FATPU Fat Projects Acquisition Corporation

Note 1—Organization, Business Operation and Going Concern

Fat Projects Acquisition Corp (the “Company”) was incorporated as a Cayman Islands exempted company on April 16, 2021. The Company was incorporated for the purpose of effecting a merger, capital share exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). As described below, the Company has selected a target for its initial business combination and entered into a Business Combination Agreement with that target.

As of June 30, 2023, the Company had not commenced any operations. All activity for the period from April 16, 2021 (inception) through June 30, 2023, relates to the Company’s formation and the Initial Public Offering (“IPO”) described below and since the closing of the IPO, the search for a prospective initial business combination, the negotiation of the Business Combination Agreement described below and the preparation and filing on October 5, 2022 with the Securities and Exchange Commission (the “SEC”) of a registration statement on Form S-4 with respect to the Business Combination and subsequent amendments thereto (as amended, the “Form S-4”). The Company will not generate any operating revenues until after the completion of its initial business combination, at the earliest. The Company will generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the IPO.

The Company’s sponsor is Fat Projects SPAC Pte Ltd, a Singapore corporation (the “Sponsor”).

The registration statement for the Company’s IPO was declared effective on October 12, 2021 (the “Effective Date”). On October 15, 2021, the Company’s consummated the IPO of 11,500,000 units at $10.00 per unit (the “Units”) (including the underwriters’ over-allotment option), which is discussed in Note 3 (the “IPO”), and the sale of 2,865,000 warrants (the “Private Placement Warrants”), each exercisable to purchase one Class A ordinary share at $11.50 per share, at a price of $1.00 per Private Placement Warrant in a private placement to the Sponsor that closed simultaneously with the IPO.

The Company must complete one or more initial business combinations having an aggregate fair market value of at least 80% of the net assets held in the Trust Account (as defined below) (excluding the deferred underwriting commissions and taxes payable on the interest earned on the Trust Account) at the time of signing a definitive agreement in connection with the initial business combination. However, the Company will complete the initial business combination only if the post-Business Combination company in which its public shareholders own shares will own or acquire 50% or more of the outstanding voting securities of the target or is otherwise not required to register as an investment company under the Investment Company Act (the “Investment Company Act”). There is no assurance that the Company will be able to complete a Business Combination successfully.

Following the closing of the IPO, management has agreed that an amount equal to at least $10.00 per Unit sold in the IPO, including the proceeds of the Private Placement Warrants, are being held in a trust account (“Trust Account”) and will be invested only in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act, which invest only in direct U.S. government treasury obligations. Except with respect to interest earned on the funds held in the Trust Account that may be released to the Company to pay its tax obligations and up to $100,000 of interest that may be used for its dissolution expenses, the proceeds from the IPO and the sale of the placement warrants will not be released from the Trust Account until the earliest to occur of: (a) the completion of the initial business combination, (b) the redemption of any public shares properly submitted in connection with a shareholder vote to amend the Company’s amended and restated memorandum and articles of association (A) to modify the substance or timing of the Company’s obligation to allow redemption in connection with the initial business combination or certain amendments to the Company’s charter prior thereto or to redeem 100% of the public shares if the Company does not complete its initial business combination within the Combination Period as defined below or (B) with respect to any other provision relating to shareholders’ rights or pre-initial business combination activity, and (c) the redemption of the public shares if the Company is unable to complete its initial business combination within the deadline specified in its Amended and Restated Articles and Memorandum of Association, as amended, which is currently by September 15, 2023, but which may be extended by the Company by up to four additional 1-month periods to January 15, 2024 if the Company deposits or causes to be deposited $24,280 into the Trust Account for each 1-month extension (the “Combination Period”) subject to applicable law.

The Company will provide its public shareholders with the opportunity to redeem all or a portion of their public shares upon the completion of the initial business combination either (i) in connection with a shareholder meeting called to approve the initial business combination or (ii) by means of a tender offer. The decision as to whether the Company will seek shareholder approval of a proposed initial business combination or conduct a tender offer will be made by the Company, solely in its discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would require the Company to seek shareholder approval under applicable law or share exchange listing requirements.

The Company will provide its public shareholders with the opportunity to redeem all or a portion of their public shares upon the completion of the initial business combination at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of the initial business combination, including interest earned on the funds held in the Trust Account and not previously released to the Company to pay its taxes, divided by the number of then outstanding public shares, subject to the limitations described herein. The amount in the Trust Account was initially $10.00 per public share, however, there is no guarantee that investors will receive $10.00 per share upon redemption. The per-share amount the Company will distribute to investors who properly redeem their shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriters.

All ordinary shares subject to redemption are recorded at a redemption value and classified as temporary equity following the completion of the IPO, in accordance with Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” The Company will proceed with a Business Combination if the Company seeks shareholder approval and a majority of the issued and outstanding shares voted are voted in favor of the Business Combination.

The shareholders of the Company approved the First Amendment to the Amended and Restated Memorandum and Articles of Association of the Company (the “First Charter Amendment”) at a January 13, 2023 Shareholders Meeting, changing the structure and cost of the Company’s right to extend the date (the “Termination Date”) by which the Company must either (i) consummate a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination involving the Company and one or more businesses (a “business combination”), or else (ii) cease its operations if it fails to complete such business combination, and redeem or repurchase 100% of the Company’s Class A ordinary shares included as part of the units sold in the IPO.

In connection with the approval of the First Charter Amendment on January 13, 2023, holders of 6,058,262 of the public shares exercised their right to redeem those shares for cash at an approximate price of $10.16 per share, for an aggregate of approximately $61.57 million, leaving 5,441,738 public shares outstanding after the January 13, 2023 shareholders meeting.

On January 17, 2023, February 15, 2023, March 21, 2023, the Company deposited three tranches of $312,900, for an aggregate of $938,700, into the Company’s Trust Account, which came from cash on hand of the Company and from proceeds of loans from shareholders of the Company’s Sponsor and other designees of the Company who received non-interest bearing, unsecured promissory notes in consideration for the loans and which enables the Company to extend the period of time it has to consummate its initial business combination by three one-month increments from January 15, 2023 to April 15, 2023.

On April 14, 2023, the shareholders of the Company approved the Second Amendment to the Amended and Restated Memorandum and Articles of Association of the Company (the “Second Charter Amendment”), to extend the Termination Date by up to nine (9) one-month extensions to January 15, 2024 (each of which is referred to as an “Extension”, and such later date, the “Extended Deadline”) provided that (i) the Company or its Sponsor (or any of either of their affiliates or permitted designees) will deposit on or prior to (i) in case of the first such extension, the deadline for the Company to consummate a Business Combination prior to such extension, or the next business day if such deadline is not a business day, and (ii) for each subsequent extension, the last day of the immediately preceding extension for each such extension, or the next business day if such last day is not a business day (each a “Deadline Date”) into the Trust Account the lesser of (x) $50,000 or (y) $0.05 per share for each Public Share outstanding as of the applicable Deadline Date for each such one-month extension until January 15, 2024 unless the closing of the Company’s initial business combination shall have occurred (the “Extension Payment”) in exchange for a non-interest bearing, unsecured promissory note payable upon consummation of a business combination, which notes may be convertible at the option of the holder at any time after the consummation of the Company’s Initial Business Combination into warrants that are identical to the placement warrants (as defined in the registration statement) at a conversion price of $1.00 per warrant, and (ii) the procedures relating to any such extension, as set forth in the Trust Agreement, shall have been complied with.

In connection with the approval of the Second Charter Amendment on April 14, 2023, holders of 4,956,145 shares of Class A Ordinary Shares exercised their right to redeem those shares for cash at an approximate price of $10.46 per share, for an aggregate of approximately $51.82 million, leaving 485,593 public shares outstanding after the April 14, 2023 shareholders meeting.

On April 17, 2023, May 15, 2023, June 22, 2023, July 14, 2023 and August 15, 2023, the Company deposited five tranches of $24,280 into the Trust Account, to extend the period of time it has to consummate its initial business combination by five one-month periods from April 15, 2023 to September 15, 2023. In April 2023, the Company raised an additional $109,280, under the $1,000,000 Promissory Note Offering, for extension deposits.

If the Company is unable to complete the initial business combination by the Termination Date, the Company will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the 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 on the funds held in the Trust Account and not previously released to the Company to pay its taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public shareholders’ rights as shareholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining shareholders and its board of directors, dissolve and liquidate, subject in the case of clauses (ii) and (iii) above to the Company’s obligations under the laws of Cayman Islands to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to the Company’s warrants, which will expire worthless if the Company fails to complete its initial business combination within Combination Period.

The Sponsor, officers and directors have entered into a letter agreement with the Company, pursuant to which they have agreed to (i) waive their redemption rights with respect to any Founder Shares and public shares held by them in connection with the completion of the initial business combination, (ii) waive their redemption rights with respect to any Founder Shares and public shares held by them in connection with a shareholder vote to approve an amendment to the Company’s amended and restated memorandum and articles of association (A) to modify the substance or timing of the Company’s obligation to allow redemption in connection with the initial business combination or certain amendments to the Company’s charter prior thereto or to redeem 100% of the public shares if the Company does not complete its initial business combination within the Combination Period, or (B) with respect to any other provision relating to any rights of holders of the Company’s Class A ordinary shares and (iii) waive their rights to liquidating distributions from the Trust Account with respect to any Founder Shares held by them if the Company fails to complete its initial business combination within the Combination Period, although they will be entitled to liquidating distributions from the Trust Account with respect to any public shares they hold if the Company fails to complete its initial business combination within the prescribed time frame.

The Sponsor has agreed that it will be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has entered into a written letter of intent, confidentiality or similar agreement or Business Combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10.00 per public share and (ii) the actual amount per public share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.00 per public share due to reductions in the value of the Trust Account, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the Trust Account (whether or not such waiver is enforceable) nor will it apply to any claims under the Company’s indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act. However, the Company has not asked the Sponsor to reserve for such indemnification obligations, nor has the Company independently verified whether the Sponsor has sufficient funds to satisfy its indemnity obligations and believes that the Sponsor has no material assets. Therefore, the Company cannot assure you that the Sponsor would be able to satisfy those obligations. None of the Company’s officers or directors will indemnify the Company for claims by third parties including, without limitation, claims by vendors and prospective target businesses. Our independent registered public accounting firm, our principal legal counsel and the underwriters of the offering, have not executed agreements with us waiving such claims to the monies held in the Trust Account.

The anchor investors (as defined in Note 3) will not be entitled to (i) redemption rights with respect to any Founder Shares held by them in connection with the completion of the initial business combination, (ii) redemption rights with respect to any Founder Shares held by them in connection with a shareholder vote to amend the Company’s amended and restated memorandum and articles of association in a manner that would affect the substance or timing of the Company’s obligation to redeem 100% of its Public Shares if the Company has not consummated an initial business combination within the Combination Period or (iii) rights to liquidating distributions from the Trust Account with respect to any Founder Shares held by them if the Company fails to complete the initial business combination within the Combination Period (although they will be entitled to liquidating distributions from the Trust Account with respect to any Public Shares they hold if the Company fails to complete the initial business combination within the Combination Period).

Subject to the requirement that each anchor investor purchase 100% of the units allocated to it in the IPO, in connection with the closing of the IPO the Sponsor sold 75,000 founder shares to each anchor investor (750,000 founder shares in the aggregate) at their original purchase price of approximately $0.009 (See Note 6).

Merger

On August 26, 2022, the Company entered into a Business Combination Agreement with Avanseus Holdings Pte. Ltd., a Singapore private company limited by shares (“Avanseus”) (as may be amended and/or restated from time to time, the “Business Combination Agreement”).

The Business Combination Agreement and the transactions contemplated thereby were approved by the boards of directors of each of the Company and Avanseus (other than the PIPE Investment as defined below, which will require further approval of each board of directors), subject to the approval of the Company’s shareholders.

The Business Combination Agreement provides for a series of transactions, pursuant to which, among other things, Avanseus’ shareholders will exchange all of their outstanding Avanseus shares in consideration for newly issued Company Class A Ordinary Shares (the “Share Exchange”), subject to the conditions set forth in the Business Combination Agreement, with Avanseus thereby becoming a wholly owned subsidiary of the Company (the Share Exchange and the other transactions contemplated by the Business Combination Agreement, together, the “Business Combination” or the “Proposed Transaction”). In connection with the Business Combination, the Company will change its corporate name to “Avanseus Holdings Corporation” (“New Avanseus”).

The Business Combination Agreement, prior to the Second BCA Amendment described below in Note 6, provided that the Company will use its commercially reasonable efforts to enter into and consummate subscription agreements in form and substance mutually acceptable to the Company and Avanseus with investors mutually reasonably acceptable to the Company and Avanseus pursuant to which such investors will agree to purchase up to an aggregate of $35 million of (i) the Company’s Series A Convertible Preference Shares, which shares will be convertible into the Company’s Class A Ordinary Shares, and/or (ii) the Company’s Class A Ordinary Shares, with such purchases to be consummated prior to or substantially currently with the closing of the Share Exchange (the “PIPE Investment”).

The Business Combination is expected to close in the third or fourth quarter of 2023, following the receipt of the required approval by the Company’s shareholders and the fulfillment of other customary closing conditions.

On October 3, 2022, the Company and Avanseus entered into a First Amendment to Business Combination Agreement (the “First BCA Amendment”) to amend the previously announced Business Combination Agreement dated August 26, 2022. The BCA Amendment amended the Original Business Combination Agreement to (1) add a mutual condition to the obligations of the Company and Avanseus to close the transactions contemplated in the Business Combination Agreement that holders of the Company’s Class A Ordinary Shares redeem an aggregate of at least 5,200,000 of such shares so that Avanseus will be the acquiror for accounting purposes at both the minimum and maximum redemption levels required to be disclosed in the Registration Statement on Form S-4 to be filed with the Commission pursuant to the Business Combination Agreement, (2) replace the form of Incentive Equity Plan attached to the Original Business Combination Agreement with an amended Incentive Equity Plan to conform the eligible participants in the plan to the eligible participants listed in the Original Business Combination Agreement, (3) improve the description of the Nasdaq listing process in the Business Combination Agreement for the Company Class A Ordinary Shares to be issued to Avanseus’ shareholders and pursuant to the Incentive Equity Plan and (4) provide that subscription agreements for PIPE investors be mutually reasonably acceptable to Avanseus as well as the Company.

The Company filed the initial Form S-4 with SEC with respect to the Business Combination on October 5, 2022. It filed Amendments No. 1, 2, 3 and 4 to the Form S-4 on November 25, 2022, January 6, 2023, March 20, 2023 and May 11, 2023.

On February 14, 2023, Avanseus and the Company entered into a Second Amendment to Business Combination Agreement (the “Second BCA Amendment”) to further amend the Original Business Combination Agreement. The Second BCA Amendment further amends the Original Business Combination Agreement to:

On July 14, 2023, Avanseus and the Company entered into a Third Amendment to Business Combination Agreement (the “Third BCA Amendment”) to further amend the Original Business Combination Agreement. The Third BCA Amendment further amends the Original Business Combination Agreement to:

Liquidity, Capital Resources and Going Concern

As of June 30, 2023, the Company had $3,880 in its operating bank account and working capital deficit of $3,331,944.

The Company’s liquidity needs prior to the IPO, had been satisfied through a payment from the Sponsor of $25,000 (see Note 5) for the founder shares to cover certain offering costs, the loan under an unsecured promissory note from the Sponsor of up to $300,000 (see Note 5), and borrowings from related parties (see Note 5). Subsequent to the consummation of the IPO, the Company’s liquidity has been satisfied through the net proceeds from the IPO and the Private Placement held outside of the Trust Account, a Working Capital Loan of $90,000 (see Note 5) and promissory notes issued to related parties and third parties (see Note 5 and Note 6).

In order to finance transaction costs in connection with a Business Combination, the Sponsor, initial shareholders, officers, directors or their affiliates may, but are not obligated to, provide the Company Working Capital Loans, as defined below (see Note 5). As of both June 30, 2023 and December 31, 2022, the Company had outstanding balance of $90,000 from Sponsor under the Working Capital Loans.

In connection with the Company’s assessment of going concern considerations in accordance with FASB Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that the Company has and will continue to incur significant costs in pursuit of its acquisition plans which raises substantial doubt about the Company’s ability to continue as a going concern. Moreover, the Company may need to obtain additional financing either to complete the initial business combination or because it becomes obligated to redeem a significant number of its Public Shares upon consummation of the initial business combination, in which case the Company may issue additional securities or incur debt in connection with such Business Combination. Subject to compliance with applicable securities laws, the Company would only complete such financing simultaneously with the completion of its initial business combination. If the Company is unable to complete the initial business combination because it does not have sufficient funds available to it, it will be forced to cease operations and liquidate the Trust Account. In addition, following the initial business combination, if cash on hand is insufficient, the Company may need to obtain additional financing in order to meet its obligations.

In addition, management has determined that the mandatory liquidation and subsequent dissolution, should the Company be unable to complete a business combination, raises substantial doubt about the Company’s ability to continue as a going concern. The Company has until September 15, 2023 (or until as late as January 15, 2024 if the Company extends the Termination Date as authorized under the Second Charter Amendment to consummate a business combination, by up to four additional 1-month periods by depositing or causing to be deposited $24,280 into the Trust Account for each 1-month extension). It is uncertain that the Company will be able to consummate a business combination by this time. If a business combination is not consummated by this date, there will be a mandatory liquidation and subsequent dissolution unless there are further extensions as described above. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after September 15, 2023 (or by January 15, 2024 if the Company extends the Termination Date as authorized under the Second Charter Amendment). Management has determined that the mandatory liquidation, should a business combination not occur, and potential subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern.

Risks and Uncertainties

Management is currently evaluating the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of this financial statement. The financial statement does not include any adjustments that might result from the outcome of this uncertainty.

Additionally, as a result of the military action commenced in February 2022 by the Russian Federation in the country of Ukraine and related economic sanctions, the Company’s ability to consummate a Business Combination, or the operations of a target business with which the Company ultimately consummates a Business Combination, may be materially and adversely affected. Further, the Company’s ability to consummate a transaction may be dependent on the ability to raise equity and debt financing which may be impacted by these events, including as a result of increased market volatility, or decreased market liquidity in third-party financing being unavailable on terms acceptable to the Company or at all. The impact of this action and related sanctions on the world economy and the specific impact on the Company’s financial position, results of operations and/or ability to consummate a Business Combination are not yet determinable. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Note 2—Significant Accounting Policies

Note 3—Initial Public Offering

Public Units

On October 15, 2021, the Company sold 11,500,000 Units at a price of $10.00 per Unit. Each Unit consists of one Class A ordinary share and one redeemable warrant (the “Public Warrants”).

Ten qualified institutional buyers or institutional accredited investors which are not affiliated with the Company, the Sponsor, the directors or any member of the Company’s management (the “anchor investors”) purchased 950,000 Units each, or 9,500,000 in the aggregate, in the IPO at the offering price of $10.00 per Unit. There can be no assurance that the anchor investors will retain their shares, if any, prior to or upon the consummation of the initial business combination.

Following the closing of the IPO on October 15, 2021, $115,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the IPO and the sale of the Private Placement Warrants was deposited into the Trust Account, invested in United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government treasury obligations.

Public Warrants

Each warrant entitles the holder to purchase one Class A ordinary share at a price of $11.50 per share, subject to adjustment as discussed herein. In addition, if (x) the Company issues additional Class A ordinary shares or equity-linked securities for capital raising purposes in connection with the closing of the initial business combination at an issue price or effective issue price of less than $9.20 per Class A ordinary share (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of the initial business combination on the date of the consummation of the initial business combination (net of redemptions), and (z) the volume weighted average trading price of the Company’s Class A ordinary share during the 20 trading day period starting on the trading day prior to the day on which the Company consummates the initial business combination (such price, the “Market Value”) is below $9.20 per share, then the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the greater of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price described below under “Redemption of warrants” will be adjusted (to the nearest cent) to be equal to 180% of the greater of the Market Value and the Newly Issued Price.

The warrants will become exercisable on the later of 12 months from the closing of the IPO or the completion of the Company’s initial business combination, and will expire five years after the completion of the Company’s initial business combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.

The Company has not registered the Class A ordinary shares issuable upon exercise of the warrants at this time. However, the Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of the initial business combination, the Company will use its best efforts to file with the SEC a registration statement covering the issuance of the Class A ordinary shares issuable upon exercise of the warrants, to cause such registration statement to become effective within 60 business days following the initial business combination and to maintain a current prospectus relating to those Class A ordinary shares until the warrants expire or are redeemed, as specified in the warrant agreement. If a registration statement covering the issuance of the Class A ordinary shares issuable upon exercise of the warrants is not effective by the 60th business day after the closing of the initial business combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company will has failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis.

Redemption of warrants. Once the warrants become exercisable, the Company may redeem the outstanding warrants (except as described herein with respect to the Private Placement Warrants):

Note 4—Private Placement

Simultaneously with the closing of the IPO, the Company’s Sponsor purchased an aggregate of 2,865,000 Private Placement Warrants at a price of $1.00 per Private Placement Warrant, for an aggregate purchase price of $2,865,000. The Private Placement Warrants (including the Class A ordinary shares issuable upon exercise of the Private Placement Warrants) will not be transferable, assignable or salable (except to certain permitted transferees) until 30 days after the completion of the initial business combination and they will not be redeemable by the Company so long as they are held by the Sponsor or its permitted transferees. In accordance with one of the permitted exceptions to the restrictions on transfer of the Private Warrants, promptly after the completion of the IPO, the Sponsor distributed all of the Private Warrants to its shareholders. Therefore, the Sponsor itself no longer holds any of the Private Warrants, and all of the Private Warrants are held by the Sponsor’s Shareholders (the “Sponsor’s Shareholders”).

The Sponsor, or its permitted transferees, has the option to exercise the Private Placement Warrants on a cashless basis. The placement warrants (including the Class A ordinary shares issuable upon exercise of the placement warrants) will not be transferable, assignable or salable until 30 days after the completion of the initial business combination, subject to certain exceptions.

The Private Warrants are identical to the Public Warrants except that, so long as the Private Warrants are held by the Sponsor or its permitted transferees, (i) they (including the Class A Ordinary Shares issuable upon exercise of these warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold by the holders until 30 days after the completion of the initial business combination, and (ii) they will be entitled to registration rights.

Note 5—Related Party Transactions

Founder Shares

On April 22, 2021, the Sponsor paid, $25,000, or approximately $0.009 per share, to cover certain offering costs and expenses in consideration for 2,875,000 Class B ordinary shares, par value $0.0001. Up to 375,000 Founder Shares were subject to forfeiture by the Sponsor depending on the extent to which the underwriters’ over-allotment option is exercised. The underwriters fully exercised their over-allotment option at the IPO resulting in no Founder Shares being subject to forfeiture.

The Sponsor, directors and executive officers have agreed not to transfer, assign or sell any of their Founder Shares (or Class A ordinary shares issuable upon conversion thereof), subject to certain limited exceptions, until the earlier of (A) six months after the date of the Company’s initial business combination or (B) subsequent to the Company’s initial business combination, (x) if the reported last sale price of the Company’s Class A ordinary shares equals or exceeds US $12.00 per share (as adjusted for share subdivisions, share dividends, right issuances, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the Company’s initial business combination, or (y) the date on which the Company completes a liquidation, merger, share exchange, reorganization or other similar transaction that results in all of our shareholders having the right to exchange their shares for cash, securities or other property.

In September 2021, the Company received expressions of interest from anchor investors to purchase Units in the IPO. Subject to each anchor investor purchasing 100% of the Units allocated to it, in connection with the closing of the IPO the Sponsor sold 75,000 founder shares to each anchor investor (750,000 founder shares in the aggregate) at their original purchase price of approximately $0.009 per share. The Company accounted for the fair value in excess of consideration paid with respect to the number of Founder Shares sold to the anchor investors as an offering cost reflected as an increase to additional paid in capital offset by a reduction of the offering proceeds upon completion of the IPO. The fair value of each Founder Share was determined to be $6.75 per share or approximately $5,062,500 (see note 6). Valuation of the Founder Shares was determined using an internal valuation model driven primarily by the initial issuance price of our Class A ordinary shares, an assumed value of $1.00 for the warrants included in the Units, and a 75% probability of successfully completing an initial business combination.

In accordance with one of the permitted exceptions to the restrictions on transfer of the founder shares, on October 18, 2021, the Sponsor transferred 2,070,000 Class B ordinary shares held by it to its Sponsor’s Shareholders, which include all of the Company’s directors and executive officers or companies controlled by them.

Share Based Compensation

In April and May 2021, the Company’s sponsor transferred interests in a total of 205,000 Founder Shares to directors. On May 3, 2023, to induce Fat Projects International Investments and Holdings Limited (“FPI”) to sell the 127,000 Class B Shares to an unrelated third party (as described in Note 6), each of the Company’s six directors other than Mr. Andrada and Mr. Lo waived their right to receive 10,000 compensator Class B Ordinary Shares (for an aggregate of 60,000 shares) from FPI upon consummation of the Company’s initial business combination to be included in the shares sold to the private investor.

The Company has determined the valuation of the Class B ordinary shares as of the Grant Dates. The valuation resulted in a fair value of approximately $1.45 per share as of the Grant Dates, or an aggregate of $297,615 for the 205,000 shares. As vesting of Founder Shares to directors is contingent upon the closing of an initial business combination, a performance condition is not probable of occurring at June 30, 2023 and December 31, 2022. As a result of the waiver described above, upon consummation of an initial Business Combination the Company will recognize $210,525 (145,000 shares at approximately $1.45 per share,) in compensation expense.

Due from Related Party

Since April 16, 2021 (inception), related parties have paid for certain offering costs and expenses on behalf of the Company. At December 31, 2021 an excess of $50,000 was repaid to those related parties and was due back to the Company. On April 26, 2022, the Company was repaid all amounts due to the Company from the related parties.

As of June 30, 2023, the amount due from related party was $26,775, which was the loans under the $1,000,000 Promissory Note Offering (as defined below) that has been received by Sponsor on behalf of the Company, these amounts will be used for the extension deposits and working capital purposes as demanded.

Due to Related Party

As of June 30, 2023, the Company had due to related party balance of $77,539, consisting of unpaid administrative fee of $60,000, travel reimbursement of $4,560 and operating expenses paid by Sponsor on behalf of the Company of $13,079.

Promissory Note—Related Party

On May 6, 2021, the Sponsor agreed to loan the Company up to $300,000 to be used for a portion of the expenses of the IPO. These loans were non-interest bearing, unsecured and due at the earlier of October 31, 2021, or the closing of the IPO. As of June 30, 2023 and December 31, 2022, no amount was outstanding on the promissory note. The promissory note has expired, and no borrowings are permitted on this note.

On January 8, 2023, the Company’s board of directors authorized the Company to raise up to $1 million of funds by the issuance of non-interest-bearing notes (the “$1,000,000 Promissory Note Offering” and the notes offered therein, the “Zero-Interest Notes”) to fund extensions of the deadline to complete the Company’s initial business combination. Certain of the holders of the Founder Shares other than the anchor investors agreed among themselves to transfer up to 5% of their Founder Shares to subscribers to this note offering and the $1,062,500 Promissory Note Offering described in Note 6 below at a rate of one share for each $10 of principal amount of notes to incentivize subscriptions (the “Subscriber Shares”). The Company has concluded that the transfer of the subscriber shares will be recorded as a debt issuance cost and amortized on a straight line basis over the life of the promissory note entered into by the subscriber.

For the six months ended June 30, 2023, the Company issued an aggregate of $407,540 in principal amount of Zero-Interest Notes in the $1,000,000 Promissory Note Offering to 20 related parties providing funding in that amount for the extension deposits. The Zero-Interest Notes are non-interest-bearing and will be payable on the earlier to occur of (i) the date on which Company consummates its initial business combination and (ii) December 31, 2023.

Certain of the holders of the Founder Shares other than the anchor investors agreed to transfer Class B ordinary shares as an inducement to the subscribers to the Zero-Interest Notes to purchase the notes. In connection with the issuance of $407,540 Zero-Interest Notes, the Company recorded $400,817 as debt issuance costs, in the accompanying condensed balance sheets, for the fair value of 40,754 Subscriber Shares to be transferred to investors.

For the three and six months ended June 30, 2023, the Company recognized $110,977 and $161,033 of interest expense, included in interest expense of $290,165 and $397,396 on the condensed statement of operations, associated with amortization of the debt issuance costs for the fair value of 40,754 Subscriber Shares to be transferred to investors.

As of June 30, 2023 the promissory note – related party, net under the $1,000,000 Promissory Note Offering was as follows:

On May 4, 2023, FPI, a shareholder of the Company’s Sponsor that received the Company’s Class B Ordinary Shares and Private Placement warrants shortly after the closing of the Company’s IPO which is controlled by the Company’s Co-Chief Executive Officers, David Andrada and Tristan Lo, sold 127,000 Class B Ordinary Shares to a private investor for $250,000 and loaned the proceeds to the Company in return for a non-interest-bearing, unsecured promissory note in that principal amount. This transaction was not part of either the $1,000,000 Promissory Note Offering or the $1,062,500 Promissory note Offering but rather was a separate transaction. Each of the Company’s six directors other than Mr. Andrada and Mr. Lo waived their right to receive 10,000 compensator Class B Ordinary Shares (for an aggregate of 60,000 shares) from FPI upon consummation of the Company’s initial business combination to be included in the shares sold to the private investor.

The Company evaluated the promissory note entered into with FPI on May 4, 2023. The Company did not identify any features included within the promissory note that would require bifurcation as embedded derivatives; therefore, pursuant to ASC 470-20-25-12, all proceeds received from the issuance of the promissory note were recorded as a liability on the unaudited condensed balance sheets and no portion of the proceeds received from issuing the promissory note were attributed to any embedded features. As of June 30, 2023, the Company recorded the $250,000 funding received as “promissory note – Related party, net” on the accompany condensed balance sheets.

Working Capital Loans

In order to finance transaction costs in connection with an intended Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes the initial business combination, the Company may repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans may be repaid only out of funds held outside the Trust Account. In the event that the initial business combination does not close, the Company may use a portion of the working capital held outside the Trust Account to repay the Working Capital Loans but no proceeds from the Trust Account would be used to repay the Working Capital Loans. Up to $1,500,000 of such Working Capital Loans may be convertible into warrants of the post-Business Combination entity at a price of $1.00 per warrant at the option of the lender. The warrants would be identical to the Private Placement Warrants. On December 22, 2022, the Company borrowed $90,000 from the Sponsor under the Working Capital Loan, which is convertible into warrants as described above. The loan is non-interest bearing and payable on the earliest to occur of (i) the date which the Company consummates its initial business combination and (ii) the date that the winding up of the Company is effective (such date, the “Maturity Date”). The principal balance may be prepaid at any time, at the election of the Company.

As of both June 30, 2023, and December 31, 2022, the Company had $90,000 of outstanding borrowings under the Working Capital Loans.

Office Space, Secretarial and Administrative Services

Commencing on the date that the Company’s securities are first listed on the NASDAQ through the earlier of consummation of the initial Business Combination and the liquidation, the Company has agreed to pay the Sponsor a total of $10,000 per month for office space, utilities, secretarial support and administrative services. For the three and six months ended June 30, 2023, the expense for office space, secretarial and administrative services was $30,000 and $60,000, respectively. For the three and six months ended June 30, 2022, the expense for office space, secretarial and administrative services was $30,000 and $60,000, respectively. On June 30, 2023, and December 31, 2022, the unpaid balance was $60,000 and $0, respectively, and reported on the balance sheet as due to related party.

Note 6—Promissory Note - Third Party

On January 26, 2023, the Company’s board of directors authorized the Company to raise up to $1,062,500 of funds (the “1,062,500 Promissory Note Offering”) for working capital (which can also be used to fund extensions of the deadline to complete our initial business combination) through a private offering of promissory notes bearing simple interest at a rate of 15% per annum (the “Interest-Bearing Notes”) to prospective investors who are not our sponsor, directors or officers or any of their or our affiliates (“non-affiliates”). Certain of the holders of the Founder Shares other than the anchor investors have agreed among themselves to transfer up to 5% of their Founder Shares to subscribers to this note offering and the $1,000,000 Promissory Note Offering described in Note 5 above at a rate of one share for each $10 of principal amount of notes to incentivize subscriptions. The Company has concluded that the transfer of the subscriber shares will be recorded as a debt issuance cost and amortized on a straight line basis over the life of the promissory note entered into by the subscriber.

For the six months ended June 30, 2023, the Company issued an aggregate principal amount of $607,740 Interest-Bearing Notes to 4 non-affiliates under the $1,062,500 Promissory Note Offering, providing funding of $607,740 for the extension deposits and working capital. These notes will be payable on the earlier to occur of (i) the date on which Company consummates its initial business combination and (ii) December 31, 2023.

In connection with the issuance of $607,740 Interest-Bearing Notes, the Company recorded $594,791 as deferred debt financing costs, in the accompanying condensed balance sheets, for the fair value of 60,774 Subscriber Shares to be transferred to investors.

For the three and six months ended June 30, 2023, the Company recognized $179,188 and $236,363 interest expense included in interest expense of $290,165 and $397,396 on the condensed statement of operations, associated with amortization of the debt issuance costs for the fair value of 60,774 Subscriber Shares to be transferred to investors.

For the three and six months ended June 30, 2023, the Company accrued $22,728 and $30,528 interest expense in relation to the Interest-Bearing Notes respectively.

As of June 30, 2023 the promissory note – third party, net was as follows:

Note 7—Commitments & Contingencies

Registration Rights

The holders of (i) the Founder Shares, (ii) the representative shares, (iii) the Placement Warrants (including component securities contained therein), (iv) warrants (including securities contained therein) that may be issued upon conversion of Working Capital Loans, (v) any Class A ordinary shares issuable upon the exercise of the Placement Warrants, (vi) any Class A ordinary shares that may be issued upon exercise of the warrants as part of the Working Capital Loans and (vii) Class A ordinary share issuable upon conversion of the Founder Shares, will be entitled to registration rights pursuant to a registration rights agreement signed on October 12, 2021, requiring the Company to register such securities for resale (in the case of the Founder Shares, only after conversion to the Company’s Class A ordinary shares). The holders of the majority of these securities are entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the Company’s completion of the initial business combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. The registration rights agreement does not contain liquidated damages or other cash settlement provisions resulting from delays in registering the Company’s securities. The Company will bear the expenses incurred in connection with the filing of any such registration statements.

Underwriters Agreement

The Company granted the underwriters a 45-day option from the date of the IPO to purchase up to an additional 1,500,000 units to cover over-allotments, if any. At the IPO, the underwriters fully exercised their option to purchase the additional 1,500,000 units.

The underwriters were paid a cash underwriting discount of one percent (1%) of the gross proceeds of the IPO, or $1,150,000. Additionally, the underwriters will be entitled to a deferred underwriting discount of 3.5% of the gross proceeds of the IPO, or $4,025,000, upon the completion of the Company’s initial business combination.

Anchor Investors

The Sponsor entered into an agreement with ten strategic investors (each referred to as an “anchor investor”) for the purchase of 75,000 Founder Shares each at the same price the Sponsor paid ($0.009 per share). The anchor investors purchased 9,500,000 Units in the IPO. The Company can make no assurance that the anchor investor will retain their shares, if any, upon the completion of the Company’s Business Combination. As a result of the Founder Shares and Private Placement Warrants that the anchor investor may hold, it may have different interests with respect to a vote on an initial business combination than other public shareholders (see Note 5). The Company believes that in connection with the First Charter Amendment and the Second Charter Amendment, the anchor investors redeemed most or all of the Class A ordinary shares that were included in the Units they purchased in the IPO.

The Company accounted for the fair value in excess of consideration paid with respect to the number of Founder Shares sold to the anchor investors as an offering cost reflected as an increase to additional paid in capital offset by a reduction of the offering proceeds upon completion of the IPO. The fair value of each Founder Share was determined to be $6.75 per share or approximately $5,062,500 in the aggregate for all 750,000 Founder Shares transferred to the anchor investors (see note 5). Valuation of the Founder Shares was determined using an internal valuation model and classified as a Level 3 valuation. The valuation was driven primarily by the initial issuance price of the Public Units, an assumed value of $1.00 for the warrants included in the Units, and a 75% probability of successfully completing an initial business combination.

Class B Shares Related to Debt Issuance

In January 2023, the Company’s board of directors authorized the Company to raise up to $1,062,500 of interest bearing notes and up to $1 million of non-interest bearing notes, See Note 6 and Note 5, respectively. Certain of the holders of the Founder Shares other than the anchor investors have agreed among themselves to transfer up to 5% of their Founder Shares to subscribers to this note offering at a rate of one share for each $10 of principal amount of notes to incentivize subscriptions. The Company has concluded that the transfer of the subscriber shares will be recorded as a debt issuance cost and amortized on a straight-line basis over the life of the promissory note entered into by the subscriber.

The fair value of each Subscriber Share was determined to be $9.61-$10.54 per share (depending on the terms of each Zero-Interest Note and Interest-Bearing Notes as defined in Note 5 and Note 6) or $995,608 in the aggregate for all 101,528 Subscriber Shares transferred to the note investors (see note 5 and note 6). Valuation of the Subscriber Shares was determined using the Monte Carlo Model and classified as Level 3 in the fair value hierarchy. The key inputs for Monte Carlo Model includes 1) Volatility of 1.1% -8.2%, 2) risk- free rate of 4.64% -5.11%, 3) stock price of $10.22 -$11.10 per share and 4) estimated term of 0.80 - 0.95 years.

Representative Shares

The Company issued to EF Hutton and/or its designees (the “Representatives”) 115,000 Class A ordinary shares upon the consummation of the IPO. EF Hutton has agreed not to transfer, assign or sell any such ordinary shares until the completion of the initial business combination. In addition, EF Hutton has agreed (i) to waive its redemption rights with respect to such ordinary shares in connection with the completion of the initial business combination and (ii) to waive its rights to liquidating distributions from the Trust Account with respect to such ordinary shares if the Company fails to complete its initial business combination within the Combination Period.

The ordinary shares have been deemed compensation by FINRA and are therefore subject to a lock-up for a period of 180 days immediately following the commencement of sales of the registration statement of which the IPO forms a part pursuant to Rule 5110(e)(1) of FINRA’s NASD Conduct Rules. Pursuant to FINRA Rule 5110(e)(1), these securities may not be sold, transferred, assigned, pledged or hypothecated or the subject of any hedging, short sale, derivative, put or call transaction that would result in the economic disposition of the securities by any person for a period of 180 days immediately following the effective date of the registration statement of which the IPO forms a part, nor may they be sold, transferred, assigned, pledged or hypothecated for a period of 180 days immediately following the commencement of sales of the IPO except to any underwriter and selected dealer participating in the offering and their bona fide officers or partners, registered persons or affiliates or as otherwise permitted under Rule 5110(e)(2).

The Company accounted for the fair value of the Class A ordinary shares issued to the Representatives as an offering cost reflected as an increase to additional paid in capital offset by a reduction of the offering proceeds upon completion of the IPO. The fair value of each Class A ordinary share was determined to be $9.00 per share or approximately $1,092,380. Valuation of the Class A ordinary shares was determined using an internal valuation model and classified as a Level 3 valuation. The valuation was driven primarily by the initial issuance price of the Public Units, and an assumed value of approximately $1 for the warrants included in the Units.

Note 8—Shareholders’ Deficit

Preference shares—The Company is authorized to issue 1,000,000 preference shares with a par value of $0.0001 and with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. As of June 30, 2023, and December 31, 2022, there were no preference shares issued or outstanding.

Class A ordinary shares—The Company is authorized to issue 300,000,000 Class A ordinary shares with a par value of $0.0001 per share. As of June 30, 2023, and December 31, 2022, there were 115,000 Class A ordinary shares issued or outstanding, excluding 485,593 and 11,500,000 ordinary shares, respectively, subject to possible redemption.

Class B ordinary shares—The Company is authorized to issue 30,000,000 Class B ordinary shares with a par value of $0.0001 per share. Holders are entitled to one vote for each Class B ordinary share. On June 30, 2023, and December 31, 2022, there were 2,875,000 Class B ordinary shares issued and outstanding.

Holders of Class A ordinary shares and holders of Class B ordinary shares will vote together as a single class on all matters submitted to a vote of the Company’s shareholders except as required by law. Unless specified in the Company’s amended and restated memorandum and articles of association, or as required by applicable provisions of the Companies Act or applicable stock exchange rules, the affirmative vote of a majority of the Company’s ordinary shares that are voted is required to approve any such matter voted on by its shareholders.

The Class B ordinary shares and will automatically convert into Class A ordinary shares (which such Class A ordinary shares delivered upon conversion will not have redemption rights or be entitled to liquidating distributions from the Trust Account if the Company does not consummate an initial business combination) at the time of the initial business combination or earlier at the option of the holders thereof at a ratio such that the number of Class A ordinary shares issuable upon conversion of all Founder Shares will equal, in the aggregate, on an as-converted basis, 20% of the sum of (i) the total number of ordinary shares issued and outstanding upon the completion of the IPO, plus (ii) the total number of Class A ordinary shares issued, deemed issued or issuable upon conversion or exercise of any equity-linked securities or rights issued or deemed issued by the Company in connection with or in relation to the consummation of the initial business combination, excluding any Class A ordinary shares or equity-linked securities exercisable for or convertible into Class A ordinary shares issued, deemed issued or to be issued to any seller in the initial business combination and any Placement Warrants issued to the Sponsor, its affiliates or any member of the Company’s management team upon conversion of Working Capital Loans, unless the holders of a majority of the then-outstanding Class B ordinary shares agree to waive such adjustment with respect to such issuance or deemed issuance at the time thereof. In no event will the Class B ordinary shares convert into Class A ordinary shares at a rate of less than one-to-one.

Note 9—Subsequent Events

The Company evaluated subsequent events and transactions that occurred after the unaudited condensed financial statements were issued. Based on this review, other than described below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.

Third BCA Amendment

On July 14, 2023, Avanseus and the Company entered into a Third Amendment to Business Combination Agreement (the “Third BCA Amendment”) to further amend the Original Business Combination Agreement. The Third BCA Amendment further amends the Original Business Combination Agreement to: