References to the "Company," "us," "our" or "we" refer to Fat Projects
Acquisition Corp. The following discussion and analysis of our financial
condition and results of operations should be read in conjunction with our
audited financial statements and related notes included herein.
Cautionary Note Regarding Forward-Looking Statements
All statements other than statements of historical fact included in this Report
including, without limitation, statements under 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. When used in
this Report, words such as "anticipate," "believe," "estimate," "expect,"
"intend" and similar expressions, as they relate to us or the Company's
management, identify forward-looking statements. Such forward-looking statements
are based on the beliefs of management, as well as assumptions made by, and
information currently available to, the Company's management. Actual results
could differ materially from those contemplated by the forward- looking
statements as a result of certain factors detailed in our filings with the SEC.
All subsequent written or oral forward-looking statements attributable to us or
persons acting on the Company's behalf are qualified in their entirety by this
paragraph.
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the financial statements and the
notes thereto contained elsewhere in this Report. Certain information contained
in the discussion and analysis set forth below includes forward-looking
statements that involve risks and uncertainties.
Overview
We are a blank check company incorporated on April 16, 2021 as a Cayman Islands
exempted company and formed for the purpose of entering into a merger, share
exchange, asset acquisition, share purchase, recapitalization, reorganization or
other similar business combination with one or more target businesses. While our
efforts to identify a target business may span many industries and regions
worldwide, we focus our search for prospects within the supply chain,
transportation, logistics, finance, sustainability/ESG, food, agriculture,
e-commerce, and/or big data sectors. We intend to effectuate our initial
business combination using cash from the proceeds of our Initial Public Offering
and the private placement of the private placement warrants, the proceeds of the
sale of our shares in connection with our initial business combination, shares
issued to the owners of the target, debt issued to bank or other lenders or the
owners of the target, or a combination of the foregoing.
We expect to continue to incur significant costs in the pursuit of our initial
business combination. We cannot assure you that our plans to complete our
initial business combination will be successful.
Initial Public Offering.
On October 15, 2021 we consummated our initial public offering pursuant to which
we issued 11,500,000 public units at a price of $10.00 per unit (after the
exercise of the underwriters' overallotment option). Each public unit is
comprised of one of our Class A ordinary shares and one redeemable warrant
exercisable for one of our Class A ordinary shares with an exercise price of
$11.50 per share. Simultaneously with the consummation of our initial public
offering, we issued 2,865,000 private placement warrants to our sponsor at a
price of $1.00 per warrant. We also issued 115,000 of our Class A ordinary
shares to EF Hutton, the lead underwriter for our initial public offering as
compensation for serving as lead underwriter. We deposited $115,000,000 of the
proceeds from the initial public offering and the private placement of the
private placement warrants into our trust account with Continental for the
benefit of the holders of our public shares.
Proposed Business Combination with Avanseus Holdings Pte. Ltd.
On August 26, 2022, we entered into a Business Combination Agreement with
Avanseus Holdings Pte. Ltd., a Singapore private company limited by shares
("Avanseus") (as may be amended and/or restated from time to time, the "Business
Combination Agreement"). The Business Combination Agreement and the transactions
contemplated thereby were approved by our board of directors and the Avanseus
board of directors (other than the PIPE Investment as described below which will
require further approval of the boards of directors), subject to the approval of
our shareholders.
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The Business Combination Agreement provides for a series of transactions,
pursuant to which, among other things, Avanseus' shareholders will exchange all
of their outstanding Avanseus shares in consideration for newly issued Company
Class A Ordinary Shares (the "Share Exchange"), subject to the conditions set
forth in the Business Combination Agreement, with Avanseus thereby becoming our
wholly owned subsidiary (the Share Exchange and the other transactions
contemplated by the Business Combination Agreement, together, the "Business
Combination" or the "Proposed Transaction"). In connection with the Business
Combination, we will change our corporate name to "Avanseus Holdings
Corporation" ("New Avanseus").
The Business Combination Agreement, prior to the Second BCA Amendment described
below, provided that the Company will use its commercially reasonable efforts to
enter into and consummate subscription agreements in form and substance mutually
acceptable to the Company and Avanseus with investors mutually reasonably
acceptable to the Company and Avanseus pursuant to which such investors will
agree to purchase up to an aggregate of $35 million of (i) the Company's Series
A Convertible Preference Shares, which shares will be convertible into the
Company's Class A Ordinary Shares, and/or (ii) the Company's Class A Ordinary
Shares, with such purchases to be consummated prior to or substantially
currently with the closing of the Share Exchange (the "PIPE Investment").
The Business Combination is expected to close in the first quarter of 2023,
following the receipt of the required approval by our shareholders and the
fulfillment of other customary closing conditions.
On October 3, 2022, Avanseus and we entered into the First BCA Amendment to
amend the previously announced Original Business Combination Agreement. The
First BCA Amendment amends the Original Business Combination Agreement to:
(1) Add a mutual condition to the obligations of Avanseus and us to close the
transactions contemplated in the Business Combination Agreement that holders
of the Company's Class A Ordinary Shares redeem an aggregate of at least
5,200,000 of such shares so that Avanseus will be the acquiror for accounting
purposes at both the minimum and maximum redemption levels required to be
disclosed in the Registration Statement on Form S-4 to be filed with the
Commission pursuant to the Business Combination Agreement;
(2) Replace the form of Incentive Equity Plan attached to the Original Business
Combination Agreement with an amended Incentive Equity Plan to conform the
eligible participants in the plan to the eligible participants listed in the
Original Business Combination Agreement;
(3) Improve the description of the Nasdaq listing process in the Business
Combination Agreement for our Class A Ordinary Shares to be issued to
Avanseus' shareholders and pursuant to the Incentive Equity Plan; and
(4) Provide that subscription agreements for PIPE investors be mutually
reasonably acceptable to Avanseus as well as us.
On February 14, 2023, Avanseus and we entered into the Second BCA Amendment to
further amend the Original Business Combination Agreement. The Second BCA
Amendment further amends the Original Business Combination Agreement to:
(1) Amend the definition of Acquiror Transaction Expenses to exclude expenses
that are expressly deferred, waived or converted to equity by written
agreement of the parties to which they are owed on terms satisfactory to
Avanseus;
(2) Delete provisions related to a PIPE offering by FATP and provisions related
to a pool of one million FATP Class A Ordinary Shares to be issued for
purposes mutually acceptable to FATP and Avanseus;
(3) Delete a closing condition that required the combined companies to have at
least $5,000,001 of net tangible assets at Closing;
(4) Amend the minimum cash closing condition to reduce the amount of cash that
the combined companies must have at Closing after the payment of their
transaction expenses from $25 million to $4 million;
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(5) Add a new closing condition that FATP enter into one or more definitive
financing agreements with terms mutually acceptable to FATP and Avanseus with
one or more post-closing financing providers acceptable to both FATP and
Avanseus, which may include the issuance of up to one millions FATP Class A
ordinary shares as origination fees to the post-closing financing providers;
(6) Extend the Agreement End Date, which is the date that either FATP or Avanseus
may terminate the Business Combination Agreement without cause (provided that
the terminating party is not itself in material breach of the Business
Combination Agreement), from February 22, 2023 to July 15, 2023; and
(7) Delete the closing condition added by the First BCA Amendment that holders of
at least 5,200,000 publicly held Class A ordinary shares redeem such shares
at the closing of the transactions contemplated in the Business Combination
since the redemption of 6,058,262 Class A ordinary shares in connection with
the January 13, 2023 Charter Amendment rendered such condition unnecessary.
Charter Amendment and Share Redemptions
In an extraordinary general meeting held on January 13, 2023, shareholders
approved the Charter Amendment, changing the structure and cost of our right to
extend the Termination Date by which we must either (i) consummate a merger,
capital stock exchange, asset acquisition, stock purchase, reorganization or
similar business combination involving the Company and one or more businesses (a
"business combination"), or else (ii) cease our operations if we fail to
complete such business combination, and redeem or repurchase 100% of our public
shares included as part of the units sold in our initial public offering.
The Charter Amendment allows us to extend the Termination Date by up to six (6)
one-month Extensions to July 15, 2023, provided that if any Extended Deadline
ends on a day that is not a business day, such Extended Deadline will be
automatically extended to the next succeeding business day. To obtain each
1-month extension, we, our sponsor or any of their affiliates or designees must
deposit into our Trust Account with Continental by the deadline applicable prior
to the extension $0.0575 per share for each of our public shares outstanding as
of the deadline prior to the extension (after giving effect to redemptions in
connection with the approval of the Charter Amendment by our shareholders with
respect to the first such extension).
In connection with the approval of the Charter Amendment, holders of 6,058,262
of our public shares exercised their right to redeem those shares for cash at an
approximate price of $10.16 per share, for an aggregate of approximately $61.57
million, leaving 5,441,738 of our public shares outstanding.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities from inception through December 31, 2022, were
organizational activities, those necessary to prepare for our Initial Public
Offering, described below, and, after our Initial Public Offering, identifying a
target company for an initial business combination, negotiating the Business
Combination Agreement and the preparation and filing on October 5, 2022 with the
SEC the Form S-4 with respect to the Business Combination and subsequent
amendments thereto. 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 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 and expenses incurred in connection with
negotiating the Business Combination Agreement and preparing and filing the Form
S-4 and amendments thereto.
For the year ended December 31, 2022, we had a net loss of $736,161, which
consisted of formation and operating costs of $2,488,328, partially offset by
the interest earned on investments held in the trust account of $1,752,167.
For the period from April 16, 2021 (inception) through December 31, 2021, we had
a net loss of $231,291, which consisted of formation and operating costs of
$241,834 and interest earned on investments held in the trust account of
$10,543.
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Liquidity, Capital Resources and Going Concern
On October 15, 2021, we consummated our Initial Public Offering of 11,500,000
Units at a price of $10.00 per Unit, generating gross proceeds of $115,000,000.
Simultaneously with the closing of our Initial Public Offering, we consummated
the sale of 2,865,000 Placement Warrants to the Sponsor at a price of $1.00 per
Warrant, generating gross proceeds of $2,865,000.
For the year ended December 31, 2022, cash used in operating activities was
$822,093. Our net loss of $736,161 resulted from formation and operating costs
of $2,488,328 partially offset by interest earned on investments held in the
Trust Account of $1,752,167. Changes in operating assets and liabilities
provided $1,666,235 of cash from operating activities.
For the year ended December 31, 2022, cash provided by financing activities was
$140,000, which consisted of proceeds from issuance of promissory note to the
Sponsor of $90,000 and proceeds from related party of $50,000.
For the year ended December 31, 2022, no cash was provided by or used in
investing activities.
For period from April 16, 2021 (inception) through December 31, 2021, cash used
in operating activities was $376,904. Our net loss of $231,291 resulted from
interest earned on investments held in Trust Account of $10,543, partially
offset by formation and operating costs paid by sponsor of $4,096. Changes in
operating assets and liabilities used $139,166 of cash from operating
activities.
For period from April 16, 2021 (inception) through December 31, 2021, cash
provided by financing activities was $116,131,797. Proceeds from sale of Class B
ordinary shares to our Sponsor of $25,000, proceeds from our IPO of
$115,000,000, proceeds from the private placement of our private warrants of
$2,865,000 and proceeds from the issuance of a promissory note to related party
of $163,398 were partially offset by payments of the underwriting discount for
the IPO of $1,150,000, repayment of the promissory note to the related party of
$163,398, payments to a related party of $133,824 and payment of deferred
offering costs of $474,379.
For period from April 16, 2021 (inception) through December 31, 2021, cash used
in investing activities was $115,000,000, which consisted of investments held in
trust account.
As of December 31, 2022, we had investments of $116,762,710 held in the trust
account. As of February 28, 2023, we had investments of approximately $56.3
million held in the trust account after the redemption of public shares in
connection with the Charter Amendment. 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 paid and deferred underwriting
commissions) to complete our initial business combination. We may withdraw
interest to pay taxes and we may use up to $100,000 from the trust account to
pay liquidation expenses in the event we are unable to complete our initial
business combination by the deadline in our charter and are required to dissolve
the Company. During the year ended December 31, 2022, we did not withdraw any
interest earned on the trust account. To the extent that our capital stock or
debt is used, in whole or in part, as consideration to complete our initial
business combination, the remaining proceeds held in the trust account will be
used as working capital to finance the operations of the target business or
businesses, make other acquisitions and pursue our growth strategies.
As of December 31, 2022, we had cash of $72,800 outside of the trust account. We
intend to use the funds held outside the trust account primarily to structure,
negotiate and complete our initial business combination.
In order to fund working capital deficiencies or finance transaction costs in
connection with our initial 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 our initial business
combination, we would repay such loaned amounts. In the event that our initial
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 Placement Warrants, at a
price of $1.00 per warrant at the option of the lender. As of December 31, 2022,
the Company borrowed $90,000 from Sponsor under the Working Capital Loans.
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As described below, in January 2023, our board authorized us to issue up to $1
million in principal amount of non-interest-bearing notes to fund extensions of
the deadline to complete our initial business combination and to issue up to
$1,062,500 of 15% interest-bearing notes to non-affiliates of our Sponsor and
our officers and directors to raise working capital. As of February 28, 2023,
there was an aggregate principal amount of $200,260 of non-interest-bearing
notes and $355,740 of interest-bearing notes outstanding
In connection with the Company's assessment of going concern considerations in
accordance with FASB Accounting Standards Update ("ASU") 2014-15, "Disclosures
of Uncertainties about an Entity's Ability to Continue as a Going Concern,"
management has determined that the Company has and will continue to incur
significant costs in pursuit of its acquisition plans which raises substantial
doubt about the Company's ability to continue as a going concern. Moreover, we
may need to obtain additional financing either to complete our initial business
combination or because we become obligated to redeem a significant number of our
Public Shares upon consummation of our initial business combination, in which
case we may issue additional securities or incur debt in connection with such
Business Combination. Subject to compliance with applicable securities laws, we
would only complete such financing simultaneously with the completion of our
initial business combination. If we are unable to complete our initial business
combination because we do not have sufficient funds available to us, we will be
forced to cease operations and liquidate the trust account. In addition,
following our initial business combination, if cash on hand is insufficient, we
may need to obtain additional financing in order to meet our obligations.
In addition, management has determined that the mandatory liquidation and
subsequent dissolution, should the Company be unable to complete a business
combination, raises substantial doubt about the Company's ability to continue as
a going concern. The Company has until March 15, 2023 to consummate a Business
Combination unless the Company further extends the period of time to consummate
a business combination by depositing an aggregate of $312,900 (representing
$0.0575 per public share) into the Company's trust account for each of up to
four monthly extensions remaining available after the Charter Amendment, or
unless the Company's shareholders approve of a further extension, in each case
in accordance with the Company's amended and restated memorandum and articles of
association. It is uncertain that the Company will be able to consummate a
Business Combination by this time. If a Business Combination is not consummated
by this date, there will be a mandatory liquidation and subsequent dissolution
unless there are further extensions as described above. No adjustments have been
made to the carrying amounts of assets or liabilities should the Company be
required to liquidate after March 15, 2023 (assuming no further extensions).
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of December 31, 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 an agreement to pay the Sponsor
a monthly fee up to $10,000 for office space, utilities and secretarial and
administrative support services. We began incurring these fees on October 12,
2021 and will continue to incur these fees monthly until the earlier of the
completion of the Business Combination and our liquidation.
The underwriters are entitled to a deferred fee of $4,025,000 in the aggregate.
The deferred fee will become payable to the underwriters 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 December 17, 2022, we issued a non-interest-bearing promissory note in the
principal amount of $90,000 to our sponsor in consideration for a $90,000
working capital loan. The note is convertible at the option of the holder into
warrants that are substantially identical to our private placement warrants upon
the completion of our initial business combination.
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Our board of directors has authorized us (1) to raise up to $1 million of funds
by the issuance of non-interest bearing notes to fund extensions of the deadline
to complete our initial business combination and (2) to raise up to $1,062,500
of funds for working capital (which can also be used to fund extensions of the
deadline to complete our initial business combination) through a private
offering of promissory notes bearing simple interest at a rate of 15% per annum
to prospective investors who are not our sponsor, directors or officers or any
of their affiliates. As of February 28, 2023, there was an aggregate principal
amount of $200,260 of non-interest-bearing notes and $355,740 of
interest-bearing notes outstanding.
Critical Accounting Policies and Significant Estimates
This management's discussion and analysis of our financial condition and results
of operations is based on our financial statements, which have been prepared in
accordance with United States generally accepted accounting principles. The
preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses and the disclosure of contingent assets and liabilities in our
financial statements. On an ongoing basis, we evaluate our estimates and
judgments, including those related to fair value of financial instruments and
accrued expenses. We base our estimates on historical experience, known trends
and events and various other factors that we believe to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions.
Offering Costs
We comply with the requirements of the ASC 340-10-S99-1. Offering costs consists
of legal, accounting and underwriting fees and other costs incurred through the
balance sheet date that are directly related to the Initial Public Offering, and
fair value in excess of consideration paid with respect to the Founder Shares
sold to the anchor investors. Offering costs are allocated to the separable
financial instruments issued in the IPO based on a relative fair value basis,
compared to total proceeds received. Upon closing of the IPO on October 15,
2021, offering costs associated with the Class A ordinary shares were charged to
temporary equity. Offering costs associated with the warrants were changed to
equity. The Sponsor sold 75,000 founder shares to each of ten anchor investors
(750,000 founder shares in the aggregate) at approximately $0.009 per share. The
Company accounted for the fair value in excess of consideration paid with
respect to the number of Founder Shares sold to the anchor investors as an
offering cost reflected as an increase to additional paid in capital offset by a
reduction of the offering proceeds upon completion of the IPO. The fair value of
each Founder Share was determined to be $6.75.
Ordinary Shares Subject to Possible Redemption
We account for our ordinary shares subject to possible redemption in accordance
with the guidance in ASC Topic 480 "Distinguishing Liabilities from Equity."
Ordinary shares subject to mandatory redemption (if any) are classified as
liability instruments and measured at fair value. Conditionally redeemable
ordinary shares (including ordinary shares that feature redemption rights that
are either within the control of the holder or subject to redemption upon the
occurrence of uncertain events not solely within our control) is classified as
temporary equity. At all other times, ordinary shares are classified as
shareholders' equity. Our Class A ordinary shares feature certain redemption
rights that are considered to be outside of our control and subject to the
occurrence of uncertain future events. Accordingly, all Class A ordinary shares
subject to possible redemption are presented at redemption value as temporary
equity, outside of the shareholders' equity section of our balance sheet.
Net Loss Per Ordinary Share
We comply with the accounting and disclosure requirements of ASC Topic 260,
"Earnings Per Share." Net loss per ordinary share is computed by dividing net
loss by the weighted average number of ordinary shares outstanding during the
period, excluding ordinary shares subject to forfeiture. At December 31, 2022
and 2021, we did not have any dilutive securities and other contracts that
could, potentially, be exercised or converted into ordinary shares and then
share in the earnings of us. As a result, diluted loss per ordinary share is the
same as basic loss per ordinary share for the period presented.
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Financial Instruments
We account for warrants as either equity-classified or liability-classified
instruments based on an assessment of the warrant's specific terms and
applicable authoritative guidance in FASB ASC 480, Distinguishing Liabilities
from Equity ("ASC 480") and ASC 815, Derivatives and Hedging ("ASC 815"). The
assessment considers whether the warrants (i) are freestanding financial
instruments pursuant to ASC 480, (ii) meet the definition of a liability
pursuant to ASC 480, and (iii) meet all of the requirements for equity
classification under ASC 815, including whether the warrants are indexed to the
Company's own ordinary shares and also considers whether the warrant holders
could potentially require "net cash settlement" in a circumstance outside of the
Company's control, among other conditions for equity classification. This
assessment is conducted at the time of warrant issuance and as of each
subsequent annual period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity
classification, the warrants are required to be recorded as a component of
equity at the time of issuance. For issued or modified warrants that do not meet
all of the criteria for equity classification, the warrants are required to be
recorded at their initial fair value on the date of issuance and each balance
sheet date thereafter. The Company accounts for its outstanding warrants as
equity-classified.
Recent Accounting Standards
Management does not believe that any recently issued, but not effective,
accounting standards, if currently adopted, would have a material effect on the
Company's financial statements.
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FAT PROJECTS ACQUISITION CORP 
