for business or other legal reasons. So long as we obtain and maintain a listing for our securities on Nasdaq, we will be required to comply with such rules.
If shareholder approval of the transaction is required by law or stock exchange listing requirements, or we decide to obtain shareholder approval for business or other legal reasons, we will, pursuant to our amended and restated memorandum and articles of association:
| ● | conduct the redemptions in conjunction with a proxy solicitation pursuant to Regulation 14A of the Exchange Act, which regulates the solicitation of proxies, and not pursuant to the tender offer rules, and |
| ● | file proxy materials with the SEC. |
In the event that we seek shareholder approval of our initial business combination, we will distribute proxy materials and, in connection therewith, provide our public shareholders with the redemption rights described above upon completion of the initial business combination.
If we seek shareholder approval, we will complete our initial business combination only if a majority of the outstanding ordinary shares voted are voted in favor of the initial business combination. A quorum for such meeting will consist of the holders present in person or by proxy of shares of outstanding capital stock of the company representing a majority of the voting power of all outstanding shares of capital stock of the company entitled to vote at such meeting. Our initial shareholders will count toward this quorum and pursuant to the letter agreement, our sponsor, officers and directors have agreed to vote their founder shares and any public shares purchased during or after our initial public offering (including in open market and privately negotiated transactions) in favor of our initial business combination. For purposes of seeking approval of the majority of our outstanding ordinary shares voted, non-votes will have no effect on the approval of our initial business combination once a quorum is obtained. We intend to give approximately 30 days (but not less than 10 days nor more than 60 days) prior written notice of any such meeting, if required, at which a vote shall be taken to approve our initial business combination. These quorum and voting thresholds, and the voting agreements of our initial shareholders, may make it more likely that we will consummate our initial business combination. Each public shareholder may elect to redeem its public shares irrespective of whether they vote for or against the proposed transaction.
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If a shareholder vote is not required and we do not decide to hold a shareholder vote for business or other legal reasons, we will, pursuant to our amended and restated memorandum and articles of association:
| ● | conduct the redemptions pursuant to Rule 13e-4 and Regulation 14E of the Exchange Act, which regulate issuer tender offers, and |
| ● | file tender offer documents with the SEC prior to completing our initial business combination which contain substantially the same financial and other information about the initial business combination and the redemption rights as is required under Regulation 14A of the Exchange Act, which regulates the solicitation of proxies. |
Upon the public announcement of our initial business combination, we or our sponsor will terminate any plan established in accordance with Rule 10b5-1 to purchase Class A ordinary shares in the open market if we elect to redeem our public shares through a tender offer, to comply with Rule 14e-5 under the Exchange Act.
In the event we conduct redemptions pursuant to the tender offer rules, our offer to redeem will remain open for at least 20 business days, in accordance with Rule 14e-1(a) under the Exchange Act, and we will not be permitted to complete our initial business combination until the expiration of the tender offer period. In addition, the tender offer will be conditioned on public shareholders not tendering more than a specified number of public shares which are not purchased by our sponsor, which number will be based on the requirement that we will only redeem our public shares so long as (after such redemption) our net tangible assets will be at least $5,000,001 either immediately prior to or upon consummation of our initial business combination and after payment of underwriters’ fees and commissions (so that we are not subject to the SEC’s “penny stock” rules) or any greater net tangible asset or cash requirement which may be contained in the agreement relating to our initial business combination. If public shareholders tender more shares than we have offered to purchase, we will withdraw the tender offer and not complete the initial business combination.
Our amended and restated memorandum and articles of association provide that we may not redeem our public shares unless our net tangible assets are at least $5,000,001 either immediately prior to or upon consummation of our initial business combination and after payment of underwriters’ fees and commissions (so that we are not subject to the SEC’s “penny stock” rules) or any greater net tangible asset or cash requirement which may be contained in the agreement relating to our initial business combination. For example, the proposed initial business combination may require: (i) cash consideration to be paid to the target or its owners, (ii) cash to be transferred to the target for working capital or other general corporate purposes or (iii) the retention of cash to satisfy other conditions in accordance with the terms of the proposed initial business combination. In the event the aggregate cash consideration we would be required to pay for all Class A ordinary shares that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the proposed initial business combination exceed the aggregate amount of cash available to us, we will not complete the initial business combination or redeem any shares, and all Class A ordinary shares submitted for redemption will be returned to the holders thereof.
In the event that the anchor investors hold all purchased units until prior to consummation of our initial business combination and vote their public shares in favor of our initial business combination, in addition to the founder shares, no affirmative votes from other public shareholders would be required to approve our initial business combination. However, because our anchor investors are not obligated to continue owning any public shares following the closing of our initial public offering and are not obligated to vote any public shares in favor of our initial business combination, we cannot assure you that any of these anchor investors will be shareholders at the time our shareholders vote on our initial business combination, and, if they are shareholders, we cannot assure you as to how such anchor investors will vote on any business combination
Limitation on Redemption upon Completion of our Initial Business Combination if we Seek Shareholder Approval
Notwithstanding the foregoing, if we seek shareholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our amended and restated memorandum and articles of association provides 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 Exchange Act), will be restricted from seeking redemption rights with respect to more than an aggregate of 15% of the shares sold in our initial public offering, which we refer to as the “Excess Shares.” Such restriction shall also be applicable to our affiliates. We believe this restriction will discourage shareholders from accumulating large blocks of shares, and subsequent attempts by such holders to use their ability to exercise their redemption rights against a proposed initial business combination as a means to force us or our management to purchase their shares at a significant premium to the then-current market price or on other undesirable terms. By limiting our shareholders’ ability to redeem no more than 15% of the shares sold in our initial public offering without our prior consent, we believe we will limit the ability of a small group of shareholders to unreasonably attempt to block our ability to complete our initial business combination, particularly in connection with an initial business combination with a target that requires as a closing condition that we have a minimum net worth or a certain amount of cash. However, we would not be restricting our shareholders’ ability to vote all of their shares (including Excess Shares) for or against our initial business combination.
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Tendering Stock Certificates in Connection with Redemption Rights
We may require our public shareholders seeking to exercise their redemption rights, whether they are record holders or hold their shares in “street name,” to either tender their certificates to our transfer agent up to two business days prior to the vote on the proposal to approve the initial business combination, or to deliver their shares to the transfer agent electronically using the DWAC System, at the holder’s option. The proxy materials that we will furnish to holders of our public shares in connection with our initial business combination will indicate whether we are requiring public shareholders to satisfy such delivery requirements. Accordingly, a public shareholder would have up to two days prior to the vote on the initial business combination to tender its shares if it wishes to seek to exercise its redemption rights. Given the relatively short exercise period, it is advisable for shareholders to use electronic delivery of their public shares.
There is a nominal cost associated with the above-referenced tendering process and the act of certificating the shares or delivering them through the DWAC System. The transfer agent will typically charge the tendering broker a nominal fee and it would be up to the broker whether or not to pass this cost on to the redeeming holder. However, this fee would be incurred regardless of whether or not we require holders seeking to exercise redemption rights to tender their shares. The need to deliver shares is a requirement of exercising redemption rights regardless of the timing of when such delivery must be effectuated.
The foregoing is different from the procedures used by many blank check companies. In order to perfect redemption rights in connection with their business combinations, many blank check companies would distribute proxy materials for the shareholders’ vote on an initial business combination, and a holder could simply vote against a proposed initial business combination and check a box on the proxy card indicating such holder was seeking to exercise his or her redemption rights. After the initial business combination was approved, the company would contact such shareholder to arrange for him or her to deliver his or her certificate to verify ownership. As a result, the shareholder then had an “option window” after the completion of the initial business combination during which he or she could monitor the price of the company’s stock in the market. If the price rose above the redemption price, he or she could sell his or her shares in the open market before actually delivering his or her shares to the company for cancellation. As a result, the redemption rights, to which shareholders were aware they needed to commit before the shareholder meeting, would become “option” rights surviving past the completion of the initial business combination until the redeeming holder delivered its certificate. The requirement for physical or electronic delivery prior to the meeting ensures that a redeeming holder’s election to redeem is irrevocable once the initial business combination is approved.
Any request to redeem such shares, once made, may be withdrawn at any time up to the date of the shareholder meeting. Furthermore, if a holder of a public share delivered its certificate in connection with an election of redemption rights and subsequently decides prior to the applicable date not to elect to exercise such rights, such holder may simply request that the transfer agent return the certificate (physically or electronically). It is anticipated that the funds to be distributed to holders of our public shares electing to redeem their shares will be distributed promptly after the completion of our initial business combination.
If our initial business combination is not approved or completed for any reason, then our public shareholders who elected to exercise their redemption rights would not be entitled to redeem their shares for the applicable pro rata share of the trust account. In such case, we will promptly return any certificates delivered by public holders who elected to redeem their shares.
If our initial proposed initial business combination is not completed, we may continue to try to complete an initial business combination with a different target by March 15, 2023 (or until July 15, 2023 if we extend the period of time to consummate a business combination).
Redemption of Public Shares and Liquidation if no Initial Business Combination
In an extraordinary general meeting held on January 13, 2023, shareholders approved the First Amendment to the Amended and Restated Memorandum and Articles of Association (the “Charter Amendment”), changing the structure and cost of our right to extend the date (the “Termination Date”) by which we must either (i) consummate a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination involving the Company and one or more businesses (a “business combination”), or else (ii) cease our operations if we fail to complete such business combination, and redeem or repurchase 100% of our public shares included as part of the units sold in our initial public offering.
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The Charter Amendment allows us to extend the Termination Date by up to six (6) one-month extensions from January 15, 2023 to July 15, 2023 (each of which we refer to as an “Extension”, and such later date, the “Extended Deadline”) provided that if any Extended Deadline ends on a day that is not a business day, such Extended Deadline will be automatically extended to the next succeeding business day. To obtain each 1-month extension, we, our sponsor or any of their affiliates or designees must deposit into our Trust Account with Continental by the deadline applicable prior to the extension $0.0575 per share for each of our publicly held shares outstanding as of the deadline prior to the extension (after giving effect to redemptions in connection with the approval of the Charter Amendment by our shareholders with respect to the first such extension). If we are unable to complete our initial business combination by the applicable Extended Deadline, we will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, 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 us to pay our taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public shareholders’ rights as shareholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining shareholders and our board of directors, dissolve and liquidate, subject in the case of clauses (ii) and (iii) above to our obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law.
There will be no redemption rights or liquidating distributions with respect to our warrants, which will expire worthless if we fail to complete our initial business combination by the applicable Extended Deadline.
Our sponsor, senior advisors, officers and directors have entered into a letter agreement with us, pursuant to which they have waived their rights to liquidating distributions from the trust account with respect to any founder shares held by them if we fail to complete our initial business combination within 21 months from the closing of the IPO (i.e. by July 15, 2023). The anchor investors will not be entitled to rights to liquidating distributions from the trust account with respect to any founder shares held by them if we fail to complete our initial business combination within the prescribed time frame. However, if our sponsor, senior advisors, officers, directors, or anchor investors acquire public shares in or after the IPO, they will be entitled to liquidating distributions from the trust account with respect to such public shares if we fail to complete our initial business combination within 21 months from the closing of the IPO.
Our sponsor, officers and directors have agreed, pursuant to a written agreement with us, that they will not propose any amendment to our amended and restated memorandum and articles of association (i) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or certain amendments to our amended and restated memorandum and articles of association, prior thereto or to redeem 100% of our public shares if we do not complete our initial business combination within 21 months from the closing of the IPO or (ii) with respect to any other provision relating to shareholders’ rights or pre-initial business combination activity, unless we provide our public shareholders with the opportunity to redeem their Class A ordinary shares upon approval of any such amendment 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 us to pay our taxes divided by the number of then outstanding public shares. However, we may not redeem our public shares unless our net tangible assets are at least $5,000,001 either immediately prior to or upon consummation of our initial business combination and after payment of underwriters’ fees and commissions (so that we are not subject to the SEC’s “penny stock” rules). If this optional redemption right is exercised with respect to an excessive number of public shares such that we cannot satisfy the net tangible asset requirement (described above), we would not proceed with the amendment or the related redemption of our public shares at such time.
We expect that all costs and expenses associated with implementing our plan of dissolution, as well as payments to any creditors, will be funded from amounts remaining from proceeds held outside the trust account, although we cannot assure you that there will be sufficient funds for such purpose. We will depend on sufficient interest being earned on the proceeds held in the trust account to pay any tax obligations we may owe. However, if those funds are not sufficient to cover the costs and expenses associated with implementing our plan of dissolution, to the extent that there is any interest accrued in the trust account not required to pay taxes, we may request the trustee to release to us an additional amount of up to $100,000 of such accrued interest to pay those costs and expenses.
If we were to expend all of the net proceeds of our Initial Public Offering and the sale of the placement warrant, other than the proceeds deposited in the trust account, and without taking into account interest, if any, earned on the trust account, the per-share redemption amount received by shareholders upon our dissolution would be approximately $10.00. The proceeds deposited in the trust account could, however, become subject to the claims of our creditors which would have higher priority than the claims of our public shareholders. We cannot assure you that the actual per-share redemption amount received by shareholders will not be substantially less than $10.00. While we intend to pay such amounts, if any, we cannot assure you that we will have funds sufficient to pay or provide for all creditors’ claims.
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Although we will seek to have all vendors, service providers, prospective target businesses or other entities with which we do business execute agreements with us waive any right, title, interest or claim of any kind in or to any monies held in the trust account for the benefit of our public shareholders, there is no guarantee that they will execute such agreements or even if they execute such agreements that they would be prevented from bringing claims against the trust account including but not limited to fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain an advantage with respect to a claim against our assets, including the funds held in the trust account. If any third party refuses to execute an agreement waiving such claims to the monies held in the trust account, our management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third party that has not executed a waiver if management believes that such third party’s engagement would be significantly more beneficial to us than any alternative. Examples of possible instances where we may engage a third party that refuses to execute a waiver include the engagement of a third party consultant whose particular expertise or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where management is unable to find a service provider willing to execute a waiver. Marcum, our independent registered public accounting firm, Nelson Mullins Riley & Scarborough, LLP, our principal legal counsel, and the underwriters of the offering, have not executed agreements with us waiving such claims to the monies held in the trust account.
In addition, there is no guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with us and will not seek recourse against the trust account for any reason. Our sponsor has agreed that it will be liable to us if and to the extent any claims by a third party for services rendered or products sold to us, or a prospective target business with which we have entered into a written letter of intent, confidentiality or similar agreement or business combination agreement, reduce the amount of funds in the trust account to below the lesser of (i) $10.00 per public share and (ii) the actual amount per public share held in the trust account as of the date of the liquidation of the trust account, if less than $10.00 per share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the trust account (whether or not such waiver is enforceable) nor will it apply to any claims under our indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act. However, we have not asked our sponsor to reserve for such indemnification obligations, nor have we independently verified whether our sponsor has sufficient funds to satisfy its indemnity obligations and believe that our sponsor has no material assets. Therefore, we cannot assure you that our sponsor would be able to satisfy those obligations. None of our officers or directors will indemnify us for claims by third parties including, without limitation, claims by vendors and prospective target businesses.
In the event that the proceeds in the trust account are reduced below (i) $10.00 per public share or (ii) such lesser amount per public share held in the trust account as of the date of the liquidation of the trust account, due to reductions in value of the trust assets, in each case net of the amount of interest which may be withdrawn to pay taxes, and our sponsor asserts that it is unable to satisfy its indemnification obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action against our sponsor to enforce its indemnification obligations. While we currently expect that our independent directors would take legal action on our behalf against our sponsor to enforce its indemnification obligations to us, it is possible that our independent directors in exercising their business judgment may choose not to do so if, for example, the cost of such legal action is deemed by the independent directors to be too high relative to the amount recoverable or if the independent directors determine that a favorable outcome is not likely. We have not asked our sponsor to reserve for such indemnification obligations and we cannot assure you that our sponsor would be able to satisfy those obligations. Accordingly, we cannot assure you that due to claims of creditors the actual value of the per-share redemption price will not be less than $10.00 per public share.
We will seek to reduce the possibility that our sponsor will have to indemnify the trust account due to claims of creditors by endeavoring to have all vendors, service providers, prospective target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to monies held in the trust account. Our sponsor will also not be liable as to any claims under our indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act. As of February 28, 2023, we have access to up to approximately $56.3 million from the proceeds of the IPO and the sale of the placement warrant with which to pay any such potential claims (including costs and expenses incurred in connection with our liquidation, currently estimated to be no more than approximately $100,000). In the event, that we liquidate, and it is subsequently determined that the reserve for claims and liabilities is insufficient, shareholders who received funds from our trust account could be liable for claims made by creditors.
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If we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the proceeds held in the trust account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our shareholders. To the extent any bankruptcy claims deplete the trust account, we cannot assure you we will be able to return $10.00 per share to our public shareholders. Additionally, if we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, any distributions received by shareholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover some or all amounts received by our shareholders. Furthermore, our board of directors may be viewed as having breached its fiduciary duty to our creditors and/or may have acted in bad faith, thereby exposing itself and our company to claims of punitive damages, by paying public shareholders from the trust account prior to addressing the claims of creditors. We cannot assure you that claims will not be brought against us for these reasons.
Our public shareholders will be entitled to receive funds from the trust account only upon the earlier to occur of: (i) the completion of our initial business combination, (ii) the redemption of any public shares properly tendered in connection with a shareholder vote to amend any provisions of our amended and restated memorandum and articles of association (A) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or certain amendments to our amended and restated memorandum and articles of association, prior thereto or to redeem 100% of our public shares if we do not complete our initial business combination within 21 months from the closing of the IPO or (B) with respect to any other provision relating to shareholders’ rights or pre-initial business combination activity, and (iii) the redemption of all of our public shares if we are unable to complete our business combination within 21 months from the closing of the IPO, subject to applicable law. In no other circumstances will a shareholder have any right or interest of any kind to or in the trust account. In the event we seek shareholder approval in connection with our initial business combination, a shareholder’s voting in connection with the initial business combination alone will not result in a shareholder’s tendering of its shares to us for redemption for an applicable pro rata share of the trust account. Such shareholder must have also exercised its redemption rights as described above. These provisions of our amended and restated memorandum and articles of association, like all provisions of our amended and restated memorandum and articles of association, may be amended by special resolution.
Competition
In identifying, evaluating and selecting a target business for our initial business combination, we may encounter intense competition from other entities having a business objective similar to ours, including other blank check companies, private equity groups and leveraged buyout funds, and operating businesses seeking strategic business combinations. Many of these entities are well established and have extensive experience identifying and effecting business combinations directly or through affiliates. Moreover, many of these competitors possess greater financial, technical, human and other resources than we do. Our ability to acquire larger target businesses will be limited by our available financial resources. This inherent limitation gives others an advantage in pursuing the initial business combination of a target business. Furthermore, our obligation to pay cash in connection with our public shareholders who exercise their redemption rights may reduce the resources available to us for our initial business combination and our outstanding warrants, and the future dilution they potentially represent, may not be viewed favorably by certain target businesses. Either of these factors may place us at a competitive disadvantage in successfully negotiating an initial business combination.
Employees
We have three officers. These individuals are not obligated to devote any specific number of hours to our matters but they devote as much of their time as they deem necessary, in the exercise of their respective business judgement, to our affairs until we have completed our initial business combination. The amount of time our officers devote in any time period varies based on the stage of the initial business combination process we are in. We do not intend to have any full time employees prior to the completion of our initial business combination. We do not have an employment agreement with any member of our management team.
Periodic Reporting and Financial Information
We have registered our units, Class A ordinary shares and public warrants under the Exchange Act and have reporting obligations, including the requirement that we file annual, quarterly and current reports with the SEC. In accordance with the requirements of the Exchange Act, our annual reports will contain financial statements audited and reported on by our independent registered public accountants.
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We will provide shareholders with audited financial statements of the prospective target business as part of the tender offer materials or proxy solicitation materials sent to shareholders to assist them in assessing the target business. In all likelihood, these financial statements will need to be prepared in accordance with, or reconciled to, GAAP, or IFRS, depending on the circumstances, and the historical financial statements may be required to be audited in accordance with the standards of the PCAOB. These financial statement requirements may limit the pool of potential targets we may conduct an initial business combination with because some targets may be unable to provide such statements in time for us to disclose such statements in accordance with federal proxy rules and complete our initial business combination within the prescribed time frame. We cannot assure you that any particular target business identified by us as a potential business combination candidate will have financial statements prepared in accordance with GAAP or IFRS or that the potential target business will be able to prepare its financial statements in accordance with the requirements outlined above. To the extent that these requirements cannot be met, we may not be able to acquire the proposed target business. While this may limit the pool of potential business combination candidates, we do not believe that this limitation will be material.
Commencing with the fiscal year ending December 31, 2022, we are required to evaluate our internal control procedures as required by the Sarbanes-Oxley Act. A target company may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding adequacy of their internal controls. The development of the internal controls of any such entity to achieve compliance with the Sarbanes-Oxley Act may increase the time and costs necessary to complete any such business combination.
We have filed a Registration Statement on Form 8-A with the SEC to voluntarily register our securities under Section 12 of the Exchange Act. As a result, we are subject to the rules and regulations promulgated under the Exchange Act. We have no current intention of filing a Form 15 to suspend our reporting or other obligations under the Exchange Act prior or subsequent to the consummation of our initial business combination.
We are a Cayman Islands exempted company. Exempted companies are Cayman Islands companies conducting business mainly outside the Cayman Islands and, as such, are exempted from complying with certain provisions of the Companies Act.
We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act. As such, we are eligible to 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 auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the prices of our securities may be more volatile.
In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this extended transition period.
We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following October 15, 2026, the fifth anniversary of the completion of our initial public offering, (b) in which we have total annual gross revenue of at least $1.235 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Class A ordinary shares that are held by non-affiliates exceeds $700 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. References herein to “emerging growth company” will have the meaning associated with it in the JOBS Act.
Additionally, we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our ordinary shares held by non-affiliates exceeds $250 million as of the end of that year’s second fiscal quarter, or (2) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our ordinary shares held by nonaffiliates exceeds $700 million as of the end of that year’s second fiscal quarter.
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Item 1A. Risk Factors.
As a smaller reporting company, we are not required to include risk factors in this Report. However, below is a partial list of material risks, uncertainties and other factors that could have a material effect on the Company and its operations:
| ● | we are a Cayman Islands exempt company incorporated on April 16, 2021 with a limited operating history and no revenues; |
| ● | our ability to continue as a “going concern”; |
| ● | as a result of the low initial price paid by our sponsor and the anchor investors for the founder shares, our sponsor, its affiliates and our management team as well as the anchor investors stand to make a substantial profit even if an initial business combination subsequently declines in value or is unprofitable for our public shareholders; |
| ● | we may not be able to complete our Business Combination with Avanseus or any other initial business combination within the prescribed time frame; |
| ● | you will not have any rights or interests in funds from the trust account, except under certain limited circumstances; |
| ● | negative interest rate for securities in which we invest the funds held in the trust account; |
| ● | our shareholders may be held liable for claims by third parties against us; |
| ● | if third parties bring claims against us, the proceeds held in the trust account could be reduced and the per-share redemption amount received by shareholders may be less than $10.00 per share |
| ● | subsequent to completion of our initial business combination, we may be required to take write-downs or write-offs, restructuring and impairment or other charges; |
| ● | conflicts of interest of our sponsor, officers and directors and our anchor investors; |
| ● | we may have a limited ability to assess the management of a prospective target business; |
| ● | our public shareholders may not be afforded an opportunity to vote on our proposed business combination; |
| ● | we may redeem your unexpired warrants prior to their exercise at a time that is disadvantageous to you; |
| ● | we may amend the terms of the public warrants in a manner that may be adverse to holders of public warrants with the approval by the holders of at least 65% of the then outstanding public warrants; |
| ● | our competitors have advantages over us in seeking business combinations; |
| ● | we may be unable to obtain additional financing; |
| ● | our warrants may have an adverse effect on the market price of our ordinary shares; |
| ● | we may issue additional equity and/or debt securities to complete our initial business combination; |
| ● | our sponsor controls a substantial interest in us; |
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| ● | if we seek shareholder approval of our initial business combination, our sponsor, who controls a substantial interest in us, has agreed to vote in favor of such initial business combination, regardless of how our public shareholders vote; |
| ● | the ability of our public shareholders to redeem their shares for cash may make our financial condition unattractive to potential business combination targets, may not allow us to complete the most desirable business combination or optimize our capital structure, and will increase the probability that our initial business combination would be unsuccessful; |
| ● | lack of protections normally afforded to investors of blank check companies; |
| ● | possibility of losing the ability to redeem all shares equal to or in excess of 15% of our ordinary shares if we seek shareholder approval of our initial business combination and we do not conduct redemptions pursuant to the tender offer rules; |
| ● | Nasdaq may delist our securities from trading on its exchange; |
| ● | we will likely only be able to complete one business combination with the proceeds of the IPO and the sale of the placement warrants, which will cause us to be solely dependent on a single business which may have a limited number of products or services; |
| ● | we are not registering the ordinary shares issuable upon exercise of the warrants sold as part of the units in the IPO at this time, and such registration may not be in place when an investor desires to exercise such warrants; |
| ● | shares being redeemed and warrants becoming worthless; |
| ● | events which may result in the per-share amount held in our trust account dropping below $10.00 per public share; |
| ● | our directors may decide not to enforce the indemnification obligations of our sponsor; |
| ● | if, before distributing the proceeds in the trust account to our public shareholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the claims of creditors in such proceeding may have priority over the claims of our shareholders and the per-share amount that would otherwise be received by our shareholders in connection with our liquidation may be reduced; |
| ● | because we are not limited to a particular industry or any specific target businesses with which to pursue our initial business combination, you will be unable to ascertain the merits or risks of any particular target business’s operations; |
| ● | we may seek acquisition opportunities in companies that may be outside of our management’s areas of expertise; |
| ● | impact of COVID-19 and related risks; the potential inability to enforce judgments against us or our management or board of directors; |
| ● | if we effect our initial business combination with a company with operations or opportunities outside of the United States, we would be subject to a variety of additional risks that may negatively impact our operations; |
| ● | changes in laws or regulations, or a failure to comply with any laws and regulations, tax consequences to business combinations may adversely affect our business, investments and results of operations; and |
| ● | we have identified a material weakness in our accounting controls as a result of repayment of certain amounts to our Sponsor and its Affiliate prior to, and at the time, we completed our initial public offering. We are working to correct those weaknesses. |
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We may be a passive foreign investment company (a “PFIC”), which could result in adverse U.S. federal income tax consequences to U.S. investors.
If we are a PFIC for any taxable year (or portion thereof) that is included in the holding period of a U.S. Holder of our Class A ordinary shares or redeemable warrants, the U.S. holder may be subject to certain adverse U.S. federal income tax consequences and may be subject to additional reporting requirements. As used herein, the term “U.S. Holder” means a beneficial owner of Units, Class A ordinary shares or redeemable warrants that is for U.S. federal income tax purposes: (i) an individual citizen or resident of the United States, (ii) a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) that is created or organized (or treated as created or organized) in or under the laws of the United States, any state thereof or the District of Columbia, (iii) an estate the income of which is subject to U.S. federal income taxation regardless of its source or (iv) a trust if (A) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust, or (B) it has in effect a valid election to be treated as a United States person. Our PFIC status for our current and subsequent taxable years may depend on whether we qualify for the PFIC start-up exception. Depending on the particular circumstances the application of the start-up exception may be subject to uncertainty, and there cannot be any assurance that we will qualify for the start-up exception. Accordingly, there can be no assurances with respect to our status as a PFIC for our current taxable year or any subsequent taxable year. Our actual PFIC status for any taxable year, however, will not be determinable until after the end of such taxable year. Moreover, if we determine we are a PFIC for any taxable year prior to our Business Combination, upon written request, we will endeavor to provide to a U.S. holder such information as the Internal Revenue Service (“IRS”) may require, including a PFIC Annual Information Statement, in order to enable the U.S. holder to make and maintain a qualified electing fund (“QEF”) election, but there can be no assurance that we will timely provide such required information, and such election would be unavailable with respect to our redeemable warrants in all cases. We urge U.S. investors to consult their own tax advisors regarding the possible application of the PFIC rules.
For the complete list of risks relating to our operations, see the section titled “Risk Factors” contained in the IPO Registration Statement.
Item 1B. Unresolved Staff Comments.
Not applicable.
Item 2. Properties.
Our executive offices are located at 27 Bukit Manis Road, Singapore, 099892, and our telephone number is + 65-8590-2056. The cost for our use of this space is included in the $10,000 per month fee we pay to our Sponsor for office space, administrative and shared personnel support services. We consider our current office space adequate for our current operations.
Item 3. Legal Proceedings.
To the knowledge of our management team, there is no litigation currently pending, or contemplated by governmental authorities, against us, any of our officers or directors in their capacity as such or against any of our property.
Item 4. Mine Safety Disclosures.
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters, and Issuer Purchases of Equity Securities.
| (a) | Market Information |
Our units, public shares and public warrants are each traded on Nasdaq under the symbols “FATPU,” “FATP,” and “FATPW,” respectively. Our units commenced public trading on October 13, 2021, and our public shares and public warrants commenced separate public trading on December 3, 2021.
| (b) | Holders |
On February 28, 2023, there was 1 holder of record of our units, 3 holders of record of our Class A ordinary shares and 22 holders of record of our warrants.
| (c) | Dividends |
We have not paid any cash dividends on our ordinary share to date and do not intend to pay cash dividends prior to the completion of our initial business combination. The payment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial condition subsequent to completion of our initial business combination. The payment of any cash dividends subsequent to our initial business combination will be within the discretion of our board of directors at such time. In addition, our board of directors is not currently contemplating and does not anticipate declaring any stock dividends in the foreseeable future. Further, if we incur any indebtedness in connection with our initial business combination, our ability to declare dividends may be limited by restrictive covenants we may agree to in connection therewith.
| (d) | Securities Authorized for Issuance Under Equity Compensation Plans. |
None.
| (e) | Recent Sales of Unregistered Securities |
On December 17, 2022, we issued a non-interest-bearing promissory note in the principal amount of $90,000 to our sponsor in consideration for a $90,000 working capital loan. The note is convertible at the option of the holder into warrants that are substantially identical to our private placement warrants upon the completion of our initial business combination.
| (f) | Purchases of Equity Securities by the Issuer and Affiliated Purchasers |
None.
| (g) | Use of Proceeds from the Initial Public Offering |
On October 15, 2021, we consummated our initial public offering of 11,500,000 units, including 1,500,000 units issued pursuant to the exercise of the underwriters’ over-allotment option. Each unit consists of one public share and one public warrant, with each public warrant entitling the holder thereof to purchase one public share for $11.50 per share. The units were sold at a price of $10.00 per unit, generating gross proceeds to us of $115,000,000.
Simultaneously with the closing of the initial public offering, we completed the private sale of an aggregate of 2,865,000 warrants to Fat Projects SPAC Pte. Ltd., our sponsor at a purchase price of $1.00 per private placement warrant, generating gross proceeds of $2,865,000.
A total of $115,000,000 of the proceeds from the initial public offering and the sale of the private placement warrants, was placed in a U.S.-based trust account maintained by Continental, acting as trustee. The proceeds held in the trust account may be invested by the trustee only in U.S. government securities with a maturity of 185 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. The remainder of the proceeds were used to pay offering expenses incurred in connection with our initial public offering and for working capital.
Item 6. [Reserved].
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
References to the “Company,” “us,” “our” or “we” refer to Fat Projects Acquisition Corp. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited financial statements and related notes included herein.
Cautionary Note Regarding Forward-Looking Statements
All statements other than statements of historical fact included in this Report including, without limitation, statements under 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. When used in this Report, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions, as they relate to us or the Company’s management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, the Company’s management. Actual results could differ materially from those contemplated by the forward- looking statements as a result of certain factors detailed in our filings with the SEC. All subsequent written or oral forward-looking statements attributable to us or persons acting on the Company’s behalf are qualified in their entirety by this paragraph.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Overview
We are a blank check company incorporated on April 16, 2021 as a Cayman Islands exempted company and formed for the purpose of entering into a merger, share exchange, asset acquisition, share purchase, recapitalization, reorganization or other similar business combination with one or more target businesses. While our efforts to identify a target business may span many industries and regions worldwide, we focus our search for prospects within the supply chain, transportation, logistics, finance, sustainability/ESG, food, agriculture, e-commerce, and/or big data sectors. We intend to effectuate our initial business combination using cash from the proceeds of our Initial Public Offering and the private placement of the private placement warrants, the proceeds of the sale of our shares in connection with our initial business combination, shares issued to the owners of the target, debt issued to bank or other lenders or the owners of the target, or a combination of the foregoing.
We expect to continue to incur significant costs in the pursuit of our initial business combination. We cannot assure you that our plans to complete our initial business combination will be successful.
Initial Public Offering.
On October 15, 2021 we consummated our initial public offering pursuant to which we issued 11,500,000 public units at a price of $10.00 per unit (after the exercise of the underwriters’ overallotment option). Each public unit is comprised of one of our Class A ordinary shares and one redeemable warrant exercisable for one of our Class A ordinary shares with an exercise price of $11.50 per share. Simultaneously with the consummation of our initial public offering, we issued 2,865,000 private placement warrants to our sponsor at a price of $1.00 per warrant. We also issued 115,000 of our Class A ordinary shares to EF Hutton, the lead underwriter for our initial public offering as compensation for serving as lead underwriter. We deposited $115,000,000 of the proceeds from the initial public offering and the private placement of the private placement warrants into our trust account with Continental for the benefit of the holders of our public shares.
Proposed Business Combination with Avanseus Holdings Pte. Ltd.
On August 26, 2022, we entered into a Business Combination Agreement with Avanseus Holdings Pte. Ltd., a Singapore private company limited by shares (“Avanseus”) (as may be amended and/or restated from time to time, the “Business Combination Agreement”). The Business Combination Agreement and the transactions contemplated thereby were approved by our board of directors and the Avanseus board of directors (other than the PIPE Investment as described below which will require further approval of the boards of directors), subject to the approval of our shareholders.
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The Business Combination Agreement provides for a series of transactions, pursuant to which, among other things, Avanseus’ shareholders will exchange all of their outstanding Avanseus shares in consideration for newly issued Company Class A Ordinary Shares (the “Share Exchange”), subject to the conditions set forth in the Business Combination Agreement, with Avanseus thereby becoming our wholly owned subsidiary (the Share Exchange and the other transactions contemplated by the Business Combination Agreement, together, the “Business Combination” or the “Proposed Transaction”). In connection with the Business Combination, we will change our corporate name to “Avanseus Holdings Corporation” (“New Avanseus”).
The Business Combination Agreement, prior to the Second BCA Amendment described below, provided that the Company will use its commercially reasonable efforts to enter into and consummate subscription agreements in form and substance mutually acceptable to the Company and Avanseus with investors mutually reasonably acceptable to the Company and Avanseus pursuant to which such investors will agree to purchase up to an aggregate of $35 million of (i) the Company’s Series A Convertible Preference Shares, which shares will be convertible into the Company’s Class A Ordinary Shares, and/or (ii) the Company’s Class A Ordinary Shares, with such purchases to be consummated prior to or substantially currently with the closing of the Share Exchange (the “PIPE Investment”).
The Business Combination is expected to close in the first quarter of 2023, following the receipt of the required approval by our shareholders and the fulfillment of other customary closing conditions.
On October 3, 2022, Avanseus and we entered into the First BCA Amendment to amend the previously announced Original Business Combination Agreement. The First BCA Amendment amends the Original Business Combination Agreement to:
| (1) | Add a mutual condition to the obligations of Avanseus and us to close the transactions contemplated in the Business Combination Agreement that holders of the Company’s Class A Ordinary Shares redeem an aggregate of at least 5,200,000 of such shares so that Avanseus will be the acquiror for accounting purposes at both the minimum and maximum redemption levels required to be disclosed in the Registration Statement on Form S-4 to be filed with the Commission pursuant to the Business Combination Agreement; |
| (2) | Replace the form of Incentive Equity Plan attached to the Original Business Combination Agreement with an amended Incentive Equity Plan to conform the eligible participants in the plan to the eligible participants listed in the Original Business Combination Agreement; |
| (3) | Improve the description of the Nasdaq listing process in the Business Combination Agreement for our Class A Ordinary Shares to be issued to Avanseus’ shareholders and pursuant to the Incentive Equity Plan; and |
| (4) | Provide that subscription agreements for PIPE investors be mutually reasonably acceptable to Avanseus as well as us. |
On February 14, 2023, Avanseus and we entered into the Second BCA Amendment to further amend the Original Business Combination Agreement. The Second BCA Amendment further amends the Original Business Combination Agreement to:
| (1) | Amend the definition of Acquiror Transaction Expenses to exclude expenses that are expressly deferred, waived or converted to equity by written agreement of the parties to which they are owed on terms satisfactory to Avanseus; |
| (2) | Delete provisions related to a PIPE offering by FATP and provisions related to a pool of one million FATP Class A Ordinary Shares to be issued for purposes mutually acceptable to FATP and Avanseus; |
| (3) | Delete a closing condition that required the combined companies to have at least $5,000,001 of net tangible assets at Closing; |
| (4) | Amend the minimum cash closing condition to reduce the amount of cash that the combined companies must have at Closing after the payment of their transaction expenses from $25 million to $4 million; |
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| (5) | Add a new closing condition that FATP enter into one or more definitive financing agreements with terms mutually acceptable to FATP and Avanseus with one or more post-closing financing providers acceptable to both FATP and Avanseus, which may include the issuance of up to one millions FATP Class A ordinary shares as origination fees to the post-closing financing providers; |
| (6) | Extend the Agreement End Date, which is the date that either FATP or Avanseus may terminate the Business Combination Agreement without cause (provided that the terminating party is not itself in material breach of the Business Combination Agreement), from February 22, 2023 to July 15, 2023; and |
| (7) | Delete the closing condition added by the First BCA Amendment that holders of at least 5,200,000 publicly held Class A ordinary shares redeem such shares at the closing of the transactions contemplated in the Business Combination since the redemption of 6,058,262 Class A ordinary shares in connection with the January 13, 2023 Charter Amendment rendered such condition unnecessary. |
Charter Amendment and Share Redemptions
In an extraordinary general meeting held on January 13, 2023, shareholders approved the Charter Amendment, changing the structure and cost of our right to extend the Termination Date by which we must either (i) consummate a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination involving the Company and one or more businesses (a “business combination”), or else (ii) cease our operations if we fail to complete such business combination, and redeem or repurchase 100% of our public shares included as part of the units sold in our initial public offering.
The Charter Amendment allows us to extend the Termination Date by up to six (6) one-month Extensions to July 15, 2023, provided that if any Extended Deadline ends on a day that is not a business day, such Extended Deadline will be automatically extended to the next succeeding business day. To obtain each 1-month extension, we, our sponsor or any of their affiliates or designees must deposit into our Trust Account with Continental by the deadline applicable prior to the extension $0.0575 per share for each of our public shares outstanding as of the deadline prior to the extension (after giving effect to redemptions in connection with the approval of the Charter Amendment by our shareholders with respect to the first such extension).
In connection with the approval of the Charter Amendment, holders of 6,058,262 of our public shares exercised their right to redeem those shares for cash at an approximate price of $10.16 per share, for an aggregate of approximately $61.57 million, leaving 5,441,738 of our public shares outstanding.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities from inception through December 31, 2022, were organizational activities, those necessary to prepare for our Initial Public Offering, described below, and, after our Initial Public Offering, identifying a target company for an initial business combination, negotiating the Business Combination Agreement and the preparation and filing on October 5, 2022 with the SEC the Form S-4 with respect to the Business Combination and subsequent amendments thereto. 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 marketable securities held in the trust account. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses and expenses incurred in connection with negotiating the Business Combination Agreement and preparing and filing the Form S-4 and amendments thereto.
For the year ended December 31, 2022, we had a net loss of $736,161, which consisted of formation and operating costs of $2,488,328, partially offset by the interest earned on investments held in the trust account of $1,752,167.
For the period from April 16, 2021 (inception) through December 31, 2021, we had a net loss of $231,291, which consisted of formation and operating costs of $241,834 and interest earned on investments held in the trust account of $10,543.
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Liquidity, Capital Resources and Going Concern
On October 15, 2021, we consummated our Initial Public Offering of 11,500,000 Units at a price of $10.00 per Unit, generating gross proceeds of $115,000,000. Simultaneously with the closing of our Initial Public Offering, we consummated the sale of 2,865,000 Placement Warrants to the Sponsor at a price of $1.00 per Warrant, generating gross proceeds of $2,865,000.
For the year ended December 31, 2022, cash used in operating activities was $822,093. Our net loss of $736,161 resulted from formation and operating costs of $2,488,328 partially offset by interest earned on investments held in the Trust Account of $1,752,167. Changes in operating assets and liabilities provided $1,666,235 of cash from operating activities.
For the year ended December 31, 2022, cash provided by financing activities was $140,000, which consisted of proceeds from issuance of promissory note to the Sponsor of $90,000 and proceeds from related party of $50,000.
For the year ended December 31, 2022, no cash was provided by or used in investing activities.
For period from April 16, 2021 (inception) through December 31, 2021, cash used in operating activities was $376,904. Our net loss of $231,291 resulted from interest earned on investments held in Trust Account of $10,543, partially offset by formation and operating costs paid by sponsor of $4,096. Changes in operating assets and liabilities used $139,166 of cash from operating activities.
For period from April 16, 2021 (inception) through December 31, 2021, cash provided by financing activities was $116,131,797. Proceeds from sale of Class B ordinary shares to our Sponsor of $25,000, proceeds from our IPO of $115,000,000, proceeds from the private placement of our private warrants of $2,865,000 and proceeds from the issuance of a promissory note to related party of $163,398 were partially offset by payments of the underwriting discount for the IPO of $1,150,000, repayment of the promissory note to the related party of $163,398, payments to a related party of $133,824 and payment of deferred offering costs of $474,379.
For period from April 16, 2021 (inception) through December 31, 2021, cash used in investing activities was $115,000,000, which consisted of investments held in trust account.
As of December 31, 2022, we had investments of $116,762,710 held in the trust account. As of February 28, 2023, we had investments of approximately $56.3 million held in the trust account after the redemption of public shares in connection with the Charter Amendment. We intend to use substantially all of the funds held in the trust account, including any amounts representing interest earned on the trust account (less taxes paid and deferred underwriting commissions) to complete our initial business combination. We may withdraw interest to pay taxes and we may use up to $100,000 from the trust account to pay liquidation expenses in the event we are unable to complete our initial business combination by the deadline in our charter and are required to dissolve the Company. During the year ended December 31, 2022, we did not withdraw any interest earned on the trust account. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our initial business combination, the remaining proceeds held in the trust account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
As of December 31, 2022, we had cash of $72,800 outside of the trust account. We intend to use the funds held outside the trust account primarily to structure, negotiate and complete our initial business combination.
In order to fund working capital deficiencies or finance transaction costs in connection with our initial business combination, our Sponsor or an affiliate of our Sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete our initial business combination, we would repay such loaned amounts. In the event that our initial business combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts but no proceeds from our trust account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into warrants identical to the Placement Warrants, at a price of $1.00 per warrant at the option of the lender. As of December 31, 2022, the Company borrowed $90,000 from Sponsor under the Working Capital Loans.
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As described below, in January 2023, our board authorized us to issue up to $1 million in principal amount of non-interest-bearing notes to fund extensions of the deadline to complete our initial business combination and to issue up to $1,062,500 of 15% interest-bearing notes to non-affiliates of our Sponsor and our officers and directors to raise working capital. As of February 28, 2023, there was an aggregate principal amount of $200,260 of non-interest-bearing notes and $355,740 of interest-bearing notes outstanding
In connection with the Company’s assessment of going concern considerations in accordance with FASB Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that the Company has and will continue to incur significant costs in pursuit of its acquisition plans which raises substantial doubt about the Company’s ability to continue as a going concern. Moreover, we may need to obtain additional financing either to complete our initial business combination or because we become obligated to redeem a significant number of our Public Shares upon consummation of our initial business combination, in which case we may issue additional securities or incur debt in connection with such Business Combination. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of our initial business combination. If we are unable to complete our initial business combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the trust account. In addition, following our initial business combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.
In addition, management has determined that the mandatory liquidation and subsequent dissolution, should the Company be unable to complete a business combination, raises substantial doubt about the Company’s ability to continue as a going concern. The Company has until March 15, 2023 to consummate a Business Combination unless the Company further extends the period of time to consummate a business combination by depositing an aggregate of $312,900 (representing $0.0575 per public share) into the Company’s trust account for each of up to four monthly extensions remaining available after the Charter Amendment, or unless the Company’s shareholders approve of a further extension, in each case in accordance with the Company’s amended and restated memorandum and articles of association. It is uncertain that the Company will be able to consummate a Business Combination by this time. If a Business Combination is not consummated by this date, there will be a mandatory liquidation and subsequent dissolution unless there are further extensions as described above. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after March 15, 2023 (assuming no further extensions).
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of December 31, 2022. 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 the Sponsor a monthly fee up to $10,000 for office space, utilities and secretarial and administrative support services. We began incurring these fees on October 12, 2021 and will continue to incur these fees monthly until the earlier of the completion of the Business Combination and our liquidation.
The underwriters are entitled to a deferred fee of $4,025,000 in the aggregate. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.
On December 17, 2022, we issued a non-interest-bearing promissory note in the principal amount of $90,000 to our sponsor in consideration for a $90,000 working capital loan. The note is convertible at the option of the holder into warrants that are substantially identical to our private placement warrants upon the completion of our initial business combination.
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Our board of directors has authorized us (1) to raise up to $1 million of funds by the issuance of non-interest bearing notes to fund extensions of the deadline to complete our initial business combination and (2) to raise up to $1,062,500 of funds for working capital (which can also be used to fund extensions of the deadline to complete our initial business combination) through a private offering of promissory notes bearing simple interest at a rate of 15% per annum to prospective investors who are not our sponsor, directors or officers or any of their affiliates. As of February 28, 2023, there was an aggregate principal amount of $200,260 of non-interest-bearing notes and $355,740 of interest-bearing notes outstanding.
Critical Accounting Policies and Significant Estimates
This management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with United States generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to fair value of financial instruments and accrued expenses. We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Offering Costs
We comply with the requirements of the ASC 340-10-S99-1. Offering costs consists of legal, accounting and underwriting fees and other costs incurred through the balance sheet date that are directly related to the Initial Public Offering, and fair value in excess of consideration paid with respect to the Founder Shares sold to the anchor investors. Offering costs are allocated to the separable financial instruments issued in the IPO based on a relative fair value basis, compared to total proceeds received. Upon closing of the IPO on October 15, 2021, offering costs associated with the Class A ordinary shares were charged to temporary equity. Offering costs associated with the warrants were changed to equity. The Sponsor sold 75,000 founder shares to each of ten anchor investors (750,000 founder shares in the aggregate) at approximately $0.009 per share. The Company accounted for the fair value in excess of consideration paid with respect to the number of Founder Shares sold to the anchor investors as an offering cost reflected as an increase to additional paid in capital offset by a reduction of the offering proceeds upon completion of the IPO. The fair value of each Founder Share was determined to be $6.75.
Ordinary Shares Subject to Possible Redemption
We account for our ordinary shares subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Ordinary shares subject to mandatory redemption (if any) are classified as liability instruments and 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 our control) is classified as temporary equity. At all other times, ordinary shares are classified as shareholders’ equity. Our Class A ordinary shares feature certain redemption rights that are considered to be outside of our control and subject to the occurrence of uncertain future events. Accordingly, all Class A ordinary shares subject to possible redemption are presented at redemption value as temporary equity, outside of the shareholders’ equity section of our balance sheet.
Net Loss Per Ordinary Share
We comply with the accounting and disclosure requirements of ASC Topic 260, “Earnings Per Share.” Net loss per ordinary share is computed by dividing net loss by the weighted average number of ordinary shares outstanding during the period, excluding ordinary shares subject to forfeiture. At December 31, 2022 and 2021, we 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 us. As a result, diluted loss per ordinary share is the same as basic loss per ordinary share for the period presented.
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Financial Instruments
We account 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 FASB ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants (i) are freestanding financial instruments pursuant to ASC 480, (ii) meet the definition of a liability pursuant to ASC 480, and (iii) 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 also considers 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 is conducted at the time of warrant issuance and as of each subsequent annual 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 of 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. The Company accounts for its outstanding warrants as equity-classified.
Recent Accounting Standards
Management does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s financial statements.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
As of December 31, 2022, we were not subject to any market or interest rate risk. Following the consummation of our Initial Public Offering, the net proceeds received into 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 US treasuries. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.
Item 8. Financial Statements and Supplementary Data
This information appears following Item 15 of this Report and is included herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. 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 principal executive officer and principal financial and accounting officer (our “Certifying Officers”), the effectiveness of our disclosure controls and procedures as of December 31, 2022, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our Certifying Officers concluded that, as of December 31, 2022, our disclosure controls and procedures were not effective due to a material weakness related to our review controls over the financial reporting process and related party transactions, which was initially identified at December 31, 2021.
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In light of the material weakness, we have made control improvements, including enhancing the efficacy of our review processes to identify and appropriately apply applicable accounting requirements to better evaluate and understand the nuances of the accounting standards that apply to the treatment and reporting of related party transactions. in our financial statements. Our plans at this time also include providing enhanced access to accounting literature, research materials and documents and increased communication among our management and third-party professionals with whom we consult regarding related party accounting applications. Furthermore, in light of this material weakness, we performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with GAAP. Accordingly, management believes that the financial statements included in this Report present fairly in all material respects our financial position, results of operations and cash flows for the periods presented. We continue to evaluate steps to remediate the identified material weakness. These remediation measures may be time consuming and costly and there is no assurance that these initiatives will ultimately have the intended effects.
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.
Management’s Report on Internal Controls Over Financial Reporting
As required by SEC rules and regulations implementing Section 404 of the Sarbanes-Oxley Act, our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our consolidated financial statements for external reporting purposes in accordance with GAAP. Our internal control over financial reporting includes those policies and procedures that:
| (1) | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our company, |
| (2) | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors, and |
| (3) | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect errors or misstatements in our financial statements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of our internal control over financial reporting at December 31, 2022. In making these assessments, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework (2013). Based on our assessments and those criteria, management determined that we did not maintain effective internal control over financial reporting as of December 31, 2022, due to the material weakness in our internal control over the financial reporting process and related party transactions, which was initially identified at December 31, 2021.
Management has implemented remediation steps to improve our internal control over financial reporting. Specifically, we expanded and improved our review process for complex securities, related party transactions and related accounting standards. We plan to further improve this process by enhancing access to accounting literature, identification of third-party professionals with whom to consult regarding complex accounting applications and implementing additional layers of reviews in the financial close process.
This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm due to our status as an emerging growth company under the JOBS Act.
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Changes in Internal Control over Financial Reporting
Except as noted above, there were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information.
None.
Item 9C. Disclosure regarding Foreign Jurisdictions that Prevent Inspections.
Not Applicable.
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PART III
Item 10. Directors, Executive Officers and Corporate Governance
Directors and Executive Officers
As of the date of this Report, our directors and officers are as follows:
| Name | Age | Position | ||
| Tristan Lo | 40 | Chairman, Co-Chief Executive Officer and Director | ||
| David Andrada | 42 | Co-Chief Executive Officer, Chief Financial Officer and Director | ||
| Nils Michaelis | 49 | President, Chief Operating Officer and Director | ||
| Abel Martins Alexandre | 51 | Director | ||
| Tina Wyer | 48 | Director | ||
| Stanton Sugarman | 54 | Director | ||
| Samir Addamine | 50 | Director | ||
| Alex Bono | 47 | Director |
The experience of our directors and executive officers is as follows:
Tristan Lo serves as our Co-Chief Executive Officer and Chairman of the Board. Since May 2015, Mr. Lo has served as a Managing Partner of Fat Projects Pte. Ltd., an affiliate of our sponsor, where he identifies strategic partnership opportunities, guides equity investment strategy, and leads operations of the firm’s portfolio of companies. Mr. Lo has been a lifelong entrepreneur, starting his first company in advertising and marketing while completing his Business Degree at the University of Technology Sydney. Thereafter, he founded companies in Australia including a portfolio of telecommunication retail stores, online accredited training businesses, and a portfolio of hotel businesses. In March 2013, Mr. Lo moved to Singapore and became the founder and Chief Executive Officer of Mums.sg, an e-commerce B2C company. While at Mums.sg, Mr. Lo grew the e-commerce business from inception to operations across Singapore and further expanded by acquiring a complimentary e-commerce company in Hong Kong. In 2016, Mr. Lo, subsequently negotiated a majority sale to JD.ID, an e-commerce company based in Jakarta, Indonesia, part of NASDAQ listed JD.com. JD.com is widely recognized as one of the leading e-commerce companies in the world. Following the sale to JD.ID Mr. Lo spent 18 months on the ground in Jakarta helping build their Indonesian operations from infancy. Mr. Lo is an experienced operator scaling businesses via organic growth and mergers and acquisition across Asia Pacific. In October 2018, Mr. Lo became a director of Panamericana Pte. Ltd., a Singapore food and beverage company. In October 2019, Mr. Lo co-founded Clean Eats & Co Pte. Ltd., a Singapore food technology company and has been the chief executive officer thereof since then. Mr. Lo holds a Bachelor of Business, Marketing and E-Business from University of Technology Sydney. Mr. Lo is the Co-Chief Executive Officer and chairman of the board of directors of Aura Fat Projects Acquisition Corp., a special purpose acquisition corporation listed on the Nasdaq Global Market (Nasdaq: AFAR, AFARU, AFARW).
David Andrada serves as our Co-Chief Executive Officer and Chief Financial Officer. Since May 2015, Mr. Andrada has served a Managing Partner of Fat Projects Pte. Ltd., an affiliate of our sponsor, where he helps guide the firm’s capital raisings and M&A activity. Since September 2020, Mr. Andrada serves as the Chief Financial Officer of Clean Eats & Co Pte. Ltd., a Singapore company focusing on food technology, and a non-executive director for ipaymy.com - a financial technology company headquartered in Singapore with operations in Malaysia, Hong Kong and Australia. Mr. Andrada also advises several Small/Mid Cap companies in Southeast Asia on corporate finance projects, go-public and mergers and acquisitions strategies in industries including technology, telecommunications, energy and infrastructure. Mr. Andrada is a seasoned and globally recognized banking executive having held senior positions with HSBC Group from September 2014 through August 2020, and Bank of America Merrill Lynch across Sydney, Singapore and the United States. His last role at HSBC was Global Sector Head (from September 2017 through August 2020) spending most times between Houston and London, where he was globally responsible for the firm’s institutional relationships in the Oil & Gas, Metals & Mining, Chemicals and Utilities sectors managing corporate investments, post-M&A treasury integration, digitization and treasury transformation projects. He led a team of senior banking professionals across Europe, Americas, Asia Pacific and Middle East covering some of the world’s largest companies for their corporate treasury service’s needs. Prior to moving to Houston, Mr. Andrada was based out of Singapore where he was Asia Pacific Sector Head for the firm from 2014 through September 2017. Prior to this, he was Vice President at Bank of America Merrill Lynch in Sydney helping multinational companies in Asia Pacific with their Digital Transformation programs in Treasury and Supply Chain. Mr. Andrada holds a Bachelor of Commerce, Major in Management of Financial Institutions from De La Salle University, and took further post graduate studies at The University of Sydney Business School. Mr. Andrada is the Co-Chief Executive Officer, Chief Financial Officer and a director of Aura Fat Projects Acquisition Corp., a special purpose acquisition corporation listed on the Nasdaq Global Market (Nasdaq: AFAR, AFARU, AFARW).
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Nils Michaelis serves as the President, Chief Operating Officer and Head of Mergers & Acquisition effective July 15, 2021. Mr. Michaelis’ career spans 24 years, multiple industries and geographies, having held leadership positions for world-leading consultancies such as McKinsey & Company, Accenture, and corporations such as Bertelsmann and American Express. Mr. Michaelis has been at the forefront of digital transformation throughout his career and is a seasoned expert in identifying opportunities from digital technologies, designing new approaches and business models, and then executing and successfully scaling them through a combination of organic and M&A-driven growth. Throughout his career Mr. Michaelis has been driving M&A and the integration of acquisitions to accelerate and scale business for the corporations and the clients he has served – with significant M&A experience across Asia, Europe and North America. Since August 2013, Mr. Michaelis has been based in Singapore and held senior leadership roles at Accenture as Managing Director responsible for Digital in Southeast Asia and most recently as the responsible for transformation in consumer facing industries for the Growth Markets region (APAC, Africa Middle East and Latin America), designing and executing integrated technology-led transformation journeys for his clients across experience, enablement and efficiency layers. Mr. Michaelis is deeply entrenched into the global innovation and technology ecosystems and a recognized thought leader for corporations, tertiary institutions and government-linked enterprises. Mr. Michaelis holds a Master of Business Administration from Leuphana University of Lüneburg. Mr. Michaelis is a director of Aura Fat Projects Acquisition Corp., a special purpose acquisition corporation listed on the Nasdaq Global Market (Nasdaq: AFAR, AFARU, AFARW).
Abel Martins Alexandre has 25 years of experience that spans international banking and FTSE100 corporate on four continents, with an acute understanding of business strategy and development, corporate finance and M&A, governance and risk management. Mr. Martins Alexandre has worked on around 100 structured and corporate finance transactions in his career, in advanced as well as emerging markets, and developed and implemented a number of strategies across new business activities, asset restructuring and corporate reorganization. In the last five years, Mr. Martins Alexandre contributed significantly to the build-up of the commercial activities of Rio Tinto in Singapore as part of his position in the Commercial Senior Leadership Team, having created a new treasury function and operating model, centralized commodity trading and trade finance activities, and developed a technology transformation roadmap. Mr. Martins Alexandre was the Chief Development Officer of Rio Tinto from December 1, 2014 to June 30, 2016, its Head of Commercial Treasurer from July 1, 2016 to May 31, 2019, and Group Treasurer from June 1, 2019 to March 31, 2020. He was most recently a member of Finance Senior Leadership Team in his capacity as Treasurer for the Group (in charge on all global treasury, corporate and project finance, pensions and investments, and insurance activities) and played a key role in aligning sustainability to corporate finance, progressing technology transformation, and funding of mega projects. Mr. Martins Alexandre has a very strong and proven combination of strategic thinking, finance expertise, business acumen and leadership. Recent accolades include best Treasury team in Asia in 2018 and 2019, and one of the Top 100 FinTech influencers in Southeast Asia according to Lattice80. Mr. Martins Alexandre holds a Bachelor of Philosophy from Paris-Sorbonne University, Master of Business from Toulouse Business School, and Master of Business Administration from London Business School.
Tina Wyer has over 23 years’ experience, holding several C-suite roles, responsible for driving major change and transformation agendas across both the business and technology domains. Her work in the United States, Australia and Singapore gives her a unique perspective of the business functions, regulatory, controls and opportunity landscape across diverse disciplines, geographies and cultures. Mrs. Wyer recently retired from J.P. Morgan Chase as a Managing Director after a successful 17-year career, carrying numerous senior roles including: Firmwide Chief Data Officer in New York office (from August 2014 to April 2017), Asia Chief Technology Officer for Corporate Technology in Singapore office (April 2017 to August 2020), and Australia & New Zealand Chief Financial Officer (CFO) in Sydney office. Mrs. Wyer commenced her career at KPMG and BearingPoint thereafter, where she has led major systems transformation, Basel II and ERP implementation projects in Australia and the U.S. Mrs. Wyer’s merger and acquisition experience includes substantial involvement in the merger of Bank One with and into J.P. Morgan Chase, J.P. Morgan Chase’s sell of its corporate trust business to Bank of New York, and J.P. Morgan Chase’s acquisition of retail banking and regional middle-market businesses from Bank of New York. Mrs Wyer holds a Bachelor of Commerce from Deakin University in Burwood, Melbourne, and she is a Chartered Accountant qualified in Australia and New Zealand, and award winner of the 2020 Singapore Top 100 Women in Technology.
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Stanton Sugarman’s 30-year career has seen him playing pioneering roles in the digitization of advertising, media & content, and most recently driving SaaS in the fastest growing region of the world. Mr. Sugarman has worked across the globe with leadership roles in North America, Europe and across the Asia Pacific region. Since May 1, 2021, Mr. Sugarman serves as the Chief Commercial Officer and Co-owner of the GAIA AG (global leader in Digital Therapeutics). Mr. Sugarman brings a deep understanding of the tech landscape and its evolution coupled with extensive insight into how to drive mass adoption for both B2C and B2B settings. Mr. Sugarman has contributed significantly to the rapid growth of SaaS business models – especially in the areas of marketing, sales, CRM and commerce, previously defining the customer adoption strategy for the C-Suite for Salesforce in Europe and Asia Pacific and was responsible for the Enterprise Key Account Business as the Chief Customer Officer APAC for Salesforce based out of Singapore. He is deeply entrenched into the start-up ecosystems in Silicon Valley, Germany and Southeast Asia and has been an active advisor and mentor to many start-ups. Mr. Sugarman served as Non-Executive Director for Unilever’s DACH Entity from September 2015 to August 2019. Mr. Sugarman was the Senior Vice President of Salesforce (San Francisco Bay office) from January 2016 and August 2019, and its Chief Customer Officer APAC from September 2019 to April 2021. Mr. Sugarman holds a BA (cum laude) from the University of California at Berkeley and a Master of Business Information Systems from the Rotterdam School of Management at Erasmus University and has a very strong and proven combination of pioneering business models and scaling them with clear business insight and acumen.
Samir Addamine is a serial entrepreneur and innovation leader in the technology industry. He is well recognized as an expert in mobile and digital marketing and has advised some of the world’s leading brands on how to move towards a mobile-driven ecosystem. He founded ClicMobile in 2003, a mobile digital agency that focuses on the evolving digital world and shifting technological landscape. He was a senior executive at Framfab (a Swedish internet service company), where he developed mobile applications as well as mobile go-to-market strategies for businesses. In 2012, Mr. Addamine developed mobile applications (Follow-apps) to help enterprise companies build and grow successful mobile channels via an industry-leading analytics and engagement solution. In April 2014, Mr. Addamine incorporated FollowAnalytics, Inc., a Delaware corporation, to further develop Follow-apps. Today, FollowAnalytics is a fast-growing global leader in no-code/low-code mobile development. It is headquartered in San Francisco with offices in New York, Montreal, and Paris. Key partners include Salesforce, Adobe, and Microsoft, who recommend, distribute, and integrate FollowAnalytics solutions. Mr. Addamine is on the board of promising startup companies such as Zendoc, and is a strong advocate of digital transformation via mobile and No-code/Low-code software. He is also currently a board member on the Forbes technology council. Mr. Addamine received a Bachelor of Computer Science and Electrical Engineering from University Bourgogne France-Comté in 1993, and a Master of Business Development from Novancial Business School in Paris in 1995.
Alex Bono has more than 23 years of experience in Asia and Europe with a strong track record in digital and technology across large corporations and technology start-ups. He has experience both as an entrepreneur and intrapreneur. Mr. Bono has a proven track-record and hands-on knowledge of building and monetizing companies from zero to large size. He was the winner of the prestigious award “Top 50 HK Leaders in Retail” 2018, Best Hong Kong eCommerce platform 2018. Currently, Mr. Bono is the Chief Digital Officer of DKSH based in Singapore, providing digital leadership to the market expansion service company with $11.6 billion revenue in 2020 (SIX Swiss Exchange: DKSH), developing and implementing digital transformation across 36 countries and 4 large business units with strong focus on innovative business models. Prior to DKSH, he was CEO of Habbitzz Ltd in Hong Kong, a successful eCommerce company (owned by PCCW) and acted as Senior Vice President of eCommerce with PCCW Ltd, a Hong Kong-based information and communications technology company. Mr. Bono successfully created a proprietary consumer eCommerce business for PCCW. He was also leading the area of Innovation and Digital Transformation building innovative businesses and new revenue sources. His entrepreneurial journey includes the co-founding of Moms Asia Holdings in Singapore, in which JD.com (Nasdaq: JD) took a controlling equity investment, being the Founder & Managing Director of MKKO Ventures in Singapore as well as being a member of the Groupon co-founding team in Spain. Mr. Bono holds an International MBA from IE Business School in Madrid, Spain. He also holds a master’s degree in Computer Science and a master’s degree in E-Commerce from Polytechnic University of Valencia.
Our officers are appointed by the board of directors and serve at the discretion of the board of directors, rather than for specific terms of office. Our board of directors is authorized to appoint persons to the offices set forth in our amended and restated memorandum and articles of association as it deems appropriate. Our amended and restated memorandum and articles of association provide that our officers may consist of a Chairman of the Board, Chief Executive Officer, Chief Financial Officer, President, Vice Presidents, Secretary, Treasurer, Assistant Secretaries and such other offices as may be determined by the board of directors.
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Number and Terms of Office of Officers and Directors
We have 8 directors. In accordance with Nasdaq corporate governance requirements, we are not required to hold an annual meeting until one year after our first fiscal year end following our listing on Nasdaq. Our officers are appointed by the board of directors and serve at the discretion of the board of directors, rather than for specific terms of office. Our board of directors is authorized to appoint persons to the offices set forth in our amended and restated memorandum and articles of association as it deems appropriate. Our amended and restated memorandum and articles of association provide that our officers may consist of a Chairman of the Board, Chief Executive Officer, Chief Financial Officer, President, Vice Presidents, Secretary, Treasurer, Assistant Secretaries and such other offices as may be determined by the board of directors.
Committees of the Board of Directors
Our board of directors has two standing committees: an audit committee and a compensation committee. Subject to phase-in rules and a limited exception, Nasdaq rules and Rule 10A-3 of the Exchange Act require that the audit committee of a listed company be comprised solely of independent directors, and Nasdaq rules require that the compensation committee of a listed company be comprised solely of independent directors. Each committee operates under a charter that has been approved by our board of directors and has the composition and responsibilities described below.
Audit Committee
We have established an audit committee of the board of directors. Abel Martins Alexandre, Stanton Sugarman and Samir Addamine serve as members of our audit committee, and Mr. Abel Martins Alexandre chairs the audit committee. Under the Nasdaq listing standards and applicable SEC rules, we are required to have at least three members of the audit committee, all of whom must be independent. Each of Abel Martins Alexandre, Stanton Sugarman and Samir Addamine meet the independent director standard under Nasdaq listing standards and under Rule 10-A-3(b)(1) of the Exchange Act.
Each member of the audit committee is financially literate and our board of directors has determined that that Mr. Abel Martins Alexandre qualifies as an “audit committee financial expert” as defined in applicable SEC rules.
We have adopted an audit committee charter, which details the principal functions of the audit committee, including:
| ● | the appointment, compensation, retention, replacement, and oversight of the work of the independent registered public accounting firm engaged by us; |
| ● | pre-approving all audit and permitted non-audit services to be provided by the independent registered public accounting firm engaged by us, and establishing pre-approval policies and procedures; |
| ● | setting clear hiring policies for employees or former employees of the independent registered public accounting firm, including but not limited to, as required by applicable laws and regulations; |
| ● | setting clear policies for audit partner rotation in compliance with applicable laws and regulations; |
| ● | obtaining and reviewing a report, at least annually, from the independent registered public accounting firm describing (i) the independent registered public accounting firm’s internal quality-control procedures, (ii) any material issues raised by the most recent internal quality-control review, or peer review, of the audit firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or more independent audits carried out by the firm and any steps taken to deal with such issues and (iii) all relationships between the independent registered public accounting firm and us to assess the independent registered public accounting firm’s independence; |
| ● | reviewing and approving any related party transaction required to be disclosed pursuant to Item 404 of Regulation S-K promulgated by the SEC prior to us entering into such transaction; and |
| ● | reviewing with management, the independent registered public accounting firm, and our legal advisors, as appropriate, any legal, regulatory or compliance matters, including any correspondence with regulators or government agencies and any employee complaints or published reports that raise material issues regarding our financial statements or accounting policies and any significant changes in accounting standards or rules promulgated by the Financial Accounting Standards Board, the SEC or other regulatory authorities. |
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Compensation Committee
We have established a compensation committee of the board of directors. Tina Wyer and Alex Bono serve as members of our compensation committee. Under the Nasdaq listing standards and applicable SEC rules, we are required to have at least two members of the compensation committee, all of whom must be independent. Each of Tina Wyer and Alex Bono are independent and Ms. Wyer chairs the compensation committee.
We have adopted a compensation committee charter, which details the principal functions of the compensation committee, including:
| ● | reviewing and approving on an annual basis the corporate goals and objectives relevant to our Chief Executive Officer’s compensation, if any is paid by us, evaluating our Chief Executive Officer’s performance in light of such goals and objectives and determining and approving the remuneration (if any) of our Chief Executive Officer based on such evaluation; |
| ● | reviewing and approving on an annual basis the compensation, if any is paid by us, of all of our other officers; |
| ● | reviewing on an annual basis our executive compensation policies and plans; |
| ● | implementing and administering our incentive compensation equity-based remuneration plans; |
| ● | assisting management in complying with our proxy statement and annual report disclosure requirements; |
| ● | approving all special perquisites, special cash payments and other special compensation and benefit arrangements for our officers and employees; |
| ● | if required, producing a report on executive compensation to be included in our annual proxy statement; and |
| ● | reviewing, evaluating and recommending changes, if appropriate, to the remuneration for directors. |
Notwithstanding the foregoing, as indicated above, other than the payment to our Sponsor of $10,000 per month for office space, utilities and secretarial and administrative support and reimbursement of expenses, no compensation of any kind, including finders, consulting or other similar fees, will be paid to any of our existing shareholders, officers, directors or any of their respective affiliates, prior to, or for any services they render in order to effectuate the consummation of an initial business combination. Accordingly, it is likely that prior to the consummation of an initial business combination, the compensation committee will only be responsible for the review and recommendation of any compensation arrangements to be entered into in connection with such initial business combination.
The charter also provides that the compensation committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, legal counsel or other adviser and will be directly responsible for the appointment, compensation and oversight of the work of any such adviser. However, before engaging or receiving advice from a compensation consultant, external legal counsel or any other adviser, the compensation committee will consider the independence of each such adviser, including the factors required by Nasdaq and the SEC.
Director Nominations
We do not have a standing nominating committee though we intend to form a corporate governance and nominating committee as and when required to do so by law or Nasdaq rules. In accordance with Rule 5605 of the Nasdaq rules, a majority of the independent directors may recommend a director nominee for selection by the board of directors. The board of directors believes that the independent directors can satisfactorily carry out the responsibility of properly selecting or approving director nominees without the formation of a standing nominating committee. Our independent directors will participate in the consideration and recommendation of director nominees. In accordance with Rule 5605 of the Nasdaq rules, all such directors are independent. As there is no standing nominating committee, we do not have a nominating committee charter in place.
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The board of directors will also consider director candidates recommended for nomination by our shareholders during such times as they are seeking proposed nominees to stand for election at the next annual meeting of shareholders (or, if applicable, a special meeting of shareholders). Our shareholders that wish to nominate a director for election to our board of directors should follow the procedures set forth in our amended and restated memorandum and articles of association.
We have not formally established any specific, minimum qualifications that must be met or skills that are necessary for directors to possess. In general, in identifying and evaluating nominees for director, the board of directors considers educational background, diversity of professional experience, knowledge of our business, integrity, professional reputation, independence, wisdom, and the ability to represent the best interests of our shareholders.
Code of Ethics
We have adopted a Code of Ethics applicable to our directors, officers and employees. We have filed a copy of our Code of Ethics and our audit and compensation committee charters with the SEC and copies are available on our website. You are able to review these documents by accessing our public filings at the SEC’s web site at www.sec.gov. In addition, a copy of the Code of Ethics will be provided without charge upon request from us. We intend to disclose any amendments to or waivers of certain provisions of our Code of Ethics in a Current Report on Form 8-K.
Delinquent Section 16(a) Reports
Each of Messrs. Lo, Andrada, Michaelis, Addamine, Alexandre, Bono and Sugarman and Ms. Wyer failed to file a Form 3 when the registration statement for the Company’s IPO was declared effective. Each of Messrs. Michaelis, Addamine, Alexandre, Bono and Sugarman and Ms. Wyer failed to file one Form 4 with respect to two transactions, and the Company’s Sponsor, Fat Projects SPAC Pte. Ltd., and Messrs. Lo and Andrada failed to file two Forms 4, one reporting one transaction and the other reporting two transactions. The Company expects the missing Forms 3 and 4 to be filed promptly following the date this Annual Report on Form 10-K is filed with the SEC.
Item 11. Executive Compensation
Compensation Discussion and Analysis
None of our officers has received any cash compensation for services rendered to us. Other than the payment to our Sponsor of $10,000 per month described elsewhere in this Report, no compensation of any kind, including any finder’s fee, reimbursement, consulting fee or monies in respect of any payment of a loan, will be paid by us to our sponsor, officers, directors or any affiliate of our sponsor, officers, or directors prior to, or in connection with any services rendered in order to effectuate, the consummation of our initial business combination (regardless of the type of transaction that it is). However, these individuals will be reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. Our audit committee reviews on a quarterly basis all payments that were made to our sponsor, officers, or directors, or our or their affiliates. Any such payments prior to an initial business combination will be made using funds held outside the trust account. Other than quarterly audit committee review of such payments, we do not expect to have any additional controls in place governing our reimbursement payments to our directors and executive officers for their out-of-pocket expenses incurred in connection with identifying and consummating an initial business combination.
After the completion of our initial business combination, directors or members of our management team who remain with us may be paid consulting or management fees from the combined company. All of these fees will be fully disclosed to shareholders, to the extent then known, in the tender offer materials or proxy solicitation materials furnished to our shareholders in connection with a proposed initial business combination. We have not established any limit on the amount of such fees that may be paid by the combined company to our directors or members of management. It is unlikely the amount of such compensation will be known at the time of the proposed initial business combination, because the directors of the post-combination business will be responsible for determining officer and director compensation. Any compensation to be paid to our officers will be determined, or recommended to the board of directors for determination, either by a compensation committee constituted solely by independent directors or by a majority of the independent directors on our board of directors.
We do not intend to take any action to ensure that members of our management team maintain their positions with us after the consummation of our initial business combination, although it is possible that some or all of our officers and directors may negotiate employment or consulting arrangements to remain with us after our initial business combination. The existence or terms of any such employment or consulting arrangements to retain their positions with us may influence our management’s motivation in identifying or selecting a target business but we do not believe that the ability of our management to remain with us after the consummation of our initial business combination will be a determining factor in our decision to proceed with any potential business combination. We are not party to any agreements with our officers and directors that provide for benefits upon termination of employment. The compensation committee has reviewed and discussed this Compensation Discussion and Analysis with management and, based upon its review and discussions, the compensation committee recommended to the board of directors that the Compensation Discussion and Analysis be included in this Report.
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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
The following table sets forth information regarding the beneficial ownership of our ordinary share as of February 28, 2023 based on information obtained from the persons named below, with respect to the beneficial ownership of ordinary share, by:
| ● | each person known by us to be the beneficial owner of more than 5% of our outstanding ordinary shares; |
| ● | each of our executive officers and directors that beneficially owns our ordinary shares; and |
| ● | all our executive officers and directors as a group. |
In the table below, percentage ownership is based on 8,431,738 of our ordinary shares outstanding as of February 28, 2023, consisting of (i) 5,556,738 of our Class A ordinary shares, and (ii) 2,875,000 of our Class B ordinary shares. On all matters to be voted upon, holders of the Class A ordinary shares and shares of Class B ordinary shares vote together as a single class. Currently, all of the Class B ordinary shares are convertible into Class A ordinary shares on a one-for-one basis and will automatically convert upon the consummation of our initial business combination.
The Sponsor, directors and executive officers have agreed not to transfer, assign or sell any of their Founder Shares until earliest of (A) six months after the completion of the initial business combination and (B) subsequent to the initial business combination, (x) if the closing price of the Company’s Class A ordinary shares equals or exceeds $12.00 per share (as adjusted for share splits, share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the initial business combination, or (y) the date on which the Company completes a liquidation, merger, share exchange or other similar transaction that results in all of the Company’s public shareholders having the right to exchange their ordinary shares for cash, securities or other property. Unless otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all ordinary shares beneficially owned by them. The following table does not reflect record or beneficial ownership of the private placement warrants as these warrants are not exercisable within 60 days of the date of this Report.
Class A Ordinary Shares | Class B Ordinary Shares | Total Ordinary Shares | ||||||||||||||||||||||
| Name of Beneficial Owner | Number | Percent | Number | Percent | Number | Percent | ||||||||||||||||||
| 5% Holders | ||||||||||||||||||||||||
| Boothbay Fund Management, LLC (1) Boothbay Absolute Return Strategies LP Ari Glass | 950,000 | † | 17.10 | % | 75,000 | 2.61 | % | 1,025,000 | 12.16 | % | ||||||||||||||
| Saba Capital Management, L.P. (2) Boaz R. Weinstein Saba Capital Management GP, LLC 405 Lexington Avenue, 58th Floor New York, New York 10174 | 1,064,400 | 19.16 | % | 75,000 | 2.61 | % | 1,139,400 | 13.51 | % | |||||||||||||||
| D.E. Shaw Valence Portfolios, L.L.C. (3) D.E. Shaw & Co., L.L.C. D.E. Shaw & Co., L.P. David E. Shaw 1166 Avenue of the Americas, 9th Floor New York, NY 10174 | 1,025,000 | † | 18.45 | % | 75,000 | 2.61 | % | 1,100,000 | 13.05 | % | ||||||||||||||
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| Polar Asset Management Partners Inc. (4) 16 York Street, Suite 2900 Toronto, ON Canada M5J OE6 | 600,000 | 10.80 | % | 75,000 | 2.61 | % | 675,000 | 8.01 | % | |||||||||||||||
ATW SPAC Management LLC (5) Miami, FL 33126 | 950,000 | † | 17.10 | % | - | - | 950,000 | 11.27 | % | |||||||||||||||
| Glazer Capital, LLC (6) Paul J. Glazer 250 West 55th Street, Suite 30A, New York, New York 10019 | 793,045 | 14.27 | % | 75,000 | 2.61 | % | 868,045 | 10.29 | % | |||||||||||||||
| Periscope Capital Inc. (7) 333 Bay Street, Suite 1240, Toronto, Ontario, Canada M5H 2R2 | 582,184 | 10.48 | % | - | - | 582,184 | 6.90 | % | ||||||||||||||||
| Tempo Opportunities Fund LLC (8) RPO LLC J. David Rogers 6 Landmark Square, 4th Floor, Stamford, CT 06901 | 355,872 | 6.40 | % | - | - | 355,872 | 4.22 | % | ||||||||||||||||
| Feis Equities LLC (9) Lawrence M. Feis 20 North Wacker Drive, Suite 2115, Chicago, Illinois 60606 | 400,000 | 7.20 | % | 75,000 | 2.61 | % | 475,000 | 5.63 | % | |||||||||||||||
| Fat Projects SPAC Pte. Ltd. (10) 27 Bukit Manis Road Singapore, 099892 | - | - | 816,411 | 28.40 | % | 816,411 | 9.68 | % | ||||||||||||||||
| Executive officers and directors (11) | ||||||||||||||||||||||||
| Tristan Lo (12) | - | - | 816,411 | 28.40 | % | 816,411 | 9.68 | % | ||||||||||||||||
| David Andrada (12) | - | - | 816,411 | 28.40 | % | 816,411 | 9.68 | % | ||||||||||||||||
| Nils Michaelis (13) | - | - | 88,542 | 3.08 | % | 88,542 | 1.05 | % | ||||||||||||||||
| Abel Alexandre (14) | - | - | 88,542 | 3.08 | % | 88,542 | 1.05 | % | ||||||||||||||||
| Tina Wyer (15) | - | - | 88,542 | 3.08 | % | 88,542 | 1.05 | % | ||||||||||||||||
| Stanton Sugarman (16) | - | - | 88,542 | 3.08 | % | 88,542 | 1.05 | % | ||||||||||||||||
| Samir Addamine (17) | - | - | 177,085 | 6.16 | % | 177,085 | 2.10 | % | ||||||||||||||||
| Alex Bono (18†) | - | - | 129,404 | 4.50 | % | 129,404 | 1.53 | % | ||||||||||||||||
| All executive officers and directors as a group (8 individuals) | - | - | 1,477,066 | 51.38 | % | 1,477,066 | 17.52 | % |
| * | less than 1% |
| † | The most recent Schedule 13G or 13G/A on file with the SEC is dated in 2021 and may not accurately reflect current holdings. |
| (1) | Includes 75,000 FATP Class B Ordinary Shares and FATP Class A Ordinary Shares included in a Schedule 13G dated October 19, 2021. The Schedule 13G states that these shares are held by one or more private funds, which are managed by Boothbay Fund Management, LLC, a Delaware limited liability company. Ari Glass is the Managing Member of Boothbay Fund Management, LLC. The Schedule 13G indicates that Boothbay Absolute Return Strategies LP shares beneficial ownership of 636,500 of these shares. The beneficial ownership percentage listed in the table above reflects the correct beneficial ownership percentage held by Boothbay Fund Management, LLC and Ari Glass following redemption of 6,058,262 of the Company’s Class A ordinary shares in connection with the January 13, 2023 shareholders meeting. The beneficial ownership percentage currently ascribed to Boothbay Absolute Return Strategies LP is 11.45%. |
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| (2) | Includes 75,000 FATP Class B Ordinary Shares and FATP Class A Ordinary Shares included in a Schedule 13G/A filed with the SEC on February 14, 2023. The Schedule 13G/A states that Saba Capital Management, L.P., Boaz R. Weinstein, and Saba Capital Management GP, LLC have entered into a Joint Filing Agreement, dated October 22, 2021, pursuant to which the reporting persons have agreed to file the Schedule 13G and any subsequent amendments thereto jointly in accordance with the provisions of Rule 13d-1(k)(1) under the Exchange Act. The Schedule 13G/A states that the filing of the statement should not be construed as an admission that any of the reporting persons is, for the purposes of Section 13 of the Exchange Act, the beneficial owner of the securities reported herein. The beneficial ownership percentage listed in the table above reflects the correct beneficial ownership percentage ascribed to Saba Capital Management, L.P., Boaz R. Weinstein, and Saba Capital Management GP, LLC following redemption of 6,058,262 of the Company’s Class A ordinary shares in connection with the January 13, 2023 shareholders meeting. The Schedule 13G/A reported a beneficial ownership of 9.5% of the Class A ordinary shares. | |
| (3) | Includes 75,000 FATP Class B Ordinary Shares and FATP Class A Ordinary Shares included in a Schedule 13G dated October 15, 2021. The Schedule 13G states that David E. Shaw does not own any shares directly. By virtue of David E. Shaw’s position as President and sole shareholder of D. E. Shaw & Co., Inc., which is the general partner of D. E. Shaw & Co., L.P., which in turn is the investment adviser of D. E. Shaw Valence Portfolios, L.L.C., and by virtue of David E. Shaw’s position as President and sole shareholder of D. E. Shaw & Co. II, Inc., which is the managing member of D. E. Shaw & Co., L.L.C., which in turn is the manager of D. E. Shaw Valence Portfolios, L.L.C., David E. Shaw may be deemed to have the shared power to vote or direct the vote of, and the shared power to dispose or direct the disposition of, the 1,025,000 shares as described above and, therefore, David E. Shaw may be deemed to be the beneficial owner of such shares. David E. Shaw disclaims beneficial ownership of such 1,025,000 shares. The beneficial ownership percentage listed in the table above reflects the correct beneficial ownership percentage ascribed to these persons following redemption of 6,058,262 of the Company’s Class A ordinary shares in connection with the January 13, 2023 shareholders meeting. The Schedule 13G filed by D.E. Shaw Valence Portfolios, L.L.C., D.E. Shaw & Co., L.L.C., D.E. Shaw & Co., L.P., and David E. Shaw with the SEC on October 25, 2021, reported a beneficial ownership of 8.8% of the Class A ordinary shares. |
| (4) | Includes 75,000 FATP Class B Ordinary Shares and FATP Class A Ordinary Shares included in a Schedule 13G/A filed with the SEC on February 14, 2023. The Schedule 13G/A states that it is filed by Polar Asset Management Partners Inc., a company incorporated under the laws of Ontario, Canada, which serves as the investment advisor to Polar Multi-Strategy Master Fund, a Cayman Islands exempted company with respect to the shares directly held by Polar Asset Management Partners Inc. |
| (5) | Includes FATP Class A Ordinary Shares included in a Schedule 13G dated December 31, 2021. The Schedule 13G states that the shares are held by one or more separately managed accounts managed by ATW SPAC Management LLC, a Delaware limited liability company, which has been delegated exclusive authority to vote and/or direct the disposition of such shares held by such separately managed accounts, which are sub-accounts of one or more pooled investment vehicles managed by a Delaware limited liability company. Antonio Ruiz-Gimenez is the Managing Member of ATW SPAC Management LLC. The beneficial ownership percentage listed in the table above reflects the correct beneficial ownership percentage ascribed to ATW SPAC Management LLC and Antonio Ruiz-Gimenez following redemption of 6,058,262 of the Company’s Class A ordinary shares in connection with the January 13, 2023 shareholders meeting. The Schedule 13G filed by ATW SPAC Management LLC and Antonio Ruiz-Gimenez with the SEC on February 14, 2023, reported a beneficial ownership of 8.18% of the Class A ordinary shares. |
| (6) | Includes 75,000 FATP Class B Ordinary Shares and FATP Class A Ordinary Shares included in a Schedule 13G filed by Glazer Capital, LLC and Paul J. Glazer with the SEC on February 13, 2023. The beneficial ownership percentage listed in the table above reflects the correct beneficial ownership percentage ascribed to Glazer Capital, LLC and Paul J. Glazer following redemption of 6,058,262 of the Company’s Class A ordinary shares in connection with the January 13, 2023 shareholders meeting. The Schedule 13G reported a beneficial ownership of 6.83% of the Class A ordinary shares. |
| (7) | Includes FATP Class A Ordinary Shares included in a Schedule 13G filed by Periscope Capital Inc. with the SEC on February 13, 2023. The beneficial ownership percentage listed in the table above reflects the correct beneficial ownership percentage ascribed to Periscope Capital Inc. following redemption of 6,058,262 of the Company’s Class A ordinary shares in connection with the January 13, 2023 shareholders meeting. The Schedule 13G reported a beneficial ownership of 5.01% of the Class A ordinary shares. |
| (8) | Includes FATP Class A Ordinary Shares included in a Schedule 13G filed by Tempo Opportunities Fund LLC, RPO LLC and J. David Rogers with the SEC on February 13, 2023. The beneficial ownership percentage listed in the table above reflects the correct beneficial ownership percentage ascribed to Tempo Opportunities Fund LLC, RPO LLC and J. David Rogers following redemption of 6,058,262 of the Company’s Class A ordinary shares in connection with the January 13, 2023 shareholders meeting. The Schedule 13G reported a beneficial ownership of 6.54% of the Class A ordinary shares. |
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| (9) | Includes 75,000 FATP Class B Ordinary Shares and FATP Class A Ordinary Shares included in a Schedule 13G/A filed by Feis Equities LLC and Lawrence M. Feis with the SEC on January 18, 2023. |
| (10) | Fat Projects SPAC Pte. Ltd. is our sponsor and it is controlled by Mr. Lo and Mr. Andrada. The shares listed for our sponsor are the same shares listed for each of Mr. Lo and Mr. Andrada, which are the same shares for each of them and are FATP Class B Ordinary Shares held of record by Fat Projects International Investments Ltd., which is controlled by Mr. Lo and Mr. Andrada. |
| (11) | Unless otherwise noted, the business address of each of these entities and individuals is 27 Bukit Manis Road, Sentosa Golf Club, Singapore, 099892. |
| (12) | The shares listed for each of Mr. Lo and Mr. Andrada are the same shares and are FATP Class B Ordinary Shares held of record by Fat Projects International Investments Ltd., which is controlled by Mr. Lo and Mr. Andrada. |
| (13) | These shares are FATP Class B Ordinary Shares and are held of record by Haller Bay Pte. Ltd., which is controlled by Mr. Michaelis. |
| (14) | These shares are FATP Class B Ordinary Shares and are held of record by Melody Investments & Advisory Pte. Ltd., which is controlled by Mr. Alexandre. |
| (15) | These shares are FATP Class B Ordinary Shares and are held of record by Wyer Investments Pty. Ltd., which is controlled by Ms. Wyer. |
| (16) | These shares are FATP Class B Ordinary Shares and are held of record by Sugarmilk Pte. Ltd., which is controlled by Mr. Sugarman. |
| (17) | These shares are FATP Class B Ordinary Shares and are held of record by Lafayette I SPV Pte. Ltd., which is controlled by Mr. Addamine. |
| (18) | These shares are FATP Class B Ordinary Shares. 40,862 shares are held of record by Mr. Bono, and the other 88,542 shares are held of record by SPAC Ventures and Investments Pte. Ltd., which is controlled by Mr. Bono. |
Securities Authorized for Issuance under Equity Compensation Table
None.
Changes in Control
The Company will undergo a change in control if it consummates the Business Combination with Avanseus. The Business Combination Agreement provides for a series of transactions, pursuant to which, among other things, Avanseus’ shareholders will exchange all of their outstanding Avanseus shares in consideration for newly issued Company Class A ordinary shares in the Share Exchange, subject to the conditions set forth in the Business Combination Agreement, with Avanseus thereby becoming our wholly owned subsidiary. In connection with the Business Combination, we will change our corporate name to “Avanseus Holdings Corporation.” Currently, 8,431,738 of our ordinary shares are outstanding, and the Business Combination Agreement provides for the issuance of 9,350,307 of our Class A ordinary shares to the pre-closing shareholders of Avanseus in the Share Exchange with an additional 149,693 of our Class A ordinary shares reserved for vesting of currently outstanding but unvested Avanseus compensatory restricted share awards for a total of 9,500,000 of our Class A ordinary shares.
41
Item 13. Certain Relationships and Related Transactions, and Director Independence
Founder Shares. On April 22, 2021, our sponsor purchased 2,875,000 founder shares for an aggregate purchase price of $25,000, or approximately $0.009 per share. The founder shares may not, subject to certain limited exceptions, be transferred, assigned or sold by the holder. Up to 375,000 Founder Shares were subject to forfeiture by the Sponsor depending on the extent to which the underwriters’ over-allotment option was exercised. The underwriters fully exercised their over-allotment option at the IPO resulting in no founder shares subject to forfeiture. In September 2021, the Company received expressions of interest from ten anchor investors to purchase units in our IPO. Subject to each anchor investor purchasing 100% of the Units allocated to it, in connection with the closing of the IPO, our sponsor sold 75,000 founder shares to each anchor investor (750,000 founder shares in the aggregate) at their original purchase price of approximately $0.009 per share. The Company accounted for the fair value in excess of consideration paid with respect to the number of Founder Shares sold to the anchor investors as an offering cost reflected as an increase to additional paid in capital offset by a reduction of the offering proceeds upon completion of the IPO. The fair value of each Founder Share was determined to be $6.75.
Private Placement Warrants. Simultaneously with the closing of our initial public offering on October 15, 2021, our sponsor purchased an aggregate of 2,865,000 private placement warrants at a price of $1.00 per private placement warrant, for an aggregate purchase price of $2,865,000. Each private placement warrant is exercisable to purchase one Class A ordinary share at a price of $11.50 per share. The proceeds from the private placement warrants were added to the proceeds from our initial public offering and deposited in the trust account. If we do not complete an initial business combination by March 15, 2023 (which deadline we may extent to July 15, 2023), the proceeds from the sale of the private placement warrants will be used to fund the redemption of the public shares (subject to the requirements of applicable law), and the private placement warrants and all underlying securities will expire worthless.
Monthly Support Payments to Our Sponsor. Commencing on October 12, 2021, we pay our sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support. Upon completion of our initial business combination or our liquidation, we will cease paying these monthly fees.
Sponsor Loan to Fund IPO Expenses. On May 6, 2021, our sponsor agreed to loan us up to $300,000 to be used for a portion of the expenses of our initial public offering, and we issued an unsecured promissory note to our sponsor. Pursuant to the terms of our promissory note, we could borrow up to an aggregate principal amount of $300,000. The promissory note was non-interest bearing and was payable on the earlier of (i) October 31, 2021 and (ii) the completion of our initial public offering. The Company borrowed $163,398 under the promissory note. The loan was repaid upon consummation of the IPO on October 15, 2021 out of the offering proceeds not held in the trust account.
Working Capital Loans from our Sponsor, Officers and/or Directors. In addition, in order to finance transaction costs in connection with our intended initial business combination, our sponsor or an affiliate of our sponsor or certain of our officers and directors may, but are not obligated to, loan us funds on a non-interest-bearing basis as may be required. If we complete an initial business combination, we would repay such loaned amounts. In the event that the initial business combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts but no proceeds from our trust account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into warrants, at a price of $1.00 per unit at the option of the lender, upon consummation of our initial business combination. The warrants would be identical to the private placement warrants. As of December 31, 2022, there $90,000 outstanding under the such a loan from our Sponsor pursuant to a non-interest bearing note issued on December 23, 2022 that is convertible into warrants as described above.
Extension Loans. Our amended and restated memorandum and articles of association and our IPO prospectus permit us to issue non-interest-bearing notes to our sponsor and/or affiliates or designees of us or our sponsor to fund the payments into the trust account required to obtain extensions to the deadline for us to complete our initial business combination. On January 8, 2023, our board of directors has authorized us to raise up to $1 million of funds by the issuance of non-interest bearing notes to fund such extensions, and as of February 28, 2023, there was an aggregate principal amount of $200,260 of non-interest-bearing notes outstanding. Certain of the holders of our founder shares other than the anchor investors have agreed among themselves to transfer up to 5% of their founder shares to subscribers to the note offering at a rate of one share for each $10 of principal amount of notes to incentivize subscriptions.
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Other than the foregoing, no compensation of any kind, including any finder’s fee, reimbursement, consulting fee or monies in respect of any payment of a loan, will be paid by us to our sponsor, officers, or directors or any affiliate of our sponsor, officers, or directors prior to, or in connection with any services rendered in order to effectuate, the consummation of an initial business combination (regardless of the type of transaction that it is). However, these individuals will be reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. Our audit committee reviews on a quarterly basis all payments that were made to our sponsor, officers, directors, or our or their affiliates and determines which expenses and the amount of expenses that will be reimbursed. There is no cap or ceiling on the reimbursement of out-of-pocket expenses incurred by such persons in connection with activities on our behalf.
Working Capital Loans from Non-Affiliates. On January 26, 2023, our board of directors has also authorized us to raise up to $1,062,500 of funds for working capital (which can also be used to fund extensions of the deadline to complete our initial business combination) through a private offering of promissory notes bearing simple interest at a rate of 15% per annum to prospective investors who are not our sponsor, directors or officers or any of their affiliates. Certain of the holders of our founder shares other than the anchor investors have agreed among themselves to transfer up to 5% of their founder shares to subscribers to the note offering at a rate of one share for each $10 of principal amount of notes to incentivize subscriptions. As of February 28, 2023, there was an aggregate principal amount of $355,740 of interest-bearing notes outstanding.
Possible Post-Business Combination Payments. After our initial business combination, members of our management team who remain with us may be paid consulting, management or other fees from the combined company with any and all amounts being fully disclosed to our shareholders, to the extent then known, in the tender offer or proxy solicitation materials, as applicable, furnished to our shareholders. It is unlikely the amount of such compensation will be known at the time of distribution of such tender offer materials or at the time of a shareholder meeting held to consider our initial business combination, as applicable, as it will be up to the directors of the post-combination business to determine executive and director compensation.
Registration Rights for Founder Shares, Private Placement Warrants and Other Warrants. The holders of the founder shares, private placement warrants, and warrants that may be issued upon conversion of working capital loans (and in each case holders of their component securities, as applicable) have registration rights to require us to register a sale of any of our securities held by them pursuant to a registration rights agreement entered into in connection with our initial public offering. These holders are entitled to make up to three demands, excluding short form registration demands, that we register such securities for sale under the Securities Act. In addition, these holders have “piggy-back” registration rights to include their securities in other registration statements filed by us.
Director and Officer Indemnification Agreements. We have entered into agreements with our officers and directors to provide contractual indemnification in addition to the indemnification provided for in our amended and restated memorandum and articles of association. Our amended and restated memorandum and articles of association also permit us to secure insurance on behalf of any officer, director or employee for any liability arising out of his or her actions, regardless of whether Cayman law would permit such indemnification. We have purchased a policy of directors’ and officers’ liability insurance that insures our officers and directors against the cost of defense, settlement or payment of a judgment in some circumstances and insures us against our obligations to indemnify our officers and directors.
Related Party Policy
We have adopted a code of ethics requiring us to avoid, wherever possible, all conflicts of interests, except under guidelines or resolutions approved by our board of directors (or the appropriate committee of our board) or as disclosed in our public filings with the SEC. Under our code of ethics, conflict of interest situations will include any financial transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness) involving the company. We have filed a copy of our code of ethics with the SEC and a copy is available on our website. You are able to review our code of ethics by accessing our public filings at the SEC’s web site at www.sec.gov. In addition, a copy of the code of ethics will be provided without charge upon request from us. We intend to disclose any amendments to or waivers of certain provisions of our code of ethics in a Current Report on Form 8-K
43
In addition, our audit committee, pursuant to a written charter that we have adopted, is responsible for reviewing and approving related party transactions to the extent that we enter into such transactions. An affirmative vote of a majority of the members of the audit committee present at a meeting at which a quorum is present will be required in order to approve a related party transaction. A majority of the members of the entire audit committee will constitute a quorum. Without a meeting, the unanimous written consent of all of the members of the audit committee will be required to approve a related party transaction. We have filed a copy of our audit committee charter with the SEC and a copy is available on our website. We also require each of our directors and executive officers to complete a directors’ and officers’ questionnaire that elicits information about related party transactions.
These procedures are intended to determine whether any such related party transaction impairs the independence of a director or presents a conflict of interest on the part of a director, employee or officer.
To further minimize conflicts of interest, we have agreed not to consummate an initial business combination with an entity that is affiliated with any of our sponsor, officers or directors unless we, or a committee of independent directors, have obtained an opinion from an independent investment banking firm or another independent entity that commonly renders valuation opinions that our initial business combination is fair to our company from a financial point of view.
Furthermore, except as listed below (none of which will be made from the proceeds of the IPO held in the trust account prior to the completion of our initial business combination), no finder’s fees, reimbursements, consulting fee, monies in respect of any payment of a loan or other compensation will be paid by us to our sponsor, officers or directors or any affiliate of our sponsor, officers or directors prior to, for services rendered to us prior to, or in connection with any services rendered in order to effectuate, the consummation of our initial business combination (regardless of the type of transaction that it is):
| ● | The loan from our sponsor described above under the heading “Sponsor Loan to Fund IPO Expenses”; |
| ● | The monthly payments to our sponsor described above under the heading “Monthly Support Payments to Our Sponsor”; |
| ● | Reimbursement for any out-of-pocket expenses related to identifying, investigating and completing an initial business combination; and |
| ● | Repayment of non-interest bearing loans which may be made by our sponsor or an affiliate of our sponsor or certain of our officers and directors as described above under the headings “Working Capital Loans from our Sponsor, Officers and/or Directors” and “Extension Loans.” |
Our audit committee reviews on a quarterly basis all payments that were made to our sponsor, officers, directors or our or their affiliates.
Director Independence
Nasdaq listing standards require that a majority of our board of directors be independent. An “independent director” is defined generally as a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship which in the opinion of the company’s board of directors, would interfere with the director’s exercise of independent judgment in carrying out the responsibilities of a director. Our board of directors has determined that Abel Martins Alexandre, Tina Wyer, Stanton Sugarman, Samir Addamine and Alex Bono are “independent directors” as defined in the Nasdaq listing standards and applicable SEC rules.
44
Item 14. Principal Accountant Fees and Services.
The following is a summary of fees paid or to be paid to Marcum LLP (“Marcum”) for services rendered.
Audit Fees. For the year ended December 31, 2022 and for the period from April 16, 2021 (inception) through December 31, 2021, fees for our independent registered public accounting firm were approximately $145,485 and $80,162, respectively, for the services Marcum performed in connection with our Initial Public Offering, review of the financial information included in our Forms 10-Q for the respective periods, consents related to our Form S-4 and amendments thereto and the audit of our December 31, 2022 and 2021 financial statements included in this Annual Report on Form 10-K.
Audit-Related Fees. For the year ended December 31, 2022 and for the period from April 16, 2021 (inception) through December 31, 2021, our independent registered public accounting firm did not render assurance and related services related to the performance of the audit or review of financial statements.
Tax Fees. For the year ended December 31, 2022 and for the period from April 16 (inception) through December 31, 2021, our independent registered public accounting firm did not render services to us for tax compliance, tax advice and tax planning.
All Other Fees. For the year ended December 31, 2022 and for the period from April 16 (inception) through December 31, 2021, there were no fees billed for products and services provided by our independent registered public accounting firm other than those set forth above.
Pre-Approval Policy
Our audit committee was formed upon the consummation of our initial public offering. As a result, the audit committee did not pre-approve all of the foregoing services, although any services rendered prior to the formation of our audit committee were approved by our board of directors. Since the formation of our audit committee, and on a going-forward basis, the audit committee has and will pre-approve all auditing services and permitted non-audit services to be performed for us by our auditors, including the fees and terms thereof (subject to the de minimis exceptions for non-audit services described in the Exchange Act which are approved by the audit committee prior to the completion of the audit).
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PART IV
Item 15. Exhibits, Financial Statements and Financial Statement Schedules
| (a) | The following documents are filed as part of this Report: |
| (1) | Financial Statements |
| Page | ||
| Report of Independent Registered Public Accounting Firm (PCAOB Firm # 688) | F-2 | |
| Balance Sheets | F-3 | |
| Statements of Operations | F-4 | |
| Statements of Changes in Shareholders’ Deficit | F-5 | |
| Statements of Cash Flows | F-6 | |
| Notes to Financial Statements | F-7 – F-22 |
| (2) | Financial Statements Schedule |
All financial statement schedules are omitted because they are not applicable or the amounts are immaterial and not required, or the required information is presented in the financial statements and notes beginning on F-1 on this Report.
| (3) | Exhibits |
We hereby file as part of this Report the exhibits listed in the attached Exhibit Index. Exhibits which are incorporated herein by reference can be inspected and copied at the public reference facilities maintained by the SEC, 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Copies of such material can also be obtained from the Public Reference Section of the SEC, 100 F Street, N.E., Washington, D.C. 20549, at prescribed rates or on the SEC website at www.sec.gov.
Item 16. Form 10-K Summary
Not applicable.
46
EXHIBIT INDEX
| * | Filed herewith. |
| ** | Furnished herewith. |
| (1) | Incorporated by reference to the Company’s Form S-1/A, filed with the SEC on October 12, 2021. |
| (2) | Incorporated by reference to the Company’s Form 8-K, filed with the SEC on October 15, 2021. |
| (3) | Incorporated by reference to the Company’s Form 8-K filed with the SEC on September 1, 2022. |
| (4) | Incorporated by reference to the Company’s Form 8-K filed with the SEC on October 5, 2022. |
| (5) | Incorporated by reference to the Company’s Form 8-K/A filed with the SEC on January 17, 2023. |
| (6) | Incorporated by reference to the Company’s Form 8-K filed with the SEC on February 17, 2023. |
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Item 15. Exhibits, Financial Statement Schedules
| (a) | The following documents are filed as part of this Form 10-K: |
| (1) | Financial Statements: |
| Page | |
| Report of Independent Registered Public Accounting Firm (PCAOB Firm ID 688) | F-2 |
| Balance Sheets | F-3 |
| Statements of Operations | F-4 |
| Statements of Changes in Shareholders’ Deficit | F-5 |
| Statements of Cash Flows | F-6 |
| Notes to Financial Statements | F-7 – F-22 |
| (2) | Financial Statement Schedules: |
None.
| (3) | Exhibits |
We hereby file as part of this Report the exhibits listed in the attached Exhibit Index. Exhibits which are incorporated herein by reference can be inspected and copied at the public reference facilities maintained by the SEC, 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Copies of such material can also be obtained from the Public Reference Section of the SEC, 100 F Street, N.E., Washington, D.C. 20549, at prescribed rates or on the SEC website at www.sec.gov.
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FAT PROJECTS ACQUISITION CORP
INDEX TO FINANCIAL STATEMENTS
| Page | |
| Report of Independent Registered Public Accounting Firm (PCAOB Firm ID 688) | F-2 |
| Balance Sheets | F-3 |
| Statements of Operations | F-4 |
| Statements of Changes in Shareholders’ Deficit | F-5 |
| Statements of Cash Flows | F-6 |
| Notes to Financial Statements | F-7 – F-22 |
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Shareholders and Board of Directors of
Fat Projects Acquisition Corp
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Fat Projects Acquisition Corp (the “Company”) as of December 31, 2022 and 2021, the related statements of operations, changes in shareholders’ deficit and cash flows for the year ended December 31, 2022 and for the period from April 16, 2021 (inception) through December 31, 2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the year ended December 31, 2022 and for the period from April 16, 2021 (inception) through December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph – Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 1 to the financial statements, the Company’s business plan is dependent on the completion of a business combination and the Company’s cash and working capital as of December 31, 2022 are not sufficient to complete its planned activities for a reasonable period of time, which is considered to be one year from the issuance date of the financial statements. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Marcum LLP
We have served as the Company’s auditor since 2021.
March 13, 2023
F-2
FAT PROJECTS ACQUISITION CORP
BALANCE SHEETS
| December 31, 2022 | December 31, 2021 | |||||||
| Assets: | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Due from related party | ||||||||
| Investments held in Trust Account | ||||||||
| Total current assets | ||||||||
| Long term prepaid expense | ||||||||
| Investments held in Trust Account | ||||||||
| Total assets | ||||||||
| Liabilities, Ordinary Shares Subject to Possible Redemption and Shareholders’ Deficit | ||||||||
| Current liabilities: | ||||||||
| Accrued expenses | $ | $ | ||||||
| Working Capital Loan | ||||||||
| Due to related party | ||||||||
| Deferred underwriting commissions | ||||||||
| Total current liabilities | ||||||||
| Deferred underwriting commissions | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies (Note 6) | ||||||||
| Class A ordinary shares subject to possible redemption, shares at $and $redemption value as of December 31, 2022 and 2021, respectively | ||||||||
| Shareholders’ Deficit: | ||||||||
| Preference shares, $par value; shares authorized; issued and outstanding | ||||||||
| Class A ordinary shares, $par value; shares authorized; shares issued and outstanding, excluding shares subject to redemption at December 31, 2022 and 2021 | ||||||||
| Class B ordinary shares, $par value; shares authorized; shares issued and outstanding at December 31, 2022 and 2021 | ||||||||
| 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 the financial statements.
F-3
FAT PROJECTS ACQUISITION CORP
STATEMENTS OF OPERATIONS
| For
the Year Ended December 31, 2022 | For
the | |||||||
| Formation and operating costs | $ | $ | ||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income: | ||||||||
| Interest earned on investments held in Trust Account | ||||||||
| Total other income | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Weighted average shares outstanding, Class A ordinary share subject to possible redemption | ||||||||
| Basic and diluted net loss per share, Class A ordinary share subject to possible redemption | $ | ( | ) | $ | ( | ) | ||
| Weighted average shares outstanding, Non-redeemable Class A and Class B ordinary share | ||||||||
| Basic and diluted net loss per share, Non-redeemable Class A and Class B ordinary share | $ | ( | ) | $ | ( | ) | ||
The accompanying notes are an integral part of the financial statements.
F-4
FAT PROJECTS ACQUISITION CORP
STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
FOR
THE YEAR ENDED DECEMBER 31, 2022 AND FOR THE PERIOD FROM APRIL 16, 2021
(INCEPTION) THROUGH DECEMBER 31, 2021
| Class A | Class B | Additional | ||||||||||||||||||||||||||
| Ordinary Shares | Ordinary Shares | Paid-in | Accumulated | Shareholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance as of April 16, 2021 (Inception) | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Class B ordinary share issued to initial shareholder | ||||||||||||||||||||||||||||
| Sale of 2,865,000 Private Placement Warrants | ||||||||||||||||||||||||||||
| Issuance of 115,000 representative shares | ||||||||||||||||||||||||||||
| Proceeds allocated to Public Warrants | - | - | ||||||||||||||||||||||||||
| Excess fair value of Anchor Investors | - | - | ||||||||||||||||||||||||||
| Offering costs allocated to warrants | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Ordinary shares subject to redemption | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Balance as of December 31, 2021 | $ | ( | ) | ( | ) | |||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Remeasurement of Class A ordinary shares subject to possible redemption | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance as of December 31, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
The accompanying notes are an integral part of the financial statements.
F-5
FAT PROJECTS ACQUISITION CORP
STATEMENTS OF CASH FLOWS
| For
year ended December 31, | For
the Period from April 16, 2021 (inception) through December 31, | |||||||
| 2022 | 2021 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Formation and operating costs paid by sponsor | ||||||||
| Interest earned on investments held in Trust Account | ( | ) | ( | ) | ||||
| Changes in current assets and liabilities: | ||||||||
| Due to related party | ( | ) | ||||||
| Prepaid expenses | ( | ) | ||||||
| Accrued expenses | ||||||||
| Accrued offering costs and expenses | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Investments held in Trust Account | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ||||||
| Cash flows from Financing Activities: | ||||||||
| Proceeds from initial public offering, net of costs | ||||||||
| Proceeds from private placement | ||||||||
| Proceeds from sale of ordinary shares to initial shareholder | ||||||||
| Payments from (to) related party | ( | ) | ||||||
| Proceeds from issuance of promissory note to related party | ||||||||
| Repayment of promissory note to related party | ( | ) | ||||||
| Payment of deferred offering costs | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Net change in cash | ( | ) | ||||||
| Cash, beginning of the period | ||||||||
| Cash, end of the period | $ | $ | ||||||
| Supplemental disclosure of non-cash investing and financing activities: | ||||||||
| Deferred underwriting commissions | $ | $ | ||||||
| Deferred offering costs paid by related party | $ | $ | ||||||
| Fair value of capital contribution by Sponsor to Anchor Investors | $ | $ | ||||||
| Offering costs in equity | $ | $ | ||||||
| Fair value of representative shares | $ | $ | ||||||
| Issuance of representative shares | $ | $ | ||||||
| Remeasurement of Class A ordinary shares subject to possible redemption | $ | $ | ||||||
The accompanying notes are an integral part of the financial statements.
F-6
Notes to Financial Statements
Note 1—Organization, Business Operation and Going Concern
Fat Projects Acquisition Corp (the “Company”) was incorporated as a Cayman Islands exempted company on April 16, 2021. The Company was incorporated for the purpose of effecting a merger, capital share exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). As described below, the Company has selected a target for its initial business combination and entered into a Business Combination Agreement with that target.
As of December 31, 2022, the Company had not commenced any operations. All activity for the period from April 16, 2021 (inception) through December 31, 2022, relates to the Company’s formation and the Initial Public Offering (“IPO”) described below and since the closing of the IPO, the search for a prospective initial business combination, the negotiation of the Business Combination Agreement described below and the preparation and filing on October 5, 2022 with the Securities and Exchange Commission (the “SEC”) of a registration statement on Form S-4 with respect to the Business Combination and subsequent amendments thereto (as amended, the “Form S-4”). The Company will not generate any operating revenues until after the completion of its initial business combination, at the earliest. The Company will generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the IPO.
The Company’s sponsor is Fat Projects SPAC Pte Ltd, a Singapore corporation (the “Sponsor”).
The
registration statement for the Company’s IPO was declared effective on October 12, 2021 (the “Effective Date”).
On October 15, 2021, the Company’s consummated the IPO of units at $per unit (the “Units”)
(including the underwriters’ over-allotment option), which is discussed in Note 3 (the “IPO”), and the sale of
The
Company must complete one or more initial business combinations having an aggregate fair market value of at least
Following
the closing of the IPO, management has agreed that an amount equal to at least $ per Unit sold in the IPO, including the proceeds
of the Private Placement Warrants, is being held in a trust account (“Trust Account”) and will be invested
only in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds meeting certain conditions
under Rule 2a-7 under the Investment Company Act, which invest only in direct U.S. government treasury obligations. Except with
respect to interest earned on the funds held in the Trust Account that may be released to the Company to pay its tax obligations and
up to $
On January 20, 2023, The shareholders of the Company approved the First Amendment to the Amended and Restated Memorandum and Articles of Association of the Company (the “Charter Amendment”) at the January 13, 2023 Shareholders Meeting, changing the structure and cost of the Company’s right to extend the date (the “Termination Date”) by which the Company must either (i) consummate a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination involving the Company and one or more businesses (a “business combination”), or else (ii) cease its operations if it fails to complete such business combination, and redeem or repurchase 100% of the Company’s Class A ordinary shares included as part of the units sold in the IPO. The Termination Date is currently March15, 2023 unless extended (See Note 8).
F-7
The Company will provide its public shareholders with the opportunity to redeem all or a portion of their public shares upon the completion of the initial business combination either (i) in connection with a shareholder meeting called to approve the initial business combination or (ii) by means of a tender offer. The decision as to whether the Company will seek shareholder approval of a proposed initial business combination or conduct a tender offer will be made by the Company, solely in its discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would require the Company to seek shareholder approval under applicable law or share exchange listing requirements.
The Company will provide its public shareholders with the opportunity to redeem all or a portion of their public shares upon the completion of the initial business combination at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of the initial business combination, including interest earned on the funds held in the Trust Account and not previously released to the Company to pay its taxes, divided by the number of then outstanding public shares, subject to the limitations described herein. The amount in the Trust Account was initially $10.00 per public share, however, there is no guarantee that investors will receive $10.00 per share upon redemption. The per-share amount the Company will distribute to investors who properly redeem their shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriters.
All
ordinary shares subject to redemption are recorded at a redemption value and classified as temporary equity following the completion
of the IPO, in accordance with Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification
(“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” The Company will proceed with a Business
Combination if the Company has net tangible assets of at least $
The
Company’s amended and restated memorandum and articles of association provide that the Company has until March 15, 2023 to
complete the initial business combination unless the Company extends the deadline by up to four remaining 1-month extensions by depositing
an aggregate of $
The Sponsor, officers and directors have entered into a letter agreement with the Company, pursuant to which they have agreed to (i) waive their redemption rights with respect to any Founder Shares and public shares held by them in connection with the completion of the initial business combination, (ii) waive their redemption rights with respect to any Founder Shares and public shares held by them in connection with a shareholder vote to approve an amendment to the Company’s amended and restated memorandum and articles of association (A) to modify the substance or timing of the Company’s obligation to allow redemption in connection with the initial business combination or certain amendments to the Company’s charter prior thereto or to redeem 100% of the public shares if the Company does not complete its initial business combination within the Combination Period, or (B) with respect to any other provision relating to any rights of holders of the Company’s Class A ordinary shares and (iii) waive their rights to liquidating distributions from the Trust Account with respect to any Founder Shares held by them if the Company fails to complete its initial business combination within the Combination Period, although they will be entitled to liquidating distributions from the Trust Account with respect to any public shares they hold if the Company fails to complete its initial business combination within the prescribed time frame.
F-8
The Sponsor has agreed that it will be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has entered into a written letter of intent, confidentiality or similar agreement or Business Combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10.00 per public share and (ii) the actual amount per public share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.00 per public share due to reductions in the value of the Trust Account, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the Trust Account (whether or not such waiver is enforceable) nor will it apply to any claims under the Company’s indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act. However, the Company has not asked the Sponsor to reserve for such indemnification obligations, nor has the Company independently verified whether the Sponsor has sufficient funds to satisfy its indemnity obligations and believes that the Sponsor has no material assets. Therefore, the Company cannot assure you that the Sponsor would be able to satisfy those obligations. None of the Company’s officers or directors will indemnify the Company for claims by third parties including, without limitation, claims by vendors and prospective target businesses. Our independent registered public accounting firm, our principal legal counsel and the underwriters of the offering, have not executed agreements with us waiving such claims to the monies held in the trust account.
The anchor investors will not be entitled to (i) redemption rights with respect to any Founder Shares held by them in connection with the completion of the initial business combination, (ii) redemption rights with respect to any Founder Shares held by them in connection with a shareholder vote to amend the Company’s amended and restated memorandum and articles of association in a manner that would affect the substance or timing of the Company’s obligation to redeem 100% of its Public Shares if the Company has not consummated an initial business combination within the Combination Period or (iii) rights to liquidating distributions from the Trust Account with respect to any Founder Shares held by them if the Company fails to complete the initial business combination within the Combination Period (although they will be entitled to liquidating distributions from the Trust Account with respect to any Public Shares they hold if the Company fails to complete the initial business combination within the Combination Period).
Subject to the requirement that each anchor investor purchase % of the units allocated to it in the IPO, in connection with the closing of the IPO the Sponsor sold founder shares to each anchor investor ( founder shares in the aggregate) at their original purchase price of approximately $ (See Note 6).
Merger
On August 26, 2022, the Company entered into a Business Combination Agreement with Avanseus Holdings Pte. Ltd., a Singapore private company limited by shares (“Avanseus”) (as may be amended and/or restated from time to time, the “Business Combination Agreement”).
The Business Combination Agreement and the transactions contemplated thereby were approved by the boards of directors of each of the Company and Avanseus (other than the PIPE Investment as defined below, which will require further approval of each board of directors), subject to the approval of the Company’s shareholders.
The Business Combination Agreement provides for a series of transactions, pursuant to which, among other things, Avanseus’ shareholders will exchange all of their outstanding Avanseus shares in consideration for newly issued Company Class A Ordinary Shares (the “Share Exchange”), subject to the conditions set forth in the Business Combination Agreement, with Avanseus thereby becoming a wholly owned subsidiary of the Company (the Share Exchange and the other transactions contemplated by the Business Combination Agreement, together, the “Business Combination” or the “Proposed Transaction”). In connection with the Business Combination, the Company will change its corporate name to “Avanseus Holdings Corporation” (“New Avanseus”).
The Business Combination Agreement, prior to the Second BCA Amendment described below in Note 8 – Subsequent Events, provided that the Company will use its commercially reasonable efforts to enter into and consummate subscription agreements in form and substance mutually acceptable to the Company and Avanseus with investors mutually reasonably acceptable to the Company and Avanseus pursuant to which such investors will agree to purchase up to an aggregate of $35 million of (i) the Company’s Series A Convertible Preference Shares, which shares will be convertible into the Company’s Class A Ordinary Shares, and/or (ii) the Company’s Class A Ordinary Shares, with such purchases to be consummated prior to or substantially currently with the closing of the Share Exchange (the “PIPE Investment”).
The Business Combination is expected to close in the first quarter of 2023, following the receipt of the required approval by the Company’s shareholders and the fulfillment of other customary closing conditions.
F-9
On October 3, 2022, the Company and Avanseus entered into a First Amendment to Business Combination Agreement (the “BCA Amendment”) to amend the previously announced Business Combination Agreement dated August 26, 2022. The BCA Amendment amended the Original Business Combination Agreement to (1) add a mutual condition to the obligations of the Company and Avanseus to close the transactions contemplated in the Business Combination Agreement that holders of the Company’s Class A Ordinary Shares redeem an aggregate of at least of such shares so that Avanseus will be the acquiror for accounting purposes at both the minimum and maximum redemption levels required to be disclosed in the Registration Statement on Form S-4 to be filed with the Commission pursuant to the Business Combination Agreement, (2) replace the form of Incentive Equity Plan attached to the Original Business Combination Agreement with an amended Incentive Equity Plan to conform the eligible participants in the plan to the eligible participants listed in the Original Business Combination Agreement, (3) improve the description of the Nasdaq listing process in the Business Combination Agreement for the Company Class A Ordinary Shares to be issued to Avanseus’ shareholders and pursuant to the Incentive Equity Plan and (4) provide that subscription agreements for PIPE investors be mutually reasonably acceptable to Avanseus as well as the Company. On October 5, 2022, the Company filed the Form S-4 with SEC with respect to the Business Combination, and on November 25, 2022, the Company filed Amendment No. 1 to the Form S-4 with the SEC.
Liquidity, Capital Resources and Going Concern
As
of December 31, 2022, the Company had $
The
Company’s liquidity needs prior to the IPO, had been satisfied through a payment from the Sponsor of $
In
order to finance transaction costs in connection with a Business Combination, the Sponsor, initial shareholders, officers, directors
or their affiliates may, but are not obligated to, provide the Company Working Capital Loans, as defined below (see Note 5). As of December 31,
2022, the Company borrowed $
In connection with the Company’s assessment of going concern considerations in accordance with FASB Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that the Company has and will continue to incur significant costs in pursuit of its acquisition plans which raises substantial doubt about the Company’s ability to continue as a going concern. Moreover, the Company may need to obtain additional financing either to complete the initial business combination or because it becomes obligated to redeem a significant number of its Public Shares upon consummation of the initial business combination, in which case the Company may issue additional securities or incur debt in connection with such Business Combination. Subject to compliance with applicable securities laws, the Company would only complete such financing simultaneously with the completion of its initial business combination. If the Company is unable to complete the initial business combination because it does not have sufficient funds available to it, it will be forced to cease operations and liquidate the trust account. In addition, following the initial business combination, if cash on hand is insufficient, the Company may need to obtain additional financing in order to meet its obligations.
In
addition, management has determined that the mandatory liquidation and subsequent dissolution, should the Company be unable to complete
a business combination, raises substantial doubt about the Company’s ability to continue as a going concern. The Company has until
March 15, 2023 to consummate a business combination, unless the Company further extends the period of time to consummate a business
combination by up to four remaining 1-month extensions by depositing an aggregate of $
F-10
Risks and Uncertainties
Management is currently evaluating the impact of the COVID-19 pandemic 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 this financial statement. The financial statement does not include any adjustments that might result from the outcome of this uncertainty.
Additionally, as a result of the military action commenced in February 2022 by the Russian Federation in the country of Ukraine and related economic sanctions, the Company’s ability to consummate a Business Combination, or the operations of a target business with which the Company ultimately consummates a Business Combination, may be materially and adversely affected. Further, the Company’s ability to consummate a transaction may be dependent on the ability to raise equity and debt financing which may be impacted by these events, including as a result of increased market volatility, or decreased market liquidity in third-party financing being unavailable on terms acceptable to the Company or at all. The impact of this action and related sanctions on the world economy and the specific impact on the Company’s financial position, results of operations and/or ability to consummate a Business Combination are not yet determinable. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Note 2—Significant Accounting Policies
Basis of Presentation
The accompanying financial statements are presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).
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 auditor 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 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
The preparation of financial statements in conformity with U.S. GAAP requires 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 financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
F-11
Cash and 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 had cash of $
Investments Held in Trust Account
As of December 31, 2022 and 2021, the assets held in the Trust Account consist of United States Treasury securities. As of December 31, 2021, the Company classifies its United States Treasury securities with original maturities of more than three months but less than one year as held-to-maturity in accordance with FASB ASC Topic 320 “Investments—Debt and Equity Securities.” Held-to-maturity securities are those securities which the Company has the ability and intent to hold until maturity. Held-to-maturity treasury securities are recorded at amortized cost and adjusted for the amortization or accretion of premiums or discounts.
A decline in the market value of held-to-maturity securities below cost that is deemed to be other than temporary, results in an impairment that reduces the carrying costs to such securities’ fair value. The impairment is charged to earnings and a new cost basis for the security is established. To determine whether an impairment is other than temporary, the Company considers whether it has the ability and intent to hold the investment until a market price recovery and considers whether evidence indicating the cost of the investment is recoverable outweighs evidence to the contrary. Evidence considered in this assessment includes the reasons for the impairment, the severity and the duration of the impairment, changes in value subsequent to year-end, forecasted performance of the investee, and the general market condition in the geographic area or industry in which the investee operates.
Premiums and discounts are amortized or accreted over the life of the related held-to-maturity security as an adjustment to yield using the effective-interest method. Such amortization and accretion are included in the “interest income” line item in the statement of operations. Interest income is recognized when earned.
As of December 31, 2022, the Company classifies its United States Treasury securities with original maturities within three months as trading securities in accordance with ASC 320 Topic. Trading securities are presented on the balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these securities is included in gain on Investments Held in Trust Account in the accompanying statement of operations. The estimated fair values of investments held in the Trust Account are determined using available market information and classifies as Level 1 measurements.
During the year ended December 31, 2022 and the period from April 16, 2021 (inception) through December 31, 2021, the Company did not withdraw any of the interest income from the Trust Account to pay its tax obligations.
The carrying value, excluding gross unrealized holding loss and fair value of held to maturity securities on December 31, 2021, are as follows:
Carrying
Value December 31, | Gross Unrealized Gains | Gross Unrealized Losses | Fair
Value | |||||||||||||
| U.S. Treasury Securities | $ | $ | $ | $ | ||||||||||||
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
which, at times may exceed the Federal depository insurance coverage of $
F-12
Offering Costs associated with the Initial Public Offering
The
Company complies with the requirements of the ASC 340-10-S99-1. Offering costs consisted of legal, accounting, underwriting fees, other
costs incurred through the IPO that were directly related to the IPO, and fair value in excess of consideration paid with respect to
the Founder Shares sold to the anchor investors. The Company incurred offering costs amounting to $
Income Taxes
The Company accounts for income taxes under FASB ASC 740, “Income Taxes” (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.
FASB
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. There were
There is currently no taxation imposed on income by the Government of the Cayman Islands. In accordance with federal income tax regulations, income taxes are not levied on the Company, but rather on the individual owners. United States (“U.S.”) taxation would occur on the individual owners if certain tax elections are made by U.S. owners and the Company were treated as a passive foreign investment company. Additionally, U.S. taxation could occur to the Company itself if the Company is engaged in a U.S. trade or business. The Company is not expected to be treated as engaged in a U.S. trade or business at this time.
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. Net loss per ordinary share is computed by dividing net loss by the weighted average number of ordinary shares outstanding for the period. The Company applies the two-class method in calculating earnings per share. Remeasurement adjustments associated with the redeemable Class A ordinary shares is excluded from earnings per share as the redemption value approximates fair value.
The
calculation of diluted loss per share does not consider the effect of the warrants issued in connection with the (i) IPO, and (ii) the
private placement because the warrants are contingently exercisable, and the contingencies have not yet been met. The warrants are exercisable
to purchase
The Company has two classes of shares, which are referred to as Class A ordinary shares and Class B ordinary shares. Earnings and losses are shared pro rata between the two classes of shares. No warrants were exercised during the year ended December 31, 2022 and for the period from April 16, 2021 (inception) through December 31, 2021. As a result, diluted net loss per ordinary share is the same as basic net loss per ordinary share for the period. In connection with the underwriters exercise of their over-allotment option on October 15, 2021, Class B ordinary shares were no longer subject to forfeiture. These shares were excluded from the calculation of weighted average shares outstanding until they were no longer subject to forfeiture. Accretion of the carrying value of Class A ordinary shares to redemption value is excluded from net loss per ordinary share because the redemption value approximates fair value.
F-13
The following table reflects the calculation of basic and diluted net loss per ordinary share:
| For the Year Ended | For the Year Ended | |||||||||||||||
| December 31, 2022 | December 31, 2021 | |||||||||||||||
| Class A ordinary shares subject to possible redemption | Non-redeemable Cass A and Class B ordinary shares | Class A ordinary shares subject to possible redemption | Non-redeemable Cass A and Class B ordinary shares | |||||||||||||
| Basic and diluted net loss per share | ||||||||||||||||
| Numerator: | ||||||||||||||||
| Allocation of net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Denominator: | ||||||||||||||||
| Weighted-average shares outstanding | ||||||||||||||||
| Basic and diluted net loss per share | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
Ordinary Shares Subject to Possible Redemption
The
All of the ordinary shares sold as part of the Units in the IPO contain a redemption feature which allows for the redemption of such Public Shares in connection with the Company’s liquidation, if there is a shareholder vote or tender offer in connection with a business combination and in connection with certain amendments to the Company’s amended and restated memorandum and articles of association. In accordance with SEC and its staff’s guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99, redemption provisions not solely within the control of the Company require ordinary shares subject to redemption to be classified outside of permanent equity. Therefore, all Public Shares have been classified outside of permanent equity.
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable ordinary shares to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable ordinary shares are affected by charges against additional paid in capital and accumulated deficit.
The Company issued to EF Hutton and/or its designees, Class A ordinary shares upon the consummation of the IPO. EF Hutton has agreed (i) to waive its redemption rights with respect to such ordinary shares in connection with the completion of the initial business combination and (ii) to waive its rights to liquidating distributions from the Trust Account with respect to such ordinary shares if the Company fails to complete its initial business combination within the Combination Period (See Note 6).
As of December 31, 2022 and 2021, the ordinary shares subject to possible redemption reflected on the balance sheets are reconciled in the following table:
| Gross proceeds from IPO | $ | |||
| Less: | ||||
| Proceeds allocated to Public Warrants | ( | ) | ||
| Ordinary share issuance costs | ( | ) | ||
| Plus: | ||||
| Remeasurement adjustment of carrying value to redemption value | ||||
| Ordinary shares subject to possible redemption at December 31, 2021 | ||||
| Plus: | ||||
| Accretion of carrying value to redemption value | ||||
| Ordinary shares subject to possible redemption at December 31, 2022 | $ |
F-14
The
Company complies with ASC 718 Compensation — Stock Compensation regarding interest in founder shares acquired by directors of the
Company at prices below fair value. The interest in acquired shares shall vest upon the Company consummating an initial business combination
(the “Vesting Date”). If prior to the Vesting Date, the director ceases to be a director, the interest in the founder shares
will be forfeited. The interest in the founder shares owned by the director (1) may not be sold or transferred, until six months after
the consummation of a Business Combination, and (2) may not be entitled to redemption from the funds held in the Trust Account, or any
liquidating distributions. The Company has
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates the carrying amounts represented in the accompanying balance sheets, primarily due to their short-term nature. The Company applies ASC 820, which establishes a framework for measuring fair value and clarifies the definition of fair value within that framework. ASC 820 defines fair value as an exit price, which is the price that would be received for an asset or paid to transfer a liability in the Company’s principal or most advantageous market in an orderly transaction between market participants on the measurement date. The fair value hierarchy established in ASC 820 generally requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs reflect the assumptions that market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the entity’ own assumptions based on market data and the entity’s judgments about the assumptions that market participants would use in pricing the asset or liability and are to be developed based on the best information available in the circumstances.
Level 1—Assets and liabilities with unadjusted, quoted prices listed on active market exchanges. Inputs to the fair value measurement are observable inputs, such as quoted prices in active markets for identical assets or liabilities.
Level 2—Inputs to the fair value measurement are determined using prices for recently traded assets and liabilities with similar underlying terms, as well as direct or indirect observable inputs, such as interest rates and yield curves that are observable at commonly quoted intervals.
Level 3—Inputs to the fair value measurement are unobservable inputs, such as estimates, assumptions, and valuation techniques when little or no market data exists for the assets or liabilities.
Financial Instruments
The Company will account 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 FASB 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 is conducted at the time of warrant issuance and as of each subsequent annual 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 of 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. The Company accounts for its outstanding warrants as equity-classified.
Recent Accounting Pronouncements
Management does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s financial statements.
F-15
Note 3—Initial Public Offering
Public Units
On
October 15, 2021, the Company sold Units at a price of $ per Unit.
Ten
qualified institutional buyers or institutional accredited investors which are not affiliated with the Company, the Sponsor, the directors
or any member of the Company’s management (the “anchor investors”) purchased
Following
the closing of the IPO on October 15, 2021, $
Public Warrants
Each
warrant entitles the holder to purchase one Class A ordinary share at a price of $
The
warrants will become exercisable on the later of
The Company has not registered the Class A ordinary shares issuable upon exercise of the warrants at this time. However, the Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of the initial business combination, the Company will use its best efforts to file with the SEC a registration statement covering the issuance of the Class A ordinary shares issuable upon exercise of the warrants, to cause such registration statement to become effective within 60 business days following the initial business combination and to maintain a current prospectus relating to those Class A ordinary shares until the warrants expire or are redeemed, as specified in the warrant agreement. If a registration statement covering the issuance of the Class A ordinary shares issuable upon exercise of the warrants is not effective by the 60th business day after the closing of the initial business combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company will has failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis.
F-16
Redemption of warrants. Once the warrants become exercisable, the Company may redeem the outstanding warrants (except as described herein with respect to the Private Placement Warrants):
| ● | in whole and not in part; |
| ● | at
a price of $ |
| ● | upon not less than 30 days’ prior written notice of redemption given after the warrants become exercisable (the “30-day redemption period”) to each warrant holder; and |
| ● | if, and only if, the reported last sale price of the Class A ordinary shares equals or exceeds $18.00 per share (as adjusted for share subdivision, share dividends, rights issuances, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period commencing once the warrants become exercisable and ending 3 business days before the Company sends the notice of redemption to the warrant holders. |
Note 4—Private Placement
Simultaneously
with the closing of the IPO, the Company’s Sponsor purchased an aggregate of
The Sponsor, or its permitted transferees, has the option to exercise the Private Placement Warrants on a cashless basis. The placement warrants (including the Class A ordinary shares issuable upon exercise of the placement warrants) will not be transferable, assignable or salable until 30 days after the completion of the initial business combination, subject to certain exceptions.
The Private Warrants are identical to the Public Warrants except that, so long as the Private Warrants are held by the Sponsor or its permitted transferees, (i) 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 holders until 30 days after the completion of the initial business combination, and (ii) they will be entitled to registration rights.
Note 5—Related Party Transactions
Founder Shares
On April 22, 2021, the Sponsor paid, $, or approximately $ per share, to cover certain offering costs and expenses in consideration for Class B ordinary shares, par value $. Up to Founder Shares were subject to forfeiture by the Sponsor depending on the extent to which the underwriters’ over-allotment option is exercised. The underwriters fully exercised their over-allotment option at the IPO resulting in no Founder Shares being subject to forfeiture.
The Sponsor, directors and executive officers have agreed not to transfer, assign or sell any of their Founder Shares (or Class A ordinary shares issuable upon conversion thereof), subject to certain limited exceptions, until the earlier of (A) six months after the date of the Company’s initial business combination or (B) subsequent to the Company’s initial business combination, (x) if the reported last sale price of the Company’s Class A ordinary shares equals or exceeds US $ per share (as adjusted for share subdivisions, share dividends, right issuances, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the Company’s initial business combination, or (y) the date on which the Company completes a liquidation, merger, share exchange, reorganization or other similar transaction that results in all of our shareholders having the right to exchange their shares for cash, securities or other property.
F-17
In September 2021, the Company received expressions of interest from anchor investors to purchase Units in the IPO. Subject to each anchor investor purchasing % of the Units allocated to it, in connection with the closing of the IPO the Sponsor sold founder shares to each anchor investor ( founder shares in the aggregate) at their original purchase price of approximately $per share. The Company accounted for the fair value in excess of consideration paid with respect to the number of Founder Shares sold to the anchor investors as an offering cost reflected as an increase to additional paid in capital offset by a reduction of the offering proceeds upon completion of the IPO. The fair value of each Founder Share was determined to be $ per share or approximately $(see note 6). Valuation of the Founder Shares was determined using an internal valuation model driven primarily by the initial issuance price of our Class A ordinary shares, an assumed value of $ for the warrants included in the Units, and a % probability of successfully completing an initial business combination.
In accordance with one of the permitted exceptions to the restrictions on transfer of the founder shares, on October 18, 2021, the Sponsor transferred Class B ordinary shares held by it to its Sponsor’s Shareholders, which include all of the Company’s directors and executive officers or companies controlled by them.
Share Based Compensation
In April and May 2021, the Company’s sponsor transferred interests in a total of 55,000 Founder Shares to directors.
The Company has determined the valuation of the Class B ordinary shares as of the Grant Dates. The valuation resulted in a fair value of approximately $ per share as of the Grant Dates, or an aggregate of $ for the shares. As vesting of Founder Shares to directors is contingent upon the closing of an initial business combination, a performance condition is not probable of occurring at December 31, 2022 and 2021. Upon consummation of an initial business combination the Company will recognize $ in compensation expense.
Due from related party
Since
April 16, 2021 (inception), related parties have paid for certain offering costs and expenses on behalf of the Company. At December 31,
2021 an excess of $
Promissory Note—Related Party
On
May 6, 2021, the Sponsor agreed to loan the Company up to $
Working Capital Loans
In
order to finance transaction costs in connection with an intended 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 the initial business combination, the Company may repay the Working Capital Loans out
of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans may be repaid only out of funds held
outside the Trust Account. In the event that the initial business combination does not close, the Company may use a portion of the working
capital held outside the Trust Account to repay the Working Capital Loans but no proceeds from the Trust Account would be used to repay
the Working Capital Loans. Up to $
As
of December 31, 2022 and 2021, the Company had $
F-18
Office Space, Secretarial and Administrative Services
Commencing
on the date that the Company’s securities are first listed on the NASDAQ through the earlier of consummation of the initial business
combination and the liquidation, the Company has agreed to pay the Sponsor a total of $
Note 6—Commitments & Contingencies
Registration Rights
The holders of the Founder Shares, the representative shares, Placement Warrants (including component securities contained therein) and warrants (including securities contained therein) that may be issued upon conversion of Working Capital Loans, any Class A ordinary shares issuable upon the exercise of the Placement Warrants and any Class A ordinary shares and warrants (and underlying Class A ordinary share) that may be issued upon exercise of the warrants as part of the Working Capital Loans and Class A ordinary share issuable upon conversion of the Founder Shares, will be entitled to registration rights pursuant to a registration rights agreement signed on October 12, 2021, requiring the Company to register such securities for resale (in the case of the Founder Shares, only after conversion to the Company’s Class A ordinary shares). The holders of the majority of these securities are entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the Company’s completion of the initial business combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. The registration rights agreement does not contain liquidated damages or other cash settlement provisions resulting from delays in registering the Company’s securities. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriters Agreement
The Company granted the underwriters a 45-day option from the date of the IPO to purchase up to an additional units to cover over-allotments, if any. At the IPO, the underwriters fully exercised their option to purchase the additional units.
The
underwriters were paid a cash underwriting discount of one percent (1%) of the gross proceeds of the IPO, or $. Additionally,
the underwriters will be entitled to a deferred underwriting discount of
Anchor Investors
The Sponsor entered into an agreement with ten strategic investors (each referred to as an “anchor investor”) for the purchase of Founder Shares each at the same price the Sponsor paid ($ per share). The anchor investors purchased Units in the IPO. The Company can make no assurance that the anchor investor will retain their shares, if any, upon the completion of the Company’s Business Combination. As a result of the Founder Shares and Private Placement Warrants that the anchor investor may hold, it may have different interests with respect to a vote on an initial business combination than other public shareholders (see Note 5).
The Company accounted for the fair value in excess of consideration paid with respect to the number of Founder Shares sold to the anchor investors as an offering cost reflected as an increase to additional paid in capital offset by a reduction of the offering proceeds upon completion of the IPO. The fair value of each Founder Share was determined to be $ per share or approximately $ in the aggregate for all Founder Shares transferred to the anchor investors (see note 5). Valuation of the Founder Shares was determined using an internal valuation model and classified as a Level 3 valuation. The valuation was driven primarily by the initial issuance price of the Public Units, an assumed value of $ for the warrants included in the Units, and a % probability of successfully completing an initial business combination.
F-19
Representative Shares
The Company issued to EF Hutton and/or its designees (the “Representatives”) Class A ordinary shares upon the consummation of the IPO. EF Hutton has agreed not to transfer, assign or sell any such ordinary shares until the completion of the initial business combination. In addition, EF Hutton has agreed (i) to waive its redemption rights with respect to such ordinary shares in connection with the completion of the initial business combination and (ii) to waive its rights to liquidating distributions from the Trust Account with respect to such ordinary shares if the Company fails to complete its initial business combination within the Combination Period.
The ordinary shares have been deemed compensation by FINRA and are therefore subject to a lock-up for a period of days immediately following the commencement of sales of the registration statement of which the IPO forms a part pursuant to Rule 5110(e)(1) of FINRA’s NASD Conduct Rules. Pursuant to FINRA Rule 5110(e)(1), these securities may not be sold, transferred, assigned, pledged or hypothecated or the subject of any hedging, short sale, derivative, put or call transaction that would result in the economic disposition of the securities by any person for a period of 180 days immediately following the effective date of the registration statement of which the IPO forms a part, nor may they be sold, transferred, assigned, pledged or hypothecated for a period of 180 days immediately following the commencement of sales of the IPO except to any underwriter and selected dealer participating in the offering and their bona fide officers or partners, registered persons or affiliates or as otherwise permitted under Rule 5110(e)(2).
The
Company accounted for the fair value of the Class A ordinary shares issued to the Representatives as an offering cost reflected as an
increase to additional paid in capital offset by a reduction of the offering proceeds upon completion of the IPO. The fair value of each
Class A ordinary share was determined to be $ per share or approximately $. Valuation of the Class A ordinary shares was
determined using an internal valuation model and classified as a Level 3 valuation. The valuation was driven primarily by the initial
issuance price of the Public Units, and an assumed value of approximately $
Note 7—Shareholders’ Deficit
Preference shares—The Company is authorized to issue preference shares with a par value of $and with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. As of December 31, 2022 and 2021, there were preference shares issued or outstanding.
Class A ordinary shares—The Company is authorized to issue Class A ordinary shares with a par value of $per share. As of December 31, 2022 and 2021, there were Class A ordinary shares issued or outstanding, excluding ordinary shares subject to possible redemption.
Class
B ordinary shares—The Company is authorized to issue Class B ordinary shares with a par value of $per share.
Holders of Class A ordinary shares and holders of 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. Unless specified in the Company’s amended and restated memorandum and articles of association, or as required by applicable provisions of the Companies Act or applicable stock exchange rules, the affirmative vote of a majority of the Company’s ordinary shares that are voted is required to approve any such matter voted on by its shareholders. Holders of Class A ordinary shares and holders of 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. Unless specified in the Company’s amended and restated memorandum and articles of association, or as required by applicable provisions of the Companies Act or applicable share exchange rules, the affirmative vote of a majority of the Company’s ordinary shares that are voted is required to approve any such matter voted on by the Company’s shareholders.
The Class B ordinary shares and will automatically convert into Class A ordinary shares (which such Class A ordinary shares delivered upon conversion will not have redemption rights or be entitled to liquidating distributions from the trust account if the Company does not consummate an initial business combination) at the time of the initial business combination or earlier at the option of the holders thereof at a ratio such that the number of Class A ordinary shares issuable upon conversion of all Founder Shares will equal, in the aggregate, on an as-converted basis, % of the sum of (i) the total number of ordinary shares issued and outstanding upon the completion of the IPO, plus (ii) the total number of Class A ordinary shares issued, deemed issued or issuable upon conversion or exercise of any equity-linked securities or rights issued or deemed issued by the Company in connection with or in relation to the consummation of the initial business combination, excluding any Class A ordinary shares or equity-linked securities exercisable for or convertible into Class A ordinary shares issued, deemed issued or to be issued to any seller in the initial business combination and any Placement Warrants issued to the Sponsor, its affiliates or any member of the Company’s management team upon conversion of Working Capital Loans, unless the holders of a majority of the then-outstanding Class B ordinary shares agree to waive such adjustment with respect to such issuance or deemed issuance at the time thereof. In no event will the Class B ordinary shares convert into Class A ordinary shares at a rate of less than one-to-one.
F-20
Note 8—Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the financial statements were issued. Based on this review, other than disclosed below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.
Business Combination Agreement Amendment.
On February 14, 2023, Avanseus and the Company entered into a Second Amendment to Business Combination Agreement (the “Second BCA Amendment”) to further amend the Original Business Combination Agreement. The Second BCA Amendment further amends the Original Business Combination Agreement to:
| (1) | Amend the definition of Acquiror Transaction Expenses to exclude expenses that are expressly deferred, waived or converted to equity by written agreement of the parties to which they are owed on terms satisfactory to Avanseus; |
| (2) | Delete provisions related to a PIPE offering by the Company and provisions related to a pool of one million the Company’s Class A Ordinary Shares to be issued for purposes mutually acceptable to the Company and Avanseus; |
| (3) | Delete
a closing condition that required the combined companies to have at least $ |
| (4) | Amend
the minimum cash closing condition to reduce the amount of cash that the combined companies
must have at |
| (5) | Add a new closing condition that the Company enter into one or more definitive financing agreements with terms mutually acceptable to the Company and Avanseus with one or more post-closing financing providers acceptable to both the Company and Avanseus, which may include the issuance of up to one millions the Company’s Class A ordinary shares as origination fees to the post-closing financing providers; |
| (6) | Extend the Agreement End Date, which is the date that either the Company or Avanseus may terminate the Business Combination Agreement without cause (provided that the terminating party is not itself in material breach of the Business Combination Agreement), from February 22, 2023 to July 15, 2023; and |
| (7) |
Charter Amendment.
In an extraordinary general meeting held on January 13, 2023, shareholders approved the First Amendment to the Amended and Restated Memorandum and Articles of Association (the “Charter Amendment”), changing the structure and cost of the Company’s right to extend the date (the “Termination Date”) by which the Company must either (i) consummate a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination involving the Company and one or more businesses (a “business combination”), or else (ii) cease operations if the Company fails to complete such business combination, and redeem or repurchase 100% of the public shares included as part of the units sold in the IPO.
The
Charter Amendment allows the Company to extend the Termination Date by up to six (6) one-month extensions to July 15, 2023 (each
of which is refered to as an “Extension”, and such later date, the “Extended Deadline”)
provided that if any Extended Deadline ends on a day that is not a business day, such Extended Deadline will be automatically extended
to the next succeeding business day. To obtain each 1-month extension, the Company, the sponsor or any of their affiliates or designees
must deposit into the Company’s Trust Account with Continental by the deadline applicable prior to the extension $0.0575 per share
for each of the public shares outstanding as of the deadline prior to the extension (after giving effect to redemptions in connection
with the approval of the Charter Amendment by the Company’s shareholders with respect to the first such extension). In connection
with the approval of the Charter Amendment on January 13, 2023,
F-21
Extension of Deadline to Complete the Company’s Initial Business Combination.
The
Company has exercised its right to extend the deadline to complete its initial business combination twice to date. On January 17,
2023, the Company deposited an aggregate of $
Debt Capital Financing for Extension Funds and Working Capital
On
January 8, 2023, the Company’s board of directors authorized the Company to raise up to $
On
January 26, 2023, the Company’s board of directors authorized the Company to raise up to $
In
January and February 2023, one of the Company’s officers paid $
F-22
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
| March 13, 2023 | Fat Projects Acquisition Corp | |
| By: | /s/ Tristan Lo | |
| Name: | Tristan Lo | |
| Title: | Co-Chief Executive Officer | |
| (Principal Executive Officer) | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Name | Position | Date | ||
| /s/ Tristan Lo | Co-Chief Executive Officer and Chairman and Director | March 13, 2023 | ||
| Tristan Lo | (Principal Executive Officer) | |||
| /s/ David Andrada | Co-Chief Executive Officer and Chief Financial Officer and Director | March 13, 2023 | ||
| David Andrada | (and Principal Financial and Accounting Officer) | |||
| /s/ Nils Michaelis | President and Chief Operating Officer and Head of Mergers & Acquisitions and Director | March 13, 2023 | ||
| Nils Michaelis | ||||
| /s/ Abel Martins Alexandre | Director | March 13, 2023 | ||
| Abel Martins Alexandre | ||||
| /s/ Tina Wyer | Director | March 13, 2023 | ||
| Tina Wyer | ||||
| /s/ Stanton Sugarman | Director | March 13, 2023 | ||
| Stanton Sugarman | ||||
| /s/ Samir Addamine | Director | March 13, 2023 | ||
| Samir Addamine | ||||
| /s/ Alex Bono | Director | March 13, 2023 | ||
| Alex Bono |
49
Exhibit 4.5
DESCRIPTION OF THE REGISTRANT’S SECURITIES
REGISTERED PURSUANT TO SECTION1 12 OF THE
SECURITIES EXCHANGE ACT OF 1934
The following summary of the registered securities of Fat Projects Acquisition Corp does not purport to be complete and is qualified in its entirety by reference to our memorandum and articles of association, as amended, (“Articles”) which are incorporated by reference as an exhibit to the Annual Report on Form 10-K of which this Exhibit is a part, and certain provisions of Cayman Islands law. Unless the context requires otherwise, all references to the “Company,” “we,” “our,” and “us” in this Exhibit refer to Fat Projects Acquisition Corp.
Pursuant to our Articles, our authorized share capital consists of 300,000,000 Class A Shares, $0.0001 par value (“Class A Shares”), 30,000,000 Class B ordinary shares, $0.0001 par value (the “Class B Shares” and together with the Class A Shares, the “Ordinary Shares”), and 1,000,000 preference shares, $0.0001 par value. The following description summarizes the material terms of our shares. Because it is only a summary, it may not contain all the information that is important to you.
Units
In our initial public offering, which closed on October 15, 2021 (our “IPO”), we issued units with an offering price of $10.00 per unit, and each unit consisted of one Class A Share (as defined below) and one redeemable warrant. Only whole warrants are exercisable. Each whole warrant entitles the holder to purchase one Class A Share for an initial exercise price of $11.50 per share, subject to adjustment. We issued a total of 11,500,000 units in our IPO which includes units issuable upon the full exercise of the underwriters’ over-allotment option.
On December 2, 2021, the Company issued a press release, announcing that the holders of the units may elect to separately trade the Class A Shares and the warrants comprising the units commencing on December 3, 2021.
Ordinary Shares
On January 13, 2023, we redeemed 6,058,262 of our Class A Shares in connection with the approval by our shareholders of an amendment to our Articles that amended how we can obtain extensions to the deadline to complete our initial business combination. As of February 28, 2023, there were 5,556,738 of our Class A Shares, $0.0001 par value per share and 2,875,000 of the Company’s Class B Shares, $0.0001 par value per share issued and outstanding.
Ordinary shareholders of record are entitled to one vote for each share held on all matters to be voted on by shareholders. Except as described below, holders of Class A Shares and holders of Class B Shares will vote together as a single class on all matters submitted to a vote of our shareholders except as required by law. Unless specified in our Articles, or as required by applicable provisions of the Cayman Companies Act, as amended, (the “Companies Act”) or applicable share exchange rules, an Ordinary Resolution (as defined in our Articles) is required to approve any such matter voted on by our shareholders. Approval of certain actions will require a Special Resolution (as defined in our Articles); such actions include amending our Articles, reducing our share capital, continuations out and approving a statutory merger or consolidation with another company. There is no cumulative voting with respect to the appointment of directors, with the result that the holders of more than 50% of the shares voted for the appointment of directors can appoint all of the directors. Our shareholders are entitled to receive ratable dividends when, as and if declared by the board of directors out of funds legally available therefor. Prior to our initial business combination, only holders of our Class B Shares will have the right to vote on the appointment of directors. Holders of our Class A Shares will not be entitled to vote on the appointment of directors during such time. In addition, prior to the completion of an initial business combination, holders of a majority of our Class B Shares may remove a member of the board of directors for any reason by Ordinary Resolution. The provisions of our Articles governing the appointment or removal of directors prior to our initial business combination may only be amended by a Special Resolution passed by not less than 90% of our Ordinary Shares who attend and vote at our general meeting. Additionally, in a vote to continue the Company in a jurisdiction outside the Cayman Islands (which requires a Special Resolution), holders of our Class B Shares will have ten votes for every Class B Share and holders of our Class A Shares will have one vote for every Class A Share.
Because our Articles authorizes the issuance of up to 300,000,000 Class A Shares, if we were to enter into a business combination, we may (depending on the terms of such a business combination) be required to increase the number of Class A Shares that we will be authorized to issue at the same time as our shareholders vote on the business combination to the extent we seek shareholder approval in connection with our initial business combination.
In accordance with the Nasdaq corporate governance requirements, we are not required to hold an annual general meeting until one year after our first fiscal year end following our listing on Nasdaq. There is no requirement under the Companies Act for us to hold annual or extraordinary general meetings to appoint directors. We may not hold an annual general meeting to appoint new directors prior to the consummation of our initial business combination. Prior to the completion of an initial business combination, any vacancy on the board of directors may be filled by a nominee chosen by holders of a majority of our Class B Shares by Ordinary Resolution. In addition, prior to the completion of an initial business combination, holders of a majority of our Class B Shares may remove a member of the board of directors for any reason by Ordinary Resolution.
We will provide our public shareholders with the opportunity to redeem all or a portion of their Class A Shares upon the completion of our initial business combination at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account calculated as of two business days prior to the consummation of our initial business combination, including interest earned on the funds held in the trust account and not previously released to us to pay our income taxes, if any, divided by the number of the then-outstanding Class A shares, subject to the limitations described herein. The amount in the trust account was initially $10.00 per Class A Share. The per share amount we will distribute to investors who properly redeem their shares will not be reduced by the deferred underwriting commissions we will pay to the underwriters. The redemption rights will include the requirement that a beneficial owner must identify itself in order to validly redeem its shares. Our sponsor, officers and directors have entered into a letter agreement with us, pursuant to which they have agreed to waive their redemption rights with respect to any Class B Shares and Class A Shares held by them in connection with (i) the completion of our initial business combination and (ii) a shareholder vote to approve an amendment to our Articles (A) that would modify the substance or timing of our obligation to provide holders of our Class A Shares the right to have their shares redeemed in connection with our initial business combination or to redeem 100% of our Class A Shares if we do not complete our initial business combination by the Termination Date (as defined below) or (B) with respect to any other provision relating to the rights of holders of our Class A Shares. Unlike many blank check companies that hold shareholder votes and conduct proxy solicitations in conjunction with their initial business combinations and provide for related redemptions of Class A Shares for cash upon the completion of such initial business combinations even when a vote is not required by law, if a shareholder vote is not required by applicable law or share exchange listing requirements and we do not decide to hold a shareholder vote for business or other reasons, we will, pursuant to our Articles, conduct the redemptions pursuant to the tender offer rules of the SEC, and file tender offer documents with the SEC prior to completing our initial business combination. Our Articles requires these tender offer documents to contain substantially the same financial and other information about the initial business combination and the redemption rights as is required under the SEC’s proxy rules. If, however, a shareholder approval of the transaction is required by applicable law or share exchange listing requirements, or we decide to obtain shareholder approval for business or other reasons, we will, like many blank check companies, offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If we seek shareholder approval, we will complete our initial business combination only if we obtain the approval of an Ordinary Resolution. However, the participation of our sponsor, officers, directors, advisors or their affiliates in privately-negotiated transactions, if any, could result in the approval of our initial business combination even if a majority of our public shareholders vote, or indicate their intention to vote, against such initial business combination. For purposes of seeking approval of the majority of our issued and outstanding Ordinary Shares, non-votes will have no effect on the approval of our initial business combination once a quorum is obtained. Our Articles require that at least five clear days’ notice will be given of any general meeting.
If we seek shareholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, then, pursuant to our Articles, 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 United States Exchange Act (“Exchange Act”)), will be restricted from redeeming its shares in excess of an amount equal to 15% of the Class A shares issued in our IPO (“Excess Shares”), without our prior consent. However, we would not be restricting our shareholders’ ability to vote all of their shares (including Excess Shares) for or against our initial business combination. Our shareholders’ inability to redeem the Excess Shares will reduce their influence over our ability to complete our initial business combination, and such shareholders could suffer a material loss in their investment if they sell such Excess Shares on the open market. Additionally, such shareholders will not receive redemption distributions with respect to the Excess Shares if we complete our initial business combination. And, as a result, such shareholders will continue to hold that number of shares exceeding 15% and, would be required to sell their shares in open market transactions in order to dispose such shares, potentially at a loss.
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If we seek shareholder approval, we will complete our initial business combination only if we obtain the approval of an Ordinary Resolution. In such case, our initial shareholders have agreed to vote their Class B Shares and Class A Shares in favor of our initial business combination. As a result, with only 5,441,738 of our Class A Shares remaining outstanding, we would not need the favorable votes of any of our Class A Shares in addition to the 2,875,000 Class B Shares if only the minimum number of shares representing a quorum are voted, and we would need only 1,225,870 of our Class A Shares in addition to the 2,875,000 Class B Shares or 22.5% of the Class A Shares to be voted if all issued and outstanding shares are voted (assuming the 115,000 representative shares are voted in favor of the initial business combination), in favor of an initial business combination in order to have our initial business combination approved. Additionally, each public shareholder may elect to redeem their Class A Shares irrespective of whether they vote for or against the proposed transaction or vote at all.
Pursuant to our Articles if we have not consummated an initial business combination by the Termination Date, we will (i) cease all operations except for the purpose of winding up; (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Class A 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 us to pay our income taxes, if any (less up to $100,000 of interest to pay dissolution expenses) divided by the number of the then-outstanding Class A Shares, which redemption will completely extinguish public shareholders’ rights as shareholders (including the right to receive further liquidation distributions, if any); and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining shareholders and our board of directors, liquidate and dissolve, subject, in each case to our obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law. Our sponsor, officers and directors have entered into a letter agreement with us, pursuant to which they have agreed to waive their rights to liquidating distributions from the trust account with respect to any Class B Shares they hold if we fail to consummate an initial business combination by the Termination Date (although they will be entitled to liquidating distributions from the trust account with respect to any Class A Shares they hold if we fail to complete our initial business combination within the prescribed time frame). Our Articles provide that, if we wind up for any other reason prior to the consummation of our initial business combination, we will follow the foregoing procedures with respect to the liquidation of the trust account as promptly as reasonably possible but not more than ten business days thereafter, subject to applicable Cayman Islands law.
Our Articles originally provided that the “Termination Date” would be the date that was 12 months after the closing of the IPO, which was October 15, 2022 (or 15 months if we filed a proxy statement, registration statement or similar filing for an initial business combination within 12 months from the consummation of the IPO but did not completed the initial business combination within such 12-month period, or up to 21 months if we extend the period of time to consummate a business combination, or as extended by the Company’s shareholders in accordance with our Articles). We filed a registration statement on Form S-4 with respect to our initial business combination on October 5, 2022, which extended the Termination Date to January 15, 2023. On January 13, 2023, our shareholders approved an amendment to our Articles that gave up the right to obtain up to six additional 1-month extensions to the Termination Date provided we, our sponsor or affiliates or designees of we or our sponsor deposit $0.0575 per outstanding Class A Share into our trust account by the then applicable Termination Date (each such 1-month period, an “Extension Period”). In connection with the amendment, we redeemed 6,058,262 of our Class A Shares, so there are now 5,556,738 of our Class A Shares outstanding, and the cost of 1-month extensions is approximately $312,900. As of the date of this Annual Report, we have acquired two extensions, and the current Termination Date is March 15, 2023. We may obtain up to four more 1-month extensions extending the Termination Date to up to July 15, 2023. In addition, we may request that our shareholders approve further extensions of the Termination Date.
In the event of a liquidation, dissolution or winding up of the company after a business combination, our shareholders are entitled to share ratably in all assets remaining available for distribution to them after payment of liabilities and after provision is made for each class of shares, if any, having preference over the Ordinary Shares. Our shareholders have no preemptive or other subscription rights. There are no sinking fund provisions applicable to the Ordinary Shares, except that we will provide our public shareholders with the opportunity to redeem their Class A Shares for cash at a per share price 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 us to pay our income taxes, if any, divided by the number of the then-outstanding Class A Shares, upon the completion of our initial business combination, subject to the limitations described herein.
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Class B Shares
The Class B Shares are, except as described below, identical to the Class A Shares included in the units sold in the IPO, and holders of Class B Shares have the same shareholder rights as public shareholders, except that: (a) prior to our initial business combination, only holders of the Class B Shares have the right to vote on the appointment of directors and holders of a majority of our Class B Shares may remove a member of the board of directors for any reason by Ordinary Resolution; (b) the Class B Shares are subject to certain transfer restrictions, as described in more detail below; (c) our sponsor, officers and directors have entered into a letter agreement with us, pursuant to which they have agreed to (i) waive their redemption rights with respect to their Class B Shares in connection with the completion of our initial business combination, (ii) waive their redemption rights with respect to their Class B Shares and Class A Shares in connection with a shareholder vote to approve an amendment to our Articles (A) that would modify the substance or timing of our obligation to provide holders of our Class A Shares the right to have their shares redeemed in connection with our initial business combination or to redeem 100% of our Class A Shares if we do not complete our initial business combination by the Termination Date or (B) with respect to any other provision relating to the rights of holders of our Class A Shares; and (iii) waive their rights to liquidating distributions from the trust account with respect to any Class B Shares they hold if we fail to consummate an initial business combination by the Termination Date (although they will be entitled to liquidating distributions from the trust account with respect to any Class A Shares they hold if we fail to complete our initial business combination within the prescribed time frame); (d) the Class B Shares will automatically convert into our Class A Shares at the time of our initial business combination or earlier at the option of the holders thereof as described herein; (e) the Class B Shares are entitled to registration rights; and (f) in a vote to continue the company in a jurisdiction outside the Cayman Islands (which requires a Special Resolution), holders of our Class B Shares will have ten votes for every Class B Share and holders of our Class A Shares will have one vote for every Class A Share. If we seek shareholder approval, we will complete our initial business combination only if we obtain the approval of an Ordinary Resolution. In such case, our initial shareholders have agreed to vote their Class B Shares and Class A Shares in favor of our initial business combination.
The Class B Shares are will automatically convert into Class A Shares (which such Class A Shares delivered upon conversion will not have redemption rights or be entitled to liquidating distributions from the trust account if we do not consummate an initial business combination) at the time of our initial business combination or earlier at the option of the holders thereof at a ratio such that the number of Class A Shares issuable upon conversion of all Class B Shares will equal, in the aggregate, on an as-converted basis, 20% of the sum of (i) the total number of Ordinary Shares issued and outstanding upon the completion of the IPO, plus (ii) the total number of Class A Shares issued, deemed issued or issuable upon conversion or exercise of any equity-linked securities or rights issued or deemed issued by the company in connection with or in relation to the consummation of the initial business combination, excluding any Class A Shares or equity-linked securities exercisable for or convertible into Class A Shares issued, deemed issued or to be issued to any seller in the initial business combination and any placement warrants issued to our sponsor, its affiliates or any member of our management team upon conversion of working capital loans and the representative shares, unless the holders of a majority of the then-outstanding Class B Shares agree to waive such adjustment with respect to such issuance or deemed issuance at the time thereof. In no event will the Class B Shares convert into Class A Shares at a rate of less than one-to-one.
Except as described herein, our sponsor, directors and executive officers have agreed not to transfer, assign or sell any of their Class B Shares until earliest of (A) six months after the completion of our initial business combination and (B) subsequent to our initial business combination, (x) if the closing price of our Class A Shares equals or exceeds $12.00 per share (as adjusted for share subdivisions, share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after our initial business combination, or (y) the date on which we complete a liquidation, merger, share exchange or other similar transaction that results in all of our public shareholders having the right to exchange their Ordinary Shares for cash, securities or other property. We refer to such transfer restrictions as the lock-up. Any permitted transferees would be subject to the same restrictions and other agreements of our sponsor, directors and executive officers with respect to any Class B Shares.
Prior to our initial business combination, only holders of our Class B Shares will have the right to vote on the appointment of directors. Holders of our Class A Shares will not be entitled to vote on the appointment of directors during such time. In addition, prior to the completion of an initial business combination, holders of a majority of our Class B Shares may remove a member of the board of directors for any reason by Ordinary Resolution. These provisions of our Articles may only be amended by a Special Resolution passed by not less than 90% of our Ordinary Shares who attend and vote at our general meeting. With respect to any other matter submitted to a vote of our shareholders, including any vote in connection with our initial business combination, except as required by law, holders of our Class B Shares and holders of our Class A Shares will vote together as a single class, with each share entitling the holder to one vote.
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Register of Members
Under Cayman Islands law, we must keep a register of members and there will be entered therein:
| ☐ | the names and addresses of the members with a statement of the shares held by each member and the statement shall: |
| ● | distinguish each share by its number (so long as the share has a number); |
| ● | confirm the amount paid, or agreed to be considered as paid on the shares of each members; |
| ● | confirm the number and category of shares held by each member; and |
| ● | confirm whether each relevant category of shares held by a member carries voting rights under the Articles, and if so, whether such voting rights are conditional; |
| ☐ | whether there are voting rights attached to the shares in issue; |
| ☐ | the date on which the name of any person was entered on the register as a member; and |
| ☐ | the date on which any person ceased to be a member. |
Under Cayman Islands law, the register of members of our company is prima facie evidence of the matters set out therein (i.e., the register of members will raise a presumption of fact on the matters referred to above unless rebutted) and a member registered in the register of members will be deemed as a matter of Cayman Islands law to have legal title to the shares as set against its name in the register of members. However, there are certain limited circumstances where an application may be made to a Cayman Islands court for a determination on whether the register of members reflects the correct legal position. Further, the Cayman Islands court has the power to order that the register of members maintained by a company should be rectified where it considers that the register of members does not reflect the correct legal position. If an application for an order for rectification of the register of members were made in respect of our Ordinary Shares, then the validity of such shares may be subject to re-examination by a Cayman Islands court.
Preference Shares
Our Articles authorizes 1,000,000 preference shares and provides that preference shares may be issued from time to time in one or more series. Our board of directors are authorized to fix the voting rights, if any, designations, powers, preferences, the relative, participating, optional or other special rights and any qualifications, limitations and restrictions thereof, applicable to the shares of each series. Our board of directors will be able to, without shareholder approval, issue preference shares with voting and other rights that could adversely affect the voting power and other rights of the holders of the Ordinary Shares and could have anti-takeover effects. The ability of our board of directors to issue preference shares without shareholder approval could have the effect of delaying, deferring or preventing a change of control of us or the removal of existing management. We have no preference shares issued and outstanding at the date hereof. Although we do not currently intend to issue any preference shares, we cannot assure you that we will not do so in the future.
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Redeemable Warrants
Public Shareholders’ Warrants
Each whole warrant entitles the registered holder to purchase one of our Class A Shares at a price of $11.50 per share, subject to adjustment as discussed below, at any time commencing on the later of 12 months from the closing of the IPO and the date of the consummation of our initial business combination. Pursuant to the warrant agreement, a warrant holder may exercise its warrants only for a whole number of Class A Shares. This means that only a whole warrant may be exercised at any given time by a warrant holder. No fractional warrants will be issued upon separation of the units and only whole warrants will trade.
The warrants will expire five years after the completion of our initial business combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.
We will not be obligated to deliver any Class A Shares pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the United States Securities Act (“Securities Act”) with respect to the Class A Shares underlying the warrants is then effective and a prospectus relating thereto is current, subject to our satisfying our obligations described below with respect to registration. No warrant will be exercisable and we will not be obligated to issue Class A Shares upon exercise of a warrant unless the Class A Shares issuable upon such warrant exercise have been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants. In the event that the conditions in the two immediately preceding sentences are not satisfied with respect to a warrant, the holder of such warrant will not be entitled to exercise such warrant and such warrant may have no value and expire worthless. In no event will we be required to net cash settle any warrant. In the event that a registration statement is not effective for the exercised warrants, the purchaser of a unit containing such warrant will have paid the full purchase price for the unit solely for the Class A Share underlying such unit.
We have not registered the Class A Shares issuable upon exercise of the warrants. However, we have agreed that we will use our best efforts to file with the SEC a registration statement covering the Class A Shares issuable upon exercise of the warrants, to cause such registration statement to become effective and to maintain a current prospectus relating to those Class A Shares until the warrants expire or are redeemed, as specified in the warrant agreement. If a registration statement covering the Class A Shares issuable upon exercise of the warrants is not effective by the 60th business day after the closing of our initial business combination, warrant holders may, until such time as there is an effective registration statement and during any period when we will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis.
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Once the warrants become exercisable, we may call the warrants for redemption:
| ☐ | in whole and not in part; |
| ☐ | at a price of $0.01 per warrant; |
| ☐ | upon not less than 30 days’ prior written notice of redemption given after the warrants become exercisable (the “30-day redemption period”) to each warrant holder; and |
| ☐ | if, and only if, the reported last sale price of the Class A Shares equals or exceeds $18.00 per share (as adjusted for share subdivisions, share dividends, rights issuances, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period commencing once the warrants become exercisable and ending three business days before we send the notice of redemption to the warrant holders. |
If and when the warrants become redeemable by us, we may not exercise our redemption right if the issuance of ordinary shares upon exercise of the warrants is not exempt from registration or qualification under applicable state blue sky laws or we are unable to effect such registration or qualification. We will use our best efforts to register or qualify such Ordinary Shares under the blue sky laws of the state of residence in those states in which the warrants were offered by us in our IPO.
We have established the last of the redemption criterion discussed above to prevent a redemption call unless there is at the time of the call a significant premium to the warrant exercise price. If the foregoing conditions are satisfied and we issue a notice of redemption of the warrants, each warrant holder will be entitled to exercise its warrant prior to the scheduled redemption date. However, the price of the Class A Share may fall below the $18.00 redemption trigger price (as adjusted for share subdivisions, share dividends, reorganizations, recapitalizations and the like) as well as the $11.50 warrant exercise price after the redemption notice is issued.
If we call the warrants for redemption as described above, our management will have the option to require any holder that wishes to exercise its warrant to do so on a “cashless basis.” In determining whether to require all holders to exercise their warrants on a “cashless basis,” our management will consider, among other factors, our cash position, the number of warrants that are outstanding and the dilutive effect on our shareholders of issuing the maximum number of Class A Shares issuable upon the exercise of our warrants. If our management takes advantage of this option, all holders of warrants would pay the exercise price by surrendering their warrants for that number of Class A Shares equal to the quotient obtained by dividing (x) the product of the number of Class A 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” for this purpose shall mean the average reported last sale price of the Class A 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. If our management takes advantage of this option, the notice of redemption will contain the information necessary to calculate the number of Class A Shares to be received upon exercise of the warrants, including the “fair market value” in such case. Requiring a cashless exercise in this manner will reduce the number of shares to be issued and thereby lessen the dilutive effect of a warrant redemption. We believe this feature is an attractive option to us if we do not need the cash from the exercise of the warrants after our initial business combination. If we call our warrants for redemption and our management does not take advantage of this option, our sponsor and its permitted transferees would still be entitled to exercise their placement warrants for cash or on a cashless basis using the same formula described above that other warrant holders would have been required to use had all warrant holders been required to exercise their warrants on a cashless basis, as described in more detail below.
A holder of a warrant may notify us in writing in the event it elects to be subject to a requirement that such holder will not have the right to exercise such warrant, to the extent that after giving effect to such exercise, such person (together with such person’s affiliates), to the warrant agent’s actual knowledge, would beneficially own in excess of 4.9% or 9.8% (or such other amount as a holder may specify) of the Class A Shares outstanding immediately after giving effect to such exercise.
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If the number of outstanding Class A Shares is increased by a share dividend payable in Class A Shares, or by a split-up of Class A Shares or other similar event, then, on the effective date of such share dividend, split-up or similar event, the number of Class A Shares issuable on exercise of each whole warrant will be increased in proportion to such increase in the outstanding Class A Shares.
In addition, if we, at any time while the warrants are outstanding and unexpired, pay a dividend or make a distribution in cash, securities or other assets to the holders of Class A Shares on account of such Class A Shares (or other shares into which the warrants are convertible), other than (a) as described above, (b) certain ordinary cash dividends, (c) to satisfy the redemption rights of the holders of Class A Shares in connection with a proposed initial business combination, (d) to satisfy the redemption rights of the holders of Class A Shares in connection with a shareholder vote to amend our Articles (i) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or certain amendments to our Articles prior thereto or to redeem 100% of our Class A Shares if we do not complete our initial business combination by the Termination Date or (ii) with respect to any other provision relating to shareholders’ rights or pre-initial business combination activity, or (e) in connection with the redemption of our Class A Shares upon our failure to complete our initial business combination, then the warrant exercise price will be decreased, effective immediately after the effective date of such event, by the amount of cash and/or the fair market value of any securities or other assets paid on each Class A Share in respect of such event.
If the number of our issued and outstanding Class A Shares is decreased by a consolidation, combination, or re-designation of Class A Shares or other similar event, then, on the effective date of such consolidation, combination, re-designation or similar event, the number of Class A Shares issuable on exercise of each warrant will be decreased in proportion to such decrease in outstanding Class A Shares.
Whenever the number of Class A Shares purchasable upon the exercise of the warrants is adjusted, as described above, the warrant exercise price will be adjusted by multiplying the warrant exercise price immediately prior to such adjustment by a fraction (x) the numerator of which will be the number of Class A Shares purchasable upon the exercise of the warrants immediately prior to such adjustment, and (y) the denominator of which will be the number of Class A Shares so purchasable immediately thereafter.
The warrants were issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and us. You should review a copy of the warrant agreement, which is filed as an exhibit to this annual report, for a complete description of the terms and conditions applicable to the warrants. The warrant agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any mistake, including to conform the provisions of the warrant agreement to the description of the terms of the warrants and the warrant agreement, or defective provision, but requires the approval by the holders of at least a majority of the then outstanding public warrants to make any change that adversely affects the interests of the registered holders of public warrants.
In addition, if (x) we issue additional Class A Shares or equity-linked securities for capital raising purposes in connection with the closing of our initial business combination at a Newly Issued Price of less than $9.20 per Class A Share (with such issue price or effective issue price to be determined in good faith by our board of directors and, in the case of any such issuance to our sponsor or its affiliates, without taking into account any Class B Shares held by our sponsor or such affiliates, as applicable, prior to such issuance), (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 our initial business combination on the date of the consummation of our initial business combination (net of redemptions), and (z) the Market Value is below $9.20 per share, then the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the greater of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price described above will be adjusted (to the nearest cent) to be equal to 180% of the greater of the Market Value and the Newly Issued Price.
The warrants may be exercised upon surrender of the warrant certificate on or prior to the expiration date at the offices of the warrant agent, with the exercise form on the reverse side of the warrant certificate completed and executed as indicated, accompanied by full payment of the exercise price (or on a cashless basis, if applicable), by certified or official bank check payable to us, for the number of warrants being exercised. The warrant holders do not have the rights or privileges of holders of Class A Shares and any voting rights until they exercise their warrants and receive Class A Shares. After the issuance of Class A Shares upon exercise of the warrants, each holder will be entitled to one (1) vote for each share held of record on all matters to be voted on by shareholders.
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No fractional shares will be issued upon exercise of the warrants. If, upon exercise of the warrants, a holder would be entitled to receive a fractional interest in a share, we will, upon exercise, round down to the nearest whole number of Class A Shares to be issued to the warrant holder.
We have agreed that, subject to applicable law, any action, proceeding or claim against us arising out of or relating in any way to the warrant agreement will be brought and enforced in the courts of the State of New York or the United States District Court for the Southern District of New York, and we irrevocably submit to such jurisdiction, which jurisdiction will be the exclusive forum for any such action, proceeding or claim. This provision applies to claims under the Securities Act but does not apply to claims under the Exchange Act or any claim for which the federal district courts of the United States of America are the sole and exclusive forum.
Placement warrants
Except as described below, the placement warrants have terms and provisions that are identical to those of the warrants included in the units in the IPO, including as to exercise price, exercisability and exercise period. The placement warrants (including the Class A Shares issuable upon exercise of the placement warrants) will not be transferable, assignable or salable until the completion of our initial business combination (except, among other limited exceptions as described in the Registration Statement).
In addition, holders of our placement warrants are entitled to certain registration rights.
In order to finance transaction costs in connection with an intended initial business combination, our sponsor or an affiliate of our sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. Up to $1,500,000 of such loans may be convertible into warrants, at a price of $1.00 per warrant at the option of the lender, upon consummation of our initial business combination. The warrants would be identical to the placement warrants.
Our sponsor has agreed not to transfer, assign or sell any of the placement warrants (including the Class A Shares issuable upon exercise of any of these warrants) until the date we complete our initial business combination, except that, among other limited exceptions as described in the IPO Registration Statement.
Dividends
We have not paid any cash dividends on our Ordinary Shares to date and do not intend to pay cash dividends prior to the completion of an initial business combination. The payment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial conditions subsequent to completion of an initial business combination. The payment of any cash dividends subsequent to an initial business combination will be within the discretion of our board of directors at such time. If we increase or decrease the size of the offering we will effect a share dividend or a share contribution back to capital or other appropriate mechanism, as applicable, with respect to our Class B Shares immediately prior to the consummation of the offering in such amount as to maintain the ownership of our initial shareholders at 20.0% of our issued and outstanding Ordinary Shares (excluding the placement warrants and the underlying securities any warrants that may be issued upon conversion the loans and the underlying securities and assuming they do not purchase any units in the IPO and the representative shares) upon the consummation of the IPO. Further, if we incur any indebtedness, our ability to declare dividends may be limited by restrictive covenants we may agree to in connection therewith.
Our Transfer Agent and Warrant Agent
The transfer agent for our Ordinary Shares and warrant agent for our warrants is Continental Stock Transfer & Trust Company. We have agreed to indemnify Continental Stock Transfer & Trust Company in its roles as transfer agent and warrant agent, its agents and each of its shareholders, directors, officers and employees against all claims and losses that may arise out of acts performed or omitted for its activities in that capacity, except for any liability due to any gross negligence, willful misconduct or bad faith of the indemnified person or entity.
Certain Differences in Corporate Law
Cayman Islands companies are governed by the Companies Act. The Companies Act is modeled on English law but does not follow recent English law statutory enactments, and differs from laws applicable to United States corporations and their shareholders. Set forth below is a summary of the material differences between the provisions of the Companies Act applicable to us and the laws applicable to companies incorporated in the United States and their shareholders.
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Mergers and Similar Arrangements. In certain circumstances, the Companies Act allows for mergers or consolidations between two Cayman Islands companies, or between a Cayman Islands exempted company and a company incorporated in another jurisdiction (provided that is facilitated by the laws of that other jurisdiction).
Where the merger or consolidation is between two Cayman Islands companies, the directors of each company must approve a written plan of merger or consolidation containing certain prescribed information. That plan of merger or consolidation must then be authorized by either (a) a special resolution (usually a majority of at least two-thirds in value of the voting shares voted at a general meeting) of the shareholders of each company; or (b) such other authorization, if any, as may be specified in such constituent company’s articles of association. No shareholder resolution is required for a merger between a parent company (i.e., a company that holds issued shares that together represent 90% of the votes at a general meeting of the subsidiary company) and its subsidiary company. The consent of each holder of a fixed or floating security interest of a constituent company must be obtained, unless the court waives such requirement. If the Cayman Islands Registrar of Companies is satisfied that the requirements of the Companies Act (which includes certain other formalities) have been complied with, the Registrar of Companies will register the plan of merger or consolidation.
Where the merger or consolidation involves a foreign company, the procedure is similar, save that with respect to the foreign company, the directors of the Cayman Islands exempted company are required to make a declaration to the effect that, having made due enquiry, they are of the opinion that the requirements set out below have been met: (i) that the merger or consolidation is permitted or not prohibited by the constitutional documents of the foreign company and by the laws of the jurisdiction in which the foreign company is incorporated, and that those laws and any requirements of those constitutional documents have been or will be complied with; (ii) that no petition or other similar proceeding has been filed and remains outstanding or order made or resolution adopted to wind up or liquidate the foreign company in any jurisdictions; (iii) that no receiver, trustee, administrator or other similar person has been appointed in any jurisdiction and is acting in respect of the foreign company, its affairs or its property or any part thereof; and (iv) that no scheme, order, compromise or other similar arrangement has been entered into or made in any jurisdiction whereby the rights of creditors of the foreign company are and continue to be suspended or restricted.
Where the surviving company is the Cayman Islands exempted company, the directors of the Cayman Islands exempted company are further required to make a declaration to the effect that, having made due enquiry, they are of the opinion that the requirements set out below have been met: (i) that the foreign company is able to pay its debts as they fall due and that the merger or consolidation is bona fide and not intended to defraud unsecured creditors of the foreign company; (ii) that in respect of the transfer of any security interest granted by the foreign company to the surviving or consolidated company (a) consent or approval to the transfer has been obtained, released or waived; (b) the transfer is permitted by and has been approved in accordance with the constitutional documents of the foreign company; and (c) the laws of the jurisdiction of the foreign company with respect to the transfer have been or will be complied with; (iii) that the foreign company will, upon the merger or consolidation becoming effective, cease to be incorporated, registered or exist under the laws of the relevant foreign jurisdiction; and (iv) that there is no other reason why it would be against the public interest to permit the merger or consolidation.
Where the above procedures are adopted, the Companies Act provides for a right of dissenting shareholders to be paid a payment of the fair value of his shares upon their dissenting to the merger or consolidation if they follow a prescribed procedure. In essence, that procedure is as follows: (a) the shareholder must give his written objection to the merger or consolidation to the constituent company before the vote on the merger or consolidation, including a statement that the shareholder proposes to demand payment for his shares if the merger or consolidation is authorized by the vote; (b) within 20 days following the date on which the merger or consolidation is approved by the shareholders, the constituent company must give written notice to each shareholder who made a written objection; (c) a shareholder must within 20 days following receipt of such notice from the constituent company, give the constituent company a written notice of his intention to dissent including, among other details, a demand for payment of the fair value of his shares; (d) within seven days following the date of the expiration of the period set out in paragraph (b) above or seven days following the date on which the plan of merger or consolidation is filed, whichever is later, the constituent company, the surviving company or the consolidated company must make a written offer to each dissenting shareholder to purchase his shares at a price that the company determines is the fair value and if the company and the shareholder agree on the price within 30 days following the date on which the offer was made, the company must pay the shareholder such amount; and (e) if the company and the shareholder fail to agree a price within such 30 day period, within 20 days following the date on which such 30 day period expires, the company (and any dissenting shareholder) must file a petition with the Cayman Islands Grand Court to determine the fair value and such petition must be accompanied by a list of the names and addresses of the dissenting shareholders with whom agreements as to the fair value of their shares have not been reached by the company. At the hearing of that petition, the court has the power to determine the fair value of the shares together with a fair rate of interest, if any, to be paid by the company upon the amount determined to be the fair value. Any dissenting shareholder whose name appears on the list filed by the company may participate fully in all proceedings until the determination of fair value is reached. These rights of a dissenting shareholder are not available in certain circumstances, for example, to dissenters holding shares of any class in respect of which an open market exists on a recognized stock exchange or recognized interdealer quotation system at the relevant date or where the consideration for such shares to be contributed are shares of any company listed on a national securities exchange or shares of the surviving or consolidated company.
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Moreover, Cayman Islands law has separate statutory provisions that facilitate the reconstruction or amalgamation of companies in certain circumstances. Such schemes of arrangement will generally be more suited for complex mergers or other transactions involving widely held companies, commonly referred to in the Cayman Islands as a “Scheme of arrangement” which may be tantamount to a merger. In the event that a merger was sought pursuant to a scheme of arrangement (the procedures for which are more rigorous and take longer to complete than the procedures typically required to consummate a merger in the United States), the arrangement in question must be approved by a majority in number of each class of shareholders and creditors with whom the arrangement is to be made and who must in addition represent three-fourths in value of each such class of shareholders or creditors, as the case may be, that are present and voting either in person or by proxy at a general meeting, or meeting summoned for that purpose. The convening of the meetings and subsequently the terms of the arrangement must be sanctioned by the Grand Court of the Cayman Islands. While a dissenting shareholder would have the right to express to the court the view that the transaction should not be approved, the court can be expected to approve the arrangement if it satisfies itself that:
| ☐ | we are not proposing to act illegally or beyond the scope of our corporate authority and the statutory provisions as to majority vote have been complied with; |
| ☐ | the shareholders have been fairly represented at the meeting in question; |
| ☐ | the arrangement is such as a businessman would reasonably approve; and |
| ☐ | the arrangement is not one that would more properly be sanctioned under some other provision of the Companies Act or that would amount to a “fraud on the minority.” |
If a scheme of arrangement or takeover offer (as described below) is approved, any dissenting shareholder would have no rights comparable to appraisal rights (providing rights to receive payment in cash for the judicially determined value of the shares), which would otherwise ordinarily be available to dissenting shareholders of United States corporations.
Squeeze-out Provisions. When a takeover offer is made and accepted by holders of 90% of the shares to whom the offer relates within four months, the offeror may, within a two-month period, require the holders of the remaining shares to transfer such shares on the terms of the offer. An objection can be made to the Grand Court of the Cayman Islands, but this is unlikely to succeed unless there is evidence of fraud, bad faith, collusion or inequitable treatment of the shareholders.
Further, transactions similar to a merger, reconstruction and/or an amalgamation may in some circumstances be achieved through means other than these statutory provisions, such as a share capital exchange, asset acquisition or control, or through contractual arrangements of an operating business.
Shareholders’ Suits. Harney Westwood & Riegels (“Harneys”), our Cayman Islands legal counsel, is not aware of any reported class action having been brought in a Cayman Islands court. Derivative actions have been brought in the Cayman Islands courts, and the Cayman Islands courts have confirmed the availability for such actions. In most cases, we will be the proper plaintiff in any claim based on a breach of duty owed to us, and a claim against (for example) our officers or directors usually may not be brought by a shareholder. However, based both on Cayman Islands authorities and on English authorities, which would in all likelihood be of persuasive authority and be applied by a court in the Cayman Islands, exceptions to the foregoing principle apply in circumstances in which:
| ☐ | a company is acting, or proposing to act, illegally or beyond the scope of its authority; |
| ☐ | the act complained of, although not beyond the scope of the authority, could be effected if duly authorized by more than the number of votes which have actually been obtained; or |
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| ☐ | those who control the company are perpetrating a “fraud on the minority.” |
| ☐ | A shareholder may have a direct right of action against us where the individual rights of that shareholder have been infringed or are about to be infringed. |
Enforcement of Civil Liabilities. The Cayman Islands has a different body of securities laws as compared to the United States and provides less protection to investors. Additionally, Cayman Islands companies may not have standing to sue before the federal courts of the United States.
We have been advised by Harneys, our Cayman Islands legal counsel, that the courts of the Cayman Islands are unlikely (i) to recognize or enforce against us judgments of courts of the United States predicated upon the civil liability provisions of the federal securities laws of the United States or any state; and (ii) in original actions brought in the Cayman Islands, to impose liabilities against us predicated upon the civil liability provisions of the federal securities laws of the United States or any state, so far as the liabilities imposed by those provisions are penal in nature. In those circumstances, although there is no statutory enforcement in the Cayman Islands of judgments obtained in the United States, the courts of the Cayman Islands will recognize and enforce a foreign money judgment of a foreign court of competent jurisdiction without retrial on the merits based on the principle that a judgment of a competent foreign court imposes upon the judgment debtor an obligation to pay the sum for which judgment has been given provided certain conditions are met. For a foreign judgment to be enforced in the Cayman Islands, such judgment must be final and conclusive and for a liquidated sum, and must not be in respect of taxes or a fine or penalty, inconsistent with a Cayman Islands judgment in respect of the same matter, impeachable on the grounds of fraud or obtained in a manner, and or be of a kind the enforcement of which is contrary to natural justice or the public policy of the Cayman Islands (awards of punitive or multiple damages may well be held to be contrary to public policy). A Cayman Islands Court may stay enforcement proceedings if concurrent proceedings are being brought elsewhere.
Special Considerations for Exempted Companies. We are an exempted company with limited liability under the Companies Act. The Companies Act distinguishes between ordinary resident companies and exempted companies. Any company that is registered in the Cayman Islands but conducts business mainly outside of the Cayman Islands may apply to be registered as an exempted company. The requirements for an exempted company are essentially the same as for an ordinary company except for certain exemptions and privileges including those listed below:
| ☐ | annual reporting requirements are minimal and consist mainly of a statement that the company has conducted its operations mainly outside of the Cayman Islands and has compiled with the provisions of the Companies Act; |
| ☐ | an exempted company’s register of members is not open to inspection and can be kept outside of the Cayman Islands; |
| ☐ | an exempted company does not have to hold an annual general meeting; |
| ☐ | an exempted company may issue shares with no par value; |
| ☐ | an exempted company may obtain an undertaking against the imposition of any future taxation (such undertakings are usually given for 30 years in the first instance); |
| ☐ | an exempted company may register by way of continuation in another jurisdiction and be deregistered in the Cayman Islands; |
| ☐ | an exempted company may register as a limited duration company; and |
| ☐ | an exempted company may register as a segregated portfolio company. |
“Limited liability” means that the liability of each shareholder is limited to the amount if any unpaid on the shares held by such shareholder in the company (except in exceptional circumstances, such as involving fraud, the establishment of an agency relationship or an illegal or improper purpose or other circumstances in which a court may be prepared to pierce or lift the corporate veil).
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Our Articles.
Our Articles contain provisions designed to provide certain rights and protections relating to the IPO that will apply to us until the completion of our initial business combination. These provisions cannot be amended without a special resolution under Cayman Islands law. As a matter of Cayman Islands law, a resolution is deemed to be a special resolution where it has been adopted by the affirmative vote of at least a two-thirds majority (or such higher threshold as specified in the company’s memorandum and articles of association) of the votes cast by the holders of the issued shares present in person or represented by proxy at a general meeting of the company and entitled to vote on such matter or a resolution approved in writing by all of the holders of the issued shares entitled to vote on such matter. Other than as described above, our Articles provide that special resolutions must be approved either by at least two-thirds (or such higher threshold as specified in our Articles) of the shares voted at a general meeting of the company (i.e., the lowest threshold permissible under Cayman Islands law), or by a unanimous written resolution of all of our shareholders.
Our initial shareholders, who will collectively beneficially own 19.84% of our Ordinary Shares upon the closing of the IPO (assuming they do not purchase any units in the IPO), will participate in any vote to amend our Articles and will have the discretion to vote in any manner they choose. Specifically, our Articles provide, among other things, that:
| ☐ | if we have not consummated an initial business combination by the Termination Date, we will (i) cease all operations except for the purpose of winding up; (ii) as promptly as reasonably possible but no more than ten business days thereafter, redeem the Class A 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 us to pay our income taxes that were paid by us or are payable by us, if any (less up to $100,000 of interest to pay dissolution expenses) divided by the number of the then-outstanding Class A Shares, which redemption will completely extinguish public shareholders’ rights as shareholders (including the right to receive further liquidation distributions, if any); and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining shareholders and our board of directors, liquidate and dissolve, subject, in each case to our obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law; |
| ☐ | prior to or in connection with our initial business combination, we may not issue additional securities that would entitle the holders thereof to (i) receive funds from the trust account or (ii) vote as a class with our Class A Shares (a) on our initial business combination or on any other proposal presented to shareholders prior to or in connection with the completion of an initial business combination or (b) to approve an amendment to our Articles to (x) extend the Termination Date or (y) amend the foregoing provisions; |
| ☐ | although we do not intend to enter into a business combination with a target business that is affiliated with our sponsor, officers or directors, we are not prohibited from doing so. In the event we enter into such a transaction, we, or a committee of independent directors, will obtain an opinion from independent investment banking firm or another independent entity that commonly renders valuation opinions that such a business combination is fair to our company from a financial point of view; |
| ☐ | if a shareholder vote on our initial business combination is not required by applicable law or share exchange listing requirements and we do not decide to hold a shareholder vote for business or other reasons, we will offer to redeem our Class A Shares pursuant to Rule 13e-4 and Regulation 14E of the Exchange Act, and will file tender offer documents with the SEC prior to completing our initial business combination, which contain substantially the same financial and other information about our initial business combination and the redemption rights as is required under Regulation 14A of the Exchange Act; |
| ☐ | so long as our securities are then listed on Nasdaq, our initial business combination must occur with one or more target businesses that together have an aggregate fair market value of at least 80% of the value of the net assets held in the trust account (excluding the amount of deferred underwriting commissions held in trust and taxes payable on the income earned on the trust account) at the time of signing a definitive agreement in connection with our initial business combination; |
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| ☐ | if our shareholders approve an amendment to our Articles (A) that would modify the substance or timing of our obligation to provide holders of our Class A Shares the right to have their shares redeemed in connection with our initial business combination or to redeem 100% of our Class A Shares if we do not complete our initial business combination by the Termination Date or (B) with respect to any other provision relating to the rights of holders of our Class A Shares, we will provide our public shareholders with the opportunity to redeem all or a portion of their Ordinary Shares upon such approval 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 us to pay our income taxes, if any, divided by the number of the then-outstanding Class A Shares, subject to the limitations described herein; and |
| ☐ | we will not effectuate our initial business combination solely with another blank check company or a similar company with nominal operations. |
In addition, our Articles provide that under no circumstances will we redeem our Class A shares in an amount that would cause our net tangible assets to be less than $5,000,001.
The Companies Act permits a company incorporated in the Cayman Islands to amend its memorandum and articles of association with the approval of a special resolution. A company’s articles of association may specify that the approval of a higher majority is required but, provided the approval of the required majority is obtained, any Cayman Islands exempted company may amend its memorandum and articles of association regardless of whether its memorandum and articles of association provide otherwise. Accordingly, although we could amend any of the provisions relating to our proposed offering, structure and business plan which are contained in our Articles, we view all of these provisions as binding obligations to our shareholders and neither we, nor our officers or directors, will take any action to amend or waive any of these provisions unless we provide dissenting public shareholders with the opportunity to redeem their Class A Shares.
Anti-Money Laundering, Counter-Terrorist Financing, Prevention of Proliferation Financing and Financial Sanctions Compliance —Cayman Islands
If any person resident in the Cayman Islands knows or suspects, or has reasonable grounds for knowing or suspecting, that another person is engaged in criminal conduct, is involved with terrorism or terrorist property or proliferation financing or is the business combination partner of a financial sanction and the information for that knowledge or suspicion came to their attention in the course of business in the regulated sector or other trade, profession, business or employment, the person will be required to report such knowledge or suspicion to (i) the Financial Reporting Authority of the Cayman Islands, pursuant to the Proceeds of Crime Act (As Revised) of the Cayman Islands if the disclosure relates to criminal conduct, money laundering, or proliferation financing or is the business combination partner of a financial sanction; or (ii) a police officer of the rank of constable or higher, or the Financial Reporting Authority, pursuant to the Terrorism Act (As Revised) of the Cayman Islands, if the disclosure relates to involvement with terrorism or terrorist financing and property. Such a report will not be treated as a breach of confidence or of any restriction upon the disclosure of information imposed by any enactment or otherwise. We reserve the right to refuse to make any payment to a shareholder if our directors or officers suspect or are advised that the payment to such shareholder might result in a breach of applicable anti-money laundering, counter-terrorist financing, prevention of proliferation financing and financial sanctions or other laws or regulations by any person in any relevant jurisdiction, or if such refusal is considered necessary or appropriate to ensure our compliance with any such laws or regulations in any applicable jurisdiction.
Data Protection—Cayman Islands
We have certain duties under the Data Protection Act, 2017 (As Revised) of the Cayman Islands (the “DPA”) based on internationally accepted principles of data privacy.
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Privacy Notice
Introduction
This privacy notice puts our shareholders on notice that through your investment in the company you will provide us with certain personal information which constitutes personal data within the meaning of the DPA (“personal data”). In the following discussion, the “company” refers to us and our affiliates and/or delegates, except where the context requires otherwise.
Investor Data
We will collect, use, disclose, retain and secure personal data to the extent reasonably required only and within the parameters that could be reasonably expected during the normal course of business. We will only process, disclose, transfer or retain personal data to the extent legitimately required to conduct our activities of on an ongoing basis or to comply with legal and regulatory obligations to which we are subject. We will only transfer personal data in accordance with the requirements of the DPA, and will apply appropriate technical and organizational information security measures designed to protect against unauthorized or unlawful processing of the personal data and against the accidental loss, destruction or damage to the personal data.
In our use of this personal data, we will be characterized as a “data controller” for the purposes of the DPA, while our affiliates and service providers who may receive this personal data from us in the conduct of our activities may either act as our “data processors” for the purposes of the DPA or may process personal information for their own lawful purposes in connection with services provided to us.
We may also obtain personal data from other public sources. Personal data includes, without limitation, the following information relating to a shareholder and/or any individuals connected with a shareholder as an investor: name, residential address, email address, contact details, corporate contact information, signature, nationality, place of birth, date of birth, tax identification, credit history, correspondence records, passport number, bank account details, source of funds details and details relating to the shareholder’s investment activity.
Who this Affects
If you are a natural person, this will affect you directly. If you are a corporate investor (including, for these purposes, legal arrangements such as trusts or exempted limited partnerships) that provides us with personal data on individuals connected to you for any reason in relation your investment in the company, this will be relevant for those individuals and you should transmit the content of this Privacy Notice to such individuals or otherwise advise them of its content.
How the Company May Use a Shareholder’s Personal Data
The company, as the data controller, may collect, store and use personal data for lawful purposes, including, in particular:
| a) | where this is necessary for the performance of our rights and obligations under any purchase agreements; |
| b) | where this is necessary for compliance with a legal and regulatory obligation to which we are subject (such as compliance with anti-money laundering and FATCA/CRS requirements); and/or |
| c) | where this is necessary for the purposes of our legitimate interests and such interests are not overridden by your interests, fundamental rights or freedoms. |
Should we wish to use personal data for other specific purposes (including, if applicable, any purpose that requires your consent), we will contact you.
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Why We May Transfer Your Personal Data
In certain circumstances we may be legally obliged to share personal data and other information with respect to your shareholding with the relevant regulatory authorities such as the Cayman Islands Monetary Authority or the Tax Information Authority. They, in turn, may exchange this information with foreign authorities, including tax authorities.
We anticipate disclosing personal data to persons who provide services to us and their respective affiliates (which may include certain entities located outside the United States, the Cayman Islands or the European Economic Area), who will process your personal data on our behalf.
The Data Protection Measures We Take
Any transfer of personal data by us or our duly authorized affiliates and/or delegates outside of the Cayman Islands shall be in accordance with the requirements of the DPA.
We and our duly authorized affiliates and/or delegates shall apply appropriate technical and organizational information security measures designed to protect against unauthorized or unlawful processing of personal data, and against accidental loss or destruction of, or damage to, personal data.
We shall notify you of any personal data breach that is reasonably likely to result in a risk to your interests, fundamental rights or freedoms or those data subjects to whom the relevant personal data relates.
Rights of Individual Data Subjects
| ☐ | Individual data subjects have certain data protection rights, including the right to: |
| ☐ | be informed about the purposes for which your personal data are processed; |
| ☐ | access your personal data; |
| ☐ | stop direct marketing; |
| ☐ | restrict the processing of your personal data; |
| ☐ | have incomplete or inaccurate personal data corrected; |
| ☐ | ask us to stop processing your personal data; |
| ☐ | be informed of a personal data breach (unless the breach is unlikely to be prejudicial to you); |
| ☐ | complain to the Data Protection Ombudsman; and |
| ☐ | require us to delete your personal data in some limited circumstances. |
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Certain Anti-takeover Provisions of our Articles
Our authorized but unissued Class A Shares and preference shares will be available for future issuances without shareholder approval and could be utilized for a variety of corporate purposes, including future offerings to raise additional capital, acquisitions and employee benefit plans. The existence of authorized but unissued and unreserved Class A Shares and preference shares could render more difficult or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise.
Valuation of Class Rights; Class B Shares Consent Right
For so long as any Class B Shares remain issued and outstanding, we may not, without the prior vote or written consent of the holders of a majority of the Class B Shares then outstanding, voting separately as a single class, amend, alter or repeal any provision our Articles, whether by merger, consolidation or otherwise, if such amendment, alteration or repeal would alter or change the powers, preferences or relative, participating, optional or other or rights of the Class B Shares. Any action required or permitted to be taken at any meeting of the holders of Class B Shares may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of a majority of the outstanding Class B Shares.
Securities Eligible for Future Sale
Immediately after the consummation of the IPO we had 14,490,000 Ordinary Shares outstanding (after the exercise in full of the underwriters’ over-allotment option). Of these shares, 11,500,000 sold in the IPO were freely tradable without restriction or further registration under the Securities Act, except for any shares purchased by one of our affiliates within the meaning of Rule 144 under the Securities Act. We redeemed 6,058,262 of our Class A Shares in connection with the approval by our shareholders of an amendment to our Articles that amended how we can obtain extensions to the deadline to complete our initial business combination leaving 5,441,738 Class A Shares outstanding. There are also 115,000 representative shares outstanding, which are Class A Shares. All of the remaining 2,875,000 Class B Shares are restricted securities under Rule 144, in that they were issued in private transactions not involving a public offering, and the Class B Shares are subject to transfer restrictions as set forth in the IPO Registration Statement.
Pursuant to Rule 144, a person who has beneficially owned restricted ordinary shares or warrants for at least six months would be entitled to sell their securities provided that (i) such person is not deemed to have been one of our affiliates at the time of, or at any time during the three months preceding, a sale and (ii) we are subject to the Exchange Act periodic reporting requirements for at least three months before the sale and have filed all required reports under Section 13 or 15(d) of the Exchange Act during the 18 months (or such shorter period as we were required to file reports) preceding the sale.
Persons who have beneficially owned our restricted ordinary shares or warrants for at least six months but who are our affiliates at the time of, or at any time during the three months preceding, a sale, would be subject to additional restrictions, by which such person would be entitled to sell within any three-month period only a number of securities that does not exceed the greater of:
| ● | 1% of the total number of Class A Shares then outstanding, which equals 55,567 shares as of the date of this annual report; or |
| ● | the average weekly reported trading volume of the ordinary shares during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale. |
Sales by our affiliates under Rule 144 are also limited by manner of sale provisions and notice requirements and to the availability of current public information about us.
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Restrictions on the Use of Rule 144 by Shell Companies or Former Shell Companies
Rule 144 is not available for the resale of securities initially issued by shell companies (other than business combination related shell companies) or issuers that have been at any time previously a shell company. However, Rule 144 also includes an important exception to this prohibition if the following conditions are met:
| ● | the issuer of the securities that was formerly a shell company has ceased to be a shell company; |
| ● | the issuer of the securities is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act; |
| ● | the issuer of the securities has filed all Exchange Act reports and materials required to be filed, as applicable, during the preceding 18 months (or such shorter period that the issuer was required to file such reports and materials), other than Current Reports on Form 8-K; and |
| ● | at least one year has elapsed from the time that the issuer filed current Form 10 type information with the SEC reflecting its status as an entity that is not a shell company. |
As a result, our initial shareholders will be able to sell their Class B Shares and placement warrant (including component securities contained therein), as applicable, pursuant to Rule 144 without registration one year after we have completed our initial business combination.
Registration Rights
The holders of the Class B Shares, the representative shares, placement warrant (including component securities contained therein) and warrants (including securities contained therein) that may be issued upon conversion of working capital loans, any Class A Shares issuable upon the exercise of the placement warrants and any Class A Shares and warrants (and underlying Class A Shares) that may be issued upon exercise of the warrants as part of the working capital loans and Class A Shares issuable upon conversion of the Class B Shares, will be entitled to registration rights pursuant to a registration rights agreement to be signed prior to or on the effective date of the IPO, requiring us to register such securities for resale (in the case of the Class B Shares, only after conversion to our Class A Share). The holders of the majority of these securities are entitled to make up to three demands, excluding short form demands, that we register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to our completion of our initial business combination and rights to require us to register for resale such securities pursuant to Rule 415 under the Securities Act. The registration rights agreement does not contain liquidated damages or other cash settlement provisions resulting from delays in registering our securities. We will bear the expenses incurred in connection with the filing of any such registration statements. We will bear the expenses incurred in connection with the filing of any such registration statements.
Listing of Securities
Our units, Class A Shares and warrants are listed on the Nasdaq Global Market under the symbols “FATPU,” “FATP”, and “FATPW,” respectively.
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Exhibit 31.1
CERTIFICATIONS
I, Tristan Lo, certify that:
| 1. | I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2022 of Fat Projects Acquisition Corp; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | (Paragraph omitted pursuant to SEC Release Nos. 33-8238/34-47986 and 33-8392/34-49313); |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: March 13, 2023 | By: | /s/ Tristan Lo |
| Tristan Lo | ||
| Co-Chief Executive Officer | ||
| (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATIONS
I, David Andrada, certify that:
| 1. | I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2022 of Fat Projects Acquisition Corp; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | (Paragraph omitted pursuant to SEC Release Nos. 33-8238/34-47986 and 33-8392/34-49313); |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: March 13, 2023 | By: | /s/ David Andrada |
| David Andrada | ||
| Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADDED BY
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Fat Projects Acquisition Corp (the “Company”) on Form 10-K for the year ended December 31, 2022, as filed with the Securities and Exchange Commission (the “Report”), I, Tristan Lo, Co-Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as added by §906 of the Sarbanes-Oxley Act of 2002, that:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | To my knowledge, the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period covered by the Report. |
| Date: March 13, 2023 | By: | /s/ Tristan Lo |
| Tristan Lo | ||
| Co-Chief Executive Officer | ||
| (Principal Executive Officer) |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADDED BY
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Fat Projects Acquisition Corp (the “Company”) on Form 10-K for the year ended December 31, 2022, as filed with the Securities and Exchange Commission (the “Report”), I, David Andrada, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as added by §906 of the Sarbanes-Oxley Act of 2002, that:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | To my knowledge, the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period covered by the Report. |
| Date: March 13, 2023 | By: | /s/ David Andrada |
| David Andrada | ||
| Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) |
BALANCE SHEETS (Parenthetical) - $ / shares |
Dec. 31, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Preferred stock, par value, (per share) | $ 0.0001 | $ 0.0001 |
| Preferred stock, shares authorized | 1,000,000 | 1,000,000 |
| Preferred stock, shares issued | 0 | 0 |
| Preferred stock, shares outstanding | 0 | 0 |
| Common stock subject to redemption | ||
| Temporary equity, shares issued | 11,500,000 | 11,500,000 |
| Temporary equity, redemption price per share | $ 10.15 | $ 10.00 |
| Temporary equity, shares outstanding | 11,500,000 | 11,500,000 |
| Common Class A [Member] | ||
| Common shares, par value, (per share) | $ 0.0001 | $ 0.0001 |
| Common shares, shares authorized | 300,000,000 | 300,000,000 |
| Common shares, shares issued | 115,000 | 115,000 |
| Common shares, shares outstanding | 115,000 | 115,000 |
| Common Class B [Member] | ||
| Common shares, par value, (per share) | $ 0.0001 | $ 0.0001 |
| Common shares, shares authorized | 30,000,000 | 30,000,000 |
| Common shares, shares issued | 2,875,000 | 2,875,000 |
| Common shares, shares outstanding | 2,875,000 | 2,875,000 |
STATEMENTS OF OPERATIONS - USD ($) |
9 Months Ended | 12 Months Ended |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2022 |
|
| Income Statement [Abstract] | ||
| Formation and operating costs | $ 241,834 | $ 2,488,328 |
| Loss from operations | (241,834) | (2,488,328) |
| Other income: | ||
| Interest earned on investments held in Trust Account | 10,543 | 1,752,167 |
| Total other income | 10,543 | 1,752,167 |
| Net loss | $ (231,291) | $ (736,161) |
| Weighted average shares outstanding, Class A ordinary share subject to possible redemption | 3,450,000 | 11,500,000 |
| Basic and diluted net loss per share, Class A ordinary share subject to possible redemption | $ (0.04) | $ (0.05) |
| Weighted average shares outstanding, Non-redeemable Class A and Class B ordinary share | 2,589,308 | 2,990,000 |
| Basic and diluted net loss per share, Non-redeemable Class A and Class B ordinary share | $ (0.04) | $ (0.05) |
Organization, Business Operation and Going Concern |
12 Months Ended |
|---|---|
Dec. 31, 2022 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Organization, Business Operation and Going Concern | Note 1—Organization, Business Operation and Going Concern
Fat Projects Acquisition Corp (the “Company”) was incorporated as a Cayman Islands exempted company on April 16, 2021. The Company was incorporated for the purpose of effecting a merger, capital share exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). As described below, the Company has selected a target for its initial business combination and entered into a Business Combination Agreement with that target.
As of December 31, 2022, the Company had not commenced any operations. All activity for the period from April 16, 2021 (inception) through December 31, 2022, relates to the Company’s formation and the Initial Public Offering (“IPO”) described below and since the closing of the IPO, the search for a prospective initial business combination, the negotiation of the Business Combination Agreement described below and the preparation and filing on October 5, 2022 with the Securities and Exchange Commission (the “SEC”) of a registration statement on Form S-4 with respect to the Business Combination and subsequent amendments thereto (as amended, the “Form S-4”). The Company will not generate any operating revenues until after the completion of its initial business combination, at the earliest. The Company will generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the IPO.
The Company’s sponsor is Fat Projects SPAC Pte Ltd, a Singapore corporation (the “Sponsor”).
The registration statement for the Company’s IPO was declared effective on October 12, 2021 (the “Effective Date”). On October 15, 2021, the Company’s consummated the IPO of units at $per unit (the “Units”) (including the underwriters’ over-allotment option), which is discussed in Note 3 (the “IPO”), and the sale of 2,865,000 warrants (the “Private Placement Warrants”), each exercisable to purchase one Class A ordinary share at $11.50 per share, at a price of $1.00 per Private Placement Warrant in a private placement to the Sponsor that closed simultaneously with the IPO.
The Company must complete one or more initial business combinations having an aggregate fair market value of at least 80% of the net assets held in the Trust Account (as defined below) (excluding the deferred underwriting commissions and taxes payable on the interest earned on the Trust Account) at the time of signing a definitive agreement in connection with the initial business combination. However, the Company will complete the initial business combination only if the post-Business Combination company in which its public shareholders own shares will own or acquire 50% or more of the outstanding voting securities of the target or is otherwise not required to register as an investment company under the Investment Company Act (the “Investment Company Act”). There is no assurance that the Company will be able to complete a Business Combination successfully.
Following the closing of the IPO, management has agreed that an amount equal to at least $ per Unit sold in the IPO, including the proceeds of the Private Placement Warrants, is being held in a trust account (“Trust Account”) and will be invested only in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act, which invest only in direct U.S. government treasury obligations. Except with respect to interest earned on the funds held in the Trust Account that may be released to the Company to pay its tax obligations and up to $100,000 of interest that may be used for its dissolution expenses, the proceeds from the IPO and the sale of the placement warrants will not be released from the Trust Account until the earliest to occur of: (a) the completion of the initial business combination, (b) the redemption of any public shares properly submitted in connection with a shareholder vote to amend the Company’s amended and restated memorandum and articles of association (A) to modify the substance or timing of the Company’s obligation to allow redemption in connection with the initial business combination or certain amendments to the Company’s charter prior thereto or to redeem % of the public shares if the Company does not complete its initial business combination within the Combination Period as defined below or (B) with respect to any other provision relating to shareholders’ rights or pre-initial business combination activity, and (c) the redemption of the public shares if the Company is unable to complete its initial business combination within the Combination Period subject to applicable law.
On January 20, 2023, The shareholders of the Company approved the First Amendment to the Amended and Restated Memorandum and Articles of Association of the Company (the “Charter Amendment”) at the January 13, 2023 Shareholders Meeting, changing the structure and cost of the Company’s right to extend the date (the “Termination Date”) by which the Company must either (i) consummate a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination involving the Company and one or more businesses (a “business combination”), or else (ii) cease its operations if it fails to complete such business combination, and redeem or repurchase 100% of the Company’s Class A ordinary shares included as part of the units sold in the IPO. The Termination Date is currently March15, 2023 unless extended (See Note 8).
The Company will provide its public shareholders with the opportunity to redeem all or a portion of their public shares upon the completion of the initial business combination either (i) in connection with a shareholder meeting called to approve the initial business combination or (ii) by means of a tender offer. The decision as to whether the Company will seek shareholder approval of a proposed initial business combination or conduct a tender offer will be made by the Company, solely in its discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would require the Company to seek shareholder approval under applicable law or share exchange listing requirements.
The Company will provide its public shareholders with the opportunity to redeem all or a portion of their public shares upon the completion of the initial business combination at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of the initial business combination, including interest earned on the funds held in the Trust Account and not previously released to the Company to pay its taxes, divided by the number of then outstanding public shares, subject to the limitations described herein. The amount in the Trust Account was initially $10.00 per public share, however, there is no guarantee that investors will receive $10.00 per share upon redemption. The per-share amount the Company will distribute to investors who properly redeem their shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriters.
All ordinary shares subject to redemption are recorded at a redemption value and classified as temporary equity following the completion of the IPO, in accordance with Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” The Company will proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 upon such consummation of a Business Combination and, if the Company seeks shareholder approval, a majority of the issued and outstanding shares voted are voted in favor of the Business Combination.
The Company’s amended and restated memorandum and articles of association provide that the Company has until March 15, 2023 to complete the initial business combination unless the Company extends the deadline by up to four remaining 1-month extensions by depositing an aggregate of $312,900 (representing $0.0575 per public share) into the Company’s trust account for each such extension, or if the Company’s shareholders further extend the time period, in each case in accordance with the Company’s amended and restated memorandum and articles of association (the “Combination Period”). If the Company is unable to complete the initial business combination within the Combination Period, the Company will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, 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 (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public shareholders’ rights as shareholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining shareholders and its board of directors, dissolve and liquidate, subject in the case of clauses (ii) and (iii) above to the Company’s obligations under the laws of Cayman Islands to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to the Company’s warrants, which will expire worthless if the Company fails to complete its initial business combination within Combination Period.
The Sponsor, officers and directors have entered into a letter agreement with the Company, pursuant to which they have agreed to (i) waive their redemption rights with respect to any Founder Shares and public shares held by them in connection with the completion of the initial business combination, (ii) waive their redemption rights with respect to any Founder Shares and public shares held by them in connection with a shareholder vote to approve an amendment to the Company’s amended and restated memorandum and articles of association (A) to modify the substance or timing of the Company’s obligation to allow redemption in connection with the initial business combination or certain amendments to the Company’s charter prior thereto or to redeem 100% of the public shares if the Company does not complete its initial business combination within the Combination Period, or (B) with respect to any other provision relating to any rights of holders of the Company’s Class A ordinary shares and (iii) waive their rights to liquidating distributions from the Trust Account with respect to any Founder Shares held by them if the Company fails to complete its initial business combination within the Combination Period, although they will be entitled to liquidating distributions from the Trust Account with respect to any public shares they hold if the Company fails to complete its initial business combination within the prescribed time frame.
The Sponsor has agreed that it will be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has entered into a written letter of intent, confidentiality or similar agreement or Business Combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10.00 per public share and (ii) the actual amount per public share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.00 per public share due to reductions in the value of the Trust Account, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the Trust Account (whether or not such waiver is enforceable) nor will it apply to any claims under the Company’s indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act. However, the Company has not asked the Sponsor to reserve for such indemnification obligations, nor has the Company independently verified whether the Sponsor has sufficient funds to satisfy its indemnity obligations and believes that the Sponsor has no material assets. Therefore, the Company cannot assure you that the Sponsor would be able to satisfy those obligations. None of the Company’s officers or directors will indemnify the Company for claims by third parties including, without limitation, claims by vendors and prospective target businesses. Our independent registered public accounting firm, our principal legal counsel and the underwriters of the offering, have not executed agreements with us waiving such claims to the monies held in the trust account.
The anchor investors will not be entitled to (i) redemption rights with respect to any Founder Shares held by them in connection with the completion of the initial business combination, (ii) redemption rights with respect to any Founder Shares held by them in connection with a shareholder vote to amend the Company’s amended and restated memorandum and articles of association in a manner that would affect the substance or timing of the Company’s obligation to redeem 100% of its Public Shares if the Company has not consummated an initial business combination within the Combination Period or (iii) rights to liquidating distributions from the Trust Account with respect to any Founder Shares held by them if the Company fails to complete the initial business combination within the Combination Period (although they will be entitled to liquidating distributions from the Trust Account with respect to any Public Shares they hold if the Company fails to complete the initial business combination within the Combination Period).
Subject to the requirement that each anchor investor purchase % of the units allocated to it in the IPO, in connection with the closing of the IPO the Sponsor sold founder shares to each anchor investor ( founder shares in the aggregate) at their original purchase price of approximately $ (See Note 6).
Merger
On August 26, 2022, the Company entered into a Business Combination Agreement with Avanseus Holdings Pte. Ltd., a Singapore private company limited by shares (“Avanseus”) (as may be amended and/or restated from time to time, the “Business Combination Agreement”).
The Business Combination Agreement and the transactions contemplated thereby were approved by the boards of directors of each of the Company and Avanseus (other than the PIPE Investment as defined below, which will require further approval of each board of directors), subject to the approval of the Company’s shareholders.
The Business Combination Agreement provides for a series of transactions, pursuant to which, among other things, Avanseus’ shareholders will exchange all of their outstanding Avanseus shares in consideration for newly issued Company Class A Ordinary Shares (the “Share Exchange”), subject to the conditions set forth in the Business Combination Agreement, with Avanseus thereby becoming a wholly owned subsidiary of the Company (the Share Exchange and the other transactions contemplated by the Business Combination Agreement, together, the “Business Combination” or the “Proposed Transaction”). In connection with the Business Combination, the Company will change its corporate name to “Avanseus Holdings Corporation” (“New Avanseus”).
The Business Combination Agreement, prior to the Second BCA Amendment described below in Note 8 – Subsequent Events, provided that the Company will use its commercially reasonable efforts to enter into and consummate subscription agreements in form and substance mutually acceptable to the Company and Avanseus with investors mutually reasonably acceptable to the Company and Avanseus pursuant to which such investors will agree to purchase up to an aggregate of $35 million of (i) the Company’s Series A Convertible Preference Shares, which shares will be convertible into the Company’s Class A Ordinary Shares, and/or (ii) the Company’s Class A Ordinary Shares, with such purchases to be consummated prior to or substantially currently with the closing of the Share Exchange (the “PIPE Investment”).
The Business Combination is expected to close in the first quarter of 2023, following the receipt of the required approval by the Company’s shareholders and the fulfillment of other customary closing conditions.
On October 3, 2022, the Company and Avanseus entered into a First Amendment to Business Combination Agreement (the “BCA Amendment”) to amend the previously announced Business Combination Agreement dated August 26, 2022. The BCA Amendment amended the Original Business Combination Agreement to (1) add a mutual condition to the obligations of the Company and Avanseus to close the transactions contemplated in the Business Combination Agreement that holders of the Company’s Class A Ordinary Shares redeem an aggregate of at least of such shares so that Avanseus will be the acquiror for accounting purposes at both the minimum and maximum redemption levels required to be disclosed in the Registration Statement on Form S-4 to be filed with the Commission pursuant to the Business Combination Agreement, (2) replace the form of Incentive Equity Plan attached to the Original Business Combination Agreement with an amended Incentive Equity Plan to conform the eligible participants in the plan to the eligible participants listed in the Original Business Combination Agreement, (3) improve the description of the Nasdaq listing process in the Business Combination Agreement for the Company Class A Ordinary Shares to be issued to Avanseus’ shareholders and pursuant to the Incentive Equity Plan and (4) provide that subscription agreements for PIPE investors be mutually reasonably acceptable to Avanseus as well as the Company. On October 5, 2022, the Company filed the Form S-4 with SEC with respect to the Business Combination, and on November 25, 2022, the Company filed Amendment No. 1 to the Form S-4 with the SEC.
Liquidity, Capital Resources and Going Concern
As of December 31, 2022, the Company had $72,800 in its operating bank account and working capital deficit of $1,544,269.
The Company’s liquidity needs prior to the IPO, had been satisfied through a payment from the Sponsor of $25,000 (see Note 5) for the founder shares to cover certain offering costs, the loan under an unsecured promissory note from the Sponsor of up to $300,000 (see Note 5), and borrowings from related parties (see Note 5). Subsequent to the consummation of the IPO, the Company’s liquidity has been satisfied through the net proceeds from the IPO and the Private Placement held outside of the Trust Account and a Working Capital Loan of $90,000 (see Note 5).
In order to finance transaction costs in connection with a Business Combination, the Sponsor, initial shareholders, officers, directors or their affiliates may, but are not obligated to, provide the Company Working Capital Loans, as defined below (see Note 5). As of December 31, 2022, the Company borrowed $90,000 from Sponsor under the Working Capital Loans.
In connection with the Company’s assessment of going concern considerations in accordance with FASB Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that the Company has and will continue to incur significant costs in pursuit of its acquisition plans which raises substantial doubt about the Company’s ability to continue as a going concern. Moreover, the Company may need to obtain additional financing either to complete the initial business combination or because it becomes obligated to redeem a significant number of its Public Shares upon consummation of the initial business combination, in which case the Company may issue additional securities or incur debt in connection with such Business Combination. Subject to compliance with applicable securities laws, the Company would only complete such financing simultaneously with the completion of its initial business combination. If the Company is unable to complete the initial business combination because it does not have sufficient funds available to it, it will be forced to cease operations and liquidate the trust account. In addition, following the initial business combination, if cash on hand is insufficient, the Company may need to obtain additional financing in order to meet its obligations.
In addition, management has determined that the mandatory liquidation and subsequent dissolution, should the Company be unable to complete a business combination, raises substantial doubt about the Company’s ability to continue as a going concern. The Company has until March 15, 2023 to consummate a business combination, unless the Company further extends the period of time to consummate a business combination by up to four remaining 1-month extensions by depositing an aggregate of $312,900 (representing $0.0575 per public share) into the Company’s trust account, or unless the Company’s shareholders approve of a further extension, in each case in accordance with the Company’s amended and restated memorandum and articles of association. It is uncertain that the Company will be able to consummate a business combination by this time. If a business combination is not consummated by this date, there will be a mandatory liquidation and subsequent dissolution unless there are further extensions as described above. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after March 15, 2023 (assuming no further extensions). Management has determined that the mandatory liquidation, should a business combination not occur, and potential subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern.
Risks and Uncertainties
Management is currently evaluating the impact of the COVID-19 pandemic 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 this financial statement. The financial statement does not include any adjustments that might result from the outcome of this uncertainty.
Additionally, as a result of the military action commenced in February 2022 by the Russian Federation in the country of Ukraine and related economic sanctions, the Company’s ability to consummate a Business Combination, or the operations of a target business with which the Company ultimately consummates a Business Combination, may be materially and adversely affected. Further, the Company’s ability to consummate a transaction may be dependent on the ability to raise equity and debt financing which may be impacted by these events, including as a result of increased market volatility, or decreased market liquidity in third-party financing being unavailable on terms acceptable to the Company or at all. The impact of this action and related sanctions on the world economy and the specific impact on the Company’s financial position, results of operations and/or ability to consummate a Business Combination are not yet determinable. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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Significant Accounting Policies |
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| Significant Accounting Policies | Note 2—Significant Accounting Policies
Basis of Presentation
The accompanying financial statements are presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).
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 auditor 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 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
The preparation of financial statements in conformity with U.S. GAAP requires 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 financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
Cash and 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 had cash of $72,800 and $754,893 and no cash equivalents as of December 31, 2022 and 2021, respectively.
Investments Held in Trust Account
As of December 31, 2022 and 2021, the assets held in the Trust Account consist of United States Treasury securities. As of December 31, 2021, the Company classifies its United States Treasury securities with original maturities of more than three months but less than one year as held-to-maturity in accordance with FASB ASC Topic 320 “Investments—Debt and Equity Securities.” Held-to-maturity securities are those securities which the Company has the ability and intent to hold until maturity. Held-to-maturity treasury securities are recorded at amortized cost and adjusted for the amortization or accretion of premiums or discounts.
A decline in the market value of held-to-maturity securities below cost that is deemed to be other than temporary, results in an impairment that reduces the carrying costs to such securities’ fair value. The impairment is charged to earnings and a new cost basis for the security is established. To determine whether an impairment is other than temporary, the Company considers whether it has the ability and intent to hold the investment until a market price recovery and considers whether evidence indicating the cost of the investment is recoverable outweighs evidence to the contrary. Evidence considered in this assessment includes the reasons for the impairment, the severity and the duration of the impairment, changes in value subsequent to year-end, forecasted performance of the investee, and the general market condition in the geographic area or industry in which the investee operates.
Premiums and discounts are amortized or accreted over the life of the related held-to-maturity security as an adjustment to yield using the effective-interest method. Such amortization and accretion are included in the “interest income” line item in the statement of operations. Interest income is recognized when earned.
As of December 31, 2022, the Company classifies its United States Treasury securities with original maturities within three months as trading securities in accordance with ASC 320 Topic. Trading securities are presented on the balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these securities is included in gain on Investments Held in Trust Account in the accompanying statement of operations. The estimated fair values of investments held in the Trust Account are determined using available market information and classifies as Level 1 measurements.
During the year ended December 31, 2022 and the period from April 16, 2021 (inception) through December 31, 2021, the Company did not withdraw any of the interest income from the Trust Account to pay its tax obligations.
The carrying value, excluding gross unrealized holding loss and fair value of held to maturity securities on December 31, 2021, are as follows:
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 which, at times may exceed the Federal depository insurance coverage of $250,000. As of December 31, 2022 and 2021, the Company had not experienced losses on this account and management believes the Company was not exposed to significant risks on such account.
Offering Costs associated with the Initial Public Offering
The Company complies with the requirements of the ASC 340-10-S99-1. Offering costs consisted of legal, accounting, underwriting fees, other costs incurred through the IPO that were directly related to the IPO, and fair value in excess of consideration paid with respect to the Founder Shares sold to the anchor investors. The Company incurred offering costs amounting to $11,883,987 as a result of the IPO consisting of $ of underwriting commissions, $ fair value of Representative Shares, $4,025,000 of deferred underwriting commissions, $554,107 of other offering costs and $ of fair value in excess of consideration paid with respect to the Founder Shares sold to the anchor investors. Of the total offering costs, $11,284,247 was charged to temporary equity upon the completion of the IPO and $599,740 was charged to equity during the period from April 16, 2021 (inception) through December 31, 2021.
Income Taxes
The Company accounts for income taxes under FASB ASC 740, “Income Taxes” (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.
FASB 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. There were no unrecognized tax benefits as of December 31, 2022 and 2021. 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 December 31, 2022 and 2021, there were no unrecognized tax benefits and no amounts were accrued for the payment of interest and penalties. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
There is currently no taxation imposed on income by the Government of the Cayman Islands. In accordance with federal income tax regulations, income taxes are not levied on the Company, but rather on the individual owners. United States (“U.S.”) taxation would occur on the individual owners if certain tax elections are made by U.S. owners and the Company were treated as a passive foreign investment company. Additionally, U.S. taxation could occur to the Company itself if the Company is engaged in a U.S. trade or business. The Company is not expected to be treated as engaged in a U.S. trade or business at this time.
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. Net loss per ordinary share is computed by dividing net loss by the weighted average number of ordinary shares outstanding for the period. The Company applies the two-class method in calculating earnings per share. Remeasurement adjustments associated with the redeemable Class A ordinary shares is excluded from earnings per share as the redemption value approximates fair value.
The calculation of diluted loss per share does not consider the effect of the warrants issued in connection with the (i) IPO, and (ii) the private placement because the warrants are contingently exercisable, and the contingencies have not yet been met. The warrants are exercisable to purchase 14,365,000 Class A ordinary shares in the aggregate. As of December 31, 2022 and 2021, the Company did not have any dilutive securities or 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 net loss per ordinary share is the same as basic net loss per ordinary share for the periods presented.
The Company has two classes of shares, which are referred to as Class A ordinary shares and Class B ordinary shares. Earnings and losses are shared pro rata between the two classes of shares. No warrants were exercised during the year ended December 31, 2022 and for the period from April 16, 2021 (inception) through December 31, 2021. As a result, diluted net loss per ordinary share is the same as basic net loss per ordinary share for the period. In connection with the underwriters exercise of their over-allotment option on October 15, 2021, Class B ordinary shares were no longer subject to forfeiture. These shares were excluded from the calculation of weighted average shares outstanding until they were no longer subject to forfeiture. Accretion of the carrying value of Class A ordinary shares to redemption value is excluded from net loss per ordinary share because the redemption value approximates fair value.
The following table reflects the calculation of basic and diluted net loss per ordinary share:
Ordinary Shares Subject to Possible Redemption
The 11,500,000 Public Warrants and 2,865,000 Private Placement Warrants were issued in accordance with the guidance contained in ASC 815-40. Such guidance provides that because the warrants meet the criteria for equity treatment thereunder, each warrant is recorded as equity. The Company accounts for its outstanding warrants as equity-classified instruments based on such guidance.
All of the ordinary shares sold as part of the Units in the IPO contain a redemption feature which allows for the redemption of such Public Shares in connection with the Company’s liquidation, if there is a shareholder vote or tender offer in connection with a business combination and in connection with certain amendments to the Company’s amended and restated memorandum and articles of association. In accordance with SEC and its staff’s guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99, redemption provisions not solely within the control of the Company require ordinary shares subject to redemption to be classified outside of permanent equity. Therefore, all Public Shares have been classified outside of permanent equity.
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable ordinary shares to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable ordinary shares are affected by charges against additional paid in capital and accumulated deficit.
The Company issued to EF Hutton and/or its designees, Class A ordinary shares upon the consummation of the IPO. EF Hutton has agreed (i) to waive its redemption rights with respect to such ordinary shares in connection with the completion of the initial business combination and (ii) to waive its rights to liquidating distributions from the Trust Account with respect to such ordinary shares if the Company fails to complete its initial business combination within the Combination Period (See Note 6).
As of December 31, 2022 and 2021, the ordinary shares subject to possible redemption reflected on the balance sheets are reconciled in the following table:
The Company complies with ASC 718 Compensation — Stock Compensation regarding interest in founder shares acquired by directors of the Company at prices below fair value. The interest in acquired shares shall vest upon the Company consummating an initial business combination (the “Vesting Date”). If prior to the Vesting Date, the director ceases to be a director, the interest in the founder shares will be forfeited. The interest in the founder shares owned by the director (1) may not be sold or transferred, until six months after the consummation of a Business Combination, and (2) may not be entitled to redemption from the funds held in the Trust Account, or any liquidating distributions. The Company has 12 months. which was automatically extended to 15 months with respect to the filing of Form S-4 on October 5, 2022, (or up to 21 months if the Company further extends the period of time to consummate a business combination, or if the Company’s shareholders approve an extension, in each case in accordance with the Company’s amended and restated memorandum and articles of association) from the date of the IPO to consummate a Business Combination, and if a Business Combination is not consummated, the Company will liquidate and the interest in the founder shares will become worthless (see Note 5).
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates the carrying amounts represented in the accompanying balance sheets, primarily due to their short-term nature. The Company applies ASC 820, which establishes a framework for measuring fair value and clarifies the definition of fair value within that framework. ASC 820 defines fair value as an exit price, which is the price that would be received for an asset or paid to transfer a liability in the Company’s principal or most advantageous market in an orderly transaction between market participants on the measurement date. The fair value hierarchy established in ASC 820 generally requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs reflect the assumptions that market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the entity’ own assumptions based on market data and the entity’s judgments about the assumptions that market participants would use in pricing the asset or liability and are to be developed based on the best information available in the circumstances.
Level 1—Assets and liabilities with unadjusted, quoted prices listed on active market exchanges. Inputs to the fair value measurement are observable inputs, such as quoted prices in active markets for identical assets or liabilities.
Level 2—Inputs to the fair value measurement are determined using prices for recently traded assets and liabilities with similar underlying terms, as well as direct or indirect observable inputs, such as interest rates and yield curves that are observable at commonly quoted intervals.
Level 3—Inputs to the fair value measurement are unobservable inputs, such as estimates, assumptions, and valuation techniques when little or no market data exists for the assets or liabilities.
Financial Instruments
The Company will account 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 FASB 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 is conducted at the time of warrant issuance and as of each subsequent annual 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 of 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. The Company accounts for its outstanding warrants as equity-classified.
Recent Accounting Pronouncements
Management does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s financial statements.
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Initial Public Offering |
12 Months Ended | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2022 | |||||||||||||
| Initial Public Offering | |||||||||||||
| Initial Public Offering | Note 3—Initial Public Offering
Public Units
On October 15, 2021, the Company sold Units at a price of $ per Unit. Each Unit consists of one Class A ordinary share and one redeemable warrant (the “Public Warrants”).
Ten qualified institutional buyers or institutional accredited investors which are not affiliated with the Company, the Sponsor, the directors or any member of the Company’s management (the “anchor investors”) purchased 950,000 Units each, or 9,500,000 in the aggregate, in the IPO at the offering price of $ per Unit. There can be no assurance that the anchor investors will retain their shares, if any, prior to or upon the consummation of the initial business combination.
Following the closing of the IPO on October 15, 2021, $115,000,000 ($ per Unit) from the net proceeds of the sale of the Units in the IPO and the sale of the Private Placement Warrants was deposited into the Trust Account, invested in United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government treasury obligations.
Public Warrants
Each warrant entitles the holder to purchase one Class A ordinary share at a price of $11.50 per share, subject to adjustment as discussed herein. 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 Company’s 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 the Company’s Class A ordinary share 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, then the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to % of the greater of the Market Value and the Newly Issued Price, and the $ per share redemption trigger price described below under “Redemption of warrants” will be adjusted (to the nearest cent) to be equal to % of the greater of the Market Value and the Newly Issued Price.
The warrants will become exercisable on the later of 12 months from the closing of the IPO or the completion of the Company’s initial business combination, and will expire five years after the completion of the Company’s initial business combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.
The Company has not registered the Class A ordinary shares issuable upon exercise of the warrants at this time. However, the Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of the initial business combination, the Company will use its best efforts to file with the SEC a registration statement covering the issuance of the Class A ordinary shares issuable upon exercise of the warrants, to cause such registration statement to become effective within 60 business days following the initial business combination and to maintain a current prospectus relating to those Class A ordinary shares until the warrants expire or are redeemed, as specified in the warrant agreement. If a registration statement covering the issuance of the Class A ordinary shares issuable upon exercise of the warrants is not effective by the 60th business day after the closing of the initial business combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company will has failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis.
Redemption of warrants. Once the warrants become exercisable, the Company may redeem the outstanding warrants (except as described herein with respect to the Private Placement Warrants):
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Private Placement |
12 Months Ended |
|---|---|
Dec. 31, 2022 | |
| Private Placement | |
| Private Placement | Note 4—Private Placement
Simultaneously with the closing of the IPO, the Company’s Sponsor purchased an aggregate of 2,865,000 Private Placement Warrants at a price of $1.00 per Private Placement Warrants, for an aggregate purchase price of $2,865,000. The Private Placement Warrants (including the Class A ordinary shares issuable upon exercise of the Private Placement Warrants) will not be transferable, assignable or salable (except to certain permitted transferees) until days after the completion of the initial business combination and they will not be redeemable by the Company so long as they are held by the Sponsor or its permitted transferees. In accordance with one of the permitted exceptions to the restrictions on transfer of the Private Warrants, promptly after the completion of the IPO, the Sponsor distributed all of the Private Warrants to its shareholders. Therefore, the Sponsor itself no longer holds any of the Private Warrants, and all of the Private Warrants are held by the Sponsor’s Shareholders (the “Sponsor’s Shareholders”).
The Sponsor, or its permitted transferees, has the option to exercise the Private Placement Warrants on a cashless basis. The placement warrants (including the Class A ordinary shares issuable upon exercise of the placement warrants) will not be transferable, assignable or salable until 30 days after the completion of the initial business combination, subject to certain exceptions.
The Private Warrants are identical to the Public Warrants except that, so long as the Private Warrants are held by the Sponsor or its permitted transferees, (i) 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 holders until 30 days after the completion of the initial business combination, and (ii) they will be entitled to registration rights.
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Related Party Transactions |
12 Months Ended |
|---|---|
Dec. 31, 2022 | |
| Related Party Transactions [Abstract] | |
| Related Party Transactions | Note 5—Related Party Transactions
Founder Shares
On April 22, 2021, the Sponsor paid, $, or approximately $ per share, to cover certain offering costs and expenses in consideration for Class B ordinary shares, par value $. Up to Founder Shares were subject to forfeiture by the Sponsor depending on the extent to which the underwriters’ over-allotment option is exercised. The underwriters fully exercised their over-allotment option at the IPO resulting in no Founder Shares being subject to forfeiture.
The Sponsor, directors and executive officers have agreed not to transfer, assign or sell any of their Founder Shares (or Class A ordinary shares issuable upon conversion thereof), subject to certain limited exceptions, until the earlier of (A) six months after the date of the Company’s initial business combination or (B) subsequent to the Company’s initial business combination, (x) if the reported last sale price of the Company’s Class A ordinary shares equals or exceeds US $ per share (as adjusted for share subdivisions, share dividends, right issuances, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the Company’s initial business combination, or (y) the date on which the Company completes a liquidation, merger, share exchange, reorganization or other similar transaction that results in all of our shareholders having the right to exchange their shares for cash, securities or other property.
In September 2021, the Company received expressions of interest from anchor investors to purchase Units in the IPO. Subject to each anchor investor purchasing % of the Units allocated to it, in connection with the closing of the IPO the Sponsor sold founder shares to each anchor investor ( founder shares in the aggregate) at their original purchase price of approximately $per share. The Company accounted for the fair value in excess of consideration paid with respect to the number of Founder Shares sold to the anchor investors as an offering cost reflected as an increase to additional paid in capital offset by a reduction of the offering proceeds upon completion of the IPO. The fair value of each Founder Share was determined to be $ per share or approximately $(see note 6). Valuation of the Founder Shares was determined using an internal valuation model driven primarily by the initial issuance price of our Class A ordinary shares, an assumed value of $ for the warrants included in the Units, and a % probability of successfully completing an initial business combination.
In accordance with one of the permitted exceptions to the restrictions on transfer of the founder shares, on October 18, 2021, the Sponsor transferred Class B ordinary shares held by it to its Sponsor’s Shareholders, which include all of the Company’s directors and executive officers or companies controlled by them.
Share Based Compensation
In April and May 2021, the Company’s sponsor transferred interests in a total of 55,000 Founder Shares to directors.
The Company has determined the valuation of the Class B ordinary shares as of the Grant Dates. The valuation resulted in a fair value of approximately $ per share as of the Grant Dates, or an aggregate of $ for the shares. As vesting of Founder Shares to directors is contingent upon the closing of an initial business combination, a performance condition is not probable of occurring at December 31, 2022 and 2021. Upon consummation of an initial business combination the Company will recognize $ in compensation expense.
Due from related party
Since April 16, 2021 (inception), related parties have paid for certain offering costs and expenses on behalf of the Company. At December 31, 2021 an excess of $50,000 was repaid to those related parties and was due back to the Company. On April 26, 2022, the Company was repaid all amounts due to the Company from the related parties.
Promissory Note—Related Party
On May 6, 2021, the Sponsor agreed to loan the Company up to $300,000 to be used for a portion of the expenses of the IPO. These loans were non-interest bearing, unsecured and due at the earlier of October 31, 2021, or the closing of the IPO. As of December 31, 2022 and 2021, no amount was outstanding on the promissory note. The promissory note has expired, and no borrowings are permitted on this note.
Working Capital Loans
In order to finance transaction costs in connection with an intended 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 the initial business combination, the Company may repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans may be repaid only out of funds held outside the Trust Account. In the event that the initial business combination does not close, the Company may use a portion of the working capital held outside the Trust Account to repay the Working Capital Loans but no proceeds from the Trust Account would be used to repay the Working Capital Loans. Up to $1,500,000 of such Working Capital Loans may be convertible into warrants of the post-Business Combination entity at a price of $1.00 per warrant at the option of the lender. The warrants would be identical to the Private Placement Warrants. On December 22, 2022, the Company borrowed $90,000 from the Sponsor under the Working Capital Loan, which is convertible into warrants as described above. The loan is non-interest bearing and payable on the earliest to occur of (i) the date which the Company consummates its initial business combination and (ii) the date that the winding up of the Company is effective (such date, the “Maturity Date”). The principal balance may be prepaid at any time, at the election of the Company.
As of December 31, 2022 and 2021, the Company had $90,000 and $0 borrowings under the Working Capital Loans.
Office Space, Secretarial and Administrative Services
Commencing on the date that the Company’s securities are first listed on the NASDAQ through the earlier of consummation of the initial business combination and the liquidation, the Company has agreed to pay the Sponsor a total of $10,000 per month for office space, utilities, secretarial support and administrative services. For the year ended December 31, 2022 and for the period from April 16, 2021 (Inception) to December 31,2021, the expense for office space, secretarial and administrative services was $120,000 and $26,129, respectively. As of December 31, 2022 and 2021, the unpaid balance was $0 and $26,129, respectively, and reported on the balance sheets as due to related party.
|
Commitments & Contingencies |
12 Months Ended |
|---|---|
Dec. 31, 2022 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| Commitments & Contingencies | Note 6—Commitments & Contingencies
Registration Rights
The holders of the Founder Shares, the representative shares, Placement Warrants (including component securities contained therein) and warrants (including securities contained therein) that may be issued upon conversion of Working Capital Loans, any Class A ordinary shares issuable upon the exercise of the Placement Warrants and any Class A ordinary shares and warrants (and underlying Class A ordinary share) that may be issued upon exercise of the warrants as part of the Working Capital Loans and Class A ordinary share issuable upon conversion of the Founder Shares, will be entitled to registration rights pursuant to a registration rights agreement signed on October 12, 2021, requiring the Company to register such securities for resale (in the case of the Founder Shares, only after conversion to the Company’s Class A ordinary shares). The holders of the majority of these securities are entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the Company’s completion of the initial business combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. The registration rights agreement does not contain liquidated damages or other cash settlement provisions resulting from delays in registering the Company’s securities. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriters Agreement
The Company granted the underwriters a 45-day option from the date of the IPO to purchase up to an additional units to cover over-allotments, if any. At the IPO, the underwriters fully exercised their option to purchase the additional units.
The underwriters were paid a cash underwriting discount of one percent (1%) of the gross proceeds of the IPO, or $. Additionally, the underwriters will be entitled to a deferred underwriting discount of 3.5% of the gross proceeds of the IPO, or $4,025,000, upon the completion of the Company’s initial business combination.
Anchor Investors
The Sponsor entered into an agreement with ten strategic investors (each referred to as an “anchor investor”) for the purchase of Founder Shares each at the same price the Sponsor paid ($ per share). The anchor investors purchased Units in the IPO. The Company can make no assurance that the anchor investor will retain their shares, if any, upon the completion of the Company’s Business Combination. As a result of the Founder Shares and Private Placement Warrants that the anchor investor may hold, it may have different interests with respect to a vote on an initial business combination than other public shareholders (see Note 5).
The Company accounted for the fair value in excess of consideration paid with respect to the number of Founder Shares sold to the anchor investors as an offering cost reflected as an increase to additional paid in capital offset by a reduction of the offering proceeds upon completion of the IPO. The fair value of each Founder Share was determined to be $ per share or approximately $ in the aggregate for all Founder Shares transferred to the anchor investors (see note 5). Valuation of the Founder Shares was determined using an internal valuation model and classified as a Level 3 valuation. The valuation was driven primarily by the initial issuance price of the Public Units, an assumed value of $ for the warrants included in the Units, and a % probability of successfully completing an initial business combination.
Representative Shares
The Company issued to EF Hutton and/or its designees (the “Representatives”) Class A ordinary shares upon the consummation of the IPO. EF Hutton has agreed not to transfer, assign or sell any such ordinary shares until the completion of the initial business combination. In addition, EF Hutton has agreed (i) to waive its redemption rights with respect to such ordinary shares in connection with the completion of the initial business combination and (ii) to waive its rights to liquidating distributions from the Trust Account with respect to such ordinary shares if the Company fails to complete its initial business combination within the Combination Period.
The ordinary shares have been deemed compensation by FINRA and are therefore subject to a lock-up for a period of days immediately following the commencement of sales of the registration statement of which the IPO forms a part pursuant to Rule 5110(e)(1) of FINRA’s NASD Conduct Rules. Pursuant to FINRA Rule 5110(e)(1), these securities may not be sold, transferred, assigned, pledged or hypothecated or the subject of any hedging, short sale, derivative, put or call transaction that would result in the economic disposition of the securities by any person for a period of 180 days immediately following the effective date of the registration statement of which the IPO forms a part, nor may they be sold, transferred, assigned, pledged or hypothecated for a period of 180 days immediately following the commencement of sales of the IPO except to any underwriter and selected dealer participating in the offering and their bona fide officers or partners, registered persons or affiliates or as otherwise permitted under Rule 5110(e)(2).
The Company accounted for the fair value of the Class A ordinary shares issued to the Representatives as an offering cost reflected as an increase to additional paid in capital offset by a reduction of the offering proceeds upon completion of the IPO. The fair value of each Class A ordinary share was determined to be $ per share or approximately $. Valuation of the Class A ordinary shares was determined using an internal valuation model and classified as a Level 3 valuation. The valuation was driven primarily by the initial issuance price of the Public Units, and an assumed value of approximately $1 for the warrants included in the Units.
|
Shareholders’ Deficit |
12 Months Ended |
|---|---|
Dec. 31, 2022 | |
| Equity [Abstract] | |
| Shareholders’ Deficit | Note 7—Shareholders’ Deficit
Preference shares—The Company is authorized to issue preference shares with a par value of $and with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. As of December 31, 2022 and 2021, there were preference shares issued or outstanding.
Class A ordinary shares—The Company is authorized to issue Class A ordinary shares with a par value of $per share. As of December 31, 2022 and 2021, there were Class A ordinary shares issued or outstanding, excluding ordinary shares subject to possible redemption.
Class B ordinary shares—The Company is authorized to issue Class B ordinary shares with a par value of $per share. Holders are entitled to one vote for each Class B ordinary share. On December 31, 2022 and 2021, there were Class B ordinary shares issued and outstanding.
Holders of Class A ordinary shares and holders of 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. Unless specified in the Company’s amended and restated memorandum and articles of association, or as required by applicable provisions of the Companies Act or applicable stock exchange rules, the affirmative vote of a majority of the Company’s ordinary shares that are voted is required to approve any such matter voted on by its shareholders. Holders of Class A ordinary shares and holders of 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. Unless specified in the Company’s amended and restated memorandum and articles of association, or as required by applicable provisions of the Companies Act or applicable share exchange rules, the affirmative vote of a majority of the Company’s ordinary shares that are voted is required to approve any such matter voted on by the Company’s shareholders.
The Class B ordinary shares and will automatically convert into Class A ordinary shares (which such Class A ordinary shares delivered upon conversion will not have redemption rights or be entitled to liquidating distributions from the trust account if the Company does not consummate an initial business combination) at the time of the initial business combination or earlier at the option of the holders thereof at a ratio such that the number of Class A ordinary shares issuable upon conversion of all Founder Shares will equal, in the aggregate, on an as-converted basis, % of the sum of (i) the total number of ordinary shares issued and outstanding upon the completion of the IPO, plus (ii) the total number of Class A ordinary shares issued, deemed issued or issuable upon conversion or exercise of any equity-linked securities or rights issued or deemed issued by the Company in connection with or in relation to the consummation of the initial business combination, excluding any Class A ordinary shares or equity-linked securities exercisable for or convertible into Class A ordinary shares issued, deemed issued or to be issued to any seller in the initial business combination and any Placement Warrants issued to the Sponsor, its affiliates or any member of the Company’s management team upon conversion of Working Capital Loans, unless the holders of a majority of the then-outstanding Class B ordinary shares agree to waive such adjustment with respect to such issuance or deemed issuance at the time thereof. In no event will the Class B ordinary shares convert into Class A ordinary shares at a rate of less than one-to-one.
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Subsequent Events |
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| Subsequent Events [Abstract] | ||||||||||||||||||||||
| Subsequent Events | Note 8—Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the financial statements were issued. Based on this review, other than disclosed below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.
Business Combination Agreement Amendment.
On February 14, 2023, Avanseus and the Company entered into a Second Amendment to Business Combination Agreement (the “Second BCA Amendment”) to further amend the Original Business Combination Agreement. The Second BCA Amendment further amends the Original Business Combination Agreement to:
Charter Amendment.
In an extraordinary general meeting held on January 13, 2023, shareholders approved the First Amendment to the Amended and Restated Memorandum and Articles of Association (the “Charter Amendment”), changing the structure and cost of the Company’s right to extend the date (the “Termination Date”) by which the Company must either (i) consummate a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination involving the Company and one or more businesses (a “business combination”), or else (ii) cease operations if the Company fails to complete such business combination, and redeem or repurchase 100% of the public shares included as part of the units sold in the IPO.
The Charter Amendment allows the Company to extend the Termination Date by up to six (6) one-month extensions to July 15, 2023 (each of which is refered to as an “Extension”, and such later date, the “Extended Deadline”) provided that if any Extended Deadline ends on a day that is not a business day, such Extended Deadline will be automatically extended to the next succeeding business day. To obtain each 1-month extension, the Company, the sponsor or any of their affiliates or designees must deposit into the Company’s Trust Account with Continental by the deadline applicable prior to the extension $0.0575 per share for each of the public shares outstanding as of the deadline prior to the extension (after giving effect to redemptions in connection with the approval of the Charter Amendment by the Company’s shareholders with respect to the first such extension). In connection with the approval of the Charter Amendment on January 13, 2023, holders of 6,058,262 of the public shares exercised their right to redeem those shares for cash at an approximate price of $10.16 per share, for an aggregate of approximately $61.57 million, leaving 5,441,738 public shares outstanding after the January 13, 2023 shareholders meeting.
Extension of Deadline to Complete the Company’s Initial Business Combination.
The Company has exercised its right to extend the deadline to complete its initial business combination twice to date. On January 17, 2023, the Company deposited an aggregate of $312,900 (representing $0.0575 per public share) into the Company’s trust account, which came from cash on hand of the Company and from proceeds of loans from shareholders of the Company’s Sponsor and other designees of the Company who received non-interest bearing, unsecured promissory notes in consideration for the loans and which enables the Company to extend the period of time it has to consummate its initial business combination by one month from January 15, 2023 to February 15, 2023, and on February 15, 2023, the Company deposited another $312,900 into the trust account to further extend the deadline to March 15, 2023. These Extensions are the first and second of up to six one-month extensions permitted under the Company’s governing documents. As of February 28, 2023, the balance in the trust account was approximately $56.3 million or approximately $10.35 per outstanding public share. The Company has four remaining 1-month extensions available to it under the Charter Amendment.
Debt Capital Financing for Extension Funds and Working Capital
On January 8, 2023, the Company’s board of directors authorized the Company to raise up to $1 million of funds by the issuance of non-interest-bearing notes to fund extensions of the deadline to complete our initial business combination. As of February 28, 2023, there was an aggregate principal amount of $200,260 of such non-interest-bearing outstanding.
On January 26, 2023, the Company’s board of directors authorized the Company to raise up to $1,062,500 of funds for working capital (which can also be used to fund extensions of the deadline to complete our initial business combination) through a private offering of promissory notes bearing simple interest at a rate of 15% per annum to prospective investors who are not our sponsor, directors or officers or any of their affiliates. As of February 28, 2023, there was an aggregate principal amount of $355,740 of such interest-bearing notes outstanding.
In January and February 2023, one of the Company’s officers paid $29,754 to third-party vendors on behalf of the Company. These debts are non-interest bearing and will mature as demanded. |
Significant Accounting Policies (Policies) |
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| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basis of Presentation | Basis of Presentation
The accompanying financial statements are presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).
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| Emerging Growth Company | 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 auditor 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 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.
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| Use of Estimates | Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires 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 financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
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| Cash and Cash Equivalents | Cash and 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 had cash of $72,800 and $754,893 and no cash equivalents as of December 31, 2022 and 2021, respectively.
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| Investments Held in Trust Account | Investments Held in Trust Account
As of December 31, 2022 and 2021, the assets held in the Trust Account consist of United States Treasury securities. As of December 31, 2021, the Company classifies its United States Treasury securities with original maturities of more than three months but less than one year as held-to-maturity in accordance with FASB ASC Topic 320 “Investments—Debt and Equity Securities.” Held-to-maturity securities are those securities which the Company has the ability and intent to hold until maturity. Held-to-maturity treasury securities are recorded at amortized cost and adjusted for the amortization or accretion of premiums or discounts.
A decline in the market value of held-to-maturity securities below cost that is deemed to be other than temporary, results in an impairment that reduces the carrying costs to such securities’ fair value. The impairment is charged to earnings and a new cost basis for the security is established. To determine whether an impairment is other than temporary, the Company considers whether it has the ability and intent to hold the investment until a market price recovery and considers whether evidence indicating the cost of the investment is recoverable outweighs evidence to the contrary. Evidence considered in this assessment includes the reasons for the impairment, the severity and the duration of the impairment, changes in value subsequent to year-end, forecasted performance of the investee, and the general market condition in the geographic area or industry in which the investee operates.
Premiums and discounts are amortized or accreted over the life of the related held-to-maturity security as an adjustment to yield using the effective-interest method. Such amortization and accretion are included in the “interest income” line item in the statement of operations. Interest income is recognized when earned.
As of December 31, 2022, the Company classifies its United States Treasury securities with original maturities within three months as trading securities in accordance with ASC 320 Topic. Trading securities are presented on the balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these securities is included in gain on Investments Held in Trust Account in the accompanying statement of operations. The estimated fair values of investments held in the Trust Account are determined using available market information and classifies as Level 1 measurements.
During the year ended December 31, 2022 and the period from April 16, 2021 (inception) through December 31, 2021, the Company did not withdraw any of the interest income from the Trust Account to pay its tax obligations.
The carrying value, excluding gross unrealized holding loss and fair value of held to maturity securities on December 31, 2021, are as follows:
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| Concentration of Credit Risk | 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 which, at times may exceed the Federal depository insurance coverage of $250,000. As of December 31, 2022 and 2021, the Company had not experienced losses on this account and management believes the Company was not exposed to significant risks on such account.
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| Offering Costs associated with the Initial Public Offering | Offering Costs associated with the Initial Public Offering
The Company complies with the requirements of the ASC 340-10-S99-1. Offering costs consisted of legal, accounting, underwriting fees, other costs incurred through the IPO that were directly related to the IPO, and fair value in excess of consideration paid with respect to the Founder Shares sold to the anchor investors. The Company incurred offering costs amounting to $11,883,987 as a result of the IPO consisting of $ of underwriting commissions, $ fair value of Representative Shares, $4,025,000 of deferred underwriting commissions, $554,107 of other offering costs and $ of fair value in excess of consideration paid with respect to the Founder Shares sold to the anchor investors. Of the total offering costs, $11,284,247 was charged to temporary equity upon the completion of the IPO and $599,740 was charged to equity during the period from April 16, 2021 (inception) through December 31, 2021.
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| Income Taxes | Income Taxes
The Company accounts for income taxes under FASB ASC 740, “Income Taxes” (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.
FASB 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. There were no unrecognized tax benefits as of December 31, 2022 and 2021. 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 December 31, 2022 and 2021, there were no unrecognized tax benefits and no amounts were accrued for the payment of interest and penalties. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
There is currently no taxation imposed on income by the Government of the Cayman Islands. In accordance with federal income tax regulations, income taxes are not levied on the Company, but rather on the individual owners. United States (“U.S.”) taxation would occur on the individual owners if certain tax elections are made by U.S. owners and the Company were treated as a passive foreign investment company. Additionally, U.S. taxation could occur to the Company itself if the Company is engaged in a U.S. trade or business. The Company is not expected to be treated as engaged in a U.S. trade or business at this time.
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| Net Loss Per Ordinary Share |
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. Net loss per ordinary share is computed by dividing net loss by the weighted average number of ordinary shares outstanding for the period. The Company applies the two-class method in calculating earnings per share. Remeasurement adjustments associated with the redeemable Class A ordinary shares is excluded from earnings per share as the redemption value approximates fair value.
The calculation of diluted loss per share does not consider the effect of the warrants issued in connection with the (i) IPO, and (ii) the private placement because the warrants are contingently exercisable, and the contingencies have not yet been met. The warrants are exercisable to purchase 14,365,000 Class A ordinary shares in the aggregate. As of December 31, 2022 and 2021, the Company did not have any dilutive securities or 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 net loss per ordinary share is the same as basic net loss per ordinary share for the periods presented.
The Company has two classes of shares, which are referred to as Class A ordinary shares and Class B ordinary shares. Earnings and losses are shared pro rata between the two classes of shares. No warrants were exercised during the year ended December 31, 2022 and for the period from April 16, 2021 (inception) through December 31, 2021. As a result, diluted net loss per ordinary share is the same as basic net loss per ordinary share for the period. In connection with the underwriters exercise of their over-allotment option on October 15, 2021, Class B ordinary shares were no longer subject to forfeiture. These shares were excluded from the calculation of weighted average shares outstanding until they were no longer subject to forfeiture. Accretion of the carrying value of Class A ordinary shares to redemption value is excluded from net loss per ordinary share because the redemption value approximates fair value.
The following table reflects the calculation of basic and diluted net loss per ordinary share:
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| Ordinary Shares Subject to Possible Redemption | Ordinary Shares Subject to Possible Redemption
The 11,500,000 Public Warrants and 2,865,000 Private Placement Warrants were issued in accordance with the guidance contained in ASC 815-40. Such guidance provides that because the warrants meet the criteria for equity treatment thereunder, each warrant is recorded as equity. The Company accounts for its outstanding warrants as equity-classified instruments based on such guidance.
All of the ordinary shares sold as part of the Units in the IPO contain a redemption feature which allows for the redemption of such Public Shares in connection with the Company’s liquidation, if there is a shareholder vote or tender offer in connection with a business combination and in connection with certain amendments to the Company’s amended and restated memorandum and articles of association. In accordance with SEC and its staff’s guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99, redemption provisions not solely within the control of the Company require ordinary shares subject to redemption to be classified outside of permanent equity. Therefore, all Public Shares have been classified outside of permanent equity.
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable ordinary shares to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable ordinary shares are affected by charges against additional paid in capital and accumulated deficit.
The Company issued to EF Hutton and/or its designees, Class A ordinary shares upon the consummation of the IPO. EF Hutton has agreed (i) to waive its redemption rights with respect to such ordinary shares in connection with the completion of the initial business combination and (ii) to waive its rights to liquidating distributions from the Trust Account with respect to such ordinary shares if the Company fails to complete its initial business combination within the Combination Period (See Note 6).
As of December 31, 2022 and 2021, the ordinary shares subject to possible redemption reflected on the balance sheets are reconciled in the following table:
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| Share Based Compensation |
The Company complies with ASC 718 Compensation — Stock Compensation regarding interest in founder shares acquired by directors of the Company at prices below fair value. The interest in acquired shares shall vest upon the Company consummating an initial business combination (the “Vesting Date”). If prior to the Vesting Date, the director ceases to be a director, the interest in the founder shares will be forfeited. The interest in the founder shares owned by the director (1) may not be sold or transferred, until six months after the consummation of a Business Combination, and (2) may not be entitled to redemption from the funds held in the Trust Account, or any liquidating distributions. The Company has 12 months. which was automatically extended to 15 months with respect to the filing of Form S-4 on October 5, 2022, (or up to 21 months if the Company further extends the period of time to consummate a business combination, or if the Company’s shareholders approve an extension, in each case in accordance with the Company’s amended and restated memorandum and articles of association) from the date of the IPO to consummate a Business Combination, and if a Business Combination is not consummated, the Company will liquidate and the interest in the founder shares will become worthless (see Note 5).
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| Fair Value of Financial Instruments | Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates the carrying amounts represented in the accompanying balance sheets, primarily due to their short-term nature. The Company applies ASC 820, which establishes a framework for measuring fair value and clarifies the definition of fair value within that framework. ASC 820 defines fair value as an exit price, which is the price that would be received for an asset or paid to transfer a liability in the Company’s principal or most advantageous market in an orderly transaction between market participants on the measurement date. The fair value hierarchy established in ASC 820 generally requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs reflect the assumptions that market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the entity’ own assumptions based on market data and the entity’s judgments about the assumptions that market participants would use in pricing the asset or liability and are to be developed based on the best information available in the circumstances.
Level 1—Assets and liabilities with unadjusted, quoted prices listed on active market exchanges. Inputs to the fair value measurement are observable inputs, such as quoted prices in active markets for identical assets or liabilities.
Level 2—Inputs to the fair value measurement are determined using prices for recently traded assets and liabilities with similar underlying terms, as well as direct or indirect observable inputs, such as interest rates and yield curves that are observable at commonly quoted intervals.
Level 3—Inputs to the fair value measurement are unobservable inputs, such as estimates, assumptions, and valuation techniques when little or no market data exists for the assets or liabilities.
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| Financial Instruments | Financial Instruments
The Company will account 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 FASB 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 is conducted at the time of warrant issuance and as of each subsequent annual 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 of 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. The Company accounts for its outstanding warrants as equity-classified.
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| Recent Accounting Pronouncements | Recent Accounting Pronouncements
Management does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s financial statements. |
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Significant Accounting Policies (Tables) |
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| Summary of gross holding losses and fair value of held-to-maturity securities |
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| Reconciliation of Net Loss per Common Share |
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| Summary of reconciliation ordinary shares subject to possible redemption reflected on the balance sheet |
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Significant Accounting Policies (Details) - US Treasury Securities [Member] |
Dec. 31, 2022
USD ($)
|
|---|---|
| Debt Securities, Held-to-Maturity, Allowance for Credit Loss [Line Items] | |
| Carrying Value | $ 115,010,543 |
| Gross Unrealized Gains | 2,237 |
| Gross Unrealized Losses | |
| Fair Value | $ 115,012,390 |
Significant Accounting Policies (Details 1) - USD ($) |
9 Months Ended | 12 Months Ended | |
|---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2022 |
Dec. 31, 2021 |
|
| Numerator: | |||
| Allocation of net loss | $ 231,291 | $ 736,161 | |
| Class A Ordinary Shares Subject To Possible Redemption [Member] | |||
| Numerator: | |||
| Allocation of net loss | $ (584,255) | $ (132,127) | |
| Denominator: | |||
| Weighted-average shares outstanding | 11,500,000 | 3,450,000 | |
| Basic and diluted net loss per share | $ (0.05) | $ (0.04) | |
| Non Redeemable Cass A And Class B Ordinary Shares [Member] | |||
| Numerator: | |||
| Allocation of net loss | $ (151,906) | $ (99,164) | |
| Denominator: | |||
| Weighted-average shares outstanding | 2,990,000 | 2,589,308 | |
| Basic and diluted net loss per share | $ (0.05) | $ (0.04) | |
Significant Accounting Policies (Details 2) - USD ($) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2022 |
Dec. 31, 2021 |
|
| Accounting Policies [Abstract] | ||
| Gross proceeds from IPO | $ 115,000,000 | |
| Proceeds allocated to Public Warrants | (5,750,000) | |
| Ordinary share issuance costs | (11,284,247) | |
| Remeasurement adjustment of carrying value to redemption value | 17,034,247 | |
| Ordinary shares subject to possible redemption | $ 115,000,000 | |
| Accretion of carrying value to redemption value | 1,762,710 | |
| Ordinary shares subject to possible redemption | $ 116,762,710 | $ 115,000,000 |
Private Placement (Details Narrative) - USD ($) |
9 Months Ended | 12 Months Ended | |
|---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2022 |
Oct. 15, 2021 |
|
| Class of Warrant or Right [Line Items] | |||
| Aggregate purchase price | $ 5,750,000 | ||
| Private Placement [Member] | |||
| Class of Warrant or Right [Line Items] | |||
| Aggregate purchase price | $ 2,865,000 | ||
| Threshold Period For Not To Transfer, Assign Or Sell Any Shares Or Warrants After Completion Of Initial Business Combination | 30 days | ||
| Private Placement Warrants | |||
| Class of Warrant or Right [Line Items] | |||
| Number of warrants to purchase shares issued | 2,865,000 | ||
| Price of warrants | $ 1.00 | $ 1.00 |
Subsequent Events (Details Narrative) - Subsequent Event [Member] - USD ($) |
1 Months Ended | ||||||
|---|---|---|---|---|---|---|---|
Jan. 13, 2023 |
Feb. 14, 2023 |
Mar. 15, 2023 |
Feb. 28, 2023 |
Jan. 26, 2023 |
Jan. 17, 2023 |
Jan. 08, 2023 |
|
| Subsequent Event [Line Items] | |||||||
| Net tangible assets | $ 5,000,001 | ||||||
| Transaction expenses | Closing after the payment of their transaction expenses from $25 million to $4 million | ||||||
| Business Combination discription | Delete the closing condition added by the First BCA Amendment that holders of at least 5,200,000 publicly held Class A ordinary shares redeem such shares at the closing of the transactions contemplated in the Business Combination since the redemption of 6,058,262 Class A ordinary shares in connection with the January 13, 2023 Charter Amendment rendered such condition unnecessary. | ||||||
| Subsequent Events discription | holders of 6,058,262 of the public shares exercised their right to redeem those shares for cash at an approximate price of $10.16 per share, for an aggregate of approximately $61.57 million, leaving 5,441,738 public shares outstanding after the January 13, 2023 shareholders meeting. | ||||||
| Deposited amount | $ 312,900 | $ 312,900 | |||||
| Trust account | $ 56,300,000 | ||||||
| Working capital | $ 1,062,500 | $ 1,000,000 | |||||
| Interest-bearing notes outstanding | $ 355,740 | $ 200,260 | |||||
| Officers paid | $ 29,754 |
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