References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to Artisan Acquisition Corp. References to our "management" or
our "management team" refer to our officers and directors, and references to the
"Sponsor" refer to Artisan LLC. 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 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. 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 final prospectus for its Initial Public
Offering (as defined below) filed with the U.S. Securities and Exchange
Commission (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 February 2, 2021 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 have not selected any
business combination target and we have not, nor has anyone on our behalf,
initiated any substantive discussions, directly or indirectly, with any business
combination target. 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, the proceeds of the sale of our shares in connection
with our initial business combination pursuant to the forward purchase
agreements (or backstop agreements we may enter into or otherwise), 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 or other sources.
Proposed Business Combination
On September 15, 2021, (i) Artisan Acquisition Corp., a Cayman Islands exempted
company ("Artisan"), (ii) Prenetics Global Limited, a Cayman Islands exempted
company ("PubCo"), (iii) AAC Merger Limited, a Cayman Islands exempted company
and a direct wholly owned subsidiary of PubCo ("Merger Sub 1"), (iv) PGL Merger
Limited, a Cayman Islands exempted company and a direct wholly owned subsidiary
of PubCo ("Merger Sub 2," and together with Merger Sub 1 the "Merger Subs") and
(v) Prenetics Group Limited, a Cayman Islands exempted company ("Prenetics")
entered into a Business Combination Agreement (as it may be amended,
supplemented or otherwise modified from time to time, the "BCA").
The BCA and the transaction contemplated thereby were unanimously approved by
the board of directors of each of Artisan and Prenetics.
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The BCA provides for, among other things, the following transactions: (i)
Artisan will merge with and into Merger Sub 1, with Merger Sub 1 being the
surviving entity in the merger, and, after giving effect to such merger,
continuing as a wholly owned subsidiary of PubCo (the "Initial Merger"), and
(ii) following the Initial Merger, Merger Sub 2 will merge with and into
Prenetics, with Prenetics being the surviving entity in the merger, and, after
giving effect to such merger, continuing as a wholly owned subsidiary of PubCo
(the "Acquisition Merger"). The Initial Merger, the Acquisition Merger and the
other transactions contemplated by the BCA are hereinafter referred to as the
"Business Combination."
The Business Combination
Subject to, and in accordance with, the terms and conditions of the BCA, in
connection with the Initial Merger, (i) every issued and outstanding Class A and
Class B ordinary share of Artisan will automatically be cancelled in exchange
for one PubCo Class A ordinary share and (ii) each issued and outstanding
warrant of Artisan will cease to exist and be assumed by PubCo and converted
automatically into a warrant to purchase one PubCo Class A ordinary share on
substantially the same terms (the "Warrants").
Subject to, and in accordance with, the terms and conditions of the BCA, in
connection with the Acquisition Merger, (i) (a) each issued and outstanding
ordinary share and preferred share in Prenetics (other than any shares of
Prenetics held by Mr. Danny Yeung) immediately prior to the effective time of
the Acquisition Merger will automatically be cancelled in exchange for such
number of PubCo Class A ordinary shares that is equal to the Exchange Ratio (as
described below and more fully defined in the BCA) and (b) each issued and
outstanding ordinary share and preferred share in Prenetics held by Mr. Danny
Yeung immediately prior to the effective time of the Acquisition Merger will
automatically be cancelled in exchange for such number of PubCo Class B ordinary
shares that is equal to the Exchange Ratio; and (ii) (a) each Prenetics
restricted share unit (other than any Prenetics restricted share unit held by
Mr. Danny Yeung) outstanding immediately prior to the effective time of the
Acquisition Merger will automatically be assumed by PubCo and converted into an
award of PubCo restricted share units representing the right to receive PubCo
Class A Ordinary Shares under the Incentive Equity Plan (as defined below) equal
to the product of (x) the number of Prenetics ordinary shares subject to such
Prenetics restricted share unit and (y) the Exchange Ratio and (b) each
Prenetics restricted share unit held by Mr. Danny Yeung outstanding immediately
prior to the effective time of the Acquisition Merger will automatically be
assumed by PubCo and converted into an award of PubCo restricted share units
representing the right to receive PubCo Class B Ordinary Shares under the
Incentive Equity Plan equal to the product of (x) the number of Prenetics
ordinary shares subject to such Prenetics restricted share unit and (y) the
Exchange Ratio.
The "Exchange Ratio" is a number determined by dividing the Price per Share (as
described below and more fully defined in the BCA) by $10. "Price per Share" is
defined in the BCA as the amount equal to $1,150,000,000 divided by such amount
equal to (a) the aggregate number of Prenetics shares (i) that are issued and
outstanding immediately prior to the effective time of Acquisition Merger and
(ii) that are issuable upon the exercise of all Prenetics restricted share
units, options, warrants, convertible notes and other equity securities of
Prenetics that are issued and outstanding immediately prior to the effective
time of Acquisition Merger minus (b) the Prenetics shares held by Prenetics or
any of its subsidiaries (if applicable) as treasury shares.
Holders of PubCo Class A ordinary shares will be entitled to one vote per share
and holders of the PubCo Class B ordinary shares will be entitled to 20 votes
per share. Each PubCo Class B ordinary share (x) is convertible into one PubCo
Class A ordinary share at any time by the holder thereof, and (y) will
automatically convert into one PubCo Class A ordinary share upon, among others
and subject to certain limitations, the sale, transfer or other disposal by the
holder thereof to any third party that is not a permitted transferee of such
holder, in each case of the foregoing (x) and (y), subject to the terms and
conditions of the amended and restated memorandum and articles of association of
PubCo to be adopted and become effective immediately prior to the effective time
of the Initial Merger (a form of which is attached to the BCA as an exhibit).
Representations and Warranties; Covenants
The BCA contains representations and warranties of the parties thereto that are
customary for transactions of this nature, including with respect to, among
other things: (i) organization, good standing and qualification; (ii)
authorization; (iii) capitalization; (iv) consents; no conflicts; (v) financial
statements; (vi) absence of certain changes; (vii) litigation; (viii) taxes;
(ix) data protection; (x) compliance with laws (including with respect to
permits and filings); (xi) material contracts; (xii) intellectual property;
(xiii) labor and employee matters and (xiv) proxy/registration statement. The
representations and warranties of the respective parties to the BCA will not
survive the closing of the transaction.
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Conditions to the Consummation of the Transaction
Consummation of the transactions contemplated by the BCA is subject to customary
closing conditions, including approval by the shareholders of Artisan and
Prenetics. The BCA also contains other conditions, including, among others: (i)
the accuracy of representations and warranties to various standards, from no
materiality qualifier to a material adverse effect qualifier, (ii) the bringdown
to closing of a representation that no material adverse effect has occurred
(both for Artisan and Prenetics); (iii) material compliance with pre-closing
covenants, (iv) the delivery of customary closing certificates, (v) the absence
of a legal prohibition on consummating the transactions, (vi) PubCo's listing
application with Nasdaq being approved, (vii) Artisan having at least
US$5,000,001 of net tangible assets remaining after redemption; and (viii) the
cash proceeds from the trust account established for the purpose of holding the
net proceeds of Artisan's initial public offering, plus cash proceeds from the
PIPE Investments (as defined below), plus cash proceeds under the Forward
Purchase Agreements (as amended by the Deeds of Novation and Amendment), plus
any amount raised pursuant to permitted equity financings prior to closing of
the Acquisition Merger, minus the aggregate amount payable to SPAC shareholders
exercising their redemption rights, in the aggregate equaling no less than
$200,000,000.
PIPE Subscription Agreements
Concurrently with the execution of the BCA, certain investors (the "PIPE
Investors") entered into share subscription agreements (each, a "PIPE
Subscription Agreement"), pursuant to which the PIPE Investors agreed to
subscribe for and purchase PubCo Class A ordinary shares at $10.00 per share for
an aggregate purchase price of $60,000,000 (the "PIPE Investment"). Pursuant the
PIPE Subscription Agreements, the obligations of the parties to consummate the
PIPE Investment are subject to the satisfaction or waiver of certain customary
closing conditions of the respective parties, including, among others, (i) all
conditions precedent under the BCA having been satisfied or waived (other than
those to be satisfied at the closing of the Business Combination), (ii) the
accuracy of representations and warranties in all material respects and (iii)
material compliance with covenants.
Deeds of Novation and Amendment to Forward Purchase Agreement
Prior to the initial public offering of Artisan, Artisan entered into forward
purchase agreements (each a "Forward Purchase Agreement"), pursuant to which the
anchor investors (each an "Anchor Investor") agreed to purchase an aggregate of
6,000,000 Class A ordinary shares of Artisan plus 1,500,000 redeemable warrants
of Artisan, for a purchase price of $10.00 per Class A ordinary share of
Artisan, as applicable, or $60,000,000 in the aggregate, in a private placement
to close immediately prior to the closing of the initial business combination of
Artisan. Concurrently with the execution of the BCA, the Anchor Investors
entered into deeds of novation and amendment (each a "Deed of Novation and
Amendment"), pursuant to which the Anchor Investors have agreed to replace their
Copies commitments to purchase the Class A ordinary shares and warrants of
Artisan under the Forward Purchase Agreements with the commitment to purchase an
aggregate of 6,000,000 PubCo Class A ordinary shares plus 1,500,000 redeemable
PubCo warrants, for a purchase price of $10.00 per PubCo Class A ordinary share,
as applicable, or $60,000,000 in the aggregate, in a private placement to close
immediately prior to the closing of the Acquisition Merger.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities for the period from February 2, 2021 (inception) through
September 30, 2021 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 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
interest income on investments held in our trust account after the initial
public offering. 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.
For the three months ended September 30, 2021, we had a net loss of $4,103,866,
which resulted from formation and operating costs of $1,689,501, change in the
fair value of warrant liabilities of $741,308 and change in fair value of the
forward purchase agreement derivative liability of $1,723,962, partially offset
by the unrealized gain on investments held in the trust account of $50,905.
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For the period from February 2, 2021 (inception) through September 30, 2021, we
had a net loss of $9,652,562, which resulted from formation and operating costs
of $2,202,636, expensed offering costs associated with the initial public
offering and private placement sale of warrants of $534,056, change in the fair
value of warrant liabilities of $5,435,602 and the change in fair value of the
forward purchase agreement derivative liability of $1,500,843, partially offset
by the unrealized gain on investments held in the trust account of $20,575.
Liquidity and Capital Resources
For the period from February 2, 2021 (inception) through September 30, 2021, net
cash used in operating activities was $1,246,636, which was due to our net loss
of $9,652,562 and unrealized gain on investments held in the trust account of
$20,575, partially offset by the change in the fair value of warrant liabilities
of $5,435,602, the change in fair value of the forward purchase agreement
derivative liability of $1,500,843, changes in working capital accounts of
$956,000 and expensed offering costs of $534,056.
For the period from February 2, 2021 (inception) through September 30, 2021, net
cash used in investing activities of $339,342,350 was the result of the amount
of net proceeds from our initial public offering and the private placement sale
of warrants being deposited to the trust account.
Net cash provided by financing activities for the for the period from February
2, 2021 (inception) through September 30, 2021 of $340,816,143 was comprised of
$332,555,503 in proceeds from the issuance of units in our initial public
offering net of underwriter's discount paid and $8,786,847 in proceeds from the
issuance of warrants in a private placement to our Sponsor, partially offset by
payment of $400,317 for offering costs associated with the initial public
offering.
On May 18, 2021, we consummated our initial public offering of 30,000,000 units.
Each unit consists of one share of one Class A ordinary share of the Company,
par value $0.0001 per share (the "Public Shares") and one-third of one
redeemable warrant of the Company (the "Public Warrants"), with each whole
warrant entitling the holder thereof to purchase one Class A ordinary shares for
$11.50 per share. The units were sold at a price of $10.00 per unit, generating
gross proceeds to the Company of $300,000,000. The Company granted the
underwriters a 45-day option to purchase up to 4,500,000 additional Units solely
to cover over-allotments.
Simultaneously with the consummation of the Initial Public Offering, we
completed the private sale of 5,333,333 warrants to our Sponsor, at a purchase
price of $1.50 per warrant (the "Private Placement Warrants"), generating gross
proceeds of $8,000,000. The proceeds from the sale of the Private Placement
Warrants were added to the net proceeds from the initial public offering held in
a trust account. If we do not complete our initial business combination within
24 months from the closing of the initial public offering, the proceeds from the
sale of the Private Placement Warrants will be used to fund the redemption of
the Public Shares (subject to the requirements of applicable law) and the
Private Placement Warrants will expire worthless.
On May 25, 2021, the underwriters partially exercised the over-allotment option
and purchased an additional 3,934,235 units, generating gross proceeds of
$39,342,350.
Simultaneously with the closing of the exercise of the over-allotment option, we
consummated the sale of 524,565 additional Private Placement Warrants at a
purchase price of $1.50 per Private Placement Warrant in a private placement to
our Sponsor, generating gross proceeds of $786,847.
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 and deferred underwriting commissions), to complete our initial
business combination. We may withdraw interest income (if any) to pay income
taxes, if any. Our annual income tax obligations will depend on the amount of
interest and other income earned on the amounts held in the trust account. We
expect the interest income earned on the amount in the trust account (if any)
will be sufficient to pay our income taxes. To the extent that our equity 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.
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Prior to the completion of our initial business combination and subsequent to
our initial public offering, we will use the proceeds from the initial public
offering held outside the trust account, as well as have access to certain funds
from loans from our sponsor, its affiliates or members of our management team.
We will use these funds 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.
We have incurred and expect to continue to incur significant costs in pursuit of
our acquisition plans. We may have insufficient funds available to operate our
business prior to our initial business combination. In order to finance
transaction costs in connection with an intended initial business combination,
our sponsor, its affiliates, our officer or certain to our directors may, but
are not obliged to, loan to us funds as may be required. If we complete our
initial business combination, we may repay such loaned amounts out of the
proceeds of the trust account released to us. 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 of the post-business combination entity
at a price of $1.50 per warrant at the option of the lender. The warrants would
be identical to the private placement warrants. Except for the foregoing, the
terms of such loans, if any, have not been determined and no written agreements
exist with respect to such loans. Prior to the completion of our initial
business combination, we do not expect to seek loans from parties other than our
sponsor, its affiliates or members of our management team as we do not believe
third parties will be willing to loan such funds and provide a waiver against
any and all rights to seek access to funds in our trust account.
Moreover, we may need to obtain additional financing to complete our initial
business combination, either because the transaction requires more cash than is
available from the proceeds held in our trust account, or because we become
obligated to redeem a significant number of our public shares upon the
completion of the business combination, in which case we may issue additional
securities or incur debt in connection with such business combination. If we
have not consummated our initial business combination within the required time
period because we do not have sufficient funds available to us, we will be
forced to cease operations and liquidate the trust account.
Off-Balance Sheet Arrangements
As of September 30, 2021, we did not have any off-balance sheet arrangements.
Contractual Obligations
Registration Rights
Pursuant to a registration rights agreement entered into on May 13, 2021, the
holders of the Founder Shares, Private Placement Warrants and warrants that may
be issued upon conversion of Working Capital Loans (and any Class A ordinary
shares issuable upon the exercise of the Private Placement Warrants and warrants
issued upon conversion of the Working Capital Loans) have registration and
shareholder rights to require the Company to register a sale of any of its
securities held by them. The holders of these securities are entitled to make up
to three demands, excluding short form demands, that the Company register such
securities. In addition, the holders have certain "piggy-back" registration
rights with respect to registration statements filed subsequent to the
completion of an initial Business Combination. The Company will bear the
expenses incurred in connection with the filing of any such registration
statements.
Promissory Notes - Related Party
On February 4, 2021, we issued an unsecured promissory note to the Sponsor (the
"Promissory Note"), pursuant to which we could borrow up to $300,000 to cover
expenses related to our initial public offering. The Promissory Note was
non-interest bearing and was payable on the earlier of September 30, 2021 or the
consummation of our initial public offering. On July 26, 2021, we repaid the
outstanding balance under the Promissory Note of $1,150.
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On August 16, 2021, we issued an unsecured promissory note to the Sponsor (the
"Second Promissory Note"), pursuant to which we may borrow up to an aggregate
principal amount of $300,000. The Second Promissory Note is non-interest bearing
and payable upon the consummation of our initial business combination. As of
September 30, 2021, we had not borrowed any amount under the Second Promissory
Note.
Underwriters Agreement
In connection with our initial public offering, the underwriters were granted a
45-day option from the date of the prospectus to purchase up to 4,500,000
additional units to cover over-allotments. On May 25, 2021, the underwriters
partially exercised the over-allotment option to purchase an additional
3,934,235 units at an offering price of $10.00 per unit, generating additional
gross proceeds of $39,342,350 to the Company.
The underwriters were paid a cash underwriting discount of $0.20 per unit, or
$6,786,847 in the aggregate upon the closing of our initial public offering and
the partial exercise of the over-allotment option. In addition, the underwriters
will be entitled to a deferred fee of $0.35 per unit, or $11,876,982 in the
aggregate. Subject to the terms of the underwriting agreement, (i) the deferred
fee will be placed in the trust account and released to the underwriters only
upon the completion of our initial business combination and (ii) the deferred
fee will be waived by the underwriters in the event that we do not complete our
initial business combination.
Forward Purchase Agreement
As more fully described in Note 1 and Note 5 in Item 1 to this Quarterly Report
on Form 10-Q, we entered into the Forward Purchase Agreements with the Sponsor
and Anchor Investors, which were subsequently amended in connection with the
execution of the Business Combination Agreement.
Critical Accounting Policies
The preparation of condensed 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:
Class A Ordinary Shares Subject to Possible Redemption
All of the 33,934,235 Class A ordinary shares sold as part of the units in our
initial public offering and subsequent partial exercise of the underwriters'
over-allotment option contain a redemption feature which allows for the
redemption of such Public Shares in connection with the Company's liquidation,
if there is a shareholder vote or tender offer in connection with our initial
business combination and in connection with certain amendments to the Company's
amended and restated memorandum and articles of association. In accordance with
SEC and its staff's guidance on redeemable equity instruments, which has been
codified in ASC 480-10-S99, redemption provisions not solely within the control
of the Company require ordinary shares subject to redemption to be classified
outside of permanent equity. Therefore, all Class A ordinary shares have been
classified outside of permanent equity.
The Company recognizes changes in redemption value immediately as they occur and
adjusts the carrying value of redeemable ordinary shares to equal the redemption
value at the end of each reporting period. Increases or decreases in the
carrying amount of redeemable ordinary shares are affected by charges against
additional paid in capital and accumulated deficit.
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Warrant Liabilities
The Company accounts 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 ASC 480 and ASC 815,
Derivatives and Hedging ("ASC 815"). The assessment considers whether the
warrants are freestanding financial instruments pursuant to ASC 480, meet the
definition of a liability pursuant to ASC 480, and whether the warrants meet all
of the requirements for equity classification under ASC 815, including whether
the warrants are indexed to the Company's own common stock, among other
conditions for equity classification. This assessment, which requires the use of
professional judgment, is conducted at the time of warrant issuance and as of
each subsequent quarterly 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
additional paid-in capital at the time of issuance. For issued or modified
warrants that do not meet all 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. Changes in the estimated fair
value of the warrants are recognized as a non-cash gain or loss on the
statements of operations. The fair value of the Public Warrants was estimated
using a Black-Scholes Option Pricing Method - Barrier Option and the fair value
of the Private Placement Warrants was estimated using a Modified Black-Scholes
Option Pricing Method.
Net Loss Per Ordinary Share
Net loss per ordinary share is computed by dividing net loss by the
weighted-average number of ordinary shares outstanding during the period. The
Company has not considered the effect of the warrants sold in our initial public
offering and private placement to purchase an aggregate of 17,169,310 shares in
the calculation of diluted net loss per share, since the exercise of the
warrants is contingent upon the occurrence of future events.
Recent Accounting Standards
In August 2020, the Financial Accounting Standards Board ("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 January 1, 2022 and should be applied on a full or
modified retrospective basis, with early adoption permitted beginning on January
1, 2021. 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 other recently issued, but not yet
effective, accounting standards, if currently adopted, would have a material
effect on the Company's financial statements.
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