ACE GLOBAL BUSINESS ACQUISITION LTD MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-K)
Overview
We are a blank check company incorporated in the
liability, as shareholders of the Company, for the liabilities of the Company
over and above the amount paid for their shares) to serve as a vehicle to effect
a merger, share exchange, asset acquisition, share purchase, recapitalization,
reorganization or similar business combination with one or more target
businesses. Our efforts to identify a prospective target business will not be
limited to a particular industry or geographic location. We intend to utilize
cash derived from the proceeds of this offering, our securities, debt or a
combination of cash, securities and debt, in effecting a business combination.
Results of Operations
Our entire activity from inception up to
the initial public offering. Since the initial public offering, our activity has
been limited to the evaluation of business combination candidates, and we will
not be generating any operating revenues until the closing and completion of our
initial business combination. We expect to incur increased expenses as a result
of being a public company (for legal, financial reporting, accounting and
auditing compliance), as well as for due diligence expenses. We expect our
expenses to increase substantially after this period.
For the year ended
was comprised of change in the fair value of the warrant liability of
and dividend earned on the marketable securities held in Trust Account of
For the year ended
comprised of operating costs of
of the warrant liability of
securities held in Trust Account of
Liquidity and Capital Resources
As of
initial public offering, the Company’s only source of liquidity was an initial
purchase of ordinary shares by the Sponsor, monies loaned by the Sponsor under a
certain unsecured promissory note and advances from the Sponsor.
On
Units at a price of
Subsequently, on
600,000 units at a price of
consummated the sale of 304,000 Private Units, at a price of
generating gross proceeds of
Following the initial public offering and the exercise of the over-allotment
option, a total of
underwriting fees and
We intend to use substantially all of the net proceeds of the initial public
offering, including the funds held in the Trust Account, to acquire a target
business or businesses and to pay our expenses relating thereto. To the extent
that our capital stock is used in whole or in part as consideration to effect
our business combination, the remaining proceeds held in the Trust Account, as
well as any other net proceeds not expended, will be used as working capital to
finance the operations of the target business. Such working capital funds could
be used in a variety of ways including continuing or expanding the target
business’ operations, for strategic acquisitions and for marketing, research and
development of existing or new products. Such funds could also be used to repay
any operating expenses or finders’ fees which we had incurred prior to the
completion of our business combination if the funds available to us outside of
the Trust Account were insufficient to cover such expenses.
We intend to use the funds held outside the Trust Account primarily to identify
and evaluate target businesses, perform business due diligence on prospective
target businesses, travel to and from the offices, plants or similar locations
of prospective target businesses or their representatives or owners, review
corporate documents and material agreements of prospective target businesses,
and structure, negotiate and complete a business combination.
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We initially had 12 months from the consummation of this offering to consummate
the initial business combination. If we does not complete a business combination
within 12 months from the consummation of the Public Offering, the Company will
trigger an automatic winding up, dissolution and liquidation pursuant to the
terms of the amended and restated memorandum and articles of association. As a
result, this has the same effect as if we had formally gone through a voluntary
liquidation procedure under the Companies Law. Accordingly, no vote would be
required from our shareholders to commence such a voluntary winding up,
dissolution and liquidation. However, we may extend the period of time to
consummate a business combination eight times (for a total of up to 30 months
from the consummation of the Public Offering to complete a business
combination). As of the date of this report, we have extended four times by an
additional three months each time (for a total of up to 24 months from the
consummation of the Public Offering to complete a business combination), and so
it now has until
the terms of the current amended and restated memorandum and articles of
association and the trust agreement between the Company and
Transfer & Trust Company, LLC
Company to consummate our initial business combination, the Company’s insiders
or their affiliates or designees, upon five days advance notice prior to the
applicable deadline, must deposit into the Trust Account
on or prior to the date of the applicable deadline. The insider,
Investment Limited
notes equal to the amount of any such deposits (i.e.,
first three extensions for each of three extension on
event that we are unable to close a business combination unless there are funds
available outside the Trust Account to do so. Such notes would either be paid
upon consummation of the Company’s initial business combination, or, at the
lender’s discretion, converted upon consummation of our business combination
into additional Private Units at a price of
shareholders have approved the issuance of the Private Units upon conversion of
such notes, to the extent the holder wishes to so convert such notes at the time
of the consummation of the Company’s initial business combination. In the event
that we receive notice from the Company’s insiders five days prior to the
applicable deadline of their intent to effect an extension, the Company intends
to issue a press release announcing such intention at least three days prior to
the applicable deadline. In addition, the Company intends to issue a press
release the day after the applicable deadline announcing whether or not the
funds had been timely deposited. If we are unable to consummate the Company’s
initial business combination by
but not more than ten business days thereafter, redeem 100% of the Company’s
outstanding public shares for a pro rata portion of the funds held in the Trust
Account, including a pro rata portion of any interest earned on the funds held
in the Trust Account and not necessary to pay taxes, and then seek to liquidate
and dissolve. However, we may not be able to distribute such amounts as a result
of claims of creditors which may take priority over the claims of the Company’s
public shareholders. In the event of dissolution and liquidation, the public
rights will expire and will be worthless.
Accordingly, we may not be able to obtain additional financing. If we are unable
to raise additional capital, we may be required to take additional measures to
conserve liquidity, which could include, but not necessarily be limited to,
curtailing operations, suspending the pursuit of a potential transaction, and
reducing overhead expenses. We cannot provide any assurance that new financing
will be available to it on commercially acceptable terms, if at all. These
conditions raise substantial doubt about the Company’s ability to continue as a
going concern through one year from the date of these consolidated financial
statements if a Business Combination is not consummated. These consolidated
financial statements do not include any adjustments relating to the recovery of
the recorded assets or the classification of the liabilities that might be
necessary should the Company be unable to continue as a going concern.
Off-balance Sheet Financing Arrangements
We have no obligations, assets or liabilities which would be considered
off-balance sheet arrangements as of
transactions that create relationships with unconsolidated entities or financial
partnerships, often referred to as variable interest entities, which would have
been established for the purpose of facilitating off-balance sheet arrangements.
We have not entered into any off-balance sheet financing arrangements,
established any special purpose entities, guaranteed any debt or commitments of
other entities, or purchased any non-financial assets.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities other than an agreement to pay our Sponsor
a monthly fee of
office space, utilities and administrative services to the Company. We began
incurring these fees on
monthly until the earlier of the completion of the business combination and the
Company’s liquidation. Also, we are committed to the below:
Registration Rights
The holders of the Founder Shares, the Private Placement Warrants (and their
underlying securities) and the warrants that may be issued upon conversion of
the Working Capital Loans (and their underlying securities) are entitled to
registration rights pursuant to a registration rights agreement signed on the
effective date of the Public Offering. The holders of a majority of these
securities are entitled to make up to two demands that the Company register such
securities. The holders of the majority of the Founder Shares can elect to
exercise these registration rights at any time commencing three months prior to
the date on which these ordinary shares are to be released from escrow. The
holders of a majority of the Private Placement Warrants and warrants issued in
payment of Working Capital Loans made to the Company (or underlying securities)
can elect to exercise these registration rights at any time after the Company
consummates a Business Combination. In addition, the holders have certain
“piggy-back” registration rights with respect to registration statements filed
subsequent to the completion of a Business Combination. The Company will bear
the expenses incurred in connection with the filing of any such registration
statements.
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Underwriting Agreement
The Company is committed to pay the Deferred Discount of 4% of the gross
offering proceeds, in the amount of
underwriter upon the Company’s consummation of the Business Combination. The
underwriter is not entitled to any interest accrued on the Deferred Discount,
and has waived its right to receive the Deferred Discount if the Company does
not close a Business Combination.
Private Warrants
The Company classifies the Private Warrants as liabilities at their fair value
and adjusts the Private Warrants to fair value at each reporting period. This
liability is subject to re-measurement at each balance sheet date until
exercised, and any change in fair value is recognized in our statement of
operations. The Private Warrants are valued using a Black Scholes model.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in
(“GAAP”) requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and income and expenses
during the periods reported. Actual results could materially differ from those
estimates. The Company has identified the following significant accounting
policies:
Warrants
The Company accounts for warrants as either equity-classified or
liability-classified instruments based on an assessment of the warrant’s
specific terms and applicable authoritative guidance in
Standards Board
“Distinguishing Liabilities from Equity” (“ASC 480”) and ASC 815, “Derivatives
and Hedging” (“ASC 815”). The assessment considers whether the warrants are
freestanding financial instruments pursuant to ASC 480, meet the definition of a
liability pursuant to ASC 480, and whether the warrants meet all of the
requirements for equity classification under ASC 815, including whether the
warrants are indexed to the Company’s own ordinary shares and whether the
warrant holders could potentially require “net cash settlement” in a
circumstance outside of the Company’s control, among other conditions for equity
classification. This assessment, which requires the use of professional
judgment, is conducted at the time of warrant issuance and as of each subsequent
quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity
classification, the warrants are required to be recorded as a component of
equity at the time of issuance. For issued or modified warrants that do not meet
all the criteria for equity classification, the warrants are required to be
recorded as liabilities at their initial fair value on the date of issuance, and
each balance sheet date thereafter. Changes in the estimated fair value of the
warrants are recognized as a non-cash gain or loss on the statements of
operations.
Ordinary Shares Subject To Possible Redemption
The Company accounts for its ordinary shares subject to possible redemption in
accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from
Equity.” Ordinary share subject to mandatory redemption (if any) is classified
as a liability instrument and is measured at fair value. Conditionally
redeemable ordinary shares (including ordinary shares that feature redemption
rights that are either within the control of the holder or subject to redemption
upon the occurrence of uncertain events not solely within the Company’s control)
are classified as temporary equity. At all other times, ordinary shares are
classified as shareholders’ equity. The Company’s ordinary shares feature
certain redemption rights that are subject to occurrence of uncertain future
events and considered to be outside of the Company’s control.
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Net Loss Per Share
The Company calculates net loss per share in accordance with ASC Topic 260,
Earnings per Share. Basic loss per share is computed by dividing the net loss by
the weighted-average number of ordinary shares outstanding during the period,
excluding ordinary shares subject to possible redemption. Diluted loss per share
is computed by dividing net loss by the weighted average number of ordinary
shares outstanding, plus to the extent dilutive, the incremental number of
ordinary shares to settle rights and other ordinary share equivalents (currently
none outstanding), as calculated using the treasury stock method. Ordinary
shares subject to possible redemption at
not currently redeemable and are not redeemable at fair value, have been
excluded from the calculation of basic and diluted loss per share since such
shares, if redeemed, only participate in their pro rata share of the Trust
Account earnings. the Company has not considered the effect of the warrants sold
in the Initial Public Offering to purchase an aggregate of 4,904,000 shares in
the calculation of diluted net loss per share, since the exercise of the
warrants is contingent upon the occurrence of future events and the inclusion of
such warrants would be anti-dilutive and the Company did not have any other
dilutive securities and other contracts that could, potentially, be exercised or
converted into ordinary shares and then share in the earnings of the Company.
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