DigiAsia Corp.(FAAS) - 2022 Q4 - Annual Report

Part I Business StoneBridge Acquisition Corporation, a SPAC, aims to complete a business combination, with a definitive agreement signed with DigiAsia Bios Pte. Ltd. on January 5, 2023 Introduction StoneBridge Acquisition Corporation, a Cayman Islands blank check company, completed its IPO in July 2021, raising $200 million for a business combination - The company is a blank check company incorporated in February 2021 to effect a merger, share exchange, asset acquisition, or similar business combination[15] - IPO and Trust Account Details | Metric | Value | | :--- | :--- | | IPO Date | July 20, 2021 | | IPO Gross Proceeds | $200,000,000 | | Private Placement Warrant Proceeds | $8,000,000 | | Amount Placed in Trust Account | $202,000,000 | - The company has a 22-month period from its IPO closing date (July 20, 2021), extendable up to 24 months, to consummate an initial business combination[21] Recent Developments - Business Combination with DigiAsia StoneBridge entered a definitive business combination agreement with DigiAsia Bios Pte. Ltd. on January 5, 2023, contingent on financing and approvals - On January 5, 2023, StoneBridge entered into a business combination agreement with DigiAsia Bios Pte. Ltd., a Singapore-based company[22] - The transaction includes an earnout provision for up to 5,000,001 additional PubCo Ordinary Shares for the Management Earnout Group, contingent on time and stock price performance milestones within a 5-year period post-closing[27] - The business combination is conditioned on obtaining transaction financing of at least $30 million (a mix of non-redeemed trust funds, PIPE, and convertible debt) and a further $100 million equity line of credit (ELOC)[31][32] - Closing is contingent upon several conditions, including StoneBridge having at least $5,000,001 of net tangible assets, receiving shareholder approval, and having aggregate cash of at least $20,000,000 available at closing[35] Business Strategy and Acquisition Criteria If the DigiAsia transaction fails, the company will target businesses in Asia Pacific's "new economy sectors" with sustainable earnings and competitive advantages - If the DigiAsia transaction fails, the company will target businesses in new economy sectors such as Ecommerce, Fintech, SaaS, Renewable Energy, and IT services, with a geographic focus on the Asia Pacific[48][65] - Key investment criteria for a target business include: sustainable earnings with significant growth, positive public market reception, high barriers to entry, strong competitive advantages, and a management team ready for public markets[67][68][69][70] Management and Governance The company is led by CEO Bhargava Marepally and President/CFO Prabhu Antony, operating as an "emerging growth company" with limited staff - The management team and board possess experience in public company governance, executive leadership, private equity, and capital markets in both Asia and the United States[49][50] - The company qualifies as an "emerging growth company" and a "smaller reporting company", allowing it to take advantage of certain reduced disclosure and reporting exemptions[85][94] - The company has two executive officers who are not obligated to devote a specific number of hours to company affairs and does not intend to have full-time employees before completing a business combination[86] Risk Factors The company faces significant risks as a blank check company, including going concern doubts, potential failure to complete a business combination, and conflicts of interest Risks Related to Business Operations and SPAC Structure As a blank check company with no operating history, StoneBridge faces substantial doubt about its ability to continue as a going concern and risks failing to complete a business combination by July 2023 - The company has no operating history or revenues, providing no basis for shareholders to evaluate its ability to achieve its business objective[91][92] - The independent registered public accounting firm's report expresses substantial doubt about the company's ability to continue as a "going concern" due to its working capital deficit and need to consummate a business combination[93][494] - The requirement to complete an initial business combination by July 2023 gives potential targets leverage in negotiations and may decrease the ability to conduct thorough due diligence[119][120] - Increased competition from a large number of other SPACs may make it more difficult and costly to find and complete an attractive business combination[170][171] Risks Related to Securities and Shareholder Rights Shareholders face risks of dilution, potential worthlessness of warrants, and limited rights, compounded by the company's Cayman Islands incorporation - If the company fails to complete a business combination, public shareholders may only receive approximately $10.31 per share, and warrants will expire worthless[121][125] - The Sponsor paid approximately $0.004 per founder share, which will result in immediate and substantial dilution to public shareholders upon a business combination[255][256] - The company's warrants are accounted for as a liability and recorded at fair value, with changes in fair value reported in earnings, which could adversely affect the stock price[277][278] - As a Cayman Islands company, it may be difficult for U.S. investors to effect service of process or enforce judgments against the company, its officers, or directors[291][292][293] Risks Related to Management and Conflicts of Interest The company's reliance on key officers with other business interests and the Sponsor's financial incentives create potential conflicts of interest with public shareholders - The company's operations are dependent on a small group of individuals, particularly CEO Bhargava Marepally and CFO Prabhu Antony, who are not required to commit a specific amount of time to company affairs[300][316] - The Sponsor, officers, and directors will lose their entire investment if a business combination is not completed, creating a conflict of interest that may influence their decision to pursue a deal that may not be advantageous for public shareholders[155][313] - Officers and directors have fiduciary or contractual duties to other entities, which may compete with the company for business opportunities, and they may present opportunities to those other entities first[318][320][321] Risks Related to Internal Controls and Foreign Operations Material weaknesses in internal controls over financial reporting and risks associated with potential foreign operations pose significant challenges for the company - The company has identified material weaknesses in its internal control over financial reporting related to the accounting and valuation for complex financial instruments and incomplete accounting for accruals[357][359] - Management concluded that due to these material weaknesses, its disclosure controls and procedures were not effective as of December 31, 2022[404] - Acquiring a company with operations outside the U.S. would subject the company to various risks, including currency fluctuations, political and economic instability, and complex tax and legal environments[341][346] Unresolved Staff Comments The company reports no unresolved staff comments - Not applicable[364] Properties The company does not own any properties, with its executive office space provided by the Sponsor for a monthly fee - The company does not own any real estate or other physical properties[365] - Executive offices are located at One World Trade Center, Suite 8500, New York, NY 10007, with the cost included in a $10,000 per month fee paid to the Sponsor for office space and administrative services[365] Legal Proceedings The company is not currently involved in any material litigation or legal proceedings - The company is not currently a party to any material litigation or legal proceedings[366] Mine Safety Disclosures This section is not applicable to the company - Not Applicable[367] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's units, Class A ordinary shares, and warrants trade on Nasdaq, with no cash dividends paid or intended prior to a business combination - The company's units, Class A ordinary shares, and warrants began trading on Nasdaq on July 16, 2021 (units) and September 7, 2021 (shares and warrants separately)[369] - The company has not paid any cash dividends and does not intend to pay any prior to completing a business combination[371] - In February 2021, the Sponsor purchased 5,750,000 Founder Shares for $25,000; simultaneously with the IPO, the Sponsor and Underwriters purchased 8,000,000 Private Placement Warrants for $8,000,000[372][373] Management's Discussion and Analysis of Financial Condition and Results of Operations As a blank check company with no operating revenue, StoneBridge reported a net income of $10.0 million for 2022, primarily from non-cash gains and interest income, but faces substantial doubt about its going concern ability Results of Operations The company, having no operating revenues, reported a net income of $10.0 million for 2022, driven by a non-cash gain on warrant liabilities and trust account interest - Statement of Operations Summary | Metric | For the year ended Dec 31, 2022 | For the period Feb 2, 2021 to Dec 31, 2021 | | :--- | :--- | :--- | | Net Income | $10,006,245 | $8,628,758 | | Loss from operations | ($1,368,675) | ($618,777) | | Change in fair value of warrant liability | $8,452,000 | $10,808,000 | | Interest income from Trust account | $2,920,785 | $6,330 | Liquidity and Capital Resources As of December 31, 2022, the company had $93,344 in cash and a $1.54 million working capital deficit, raising substantial doubt about its ability to continue as a going concern - Financial Position (as of Dec 31, 2022) | Metric (as of Dec 31, 2022) | Value | | :--- | :--- | | Cash in operating accounts | $93,344 | | Investments held in Trust Account | $205,927,087 | | Working Capital Deficit | $1,538,102 | - Management has concluded that there is substantial doubt about the Company's ability to continue as a going concern, given its liquidity needs and the mandatory liquidation deadline if a Business Combination is not completed by July 20, 2023[388][524] Critical Accounting Policies The company's critical accounting policies involve fair value measurement of warrant liabilities, classification of redeemable shares as temporary equity, and the two-class method for net income per share - Warrants are accounted for as a liability and re-measured to fair value at each reporting period, with changes in fair value impacting the statement of operations[395][568] - Class A ordinary shares subject to possible redemption are classified as temporary equity and adjusted to their redemption value at the end of each reporting period[398][540] - The company uses the two-class method for calculating net income per share, allocating earnings pro-rata between Class A and Class B ordinary shares[399][543] Controls and Procedures Management concluded that disclosure controls and procedures were ineffective as of December 31, 2022, due to material weaknesses in internal control over financial reporting, for which remediation plans are underway - Management concluded that as of December 31, 2022, disclosure controls and procedures were not effective[404] - The ineffectiveness was due to a material weakness in internal controls over financial reporting related to accounting for complex financial instruments and incomplete accounting for accruals[359][404] - The company is devoting resources to remediate the material weaknesses, including enhancing access to accounting literature and increasing communication with third-party professionals[405] Part III Directors, Executive Officers and Corporate Governance This section outlines the company's directors and executive officers, their qualifications, board committee structures, potential conflicts of interest, and the adopted code of ethics - Directors and Executive Officers | Name | Age | Title | | :--- | :--- | :--- | | Bhargava Marepally | 51 | Chief Executive Officer and Director | | Prabhu Antony | 44 | President, Chief Financial Officer, and Director | | Sylvia Barnes | 66 | Director | | Shamla Naidoo | 58 | Director | | Richard Saldanha | 79 | Director | | Jeff Najarian | 64 | Director | | Naresh Kothari | 52 | Director | - The board has established an audit committee and a compensation committee, with director nominations overseen by the independent directors[432] - Potential conflicts of interest exist as directors and officers have fiduciary or contractual duties to other entities that may compete for acquisition opportunities[444][446] - CEO Bhargava Marepally received an adjudication order from the Securities and Exchange Board of India in 2013 for violating certain trading regulations, resulting in a penalty of approximately $9,220[429] Executive Compensation Executive officers receive no cash compensation prior to a business combination, with their compensation tied to the Sponsor's founder shares and private placement warrants, and the company reimburses expenses and pays a monthly fee to the Sponsor - Executive officers and directors do not receive any cash compensation from the company prior to a business combination[452] - The company pays its Sponsor $10,000 per month for office space, administrative, and support services, which amounted to $120,000 for the year ended December 31, 2022[454] - Officers and directors are reimbursed for out-of-pocket expenses incurred in connection with activities such as identifying potential target businesses[452] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters As of March 22, 2023, StoneBridge Acquisition Sponsor LLC beneficially owned 100% of Class B ordinary shares, representing 20.0% of total outstanding shares, with CEO Bhargava Marepally and CFO Prabhu Antony sharing beneficial ownership - StoneBridge Acquisition Sponsor LLC holds 5,000,000 Class B ordinary shares, representing 100% of the class and 20.0% of total outstanding ordinary shares[458] - CEO Bhargava Marepally and CFO Prabhu Antony are managing members of the Sponsor's manager and are deemed to share beneficial ownership of the Sponsor's shares[458] - Significant institutional holders of Class A ordinary shares include Highbridge Capital Management (8.8%), Citadel Advisors LLC (8.4%), and Cantor Fitzgerald Securities (7.0%)[458] Certain Relationships and Related Transactions, and Director Independence This section details related party transactions, including the Sponsor's purchase of Founder Shares, monthly administrative fees, and potential working capital loans, alongside the board's determination of independent directors - The Sponsor purchased 5,000,000 Founder Shares for $25,000[462] - The Sponsor or its affiliates may provide Working Capital Loans, with a $1 million nonconvertible note outstanding as of December 31, 2022, under this arrangement[465][466] - The company pays the Sponsor a $10,000 monthly fee for office space and administrative services[467] - The board of directors has determined that Mses. Barnes and Naidoo, and Messrs. Saldanha, Najarian, and Kothari are "independent directors" under Nasdaq standards[478] Principal Accountant Fees and Services The company paid Marcum LLP approximately $81,350 in audit fees for 2022 and $131,325 for 2021, with no other fees for audit-related, tax, or other services - Principal Accountant Fees | Fee Type | 2022 | 2021 | | :--- | :--- | :--- | | Audit Fees | $81,350 | $131,325 | | Audit-Related Fees | $0 | $0 | | Tax Fees | $0 | $0 | | All Other Fees | $0 | $0 | Part IV Exhibits and Financial Statement Schedules This section includes the company's audited financial statements for 2022 and 2021, with an independent auditor's report highlighting a "going concern" uncertainty, and detailed notes on accounting policies, related party transactions, and subsequent events Financial Statements The audited financial statements present the company's financial position as of December 31, 2022, with total assets of $206.2 million, primarily trust account investments, and a net income of $10.0 million for the year - Balance Sheet Summary (as of Dec 31, 2022) | Account | Value | | :--- | :--- | | Total Assets | $206,195,454 | | Investments held in Trust Account | $205,927,087 | | Total Liabilities | $11,346,469 | | Derivative warrant liabilities | $540,000 | | Deferred underwriting fee payable | $9,000,000 | | Total Shareholders' Deficit | ($11,078,102) | - Statement of Operations Summary (Year ended Dec 31, 2022) | Account | Value | | :--- | :--- | | Net Income | $10,006,245 | | Loss from operations | ($1,368,675) | | Change in fair value of warrant liability | $8,452,000 | | Interest income from Trust account | $2,920,785 | Notes to Financial Statements The notes detail critical accounting policies, related party transactions, and significant subsequent events, including the DigiAsia business combination agreement, shareholder redemptions, and a Nasdaq non-compliance notice - The financial statements were prepared assuming the company will continue as a going concern, but its working capital deficiency and need to complete a business combination by July 2023 raise substantial doubt about this assumption[494][523][524] - Subsequent to year-end, on January 5, 2023, the company executed a Business Combination Agreement with DigiAsia Bios Pte. Ltd[587] - On January 20, 2023, shareholders elected to redeem 16,988,575 Class A Ordinary Shares for an aggregate amount of approximately $175.3 million[594] - On March 7, 2023, the company received a notice from Nasdaq indicating non-compliance with the minimum public holders rule, which requires at least 300 public holders[598]