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    ARTA   KYG0509L1023

ARTN ACQU

(ARTA)
Delayed Nasdaq  -  04:00 2022-05-17 pm EDT
7.791 USD   +0.90%
05/17ARTISAN ACQUISITION CORP. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)
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05/17Artisan Acquisition Corp. Reports Earnings Results for the First Quarter Ended March 31, 2022
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05/17Artisan Acquisition Corp.(NasdaqCM:ARTA) dropped from NASDAQ Composite Index
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ARTISAN ACQUISITION CORP. Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-K)

03/04/2022 | 04:42pm EDT

This Annual 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 Annual 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 "Cautionary Note Regarding Forward-Looking Statements" elsewhere in this Annual Report on Form 10-K. 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 in the Cayman Islands on February 2, 2021. The Company was formed for the purpose of entering into a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses. The Company is not limited to a particular industry or geographic region for purposes of consummating a business

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combination. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.

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 December 31, 2021 were organizational activities necessary to prepare for the our initial public offering, identifying a target for our business combination, and activities in connection with the proposed 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 period from February 2, 2021 (inception) through December 31, 2021, we had a net loss of $3,307,421, which resulted from professional fees and other expenses of $3,943,227, change in fair value of the forward purchase agreement derivative liability of $874,285 and expensed offering costs associated with the initial public offering and private placement sale of warrants of $534,056, partially offset by the change in the fair value of warrant liabilities of $2,005,780, unrealized gain on investments held in the trust account of $34,150 and dividend income on investments held in Trust Account of $4,217.

Proposed Business Combination

On September 15, 2021, (i) our Company, (ii) Prenetics Global Limited, a Cayman Islands exempted company, (iii) AAC Merger Limited, a Cayman Islands exempted company and a direct wholly owned subsidiary of PubCo, (iv) PGL Merger Limited, a Cayman Islands exempted company and a direct wholly owned subsidiary of PubCo, and (v) Prenetics entered into the BCA. For a more detailed description for the transactions contemplated under the BCA, see "Item 1. Business."

Liquidity and Capital Resources

For the period from February 2, 2021 (inception) through December 31, 2021, net cash used in operating activities was $1,372,731, which was due to the change in the fair value of warrant liabilities of $2,005,780, our net loss of $3,307,421, unrealized gain on investments held in the trust account of $34,150 and dividend income on investments held in the trust account of $4,217, offset in part by changes in working capital accounts of $2,570,496, the change in fair value of the forward purchase agreement derivative liability of $874,285 and expensed offering costs of $534,056.

For the period from February 2, 2021 (inception) through December 31, 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 December 31, 2021 of $340,817,293 was comprised of $332,555,503 in proceeds from the issuance of units in our initial public offering net of underwriters' discount paid, $8,786,847 in proceeds from the issuance of warrants in a private placement to our Sponsor, $124,740 in proceeds from the advance from related party and $1,150 in proceeds from issuance of promissory note - related party, partially offset by payment of $525,057 for offering costs associated with the initial public offering, repayment of $124,740 advance from related party and repayment of $1,150 promissory note - related party.

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 and one-third of one redeemable warrant of the Company, 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


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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.

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 the Sponsor, its affiliates or our officer or directors. 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, the Sponsor, its affiliates, our officer or certain to our directors may, but are not obligated to, loan 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 the Sponsor, its affiliates or our officer and directors 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 December 31, 2021, we did not have any off-balance sheet arrangements.

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Contractual Obligations

Registration Rights

Pursuant to a registration rights agreement entered into on May 13, 2021, holders of the founder shares, private warrants and warrants that may be issued upon conversion of any working capital loans, and any Class A ordinary shares issuable upon the exercise of these warrants have registration and shareholder rights to require the Company to register a sale of any such 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. However, we will not permit any registration statement filed under the Securities Act to become effective until termination of the applicable lockup period.

Pursuant to the Forward Purchase Agreements, we have agreed that we will use our reasonable best efforts (i) to file within 30 days after the closing of the initial business combination (and, with respect to (ii)(B) below, within 30 days following announcement of the results of the shareholder vote relating to our initial business combination or the results of our offer to shareholders to redeem their Class A ordinary shares in connection with our initial business combination (whichever is later), which we refer to as the "disclosure date") a registration statement with the SEC for a secondary offering of (A) the forward purchase securities, Class A ordinary shares underlying the forward purchase warrants and the Class A ordinary shares into which the anchor investors' founder shares are convertible, (B) any other Class A ordinary shares or warrants acquired by the anchor investors any time after we complete our initial business combination, and (C) any other equity security of the Company issued or issuable with respect to the securities referred to in (i)(A) and (i)(B) by way of a share capitalization or share sub-division or in connection with a combination of shares, recapitalization, merger, consolidation or reorganization, (ii) to cause such registration statement to be declared effective promptly thereafter, but in no event later than 60 days after the closing of the initial business combination, and (iii) to maintain the effectiveness of such registration statement until the earliest of (A) the date on which the anchor investor or its assignee ceases to hold the securities covered thereby and (B) the date all of the securities covered thereby can be sold publicly without restriction or limitation under Rule 144 under the Securities Act and without the requirement to be in compliance with Rule 144(c)(1) under the Securities Act, subject to certain conditions and limitations set forth in the forward purchase agreements.

Concurrently with the execution of the BCA, Artisan, PubCo, the Sponsor and certain shareholders of Prenetics entered into a registration rights agreement (the "Registration Rights Agreement"), to be effective upon the Closing. Following the execution of the BCA, all existing parties to the Registration Rights Agreement and several shareholders of Prenetics entered into a deed of joinder, pursuant to which such shareholders of Prenetics agreed to be bound by the terms and conditions of, and were granted the registration rights under, the Registration Rights Agreement.

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.

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 December 31, 2021, we had not borrowed any amount under the Second Promissory Note.

Underwriting Agreement

On May 13, 2021, we entered into an Underwriting Agreement with Credit Suisse Securities LLC and UBS Securities LLC. Upon the closing of our initial public offering and the partial exercise of the over-allotment option, the underwriters were paid a cash underwriting discount of $0.20 per unit, or $6,786,847 in the aggregate. 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 has been placed in the trust

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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.

Administrative Services Agreement

The Company entered into an agreement, commencing on May 13, 2021, to pay our Sponsor a total of $10,000 per month for office space, secretarial and administrative services. Upon the completion of a business combination or liquidation, the Company will cease paying these monthly fees.

Forward Purchase Agreements

On March 1, 2021, we entered into the Forward Purchase Agreements with the Sponsor and the anchor investors, which were subsequently amended in connection with the execution of the BCA.

Placement Fees

On July 17, 2021, the Company entered into an agreement (which was amended on October 7, 2021) with certain investment banks (the "PIPE Placement Agents") to assist in raising the funds in the PIPE financing. The agreement calls for the PIPE Placement Agents to receive a contingent fee equal to 1.5% (or $900,000) of the gross proceeds received by the Company from the PIPE financing.

On November 8, 2021, the Company entered into an agreement with certain investment banks (the "FPA Placement Agents") pursuant to which the FPA Placement Agents will receive a contingent fee equal to 3.5% (or $2,100,000) of the gross proceeds received by the Company from the Forward Purchase Agreements for services in connection with raising the funds to be received pursuant to the Forward Purchase Agreements.

Merger and Acquisition Advisory Agreement

On July 20, 2021, the Company entered into an agreement with an investment bank (the "M&A Advisor) for advisory services such as analyzing, structuring, negotiating, and effecting the Business Combination. In exchange for such services, the Company will pay the M&A Advisor a contingent fee of $3,000,000 which is due and payable only in the event that the Company consummates its initial business combination.

Critical Accounting Policies

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 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 our 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 Topic 480, Distinguishing Liabilities from Equity ("ASC 480"), 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 statement of operations. The initial 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 remeasurement adjustment associated with the redeemable Class A ordinary shares is excluded from net loss per share as the redemption value approximates fair value. Therefore, the earnings per share calculation allocates income and losses shared pro rata between Class A and Class B ordinary shares. As a result, the calculated net loss per share is the same for Class A and Class B ordinary shares. The Company has not considered the effect of the public warrants and private placement warrants 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 adopted ASU 2020-06 effective January 1, 2021 using the modified retrospective method of transition. The adoption of ASU 2020-06 did not have a material impact on the financial statements for the fiscal year ended December 31, 2021.

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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