NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 1 –
ORGANIZATION AND BUSINESS BACKGROUND
Ace Global Business Acquisition Limited (the
“Company”) is a newly organized blank check company incorporated on November 2, 2020, under the laws of the British Virgin
Islands for the purpose of acquiring, engaging in a share exchange, share reconstruction and amalgamation, purchasing all or substantially
all of the assets of, entering into contractual arrangements, or engaging in any other similar business combination with one or more
businesses or entities (Business Combination”). Although the Company is not limited to a particular industry or geographic region
for purposes of consummating a Business Combination, the Company intends to focus on opportunities in the artificial intelligence and
any other related technology innovations market in North America.
As of September 30, 2021, the Company had not
commenced any operations. All activity through September 30, 2021 relates to the Company’s formation and the initial public offering
as described below. The Company has selected December 31 as its fiscal year end.
Financing
The registration statement for the Company’s
Initial Public Offering became effective on April 5, 2021. On April 8, 2021, the Company consummated the Initial Public Offering of 4,000,000
units (the “Public Units”), at $10.00 per Public Unit, generating gross proceeds of $40,000,000 which is described in Note
3.
Subsequently, the underwriters exercised their
over-allotment option in full, and the closing of the issuance and sale of the additional Public Units occurred on April 9, 2021. The
total aggregate issuance by the Company of 600,000 units at a price of $10.00 per unit resulted in gross proceeds of $6,000,000.
Simultaneously with the closing of the Initial
Public Offering on April 8, 2021, the Company consummated the sale of 280,000 units (the “Private Units”) at a price of $10.00
per Private Unit in a private placement, generating gross proceeds of $2,800,000, which is described in Note 6. On April 9, 2021, simultaneously
with the sale of the over-allotment units, the Company consummated the private sale of an additional 24,000 Private Units, generating
gross proceeds of $240,000.
Transaction costs amounted to $1,125,000, consisting
of $920,000 of underwriter’s fees and $205,000 of other offering costs.
Trust Account
Following the closing of the Initial Public Offering
on April 8, 2021 and exercise of the over-allotment option on April 9, 2021, an aggregate amount of $46,920,000 from the net proceeds
of the sale of the Public Units in the Initial Public Offering and the sale of the Private Placement Units was placed in a trust account
(the “Trust Account”). The aggregate amount of $46,920,000 ($10.20 per Public Unit) will be invested in U.S. government securities,
within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or in
any open-ended investment company that holds itself out as a money market fund meeting certain conditions of Rule 2a-7 of the Investment
Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the
distribution of the funds in the Trust Account to the Company’s shareholders, as described below, except that interest earned on
the Trust Account can be released to the Company to pay its tax obligations.
Business Combination
The Company’s management has broad discretion
with respect to the specific application of the net proceeds of the Initial Public Offering and sale of the Private Units, although substantially
all of the net proceeds are intended to be applied generally toward consummating a Business Combination. NASDAQ rules provide that the
Business Combination must be with one or more target businesses that together have a fair market value equal to at least 80% of the balance
in the Trust Account (as defined below) (less any deferred underwriting commissions and taxes payable on interest earned) at the time
of the signing of an agreement to enter into a Business Combination. The Company will only complete a Business Combination if the post-Business
Combination company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling
interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act of
1940, as amended (the “Investment Company Act”). There is no assurance that the Company will be able to successfully effect
a Business Combination.
The Company will provide its shareholders with
the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection
with a shareholder meeting called to approve the Business Combination or (ii) by means of a tender offer. In connection with an Initial
Business Combination, the Company may seek shareholder approval of a Business Combination at a meeting called for such purpose at which
shareholders may seek to redeem their shares, regardless of whether they vote for or against a Business Combination. The Company will
proceed with a Business Combination only if the Company has net tangible assets of at least $5,000,001 upon such consummation of a Business
Combination and, if the Company seeks shareholder approval, a majority of the outstanding shares voted are voted in favor of the Business
Combination.
ACE GLOBAL BUSINESS ACQUISITION LIMITED
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
If a shareholder vote is not required and the
Company does not decide to hold a shareholder vote for business or other legal reasons, the Company will, pursuant to its Amended and
Restated Memorandum and Articles of Association, offer such redemption pursuant to the tender offer rules of the Securities and Exchange
Commission (“SEC”), and file tender offer documents containing substantially the same information as would be included in
a proxy statement with the SEC prior to completing a Business Combination.
The shareholders will be entitled to redeem
their Public Shares for a pro rata portion of the amount then in the Trust Account (initially $10.20 per Public Share, subject to an
increase of up to an additional $0.10 per Public Share in the event that the Ace Global Investment Limited, the sponsor elects to
extend the period of time to consummate a Business Combination (see below), plus any pro rata interest earned on the funds held in
the Trust Account and not previously released to the Company to pay its tax obligations). The per-share amount to be distributed to
shareholders who redeem their Public Shares will not be reduced by the deferred underwriting commissions the Company will pay to the
underwriter (as discussed in Note 10). There will be no redemption rights upon the completion of a Business Combination with respect
to the Company’s rights or warrants. The ordinary shares will be recorded at redemption value and classified as temporary
equity upon the completion of the Initial Public Offering, in accordance with Accounting Standards Codification (“ASC”)
Topic 480 Distinguishing Liabilities from Equity.
The sponsor and any of the Company’s officers
or directors that may hold Founder Shares (as defined in Note 5) (the “shareholders”) and the underwriters will agree (a)
to vote their Founder Shares, the ordinary shares included in the Private Units (the “Private Shares”) and any Public Shares
purchased during or after the Initial Public Offering in favor of a Business Combination, (b) not to propose an amendment to the Company’s
Amended and Restated Memorandum and Articles of Association with respect to the Company’s pre-Business Combination activities prior
to the consummation of a Business Combination unless the Company provides dissenting public shareholders with the opportunity to redeem
their Public Shares in conjunction with any such amendment; (c) not to redeem any shares (including the Founder Shares) and Private Shares
into the right to receive cash from the Trust Account in connection with a shareholder vote to approve a Business Combination (or to
sell any shares in a tender offer in connection with a Business Combination if the Company does not seek shareholder approval in connection
therewith) or a vote to amend the provisions of the Amended and Restated Memorandum and Articles of Association relating to shareholders’
rights of pre-Business Combination activity and (d) that the Founder Shares and Private Shares shall not participate in any liquidating
distributions upon winding up if a Business Combination is not consummated. However, the shareholders will be entitled to liquidating
distributions from the Trust Account with respect to any Public Shares purchased during or after the Initial Public Offering if the Company
fails to complete its Business Combination.
On August 23, 2021, the Company, DDC Enterprise
Limited (“DDC”) and Ka Yin Norma Chu (as shareholders’ representative) entered into a Share Exchange Agreement, pursuant
to which the Company will purchase from DDC’s shareholders all of the issued and outstanding shares and other equity interests
in and of DDC. Upon the closing of the transactions contemplated in the Share Exchange Agreement, Ace will acquire 100% of the issued
and outstanding securities of DDC, in exchange for approximately 30,000,000 of the Company’s ordinary shares, among which 3,000,000
ordinary shares are to be issued and held in escrow to satisfy any indemnification obligations of the seller.
The Company will have to consummate a Business
Combination until April 8, 2022. However, if the Company anticipates that it may not be able to consummate a Business Combination within
12 months, the Company may extend the period of time to consummate a Business Combination up to three times, each by an additional three
months (for a total of 21 months to complete a Business Combination (the “Combination Period”). In order to extend the time
available for the Company to consummate a Business Combination, the sponsor or its affiliate or designees must deposit into the Trust
Account $455,400 (approximately $0.099 per Public Share), on or prior to the date of the applicable deadline, for each three months extension.
Any funds which may be provided to extend the time frame will be in the form of a loan to us from our sponsor. The terms of any such
loan have not been definitely negotiated, provided, however, any loan will be interest free and will be repayable only if the Company
complete a business combination.
Liquidation
If the Company is unable to complete a Business
Combination within the Combination Period, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly
as reasonably possible but no more than ten business days thereafter, redeem 100% of the outstanding Public Shares, at a per-share price,
payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned (net of taxes payable),
which redemption will completely extinguish public shareholders’ rights as shareholders (including the right to receive further
liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption,
subject to the approval of the remaining shareholders and the Company’s board of directors, proceed to commence a voluntary liquidation
and thereby a formal dissolution of the Company, subject in each case to its obligations to provide for claims of creditors and the requirements
of applicable law. The underwriters have agreed to waive its rights to the deferred underwriting commission held in the Trust Account
in the event the Company does not complete a Business Combination within the Combination Period and, in such event, such amounts will
be included with the funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event
of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than $10.00.
ACE GLOBAL BUSINESS ACQUISITION LIMITED
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The sponsor has agreed that it will be liable
to the Company, if and to the extent any claims by a vendor for services rendered or products sold to the Company, or a prospective target
business with which the Company has discussed entering into a transaction agreement, reduce the amounts in the Trust Account to below
$10.00 per share (whether or not the underwriters’ over-allotment option is exercised in full), except as to any claims by a third
party who executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims under the Company’s
indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities
Act of 1933, as amended (the “Securities Act”). In the event that an executed waiver is deemed to be unenforceable against
a third party, the sponsor will not be responsible to the extent of any liability for such third party claims. The Company will seek
to reduce the possibility that the sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have
all vendors, service providers, prospective target businesses or other entities with which the Company does business, execute agreements
with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
NOTE 2. REVISION OF PREVIOUSLY ISSUED FINANCIAL
STATEMENTS
On April 12, 2021, the Acting Director of the
Division of Corporation Finance and Acting Chief Accountant of the SEC together issued a statement regarding the accounting and reporting
considerations for warrants issued by special purpose acquisition companies entitled “Staff Statement on Accounting and Reporting
Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”)” (the “SEC Statement”).
Specifically, the SEC Statement focused on certain provisions that provided for potential changes to the settlement amounts dependent
upon the characteristics of the holder of the warrant, which terms are similar to those contained in the warrant agreement governing
the Company’s warrants.
The Company’s management evaluated the
warrants under Accounting Standards Codification (“ASC”) Subtopic 815-40, Contracts in Entity’s Own Equity.
ASC Section 815-40-15 addresses equity versus liability treatment and classification of equity-linked financial instruments, including
warrants, and states that a warrant may be classified as a component of equity only if, among other things, the warrant is indexed to
the issuer’s common stock. Under ASC Section 815-40-15, a warrant is not indexed to the issuer’s common stock if the terms
of the warrant require an adjustment to the exercise price upon a specified event and that event is not an input to the fair value of
the warrant. The Company’s Private Placement Warrants are not indexed to the Company’s common shares in the manner contemplated
by ASC Section 815-40-15 because the holder of the instrument is not an input into the pricing of a fixed-for-fixed option on equity
shares. In addition, the tender offer provision included in the warrant agreement fails the “classified in shareholders’
equity” criteria as contemplated by ASC Section 815-40-25. As a result, the only Private Warrants shall be classified as liabilities
and the Public Warrants shall be classified as equity and the Company reevaluated the accounting treatment of the 4,600,000 warrants
that were issued to the Company’s sponsor in an initial public offering (“Public Warrants”). The Company previously
accounted for the Public Warrants as components of liabilities.
In further consideration of the guidance in Accounting
Standards Codification (“ASC”) 815-40, Derivatives and Hedging — Contracts in Entity’s Own Equity (“ASC
815”), the Company concluded that a provision in the warrant agreement related to certain transfer provisions precludes the Private
Warrants from being accounted for as components of equity. As the Private Warrants meet the definition of a derivative as contemplated
in ASC 815, the Private Warrants should be recorded as derivative liabilities on the balance sheet and measured at fair value at inception
(on the date of the Initial Public Offering) and at each reporting date in accordance with ASC 820, Fair Value Measurement, with changes
in fair value recognized in the Statements of Operations in the period of change.
In Addition, in preparation of the Company’s
unaudited condensed financial statements as of and for the period ended September 30, 2021, the Company concluded it should revise its
consolidated financial statements to classify all common stock subject to possible redemption in temporary equity. In accordance with
the SEC and its staff’s guidance on redeemable equity instruments, ASC Topic 480, Distinguishing Liabilities from Equity
(ASC 480), paragraph 10-S99, redemption provisions not solely within the control of the Company require common stock subject to redemption
to be classified outside of permanent equity. The Company had previously classified a portion of its common stock in permanent equity.
Although the Company did not specify a maximum redemption threshold, its charter provides that currently, the Company will not redeem
its public shares in an amount that would cause its net tangible assets to be less than $5,000,001. The Company considered that the threshold
would not change the nature of the underlying shares as redeemable and thus would be required to be disclosed outside equity. As a result,
the Company revised its previously filed financial statements to classify all common stock as temporary equity and to recognize accretion
from the initial book value to redemption value at the time of its Initial Public Offering and in accordance with ASC 480. The change
in the carrying value of redeemable shares of common stock resulted in charges against additional paid-in capital and accumulated deficit.
Pursuant to ASC Topic 250, Accounting Changes and Error Corrections issued by the FASB and Staff Accounting Bulletin 99, Materiality
(“SAB 99”) issued by the SEC, the Company determined the impact of the error was immaterial.
ACE GLOBAL BUSINESS ACQUISITION LIMITED
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The following tables summarize the effect of
the revision on each financial statement line item as of the dates, and for the period, indicated:
|
|
As
Previously
Reported
|
|
|
Adjustments #1
|
|
|
Adjustments #2
|
|
|
As
Revised
|
|
Balance sheet as of April 9, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant Liabilities
|
|
|
14,506,560
|
|
|
|
(13,248,000
|
)
|
|
|
-
|
|
|
|
1,258,560
|
|
Total Liabilities
|
|
|
16,690,334
|
|
|
|
(13,248,000
|
)
|
|
|
-
|
|
|
|
3,442,334
|
|
Ordinary Shares Subject to Possible Redemption
|
|
|
26,405,954
|
|
|
|
13,248,005
|
|
|
|
7,266,041
|
|
|
|
46,920,000
|
|
Ordinary Shares
|
|
|
3,465
|
|
|
|
(1,299
|
)
|
|
|
(712
|
)
|
|
|
1,454
|
|
Additional Paid-in Capital
|
|
|
5,184,021
|
|
|
|
1,294
|
|
|
|
(5,185,315
|
)
|
|
|
-
|
|
Accumulated deficit
|
|
|
(187,479
|
)
|
|
|
-
|
|
|
|
(2,080,014
|
)
|
|
|
(2,267,493
|
)
|
Total shareholders’ equity (deficit)
|
|
|
5,000,002
|
|
|
|
-
|
|
|
|
(7,266,041
|
)
|
|
|
(2,266,039
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance sheet as of June 30, 2021 (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary Shares Subject to Possible Redemption
|
|
|
39,489,087
|
|
|
|
-
|
|
|
|
7,430,913
|
|
|
|
46,920,000
|
|
Ordinary Shares
|
|
|
2,183
|
|
|
|
-
|
|
|
|
(729
|
)
|
|
|
1,454
|
|
Additional Paid-in Capital
|
|
|
5,350,170
|
|
|
|
-
|
|
|
|
(5,350,170
|
)
|
|
|
-
|
|
Accumulated deficit
|
|
|
(352,344
|
)
|
|
|
-
|
|
|
|
(2,080,014
|
)
|
|
|
(2,432,358
|
)
|
Total shareholders’ equity (deficit)
|
|
|
5,000,009
|
|
|
|
-
|
|
|
|
(7,430,913
|
)
|
|
|
(2,430,904
|
)
|
Adjustment #1 refer to reclassification of public
warrants from warrant liabilities to equity component.
Adjustment #2 refer to reclassification of all
public shares to temporary equity.
NOTE 3 –
SIGNIFICANT ACCOUNTING POLICIES
These accompanying financial statements have
been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and
pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The interim financial information
provided is unaudited, but includes all adjustments which management considers necessary for the fair presentation of the results for
these periods. Operating results for the interim period ended September 30, 2021 are not necessarily indicative of the results that may
be expected for the fiscal year ending December 31, 2021. The information included in this Form 10-Q should be read in conjunction with
Management’s Discussion and Analysis, and the financial statements and notes thereto included in the Company’s Form S-1 for
the fiscal year ended December 31, 2020, filed with the SEC on January 22, 2021.
●
|
Emerging growth company
|
The Company is an “emerging growth company,”
as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”),
and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that
are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public
accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive
compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote
on executive compensation and shareholder approval of any golden parachute payments not previously approved.
ACE GLOBAL BUSINESS ACQUISITION LIMITED
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Further, Section 102(b)(1) of the JOBS Act exempts
emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that
is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered
under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company
can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but
any such election to opt out is irrevocable. The Company has elected not to opt out of such an extended transition period which means
that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging
growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make a
comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an
emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences
in accounting standards used.
In preparing these financial statements in conformity
with U.S. GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements and the reported expenses during the reporting period.
Making estimates requires management to exercise
significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances
that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near
term due to one or more future confirming events. Accordingly, Actual results may differ from these estimates.
The Company considers all short-term investments
with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents
as of September 30, 2021 and December 31, 2020.
●
|
Cash and investment held in trust account
|
At September 30, 2021, the assets held in the
Trust Account are held in cash and US Treasury securities. Investment securities in the Company’s Trust Account consisted of $46,921,926
in United States Treasury Bills and $13 in cash.
The Company classifies marketable securities
as available-for-sale at the time of purchase and reevaluates such classification as of each balance sheet date. All marketable securities
are recorded at their estimated fair value. Unrealized gains and losses for available-for-sale securities are recorded in other comprehensive
income. The Company evaluates its investments to assess whether those with unrealized loss positions are other than temporarily impaired.
Impairments are considered other than temporary if they are related to deterioration in credit risk or if it is likely the Company will
sell the securities before the recovery of the cost basis. Realized gains and losses and declines in value determined to be other than
temporary are determined based on the specific identification method and are reported in other income (expense), net in the statements
of operations.
●
|
Deferred Offering Costs
|
Deferred offering costs consist of underwriting,
legal, accounting and other expenses incurred through the balance sheet date that are directly related to the Initial public Offering
and that were charged to shareholders’ equity upon the completion of the Initial Public Offering.
The Company accounts for the Warrants in accordance
with the guidance contained in ASC 815-40-15-7D and 7F under which the Private Warrants do not meet the criteria for equity treatment
and must be recorded as liabilities. Accordingly, 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.
ACE GLOBAL BUSINESS ACQUISITION LIMITED
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
●
|
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 shares subject to mandatory redemption (if any) are classified as a liability instrument and are 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 the occurrence
of uncertain future events and considered to be outside of the Company’s control. Accordingly, at September 30, 2021,
46,000,000 ordinary shares subject to possible redemption, respectively, are presented as temporary equity, outside of the
shareholders’ equity section of the Company’s unaudited condensed balance sheet.
The Company complies with the requirements of
the ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A – “Expenses of Offering”.
Offering costs consist principally of professional and registration fees incurred through the balance sheet date that are related to
the Public Offering and that were charged to shareholders’ equity upon the completion of the Public Offering.
●
|
Fair value of financial instruments
|
FASB ASC Topic 820 Fair Value Measurements
and Disclosures defines fair value, the methods used to measure fair value and the expanded disclosures about fair value measurements.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between the
buyer and the seller at the measurement date. In determining fair value, the valuation techniques consistent with the market approach,
income approach and cost approach shall be used to measure fair value. FASB ASC Topic 820 establishes a fair value hierarchy for inputs,
which represents the assumptions used by the buyer and seller in pricing the asset or liability. These inputs are further defined as observable
and unobservable inputs. Observable inputs are those that buyer and seller would use in pricing the asset or liability based on market
data obtained from sources independent of the Company. Unobservable inputs reflect the Company’s assumptions about the inputs that
the buyer and seller would use in pricing the asset or liability developed based on the best information available in the circumstances.
The fair value hierarchy is categorized into
three levels based on the inputs as follows:
Level 1 —
|
Valuations based on unadjusted quoted prices
in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments and block
discounts are not being applied. Since valuations are based on quoted prices that are readily and regularly available in an active
market, the valuation of these securities does not entail a significant degree of judgment.
|
|
|
Level 2 —
|
Valuations based on (i) quoted prices in
active markets for similar assets and liabilities, (ii) quoted prices in markets that are not active for identical or similar assets,
(iii) inputs other than quoted prices for the assets or liabilities, or (iv) inputs that are derived principally from or corroborated
by the market through correlation or other means.
|
|
|
Level 3 —
|
Valuations based on inputs
that are unobservable and significant to the overall fair value measurement.
|
The fair value of the Company’s
certain assets and liabilities, which qualify as financial instruments under ASC 820, “Fair Value Measurements and
Disclosures,” approximates the carrying amounts represented in the balance sheet. The fair values of cash and cash
equivalents, and other current assets, accrued expenses, due to the sponsor are estimated to approximate the carrying values as of
September 30, 2021 due to the short maturities of such instruments. See Note 9 for the disclosure of the Company’s assets and
liabilities that were measured at fair value on a recurring basis.
|
●
|
Concentration of credit risk
|
Financial instruments that potentially subject
the Company to concentration of credit risk consist of a cash account in a financial institution. The Company has not experienced losses
on this account and management believes the Company is not exposed to significant risks on such account.
ACE GLOBAL BUSINESS ACQUISITION LIMITED
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Income taxes are determined in accordance with
the provisions of ASC Topic 740, Income Taxes (“ASC 740”). Under this method, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted income tax rates
expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Any effect
on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
ASC 740 prescribes a comprehensive model for
how companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or
expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the financial statements when it
is more likely than not the position will be sustained upon examination by the tax authorities. The Company’s management
determined that the British Virgin Islands is the Company’s major tax jurisdiction. The Company recognizes accrued interest
and penalties related to unrecognized tax benefits, if any, as an income tax expense. There were no unrecognized tax benefits and no
amounts accrued for interest and penalties as of September 30, 2021 or December 31, 2020. The Company is currently not aware of any
issues under review that could result in significant payments, accruals or material deviation from its position.
The Company may be subject to potential examination
by foreign taxing authorities in the area of income taxes. These potential examinations may include questioning the timing and amount
of deductions, the nexus of income among various tax jurisdictions and compliance with foreign tax laws.
The Company’s tax provision is zero for
the period ended September 30, 2021.
The Company is considered to be an exempted British
Virgin Islands Company, and is presently not subject to income taxes or income tax filing requirements in the British Virgin Islands
or the United States.
The Company calculates net loss per share in
accordance with ASC Topic 260, Earnings per Share. In order to determine the net income (loss) attributable to both the
redeemable shares and non-redeemable shares, the Company first considered the undistributed income (loss) allocable to both the
redeemable common stock and non-redeemable common stock and the undistributed income (loss) is calculated using the total net loss
less any dividends paid. The Company then allocated the undistributed income (loss) ratably based on the weighted average number of
shares outstanding between the redeemable and non-redeemable common stock. Any remeasurement of the accretion to the redemption
value of the common stock subject to possible redemption was considered to be dividends paid to the public stockholders. As of
September 30, 2021, 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 common stock and then share in
the earnings of the Company. As a result, diluted loss per share is the same as basic loss per share for the period presented.
The net income (loss) per share presented in
the unaudited condensed statement of operations is based on the following:
|
|
For the
Three Months
Ended
September 30,
|
|
|
For the
Nine Months
Ended
September 30,
|
|
|
|
2021
|
|
|
2021
|
|
Net loss
|
|
$
|
(324,393
|
)
|
|
$
|
(660,931
|
)
|
Accretion of carrying value to redemption value
|
|
|
-
|
|
|
|
(5,014,797
|
)
|
Net loss including accretion of carrying value to redemption value
|
|
$
|
(324,393
|
)
|
|
$
|
(5,675,728
|
)
|
|
|
For the Three Months Ended
September
30, 2021
|
|
|
For the Nine Months Ended
September
30, 2021
|
|
|
|
Redeemable
Common Stock
|
|
|
Non-
Redeemable
Common Stock
|
|
|
Redeemable Common Stock
|
|
|
Non-Redeemable Common Stock
|
|
Basic and diluted net loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerators:
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocation of net loss including carrying
value to redemption value
|
|
$
|
(246,483
|
)
|
|
$
|
(77,190
|
)
|
|
$
|
(3,891,941
|
)
|
|
$
|
(1,783,787
|
)
|
Accretion of carrying value to redemption value
|
|
|
-
|
|
|
|
-
|
|
|
|
5,014,797
|
|
|
|
-
|
|
Allocation of net income (loss)
|
|
$
|
(246,483
|
)
|
|
$
|
(77,190
|
)
|
|
$
|
1,122,856
|
|
|
$
|
(1,783,787
|
)
|
Denominators:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding
|
|
|
4,600,000
|
|
|
|
1,454,000
|
|
|
|
2,931,868
|
|
|
|
1,343,758
|
|
Basic and diluted net income (loss) per share
|
|
$
|
(0.05
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
0.38
|
|
|
$
|
(1.33
|
)
|
ACE GLOBAL BUSINESS ACQUISITION LIMITED
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Parties, which can be a corporation or individual,
are considered to be related if the Company has the ability, directly or indirectly, to control the other party or exercise significant
influence over the other party in making financial and operational decisions. Companies are also considered to be related if they are
subject to common control or common significant influence.
|
●
|
Recent accounting pronouncements
|
The Company has considered all new accounting
pronouncements and has concluded that there are no new pronouncements that may have a material impact on the results of operations, financial
condition, or cash flows, based on the current information.
NOTE 4 — CASH AND INVESTMENT HELD IN
TRUST ACCOUNT
As of September 30, 2021, investment securities
in the Company’s Trust Account consisted of $46,921,926 in United States Treasury Bills and $13 in cash. The Company classifies
its United States Treasury securities as available-for-sale. Available-for-sale marketable securities are recorded at their estimated
fair value on the accompanying September 30, 2021 balance sheet. The carrying value, including gross unrealized holding gain as other
comprehensive income and fair value of held to marketable securities on September 30, 2021 is as follows:
|
|
Carrying
Value as of
September 30,
2021 (Unaudited)
|
|
|
Gross
Unrealized
Holding
Gain
|
|
|
Fair Value as of
September 30,
2021
(Unaudited)
|
|
Available-for-sale marketable securities:
|
|
|
|
|
|
|
|
|
|
U.S. Treasury Securities
|
|
$
|
46,921,926
|
|
|
$
|
-
|
|
|
$
|
46,921,926
|
|
NOTE 5 –
INITIAL PUBLIC OFFERING
On April 8, 2021, the Company sold 4,000,000
Public Units at a price of $10.00 per Public Unit. On April 9, 2021, the Company sold an additional 600,000 units to cover over-allotments.
Each Public Unit consists of one ordinary share and one redeemable warrant (“Public Warrant”). Each Public Warrant entitles
the holder to purchase one ordinary share at an exercise price of $11.50 per whole share (see Note 7).
The Company paid an upfront underwriting discount
of $920,000, equal to 2% of the gross offering proceeds to the underwriter at the closing of the Initial Public Offering, with an additional
fee of $1,840,000 (the “Deferred Underwriting Discount”) or 4% of the gross offering proceeds payable upon the Company’s
completion of the Business Combination. The Deferred Underwriting Discount will become payable to the underwriter from the amounts held
in the Trust Account solely in the event the Company completes its Business Combination. In the event that the Company does not close
the Business Combination, the underwriter has waived its right to receive the Deferred Underwriting Discount. The underwriter is not
entitled to any interest accrued on the Deferred Underwriting Discount.
NOTE 6 –
PRIVATE PLACEMENT
Simultaneously with the closing of the Initial
Public Offering, the Company consummated a private placement of 280,000 Private Units at $10.00 per unit, purchased by the sponsor. On
April 9, 2021, the Company consummated an additional 24,000 units at $10.00 per unit to cover over-allotments.
The Private Units are identical to the units
sold in the Initial Public Offering except that the warrants included in the Private Units (the “Private Warrants”) are non-redeemable
and may be exercised on a cashless basis so long as the Private Warrants continue to be held by the initial purchasers of the Placement
Units or their permitted transferees.
NOTE 7 – RELATED PARTY TRANSACTIONS
Founder Shares
In November 2020, the Company issued an aggregate
of 1,000 founder shares to the initial shareholders for an aggregate purchase price of $1.
In December 2020, the Company issued an aggregate
of 1,149,000 additional founder shares to the initial shareholders for an aggregate purchase price of $24,999.
ACE GLOBAL BUSINESS ACQUISITION LIMITED
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Advance from Related Parties
As of September 30, 2021, the Company had a temporary
advance from a shareholder and related party for its deferred cost of the Initial Public Offering. The balance is unsecured, interest-free
and has no fixed terms of repayment.
Administrative Services Agreement
The Company is obligated, commencing from January
1, 2021, to pay Ace Global Investment Limited a monthly fee of $10,000 for general and administrative services. This agreement will terminate
upon completion of the Company’s business combination or the liquidation of the trust account to public shareholders.
Related Party Extensions Loan
The Company will have until 12 months from the
consummation of the Initial Public Offering to consummate the initial Business Combination. However, if the Company anticipates that
the Company may not be able to consummate the initial Business Combination within 12 months, the Company may, but is not obligated to,
extend the period of time to consummate a Business Combination three times by an additional three months each time (for a total of up
to 21 months to complete a Business Combination). Pursuant to the terms of our amended and restated memorandum and articles of association
and the trust agreement to be entered into between us and Continental Stock Transfer & Trust Company, in order to extend the time
available for us 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 $455,400 ($0.10 per public share), on
or prior to the date of the applicable deadline. The insiders will receive a non-interest bearing, unsecured promissory note equal to
the amount of any such deposit that will not be repaid in the event that the Company 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 our initial Business
Combination or at the lender’s discretion, converted upon consummation of our Business Combination into additional private units
at a price of $10.00 per unit.
NOTE 8 –
SHAREHOLDER’S (DEFICIT) EQUITY
Ordinary shares
The Company is authorized to issue 100,000,000
ordinary shares at par value of $0.001 per share. Holders of the Company’s ordinary shares are entitled to one vote for each share.
On April 2021, the Company sold 4,600,000 units
at a price of $10.00 per Public Unit in the Public Offering.
In April, 2021, the Company issued 304,000 ordinary
shares under the private placement of 304,000 private units at $10 per unit, to the Sponsor.
As of September 30, 2021 and December 31, 2021,
1,454,000 and 1,150,000 Ordinary Shares were issued and outstanding excluding 4,600,000 and 0 shares are subject to possible conversion.
Public Warrants
Each public warrant entitles the holder thereof
to purchase one-half (1/2) of one ordinary share at a price of $11.50 per full share, subject to adjustment as described in this prospectus.
Pursuant to the warrant agreement, a warrant holder may exercise its warrants only for a whole number of shares. This means that only
an even number of warrants may be exercised at any given time by a warrant holder.
No public warrants will be exercisable for cash
unless the Company has an effective and current registration statement covering the ordinary shares issuable upon exercise of the warrants
and a current prospectus relating to such ordinary shares. It is the Company’s current intention to have an effective and current
registration statement covering the ordinary shares issuable upon exercise of the warrants and a current prospectus relating to such
ordinary shares in effect promptly following consummation of an initial business combination.
Notwithstanding the foregoing, if a registration
statement covering the ordinary shares issuable upon exercise of the public warrants is not effective within 90 days following the consummation
of our initial business combination, public warrant holders may, until such time as there is an effective registration statement and
during any period when we shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant
to an available exemption from registration under the Securities Act. In such event, each holder would pay the exercise price by surrendering
the warrants for that number of ordinary shares equal to the quotient obtained by dividing (x) the product of the number of ordinary
shares underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market value”
(defined below) by (y) the fair market value. The “fair market value” shall mean the average reported last sale price of
the ordinary shares for the 10 trading days ending on the day prior to the date of exercise. For example, if a holder held 300 warrants
to purchase 150 shares and the fair market value on the date prior to exercise was $15.00, that holder would receive 35 shares without
the payment of any additional cash consideration. If an exemption from registration is not available, holders will not be able to exercise
their warrants on a cashless basis.
ACE GLOBAL BUSINESS ACQUISITION LIMITED
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The warrants will become exercisable on the later
of the completion of an initial business combination and March 31, 2022. The warrants will expire at 5:00 p.m., New York City time, on
the fifth anniversary of our completion of an initial business combination, or earlier upon redemption.
The Company may redeem the outstanding warrants
(including any outstanding warrants issued upon exercise of the unit purchase option issued to Ladenburg Thalmann & Co., Inc.,),
in whole and not in part, at a price of $0.01 per warrant:
●
|
at any time while the Public
Warrants are exercisable,
|
●
|
upon not less than 30 days’
prior written notice of redemption to each Public Warrant holder,
|
●
|
if, and only if, the reported last sale price of the ordinary shares equals or exceeds $18.00 per share, for any 20 trading days within a 30 trading day period ending on the third trading day prior to the notice of redemption to Public Warrant holders, and
|
●
|
if, and only if, there
is a current registration statement in effect with respect to the issuance of the ordinary shares underlying such warrants at the
time of redemption and for the entire 30-day trading period referred to above and continuing each day thereafter until the date of
redemption.
|
If the foregoing conditions are satisfied and
the Company would issue a notice of redemption, each warrant holder can exercise his, her or its warrant prior to the scheduled redemption
date. However, the price of the ordinary shares may fall below the $18.00 trigger price as well as the $11.50 warrant exercise price
per full share after the redemption notice is issued and not limit our ability to complete the redemption.
The redemption criteria for the warrants have
been established at a price which is intended to provide warrant holders a reasonable premium to the initial exercise price and provide
a sufficient differential between the then-prevailing share price and the warrant exercise price so that if the share price declines
as a result of our redemption call, the redemption will not cause the share price to drop below the exercise price of the warrants.
If the Company calls the warrants for redemption
as described above, our management will have the option to require all holders that wish to exercise warrants to do so on a “cashless
basis.” In such event, each holder would pay the exercise price by surrendering the whole warrants for that number of ordinary
shares equal to the quotient obtained by dividing (x) the product of the number of ordinary shares underlying the warrants, multiplied
by the difference between the exercise price of the warrants and the “fair market value” (defined below) by (y) the fair
market value. The “fair market value” shall mean the average reported last sale price of the ordinary shares for the 10 trading
days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants. Whether
the Company will exercise our option to require all holders to exercise their warrants on a “cashless basis” will depend
on a variety of factors including the price of our ordinary shares at the time the warrants are called for redemption, the Company’s
cash needs at such time and concerns regarding dilutive share issuances.
NOTE 9 – FAIR VALUE MEASUREMENTS
The fair value of the Company’s financial
assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale
of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the
measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of
observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions
about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and
liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
Level 1: Quoted prices in active markets for
identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability
occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2: Observable inputs other than Level 1
inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical
assets or liabilities in markets that are not active.
Level 3: Unobservable inputs based on our assessment
of the assumptions that market participants would use in pricing the asset or liability.
ACE GLOBAL BUSINESS ACQUISITION LIMITED
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The following table presents information about
the Company’s assets and liabilities that were measured at fair value on a recurring basis as of September 30, 2021, and indicates
the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.
|
|
September 30,
|
|
|
Quoted Prices In
Active Markets
|
|
|
Significant Other
Observable Inputs
|
|
|
Significant Other
Unobservable Inputs
|
|
Description
|
|
2021
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury Securities
held in Trust Account*
|
|
$
|
46,921,926
|
|
|
$
|
46,921,926
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant liabilities – Private
Warrants
|
|
$
|
1,200,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,200,000
|
|
|
*
|
included in cash and investments held in trust account on the Company’s balance sheet.
|
The private warrants are accounted for as liabilities
in accordance with ASC 815-40 and are presented within warrant liabilities on the consolidated balance sheets.
The Company established the initial fair value
for the private warrants at $1,258,560 on April 9, 2021, the date of the Company’s Initial Public Offering, using a Black-Scholes
model. The Company allocated the proceeds received from the sale of Private Units, first to the private warrants based on their fair
values as determined at initial measurement, with the remaining proceeds recorded as ordinary shares subject to possible redemption,
and ordinary shares based on their relative fair values recorded at the initial measurement date. The warrants were classified as Level
3 at the initial measurement date due to the use of unobservable inputs.
The key inputs into the binomial model and Black-Scholes
model were as follows at their measurement dates:
|
|
September 30,
2021
|
|
|
April 9,
2021
(Initial
measurement)
|
|
Input
|
|
|
|
|
|
|
Share price
|
|
$
|
10.05
|
|
|
$
|
10.00
|
|
Risk-free interest rate
|
|
|
0.98
|
%
|
|
|
0.87
|
%
|
Volatility
|
|
|
49
|
%
|
|
|
52
|
%
|
Exercise price
|
|
$
|
11.50
|
|
|
$
|
11.50
|
|
Warrant life
|
|
|
5 years
|
|
|
|
5 years
|
|
As of September 30, 2021, the aggregate value
of the Private Warrants was $1.20 million. The change in fair value from April 9, 2021 to September 30, 2021 was approximately $(58,000).
To the extent that valuation is based on models
or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Because of
the inherent uncertainty of valuation, those estimated values may be materially higher or lower than the values that would have been
used had a ready market for the investments existed. Accordingly, the degree of judgment exercised by the Company in determining fair
value is greatest for investments categorized in Level 3. Level 3 financial liabilities consist of the Private Warrant liability for
which there is no current market for these securities such that the determination of fair value requires significant judgment or estimation.
Changes in fair value measurements categorized within Level 3 of the fair value hierarchy are analyzed each period based on changes in
estimates or assumptions and recorded as appropriate.
ACE GLOBAL BUSINESS ACQUISITION LIMITED
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 10 –
COMMITMENTS AND CONTINGENCIES
Risks and Uncertainties
Management is currently evaluating the impact
of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative
effect on the Company’s future financial position, results of its operations and/or search for a target company, there has been
a significant impact as of the date of these financial statements. The financial statements do not include any adjustments that might
result from the future outcome of this uncertainty.
Registration Rights
The holders of the Founder Shares, the Private
Warrants (and their underlying securities) and the warrants that may be issued upon conversion of the Working Capital Loans (and their
underlying securities) will be entitled to registration rights pursuant to a registration rights agreement to be signed prior to or on
the effective date of the Initial Public Offering. The holders of a majority of these securities will be entitled to make up to two demands
that the Company registers 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 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
will 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.
Underwriter Agreement
The underwriters are entitled to a deferred fee
of 4.0% of the gross proceeds of the Initial Public Offering, or $1,840,000 until the closing of the Business Combination. The deferred
fee can be paid in cash, stock or a combination of both (at the underwriter’s discretion). Any stock issued as a part of the deferred
fee will be issued to the underwriters at the value per share in the Company’s Trust Account, subject to any additional increases
in the amount in trust per the Company’s trust extensions. Stock to be issued to the underwriters will have unlimited piggyback
registration rights and the same rights afforded other holders of the Company’s common stock.
NOTE 11 –
SUBSEQUENT EVENTS
In accordance with ASC Topic 855, “Subsequent
Events”, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date
but before these unaudited financial statements are issued, the Company has evaluated all events or transactions that occurred after the
balance sheet date, up through the date was the Company issued the unaudited condensed financial statements. During the period, the Company
did not have any material subsequent events other than disclosed above.