Ace Business Acquisition (ACBA) - 2023 Q4 - Annual Report

Part I Business Ace Global Business Acquisition Limited is a British Virgin Islands SPAC focused on a business combination, having raised $46.92 million and entered an agreement with LE Worldwide Limited, with a deadline of April 8, 2024 - The company is a blank check company (SPAC) with no current operations or revenue, formed for a business combination[14] - On December 23, 2022, the company entered a Business Combination Agreement with LE Worldwide Limited (LEW) for $110 million in PubCo Ordinary Shares[40][41] - The acquisition strategy targets businesses in Greater China, Japan, and Southeast Asia with an enterprise value between $150 million and $300 million[29][32] - The deadline for the initial business combination has been extended multiple times to April 8, 2024, funded by the Sponsor via unsecured promissory notes[67] Risk Factors The company faces significant risks, including the potential failure to complete a business combination by April 8, 2024, SPAC structural risks, potential Nasdaq delisting, and conflicts of interest due to its "emerging growth company" status - Failure to complete the initial business combination by the April 8, 2024 deadline risks company liquidation and worthless warrants[103][104] - Initial shareholders own approximately 42.38% of Ordinary Shares and will vote for the Business Combination, increasing approval likelihood regardless of public shareholder opinion[95] - Significant share redemptions could reduce post-combination liquidity and potentially cause the business combination to fail if minimum cash conditions are not met[91][99] - As an "emerging growth company," the company has reduced disclosure obligations, potentially making its securities less attractive to investors[97][98] Unresolved Staff Comments The company reports no unresolved staff comments - Not applicable[121] Cybersecurity As a SPAC with no operations, the company does not face significant cybersecurity risks and lacks a formal risk management program, with board oversight for potential threats - The company, as a SPAC with no operations, does not believe it faces significant cybersecurity risk and has not implemented a formal risk management program[123] Properties The company owns no properties; its principal executive office is provided by its Sponsor for a $10,000 monthly fee covering administrative services - The company's principal executive office space is provided by its Sponsor for a $10,000 per month administrative services agreement[124] Legal Proceedings The company is not currently involved in any material legal proceedings or aware of claims that could adversely affect its business - The company is not currently involved in any material litigation or legal proceedings[125] Mine Safety Disclosures This item is not applicable to the company - Not applicable[126] Part II Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities The company's securities trade on Nasdaq, with 3,431,179 ordinary shares outstanding as of March 8, 2024, and $46.92 million from IPO proceeds held in a trust account, with no dividends paid or intended before a business combination - The company's securities trade on Nasdaq under symbols ACBAU (Units), ACBA (Ordinary Shares), and ACBAW (Warrants)[127] - No cash dividends have been paid to date, and none are intended prior to the completion of an initial business combination[128] - A total of $46,920,000 from the IPO and private placement proceeds were placed in a trust account for public shareholders[129] Management's Discussion and Analysis of Financial Condition and Results of Operations The company reported a net loss of $227,215 in 2023, a shift from net income of $1,084,218 in 2022, driven by higher operating costs, with substantial doubt about its going concern ability if a business combination is not completed by April 8, 2024 Results of Operations (in USD) | Metric | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | | :--- | :--- | :--- | | Net (Loss) Income | ($227,215) | $1,084,218 | | Operating Costs | ($1,462,823) | ($838,852) | | Change in Fair Value of Warrant Liability | $2,324 | $1,230,000 | | Dividend/Interest Income | $1,233,284 | $693,070 | - The increase in operating costs in 2023 compared to 2022 is mainly due to expenses incurred for the business combination[136] - The company's ability to continue as a going concern is in substantial doubt if a business combination is not consummated by April 8, 2024, with no related adjustments in financial statements[142] - The Sponsor has funded multiple extensions to the business combination deadline via non-interest bearing, unsecured promissory notes, totaling $2,713,774 as of December 31, 2023[142][282] Quantitative and Qualitative Disclosures About Market Risk The company was not subject to material market or interest rate risk as of December 31, 2023, as trust account funds are invested in short-term U.S. government securities or money market funds - The company is not subject to material market or interest rate risk, with trust account proceeds invested in U.S. government securities or money market funds[155] Controls and Procedures Management concluded the company's disclosure controls and procedures were not effective as of December 31, 2023, with no internal control report included as permitted for newly public companies - Management concluded that the company's disclosure controls and procedures were not effective as of December 31, 2023[157] - No report on internal control over financial reporting is included, as the company is availing itself of the transition period for newly public companies[160] Part III Directors, Executive Officers and Corporate Governance This section details the company's executive officers and independent directors, committee compositions, significant conflicts of interest for the sponsor and management, and the adoption of a code of ethics - The board consists of two executive officers and three independent directors: Robert Morris, Yan Xu, and Leslie Chow[163][170] - Leslie Chow is identified as the "audit committee financial expert"[176] - Significant conflicts of interest exist, as the Sponsor and management risk losing their entire investment, valued at over $17.6 million as of March 8, 2024, if a business combination is not completed[182][183] Executive Compensation Executive officers receive no cash compensation, only expense reimbursement, and the board adopted a clawback policy for incentive compensation in November 2023 - No executive officer has received any cash compensation for services rendered, only reimbursement for out-of-pocket expenses[199] - A clawback policy was adopted on November 29, 2023, allowing recovery of incentive-based compensation from executive officers in the event of a financial restatement[200][201] Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters As of March 8, 2024, Ace Global Investment Limited is the largest beneficial owner of ordinary shares with 39.90%, followed by other significant institutional holders Beneficial Ownership as of March 8, 2024 (in %) | Name of Beneficial Owner | Percentage Owned | | :--- | :--- | | Ace Global Investment Limited (Sponsor) | 39.90% | | Polar Multi-Strategy Master Fund | 11.04% | | Harraden Circle Investors, LP | 7.88% | | Fir Tree Capital Management LP | 6.06% | | All directors and executive officers as a group | 2.48% | - Insider shares are held in escrow and will be released in stages, starting one year after the consummation of an initial business combination or earlier if stock price targets are met[209] Certain Relationships and Related Transactions, and Director Independence This section details related-party transactions, including the Sponsor's purchase of 1,150,000 insider shares for $25,000 and 304,000 private units for $3.04 million, a $10,000 monthly administrative fee, and $2,226,906 owed to the Sponsor as of December 31, 2023 - The Sponsor and initial shareholders purchased 1,150,000 insider shares for an aggregate price of $25,000[213] - The company pays its Sponsor a monthly fee of $10,000 for general and administrative services[218] - As of December 31, 2023, the company owed its Sponsor $2,226,906 for expenses paid on its behalf[218] - The company has a Related Party Policy requiring the audit committee to review and approve related-party transactions exceeding $120,000[220][223] Principal Accountant Fees and Services The company paid $127,639 in total audit fees in 2023 and $101,000 in 2022 to its auditors, with no other fees paid and all services pre-approved Audit Fees (in USD) | Firm | 2023 Fees | 2022 Fees | | :--- | :--- | :--- | | Adeptus Partners LLC | $51,000 | $35,000 | | Friedman LLP / Marcum LLP | $76,639 | $66,000 | | Total | $127,639 | $101,000 | - No fees were paid for audit-related, tax, or other services to the auditors in 2023 or 2022[228] Part IV Exhibits and Financial Statement Schedules This section lists the financial statements and provides an index of all exhibits filed with the Form 10-K, including key agreements and certifications - This section contains the index to the company's financial statements and a list of all exhibits filed with the report[230][233] Financial Statements Report of Independent Registered Public Accounting Firm The auditor issued a standard opinion but expressed "Substantial Doubt about the Company's Ability to Continue as a Going Concern" due to working capital deficiency, losses, and reliance on completing a business combination - The auditor's report contains a going concern qualification, expressing substantial doubt about the company's ability to continue operations due to working capital deficiency and reliance on completing a business combination[242] Consolidated Financial Statements Consolidated financial statements show a significant decrease in assets from $49.0 million to $23.3 million due to share redemptions, an increase in liabilities from $4.2 million to $6.95 million, and a net loss of $227,215 in 2023 Consolidated Balance Sheet Data (in USD) | Account | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Cash and investments held in trust account | $23,330,523 | $48,982,188 | | Total Assets | $23,399,064 | $49,073,620 | | Total Liabilities | $6,951,262 | $4,166,363 | | Ordinary shares, subject to possible redemption | $23,330,523 | $48,982,188 | | Total shareholders' deficit | ($6,882,721) | ($4,074,931) | Consolidated Statement of Operations Data (in USD) | Account | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | | :--- | :--- | :--- | | Total operating expenses | ($1,462,823) | ($838,852) | | Total other income, net | $1,235,608 | $1,923,070 | | Net (Loss) Income | ($227,215) | $1,084,218 | Notes to Consolidated Financial Statements The notes detail the proposed business combination with LEW, multiple deadline extensions to April 8, 2024, related-party transactions, a significant reduction in redeemable shares to 1.98 million, warrant liability valuation, and subsequent promissory notes for extensions - The company has until April 8, 2024, to consummate a business combination, having extended the deadline multiple times via Sponsor promissory notes[282][284] - In 2023, 2,622,821 shares were redeemed by shareholders for approximately $28.2 million[280][335] - As of December 31, 2023, the company had advances from its Sponsor of $2,226,906 and notes payable to the Sponsor of $2,713,774[322][326] - Subsequent to year-end, in January and February 2024, the company issued three additional unsecured promissory notes to the Sponsor, each for $98,859, to fund further one-month extensions of the business combination deadline[347][348]