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."
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. 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
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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.
An additional 3,800,000 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. 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 January 18, 2022, ACE and Tempo entered into the PIPE Promissory Notes with
certain PIPE Investors affiliated with Tempo, pursuant to which such investors
agreed to loan to Tempo up to an aggregate of $5 million, which loans may be
converted into shares of Domesticated ACE common stock at a conversion price of
$10.00 per share. Pursuant to the PIPE Promissory Notes, the principal balances
of such notes shall reduce the subscription amount of such PIPE Investors
pursuant to the terms of the applicable subscription agreements on a
dollar-for-dollar basis.
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
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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. 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
(ii) 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.
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.
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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
Amended and Restated Subscription Agreements into which ACE anticipates entering
prior to the closing of the Tempo Business Combination. 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 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.
On March 16, 2022, ACE entered into the Cantor Purchase Agreement. Pursuant to
the Cantor Purchase Agreement, Domesticated ACE will have the right from time to
time at its option following the Closing 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. Sales of Domesticated
ACE common stock to CFPI under the Cantor Purchase Agreement, and the timing of
any sales, will be determined by Domesticated ACE from time to time in its sole
discretion and will depend on a variety of factors, including, among other
things, market conditions, the trading price of shares of Domesticated ACE
common stock and determinations by Domesticated ACE regarding the use of
proceeds of such sales. The net proceeds from any sales under the Cantor
Purchase Agreement will depend on the frequency with, and prices at, which the
shares of Domesticated ACE common stock are sold to CFPI. Domesticated ACE
expects to use the proceeds from any sales under the Cantor Purchase Agreement
for the payment of certain transaction expenses relating to the Tempo Business
Combination and working capital and general corporate purposes. Following the
Closing, and upon the initial satisfaction of the conditions to CFPI's
obligation to purchase shares of Domesticated ACE common stock set forth in the
Cantor Purchase Agreement, including that a registration statement registering
the resale of such shares of Domesticated ACE common stock under the Securities
Act is declared effective by the SEC and a final prospectus relating thereto is
filed with the SEC, Domesticated ACE will have the right, but not the
obligation, from time to time at its sole discretion until the first day of the
month next following the 36-month period from and after the Commencement, to
direct CFPI to purchase up to a specified maximum amount of shares of
Domesticated ACE common stock as set forth in the Cantor Purchase Agreement by
delivering written notice to CFPI prior to the commencement of trading on any
trading day. The purchase price of the shares of Domesticated ACE common stock
that the Company elects to sell pursuant to the Cantor Purchase Agreement will
be 97% of the volume weighted average price of the shares of Domesticated ACE
common stock during the applicable purchase date on which written notice has
been timely delivered to CFPI directing it to purchase shares of Domesticated
ACE common stock under the Cantor Purchase Agreement. In connection with the
execution of the Cantor Purchase Agreement, ACE agreed to issue shares of
Domesticated ACE common stock to CFPI as consideration for its irrevocable
commitment to purchase the shares of Domesticated ACE common stock upon the
terms and subject to the satisfaction of the conditions set forth in the Cantor
Purchase Agreement. In connection with ACE's entry into the Cantor Purchase
Agreement, ACE and CFPI entered into the Cantor Registration Rights Agreement,
pursuant to which Domesticated ACE has agreed to register for resale, pursuant
to Rule 415 under the Securities Act, the shares of Domesticated ACE common
stock that are sold to CFPI under the facility, including the shares of
Domesticated ACE common stock to be issued to CFPI as consideration for its
irrevocable commitment to purchase the shares of Domesticated ACE common stock,
from time to time.
On July 1, 2022, ACE, Tempo and AEPI entered into the Bridge Note, pursuant to
which AEPI agreed to loan to Tempo up to an aggregate principal amount of
$5,000,000, $2,500,000 of which was advanced to Tempo prior to the date of the
Bridge Note. Upon the closing of the Tempo Business Combination, the Bridge Note
Drawn Amount will automatically convert in full into the Bridge Note Conversion
Shares, and the Bridge Note shall be deemed to have been paid in full. The
Bridge Note has an interest rate of 12% per annum, payable in-kind by increasing
the outstanding principal amount of the Bridge Note. Interest shall be deemed to
have commenced on May 19, 2022. The Bridge Note may not be prepaid without
AEPI's written consent and prior to payment of all amounts owed under
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any Fee Deferral Agreements. The Bridge Note is subordinated in right of payment
to the prior payment in full of all Senior Indebtedness and all amounts owed
under any Fee Deferral Agreements.
In connection with the entry into the Bridge Note, on July 1, 2022, AEPI and ACE
entered into the Bridge Subscription Agreement, pursuant to which AEPI agreed,
at the closing of the Tempo Business Combination, to subscribe for up to 500,000
shares of Domesticated ACE common stock at a purchase price of $10.00 per share.
The number of shares AEPI has committed to purchase will be automatically
reduced in an amount equal to (a) the difference between $5,000,000 and the
Bridge Note Drawn Amount, divided by (b) $10.00, rounded up to the nearest whole
share. Pursuant to the Bridge Subscription Agreement, ACE agreed to issue
additional shares of Domesticated ACE common stock to AEPI in the event that the
Adjustment Period VWAP (as defined in the Bridge Subscription Agreement) is less
than $10.00 per share. In such case, AEPI 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 AEPI at the closing
of the subscription and held by AEPI on the Measurement Date, multiplied by (y)
a fraction, (A) the numerator of which is $10.00, minus the Adjustment Period
VWAP (as defined in the Bridge Subscription Agreement) and (B) the denominator
of which is the Adjustment Period VWAP (as defined in the Bridge Subscription
Agreement). In the event that the Adjustment Period VWAP (as defined in the
Bridge Subscription Agreement) is less than $4.00, the Adjustment Period VWAP
(as defined in the Bridge Subscription Agreement) shall be deemed to be $4.00.
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 June 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 June 30, 2022, we had a net income of $10,135,295,
which consists of the change in fair value of warrant liability of $11,245,389
and interest earned on investment held in the Trust Account of $105,409, offset
by operating costs of $1,215,503.
For the six months ended June 30, 2022, we had a net income of $9,076,805, which
consists of the change in fair value of warrant liability of $11,318,082 and
interest earned on investment held in the Trust Account of $113,123, offset by
operating costs of $2,354,400.
For the three months ended June 30, 2021, we had a net loss of $1,042,594, which
consists of the change in fair value of warrant liability of $171,825 and
operating costs of $885,864, offset by interest earned on investment held in the
Trust Account of $15,095.
For the six months ended June 30, 2021, we had a net loss of $12,567,023, which
consists of the change in fair value of warrant liability of $10,483,385 and
operating costs of $2,138,846, offset by interest earned on investment held in
the Trust Account of $55,208.
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 six months ended June 30, 2022, net cash used in operating activities
was $857,014. Net income of $9,076,805 was affected by change in the fair value
of the warrant liability of $11,318,082 and interest earned on investments of
$113,123. Changes in operating assets and liabilities provided $1,497,386 of
cash from operating activities.
For the six months ended June 30, 2021, net cash used in operating activities
was $880,323. Net loss of $12,567,023 was affected by interest income on
investment held in the Trust Account of $55,209 and change in fair value of
warrant liability of $10,483,385. Changes in operating assets and liabilities
provided $1,258,524 of cash from operating activities.
As of June 30, 2022, we had $83,421,902 in cash held in the Trust Account. 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 June 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 June 30, 2022, and December 31, 2021, the Company
had $829,294 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 six months ended June 30, 2022, the Company
contributed $492,136 and $738,206 to the Trust Account, respectively. Monthly
deposits into the Trust Account following the July 2022 redemptions are based on
the number of Class A Ordinary Shares still outstanding following such
redemptions.
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
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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 June 30, 2022, the Company had no cash in its operating bank accounts,
$83,421,902 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 $10,251,609.
The Company intends to complete a Business Combination by October 13, 2022 (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 June 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 October 13, 2022 (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 October 13, 2022.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of June 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.
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:
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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.
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.
We apply the two-class method in calculating earnings per share. Accretion
associated with the redeemable shares of Class A ordinary shares is excluded
from earnings per share as the redemption value approximates fair value.
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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