Ace Business Acquisition (ACBA) - 2022 Q3 - Quarterly Report

Part I Financial Statements This section presents the unaudited condensed financial statements of ACE Global Business Acquisition Limited, a blank check company, for the periods ended September 30, 2022, including balance sheets, statements of operations, changes in shareholders' deficit, and cash flows Unaudited Condensed Balance Sheets As of September 30, 2022, total assets were $48.76 million, with liabilities increasing to $4.07 million and a shareholders' deficit of $3.89 million, largely due to redeemable shares Condensed Balance Sheet Data (as of Sep 30, 2022 vs. Dec 31, 2021) | Financial Metric | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and investments held in trust account | $48,573,730 | $46,922,930 | | Total Assets | $48,756,150 | $47,107,422 | | Liabilities & Equity | | | | Total Liabilities | $4,074,603 | $3,284,383 | | Ordinary shares subject to possible redemption | $48,573,730 | $46,920,000 | | Total shareholders' deficit | $(3,892,183) | $(3,096,961) | - Liabilities increased primarily due to a $1,366,200 note payable to a related party, which was not present at the end of 2021[12] - Warrant liabilities decreased significantly from $1,240,000 to $30,000, reflecting a change in fair value[12] Unaudited Condensed Statements of Operations Net income for the three and nine months ended September 30, 2022, was $1.33 million and $858,508 respectively, primarily driven by non-cash gains from warrant liability fair value changes Statement of Operations Highlights | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Change in fair value of warrant liabilities | $1,310,000 | $50,000 | $1,210,000 | $58,560 | | Total other income, net | $1,526,006 | $50,616 | $1,494,609 | $60,535 | | Net Income (Loss) | $1,332,044 | $(324,393) | $858,508 | $(660,931) | Unaudited Condensed Statements of Changes in Shareholders' Deficit Shareholders' deficit increased from $3.10 million to $3.89 million by September 30, 2022, due to net income offset by accretion of redeemable ordinary shares Changes in Shareholders' Deficit (Jan 1, 2022 to Sep 30, 2022) | Item | Amount | | :--- | :--- | | Balance as of January 1, 2022 | $(3,096,961) | | Net income (for nine months) | $858,508 | | Accretion of carrying value to redemption value | $(1,653,730) | | Balance as of September 30, 2022 | $(3,892,183) | Unaudited Condensed Statements of Cash Flows Net cash used in operating activities was $643,240 for the nine months ended September 30, 2022, offset by $643,738 from financing activities, resulting in a minimal net change in cash Cash Flow Summary (Nine Months Ended Sep 30, 2022) | Cash Flow Activity | Amount | | :--- | :--- | | Net cash used in operating activities | $(643,240) | | Net cash used in investing activities | $0 | | Net cash provided by financing activities | $643,738 | | Net Change in Cash | $498 | - The company's operations are funded by advances from a related party, which provided $643,738 during the first nine months of 2022[21] Notes to Unaudited Condensed Financial Statements These notes detail the company's SPAC nature, IPO, business combination deadline extension, termination of a prior merger, accounting policies for warrants and redeemable shares, related-party transactions, and going concern uncertainties - The company is a blank check company formed to effect a business combination, focusing on the gaming and e-commerce sectors in Greater China, Japan, and Southeast Asia[24] - The company extended its deadline to complete a business combination to January 8, 2023, by securing three extension loans of $455,400 each from its sponsor[36][91] - A previously announced Share Exchange Agreement with DDC Enterprise Limited was mutually terminated on July 11, 2022[37] - Management has expressed substantial doubt about the company's ability to continue as a going concern if a business combination is not consummated, as it may be unable to obtain additional financing[40] - Private Warrants are classified as Level 3 liabilities and measured at fair value using a Black-Scholes model, with their value decreasing from $1.24 million to $30,000 during the first nine months of 2022[103][107] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's status as a blank check company with no revenue, net income driven by non-operating items, limited liquidity, and substantial doubt about its ability to continue as a going concern - The company is a blank check company with no operations or revenue, focused on identifying a target business in the gaming and e-commerce sectors in Asia[117] Net Income (Loss) Summary | Period | Net Income / (Loss) | Key Driver | | :--- | :--- | :--- | | Q3 2022 | $1,332,044 | Change in fair value of warrant liabilities | | Q3 2021 | $(324,393) | General & administrative expenses | | Nine Months 2022 | $858,508 | Change in fair value of warrant liabilities | | Nine Months 2021 | $(660,931) | General & administrative expenses | - As of September 30, 2022, the company had a working capital deficit of $2,022,183 and cash of $122,506, relying on sponsor advances for liquidity[127] - The company may need additional capital from its management team, but they are under no obligation to provide it. These conditions raise substantial doubt about the company's ability to continue as a going concern[131][132] Quantitative and Qualitative Disclosures About Market Risk The company reports minimal exposure to market and interest rate risk due to its trust account investments in short-term U.S. government securities - The company has minimal exposure to market and interest rate risk because its trust account proceeds are invested in short-term U.S. government securities[144] Controls and Procedures Management concluded that disclosure controls were ineffective as of September 30, 2022, due to material weaknesses in warrant and redeemable share accounting, with a remediation plan underway - Management concluded that disclosure controls and procedures were not effective as of September 30, 2022[145] - A material weakness was identified related to the accounting for warrants, which were initially misclassified. The public warrants should be classified as equity[148][150] - A second material weakness was identified in the classification of ordinary shares subject to redemption, which should have all been classified as temporary equity outside of the permanent equity section[149][150] - A remediation plan is underway to enhance the system for evaluating and implementing complex accounting standards[151] Part II Legal Proceedings and Risk Factors The company is not involved in legal proceedings, but a new risk factor emerged regarding warrant accounting classification as liabilities, potentially impacting valuation expenses and business combination efforts - The company is not currently party to any legal proceedings[154] - A new risk factor has emerged concerning the accounting treatment of warrants. An SEC staff statement from April 2021 suggests that SPAC warrants may need to be classified as liabilities, not equity[156][157] - If warrants are classified as a liability, the company would incur significant ongoing valuation expenses and it could make completing a business combination more difficult[157] Unregistered Sales of Equity Securities and Use of Proceeds This section details the private placement of 304,000 unregistered units to the sponsor for $3.04 million, with proceeds from both IPO and private placement deposited into a trust account - Simultaneously with the IPO, the company sold 304,000 Private Units at $10.00 per unit to its sponsor in a private placement, raising $3.04 million[159] - The IPO and private placement resulted in gross proceeds of $46,000,000 and $3,040,000, respectively. A total of $46,920,000 of the net proceeds was deposited into the trust account[158][161] Other Required Disclosures The company reports no defaults on senior securities, no mine safety disclosures, and provides a list of exhibits filed with the report - The company reports no defaults upon senior securities[162] - Mine Safety Disclosures are not applicable[162] - A list of exhibits filed with the report is provided, including officer certifications and XBRL data files[163][164] Signatures