Aura FAT Projects Acquisition p(AFAR) - 2024 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION Presents the company's unaudited interim financial statements and management's discussion and analysis for the specified periods Item 1. Financial Statements This section presents the unaudited interim financial statements, including the Balance Sheets, Statements of Operations, Statements of Changes in Shareholders' Deficit, Statements of Cash Flows, and accompanying Notes to Financial Statements for Aura Fat Projects Acquisition Corp. as of and for the periods ended August 31, 2024 and November 30, 2023 Balance Sheets Provides a snapshot of the company's financial position, detailing assets, liabilities, and shareholders' deficit at specific dates Balance Sheets Summary Table | Metric | August 31, 2024 | November 30, 2023 | | :----------------------------------------- | :-------------- | :---------------- | | Cash | $151,901 | $233,088 | | Cash & Marketable Securities in Trust Acct | $3,134,182 | $30,604,459 | | Total Assets | $3,413,948 | $30,968,480 | | Total Current Liabilities | $2,962,881 | $1,929,825 | | Total Liabilities | $6,987,881 | $5,954,825 | | Total Shareholders' Deficit | $(6,708,115) | $(5,590,804) | - The company experienced a significant decrease in Cash and marketable securities held in the Trust Account from $30,604,459 as of November 30, 2023, to $3,134,182 as of August 31, 2024, primarily due to redemptions[11] - Total Liabilities increased from $5,954,825 to $6,987,881, driven by increases in accounts payable, accrued expenses, and advances from related parties[11] Statements of Operations Details the company's revenues, expenses, and net income or loss over specific interim periods Statements of Operations Summary Table | Metric | 3 Months Ended Aug 31, 2024 | 3 Months Ended Aug 31, 2023 | 9 Months Ended Aug 31, 2024 | 9 Months Ended Aug 31, 2023 | | :----------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Operating and formation costs | $370,232 | $465,378 | $766,079 | $1,332,243 | | Loss from operations | $(370,232) | $(465,378) | $(766,079) | $(1,332,243) | | Interest earned on Note Receivable | $1,262 | $- | $3,768 | $- | | Interest earned on marketable securities | $261,486 | $1,009,563 | $1,085,980 | $3,687,468 | | Unrealized (loss) gain on marketable securities | $(12,045) | $9,101 | $- | $3,730 | | Total other income, net | $250,703 | $1,018,664 | $1,089,748 | $3,691,198 | | Net (loss) income | $(119,529) | $553,286 | $323,669 | $2,358,955 | | Basic and diluted net (loss) income per share, Class A | $(0.03) | $0.06 | $0.06 | $0.18 | - The company reported a net loss of $119,529 for the three months ended August 31, 2024, a significant decline from a net income of $553,286 in the prior-year period, primarily due to reduced interest income from marketable securities in the Trust Account and an unrealized loss[14] - For the nine months ended August 31, 2024, net income decreased to $323,669 from $2,358,955 in the same period of 2023, largely driven by a substantial reduction in interest earned on marketable securities held in the Trust Account[14] Statements of Changes in Shareholders' Deficit Outlines the changes in the company's equity components, including net income/loss and share redemptions, over interim periods - The accumulated deficit increased from $(5,591,104) as of November 30, 2023, to $(6,708,415) as of August 31, 2024, primarily due to extension funds attributable to common stock subject to redemption and remeasurement of Class A ordinary shares subject to redemption, partially offset by net income in earlier quarters[16][17] - Significant remeasurements of Class A ordinary shares subject to redemption occurred, totaling $(402,356), $(434,183), and $(249,441) in the three-month periods ending February 29, May 31, and August 31, 2024, respectively[16] Statements of Cash Flows Summarizes the cash inflows and outflows from operating, investing, and financing activities for interim periods Statements of Cash Flows Summary Table | Cash Flow Activity | Nine Months Ended Aug 31, 2024 | Nine Months Ended Aug 31, 2023 | | :--------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(339,969) | $(540,784) | | Net cash provided by investing activities | $28,556,257 | $92,464,424 | | Net cash used in financing activities | $(28,297,475) | $(92,239,424) | | Net Change in Cash | $(81,187) | $(315,784) | | Cash – End of period | $151,901 | $44,746 | - Cash provided by investing activities significantly decreased from $92,464,424 in 2023 to $28,556,257 in 2024, primarily due to lower cash withdrawals from the Trust Account in connection with redemptions[20] - Net cash used in financing activities also decreased from $(92,239,424) in 2023 to $(28,297,475) in 2024, reflecting reduced common stock redemptions[20] Notes to Financial Statements Provides detailed explanations and additional information supporting the interim financial statements NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS Describes the company's formation, business purpose, IPO, and ongoing efforts to complete a Business Combination - Aura Fat Projects Acquisition Corp. is a Cayman Islands exempted company incorporated on December 6, 2021, formed as a blank check company to effect a Business Combination[22] - The Company completed its Initial Public Offering (IPO) on April 18, 2022, raising $115,000,000 from 11,500,000 units and an additional $5,000,000 from private placement warrants[24] - As of August 31, 2024, the Company had $151,901 in its operating bank account and a working capital deficit of $2,683,115, raising substantial doubt about its ability to continue as a going concern without additional financing or completing a Business Combination[40][42] - The Company entered into a definitive Business Combination Agreement with Allrites Holdings Pte Ltd. on May 7, 2023, and has extended the deadline to consummate a Business Combination to October 18, 2024, with further extensions possible through July 18, 2025[34][39][43] NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Outlines the key accounting principles and methods used in preparing the interim financial statements - The financial statements are prepared in accordance with GAAP for interim financial information, omitting certain disclosures as per SEC rules for interim reporting[47] - The Company is an 'emerging growth company' and has elected not to opt out of the extended transition period for complying with new or revised financial accounting standards[49][50] - Class A ordinary shares subject to possible redemption are classified as temporary equity and presented at redemption value, with changes in redemption value recognized immediately[56][57] - The Company is an exempted Cayman Islands company and is not subject to income taxes in the Cayman Islands or the United States, resulting in a zero tax provision[62] NOTE 3. INITIAL PUBLIC OFFERING Details the terms and proceeds of the company's Initial Public Offering, including units and warrants issued - The Company sold 11,500,000 Units at $10.00 per Unit in its IPO, with each Unit consisting of one Class A ordinary share and one redeemable warrant, exercisable at $11.50 per share[71] NOTE 4. PRIVATE PLACEMENT Describes the private placement of warrants to the Sponsor and their specific terms and conditions - The Sponsor purchased 5,000,000 Private Placement Warrants at $1.00 each, generating $5,000,000 in gross proceeds[74] - Private Placement Warrants are identical to IPO warrants but lack redemption rights and liquidating distributions from the Trust Account, expiring worthless if a Business Combination is not consummated within the Combination Period[75] NOTE 5. RELATED PARTY TRANSACTIONS Discloses transactions and financial arrangements between the company and its related parties, including the Sponsor and Allrites - The Sponsor acquired 2,875,000 Class B ordinary shares (Founder Shares) for $25,000, which are subject to a lock-up period[76][77] - The Company pays an affiliate of the Sponsor $20,000 per month for administrative services, incurring $60,000 for the three months and $180,000 for the nine months ended August 31, 2024[78] - Advances from the Sponsor increased to $1,232,116 as of August 31, 2024, up from $800,000 as of November 30, 2023, used partly for extension payments into the Trust Account[82] - The Company received $181,666 in non-interest bearing advances from Allrites as of August 31, 2024, payable upon merger closing or mandatory liquidation[83] NOTE 6. COMMITMENTS Details the company's contractual obligations, including deferred underwriting fees and Business Combination agreement terms - The Company has a deferred underwriting fee of $4,025,000, payable upon completion of the Business Combination, which will be satisfied through a combination of cash (up to $402,500 or $500,000 with PIPE) and Company scrip[87][88][89] - Under the Business Combination Agreement with Allrites, Allrites shareholders will receive 9,200,000 Company Class A Ordinary Shares, valued at $92,000,000, as consideration[92] - Additional earnout consideration of up to 1,800,000 Class A Ordinary Shares is contingent on Allrites' recurring revenue exceeding $12,000,000 and $20,000,000 in the first and second fiscal years post-closing, respectively[93] - The Business Combination Agreement includes termination clauses, with a $5,000,000 liquidated damages fee payable by the terminating party under certain circumstances[94][97] NOTE 7. STOCKHOLDERS' DEFICIT Provides information on the company's authorized and outstanding share capital, including Class A and Class B ordinary shares and warrants - The Company is authorized to issue 1,000,000 preference shares (none issued), 300,000,000 Class A ordinary shares (115,000 outstanding excluding redeemable shares), and 30,000,000 Class B ordinary shares (2,875,000 outstanding)[103][104] - Class B ordinary shares (Founder Shares) have exclusive voting rights for director appointments and convert to Class A ordinary shares on a one-for-one basis upon Business Combination, subject to adjustment[105][107] - Warrants become exercisable 12 months from IPO closing or upon Business Combination, expiring five years after Business Combination, with an exercise price of $11.50 per share, subject to adjustment under certain conditions[108][109] NOTE 8. FAIR VALUE MEASUREMENTS Explains the methodology for valuing financial instruments and presents fair value hierarchy classifications - The Company classifies its financial assets and liabilities using a fair value hierarchy (Level 1, 2, 3) based on observable and unobservable inputs[119][120] - As of August 31, 2024, assets held in the Trust Account, primarily U.S. Treasury securities, were valued at $3,134,182 (Level 1), a significant decrease from $30,604,459 as of November 30, 2023[121][122] NOTE 9. SUBSEQUENT EVENTS Reports significant events that occurred after the balance sheet date, including trading suspension and delisting - Trading in the Company's securities was suspended on September 9, 2024, leading to delisting from Nasdaq[124] - The Company is moving its common stock to the over-the-counter market as an interim measure and remains committed to uplisting to Nasdaq after completing its business combination with Allrites Holdings Pte Ltd[124] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the Company's financial condition and operational results, highlighting its status as a blank check company, recent developments regarding its Business Combination deadline and related financing, and a detailed analysis of its financial performance and liquidity. It also addresses off-balance sheet arrangements, contractual obligations, and accounting policies Overview Introduces the company as a blank check entity and its strategy for pursuing a Business Combination - Aura FAT Projects Acquisition Corp. is a blank check company formed on December 6, 2021, aiming to complete a Business Combination using IPO proceeds, shares, debt, or a combination thereof[128] - The Company expects to incur significant costs in pursuing its acquisition plans and does not anticipate generating operating revenues until after the Business Combination is completed[128] Recent Developments Highlights key recent events impacting the company's operations and Business Combination efforts, including extensions and financing - Shareholders approved extensions to the Business Combination deadline, allowing for up to 12 one-month extensions through July 18, 2025, with the Sponsor depositing funds into the Trust Account for each extension[129] - The Company and its Underwriter entered into a Deed of Satisfaction and Discharge of Indebtedness for the deferred underwriting fee, which will be paid in a combination of cash and Company scrip upon Business Combination[130][131] - Shareholders also approved the NTA Amendment, removing limitations on share redemptions based on net tangible assets[132] - Advances from the Sponsor increased to $1,232,116 as of August 31, 2024, with $605,000 used for extension payments, and advances from Allrites totaled $181,666[133][134] - The definitive Business Combination Agreement with Allrites Holdings Pte Ltd. was entered into on May 7, 2023, involving a capital restructuring and exchange of shares[135][136][138][139] Results of Operations Analyzes the company's financial performance, focusing on net income/loss and key revenue and expense drivers Results of Operations Summary Table | Metric | 3 Months Ended Aug 31, 2024 | 3 Months Ended Aug 31, 2023 | 9 Months Ended Aug 31, 2024 | 9 Months Ended Aug 31, 2023 | | :----------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net (loss) income | $(119,529) | $553,286 | $323,669 | $2,358,955 | | Operating costs | $370,232 | $465,378 | $766,079 | $1,332,243 | | Interest income on marketable securities | $261,486 | $1,009,563 | $1,085,980 | $3,687,468 | - The Company reported a net loss of $119,529 for the three months ended August 31, 2024, compared to a net income of $553,286 for the same period in 2023, primarily due to reduced interest income from the Trust Account[149] - For the nine months ended August 31, 2024, net income was $323,669, a decrease from $2,358,955 in the prior year, mainly attributable to a significant drop in interest earned on marketable securities[150] Liquidity and Capital Resources Assesses the company's cash position, funding sources, and ability to meet its financial obligations and continue as a going concern - The Company's IPO and private placement generated $115,000,000 and $5,000,000 respectively, with $117,300,000 placed in the Trust Account[152] - As of August 31, 2024, the Trust Account held $3,134,182, a substantial decrease from the initial amount, with $151,901 in cash outside the Trust Account for working capital[154][155] - The Company faces a going concern risk due to liquidity needs and the mandatory liquidation date if a Business Combination is not completed by July 18, 2025 (with extensions)[159] - The Sponsor or affiliates may provide Working Capital Loans, convertible into warrants, to finance transaction costs or cover deficiencies[156] Off-Balance Sheet Arrangements Confirms the absence of any off-balance sheet arrangements as of the reporting date - The Company has no off-balance sheet arrangements as of August 31, 2024[160] Contractual obligations Details the company's ongoing contractual commitments, such as administrative fees and deferred underwriting discounts - The Company is obligated to pay an affiliate of the Sponsor $20,000 per month for administrative services until the earlier of Business Combination completion or liquidation[161] - A deferred underwriting discount of $4,025,000 is payable upon Business Combination, with payment terms recently amended to include cash and Company scrip[161][162][163] Critical Accounting Policies States that management has not identified any critical accounting policies for the interim period - Management has not identified any critical accounting policies[164] Recent Accounting Standards Indicates management's assessment of the impact of recently issued accounting pronouncements on the financial statements - Management believes no recently issued, but not yet effective, accounting pronouncements would materially affect the Company's unaudited financial statements[164] Item 3. Quantitative and Qualitative Disclosures Regarding Market Risk This item is not required for smaller reporting companies - The Company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[165] Item 4. Controls and Procedures This section details the evaluation of the Company's disclosure controls and procedures and reports on any changes in internal control over financial reporting Evaluation of Disclosure Controls and Procedures Assesses the effectiveness of the company's disclosure controls and procedures as of the reporting date - As of August 31, 2024, the Company's principal executive officer and principal financial and accounting officer concluded that disclosure controls and procedures were not effective at a reasonable assurance level[167] Changes in Internal Control over Financial Reporting Reports on any material changes in the company's internal control over financial reporting during the fiscal quarter - There were no material changes in the Company's internal control over financial reporting during the fiscal quarter ended August 31, 2024[168] PART II - OTHER INFORMATION Presents additional disclosures not covered in the financial statements, including legal, risk, and equity information Item 1. Legal Proceedings This section states that there are no legal proceedings - The Company is not currently involved in any legal proceedings[170] Item 1A. Risk Factors This section updates the risk factors, focusing on the impact of changes in laws or regulations, particularly SEC proposed rules for SPACs, and the additional burdens and risks associated with pursuing a target company with international operations - Changes in laws or regulations, or failure to comply, may adversely affect the Company's ability to negotiate and complete its initial Business Combination and results of operations[170][171] - Proposed SEC rules relating to SPACs could materially adversely affect the Company's ability to complete its initial business combination and increase associated costs and time[172] - Pursuing an international target company for a Business Combination exposes the Company to additional risks, including cross-border operational complexities, currency fluctuations, political instability, and regulatory differences[173][174][176] - Military actions and related economic sanctions (e.g., Russia-Ukraine conflict) may materially and adversely affect the Company's ability to consummate a Business Combination or the operations of a target business[177] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the issuance of unregistered equity securities, including Founder Shares and Private Placement Warrants, and the use of proceeds from the Initial Public Offering and private placement - The Company issued 2,875,000 Founder Shares to the Sponsor for $25,000, which will convert into Class A ordinary shares upon Business Combination[179] - The Initial Public Offering involved the sale of 11,500,000 Units at $10.00 each, generating $115,000,000, with each Unit comprising one Class A ordinary share and one redeemable warrant[180] - Simultaneously, 5,000,000 Private Placement Warrants were sold to the Sponsor for $5,000,000[182] - Total transaction costs amounted to $5,724,785, including $1,150,000 in underwriting fees and $4,025,000 in deferred underwriting fees[184] - Net proceeds of $118,300,215 from the IPO and private placement were primarily placed in the Trust Account ($117,300,000)[184] Item 3. Defaults Upon Senior Securities This section confirms that there are no defaults upon senior securities - There are no defaults upon senior securities[186] Item 4. Mine Safety Disclosures This section states that there are no mine safety disclosures - There are no mine safety disclosures[186] Item 5. Other Information This section indicates that there is no other information to report - There is no other information to report[186] Item 6. Exhibits This section lists the exhibits filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q - The report includes certifications from the Principal Executive Officer and Principal Financial Officer (Exhibits 31.1, 31.2, 32.1, 32.2) and XBRL taxonomy extension documents (Exhibits 101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE)[186] PART III - SIGNATURES Contains the official certifications and signatures required for the quarterly report submission Signatures Confirms the official signing and submission of the Form 10-Q report by authorized officers - The report was signed on October 7, 2024, by Tristan Lo, Co-Chief Executive Officer, Chairman, and Director, and David Andrada, Co-Chief Executive Officer, Chief Financial Officer, and Director[189]