References in this report (the "Quarterly Report") to "we," "us," "ACE" or the
"Company" refer to ACE Convergence Acquisition Corp. References to our
"management" or our "management team" refer to our officers and directors.
References to the "Sponsor" refer to ACE Convergence Acquisition LLC. The
following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with the financial
statements and the notes thereto contained elsewhere in this Quarterly Report.
Certain information contained in the discussion and analysis set forth below
includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes "forward-looking statements" that are not
historical facts and involve risks and uncertainties that could cause actual
results to differ materially from those expected and projected. All statements,
other than statements of historical fact included in this Quarterly Report,
including, without limitation, statements in this "Management's Discussion and
Analysis of Financial Condition and Results of Operations" regarding the
Company's financial position, business strategy and the plans and objectives of
management for future operations, are forward-looking statements. Words such as
"expect," "believe," "anticipate," "intend," "estimate," "seek" and variations
and similar words and expressions are intended to identify such forward-looking
statements. Such forward-looking statements relate to future events or future
performance, but reflect management's current beliefs, based on information
currently available. A number of factors could cause actual events, performance
or results to differ materially from the events, performance and results
discussed in the forward-looking statements. This quarterly report contains
revisions for previous reported periods and should be observed when reviewing
the Company's financial position. For information identifying important factors
that could cause actual results to differ materially from those anticipated in
the forward-looking statements, please refer to the Risk Factors section of the
Company's Annual Report on Form 10-K filed with the SEC. The Company's
securities filings can be accessed on the EDGAR section of the SEC's website at
www.sec.gov. Except as expressly required by applicable securities law, the
Company disclaims any intention or obligation to update or revise any
forward-looking statements whether as a result of new information, future events
or otherwise.
Overview
We are a blank check company incorporated on March 31, 2020, as a Cayman Islands
exempted company for the purpose of effecting a merger, share exchange, asset
acquisition, share purchase, reorganization or similar business combination with
one or more businesses or entities. We intend to effectuate our initial business
combination using cash from the proceeds of our initial public offering and the
sale of the Private Placement Warrants, our shares, debt or a combination of
cash, equity and debt.
We expect to continue to incur significant costs in the pursuit of our
acquisition plans. We cannot assure you that our plans to complete a Business
Combination will be successful.
Business Combination Developments
On January 7, 2021, the Company entered into the Achronix Merger Agreement with
Achronix and Merger Sub. On May 24, 2021, in our Form 10-Q for the quarter ended
March 31, 2021, we disclosed that the SEC informed the Company that it was
investigating certain disclosures made in the Form S-4 relating to the Company's
proposed business combination with Achronix.
On July 11, 2021, we and Achronix entered into a termination and release
agreement, pursuant to which the parties agreed to mutually terminate the
Achronix Merger Agreement.
On October 27, 2021, the Company received a letter from the SEC in connection
with its investigation with the following response: "We have concluded the
investigation as to ACE Convergence Acquisition Corp. ("ACE"). Based on the
information we have as of this date, we do not intend to recommend an
enforcement action by the Commission against ACE."
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On October 13, 2021, we entered into the Original Merger Agreement with Tempo
and Merger Sub, which was amended and restated on August 12, 2022, and amended
on September 7, 2022, and September 23, 2022. Pursuant to the Tempo Business
Combination contemplated by the Merger Agreement, and subject to the
satisfaction or waiver of certain conditions set forth therein, Merger Sub will
merge with and into Tempo, with Tempo surviving the merger as a wholly owned
subsidiary of the Company. Prior to the closing of the Tempo Business
Combination, the Company shall domesticate as a Delaware corporation and shall
be renamed "Tempo Automation Holdings, Inc."
On July 1, 2022, ACE and Tempo entered into the Merger Agreement Amendment,
pursuant to which the parties agreed, among other things, to (i) reduce the Base
Purchase Price from $658,434,783 to $488,375,000, (ii) increase the number of
Tempo Earnout Shares from 7,500,000 to 10,000,000, which will vest in two equal
tranches of 5,000,000 shares based on Domesticated ACE reaching $10.0 million in
EBITDA and $50.0 million in revenue in any quarter during the five-year period
following the closing date of the Tempo Business Combination, (iii) remove
certain covenants and other obligations of the parties relating to the employee
stock purchase plan contemplated by the Merger Agreement and (iv) extend the
outside date of the Merger Agreement to November 13, 2022.
On August 12, 2022, ACE, Merger Sub and Tempo entered into the Merger Agreement,
pursuant to which the parties agreed, among other things, to (i) reduce the Base
Purchase Price from $488,375,000 to $235,000,000, (ii) reduce the number of
Tempo Earnout Shares from 10,000,000 to 7,000,000, which will vest in two equal
tranches of 3,500,000 shares based on Domesticated ACE reaching $5.0 million in
Adjusted EBITDA (as defined in the Merger Agreement) and $15.0 million in
revenue in any quarter during the five-year period following the closing date,
(iii) remove terms relating to the proposed acquisitions by Tempo of each of
Whizz and Compass, (iv) reduce the minimum cash condition from $320.0 million to
$10.0 million and (v) extend the outside date of the Merger Agreement to
December 13, 2022. Pursuant to the Merger Agreement, all outstanding shares of
Tempo common stock (after giving effect to the Company Preferred Conversion (as
defined in the Merger Agreement)) as of immediately prior to the closing, and,
together with shares of Tempo common stock reserved in respect of Tempo options
as of immediately prior to the closing that will be converted into awards based
on Domesticated ACE common stock, will be cancelled in exchange for the right to
receive, or the reservation of (in the case of Tempo options, if and to the
extent earned and subject to their respective terms), an aggregate of
approximately 23,500,000 shares of Domesticated ACE common stock (at a deemed
value of $10.00 per share) equal to the quotient obtained by dividing (i) the
Base Purchase Price by (ii) $10.00, including, as applicable, a number of Tempo
Earnout Shares. On September 7, 2022, ACE and Tempo entered into the First
Amendment to the Amended and Restated Agreement and Plan of Merger, pursuant to
which the parties agreed, among other things, to increase the Base Purchase
Price from $235,000,000 to $257,927,013. On September 23, 2022, ACE and Tempo
entered into the Second Amendment to the Amended and Restated Agreement and Plan
of Merger, pursuant to which the parties agreed, among other things, that all
awards of Tempo RSUs that are outstanding at the closing of the Tempo Business
Combination will, at the effective time of the Tempo Business Combination, be
converted into (a) Domesticated ACE RSUs and (b) the right to receive a number
of Tempo Earnout Shares.
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An additional 550,000 shares of Domesticated ACE common stock will be purchased
(at a price of $10.00 per share) at the Closing by the PIPE Investors, for a
total aggregate purchase price of up to $38.0 million. In addition, the Company
originally agreed to issue additional shares of Domesticated ACE common stock to
each PIPE Investor in the event that the volume weighted average price per share
of Domesticated ACE common stock during the 30 days commencing on the date on
which a registration statement registering the resale of the shares of
Domesticated ACE common stock acquired by the PIPE Investors is declared
effective is less than $10.00 per share (which registration statement the
Company has agreed to file pursuant to the subscription agreements entered into
in connection with the PIPE Investment). Certain PIPE Investors originally
subscribed for $25.0 million of ACE's 12.0% convertible senior notes due 2025,
but such subscription was terminated in January 2022 in connection with the
subscription by certain parties for $200.0 million of 15.5% convertible notes.
The latter subscription was terminated in July 2022; as a result of such
termination, if ACE consummates an initial business combination with or among
Tempo, Compass, Whizz or any of their respective affiliates or subsidiaries, OCM
will be entitled to a termination fee of 3.5% of the aggregate principal amount
of the subscribed notes (approximately $7.0 million), to be paid by ACE
immediately following and as a condition subsequent to the closing of such
initial business combination. On September 4, 2022, Tempo, ACE, OCM and Oaktree
Capital Management, L.P. ("Oaktree") agreed to reduce such termination fee to
0.6% of the aggregate principal amount of the subscribed notes (approximately
$1.1 million) if the closing of the Tempo Business Combination occurs on or
before October 15, 2022 (the "Specified Fee Date"), to be paid on the earlier of
(i) six months after the closing of the Tempo Business Combination and (ii) the
date on which either ACE or Tempo commence bankruptcy proceedings. In addition
to the reduced termination fee, ACE and Tempo are required to pay approximately
$1.2 million in fees and expenses to OCM on the earlier of (x) immediately
following the closing of the Tempo Business Combination and (y) the Outside
Business Combination Date (as defined below). The reduced termination fee and
all other fees and expenses owed to OCM under such agreement will accrue
interest at a rate of 20% per year, compounding monthly, starting on October 15,
2022. If the Tempo Business Combination has not been consummated prior to the
Specified Fee Date, on the earliest of (I) the date on which the Merger
Agreement is terminated, (II) the date on which either ACE or Tempo commence
bankruptcy proceedings and (III) June 15, 2023 (the earliest date, the "Outside
Business Combination Date"), ACE and Tempo will pay OCM the full 3.5%
termination fee and all of its accrued and unpaid fees and expenses. To the
extent the termination fee and accrued and unpaid fees and expenses are not paid
on or prior to June 15, 2023, the unpaid portion of the termination fee
(together with all other unpaid fees and expenses) will accrue interest at a
rate of 20% per year, compounding monthly, starting on October 15, 2022. On
October 11, 2022, Tempo, ACE, OCM and Oaktree entered into a letter agreement
pursuant to which the Specified Fee Date was amended to November 15, 2022.
Additionally, in March 2022, a ACE SO3 SPV Limited agreed to purchase an
unsecured subordinated convertible note in an aggregate principal amount of
$20.0 million in connection with the Closing, which agreement was terminated in
July 2022.
On July 6, 2022, the Company entered into the Second A&R Subscription Agreements
with each of the PIPE Investors. Pursuant to the Second A&R Subscription
Agreements, among other things, the parties agreed to reduce the minimum
Adjustment Period VWAP from $6.50 to $4.00. Additionally, ACE agreed (1) to
issue 2,000,000 PIPE Incentive Shares to the PIPE Investors on a pro rata basis
as an incentive to subscribe for and purchase the shares under the Second A&R
Subscription Agreements, (2) that if the Adjustment Period VWAP is less than
$10.00 per share, the number of additional shares each PIPE Investor will be
entitled to receive shall be (i) (A) (x) the number of shares issued to such
PIPE Investor at the closing of the subscription and held by such PIPE Investor
on the Measurement Date, times (y) $10.00, minus the Adjustment Period VWAP,
minus (B) the number of PIPE Incentive Shares, times the Adjustment Period VWAP,
divided by (ii) the Adjustment Period VWAP, and (3) to issue additional shares
of Domesticated ACE common stock to each PIPE Investor in the event that the
Additional Period VWAP is less than the Adjustment Period VWAP. In such case,
each PIPE Investor will be entitled to receive a number of shares of
Domesticated ACE common stock equal to the lesser of (1) such PIPE Investor's
pro rata portion of 2,000,000 shares, and (2) (i) (A) (x) the number of shares
issued to such PIPE Investor pursuant to such subscription agreement and held by
such PIPE Investor on the last day of the Additional Period, times (y) the
Adjustment Period VWAP, minus the Additional Period VWAP, minus (B) the number
of PIPE Incentive Shares, times the Additional Period VWAP, divided by (ii) the
Additional Period VWAP.
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On September 7, 2022, ACE entered into Third Amended and Restated Subscription
Agreements (the "Third A&R PIPE Subscription Agreements") with each of the PIPE
Investors, which amend and restate the applicable Second A&R Subscription
Agreements in their entirety. One of the Third Party PIPE Investors who entered
into a Second A&R Subscription Agreement did not enter into a Third A&R PIPE
Subscription Agreement and terminated its Second A&R Subscription Agreement on
September 7, 2022. Pursuant to the Third A&R PIPE Subscription Agreements, ACE
has agreed to issue additional shares of Domesticated ACE common stock to each
PIPE Investor in the event that the volume weighted average price per share of
Domesticated ACE common stock (the "Measurement Period VWAP") during the 30 days
commencing on the date on which a registration statement registering the resale
of the shares of Domesticated ACE common stock acquired by such PIPE Investors
(the "PIPE Resale Registration Statement") is declared effective is less than
$10.00 per share. In such case, each PIPE Investor will be entitled to receive a
number of shares of Domesticated ACE common stock equal to the product of (x)
the number of shares of Domesticated ACE common stock issued to such PIPE
Investor at the closing of the subscription and held by such PIPE Investor
through the date that is 30 days after the effective date of the PIPE Resale
Registration Statement (the "Measurement Date") multiplied by (y) a fraction,
(A) the numerator of which is $10.00 minus the Adjustment Period VWAP (as
defined therein) and (B) the denominator of which is the Adjustment Period VWAP.
In the event that the Adjustment Period VWAP is less than $4.00 (the "Price
Floor Value"), the Adjustment Period VWAP shall be deemed to be the Price Floor
Value.
ACE has also agreed to issue up to 500,000 additional shares of Domesticated ACE
common stock to each such PIPE Investor in the event that the Additional Period
VWAP (as defined below) is less than the Adjustment Period VWAP. In such case,
each such PIPE Investor will be entitled to receive a number of shares of
Domesticated ACE common stock equal to the lesser of (1) such PIPE Investor's
pro rata portion of 500,000 additional shares of Domesticated ACE common stock,
and (2) (i) (A) (x) the number of shares issued to such PIPE Investor pursuant
to such subscription agreement and held by such PIPE Investor on the last day of
the 30 calendar day period ending on the date that is 15 months following the
closing of the subscriptions (such 30 calendar day period, the "Additional
Period"), times (y) the Adjustment Period VWAP, minus the average of the volume
weighted average price of a share of Domesticated ACE common stock determined
for each of the trading days during the Additional Period (the "Additional
Period VWAP"), minus (B) the number of PIPE Incentive Shares (as defined below),
times the Additional Period VWAP, divided by (ii) the Additional Period VWAP.
Additionally, ACE has agreed to issue up to 2,000,000 additional shares (the
"PIPE Incentive Shares") to such PIPE Investors on a pro rata basis with respect
to each PIPE Investor's subscription amount as an incentive to subscribe for and
purchase the shares under the Third A&R PIPE Subscription Agreements.
Notwithstanding the foregoing, in the event that Domesticated ACE consummates a
strategic transaction during the 15-month period beginning on the closing date,
then the measurement date for the issuance of such additional shares shall be
one day prior to the closing date of such strategic transaction, and the
Additional Period VWAP will be deemed to equal the price per share paid or
payable to the holders of outstanding shares of Domesticated ACE common stock in
connection with such strategic transaction. If such price is payable in whole or
in part in the form of consideration other than cash, the value of such
consideration will be (a) with respect to any securities, (i) the average of the
closing prices of the sales of such securities on all securities exchanges on
which such securities are then listed, averaged over a period of 30 trading days
ending on the day as of which such value is being determined and the 29
consecutive days preceding such day, or if the information contemplated by the
preceding clause (i) is not practically available, then the fair value of such
securities as of the date of valuation as determined in accordance with the
succeeding clause (b), and (b) with respect to any other non-cash assets, the
fair value thereof as of the date of valuation, as determined by an independent,
nationally recognized valuation firm reasonably selected by Domesticated ACE, on
the basis of an orderly sale to a willing, unaffiliated buyer in an arm's-length
transaction, taking into account all factors determinative of value as the
investment banking firm determines relevant (and giving effect to any transfer
taxes payable in connection with such sale).
One of the PIPE Investors' subscription agreement provides that, if such PIPE
Investor is an Eligible Investor (defined as any subscriber in the offering who
is not a beneficial or record owner of ACE's equity or an affiliate of ACE prior
to the Initial Closing (as defined therein)), if, after the date of such
subscription agreement, such PIPE Investor acquires ownership of Class A
Ordinary Shares in the open market or in privately negotiated transactions with
third parties (along with any related rights to redeem or convert such shares in
connection with the redemption conducted by ACE in connection with the vote to
approve the Tempo Business Combination (the "Tempo Redemption")) at least five
business days prior to ACE's extraordinary general meeting to approve the Tempo
Business Combination, and such PIPE Investor does not redeem or convert such
shares in connection with the Tempo Redemption (including revoking any prior
redemption or conversion elections made with respect to such shares) (such
shares, "PIPE Non-Redeemed Shares"), the number of shares such PIPE Investor
(only if an Eligible Investor) will be obligated to purchase under its
subscription agreement shall be reduced by the number of PIPE Non-Redeemed
Shares.
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The proceeds of the PIPE Investment, together with the amounts remaining in
ACE's trust account as of immediately following the effective time of the Tempo
Business Combination, will be retained by Domesticated ACE following the
Closing.
Concurrently with the execution of the Original Merger Agreement, the Backstop
Investor entered into the Backstop Subscription Agreement with ACE, pursuant to,
and on the terms and subject to the conditions on which, the Backstop Investor
committed to purchase, following the Domestication and prior to or substantially
concurrently with the Closing, up to 2,500,000 shares of Domesticated ACE common
stock, in a private placement for a purchase price of $10.00 per share and an
aggregate purchase price of up to $25,000,000, to backstop certain redemptions
by ACE shareholders. On March 16, 2022, ACE and the Backstop Investor terminated
the Backstop Subscription Agreement in connection with the execution of the
Cantor Purchase Agreement.
On October 13, 2021, ACE entered into the Original Sponsor Support Agreement, by
and among ACE, the Sponsor, certain of ACE's directors and officers and Tempo,
pursuant to which the Sponsor and each director and officer of ACE agreed to,
among other things, vote in favor of the Merger Agreement and the transactions
contemplated thereby, in each case, subject to the terms and conditions
contemplated by the Original Sponsor Support Agreement.
On July 6, 2022, the parties to the Original Sponsor Support Agreement entered
into the SSA Amendment, pursuant to which, among other things, the Earnout
Sponsors agreed, immediately prior to the Domestication, to contribute,
transfer, assign, convey and deliver to ACE an aggregate of 5,595,000 founder
shares in exchange for an aggregate of 3,595,000 Class A Ordinary Shares of ACE.
Pursuant to the SSA Amendment, the Earnout Sponsors also agreed to subject an
aggregate of 2,000,000 Sponsor Earnout Shares received in the SSA Exchange to
certain earnout vesting conditions or, should such shares fail to vest,
forfeiture to ACE for no consideration. On the earlier of (i) the date which is
15 months following the closing of the Tempo Business Combination and (ii)
immediately prior to the closing of a strategic transaction, the Sponsor Earnout
Shares will vest in an amount equal to (A) the number of Sponsor Earnout Shares,
less (B) the number of Additional Period Shares, if any, issuable in the
aggregate under the Second A&R Subscription Agreements. In the event of a
strategic transaction, the holders of any vested Sponsor Earnout Shares will be
eligible to participate in such strategic transaction with respect to such
Sponsor Earnout Shares on the same terms, and subject to the same conditions, as
the other holders of shares of Domesticated ACE common stock generally.
On August 12, 2022, the parties to the SSA Amendment entered into the Second SSA
Amendment, pursuant to which the SSA Exchange was amended such that the Earnout
Sponsors agreed, immediately prior to the Domestication, to contribute,
transfer, assign, convey and deliver to ACE an aggregate of 5,595,000 founder
shares in exchange for an aggregate of 3,095,000 Class A Ordinary Shares.
Pursuant to the Second SSA Amendment, the Earnout Sponsors also agreed to reduce
the number of Sponsor Earnout Shares to 500,000. On the earlier of (i) the date
which is fifteen (15) months following the closing of the Tempo Business
Combination and (ii) immediately prior to the closing of a strategic
transaction, the Sponsor Earnout Shares will vest in an amount equal to (A) the
number of Sponsor Earnout Shares, less (B) the number of Additional Period
Shares (as defined therein), if any, issuable in the aggregate under the Third
A&R PIPE Subscription Agreements. In the event of a strategic transaction, the
holders of any vested Sponsor Earnout Shares will be eligible to participate in
such strategic transaction with respect to such Sponsor Earnout Shares on the
same terms, and subject to the same conditions, as the other holders of shares
of Domesticated ACE common stock generally. On September 7, 2022, the parties to
the Sponsor Support Agreement entered into a Third Amendment to Sponsor Support
Agreement, pursuant to which the parties agreed to increase the number of shares
issued in the aggregate in the SSA Exchange from 3,095,000 to 3,595,000, and to
increase the number of Sponsor Earnout Shares from 500,000 to 1,000,000.
On October 13, 2021, ACE entered into the Tempo Holders Support Agreement, by
and among ACE, Tempo and the Tempo Stockholders. Pursuant to the Tempo Holders
Support Agreement, the Tempo Stockholders agreed to, among other things, vote to
adopt and approve, upon the effectiveness of the Registration Statement (as
defined therein), the Merger Agreement and all other documents and transactions
contemplated thereby, in each case, subject to the terms and conditions of Tempo
Holders Support Agreement, and vote against any alternative merger, purchase of
assets or proposals that would impede, frustrate, prevent or nullify any
provision of the Merger, the Merger Agreement or the Tempo Holders Support
Agreement or result in a breach of any covenant, representation, warranty or any
other obligation or agreement thereunder.
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On March 16, 2022, ACE entered into a common stock purchase agreement (the
"Cantor Purchase Agreement") with Tempo and CF Principal Investments LLC
("CFPI"), pursuant to which Domesticated ACE would have the right from time to
time at its option following closing of the Tempo Business Combination to sell
to CFPI up to $100.0 million of Domesticated ACE common stock subject to certain
customary conditions and limitations set forth in the Cantor Purchase Agreement
(the "Cantor Facility"). In connection with ACE's entry into the Cantor Purchase
Agreement, on March 16, 2022, ACE and CFPI entered into a registration rights
agreement (the "Cantor Registration Rights Agreement"), pursuant to which
Domesticated ACE agreed to register for resale, pursuant to Rule 415 under the
Securities Act, the shares of Domesticated ACE common stock sold to CFPI under
the Cantor Facility. On September 23, 2022, ACE, Tempo and CFPI entered into a
termination agreement, pursuant to which the parties mutually agreed to
terminate the Cantor Purchase Agreement and the Cantor Registration Rights
Agreement in their entirety.
The Merger Agreement contemplates that, at the Closing, ACE will enter into
lock-up agreements with (i) the Sponsor, (ii) the other parties on Schedule I of
the Sponsor Support Agreement and (iii) certain former stockholders of Tempo,
restricting the transfer of Domesticated ACE common stock from and after the
Closing. The restrictions under the lock-up agreements begin at the Closing and
end on, among other things, the date that is 365 days after the Closing or upon
the stock price of Domesticated ACE reaching $12.00 (as adjusted for stock
splits, stock capitalizations, reorganizations, recapitalizations and the like)
for any 20 trading days within any 30-trading day period commencing at least 150
days after the closing date.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities from inception to September 30, 2022, were organizational
activities, those necessary to prepare for the Initial Public Offering,
described below, and, after the Initial Public Offering, identifying a target
company for a Business Combination. We do not expect to generate any operating
revenues until after the completion of our Business Combination. Prior to
holding all funds in the Trust Account in cash, we generated non-operating
income in the form of interest income on marketable securities held in the Trust
Account. We incur expenses as a result of being a public company (for legal,
financial reporting, accounting and auditing compliance), as well as for due
diligence expenses in connection with completing a Business Combination.
For the three months ended September 30, 2022, we had a net loss of $8,636,558,
which consists of termination fees and expenses of $7,353,469, operating costs
of $894,289, change in fair value of warrant liability of $362,000 and change in
fair value of PIPE liability of $26,800.
For the nine months ended September 30, 2022, we had a net income of $440,247,
which consists of the change in fair value of warrant liability of $10,956,082
and interest earned on investment held in the Trust Account of $113,123, offset
by termination fees and expenses of $7,353,469, operating costs of $3,248,689
and change in fair value of PIPE liability of $26,800.
For the three months ended September 30, 2021, we had a net income of
$22,288,261, which consists of the change in fair value of warrant liability of
$24,916,621 and interest earned on investment held in the Trust Account of
$5,802, offset by operating costs of $2,634,162.
For the nine months ended September 30, 2021, we had a net income of $9,721,238,
which consists of the change in fair value of warrant liability of $14,433,236
and interest earned on investment held in the Trust Account of $61,010, offset
by operating costs of $4,773,008.
Liquidity and Capital Resources
Until the consummation of the Initial Public Offering, the Company's only source
of liquidity was an initial purchase of Class B ordinary shares by our Sponsor
and loans from our Sponsor.
On July 30, 2020, we consummated the Initial Public Offering of 23,000,000
Units, which includes the full exercise by the underwriters of their
over-allotment option in the amount of 3,000,000 Units, at $10.00 per Unit,
generating gross proceeds of $230,000,000. Simultaneously with the closing of
the Initial Public Offering, we consummated the sale of an aggregate of
6,600,000 Private Placement Warrants to our Sponsor at a price of $1.00 per
warrant, generating gross proceeds of $6,600,000.
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Following the Initial Public Offering, the exercise of the over-allotment option
and the sale of the Private Placement Warrants, a total of $230,000,000 was
placed in the Trust Account. We incurred $13,273,096 in transaction costs,
including $4,600,000 of underwriting fees, $8,050,000 of deferred underwriting
fees and $623,096 of other offering costs in connection with the Initial Public
Offering and the sale of the Private Placement Warrants.
For the nine months ended September 30, 2022, net cash used in operating
activities was $1,008,459. Net income of $440,247 was affected by change in the
fair value of the warrant liability of $10,956,082 and interest earned on
investments of $113,123. Changes in operating assets and liabilities provided
$9,593,699 of cash from operating activities.
For the nine months ended September 30, 2021, net cash used in operating
activities was $1,085,784. Net income of $9,721,238 was offset by change in the
fair value of the warrant liability of $14,433,236 and interest earned on
investments of $61,010. Changes in operating assets and liabilities provided
$3,687,224 of cash from operating activities.
As of September 30, 2022, we had $40,293,597 in cash held in the Trust Account.
In connection with the extension of the date by which the Company must complete
an initial business combination in October 2022, shareholders of Class A
Ordinary Shares elected to redeem an aggregate of 1,202,070 Class A Ordinary
Shares. As a result, $12,349,642 was paid out of the Trust Account in connection
with the redemptions. We intend to use substantially all of the funds held in
the Trust Account, including any amounts representing interest earned on the
Trust Account (less taxes payable (if applicable) and deferred underwriting
commissions) to complete our Business Combination. To the extent that our shares
or debt is used, in whole or in part, as consideration to complete our Business
Combination, the remaining proceeds held in the Trust Account will be used as
working capital to finance the operations of the post-Business Combination
entity, make other acquisitions and pursue our growth strategies.
As of September 30, 2022, we had no cash held outside of the Trust Account. We
intend to use any funds held outside the Trust Account primarily to identify and
evaluate target businesses, perform business due diligence on prospective target
businesses, travel to and from the offices, properties or similar locations of
prospective target businesses or their representatives or owners, review
corporate documents and material agreements of prospective target businesses,
and structure, negotiate and complete a Business Combination.
On August 12, 2020, we entered into the Working Capital Facility with ASIA-IO in
the net amount of $900,000. The funds from the Working Capital Facility shall be
utilized to finance transaction costs in connection with a business combination.
The Working Capital Facility is non-interest bearing, non-convertible and due to
be repaid upon the consummation of a business combination. In return, we
deposited $900,000 into an account held by ASIA-IO, from which we may make fund
withdrawals for up to $1,500,000. Any outstanding amounts deposited with ASIA-IO
upon the completion of a business combination or dissolution of the Company,
shall be returned to us. As of September 30, 2022, and December 31, 2021, the
Company had $1,051,499 and $527,756 borrowings under the Working Capital
Facility, respectively.
On January 13, 2022, in connection with the Company's extension of the date by
which it must complete an initial business combination, the Sponsor agreed to
contribute to the Company as a loan $0.03 for each Class A Ordinary Share of the
Company that was not redeemed in connection with the shareholder vote to approve
such extension, for each month (or a pro rata portion thereof if less than a
month) until the earlier of (i) the date of the extraordinary general meeting
held in connection with the shareholder vote to approve the Tempo Business
Combination and (ii) $1.5 million has been loaned. Up to $1.5 million of the
loans may be settled in whole warrants to purchase Class A Ordinary Shares of
the Company at a conversion price equal to $1.00 per warrant. The loan will not
bear any interest, and will be repayable by ACE to the Sponsor upon the earlier
of the date by which ACE must complete an initial business combination and the
consummation of the Tempo Business Combination. The maturity date of the Sponsor
Loan may be accelerated upon the occurrence of an Event of Default (as defined
therein). Any outstanding principal under the Sponsor Loan may be prepaid at any
time by ACE, at its election and without penalty, provided, however, that the
Sponsor shall have a right to first convert such principal balance as described
in Section 6 of the Sponsor Loan upon notice of such prepayment. On June 30,
2022, ACE and the Sponsor amended and restated the Sponsor Loan in its entirety
to, among other things, increase the aggregate principal amount available
thereunder from $1,500,000 to $2,000,000, contingent upon the approval by the
Company's shareholders of the proposal to extend the date by which the Company
must complete an initial business combination to October 13, 2022, which
proposal was approved by special resolution at an extraordinary general meeting
on July 12, 2022. For the three and nine months ended September 30, 2022, the
Company contributed $221,190 and $1,451,532 to the Trust Account, respectively.
On August 28, 2022, the Company and the Sponsor agreed to, among other things,
increase the aggregate principal amount available under such loan from
$2,000,000 to $2,125,000, contingent upon the approval by the Company's
shareholders of the extension of the date by which the Company must consummate
an initial business combination to January 30, 2023, which proposal was approved
in October 2022. Monthly deposits into the Trust Account following the October
2022 redemptions are based on the number of Class A Ordinary Shares still
outstanding following such redemptions.
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In order to fund working capital deficiencies or finance transaction costs in
connection with a business combination, our Sponsor or an affiliate of our
Sponsor or certain of our officers and directors may, but are not obligated to,
loan us funds as may be required. If we complete a Business Combination, we
would repay such loaned amounts. In the event that a Business Combination does
not close, we may use a portion of the working capital held outside the Trust
Account to repay such loaned amounts but no proceeds from our Trust Account
would be used for such repayment. Up to $1,500,000 of such loans may be
convertible into warrants identical to the Private Placement Warrants, at a
price of $1.00 per warrant at the option of the lender.
Going Concern
As of September 30, 2022, the Company had no cash in its operating bank
accounts, $40,293,597 in cash held in the Trust Account to be used for a
Business Combination or to repurchase or redeem its ordinary shares in
connection therewith and a working capital deficit of $18,720,557. In connection
with the extension of the date by which the Company must complete an initial
business combination in October 2022, shareholders of Class A Ordinary Shares
elected to redeem an aggregate of 1,202,070 Class A Ordinary Shares. As a
result, $12,349,642 was paid out of the Trust Account in connection with the
redemptions.
The Company intends to complete a Business Combination by January 30, 2023 (or,
as such date may be extended, such extended date). However, in the absence of a
completed Business Combination, the Company will require additional capital. The
Company as of September 30, 2022, has no cash held outside of trust and will
require further capital contribution from the Sponsor, management, or related
parties. If the Company is unable to raise additional capital, it may be
required to take additional measures to conserve liquidity, which could include,
but not necessarily be limited to, suspending the pursuit of a Business
Combination. The Company cannot provide any assurance that new financing will be
available to it on commercially acceptable terms, if at all. These conditions
raise substantial doubt about the Company's ability to continue as a going
concern through one year from the date of these financial statements if a
Business Combination is not consummated. These financial statements do not
include any adjustments relating to the recovery of the recorded assets or the
classification of the liabilities that might be necessary should the Company be
unable to continue as a going concern.
We have until January 30, 2023 (as such date may be extended), to consummate a
Business Combination. It is uncertain that we 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.
Management has determined that the mandatory liquidation, should a Business
Combination not occur, and potential subsequent dissolution raises substantial
doubt about our ability to continue as a going concern. No adjustments have been
made to the carrying amounts of assets or liabilities should we be required to
liquidate after January 30, 2023. The Company intends to complete its Business
Combination before January 30, 2023.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of September 30, 2022. We do not participate
in transactions that create relationships with unconsolidated entities or
financial partnerships, often referred to as variable interest entities, which
would have been established for the purpose of facilitating off-balance sheet
arrangements. We have not entered into any off-balance sheet financing
arrangements, established any special purpose entities, guaranteed any debt or
commitments of other entities, or purchased any non-financial assets.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than as described below.
We entered into an agreement to pay our Sponsor a monthly fee of $10,000 for
office space, administrative and support services. We began incurring these fees
in July 2020 and will continue to incur these fees on a monthly basis until the
earlier of the completion of the Business Combination and the Company's
liquidation.
We have an agreement to pay the underwriters a deferred fee of $8,050,000, which
will become payable to them from the amounts held in the Trust Account solely in
the event that the Company completes a Business Combination, subject to the
terms of the underwriting agreement. On March 16, 2022, Cantor Fitzgerald & Co.
agreed that the deferred fee may be paid in shares of common stock of
Domesticated ACE, subject to certain terms and conditions.
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Critical Accounting Policies
The preparation of condensed consolidated financial statements and related
disclosures in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, disclosure of
contingent assets and liabilities at the date of the financial statements, and
income and expenses during the periods reported. Actual results could materially
differ from those estimates. We have identified the following critical
accounting policies:
Warrant Liability
We account for the Warrants in accordance with the guidance contained in ASC
815-40 under which the Warrants do not meet the criteria for equity treatment
and must be recorded as liabilities. Accordingly, we classify the Warrants as
liabilities at their fair value and adjust the 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 Placement Warrants (and the Public Warrants
for periods where no observable traded price was available) are valued using a
Modified Black Scholes Model. For periods subsequent to the detachment of the
Public Warrants from the Units, the Public Warrant quoted market price was used
as the fair value as of each relevant date. As of September 30, 2022 due to
market conditions the Company is using the price of the Public Warrants to value
the Private Warrants.
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments
are derivatives or contain features that qualify as embedded derivatives in
accordance with ASC 815. For derivative financial instruments that are accounted
for as liabilities, the derivative instrument is initially recorded at its fair
value on the issuance date and is then re-valued at each reporting date, with
changes in the fair value reported in the statements of operations. The
classification of derivative instruments, including whether such instruments
should be recorded as liabilities or as equity, is evaluated at the end of each
reporting period. Derivative liabilities are classified in the balance sheet as
current or non-current based on whether net-cash settlement or conversion of the
instrument could be required within 12 months of the balance sheet date.
The PIPE Derivative is comprised of the Additional Shares (as defined in Note
6). The PIPE Derivative meets the criteria for derivative liability
classification. As such, the PIPE derivative liability is recorded at its
initial fair value on the date of issuance, and each balance sheet date
thereafter. Changes in the estimated fair value of the derivative liability is
recognized as a non-cash gain or loss on the condensed statements of operations.
The fair value of the derivative liability is discussed in Note 9.
Ordinary shares subject to possible redemption
We account for our ordinary shares subject to possible redemption in accordance
with the guidance in Accounting Standards Codification ("ASC") Topic 480
"Distinguishing Liabilities from Equity." Ordinary shares subject to mandatory
redemption is classified as a liability instrument and is measured at fair
value. Conditionally redeemable ordinary shares (including ordinary shares that
features redemption rights that is either within the control of the holder or
subject to redemption upon the occurrence of uncertain events not solely within
our control) is classified as temporary equity. At all other times, ordinary
shares are classified as shareholders' equity. Our ordinary shares feature
certain redemption rights that are considered to be outside of our control and
subject to occurrence of uncertain future events. Accordingly, ordinary shares
subject to possible redemption is presented as temporary equity, outside of the
shareholders' deficit section of our condensed consolidated balance sheets.
Net income (loss) per ordinary share
Net income (loss) per ordinary share is computed by dividing net income (loss)
by the weighted average number of ordinary shares outstanding during the period.
Accretion associated with the redeemable shares of Class A ordinary shares is
excluded from earnings per share as the redemption value approximates fair
value.
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Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective,
accounting standards, if currently adopted, would have a material effect on our
unaudited condensed consolidated interim financial statements.
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