Ace Business Acquisition (ACBA) - 2023 Q3 - Quarterly Report

Part I Financial Statements This section presents the unaudited condensed consolidated financial statements, detailing the company's financial position, performance, and cash flows for the period Unaudited Condensed Consolidated Balance Sheets The balance sheet shows total assets decreased to $22.9 million from $49.1 million, primarily due to reduced trust account cash after share redemptions Condensed Consolidated Balance Sheet Data (Unaudited) | Balance Sheet Items | Sep 30, 2023 (USD) | Dec 31, 2022 (USD) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $58,653 | $91,432 | | Cash and investments held in trust account | $22,827,616 | $48,982,188 | | Total Assets | $22,946,269 | $49,073,620 | | Liabilities & Equity | | | | Note payable – related party | $2,516,056 | $1,366,200 | | Advances from a related party | $2,078,136 | $893,814 | | Total Liabilities | $6,474,825 | $4,166,383 | | Ordinary shares, subject to possible redemption | $22,827,616 | $48,982,188 | | Total shareholders' deficit | $(6,356,172) | $(4,074,931) | Unaudited Condensed Consolidated Statements of Operations The statements of operations show a net loss of $5,474 for the quarter, a significant shift from $1.33 million net income in the prior year, driven by warrant valuation changes Condensed Consolidated Statements of Operations (Unaudited) | (In USD) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Formation, general and administrative expenses | $(351,419) | $(193,962) | $(1,128,544) | $(636,101) | | Change in fair value of warrant liabilities | $4,631 | $1,310,000 | $(2,846) | $1,210,000 | | Dividend income | $341,313 | $216,003 | $927,812 | $284,600 | | NET (LOSS) INCOME | $(5,474) | $1,332,044 | $(203,573) | $858,508 | Unaudited Condensed Consolidated Statements of Changes in Shareholders' Deficit The company's total shareholders' deficit increased from $4.07 million at the beginning of 2023 to $6.36 million as of September 30, 2023, primarily due to accretion of redeemable shares and net loss - The shareholders' deficit grew from $(4,074,931) on January 1, 2023, to $(6,356,172) on September 30, 2023[19] - Key drivers for the increased deficit during the nine months ended September 30, 2023, were the accretion of carrying value to redemption value totaling $2,077,668 and a net loss[19][72] Unaudited Condensed Consolidated Statements of Cash Flows Net cash used in operating activities was $1.2 million, with investing activities providing $27.1 million and financing activities using $25.9 million, resulting in a net decrease of $32,779 in cash Cash Flow Summary (Nine Months Ended Sep 30) | Cash Flow Activity | 2023 (USD) | 2022 (USD) | | :--- | :--- | :--- | | Net cash used in operating activities | $(1,217,102) | $(643,240) | | Net cash provided by (used in) investing activities | $27,082,384 | $(1,366,200) | | Net cash (used in) provided by financing activities | $(25,898,062) | $2,009,938 | | NET CHANGE IN CASH | $(32,779) | $498 | | Cash, end of period | $58,653 | $122,506 | Notes to Unaudited Condensed Consolidated Financial Statements The notes detail the company's SPAC formation, amended merger agreement with LE Worldwide Limited, repeated deadline extensions, significant share redemptions, and going concern doubts - The company is a blank check company aiming to merge with a business, focusing on the artificial intelligence and related technology markets in North America[25] - The company entered into a merger agreement with LE Worldwide Limited (LEW), with the merger consideration reduced from $150 million to $110 million via an amendment on September 19, 2023[38][40] - The deadline to complete a business combination has been extended multiple times and is currently January 8, 2024, funded by non-interest bearing, unsecured promissory notes from the Sponsor[44][46] - In 2023, a total of 2,622,821 shares were redeemed by shareholders, resulting in cash outflows of over $28.2 million from the Trust Account[42][101] - Management has concluded that there is substantial doubt about the Company's ability to continue as a going concern if a Business Combination is not consummated by the deadline[47] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's blank check status, the primary drivers of net loss, reliance on sponsor loans for deadline extensions, and the substantial doubt regarding its going concern ability - The company is a blank check company formed to effect a business combination and currently has no revenue or operations[115][116] - The net loss of $203,573 for the nine months ended September 30, 2023, was a decrease from a net income of $858,508 in the prior-year period, primarily due to a smaller gain from the change in fair value of warrant liabilities[121] - The company has until January 8, 2024, to consummate a business combination, having used multiple extensions funded by its sponsor, Ace Global Investment Limited, through non-interest bearing, unsecured promissory notes[128] - If a business combination is not completed by the deadline, the company will liquidate and redeem 100% of its outstanding public shares[128] - The company has no off-balance sheet arrangements, and its primary contractual obligation is a $10,000 monthly fee to its Sponsor for administrative services[131][132] Quantitative and Qualitative Disclosures Regarding Market Risk The company reports no material market or interest rate risk, as trust account funds are invested in short-term U.S. government treasury bills or money market funds - As of September 30, 2023, the company was not subject to any material market or interest rate risk[141] - Proceeds from the IPO held in the Trust Account are invested in short-term U.S. government treasury securities or money market funds, which limits interest rate risk exposure[141] Controls and Procedures Management concluded that disclosure controls were ineffective due to material weaknesses in accounting for warrants and redeemable shares, with a remediation plan in place - Management concluded that the company's disclosure controls and procedures were not effective as of September 30, 2023[142] - Material weaknesses were identified in internal control over financial reporting related to the accounting for warrants and the classification of ordinary shares subject to possible redemption[145][146][147] - A remediation plan is in place to enhance the system for evaluating and implementing complex accounting standards[148] - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[149] Part II. Other Information Legal Proceedings The company reports no involvement in any legal proceedings as of the filing date of the Form 10-Q - The Company is not party to any legal proceedings as of the filing date[150] Risk Factors No material changes to risk factors, except for new risks related to the accounting treatment of warrants, potentially requiring liability classification and fair value measurement - There have been no material changes to the risk factors previously disclosed, except for those related to the accounting treatment of warrants[151] - An SEC staff statement from April 12, 2021, indicated that SPAC warrants might need to be classified as liabilities, which would require fair value measurement each quarter and could negatively impact the company[153] Unregistered Sales of Equity Securities and Use of Proceeds Details of IPO and private placement proceeds, totaling $46 million and $3.04 million respectively, with $46.92 million deposited into a trust account - The company consummated its IPO of 4,600,000 units at $10.00 per unit, raising gross proceeds of $46,000,000 in April 2021[154] - Simultaneously, the company sold 304,000 private units to its sponsor at $10.00 per unit, generating gross proceeds of $3,040,000[155] - A total of $46,920,000 from the offering and private placement was deposited into a trust account for the benefit of public stockholders[157] Defaults Upon Senior Securities The company reports no defaults upon senior securities - None[158] Mine Safety Disclosures This item is not applicable to the company - Not Applicable[158] Other Information The company reports no other information for this item - None[158] Exhibits This section lists the exhibits filed with the quarterly report, which include certifications by the Principal Executive Officer and Principal Financial Officer as required by the Sarbanes-Oxley Act, and various Inline XBRL documents - Exhibits filed include CEO and CFO certifications pursuant to Sarbanes-Oxley Act Sections 302 and 906, and Inline XBRL data files[160] Part III. Signatures Signatures The report was duly signed and authorized by Eugene Wong, Chief Executive Officer, and Nicholas Xue Wei Tan, Chief Financial Officer, on November 14, 2023 - The report was signed on November 14, 2023, by Eugene Wong (Chief Executive Officer) and Nicholas Xue Wei Tan (Chief Financial Officer)[163]