Patria Latin American Opportunity Acquisition (PLAO) - 2022 Q4 - Annual Report

Financial Condition - As of December 31, 2022, the company had $707,749 in cash and working capital of $230,865,720, raising doubts about its ability to continue as a going concern[118]. - The company has $228,850,000 in net proceeds from its IPO and private placement of warrants available for initial business combination, after accounting for $8,050,000 in deferred underwriting commissions[184]. - Only $2,310,000 of the net proceeds from the IPO and private placement warrants is available initially outside the trust account for working capital requirements[164]. - If the company fails to complete its initial business combination, public shareholders may only receive their pro rata portion of the funds in the trust account, estimated at $10.30 per unit, and warrants will expire worthless[165]. - The trust account may be reduced below $10.30 per unit due to third-party claims, impacting shareholder redemption amounts[167]. - If the funds in the trust account are reduced, the per-share redemption amount could be less than $10.30, affecting public shareholders[169]. - The company may need to seek additional financing if the cash portion of the purchase price exceeds the amount available from the trust account, which could compel restructuring or abandonment of a business combination[152]. - The company may face challenges in raising equity and debt financing due to increased market volatility and decreased market liquidity caused by COVID-19[141]. Internal Controls and Compliance - A material weakness in internal control over financial reporting was identified as of December 31, 2021, which could adversely affect the accuracy of financial results[119]. - The company has taken steps to remediate the identified material weakness, but there is no assurance that these efforts will be effective[121]. - Future material weaknesses could limit the company's ability to comply with securities law requirements and adversely affect investor confidence[122]. Business Combination Risks - The company is obligated to offer public shareholders the right to redeem their shares for cash at the time of the initial business combination, which may limit its ability to complete such a transaction[131]. - If too many public shareholders exercise their redemption rights, the company may not meet the minimum cash requirements for a business combination[132]. - The company may face significant competition for business combination opportunities, which could hinder its ability to complete a transaction[131]. - The ability of public shareholders to redeem shares may make the company's financial condition unattractive to potential business combination targets[132]. - The company has not selected a specific business combination target but intends to target businesses with enterprise values greater than the net proceeds from its IPO and private placement warrants[152]. - The company may only complete one business combination with the proceeds from its IPO, which could lead to a lack of diversification and negatively impact operations and profitability[184]. - The company may incur substantial debt to complete a business combination, which could adversely affect leverage and financial condition, impacting shareholder value[183]. - The company may face challenges in obtaining necessary financial statements from target businesses, potentially limiting the pool of candidates[163]. Shareholder Dynamics - The company’s initial shareholders own approximately 20% of the issued and outstanding ordinary shares, which may influence the approval of the initial business combination[146]. - To approve an initial business combination, the company would need 7,500,001 (37.5%) of the 20,000,000 public shares sold in the IPO to vote in favor[146]. - If the company seeks shareholder approval for its initial business combination, initial shareholders and management have agreed to vote in favor regardless of public shareholder votes[146]. - The company may purchase shares or public warrants from public shareholders to influence the vote on a proposed business combination[147]. - Shareholders holding over 15% of Class A ordinary shares may lose the ability to redeem shares in excess of that amount if the company seeks shareholder approval for its initial business combination[217]. - The company’s initial shareholders collectively own 20% of ordinary shares and will participate in votes to amend governing documents, influencing the outcome[237]. Market and Economic Conditions - The ongoing COVID-19 pandemic may materially adversely affect the company's search for a business combination and the operations of any potential target business[140]. - Economic downturns, geopolitical tensions, and the COVID-19 pandemic may further complicate the ability to find and consummate favorable business combinations[196]. - The COVID-19 pandemic is expected to continue negatively impacting global, regional, and national economies, potentially leading to a protracted economic downturn[297]. - Market declines and volatility could result in losses and the postponement or cancellation of expansion plans or mergers and acquisitions, reducing future growth prospects[297]. - The economic slowdown may negatively impact target business performance through lower demand for products or services and higher than expected losses[297]. Regulatory and Legal Risks - The company intends to avoid being deemed an "investment company" under the Investment Company Act by restricting trust account investments to U.S. government securities with a maturity of 185 days or less[224]. - The company has not registered the Class A ordinary shares issuable upon exercise of the warrants, which may lead to warrants expiring worthless if not registered[225]. - The company may face adverse effects from foreign currency exchange controls and currency devaluation in certain Latin American countries[292]. - The company may reincorporate in another jurisdiction, which could affect the enforcement of legal rights and result in taxes imposed on shareholders or warrant holders[262]. - The company is subject to evolving regulatory measures that may increase general and administrative expenses and divert management's focus from revenue-generating activities[265]. Operational Challenges - The company anticipates substantial management time and costs associated with investigating target businesses, which may not be recoverable if a business combination is not completed[155]. - The company may pursue business combinations outside of its management's areas of expertise, which could lead to inadequate assessment of risks[154]. - The loss of key personnel from a target business upon completion of a business combination could negatively impact operations and profitability[161]. - Key personnel may negotiate employment agreements that could create conflicts of interest regarding business combinations[200]. - Officers and directors are not required to commit full time to the company's affairs, potentially limiting their ability to complete initial business combinations[201]. Currency and Inflation Risks - The ongoing military conflict between Russia and Ukraine may lead to increased inflation in Brazil and potential measures by the Brazilian government to contain inflation, impacting the cost of debt and capital for financing activities[278]. - Political and economic instability in Latin America, including Brazil, could adversely affect the trading price of the company's Class A ordinary shares[274]. - The Brazilian government has implemented various economic plans and exchange rate policies, leading to historical volatility in the Brazilian currency[289]. - The company is subject to risks inherent in investing in Latin America, including political instability and fluctuations in global commodity prices[260]. - Exchange rate fluctuations may adversely affect the financial condition and results of operations if a non-U.S. target is acquired[261].