Ace Business Acquisition (ACBA) - 2021 Q3 - Quarterly Report

Part I. Financial Information This section presents the company's unaudited financial statements, management's analysis of financial condition, market risk disclosures, and internal controls Financial Statements The unaudited condensed financial statements for the nine months ended September 30, 2021, reflect the company's financial position following its Initial Public Offering (IPO), with total assets reaching $47.4 million and a net loss of $660,931, notably revised to reclassify private warrants as liabilities and all public shares as temporary equity, resulting in a shareholder deficit Unaudited Condensed Balance Sheets This statement provides a snapshot of the company's assets, liabilities, and equity as of specific reporting dates Condensed Balance Sheet Data (Unaudited) | Account | September 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $316,825 | $ - | | Cash and investments held in trust account | $46,921,939 | $ - | | Total Assets | $47,361,073 | $45,000 | | Liabilities & Equity | | | | Total Liabilities | $3,196,370 | $35,806 | | Ordinary shares, subject to possible redemption | $46,920,000 | $ - | | Total shareholders' (deficit) equity | $(2,755,297) | $9,194 | - Total liabilities as of September 30, 2021, include $1,200,000 in warrant liabilities and $1,840,000 in deferred underwriting compensation[13] Unaudited Condensed Statement of Operations This statement details the company's revenues, expenses, and net loss over specific interim periods Statement of Operations Highlights (Unaudited) | Period | Net Loss | Total Operating Expenses | | :--- | :--- | :--- | | Three months ended Sep 30, 2021 | $(324,393) | $(375,009) | | Nine months ended Sep 30, 2021 | $(660,931) | $(721,466) | - For the nine months ended September 30, 2021, the company recognized other income of $58,560 from the change in fair value of warrant liabilities[17] Unaudited Condensed Statement Changes in Shareholders' Equity This statement outlines the comprehensive changes in the company's shareholders' equity over the reporting period - Shareholders' equity transitioned from a positive balance of $9,194 on January 1, 2021, to a deficit of $(2,755,297) by September 30, 2021[19] - The significant decrease in equity was primarily driven by the initial classification of ordinary shares subject to possible redemption, which moved $44.8 million out of permanent equity, and the period's net loss[19] Unaudited Condensed Statement of Cash Flows This statement summarizes the cash inflows and outflows from operating, investing, and financing activities for the period Cash Flow Summary for Nine Months Ended Sep 30, 2021 (Unaudited) | Cash Flow Activity | Amount | | :--- | :--- | | Net cash used in operating activities | $(834,835) | | Net cash used in investing activities | $(46,920,000) | | Net cash provided by financing activities | $48,071,660 | | Net change in cash | $316,825 | Notes to Unaudited Condensed Financial Statements These notes provide essential context, significant accounting policies, and additional details supporting the financial statements - The company is a blank check company incorporated on November 2, 2020, intending to focus on business combinations in the artificial intelligence and related technology sectors in North America[27] - On August 23, 2021, the Company entered into a Share Exchange Agreement with DDC Enterprise Limited ("DDC") to acquire 100% of DDC's issued and outstanding securities[38] - The company revised its financial statements to reclassify private warrants as liabilities and all common stock subject to possible redemption as temporary equity, following SEC guidance issued in April 2021, which resulted in significant adjustments to the balance sheet[43][45][46] Management's Discussion and Analysis of Financial Condition and Results of Operations The company, a blank check entity formed in November 2020, completed its IPO in April 2021, raising $46 million, with activities solely focused on identifying a business combination, targeting the gaming and e-commerce sectors in Greater China, Japan, and Southeast Asia, incurring a net loss of $660,931 for the nine months ended September 30, 2021, and having $316,825 in cash outside the trust account for operational needs, alongside a contractual obligation to pay its Sponsor a $10,000 monthly fee for administrative services - The company is a blank check company formed to pursue a merger or similar business combination, with an intended focus on the gaming and e-commerce sectors in Greater China, Japan, and Southeast Asia[106] Financial Position as of September 30, 2021 | Metric | Value | | :--- | :--- | | Cash (outside of Trust Account) | $316,825 | | Funds in Trust Account | $46,920,000 | | Net Loss (Nine months ended Sep 30, 2021) | $660,931 | - The company has no off-balance sheet arrangements, and its primary contractual obligation is a $10,000 monthly fee to its Sponsor for general and administrative services until a business combination is completed or the company liquidates[126][127] Quantitative and Qualitative Disclosures Regarding Market Risk The company states it is not subject to any material market or interest rate risk as of September 30, 2021, as funds held in the Trust Account are invested in short-term U.S. government treasury securities or money market funds, which minimizes exposure to interest rate fluctuations - The company is not subject to any material market or interest rate risk[134] - Net proceeds from the IPO held in the Trust Account are invested in U.S. government treasury bills with a maturity of 180 days or less or in money market funds, mitigating interest rate risk due to the short-term nature of these investments[134] Controls and Procedures Management concluded that the company's disclosure controls and procedures were not effective as of September 30, 2021, due to necessary revisions of previously issued financial statements to correct the accounting for warrants (reclassifying them as liabilities) and to reclassify all public shares to temporary equity, which stemmed from a misapplication of accounting guidance - Management concluded that disclosure controls and procedures were not effective as of September 30, 2021[135] - The ineffectiveness was a result of revisions to the balance sheet to reclassify the accounting for warrants and to move all public shares to temporary equity, correcting a misapplication of accounting guidance[135][136] Part II. Other Information This section covers legal proceedings, updated risk factors, details on equity sales, and a list of exhibits filed with the report Legal Proceedings The company reports that it is not a party to any legal proceedings as of the filing date of this report - The Company is not party to any legal proceedings as of the filing date of the Form 10-Q[140] Risk Factors The company states there have been no material changes to its previously disclosed risk factors, but specifically highlights a risk related to the accounting treatment of its warrants, which, following an April 2021 SEC staff statement, may need to be classified as liabilities rather than equity, requiring ongoing fair value measurement, incurring significant valuation expenses, and potentially complicating the completion of an initial business combination - A key risk involves the accounting treatment of warrants, as an SEC staff statement from April 12, 2021, suggests that certain SPAC warrants should be classified as liabilities on the balance sheet[142] - If the warrants are classified as a liability, the company will incur significant expenses for quarterly and annual valuation, and this classification may make it more difficult to complete an initial business combination[142] Unregistered Sales of Equity Securities and Use of Proceeds In April 2021, the company completed its IPO of 4.6 million units at $10.00 each, generating gross proceeds of $46 million, and concurrently sold 304,000 private placement units to its sponsor at $10.00 each, raising an additional $3.04 million, with a total of $46.92 million from these sales deposited into a trust account for the benefit of public stockholders - The IPO of 4,600,000 units at $10.00 per unit resulted in gross proceeds of $46,000,000[143] - Simultaneously, a private placement of 304,000 units to the sponsor at $10.00 per unit generated total proceeds of $3,040,000[144] - A total of $46,920,000 from the IPO and private placement was deposited into the trust account[145] Defaults Upon Senior Securities The company reports no defaults upon senior securities - None[147] Mine Safety Disclosures This item is not applicable to the company - Not Applicable[147] Other Information The company reports no other information - None[147] Exhibits This section lists the exhibits filed as part of the Form 10-Q, which include certifications by the Principal Executive Officer and Principal Financial Officer as required by the Sarbanes-Oxley Act, and various Inline XBRL documents - The report includes certifications from the Principal Executive Officer and Principal Financial Officer pursuant to Sarbanes-Oxley Act Sections 302 and 906[149] - Inline XBRL documents (Instance, Schema, Calculation, Definition, Label, and Presentation) are also filed as exhibits[149] Part III. Signatures This section provides the official authorization and signing details for the financial report - The report was duly authorized and signed on November 16, 2021, by Eugene Wong, Chief Executive Officer, and Nicholas Xue Wei Tan, Chief Financial Officer[153]