References in this report (the "Annual Report") to "we," "us" or the "Company"
refer to Patria Latin American Opportunity Acquisition Corp. (the "Company").
References to our "management" or our "management team" refer to our officers
and directors, and references to the "Sponsor" refer to Patria SPAC 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 Annual Report.
Certain information contained in the discussion and analysis set forth below
includes forward-looking statements that involve risks and uncertainties. Actual
results and the timing of events may differ materially from those contained in
these forward-looking statements due to a number of factors, including those
discussed in the section entitled "Item 1A. Risk Factors" and elsewhere in this
report.
Overview
We are a blank check company incorporated in Cayman Islands on February 25,
2021. The Company was formed for the purpose of effecting a merger, capital
stock exchange, asset acquisition, ordinary share purchase, reorganization or
similar business combination with one or more businesses, or the "Business
Combination." The Company is an emerging growth company and, as such, the
Company is subject to all of the risks associated with emerging growth
companies.
Initial Business Combination
The Company's management has broad discretion with respect to the specific
application of the net proceeds of the IPO, although substantially all of the
net proceeds are intended to be applied generally toward consummating a Business
Combination. There is no assurance that the Company will be able to complete a
Business Combination successfully. 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
amount of deferred underwriting commission held in Trust and taxes payable on
the income earned on the Trust Account) at the time of the agreement to enter
into the initial Business Combination. However, the Company only intends to
complete a Business Combination if the post-business combination company owns or
acquires 50% or more of the issued and outstanding voting securities of the
target or otherwise acquires a controlling interest in the target sufficient for
it not to be required to register as an investment company under the Investment
Company Act 1940, as amended (the "Investment Company Act"). Upon the closing of
the IPO, management has agreed that an amount equal to at least $10.30 per Unit
sold in the IPO, including the proceeds from the sale of the Private Placement
Warrants, will be held in a trust account ("Trust Account") located in the
United States with Continental Stock Transfer & Trust Company acting as trustee,
and invested only in United States "government securities" within the meaning of
Section 2(a)(16) of the Investment Company Act having 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, as determined by the Company, until the earlier
of: (i) the completion of a Business Combination and (ii) the distribution of
the Trust Account as described below. The Company will provide the holders (the
"Public Shareholders") of the Company's issued and outstanding Class A ordinary
shares, par value $0.0001 per share, sold in the IPO (the "Public Shares") with
the opportunity to redeem all or a portion of their Public Shares upon the
completion of a Business Combination either (i) in connection with a shareholder
meeting called to approve the Business Combination or (ii) by means of a tender
offer. The decision as to whether the Company will seek shareholder approval of
a Business Combination or conduct a tender offer will be made by the Public
Shares for a pro rata portion of the amount then held in the Trust Account. The
per-share amount to be distributed to Public Shareholders who redeem their
Public Shares will not be reduced by the deferred underwriting commissions the
Company will pay to the underwriters. If the Company seeks shareholder approval,
the Company will proceed with a Business Combination if a majority of the shares
voted are voted in favor of the Business Combination. If a shareholder vote is
not required by law and the Company does not decide to hold a shareholder vote
for business or other legal reasons, the Company will, pursuant to its Amended
and Restated Articles of Association (the "Articles of Association"), conduct
the redemptions pursuant to the tender offer rules of the U.S. Securities and
Exchange Commission ("SEC") and file tender offer documents with the SEC prior
to completing a Business Combination. If, however, shareholder approval of the
transaction is required by law, or the Company decides to obtain shareholder
approval for business or legal reasons, the Company will offer to redeem the
Public Shares in conjunction with a proxy solicitation pursuant to the proxy
rules and not pursuant to the tender offer rules. Additionally, each Public
Shareholder may elect to redeem their Public Shares irrespective of whether they
vote for or against the proposed transaction. If the Company seeks shareholder
approval in connection with a Business Combination, the initial shareholders (as
defined below) have agreed to vote their Founder Shares (as defined below) and
any Public Shares purchased during or after the IPO in favor of a Business
Combination. In addition, the initial shareholders have agreed to waive their
redemption rights with respect to their Founder Shares and Public Shares in
connection with the completion of a Business Combination.
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The Articles of Association will provide that a Public Shareholder, together
with any affiliate of such shareholder or any other person with whom such
shareholder is acting in concert or as a "group" (as defined under Section 13 of
the Securities Exchange Act of 1934, as amended (the "Exchange Act")), will be
restricted from redeeming its shares with respect to more than an aggregate of
15% of the Public Shares, without the prior consent of the Company. The holders
of the Founder Shares (the "initial shareholders") have agreed not to propose an
amendment to the Articles of Association (A) to modify the substance or timing
of the Company's obligation to allow redemption in connection with a Business
Combination or to redeem 100% of the Public Shares if the Company does not
complete a 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, unless the Company provides the
Public Shareholders with the opportunity to redeem their Public Shares in
conjunction with any such amendment.
If the Company is unable to complete a Business Combination within 15 months
from the closing of the IPO (or up to within 21 months if the Company extends
the period of time to consummate the Initial Business Combination in accordance
with the terms described in the Company's final prospectus) of the IPO (the
"Combination Period") and the Company's shareholders have not amended the
Articles of Association to extend such Combination Period, the Company will (i)
cease all operations except for the purpose of winding up; (ii) as promptly as
reasonably possible but no more than ten business days thereafter subject to
lawfully available funds therefor, 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, if any (less up to
$100,000 of interest to pay dissolution expenses) divided by the number of the
then outstanding Public Shares, which redemption will completely extinguish
Public Shareholders' rights as shareholders (including the right to receive
further liquidation distributions, if any), subject to applicable law; and (iii)
as promptly as reasonably possible following such redemption, subject to the
approval of the remaining shareholders and the board of directors, liquidate and
dissolve, subject in each case to the Company's obligations under Cayman law to
provide for claims of creditors and the requirements of other applicable law.
The initial shareholders have agreed to waive their rights to liquidating
distributions from the Trust Account with respect to the Founder Shares if the
Company fails to complete a Business Combination within the Combination Period.
However, if the initial shareholders acquire Public Shares after the IPO, they
will be entitled to liquidating distributions from the Trust if the Company
fails to complete a Business Combination within the Combination Period. The
underwriters have agreed to waive their rights to the deferred underwriting
commission held in the Trust Account in the event the Company does not complete
a Business Combination within in the Combination Period and, in such event, such
amounts will be included with the other funds held in the Trust Account that
will be available to fund the redemption of the Public Shares. In the event of
such distribution, it is possible that the per share value of the residual
assets remaining available for distribution (including Trust Account assets)
will be only $10.30. In order to protect the amounts held in the Trust Account,
the Sponsor has agreed to be liable to the Company if and to the extent any
claims by a third party (except for the Company's independent registered public
accounting firm) for services rendered or products sold to the Company, or a
prospective target business with which the Company has discussed entering into a
transaction agreement (a "Target"), reduce the amount of funds in the Trust
Account to below (i) $10.30 per unit or (ii) the lesser amount per Public Share
held in the Trust Account as of the date of the liquidation of the Trust Account
due to reductions in the value of the trust assets, in each case net of interest
which may be withdrawn to pay taxes, provided that such liability will not apply
to any claims by a third party or Target that executed a waiver of any and all
rights to seek access to the Trust Account 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 of 1933, as amended
(the "Securities Act"). In the event that an executed waiver is deemed to be
unenforceable against a third party, our sponsor will not be responsible to the
extent of any liability for such third-party claims. The Company will seek to
reduce the possibility that the Sponsor will have to indemnify the Trust Account
due to claims of creditors by endeavoring to have all vendors, service providers
(other than the Company's independent registered public accounting firm),
prospective target businesses or other entities with which the Company does
business, execute agreements with the Company waiving any right, title, interest
or claim of any kind in or to monies held in the Trust Account.
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Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities from February 25, 2021 (inception) through December 31, 2022
were organizational activities, those necessary to prepare for the Initial
Public Offering, described below, and the Company's search for a target business
with which to complete a Business Combination. We do not expect to generate any
operating revenues until after the completion of our initial Business
Combination. We generate non-operating income in the form of realized gains on
the investments held in the trust account. We are incurring 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 year ended December 31, 2022 we had a net income of $9,256,245 which
consists of general and administrative expenses of $901,733 (made up of
professional services fees of $414,769 and other general and administrative fees
of $486,964), change in fair value of derivative warrant liabilities of
$7,060,500, realized gain on the investments held in the trust account of
$3,411,986, and transaction costs allocated to derivative warrant liabilities of
$314,508.
For the period from February 25, 2021 (inception) through December 31, 2021, we
had a net loss of $49,868 which consisted of formation costs.
Liquidity and Going Concern Consideration
As of December 31, 2022, the Company had working capital of $230,865,720
including the Trust Account, deferred underwriting fees payable and Derivative
warrant liabilities. Working capital was $943,734 when marketable securities
held in Trust Account, deferred underwriting fees payable and Derivative warrant
liabilities were excluded from the calculation. Of the net proceeds from the IPO
and associated sale of Private Placement Warrants, $236,900,000 of cash was
placed in the Trust Account. The working capital surplus includes the amount of
restricted marketable securities held in the Trust Account, deferred
underwriting fees payable and derivative warrant liabilities, all of which have
been classified as current at December 31, 2022 as a result of the Company being
less than 12 months away from consuming the assets held in the Trust Account to
either consummate a business combination or to liquidate.
For the year ended December 31, 2022, cash used in operating activities was
$1,156,250 which is made up of a net income of $9,256,245 and changes in
operating assets and liabilities, which used $254,517. These amounts were offset
by realized gain on investments held in Trust Account of $3,411,986, transaction
costs allocated to derivative warrant liabilities of $314,508 and the change in
fair value of derivative warrant liabilities of $7,060,500.
During the year ended December 31, 2022, net cash used in investing activities
was $236,900,000 which included the redemption of U.S. government treasury
obligations of $715,209,000, fully offset by the purchase of U.S. government
treasury obligations of $715,209,000. Cash of $707,309 was held outside of the
Trust Account and is available for the Company's working capital purposes.
As of December 31, 2022, we had cash of $707,309. We intend to use the funds
held outside the Trust Account primarily to identify and evaluate target
businesses, perform business due diligence on prospective target businesses,
travel to and from the offices, plants or similar locations of prospective
target businesses or their representatives or owners, review corporate documents
and material agreements of prospective target businesses, structure, negotiate
and complete a Business Combination.
In order to finance transaction costs in connection with an Initial Business
Combination, the Company's sponsor, or an affiliate of the sponsor or certain of
the Company's officers and directors may, but are not obligated to, provide
Working Capital Loans to the Company. As of December 31, 2022, there were no
amounts outstanding under any Working Capital Loans.
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If the Company's estimates of the costs of identifying a target business,
undertaking due diligence and negotiating an Initial Business Combination are
less than the actual amount necessary to do so, the Company may have
insufficient funds available to operate its business prior to an Initial
Business Combination. Moreover, the Company may need to obtain additional
financing either to complete an Initial Business Combination or because it
becomes obligated to redeem a significant number of its Public Shares upon
completion of an Initial Business Combination, in which case the Company may
issue additional securities or incur debt in connection with such Initial
Business Combination.
The Company anticipates that the cash held outside of the Trust Account as of
December 31, 2022 will not be sufficient to allow the Company to operate for at
least the next 12 months from the issuance of the financial statements, assuming
that a Business Combination is not consummated during that time. Over this time
period, the Company will be using the funds held outside of the Trust Account
for paying existing accounts payable and accrued liabilities, identifying and
evaluating prospective initial Business Combination candidates, performing due
diligence on prospective target businesses, paying for travel expenditures,
selecting the target business to merge with or acquire, and structuring,
negotiating and consummating the Business Combination. These conditions raise
substantial doubt about the Company's ability to continue as a going concern for
a period of time within one year after the date that the financial statements
are issued. Management plans to address this uncertainty through the Business
Combination as discussed above. In addition, 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 under the Working
Capital Loans. There is no assurance that the Company's plans to consummate the
Business Combination will be successful or successful within the Combination
Period or that the sponsor or an affiliate of the sponsor, or certain of the
Company's officers and directors will loan the Company funds as may be required
under the Working Capital Loans.
The 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.
Commitments and Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities.
The underwriters are entitled to a deferred fee of $0.35 per Unit, or $8,050,000
in the aggregate. The deferred fee will be waived by the underwriters in the
event that the Company does not complete a Business Combination, subject to the
terms of the underwriting agreement.
Administrative Services Agreement
Commencing on the date of the IPO, the Company pays the Sponsor or an affiliate
a monthly fee of $10,000 for office space, utilities, secretarial and
administrative services. For the year ended December 31, 2022, we incurred and
paid $95,484 in administrative support fees. For the period from February 25,
2021 (inception) through December 31, 2021 we did not incur or pay any fees.
Registration Rights
The holders of Founder Shares and Private Placement Warrants, including any that
may be issued upon conversion of Working Capital Loans, if any (and any Class A
ordinary shares issuable upon the exercise of the Private Placement Warrants,
including any that may be issued upon conversion of the Working Capital Loans),
will be entitled to registration rights pursuant to a registration rights
agreement entered into prior to the consummation of the IPO. These holders will
be entitled to certain demand and "piggyback" registration rights. However, the
registration rights agreement provides that the Company is not required to
effect or permit any registration or cause any registration statement to become
effective until termination of the applicable lock-up period. The Company will
bear the expenses incurred in connection with the filing of any such
registration statements.
Off-Balance Sheet Arrangements
As of December 31, 2022 and December 31, 2021 we did not have any off-balance
sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
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Critical Accounting Estimates
The preparation of 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 not identified any critical accounting estimates.
Recent Accounting Standards
See "Recent Accounting Pronouncements" in Note 2 of the accompanying financial
statements.
JOBS Act
The Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") contains
provisions that, among other things, relax certain reporting requirements for
qualifying public companies. We qualify as an "emerging growth company" and
under the JOBS Act are allowed to comply with new or revised accounting
pronouncements based on the effective date for private (not publicly traded)
companies. We are electing to delay the adoption of new or revised accounting
standards, and as a result, we may not comply with new or revised accounting
standards on the relevant dates on which adoption of such standards is required
for non-emerging growth companies. As a result, the financial statements may not
be comparable to companies that comply with new or revised accounting
pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the
other reduced reporting requirements provided by the JOBS Act. Subject to
certain conditions set forth in the JOBS Act, if, as an "emerging growth
company," we choose to rely on such exemptions we may not be required to, among
other things, (i) provide an auditor's attestation report on our system of
internal controls over financial reporting pursuant to Section 404, (ii) provide
all of the compensation disclosure that may be required of non-emerging growth
public companies under the Dodd-Frank Wall Street Reform and Consumer Protection
Act, (iii) comply with any requirement that may be adopted by the PCAOB
regarding mandatory audit firm rotation or a supplement to the auditor's report
providing additional information about the audit and the financial statements
(auditor discussion and analysis) and (iv) disclose certain executive
compensation related items such as the correlation between executive
compensation and performance and comparisons of the CEO's compensation to median
employee compensation. These exemptions will apply for a period of five years
following the completion of our Initial Public Offering or until we are no
longer an "emerging growth company," whichever is earlier.
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PATRIA LATIN AMERICAN OPPORTUNITY ACQUISITION CORP. 
