References to the "Company," "our," "us" or "we" refer to Portage Fintech
Acquisition Corporation. The following discussion and analysis of the Company's
financial condition and results of operations should be read in conjunction with
the unaudited condensed 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.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). We have based these forward-looking statements on our current
expectations and projections about future events. These forward-looking
statements are subject to known and unknown risks, uncertainties and assumptions
about us that may cause our actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by such
forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as "may," "should," "could," "would," "expect,"
"plan," "anticipate," "believe," "estimate," "continue," or the negative of such
terms or other similar expressions. Such statements include, but are not limited
to, possible business combinations and the financing thereof, and related
matters, as well as all other statements other than statements of historical
fact included in this Form 10-Q. Factors that might cause or contribute to such
a discrepancy include, but are not limited to, those described in our other
Securities and Exchange Commission ("SEC") filings.
Overview
We are a blank check company incorporated as a Cayman Islands exempted company
on March 17, 2021 for the purpose of effecting a merger, share exchange, asset
acquisition, share purchase, reorganization or similar business combination with
one or more businesses. We intend to effectuate our Business Combination using
cash from the proceeds of our Initial Public Offering and the sale of the
Private Placement Warrants, our ordinary shares, debt or a combination of cash,
shares 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.
Results of Operations
We have neither engaged in any operations nor generated any operating revenues
to date. Our only activities from inception through September 30, 2022 were
organizational activities, those necessary to prepare for our Initial Public
Offering, described below, and our search for a target company for a Business
Combination. We do not expect to generate any operating revenues until after the
completion of our Business Combination. We generate non-operating income in the
form of interest income on investments 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 searching for, and completing, a Business Combination.
For the three months ended September 30, 2022, we had net income of $1,313,539,
which consisted of $1,482,224 of investment income earned on the Trust Account,
$304,506 of other income due to change in the fair value of the warrant
liabilities and $298,484 of reduction of deferred underwriter fee payable,
offset by $771,675 of general and administrative expenses.
For the nine months ended September 30, 2022, we had net income of $7,348,178,
which consisted of $1,998,013 of investment income earned on the Trust Account,
$7,162,484 of other income due to change in the fair value of the warrant
liabilities and $298,484 of reduction of deferred underwriter fee payable,
offset by $2,110,803 of general and administrative expenses.
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For the three months ended September 30, 2021, we had net income of $5,449,673,
which consisted of $6,485,982 of other income due to change in the fair value of
the warrant liabilities, $1,272 of investment income, $16,027 of unrealized gain
on investments held in Trust Account, offset by $1,053,608 of general and
administrative expenses.
For the period from March 17, 2021 (inception) through September 30, 2021, we
had net income of $5,286,489, which consisted of $6,485,982 of other income due
to change in the fair value of the warrant liabilities, $1,272 of investment
income, $16,027 of unrealized gain on investments held in Trust Account, offset
by $1,216,792 of general and administrative expenses.
Going Concern, Liquidity and Capital Resources
On July 23, 2021, we consummated the Initial Public Offering of 24,000,000
Units, generating gross proceeds of $240,000,000. Simultaneously with the
closing of the Initial Public Offering, we consummated the sale of 6,333,334
Private Placement Warrants at a price of $1.50 per Private Placement Warrant in
a private placement to our Sponsor, generating gross proceeds of $9,500,000. On
August 3, 2021, the underwriters notified the Company of their intention to
partially exercise their over-allotment option. As such, on August 5, 2021, the
Company consummated the sale of an additional 1,911,379 Units, at $10.00 per
Unit, and the sale of an additional 254,850 Private Placement Warrants, at $1.50
per Private Placement Warrant, generating total gross proceeds of $19,496,065.
Following the Initial Public Offering, the sale of the Private Placement
Warrants, and the exercise of the over-allotment option by the underwriters, a
total of $259,113,790 ($10.00 per Unit) was placed in the Trust Account. We
incurred $15,406,275 in Initial Public Offering related costs, including
$5,182,276 of underwriting fees, $9,068,983 of deferred underwriting fees and
$1,155,016 of other costs.
For the nine months ended September 30, 2022, cash used in operating activities
was $782,466. Net income of $7,348,178 was affected by reduction of deferred
underwriter fee payable of $298,484, investment income earned on the Trust
Account of $1,998,013, and changes in the fair value of warrants liabilities of
$7,162,484. Changes in operating assets and liabilities provided $1,328,337 of
cash for operating activities.
For the period from March 17, 2021 (inception) through September 30, 2021, cash
used in operating activities was $2,579,328. Net loss of $5,286,489 was affected
by unrealized gain on investments held in Trust Account of $16,027, changes in
the fair value of warrants liabilities of $6,485,982 and transaction costs
allocated to warrant liabilities of $135,464. Changes in operating assets and
liabilities used $1,499,273 of cash for operating activities.
As of September 30, 2022, we had investments held in the Trust Account of
$261,146,965. We intend to use the funds held in the Trust Account, including
any amounts representing interest earned on the Trust Account (less taxes
payable), to complete our Business Combination. To the extent that our share
capital 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 target business or
businesses, make other acquisitions and pursue our growth strategies.
As of September 30, 2022, we had cash of $387,583. 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, and structure,
negotiate and complete a Business Combination.
In order to fund working capital deficiencies or finance transaction costs in
connection with a Business Combination, the Sponsor, or certain of our officers
and directors or their affiliates may, but are not obligated to, loan us funds
as may be required. If we complete a Business Combination, we would repay such
loaned amounts. In the event that a Business Combination does not close, we may
use a portion of the working capital held outside the Trust Account to repay
such loaned amounts but no proceeds from our Trust Account would be used for
such repayment. Up to $1,500,000 of such loans may be convertible into warrants
upon consummation of the Business Combination at a price of $1.50 per warrant.
The warrants would be identical to the Private Placement Warrants.
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In connection with the Company's assessment of going concern considerations in
accordance with Financial Accounting Standard Board's ("FASB") ASC Subtopic
205-40, "Presentation of Financial Statements - Going Concern," the Company has
until July 23, 2023 to consummate a Business Combination. It is uncertain
whether 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 of the Company. Management has
determined that the liquidity condition and mandatory liquidation, should a
Business Combination not occur, raises substantial doubt about the Company's
ability to continue as a going concern through approximately one year from the
date these unaudited financial statements were issued. Management intends to
consummate a Business Combination prior to July 23, 2023. These unaudited
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.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of September 30, 2022. We do not participate
in transactions that create relationships with unconsolidated entities or
financial partnerships, often referred to as variable interest entities, which
would have been established for the purpose of facilitating off-balance sheet
arrangements. We have not entered into any off-balance sheet financing
arrangements, established any special purpose entities, guaranteed any debt or
commitments of other entities, or purchased any non-financial assets.
Contractual Obligations
Commencing on July 20, 2021, we agreed to pay our Sponsor a total of $10,000 per
month for office space, utilities, secretarial and administrative support
services provided to members of our management team. Upon completion of the
initial Business Combination or our liquidation, we will cease paying these
monthly fees. In addition, commencing on July 21, 2021 and until completion of
our Business Combination or liquidation, we will be required to reimburse our
Sponsor or its affiliates monthly for compensation expenses of employees
dedicated to us (including the Chief Financial Officer) not to exceed $900,000
per year. We recognized approximately $259,000 and $752,000 in connection with
such services for the three and nine months ended September 30, 2022,
respectively. We recognized approximately $243,000 in connection with such
services for the three months ended September 30, 2021 and for the period from
March 17, 2021 (inception) through September 30, 2021.
The holders of Founder Shares, Private Placement Warrants, and securities that
may be issued upon conversion of Working Capital Loans, if any, are entitled to
registration rights pursuant to a registration rights agreement. These holders
will be entitled to make up to three demands, excluding short form demands, that
we register such securities. In addition, these holders will have certain
"piggy-back" registration rights with respect to registration statements filed
subsequent to the completion of the initial Business Combination. We will bear
the expenses incurred in connection with the filing of any such registration
statements.
The underwriters are entitled to a deferred fee of three and half percent
(3.50%) of the gross proceeds of the Initial Public Offering, or $9,068,983. On
August 15, 2022, one of the underwriters waived its entitlement to the payment
of any deferred fee to be paid under the terms of the underwriting agreement and
is no longer serving in an advisor capacity. As a result of waiving $6,529,668
of deferred underwriting fees, the deferred underwriting fee payable is
$2,539,315. 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.
Critical Accounting Policies and 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 period reported. Actual results could materially differ from those
estimates. We have identified the following critical accounting policies:
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Warrant Liabilities
We evaluated the Public Warrants and the Private Placement Warrants in
accordance with ASC 815-40, "Derivatives and Hedging - Contracts in Entity's Own
Equity", and concluded that a provision in the warrant agreement related to
certain tender or exchange offers precludes the Warrants from being accounted
for as components of equity. As the Warrants meet the definition of a derivative
as contemplated in ASC 815, the Warrants are recorded as derivative liabilities
on the balance sheets and measured at fair value at inception (on the date of
the Initial Public Offering) and at each reporting date in accordance with ASC
820, "Fair Value Measurement", with changes in fair value recognized in the
statements of operations in the period of change.
Class A Ordinary Shares Subject to Possible Redemption
We account for our Class A ordinary shares subject to possible redemption in
accordance with the guidance in FASB ASC Topic 480 "Distinguishing Liabilities
from Equity." The Class A ordinary shares subject to mandatory redemption (if
any) are classified as liability instruments and are measured at fair value.
Conditionally redeemable shares of Class A ordinary shares (including Class A
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 the Company's control) are classified as temporary
equity. At all other times, Class A ordinary shares are classified as
shareholders' equity. The Company's Class A ordinary shares feature certain
redemption rights that are considered to be outside of the Company's control and
subject to the occurrence of uncertain future events. Accordingly, as of
September 30, 2022 and December 31, 2021, Class A ordinary shares subject to
possible redemption are presented as temporary equity, outside of the
shareholders' deficit section of the Company's balance sheets.
Net income (loss) per ordinary share
Net income (loss) per share is computed by dividing net income by the
weighted-average number of ordinary shares outstanding during the period. The
contractual formula utilized to calculate the redemption amount approximates
fair value. The Class A ordinary shares' feature to redeem at fair value means
that there is effectively only one class of shares. Changes in fair value are
not considered a dividend for the purposes of the numerator in the earnings per
share calculation. Net income (loss) per ordinary share is computed by dividing
the pro rata net income (loss) between the Class A ordinary shares and the Class
B ordinary shares by the weighted average number of ordinary shares outstanding
for each of the periods. The calculation of diluted income (loss) per ordinary
share does not consider the effect of the warrants issued in connection with the
Initial Public Offering and the Private Placement since the exercise of the
warrants is contingent upon the occurrence of future events and the inclusion of
such warrants would be anti-dilutive.
Recent accounting standards
In August 2020, the FASB issued Accounting Standards Update ("ASU") 2020-06,
"Debt - Debt with Conversion and Other Options" (Subtopic 470-20) and
"Derivatives and Hedging - Contracts in Entity's Own Equity" (Subtopic 815-40)
("ASU 2020-06") to simplify accounting for certain financial instruments. ASU
2020-06 eliminates the current models that require separation of beneficial
conversion and cash conversion features from convertible instruments and
simplifies the derivative scope exception guidance pertaining to equity
classification of contracts in an entity's own equity. The new standard also
introduces additional disclosures for convertible debt and freestanding
instruments that are indexed to and settled in an entity's own equity. ASU
2020-06 amends the diluted earnings per share guidance, including the
requirement to use the if-converted method for all convertible instruments. ASU
2020-06 is effective for the Company for the fiscal year beginning after
December 15, 2023, including interim periods within those fiscal years, with
early adoption permitted. The Company is currently assessing the impact, if any,
that ASU 2020-06 would have on its financial position, results of operations or
cash flows.
Management does not believe that any recently issued, but not yet effective,
accounting pronouncements, if currently adopted, would have a material effect on
the Company's financial statements.
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Emerging growth company
The Company is an "emerging growth company," as defined in Section 2(a) of the
Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012
(the "JOBS Act"), and it may take advantage of certain exemptions from various
reporting requirements that are applicable to other public companies that are
not emerging growth companies including, but not limited to, not being required
to comply with the auditor attestation requirements of Section 404 of the
Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive
compensation in its periodic reports and proxy statements, and exemptions from
the requirements of holding a nonbinding advisory vote on executive compensation
and shareholder approval of any golden parachute payments not previously
approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies
from being required to comply with new or revised financial accounting standards
until private companies (that is, those that have not had a Securities Act
registration statement declared effective or do not have a class of securities
registered under the Exchange Act) are required to comply with the new or
revised financial accounting standards. The JOBS Act provides that a company can
elect to opt out of the extended transition period and comply with the
requirements that apply to non-emerging growth companies but any such election
to opt out is irrevocable. The Company has elected not to opt out of such
extended transition period which means that when a standard is issued or revised
and it has different application dates for public or private companies, the
Company, as an emerging growth company, can adopt the new or revised standard at
the time private companies adopt the new or revised standard. This may make
comparison of the Company's financial statements with another public company
which is neither an emerging growth company nor an emerging growth company which
has opted out of using the extended transition period difficult or impossible
because of the potential differences in accounting standards used.
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