StoneBridge Acquisition (APAC) - 2023 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Interim Financial Statements (Unaudited) This section presents the unaudited interim financial statements for StoneBridge Acquisition Corporation, including condensed balance sheets, statements of operations, changes in shareholders' deficit, and cash flows, along with detailed notes explaining the company's organization, significant accounting policies, and specific financial instruments Condensed Balance Sheets The condensed balance sheets show a significant decrease in total assets and investments held in the Trust Account from December 31, 2022, to September 30, 2023, primarily due to share redemptions, while total liabilities increased, and shareholders' deficit deepened | Metric | Sep 30, 2023 (Unaudited) | Dec 31, 2022 (Audited) | | :-------------------------------- | :----------------------- | :--------------------- | | ASSETS | | | | Cash | $123,789 | $93,344 | | Prepaid expenses and other assets | $3,333 | $175,023 | | Total current assets | $127,122 | $268,367 | | Investments held in Trust Account | $26,974,295 | $205,927,087 | | TOTAL ASSETS | $27,101,417 | $206,195,454 | | LIABILITIES, REDEEMABLE ORDINARY SHARES AND SHAREHOLDERS' DEFICIT | | | | Note Payable - related party | $2,631,948 | $1,000,000 | | Accounts payable | $946,600 | $458,776 | | Due to affiliate | $437,693 | $347,693 | | Total current liabilities | $4,016,241 | $1,806,469 | | Derivative warrant liabilities | $540,000 | $540,000 | | Deferred underwriting fee payable | $9,000,000 | $9,000,000 | | Total liabilities | $13,556,241 | $11,346,469 | | Class A ordinary shares subject to possible redemption | $26,974,295 | $205,927,087 | | Total Shareholders' Deficit | $(13,429,119) | $(11,078,102) | | TOTAL LIABILITIES, REDEEMABLE ORDINARY SHARES AND SHAREHOLDERS' DEFICIT | $27,101,417 | $206,195,454 | Unaudited Condensed Statements of Operations The company reported a net loss for the three months ended September 30, 2023, compared to net income in the prior year, primarily due to lower total other income, which included a significant decrease in the change in fair value of warrant liability and lower dividend income from the Trust Account | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | General and administrative expenses | $417,108 | $293,016 | $1,272,015 | $765,866 | | Loss from operations | $417,108 | $293,016 | $1,272,015 | $765,866 | | Change in fair value of warrant liability | — | $620,000 | — | $8,192,000 | | Dividend income Trust Account | $366,916 | $911,773 | $1,646,951 | $1,204,892 | | Interest income from checking account | $1,660 | $793 | $2,946 | $917 | | Total other income | $368,576 | $1,532,566 | $1,649,897 | $9,397,809 | | NET (LOSS) INCOME | $(48,532) | $1,239,550 | $377,882 | $8,631,943 | | Basic and diluted net income per share, Class A | $0.09 | $0.06 | $0.26 | $0.36 | | Basic and diluted net (loss) income from per share, Class B | $(0.06) | $0.01 | $(0.14) | $0.30 | - Net loss for the three months ended September 30, 2023, was $(48,532), a significant decrease from net income of $1,239,550 in the same period of 2022, primarily driven by the absence of a positive change in fair value of warrant liability (which was $620,000 in 2022) and lower dividend income from the Trust Account[12] - For the nine months ended September 30, 2023, net income was $377,882, substantially lower than $8,631,943 in the prior year, mainly due to the absence of a positive change in fair value of warrant liability (which was $8,192,000 in 2022)[12] Unaudited Condensed Statements of Changes in Shareholders' Deficit The statements of changes in shareholders' deficit reflect a deepening deficit from $(11,078,102) at December 31, 2022, to $(13,429,119) at September 30, 2023, primarily due to remeasurement for Class A ordinary shares to redemption value and net losses, partially offset by net income in certain quarters - Shareholders' Deficit increased from $(11,078,102) at December 31, 2022, to $(13,429,119) at September 30, 2023[15] - Key factors contributing to the change include remeasurement for Class A ordinary shares to redemption value (e.g., $(895,995) in Q1 2023, $(384,040) in Q2 2023, $(366,916) in Q3 2023) and net losses (e.g., $(606,402) in Q1 2023, $(48,532) in Q3 2023), partially offset by net income (e.g., $1,032,816 in Q2 2023)[15] Unaudited Condensed Statements of Cash Flows For the nine months ended September 30, 2023, the company generated positive cash flow from operating activities, significantly increased cash from investing activities due to Trust Account withdrawals for redemptions, and used a substantial amount of cash in financing activities for share redemptions | Cash Flow Activity | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :------------------------------------------ | :-------------------------- | :-------------------------- | | Net cash flows provided by (used in) operating activities | $1,112,393 | $(498,983) | | Net cash flows provided by investing activities | $180,599,743 | — | | Net cash flows used in financing activities | $(181,681,691) | — | | Net change in cash | $30,445 | $(498,983) | | Cash, beginning of period | $93,344 | $670,522 | | Cash, end of period | $123,789 | $171,539 | - Operating activities provided $1,112,393 in cash for the nine months ended September 30, 2023, a significant improvement from a cash outflow of $(498,983) in the prior year[20] - Investing activities generated $180,599,743 in cash in 2023, primarily from the withdrawal of $181,681,691 from the Trust Account for ordinary share redemptions, which was not present in 2022[20] - Financing activities used $(181,681,691) in cash in 2023, entirely due to the redemption of ordinary shares[20] Notes to Condensed Financial Statements (Unaudited) These notes provide critical context to the financial statements, detailing the company's SPAC nature, the proposed business combination with DigiAsia, significant accounting policies, and specific financial instruments like warrants and redeemable shares, also highlighting related party transactions, commitments, liquidity challenges, and going concern risk Note 1 — Description of Organization and Business Operations StoneBridge Acquisition Corporation, a SPAC, was formed to effect a business combination, entered into an agreement with DigiAsia Bios Pte. Ltd. on January 5, 2023, for a proposed amalgamation, has extended its business combination deadline multiple times, most recently to January 20, 2024, and faces mandatory liquidation if a combination is not completed by then, with significant share redemptions having occurred, reducing the Trust Account balance - StoneBridge Acquisition Corporation was incorporated on February 2, 2021, as a SPAC to effect a Business Combination[21] - On January 5, 2023, the Company entered into a Business Combination Agreement with DigiAsia Bios Pte. Ltd. for an amalgamation[22] - The deadline to consummate a business combination has been extended multiple times, most recently to January 20, 2024, with failure to complete by this date resulting in mandatory liquidation[34][47] - Shareholders redeemed 16,988,575 Class A ordinary shares for approximately $175,285,891 on January 20, 2023, and an additional 585,456 shares for approximately $6,395,800 on July 19, 2023, significantly reducing the Trust Account balance[50] Liquidity and Going Concern As of September 30, 2023, the company had a working capital deficit of $3,889,119 and faces substantial doubt about its ability to continue as a going concern if it cannot raise additional funds or complete a business combination by January 20, 2024 - As of September 30, 2023, the Company had $123,789 in its operating bank account, $26,974,295 in the Trust Account, and a working capital deficit of $3,889,119[52] - Management expects to incur significant costs and believes additional funds are needed to meet expenditures and consummate a business combination[52] - The company's ability to continue as a going concern is in substantial doubt if it cannot complete a Business Combination by January 20, 2024, leading to mandatory liquidation[53] Risks and Uncertainties The company acknowledges global geopolitical conflicts, specifically the Russia-Ukraine war and the Israel-Hamas conflict, as sources of uncertainty that could materially affect its ability to consummate a Business Combination or the operations of a target business - The Russia-Ukraine military action and related economic sanctions may materially and adversely affect the Company's ability to consummate a Business Combination or the operations of a target business[54] - The military conflict between Israel and Hamas in October 2023 also causes uncertainty in global markets, with its full impact on the Company's financial condition and Business Combination remaining uncertain[55] Note 2 — Summary of Significant Accounting Policies The company prepares its financial statements in accordance with GAAP for interim reporting, utilizing condensed disclosures, operates as an emerging growth company, electing to use the extended transition period for new accounting standards, with key policies including the use of estimates, classification of investments in the Trust Account as trading securities, and accounting for warrants as liability-classified instruments - 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[59] - Investments held in the Trust Account are classified as trading securities and presented at fair value, with gains and losses recognized in the statements of operations[64] - Warrants are accounted for as liability-classified instruments and are re-measured at fair value at each balance sheet date, with changes recognized in the statement of operations[67][68] - Class A Ordinary shares subject to possible redemption are classified as temporary equity, and changes in redemption value are recognized immediately[72][73] Note 3 — Initial Public Offering The company completed its Initial Public Offering on July 20, 2021, selling 20,000,000 units at $10.00 each, with each unit consisting of one Class A Ordinary share and one-half of one redeemable Public Warrant - The Company sold 20,000,000 units at $10.00 per unit in its Initial Public Offering on July 20, 2021[80] - Each unit consisted of one Class A Ordinary share and one-half of one redeemable Public Warrant, exercisable at $11.50 per share[80] Note 4 — Private Placement Warrants Concurrently with the IPO, the Sponsor and underwriter purchased 8,000,000 Private Placement Warrants at $1.00 each, generating $8,000,000 in gross proceeds, and these warrants will expire worthless if a Business Combination is not completed within the Combination Period - 8,000,000 Private Placement Warrants were sold to the Sponsor and underwriter at $1.00 per warrant, generating $8,000,000[81] - The Private Placement Warrants will expire worthless if the Company does not complete a Business Combination within the Combination Period[82] Note 5 — Related Party Transactions Related party transactions include the Sponsor's purchase and forfeiture of Founder Shares, amounts owed to the Sponsor for offering and administrative costs, and a significant note payable to the Sponsor for extension payments, with the company also having advisory agreements with entities where its CFO has an executive role - The Sponsor purchased 5,750,000 Founder Shares for $25,000 and later forfeited 750,000 shares[83] - As of September 30, 2023, the Company owed the Sponsor $437,693 for deferred offering, formation costs, and administrative support services[86] - A Note Payable to a related party (Sponsor) increased from $1,000,000 at December 31, 2022, to $2,631,948 at September 30, 2023, primarily for extension payments and operating costs[89] - The Company pays the Sponsor $10,000 per month for administrative and support services, totaling $90,000 for the nine months ended September 30, 2023[90] - The Company has advisory agreements with Sett & Lucas Limited, where its CFO is an Executive Director, for financial advisory and investment banking services related to the Business Combination, with success fees contingent on completion[91][92] Note 6 — Commitments and Contingencies The company has registration rights agreements for Founder Shares and warrants, and a deferred underwriting commission of $9,000,000 contingent on completing a Business Combination, which a fee reduction agreement with Cantor Fitzgerald & Co. modifies by forfeiting $4,500,000 in cash for shares of the merged entity and capping the remaining cash fee - Holders of Founder Shares, Private Placement Warrants, and warrants from working capital loans are entitled to registration rights[93] - A deferred underwriting commission of $9,000,000 is payable to underwriters upon completion of a Business Combination[94] - A fee reduction agreement with Cantor Fitzgerald & Co. (underwriters) stipulates a forfeiture of $4,500,000 cash of the deferred fee in exchange for shares of the merged entity, with the remaining cash fee capped at 25% of the Trust Account balance, up to $4,500,000[95][98] Note 7 — Shareholders' Deficit The company has Class A and Class B Ordinary shares, with significant redemptions of Class A shares occurring in January and July 2023, Class B shares convert to Class A upon a Business Combination, and there are no preferred shares outstanding - 16,988,575 Class A Ordinary Shares were redeemed on January 20, 2023, for approximately $175,285,892[102] - An additional 585,456 Class A Ordinary Shares were redeemed on July 19, 2023, for approximately $6,395,800[103] - As of September 30, 2023, and December 31, 2022, there were 5,000,000 Class B Ordinary shares issued and outstanding[103] - Class B Ordinary shares automatically convert into Class A Ordinary shares upon a Business Combination[104][106] Note 8 — Warrants The company's 18,000,000 Public and Private Warrants are classified as liabilities and re-measured at fair value each period, Public Warrants become exercisable after a Business Combination or 12 months from IPO, with specific redemption conditions, and Private Warrants have similar terms but are non-transferable and non-redeemable while held by initial purchasers - The 18,000,000 Public and Private Warrants are classified as liabilities and re-measured at fair value at each balance sheet date[108] - Public Warrants become exercisable 30 days after a Business Combination or 12 months from the IPO closing, and are redeemable by the Company under specific conditions (e.g., share price exceeding $18.00)[109][110] - Private Warrants are identical to Public Warrants but are non-transferable, non-assignable, and non-redeemable as long as held by initial purchasers or permitted transferees[111] - As of September 30, 2023, and December 31, 2022, there were 10,000,000 Public Warrants and 8,000,000 Private Warrants outstanding[116] Note 9 — Fair Value Measurements The company uses a fair value hierarchy (Level 1, 2, 3) to classify its financial assets and liabilities, U.S. Treasury securities are Level 1, Public Warrants are Level 1, while Private Warrants are Level 3, valued using a modified Black Scholes model with unobservable inputs like probability of acquisition and volatility - The Company classifies its financial assets and liabilities using a fair value hierarchy: Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[117][118] - U.S. Treasury Securities held in the Trust Account are classified as Level 1 fair value measurements[124] - Public Warrants are valued using Level 1 inputs (quoted prices), while Private Warrants are valued using Level 3 inputs (modified Black Scholes model with unobservable inputs like probability of acquisition and volatility)[121][122][124] Fair Value of Warrant Liabilities | Metric | Public Warrants (Level 1) | Private Warrants (Level 3) | Total Warrants | | :------------------------------ | :------------------------ | :------------------------- | :------------- | | Fair value as of Dec 31, 2022 | $300,000 | $240,000 | $540,000 | | Change in fair value (Q1 2023) | $600,000 | $480,000 | $1,080,000 | | Fair value as of Mar 31, 2023 | $900,000 | $720,000 | $1,620,000 | | Change in fair value (Q2 2023) | $(600,000) | $(480,000) | $(1,080,000) | | Fair value as of Jun 30, 2023 | $300,000 | $240,000 | $540,000 | | Change in fair value (Q3 2023) | $0 | $0 | $0 | | Fair value as of Sep 30, 2023 | $300,000 | $240,000 | $540,000 | Note 10 — Subsequent Events On October 12, 2023, the Sponsor deposited $60,649 into the Trust Account to extend the business combination deadline to November 20, 2023 - On October 12, 2023, the Sponsor deposited $60,649 into the Trust Account to extend the business combination deadline to November 20, 2023[128] 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, emphasizing its status as a blank check company seeking a business combination with DigiAsia, detailing financial performance, liquidity challenges, and critical accounting policies, and reiterating the going concern risk due to the impending business combination deadline Overview StoneBridge Acquisition Corporation is a blank check company formed to effect a business combination, expecting to incur significant costs in pursuit of its acquisition plans without generating operating revenues until a combination is completed - The Company is a blank check company formed for the purpose of effecting a merger, capital share exchange, asset acquisition, share purchase, reorganization or similar business combination[131] - The Company expects to incur significant costs in pursuit of its acquisition plans and will not generate operating revenues until after the completion of an initial business combination[131][137] Proposed Business Combination The company entered into a Business Combination Agreement with DigiAsia Bios Pte. Ltd. on January 5, 2023, for an amalgamation, with the transaction subject to customary conditions, including stockholder approval and the effectiveness of the Form F-4 registration statement - On January 5, 2023, StoneBridge Acquisition Corporation entered into a Business Combination Agreement with DigiAsia Bios Pte. Ltd. for an amalgamation[133] - The consummation of the Business Combination is subject to customary conditions, including approval by the Company's stockholders and the effectiveness of the Form F-4[132] - An amendment on June 22, 2023, extended the Business Combination Agreement's Termination Date from June 30, 2023, to December 29, 2023[136] Results of Operations The company reported a net loss of $48,532 for the three months ended September 30, 2023, compared to a net income of $1,239,550 in the prior year, and for the nine months, net income was $377,882, down from $8,631,943 in 2022, primarily due to changes in warrant liability fair value and dividend income | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net (Loss) Income | $(48,532) | $1,239,550 | $377,882 | $8,631,943 | | Investment income from trust account | $366,916 | $911,773 | $1,646,951 | $1,204,892 | | Change in fair value of warrants | — | $620,000 | — | $8,192,000 | | Operating expenses | $417,108 | $293,016 | $1,272,015 | $765,866 | - The company experienced a net loss of $48,532 for the three months ended September 30, 2023, a significant decline from a net income of $1,239,550 in the same period of 2022, largely due to the absence of a positive change in fair value of warrant liability[138][139] - For the nine months ended September 30, 2023, net income was $377,882, a substantial decrease from $8,631,943 in 2022, primarily because of the $8,192,000 positive change in fair value of warrants in 2022 that did not recur in 2023[138][139] Liquidity and Capital Resources The company's liquidity is constrained by a working capital deficit of $3,889,119 as of September 30, 2023, and a reduced Trust Account balance, facing significant costs for acquisition plans and a going concern risk if it cannot secure additional funds or complete a business combination by January 20, 2024 - As of September 30, 2023, the Company had $123,789 in operating cash, $26,974,295 in the Trust Account, and a working capital deficit of $3,889,119[145] - The Company's ability to continue as a going concern is in substantial doubt if it cannot raise additional funds or complete a Business Combination by January 20, 2024[146] - Cash flows from operating activities for the nine months ended September 30, 2023, were $1,112,393, while investing activities provided $180,599,743, and financing activities used $181,681,691, mainly due to share redemptions[141] Contractual obligations The company has no long-term debt or lease obligations, with its primary contractual obligation being a $9,000,000 deferred underwriting fee contingent on completing a business combination, which a recent agreement with Cantor Fitzgerald & Co. reduces by $4,500,000 in exchange for shares of the merged entity and caps the remaining cash fee - The Company has no long-term debt, capital lease obligations, operating lease obligations, or long-term liabilities[148] - A deferred underwriting fee of $9,000,000 is payable to underwriters upon completion of a business combination[148] - Under a fee reduction agreement, Cantor Fitzgerald & Co. will forfeit $4,500,000 of the deferred fee in cash in exchange for shares of the merged entity, with the remaining cash fee capped at 25% of the Trust Account balance, up to $4,500,000[148][150] JOBS Act As an 'emerging growth company' under the JOBS Act, the company has elected to delay the adoption of new or revised accounting standards, which may affect comparability with other public companies - The Company qualifies as an 'emerging growth company' under the JOBS Act[151] - The Company has elected to delay the adoption of new or revised accounting standards, aligning with private company effective dates[151] Critical Accounting Policies and Estimates The company's critical accounting estimates involve significant judgment, particularly in the valuation of derivative warrant liabilities, which depend on estimates like the probability of a successful business combination and implied volatility, with warrants classified as liabilities and re-measured at fair value, and redeemable ordinary shares classified as temporary equity - Critical accounting estimates include the probability of a successful business combination and the implied volatility of Public and Private Warrants[154] - Warrants are accounted for as liability-classified instruments and recorded at fair value, with changes recognized in the statements of operations[155][156] - Ordinary shares subject to possible redemption are classified as temporary equity, with changes in redemption value recognized immediately[158] Item 3. Quantitative and Qualitative Disclosures about Market Risk This item is not applicable to the company as it is a smaller reporting company - This item is not applicable as the Company is a smaller reporting company[161] Item 4. Controls and Procedures The company's CEO and CFO concluded that disclosure controls and procedures were not effective as of September 30, 2023, due to material weaknesses in accounting and valuation for complex financial instruments and incomplete accounting for accruals, with no material changes to internal control over financial reporting occurring during the quarter - As of September 30, 2023, the Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures were not effective[164] - Material weaknesses were identified related to accounting and valuation for complex financial instruments and incomplete accounting for accruals[164] - Despite the weaknesses, management believes the financial statements fairly present the financial position, results of operations, and cash flows due to additional analysis performed[164] - There were no material changes to internal control over financial reporting during the quarter ended September 30, 2023[165] PART II. OTHER INFORMATION Item 1. Legal Proceedings There are no legal proceedings to report - No legal proceedings are reported[167] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K and subsequent Quarterly Reports - No material changes to risk factors disclosed in the Annual Report on Form 10-K filed on March 28, 2023, or subsequent Quarterly Reports[167] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company's Initial Public Offering on July 20, 2021, generated $200,000,000 from 20,000,000 units and $8,000,000 from 8,000,000 Private Placement Warrants, with $202,000,000 placed in a Trust Account, and offering costs amounting to $13,577,812 - The Initial Public Offering on July 20, 2021, involved the sale of 20,000,000 units at $10.00 per unit, generating $200,000,000[168] - Concurrently, 8,000,000 Private Placement Warrants were sold at $1.00 per warrant, generating $8,000,000[168] - A total of $202,000,000 from the IPO and private placement was placed in a Trust Account[170] - Offering costs for the IPO amounted to $13,577,812, including $4,000,000 in underwriting fees and $9,000,000 in deferred underwriting fees[169] Item 3. Defaults Upon Senior Securities There are no defaults upon senior securities to report - No defaults upon senior securities are reported[171] Item 4. Mine Safety Disclosures This item is not applicable to the company - This item is not applicable[171] Item 5. Other Information There is no other information to report under this item - No other information is reported under this item[171] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications from the CEO and CFO (Sections 302 and 906 of Sarbanes-Oxley Act) and Inline XBRL documents - Exhibits include certifications of the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[173][174][175][176] - Inline XBRL documents (Instance, Schema, Calculation, Definition, Labels, Presentation Linkbase Documents) and the Cover Page Interactive Data File are also included[177][178][179][180] Signatures The report is signed by Bhargava Marepally, Chief Executive Officer and Director, and Prabhu Antony, President, Chief Financial Officer and Director, on November 6, 2023 - The report was signed on November 6, 2023, by Bhargava Marepally (Chief Executive Officer and Director) and Prabhu Antony (President, Chief Financial Officer and Director)[184]