As filed with the Securities and Exchange Commission on November 25, 2022.
Registration No. 333-267741
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
TO
FORM
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
(Exact name of registrant as specified in its charter)
| 6770 | Not Applicable | |||
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(State or other jurisdiction of incorporation or organization) |
(Primary Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification Number) |
Telephone:
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
Telephone:
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
|
Andrew M. Tucker Nelson Mullins Riley & Scarborough LLP 101 Constitution Avenue, NW. Suite 900 Washington, D.C. 20001 (202) 689-2800 |
Scott Rapfogel Lucosky Brookman LLP 111 Broadway, Suite 807 New York, NY 10006 (212) 417-8160 |
Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after (i) this Registration Statement becomes effective and (ii) upon completion of the transactions described in the enclosed proxy statement/prospectus.
If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box: ☐
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.
If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:
| Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer) | ☐ |
| Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer) | ☐ |
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The information in this preliminary proxy statement/prospectus is not complete and may be changed. We may not issue these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary proxy statement/prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
PRELIMINARY — SUBJECT TO COMPLETION, DATED NOVEMBER [●], 2022
PROXY STATEMENT FOR GENERAL MEETING OF SHAREHOLDERS
OF
FAT PROJECTS ACQUISITION CORP
AND
PROSPECTUS FOR UP TO [●] CLASS A ORDINARY SHARES
OF
FAT PROJECTS ACQUISITION CORP
On August 26, 2022, Fat Projects Acquisition Corp, a Cayman Islands exempted company limited by shares, with company registration number 374480 (“FATP”), entered into a business combination agreement, as amended pursuant to Amendment No. 1 thereto dated as of October 3, 2022 (as it may be amended, supplemented, or otherwise modified from time to time, the “Business Combination Agreement”) with Avanseus Holdings Pte. Ltd., a Singapore private company limited by shares (“Avanseus”). The Business Combination Agreement, among other things, (i) anticipates that each holder of Avanseus Ordinary Shares and Avanseus Non-Voting Shares will exchange each such outstanding Avanseus share for 0.318496 FATP Class A Ordinary Shares (rounded down to the nearest whole share) (the “Exchange” and, together with the other transactions contemplated by the Business Combination Agreement, the “Business Combination”), and provides that Avanseus will thereby become a wholly-owned subsidiary of FATP, and (ii) provides that each Avanseus Restricted Share Award outstanding with respect to Avanseus Ordinary Shares or Avanseus Non-Voting Shares that is not vested at the effective time of the Exchange will be amended to provide that FATP assumes and replaces Avanseus as the grantor of Unvested Grant Shares and the grantee becomes entitled to receive 0.318496 FATP Class A Ordinary Shares in place of each unvested Avanseus share if and when vesting occurs.
As consideration for the Exchange, holders of outstanding Avanseus Ordinary Shares and/or Avanseus Non-Voting Shares collectively will be entitled to receive from FATP an aggregate of 9,350,307 FATP Class A Ordinary Shares, which FATP and Avanseus agreed are valued at $10.00 per share for an aggregate value equal to $93,503,070, for the outstanding Avanseus Ordinary Shares and Avanseus Non-Voting Shares, and grantees under Restricted Share Awards for Avanseus Ordinary Shares or Avanseus Non-Voting Shares that have not fully vested at the effective time of the Exchange will become entitled to receive an aggregate of 149,693 FATP Class A Ordinary Shares if all of such shares vest in accordance with the provisions of the amended Restricted Share Awards, for total consideration of 9,500,000 FATP Class A Ordinary Shares having an aggregate value of $95,000,000.
In connection with the Business Combination, FATP will change its corporate name to “Avanseus Holdings Corporation” (“New Avanseus”). References in this proxy statement/prospectus to “Avanseus” are to Avanseus Holdings Pte. Ltd. prior to the consummation of the Business Combination, and references to “New Avanseus” are to Fat Projects Acquisition Corp, under its new corporate name after the consummation of the Business Combination.
Proposals to approve the Business Combination Agreement, the other transaction documents, and the transactions contemplated thereby and the other matters discussed in this proxy statement/prospectus will be presented at the General Meeting of shareholders of FATP scheduled to be held on [●], 2023. All of the independent directors of the board of directors of FATP (the “FATP Board”) unanimously determined that the Business Combination Agreement and the transactions contemplated thereby, including the Exchange, are in the best interests of FATP and its shareholders and recommended that the FATP Board approve the Business Combination Agreement. Based on the recommendation of the independent directors, the FATP Board unanimously approved the Business Combination Agreement and the transactions contemplated thereby, including the Exchange, and recommends that you vote or give instruction to vote “FOR” the approval of the Business Combination Agreement, the other transaction documents, and the transactions contemplated thereby as well as the other proposals described in this proxy statement/prospectus. When you consider the FATP Board’s recommendation of these proposals, you should keep in mind that FATP’s directors and officers have interests in the Business Combination that are different from, or in addition to, the interests of FATP shareholders generally. See the section entitled “The Business Combination Proposal; Terms of the Business Combination — Interests of FATP’s Directors and Officers in the Business Combination” of this proxy statement/prospectus for additional information. The FATP Board was aware of and considered these interests, among other matters, in evaluating and negotiating the Business Combination and in recommending to FATP shareholders that they vote in favor of the proposals presented at the meeting.
See the section entitled “The Business Combination Proposal; Terms of the Business Combination — The Business Combination Agreement — General Description of the Business Combination Transactions — The Exchange” of this proxy statement/prospectus for additional information.
The Business Combination Agreement provides that FATP will use its commercially reasonable efforts to enter into and consummate subscription agreements in form and substance mutually acceptable to FATP and Avanseus (the “PIPE Subscription Agreements”) with investors mutually reasonably acceptable to FATP and Avanseus pursuant to which such investors will agree to purchase up to an aggregate of $35 million of (i) FATP Series A Convertible Preference Shares, which shares will be convertible into FATP Class A Ordinary Shares and (ii) FATP Class A Ordinary Shares, with such purchases to be consummated prior to or substantially currently with the closing of the Exchange (the “PIPE Investment”). Consummation of the PIPE Investment is not a condition to the consummation of the Business Combination pursuant to the Business Combination Agreement. The Business Combination Agreement does require that FATP have at least $25 million of cash and cash equivalents at Closing after the payment of FATP’s and Avanseus’ transaction expenses, and the purpose of the PIPE Investment to help maximize the chances that this condition will be satisfied.
In addition to the PIPE Investment, the Business Combination Agreement also allows FATP to issue in one or more private placements to investors mutually reasonably acceptable to FATP and Avanseus FATP Class A Ordinary Shares and/or any combination of FATP Series A Convertible Preference Shares convertible into FATP Class A Ordinary Shares or warrants, options or rights that are exercisable for FATP Class A Ordinary Shares (“Pool Securities”), all in an aggregate amount equal, on a fully-diluted basis, to 1,000,000 FATP Class A Ordinary Shares for purposes that are mutually reasonably acceptable to FATP and Avanseus and pursuant to subscription agreements and other related private placement documents in form and substance mutually reasonably acceptable to FATP and Avanseus. FATP may issue the Pool Securities before, at or after the Closing of the Exchange as may be mutually reasonably acceptable to FATP and Avanseus.
The Business Combination Agreement is attached to this proxy statement/prospectus as Annex A. Upon the effective time of the Exchange, FATP will adopt the amended and restated memorandum and articles of association in the form attached to this proxy statement/prospectus as Annex B and the Avanseus Holdings Corporation 2022 Equity Incentive Plan in the form attached to this proxy statement/prospectus as Annex C.
This proxy statement/prospectus provides you with detailed information about the Business Combination and other matters to be considered at the General Meeting of FATP shareholders. We encourage you to carefully read this entire document. You should, in particular, carefully consider the risk factors described in “Risk Factors” beginning on page 38 of this proxy statement/prospectus.
This proxy statement/prospectus is dated [●], 2022 and is first being mailed to FATP shareholders on or about [●], 2022.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES REGULATORY AGENCY HAS APPROVED OR DISAPPROVED THE TRANSACTIONS DESCRIBED IN THIS PROXY STATEMENT/PROSPECTUS OR ANY OF THE SECURITIES TO BE ISSUED IN THE BUSINESS COMBINATION, PASSED UPON THE MERITS OR FAIRNESS OF THE BUSINESS COMBINATION OR RELATED TRANSACTIONS OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE DISCLOSURE IN THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY CONSTITUTES A CRIMINAL OFFENSE.
ADDITIONAL INFORMATION
No person is authorized to give any information or to make any representation with respect to the matters that this proxy statement/prospectus describes other than those contained in this proxy statement/ prospectus, and, if given or made, the information or representation must not be relied upon as having been authorized by FATP or Avanseus. This proxy statement/prospectus does not constitute an offer to sell or a solicitation of an offer to buy securities or a solicitation of a proxy in any jurisdiction where, or to any person to whom, it is unlawful to make such an offer or a solicitation. Neither the delivery of this proxy statement/prospectus nor any distribution of securities made under this proxy statement/prospectus will, under any circumstances, create an implication that there has been no change in the affairs of FATP or Avanseus since the date of this proxy statement/prospectus or that any information contained herein is correct as of any time subsequent to such date.
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FAT PROJECTS ACQUISITION CORP
27 Bukit Manis Road
Singapore, 099892
Dear Fat Projects Acquisition Corp Shareholders:
You are cordially invited to attend the General Meeting (the “General Meeting”) of shareholders of Fat Projects Acquisition Corp, an exempted company limited by shares incorporated under the laws of the Cayman Islands with company registration number 374480 (“FATP”), at [●] AM Eastern time, on [●], 2022 and on such other date and at such other time to which the meeting may be adjourned. The General Meeting will be conducted via live webcast. You will be able to attend the General Meeting online, vote and submit your questions during the General Meeting by visiting https://www.cstproxy.com/fatprojects/2022. We are pleased to utilize virtual shareholder meeting technology to provide ready access and cost savings for FATP shareholders and FATP. The virtual meeting format allows attendance from any location in the world.
The General Meeting will be held for the following purposes:
| 1. | to consider and vote upon a proposal to (i) approve the Business Combination Agreement, dated as of August 26, 2022, as amended pursuant to Amendment No. 1 thereto dated as of October 3, 2022 (as it may be amended, supplemented or otherwise modified from time to time, the “Business Combination Agreement”), by and between FATP and Avanseus Holdings Pte. Ltd., a Singapore private company limited by shares (“Avanseus”), (ii) the other transaction documents, as discussed below, and (iii) the transactions contemplated thereby, pursuant to which, among other things, (a) each holder of Avanseus ordinary shares (the “Avanseus Ordinary Shares”) and Avanseus non-voting shares (the “Avanseus Non-Voting Shares”) will exchange each such outstanding Avanseus share for 0.318496 Class A Ordinary Shares of FATP, par value $0.0001 per share (the “FATP Class A Ordinary Shares”) (rounded down to the nearest whole share), for a total of 9,350,307 FATP Class A Ordinary Shares (the “Exchange” and, together with the other transactions contemplated by the Business Combination Agreement, the “Business Combination”), and Avanseus will thereby become a wholly-owned subsidiary of FATP, and (b) each Avanseus Restricted Share Award outstanding with respect to Avanseus Ordinary Shares or Avanseus Non-Voting Shares that is not vested at the effective time of the Exchange will be amended to provide that FATP assumes and replaces Avanseus as the grantor of unvested shares and the grantee becomes entitled to receive 0.318496 FATP Class A Ordinary Shares in place of each unvested Avanseus share if and when vesting occurs, for a total of 149,693 FATP Class A Ordinary Shares (the “Business Combination Proposal”). The Business Combination Agreement is attached to this proxy statement/prospectus as Annex A; |
| 2. | to consider and vote upon a proposal to adopt the amended and restated memorandum and articles of association of FATP in the form attached to the accompanying proxy statement/prospectus as Annex B (the “Articles Amendment Proposal”); |
| 3. | to consider and vote upon a proposal to approve the issuance of [●] FATP Class A Ordinary Shares, and [●] FATP Series A Convertible Preference Shares (the “FATP Preference Shares”) in accordance with the Business Combination Agreement (the “Share Issuance Proposal”); |
| 4. | to consider and vote upon a proposal to approve and adopt the Avanseus Holdings Corporation 2022 Equity Incentive Plan (the “New Avanseus Incentive Plan”) in the form attached to this proxy statement/prospectus as Annex C (the “Incentive Plan Proposal”); and |
| 5. | to consider and approve, if presented, a proposal to adjourn the General Meeting to a later date or dates (the “Adjournment Proposal”). |
Under the Business Combination Agreement, the approval of the Business Combination Proposal, the Articles Amendment Proposal, the Share Issuance Proposal and the Incentive Plan Proposal by the requisite vote of FATP shareholders is a condition to the consummation of the Business Combination. Each of the Business Combination Proposal, the Articles Amendment Proposal, the Share Issuance Proposal and the Incentive Plan Proposal is cross-conditioned on the approval of each other. If any one of these proposals is not approved by FATP shareholders, the Business Combination will not be consummated. The Adjournment Proposal, if approved, will allow the
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Chairman of the General Meeting to adjourn the General Meeting to a later date or dates. In no event will FATP solicit proxies to adjourn the General Meeting or consummate the Business Combination and related transactions beyond the date by which it may properly do so under FATP’s amended and restated articles of association (the “Existing FATP Articles”) and the Companies Act (As Revised) of the Cayman Islands (the “Cayman Islands Companies Act”). The purpose of the Adjournment Proposal is to permit further solicitation of additional proxies in the event that there are not sufficient votes at the time of the meeting to approve the Business Combination and related transactions. The Adjournment Proposal is not conditioned upon the approval of any other proposal set forth in the accompanying proxy statement/prospectus.
Each of these proposals is more fully described in the accompanying proxy statement/prospectus, which each shareholder is encouraged to read carefully and in its entirety.
As further described in the accompanying proxy statement/prospectus, pursuant to the terms and conditions of the Business Combination Agreement, among other things, (i) each holder of Avanseus Ordinary Shares and Avanseus Non-Voting Shares will exchange each such outstanding Avanseus share for 0.318496 FATP Class A Ordinary Shares (rounded down to the nearest whole share), and Avanseus will thereby become a wholly-owned subsidiary of FATP, and (ii) each Avanseus Restricted Share Award outstanding with respect to Avanseus Ordinary Shares or Avanseus Non-Voting Shares that is not vested at the effective time of the Exchange will be amended to provide that FATP assumes and replaces Avanseus as the grantor of Unvested Grant Shares and the grantee becomes entitled to receive 0.318496 FATP Class A Ordinary Shares in place of each unvested Avanseus share if and when vesting occurs.
As consideration for the Exchange, holders of outstanding Avanseus Ordinary Shares and/or Avanseus Non-Voting Shares collectively will be entitled to receive from FATP an aggregate of 9,350,307 FATP Class A Ordinary Shares, which FATP and Avanseus agreed are valued at $10.00 per share for an aggregate value equal to $93,503,070, for the outstanding Avanseus Ordinary Shares, and Avanseus Non-Voting Shares and grantees under Restricted Share Awards for Avanseus Ordinary Shares or Avanseus Non-Voting Shares that have not fully vested at the effective time of the Exchange will become entitled to receive an aggregate of 149,693 FATP Class A Ordinary Shares if all of such shares vest in accordance with the provisions of the amended Restricted Share Awards, for total consideration of 9,500,000 FATP Class A Ordinary Shares having an aggregate value of $95,000,000.
In connection with the Business Combination, FATP will change its corporate name to “Avanseus Holdings Corporation” (“New Avanseus”). Immediately after the closing of the Exchange, all FATP Class A Ordinary Shares and FATP Class B Ordinary Shares will automatically be converted to New Avanseus Ordinary Shares without any class designation without any action on the part of any holders of FATP Class A Ordinary Shares or FATP Class B Ordinary Shares.
The Business Combination Agreement provides that FATP will use its commercially reasonable efforts to enter into and consummate subscription agreements in form and substance mutually acceptable to FATP and Avanseus (the “PIPE Subscription Agreements”) with investors mutually reasonably acceptable to FATP and Avanseus pursuant to which such investors will agree to purchase up to an aggregate of $35 million of (i) FATP Series A Convertible Preference Shares, which shares will be convertible into FATP Class A Ordinary Shares and (ii) FATP Class A Ordinary Shares, with such purchases to be consummated prior to or substantially currently with the closing of the Exchange (the “PIPE Investment”).
In addition to the PIPE Investment, the Business Combination Agreement also allows FATP to issue, in one or more private placements to investors mutually reasonably acceptable to FATP and Avanseus, FATP Class A Ordinary Shares and/or any combination of FATP Preference Shares convertible into FATP Class A Ordinary Shares or warrants, options or rights that are exercisable for FATP Class A Ordinary Shares (“Pool Securities”), all in an aggregate amount equal, on a fully-diluted basis, to 1,000,000 FATP Class A Ordinary Shares for purposes that are mutually reasonably acceptable to FATP and Avanseus and pursuant to subscription agreements and other related private placement documents in form and substance mutually reasonably acceptable to FATP and Avanseus. The Pool Securities offered pursuant thereto may be issued before, at or after the closing of the Exchange as may be mutually reasonably acceptable to FATP and Avanseus. The primary purposes for which FATP and Avanseus might agree that FATP may issue Pool Securities would be to incentivize FATP’s public shareholders to refrain from requesting the redemption of their public shares and/or to hold their public shares for a longer period of time following Closing to support the post-Closing price of the New Avanseus Ordinary Shares. If the parties decide that FATP should issue
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Pool Securities to incentivize post-Closing retention of public shares by FATP’s public shareholders, FATP might issue Pool Securities after Closing to such shareholders who agree to continue to hold their public shares for a specified period of time. FATP and Avanseus may agree on other acceptable purposes for FATP’s issuance of Pool Securities, of which they are not currently aware or considering, as the Business Combination process progresses.
In connection with the Business Combination, certain related agreements have been or will be entered into prior to the closing of the Exchange, including the Share Exchange Agreements, the Unvested Restricted Share Amendments, the Restrictive Covenant Agreements, the PIPE Subscription Agreements, the Avanseus Holders Support Agreement, the Sponsor Support Agreement, and the Registration Rights Agreement (each as defined in the accompanying proxy statement/prospectus). See “The Business Combination Proposal; Terms of the Business Combination — Related Agreements” in the accompanying proxy statement/prospectus for more information.
Pursuant to the Existing FATP Articles, a holder of FATP’s public shares (a “public FATP shareholder”) may request that FATP redeem all or a portion of such public shares for cash in connection with the completion of the Business Combination. The redemption rights include the requirement that a holder must identify itself in writing as a beneficial holder and provide its legal name, phone number and address to Continental Stock Transfer & Trust Company in order to validly redeem its shares. Public FATP shareholders may elect to redeem their public shares even if they vote “for” the Business Combination Proposal. If the Business Combination is not consummated, the public shares will be returned to the respective holder, broker or bank. If the Business Combination is consummated, and if a public FATP shareholder properly exercises its right to redeem all or a portion of the public shares that it holds and timely delivers its share certificates (if any) and other redemption forms (as applicable) to Continental Stock Transfer & Trust Company, FATP will redeem such public shares for a per-share price, payable in cash, equal to the pro rata portion of the amount on deposit in the trust account as of two business days prior to the consummation of the Business Combination, including interest earned on the funds held in the trust account and not previously released to FATP. For illustrative purposes, as of September 30, 2022, this would have amounted to approximately $10.07 per issued and outstanding public share. If a public FATP shareholder exercises its redemption rights in full, then it will be electing to exchange its public shares for cash and will no longer own public shares. See “General Meeting of FATP Shareholders — Redemption Rights” in the accompanying proxy statement/prospectus for a detailed description of the procedures to be followed if you wish to redeem your public shares for cash.
Notwithstanding the foregoing, a public FATP shareholder, together with any affiliate of such public FATP shareholder or any other person with whom such public FATP shareholder is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (“Exchange Act”)), will be restricted from redeeming its public shares with respect to more than an aggregate of 15% of the public shares without the consent of FATP. Accordingly, if a public FATP shareholder, alone or acting in concert or as a group, seeks to redeem more than 15% of the public shares, then any such shares in excess of that 15% limit would not be redeemed unless FATP consents to such redemption.
FAT Projects SPAC Pte. Ltd. (the “Sponsor”) has agreed to, among other things, vote all of its shares of FATP in favor of the proposals being presented at the General Meeting and waive their redemption rights with respect to their shares of FATP in connection with the consummation of the Business Combination. As of the date of this proxy statement/prospectus, the Sponsor no longer owns any FATP Shares — it has transferred 750,000 of the FATP Class B Ordinary Shares it originally purchased to the Anchor Investors and the remaining 2,125,000 FATP Class B Ordinary Shares to its direct and indirect shareholders, which include all of FATP’s directors and executive officers or companies controlled by them (the “Sponsor’s Shareholders”). The Sponsor sold 750,000 FATP Class B Ordinary Shares to the Anchor Investors at a price of $0.009 per share (the same price the Sponsor paid to acquire the shares from FATP rounded to three decimal places) to incentivize each Anchor Investor to purchase 990,000 Units in the FATP IPO. The Sponsor transferred its remaining FATP Class B Ordinary Shares to its direct and indirect shareholders shortly after the closing of the FATP IPO in a non-cash distribution with respect to their equity in the Sponsor to obtain favorable tax treatment for such shareholders. For additional information, see “Certain Relationships and Related Person Transactions — FATP Relationships and Related Party Transactions.” As of the date of this proxy statement/prospectus, the FATP Class B Ordinary Shares held by the Sponsor’s Shareholders and the Anchor Investors constitute approximately 19.8% of the issued and outstanding FATP Ordinary Shares, which they are obligated to vote in favor of the proposals being presented at the General Meeting and with respect to which they have agreed not to request redemption. (The Anchor Investors are not obligated to vote their FATP Class A Ordinary Shares in favor of the proposals or refrain from requesting the redemption of their FATP Class A Ordinary
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Shares.) The Business Combination Agreement is subject to the satisfaction or waiver of certain closing conditions as described in the accompanying proxy statement/prospectus, including that the holders of at least 5,200,000 public shares elect to have their public shares redeemed. There can be no assurance that the parties to the Business Combination Agreement would waive any such closing condition. In addition, in no event will FATP redeem public shares in an amount that would cause FATP’s net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act) to be less than $5,000,001 after giving effect to the Business Combination.
FATP is providing the accompanying proxy statement/prospectus and accompanying proxy card to FATP shareholders in connection with the solicitation of proxies to be voted at the General Meeting and at any adjournments of the General Meeting. Information about the General Meeting, the Business Combination and other related business to be considered by FATP shareholders at the General Meeting is included in the accompanying proxy statement/prospectus. Whether or not you plan to attend the General Meeting, all of FATP shareholders should read the accompanying proxy statement/prospectus, including the Annexes and other documents referred to therein, carefully and in their entirety. You should also carefully consider the risk factors described in “Risk Factors” beginning on page 38 of the accompanying proxy statement/prospectus.
After careful consideration, FATP’s board of directors has unanimously approved the Business Combination and determined that the Business Combination Proposal, the Articles Amendment Proposal, the Share Issuance Proposal, the Incentive Plan Proposal and the Adjournment Proposal are advisable and fair to and in the best interest of FATP and unanimously recommends that you vote or give instruction to vote “FOR” the Business Combination Proposal, “FOR” the Articles Amendment Proposal, “FOR” the Share Issuance Proposal, “FOR” the Incentive Plan Proposal and “FOR” the Adjournment Proposal, if presented. When you consider the board of directors’ recommendation of these proposals, you should keep in mind our directors and officers have interests in the Business Combination that may conflict with your interests as a shareholder. See the section entitled “The Business Combination Proposal; Terms of the Business Combination — Interests of FATP’s Directors and Officers in the Business Combination.” in the accompanying proxy statement/prospectus for a further discussion of these considerations.
The approval of the Business Combination Proposal will require an ordinary resolution, which means a resolution passed by a simple majority of the votes cast by those shareholders of FATP who, being entitled to do so, attend, in person or by proxy, and vote thereupon at the General Meeting. The approval of the Articles Amendment Proposal will require a special resolution, which means a resolution that is passed by at least two-thirds of the votes cast by those shareholders of FATP who, being entitled to do so, attend, in person or by proxy, and vote thereupon at the General Meeting. The approval of the Share Issuance Proposal will require approval by a majority of the votes cast by those shareholders of FATP who, being entitled to do so, attend, in person or by proxy, and vote thereupon at the General Meeting. The approval of the Incentive Plan Proposal will require an ordinary resolution, which means a resolution passed by a simple majority of the votes cast by those shareholders of FATP who, being entitled to do so, attend, in person or by proxy, and vote thereupon at the General Meeting. The approval of the Adjournment Proposal if presented will require the consent of the meeting, which means a simple majority of the votes that are cast by those shareholders of FATP who are present, in person or by proxy, and vote thereupon at the General Meeting. An abstention or broker non-vote will be counted towards the quorum requirement but will not count as a vote cast at the General Meeting and therefore will have no effect on the outcome of the vote on the proposals.
Your vote is important regardless of the number of shares you own. Whether or not you plan to attend the General Meeting, please sign, date, vote and return the enclosed proxy card as soon as possible in the envelope provided to make sure that your shares are represented at the General Meeting. If your shares are held in “street name” or are in a margin or similar account, you should contact your broker or bank to ensure that votes related to the shares you beneficially own are properly counted. The Business Combination will be consummated only if the Business Combination Proposal, the Articles Amendment Proposal, the Share Issuance Proposal and the Incentive Plan Proposal are approved at the General Meeting. Each of the Business Combination Proposal, the Articles Amendment Proposal, the Share Issuance Proposal and the Incentive Plan Proposal is cross-conditioned on the approval of each other. The Adjournment Proposal is not conditioned upon the approval of any other proposal set forth in this proxy statement/prospectus.
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If you sign, date and return your proxy card without indicating how you wish to vote, your proxy will be voted FOR each of the proposals presented at the General Meeting. If you fail to return your proxy card or fail to instruct your bank, broker or other nominee how to vote, and do not attend the General Meeting in person, the effect will be, among other things, that your shares will not be counted for purposes of determining whether a quorum is present at the General Meeting. If you are a shareholder of record and you attend the General Meeting and wish to vote at the General Meeting, you may withdraw your proxy and vote in person at the General Meeting.
TO EXERCISE YOUR REDEMPTION RIGHTS, YOU MUST DEMAND IN WRITING THAT YOUR FATP SHARES BE REDEEMED FOR A PRO RATA PORTION OF THE FUNDS HELD IN
THE TRUST ACCOUNT AND TENDER YOUR SHARES TO OUR TRANSFER AGENT AT LEAST TWO BUSINESS DAYS BEFORE THE SCHEDULED DATE OF THE GENERAL MEETING. IN ORDER TO EXERCISE YOUR REDEMPTION RIGHT, YOU NEED TO IDENTIFY YOURSELF AS A BENEFICIAL HOLDER AND PROVIDE YOUR LEGAL NAME, PHONE NUMBER AND ADDRESS IN YOUR WRITTEN DEMAND. YOU MAY TENDER YOUR SHARES BY EITHER DELIVERING YOUR SHARE CERTIFICATE TO THE TRANSFER AGENT OR BY DELIVERING YOUR SHARES ELECTRONICALLY USING THE DEPOSITORY TRUST COMPANY’S DWAC (DEPOSIT/ WITHDRAWAL AT CUSTODIAN) SYSTEM. IF THE BUSINESS COMBINATION IS NOT COMPLETED, THEN THESE SHARES SHALL BE RETURNED TO YOU OR YOUR ACCOUNT. IF YOU HOLD THE
SHARES IN STREET NAME, YOU NEED TO INSTRUCT THE ACCOUNT EXECUTIVE AT YOUR BROKER, BANK OR OTHER NOMINEE TO WITHDRAW THE SHARES FROM YOUR ACCOUNT IN ORDER TO EXERCISE YOUR REDEMPTION RIGHTS. SEE “GENERAL MEETING OF FATP SHAREHOLDERS — REDEMPTION RIGHTS” FOR MORE SPECIFIC INSTRUCTIONS.
On behalf of FATP’s board of directors, I would like to thank you for your support and look forward to the successful completion of the Business Combination.
| Sincerely, | |
|
Tristan Lo Chairman of the Board of Directors |
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES REGULATORY AGENCY HAS APPROVED OR DISAPPROVED THE TRANSACTIONS DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS, PASSED UPON THE MERITS OR FAIRNESS OF THE BUSINESS COMBINATION OR RELATED TRANSACTIONS OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE DISCLOSURE IN THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY CONSTITUTES A CRIMINAL OFFENSE.
The accompanying proxy statement/prospectus is dated [●], 2022, and is first being mailed to shareholders on or about [●], 2022.
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FAT PROJECTS ACQUISITION CORP
NOTICE OF GENERAL MEETING
TO BE HELD ON [●], 2022
TO THE SHAREHOLDERS OF FAT PROJECTS ACQUISITION CORP:
NOTICE IS HEREBY GIVEN that a General Meeting of shareholders (the “General Meeting”) of Fat Projects Acquisition Corp, an exempted company limited by shares incorporated under the laws of the Cayman Islands, with company registration number 374480 (“FATP”), will be held completely virtually at [●] AM Eastern time, on [●], 2022 and on such other date and at such other time to which the meeting may be adjourned. The General Meeting will be conducted via live webcast. You will be able to attend the General Meeting online, vote and submit your questions during the General Meeting by visiting https://www.cstproxy.com/fatprojects/2022. You are cordially invited to attend the General Meeting, to conduct the following items of business and/or consider, and if thought fit, approve the following resolutions:
| ● | Proposal 1—The Business Combination Proposal: to consider and vote upon a proposal to approve (i) the Business Combination Agreement, dated as of August 26, 2022, as amended pursuant to Amendment No. 1 thereto dated as of October 3, 2022 (attached as Annex A to the attached proxy statement/prospectus) (as it may be amended, supplemented or otherwise modified from time to time, the “Business Combination Agreement”), by and between FATP and Avanseus Holdings Pte. Ltd., a Singapore private company limited by shares (“Avanseus”), (ii) the other transaction documents, as discussed below, and (iii) the transactions contemplated thereby, pursuant to which, among other things, (a) each holder of Avanseus ordinary shares (the “Avanseus Ordinary Shares”) and Avanseus non-voting shares (the “Avanseus Non-Voting Shares”) will exchange each such outstanding Avanseus share for 0.318496 Class A ordinary shares of FATP, par value $0.0001 per share (the “FATP Class A Ordinary Shares”) (rounded down to the nearest whole share), for a total of 9,350,307 FATP Class A Ordinary Shares (the “Exchange” and, together with the other transactions contemplated by the Business Combination Agreement, the “Business Combination”), and Avanseus will thereby become a wholly-owned subsidiary of FATP, (b) each Avanseus Restricted Share Award outstanding with respect to Avanseus Ordinary Shares or Avanseus Non-Voting Shares that is not vested at the effective time of the Exchange will be amended to provide that FATP assumes and replaces Avanseus as the grantor of unvested shares and the grantee becomes entitled to receive 0.318496 FATP Class A Ordinary Shares in place of each unvested Avanseus share if and when vesting occurs, for a total of 149,693 FATP Class A Ordinary Shares and (c) the sole outstanding warrant for Avanseus Shares, which is held by Crystal Technology Services Pte. Ltd., will be terminated and FATP will issue to Crystal Technology Services Pte. Ltd. a new warrant for 1,000,000 FATP Class A Ordinary Shares (the “Business Combination Proposal”); |
| ● | Proposal 2 — The Articles Amendment Proposal: to consider and vote upon a proposal to adopt the amended and restated memorandum and articles of association of FATP in the form attached as Annex B to the attached proxy statement/prospectus (the “Articles Amendment Proposal”); |
| ● | Proposal 3 — The Share Issuance Proposal: to consider and vote upon a proposal to approve the issuance of [●] FATP Class A Ordinary Shares and [●] FATP Series A Convertible Preference Shares in accordance with the Business Combination Agreement (the “Share Issuance Proposal”); |
| ● | Proposal 4 — The Incentive Plan Proposal: to consider and vote upon a proposal to approve and adopt the Avanseus Holdings Corporation 2022 Equity Incentive Plan in the form attached as Annex C to the attached proxy statement/prospectus (the “Incentive Plan Proposal”); and |
| ● | Proposal 5 — The Adjournment Proposal: to consider and vote upon a proposal to adjourn the General Meeting to a later date or dates if necessary, to permit further solicitation and vote of proxies if, based upon the tabulated vote at the time of the General Meeting, there are not sufficient votes to approve one or more proposals presented to shareholders for vote (the “Adjournment Proposal”). |
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Under the Business Combination Agreement, the approval of the Business Combination Proposal, the Articles Amendment Proposal, the Share Issuance Proposal and the Incentive Plan Proposal by the requisite vote of FATP shareholders is a condition to the consummation of the Business Combination. If any one of these proposals is not approved by FATP shareholders, the Business Combination will not be consummated. Each of the Business Combination Proposal, the Articles Amendment Proposal, the Share Issuance Proposal and the Incentive Plan Proposal is cross-conditioned on the approval of each other. The Adjournment Proposal is not conditioned on the approval of any other proposal set forth in this proxy statement/prospectus.
These items of business are described in the attached proxy statement/prospectus, which we encourage you to read in its entirety before voting.
Only holders of record of FATP ordinary shares (“FATP Shares”) at the close of business on [●], 2022 are entitled to notice of the meeting and to vote at the General Meeting and any adjournments or postponements of the General Meeting.
This proxy statement/prospectus and accompanying proxy card is being provided to FATP shareholders in connection with the solicitation of proxies to be voted at the General Meeting and at any adjournment of the General Meeting.
Whether or not you plan to attend the General Meeting, all of FATP’s shareholders are urged to read this proxy statement/prospectus, including the Annexes and the documents referred to herein, carefully and in their entirety. You should also carefully consider the risk factors described in “Risk Factors” beginning on page 38 of this proxy statement/prospectus.
After careful consideration, FATP’s board of directors has unanimously approved the Business Combination and determined that the Business Combination Proposal, the Articles Amendment Proposal, the Share Issuance Proposal, the Incentive Plan Proposal and the Adjournment Proposal are advisable and fair to and in the best interest of FATP and unanimously recommends that you vote or give instruction to vote “FOR” the Business Combination Proposal, “FOR” the Articles Amendment Proposal, “FOR” the Share Issuance Proposal, “FOR” the Incentive Plan Proposal and “FOR” the Adjournment Proposal, if presented. When you consider the board of directors’ recommendation of these proposals, you should keep in mind that FATP’s directors and officers have interests in the Business Combination that may conflict with your interests as a shareholder. See the section entitled “The Business Combination Proposal; Terms of the Business Combination — Interests of FATP’s Directors and Officers in the Business Combination” in the accompanying proxy statement/prospectus for a further discussion of these considerations.
Pursuant to the amended and restated articles of association of FATP, a public FATP shareholder may request of FATP that FATP redeem all or a portion of its FATP Shares for cash if the Business Combination is consummated. As a holder of FATP Shares, you will be entitled to receive cash for any FATP Shares to be redeemed only if, prior to [●], 2022 (two business days before the General Meeting), you:
| (i) | hold FATP Shares; |
| (ii) | submit a written request to Continental Stock Transfer & Trust Company (“Continental”), FATP’s transfer agent, in which you (a) request that FATP redeem all or a portion of your FATP Shares for cash, and (b) identify yourself as the beneficial holder of the FATP Shares and provide your legal name, phone number and address; and |
| (iii) | deliver shares or share certificates (if any) and other redemption forms (as applicable) to Continental, physically or electronically through The Depository Trust Company. |
Holders of FATP Shares must complete the procedures for electing to redeem their public shares in the manner described above prior to [●], 2022 (two business days before the General Meeting) in order for their FATP Shares to be redeemed.
If the Business Combination is not consummated, the public shares will be returned to the respective holder, broker or bank. If the Business Combination is consummated, and if a public FATP shareholder properly exercises its right to redeem all or a portion of the public shares that it holds and timely delivers its shares or share certificates (if any) and other redemption forms (as applicable) to Continental, FATP will redeem such public shares for a per-share
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price, payable in cash, equal to the pro rata portion of the amount on deposit in the trust account as of two business days prior to the consummation of the Business Combination, including interest earned on the funds held in the trust account and not previously released to FATP.
For illustrative purposes, as of September 30, 2022, this would have amounted to approximately $10.07 per issued and outstanding share less any owed but unpaid taxes on the funds in the trust account. There are currently no owed but unpaid income taxes on the funds in the trust account. However, the proceeds deposited in the trust account could become subject to the claims of FATP’s creditors, if any, which would have priority over the claims of FATP shareholders. Therefore, the per share distribution from the trust account in such a situation may be less than originally expected due to such claims. It is expected that the funds to be distributed to FATP shareholders electing to redeem their shares will be distributed promptly after the consummation of the Business Combination.
A holder of FATP Shares, together with any affiliate of such holder and any person with whom such holder is acting in concert or as a “group” (as defined under Section 13(d)(3) of the Exchange Act), may not seek to have more than 15% of the aggregate public shares redeemed without the consent of FATP. Under the Existing FATP Articles, the Business Combination may not be consummated if FATP has net tangible assets of less than $5,000,001 either immediately prior to or upon consummation of the Business Combination after taking into account the redemption for cash of all public shares properly demanded to be redeemed by holders of FATP Shares. In addition, the Business Combination Agreement provides that the obligation of each party to close the Business Combination Transactions is conditioned on FATP public shareholders requesting redemption of at least an aggregate of 5,200,000 FATP Class A Ordinary Shares.
A FATP shareholder that requests to have FATP Shares redeemed may withdraw such request at any time up to the date of the General Meeting.
Any corrected or changed written exercise of redemption rights must be received by Continental, FATP’s transfer agent, at least two business days prior to the vote taken on the Business Combination Proposal at the General Meeting. No request for redemption shall be honored unless the holder’s shares or share certificates (if any) and other redemption forms (as applicable) have been delivered (either physically or electronically) to Continental at least two business days prior to the vote at the General Meeting.
FAT Projects SPAC Pte. Ltd. (the “Sponsor”) has, pursuant to the Sponsor Support Agreement (as defined in the accompanying proxy statement/prospectus), agreed to, among other things, vote all of its FATP Shares in favor of the proposals being presented at the General Meeting in connection with the consummation of the Business Combination. As of the date of this proxy statement/prospectus, the Sponsor’s Shareholders and the Anchor Investors in the aggregate own 2,875,000 FATP Class B Ordinary Shares, which constitute approximately 19.8% of the issued and outstanding FATP Ordinary Shares, and which they are obligated to vote in favor of the proposals being presented at the General Meeting. (The Anchor Investors are not obligated to vote their FATP Class A Ordinary Shares in favor of the proposals.) See “The Business Combination Proposal; Terms of the Business Combination — Related Agreements — Sponsor Support and Lock-up Agreement” in the accompanying proxy statement/prospectus for more information related to the Sponsor Support Agreement.
The Business Combination Agreement is also subject to the satisfaction or waiver of certain other closing conditions as described in the accompanying proxy statement/prospectus. There can be no assurance that the parties to the Business Combination Agreement would waive any such provision of the Business Combination Agreement.
All FATP shareholders are cordially invited to attend the General Meeting. To ensure your representation at the General Meeting, however, you are urged to complete, sign, date and return the enclosed proxy card as soon as possible by following the instructions provided in this proxy statement/prospectus and on the enclosed proxy card. If you are a shareholder of record of FATP Shares, you may also cast your vote by means of remote communication at the General Meeting by navigating to https://www.cstproxy.com/fatprojects/2022 and entering the control number on your proxy card. If your shares are held in an account at a brokerage firm or bank, you must instruct your broker or bank on how to vote your shares or, if you wish to attend the General Meeting and vote by means of remote communication you must obtain a proxy from your broker or bank and a control number from Continental.
Your vote is important regardless of the number of shares you own. Whether or not you plan to attend the General Meeting, please sign, date, vote and return the enclosed proxy card as soon as possible in the envelope provided to make sure that your shares are represented at the General Meeting. If your shares are held in “street name” or are in a margin or similar account, you should contact your broker or bank to ensure that votes related to the shares you beneficially own are properly counted. The Business Combination will be consummated only if the Business Combination Proposal, the Articles Amendment Proposal, the Share
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Issuance Proposal and the Incentive Plan Proposal are approved at the General Meeting. Each of the Business Combination Proposal, the Articles Amendment Proposal, the Share Issuance Proposal and the Incentive Plan Proposal is cross-conditioned on the approval of each other. The Adjournment Proposal is not conditioned upon the approval of any other proposal set forth in this proxy statement/prospectus.
Thank you for your participation. We look forward to your continued support
| By Order of the Board of Directors | |
|
Tristan Lo Chairman |
If you sign, date, and return your proxy card without indicating how you wish to vote, your proxy will be voted FOR each of the proposals presented at the General Meeting. If you fail to return your proxy card or fail to instruct your bank, broker or other nominee how to vote, and do not attend the General Meeting, the effect will be, among other things, that your shares will not be counted for purposes of determining whether a quorum is present at the General Meeting and will not be voted. An abstention or broker non-vote will be counted towards the quorum requirement but will not count as a vote cast at the General Meeting, and therefore will have no effect on the outcome of the vote on the proposals. If you are a shareholder of record and you attend and wish to vote at the General Meeting, you may withdraw your proxy and vote in person. Your attention is directed to the proxy statement/prospectus accompanying this notice (including the Annexes and other documents referred to herein) for a more complete description of the Business Combination and related transactions and each of the proposals. You are encouraged to read the proxy statement/prospectus carefully and in its entirety, including the Annexes and other documents referred to therein. If you have any questions or need assistance voting your ordinary shares, please contact Laurel Hill Advisory Group, LLC, our proxy solicitor, at 2 Robbins Lane, Suite 201, Jericho, NY 11753, USA, by telephone at +1 (855) 414-2266 or by emailing FATP@laurelhill.com.
TO EXERCISE YOUR REDEMPTION RIGHTS, YOU MUST DEMAND IN WRITING THAT YOUR FATP SHARES BE REDEEMED FOR A PRO RATA PORTION OF THE FUNDS HELD IN THE TRUST ACCOUNT AND TENDER YOUR SHARES TO OUR TRANSFER AGENT AT LEAST TWO BUSINESS DAYS BEFORE THE SCHEDULED DATE OF THE GENERAL MEETING. IN ORDER TO EXERCISE YOUR REDEMPTION RIGHT, YOU NEED TO IDENTIFY YOURSELF AS A BENEFICIAL HOLDER AND PROVIDE YOUR LEGAL NAME, PHONE NUMBER AND ADDRESS IN YOUR WRITTEN DEMAND. YOU MAY TENDER YOUR SHARES BY EITHER DELIVERING YOUR SHARE CERTIFICATE TO THE TRANSFER AGENT OR BY DELIVERING YOUR SHARES ELECTRONICALLY USING THE DEPOSITORY TRUST COMPANY’S DWAC (DEPOSIT/ WITHDRAWAL AT CUSTODIAN) SYSTEM. IF THE BUSINESS COMBINATION IS NOT COMPLETED, THEN THESE SHARES WILL BE RETURNED TO YOU OR YOUR ACCOUNT. IF YOU HOLD THE SHARES IN STREET NAME, YOU NEED TO INSTRUCT THE ACCOUNT EXECUTIVE AT YOUR BROKER, BANK OR OTHER NOMINEE TO WITHDRAW THE SHARES FROM YOUR ACCOUNT IN ORDER TO EXERCISE YOUR REDEMPTION RIGHTS. SEE “GENERAL MEETING OF FATP SHAREHOLDERS — REDEMPTION RIGHTS” IN THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS FOR MORE SPECIFIC INSTRUCTIONS.
THE PROXY STATEMENT/PROSPECTUS INCORPORATES IMPORTANT BUSINESS AND FINANCIAL INFORMATION ABOUT FATP THAT IS NOT INCLUDED IN OR DELIVERED HEREWITH. THIS INFORMATION IS AVAILABLE WITHOUT CHARGE TO SHAREHOLDERS OF FATP UPON WRITTEN OR ORAL REQUEST. IF YOU WOULD LIKE TO MAKE SUCH REQUEST, YOU SHOULD CONTACT FATP IN WRITING AT Fat Projects Acquisition Corp, 27 Bukit Manis Road, Singapore, 099892 or investor@fatprojects.com OR BY TELEPHONE AT +65 8590-2056. TO OBTAIN TIMELY DELIVERY, YOU MUST REQUEST THE INFORMATION NO LATER THAN [●], 2022, WHICH IS FIVE BUSINESS DAYS BEFORE THE DATE YOU MUST MAKE YOUR INVESTMENT DECISION.
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Table of Contents
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ABOUT THIS PROXY STATEMENT/PROSPECTUS
This document, which forms part of a registration statement on Form S-4 filed with the U.S. Securities and Exchange Commission (the “SEC”) by FATP, constitutes a prospectus of FATP under Section 5 of the Securities Act of 1933, as amended (the “Securities Act”) with respect to the FATP Class A Ordinary Shares to be issued to Avanseus shareholders if the Business Combination described herein is consummated. This document also constitutes a proxy statement under Section 14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), with respect to the General Meeting of FATP shareholders at which FATP shareholders will be asked to consider and vote upon the Business Combination Proposal, the Articles Amendment Proposal, the Share Issuance Proposal and the Incentive Plan Proposal (each as defined herein) and to adjourn the meeting, if necessary, to permit further solicitation of proxies because there are not sufficient votes to approve and/or adopt the Business Combination Proposal, the Articles Amendment Proposal, the Share Issuance Proposal and the Incentive Plan Proposal.
You may request copies of this proxy statement/prospectus and any other publicly available information concerning FATP, without charge, by written request to Laurel Hill, our proxy solicitor, by calling +1 (855) 414-2266 (for individuals) or + 1 (855) 414-2266 (for banks and brokers), or by emailing FATP@laurelhill.com, or from the SEC through the SEC website at http://www.sec.gov.
In order for FATP shareholders to receive timely delivery of the documents in advance of the General Meeting of FATP to be held on [●], 2023 you must request the information no later than five business days prior to the date of the General Meeting, or no later than [●], 2022.
References to “U.S. Dollars” and “$” in this proxy statement/prospectus are to United States dollars, the legal currency of the United States. Certain monetary amounts, percentages and other figures included in this proxy statement/prospectus have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables or charts may not be the arithmetic aggregation of the figures that precede them, and figures expressed as percentages in the text may not total 100% or, as applicable, when aggregated may not be the arithmetic aggregation of the percentages that precede them. In particular, in certain cases, percentage changes are based on a comparison of the actual values recorded in the relevant financial statements and not rounded values shown in this proxy statement/prospectus.
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INDUSTRY AND MARKET DATA
This proxy statement/prospectus includes industry and market data that have been derived from publicly available information, industry publications and other third-party sources, including estimated insights from Next Move Strategy Consulting, BlueWeave Consulting, ReportLinker, and Markets&Markets, as well as from Avanseus’ own internal data and estimates. Independent consultant reports, industry publications and other published sources generally state that the information they contain has been obtained from sources believed to be reliable, but that the accuracy and completeness of such information is not guaranteed. While we have compiled, extracted, and reproduced industry data from these sources, we have not independently verified the data. Forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and uncertainties as the other forward-looking statements in this proxy statement/prospectus. These forecasts and forward-looking information are subject to uncertainty and risk due to a variety of factors, including those described under “Risk Factors.” These and other factors could cause results to differ materially from those expressed in any forecasts or estimates.
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PRESENTATION OF FINANCIAL INFORMATION
FATP
The historical financial statements of FATP were prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) and are denominated in U.S. Dollars.
Avanseus
Avanseus’ audited consolidated financial statements for the years ended December 31, 2021 and 2020 and unaudited financial statements for the six-month period ended June 30, 2022 and 2021 included in this proxy statement/prospectus have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. IFRS differs from U.S. GAAP in certain material respects and thus may not be comparable to financial information presented by U.S. companies.
For presentation purpose, Avanseus’ unaudited statement of operations for the nine months ended June 30, 2022 is used in the pro forma calculation. Avanseus’ unaudited statement of operations for nine months ended June 30, 2022 is derived from Avanseus’ unaudited statement of operations for six month ended June 30, 2022, included elsewhere in this proxy statement/prospectus, combined with Avanseus’ unaudited statement of operations for three months ended December 31, 2021 (not included elsewhere in this proxy statement/prospectus).
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FREQUENTLY USED TERMS
Key Business and Business Combination Related Terms
Unless otherwise stated or unless the context otherwise requires in this document:
“75% Redemption Scenario” means an assumed scenario where FATP public shareholders holding 6,049,782 FATP Class A Ordinary Shares exercise their redemption rights and that such shares are redeemed for their pro rata shares of the funds in the trust account at a redemption price of approximately $61.0 million;
“ACRA” means the Singapore Accounting and Corporate Regulatory Authority;
“AI” means artificial intelligence;
“Amended Articles” means the amended and restated memorandum and articles of association of New Avanseus adopted as of the effective time of the Exchange;
“Anchor Investors” means the 10 FATP Shareholders who each received 75,000 Founder Shares in a transfer from the Sponsor pursuant to investment agreements between the Sponsor and such FATP Shareholders dated on or about October 12, 2021;
“Avanseus” means Avanseus Pte. Ltd., a Singapore private company limited by shares, or as the context requires, Avanseus Pte. Ltd. and its subsidiaries and consolidated affiliated entities;
“Avanseus Holders Support Agreement” means the Company Holders Support Agreement dated as of August 25, 2022 pursuant to which Avanseus shareholders holding, in the aggregate, approximately 78% of the Avanseus Ordinary Shares have agreed, among other things: (i) to convert their Avanseus Preference Shares, if any, at or prior to the closing of the Exchange into Avanseus Ordinary Shares; (ii) to vote, to the extent applicable, in favor of the transactions contemplated by the Business Combination Agreement and other transaction proposals; (iii) to vote against any proposals that would materially impede the transactions contemplated by the Business Combination Agreement or any other transaction proposal; and (iv) not to sell or transfer any of their shares prior to the closing of the Exchange; and certain shareholders of Avanseus have agreed to a lock-up of the FATP Class A Ordinary Shares that they will receive pursuant to the Exchange (subject to certain exceptions) for a period ending on the earlier of 180 days following the closing of the Exchange or the date on which FATP completes a transaction resulting in all of FATP’s shareholders having the right to exchange their shares for cash securities or other property following the closing of the Exchange;
“Avanseus Non-Voting Shares” means the non-voting shares in the capital of Avanseus, as defined in Avanseus’ governing documents as of the date of the Business Combination Agreement;
“Avanseus Ordinary Shares” means the ordinary shares in the capital of Avanseus, as defined in Avanseus’ governing documents as of the date of the Business Combination Agreement;
“Avanseus Preference Shares” means the Series A Preference Shares in the capital of Avanseus, as defined in Avanseus’ governing documents as of the date of the Business Combination Agreement;
“Avanseus Shares” means the outstanding ordinary shares, non-voting shares and preference shares of Avanseus;
“Business Combination” means the Exchange and the other transactions contemplated by the Business Combination Agreement;
“Business Combination Agreement” means the business combination agreement, dated as of August 26, 2022, by and between FATP and Avanseus, as amended pursuant to Amendment No. 1 thereto dated as of October 3, 2022, and as it may be amended, supplemented, or otherwise modified from time to time;
“Business Combination Transactions” means, collectively, the Exchange and each of the other transactions contemplated by the Business Combination Agreement, the Share Exchange Agreements, the Unvested Restricted Share Amendments, the Restrictive Covenant Agreements, the PIPE Subscription Agreements, the Avanseus Holders Support Agreement, the Sponsor Support Agreement, the Registration Rights Agreement, the Amended Articles and any other related agreements, documents or certificates entered into or delivered pursuant thereto;
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“Cayman Islands Companies Act” means the Companies Act (As Revised) of the Cayman Islands;
“Closing” means the closing of the Exchange;
“Closing Date” means the date of the Closing;
“Code” means the Internal Revenue Code of 1986, as amended;
“Confidentiality Agreement” means the confidentiality agreement, dated as of April 28, 2022 (as may be amended, supplemented, or otherwise modified from time to time), between FATP and Avanseus;
“Continental” means Continental Stock Transfer & Trust Company;
“Deal Support” means the total consideration from FATP of $105 million with $95 million allocated to the existing equity of Avanseus and $10 million allocated for the collective purposes of supporting lower redemptions, incentivizing longer holding of FATP public shares and/or to allow for funding of cash needs of the combined company;
“Euros” or “€” means Euros, the legal currency of the European Union;
“Exchange” means the exchange of Avanseus Ordinary Shares and Avanseus Non-Voting Shares for FATP Class A Ordinary Shares pursuant to the Business Combination Agreement;
“Exchange Act” means the Securities Exchange Act of 1934, as amended;
“Existing FATP Articles” means those amended and restated memorandum and articles of association of FATP in force immediately prior to the adoption of the Amended Articles;
“FATP” means Fat Projects Acquisition Corp, an exempted company limited by shares incorporated under the laws of the Cayman Islands, with company registration number 374480;
“FATP Board” means the board of directors of FATP;
“FATP Class A Ordinary Shares” means the Class A ordinary shares of FATP, having a par value of $0.0001 each;
“FATP Class B Ordinary Shares” means the Class B ordinary shares of FATP, having a par value of $0.0001 each;
“FATP IPO” means FATP’s initial public offering, consummated on October 15, 2021, through the sale of 11,500,000 Units (including the 1,500,000 Units sold pursuant to the underwriters’ exercise of their over-allotment option) at $10.00 per Unit;
“FATP Ordinary Shares” means the FATP Class A Ordinary Shares and the FATP Class B Ordinary Shares;
“FATP Preference Shares” means the Series A Convertible Preference Shares of FATP, having a par value of $0.0001;
“FATP Shares” means, collectively, the FATP Class A Ordinary Shares, the FATP Class B Ordinary Shares and the FATP Preference Shares;
“FATP Warrants” means the Private Warrants and the Public Warrants;
“Financial Projections” means, collectively, the Initial Projections, the June Updated Projections and the September Updated Projections;
“Founder Shares” means the 2,875,000 FATP Class B Ordinary Shares that were issued to the Sponsor prior to the FATP IPO;
“General Meeting” means the General Meeting of shareholders of FATP to be held virtually at [●] AM Eastern time, on [●], 2023 via live webcast at https://www.cstproxy.com/fatprojects/2022;
“GST” means any goods and service tax in Singapore;
“Harneys” means Harney Westwood & Riegels of 3rd Floor, Harbour Place, 103 South Church Street, PO Box 10240, Grand Cayman, KY1-1002, Cayman Islands and its affiliates, as Cayman Islands counsel to FATP;
“IASB” means the International Accounting Standards Board;
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“IFRS” means the International Financial Reporting Standards, as issued by the IASB;
“Initial Projections” means the financial projections of Avanseus for each of the fiscal years ending December 31, 2022 and December 31, 2023 that Avanseus prepared in May 2022;
“IRS” means the U.S. Internal Revenue Service;
“June Updated Projections” means the updated version of the Initial Projections that Avanseus prepared in June 2022;
“Laurel Hill” means Laurel Hill Advisory Group, LLC, whom FATP has engaged to assist in the solicitation of proxies for the General Meeting;
“Management’s Adjustments” means the reasonably estimable synergies and other transaction effects that have occurred or are reasonably expected to occur;
“Maximum Redemption Scenario” means an assumed scenario where FATP public shareholders holding approximately 8,066,376 FATP Class A Ordinary Shares exercise their redemption rights and that such shares are redeemed for their pro rata shares of the funds in the trust account at a redemption price of approximately $81.2 million;
“Minimum Redemption Scenario” means an assumed scenario where FATP public shareholders redeem 5,200,000 FATP Class A Ordinary Shares and that such shares are redeemed for their pro rata shares of the funds in the trust account at a redemption price of approximately $52.4 million;
“Nasdaq” means the Nasdaq Stock Market LLC;
“New Avanseus” means Avanseus Holdings Corporation (formerly named Fat Projects Acquisition Corp) following the consummation of the Business Combination;
“New Avanseus Ordinary Shares” means the ordinary shares of New Avanseus, having a par value of $0.0001 each;
“PFIC” means passive foreign investment company;
“PIPE Investment” means the anticipated purchase of up to $35 million of FATP Preference Shares, which shares will be convertible into FATP Class A Ordinary Shares, and (ii) FATP Class A Ordinary Shares pursuant to the PIPE Subscription Agreements, pursuant to private offering by FATP that will be conducted in accordance with the exemption from registration provided in Regulation S under the Securities Act;
“PIPE Investors” means the third-party investors who enter into PIPE Subscription Agreements;
“PIPE Subscription Agreements” means the subscription agreements that the Business Combination Agreement anticipates that FATP will enter into with certain investors pursuant to which the investors will agree to purchase up to an aggregate of $35 million of (i) FATP Preference Shares, which shares will be convertible into FATP Class A Ordinary Shares, and (ii) FATP Class A Ordinary Shares;
“Private Warrants” means the aggregate 2,865,000 warrants, each exercisable to purchase one FATP Class A Ordinary Share at $11.50 per share, that FATP issued at a price of $1.00 per warrant issued to the Sponsor simultaneously with the closing of the FATP IPO and the exercise of the underwriters’ over-allotment option to purchase additional Units;
“Public Warrants” means the warrants included in the Units issued in the FATP IPO, each of which is exercisable for one FATP Class A Ordinary Share at $11.50 per share, in accordance with its terms;
“Other Transaction Documents” means the Business Combination Agreement, the Share Exchange Agreements, the Unvested Restricted Share Amendments, the Restrictive Covenant Agreements, the PIPE Subscription Agreements, the Avanseus Holders Support Agreement, the Sponsor Support Agreement, the Registration Rights Agreement, the Amended Articles, and any other related agreements, documents or certificates entered into or delivered pursuant thereto;
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“Registration Rights Agreement” means the registration rights agreement, dated as of August 25, 2022, by and among FATP, the Sponsor, and certain of the shareholders of Avanseus to be effective upon the Closing pursuant to which, among other things, FATP will agree to undertake certain resale shelf registration obligations in accordance with the Securities Act and the Sponsor, certain Sponsor affiliated parties and certain shareholders of Avanseus party thereto have been granted certain demand and piggyback registration rights;
“Restrictive Covenant Agreement” means a deed of restrictive covenant agreement between FATP and each of Bhargab Mitra, Chiranjib Bhandary, Dennis Lorenzin, and Mei Lan Ng in substantially the form attached as Exhibit I to the Business Combination Agreement or in other form and substance acceptable to FATP in good faith;
“SEC” means the U.S. Securities and Exchange Commission;
“September Updated Projections” means the updated version of the Initial Projections that Avanseus prepared in September 2022;
“Share Exchange Agreement” means a share exchange agreement, between Avanseus shareholders and FATP in substantially the form attached as Exhibit A to the Business Combination Agreement or in other form and substance acceptable to FATP in good faith providing for the exchange of that Avanseus Shareholder’s Avanseus Shares for FATP Class A Ordinary Shares at the Closing;
“Singapore Dollars” and “S$” means Singapore dollars, the legal currency of Singapore;
“SPAC” means special purpose acquisition company;
“Sponsor” means Fat Projects SPAC Pte. Ltd, a Singapore private company limited by shares;
“Sponsor’s Shareholders” means the shareholders of the Sponsor, which include all of FATP’s directors and executive officers or companies controlled by them, as of October 12, 2021;
“Sponsor Support Agreement” means the sponsor support and lock-up agreement, dated as of August 25, 2022, by and among FATP, the Sponsor and Avanseus pursuant to which the Sponsor has agreed, among other things and subject to the terms and conditions set forth therein (i) to vote in favor of the transactions contemplated in the Business Combination Agreement and the other transaction proposals, (ii) to appear at the General Meeting for purposes of constituting a quorum, (iii) to vote against any proposals that would materially impede the transactions contemplated in the Business Combination Agreement and the other transaction proposals, (iv) not to redeem any FATP Shares held by the Sponsor, and (v) to a lock-up of its FATP Ordinary Shares (subject to certain exceptions) for a period ending on the earlier of 180 days following the Closing or the date on which FATP completes a transaction resulting in all of FATP’s shareholders having the right to exchange their shares for cash securities or other property following the Closing;
“Transaction Accounting Adjustments” means the required adjustments to depict the accounting for the Business Combination Transactions in accordance with Article 11 of Regulation S-X as in effect on the date of this proxy statement/prospectus;
“trust account” means the U.S.-based trust account maintained by Continental Stock Transfer & Trust Company, acting as trustee, into which FATP placed the proceeds of the FATP IPO and the proceeds of the sale of the Private Warrants
“Unit” means one FATP Class A Ordinary Share and one Public Warrant, whereby each Public Warrant entitles the holder thereof to purchase one FATP Class A Ordinary Share at an exercise price of $11.50 per share, sold in the FATP IPO;
“Unvested Grant Shares” means Avanseus Ordinary Shares or Avanseus Non-Voting Shares issuable pursuant to an Avanseus Restricted Share Award that have not fully vested at the effective time of the Exchange;
“Unvested Restricted Share Amendment” means the amendment duly executed and delivered by holders of Unvested Grant Shares in the form attached to the Business Combination Agreement as Exhibit F, pursuant to which each holder agrees that its right to receive Unvested Grant Shares satisfaction of the vesting criteria with respect thereto is replaced with the right to receive 0.318496 FATP Class A Ordinary Shares per Unvested Grant Shares; and
“U.S. GAAP” means United States generally accepted accounting principles.
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QUESTIONS AND ANSWERS ABOUT THE PROPOSED BUSINESS COMBINATION
The questions and answers below highlight only selected information from this document and only briefly address some commonly asked questions about the Business Combination and the proposals to be presented at the General Meeting. The following questions and answers do not include all the information that is important to FATP shareholders or Avanseus shareholders. FATP shareholders and Avanseus shareholders should read this proxy statement/prospectus, including the Annexes and the other documents referred to herein, carefully and in their entirety to fully understand the Business Combination and, for FATP shareholders, the voting procedures for the General Meeting, which will be held at [●] AM Eastern time, on [●], virtually via live webcast at https://www.cstproxy.com/fatprojects/2022.
QUESTIONS AND ANSWERS ABOUT THE PROPOSALS — FATP SHAREHOLDERS
| Q: | Why am I receiving this proxy statement/ prospectus? |
| A: | FATP shareholders are being asked to consider and vote upon a proposal to approve and/or adopt the Business Combination and certain related proposals. |
FATP and Avanseus have agreed to the Business Combination under the terms of the Business Combination Agreement that is described in this proxy statement/prospectus. The Business Combination Agreement, among other things, (i) anticipates that each holder of Avanseus Ordinary Shares and Avanseus Non-Voting Shares will exchange each such outstanding Avanseus share for 0.318496 FATP Class A Ordinary Shares (rounded down to the nearest whole share), and provides that Avanseus will thereby become a wholly-owned subsidiary of FATP, and (ii) provides that each Avanseus Restricted Share Award outstanding with respect to Avanseus Ordinary Shares or Avanseus Non-Voting Shares that is not vested at the effective time of the Exchange will be amended to provide that FATP assumes and replaces Avanseus as the grantor of unvested shares and the grantee becomes entitled to receive 0.318496 FATP Class A Ordinary Shares in place of each unvested Avanseus share if and when vesting occurs.
| Q: | What proposals are shareholders of FATP being asked to vote upon? |
| A: | At the General Meeting, FATP is asking holders of the FATP Class A Ordinary Shares to consider and vote upon the following proposals: |
| ● | Business Combination Proposal — To vote to approve the Business Combination Agreement, the Other Transaction Documents, and the Business Combination Transactions contemplated thereby. See the section entitled “The Business Combination Proposal; Terms of the Business Combination.” |
| ● | Articles Amendment Proposal — To vote to adopt amended and restated memorandum and articles of association. See the section entitled “The Articles Amendment Proposal.” |
| ● | Share Issuance Proposal — To vote to approve the issuance of [●] FATP Class A Ordinary Shares and [●] FATP Preference Shares. See the section entitled “The Share Issuance Proposal.” |
| ● | Incentive Plan Proposal — To vote to approve and adopt the Avanseus Holdings Corporation 2022 Equity Incentive Plan (the “New Avanseus Incentive Plan”). See the section entitled “The Incentive Plan Proposal.” |
| ● | Adjournment Proposal — To consider and vote upon a proposal to adjourn the meeting to a later date or dates to permit further solicitation and voting of proxies if, based upon the tabulated vote at the time of the General Meeting, FATP would not have been authorized to consummate the Business Combination. See the section entitled “The Adjournment Proposal.” |
FATP will hold the General Meeting of its shareholders to consider and vote upon these proposals. This proxy statement/prospectus contains important information about the Business Combination and the other matters to be acted upon at the General Meeting. Shareholders should read it carefully and in its entirety.
The vote of shareholders is important. FATP encourages its shareholders to submit their completed proxy card as soon as possible after carefully reviewing this proxy statement/prospectus.
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| Q: | Are the proposals conditioned on one another? |
| A: | Yes. Each of the Business Combination Proposal, the Articles Amendment Proposal, the Share Issuance Proposal and the Incentive Plan Proposal is cross-conditioned on the approval of each other. The Adjournment Proposal is not conditioned upon the approval of any other proposal. |
| Q: | Why is FATP proposing the Business Combination? |
| A: | FATP was incorporated to consummate a merger, share exchange, asset acquisition, share purchase, reorganization, or other similar business combination with one or more businesses or entities. |
Avanseus is a software company specializing in building enterprise solutions enabled by analytics, artificial intelligence, machine learning, and cognitive computing. Avanseus’ current focus is predictive operations and maintenance software, primarily in the telecommunications sector. It has developed and own proprietary technology that can scale across various industries. For more information, see “Avanseus’ Business.”
Based on its due diligence investigations of Avanseus and the industries in which it operates, including the financial and other information provided by Avanseus in the course of FATP’s due diligence investigations, the FATP Board believes that the Business Combination is in the best interests of FATP and presents an opportunity to increase shareholder value. However, there can be no assurances of this. Although the FATP Board believes that the Business Combination presents a unique business combination opportunity and is in the best interests of FATP, the FATP Board did consider certain potentially material negative factors in arriving at that conclusion. See “The Business Combination Proposal; Terms of the Business Combination — FATP’s Board of Directors’ Reasons for the Approval of the Business Combination” for a discussion of the factors that the FATP Board considered in making its decision.
| Q: | Did the FATP Board obtain a third-party valuation or fairness opinion in determining whether or not to proceed with the Business Combination? |
| A: | No. The FATP Board did not obtain a third-party valuation or fairness opinion in connection with its determination to approve the Business Combination. However, FATP’s management, the members of the FATP Board and the other representatives of FATP have substantial experience in evaluating the operating and financial merits of companies similar to Avanseus and reviewed certain financial and operating information of Avanseus and other relevant financial information selected based on the experience and the professional judgment of FATP’s management team, which enabled them to make the necessary analyses and determinations regarding the Business Combination. Accordingly, investors will be relying solely on the judgment of the FATP Board in valuing Avanseus’ business and assume the risk that the FATP Board may not have properly valued such business. |
| Q: | How will the effective rate of underwriting discounts and commissions paid on capital raised in FATP’s initial public offering and retained after the Business Combination be affected by redemptions? |
| A: | FATP sold 11,500,000 Units in its initial public offering, with investors paying $10.00 per Unit, representing gross initial public offering proceeds of $115,000,000. The underwriters in the initial public offering received $1,150,000 upon completion of the FATP IPO and will receive an additional $4,025,000 upon consummation of the Business Combination, resulting in a 3.5% rate of underwriting discounts and commissions, which represents the underwriters’ total underwriting discounts and commissions as a percentage of gross initial public offering proceeds. However, to the extent there are redemptions, the effective rate of underwriting discounts and commissions paid by FATP and borne indirectly by its non-redeeming stockholders will be higher after taking into account proceeds used to redeem the FATP Shares of redeeming stockholders. For example, (i) assuming the Minimum Share Redemption Scenario, the effective rate of underwriting discounts and commissions paid by FATP will increase to 8.2%, (ii) assuming the 75% Redemption Scenario, the effective rate of underwriting discounts and commissions paid by FATP will increase to 9.5%, and (iii) assuming the Maximum Redemption Scenario, the effective rate of underwriting discounts and commissions paid by FATP will increase to 15.1%. |
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| Q: | What are the U.S. Federal income tax consequences of the Business Combination to U.S. holders of FATP Shares? |
| A: | U.S. holders of FATP Class A Ordinary Shares and FATP Warrants will retain their FATP Class A Ordinary Shares and FATP Warrants in the Business Combination, will not receive any consideration in connection with the Business Combination and will not receive any additional FATP Class A Ordinary Shares or additional FATP Warrants (New Avanseus Ordinary Shares and warrants to purchase securities of New Avanseus after the change in corporate name) in the Business Combination. As a result, there will be no material U.S. federal income tax consequences to U.S. holders of FATP Class Ordinary Shares and FATP Warrants as a result of the Business Combination, regardless of whether the Business Combination qualifies as a “reorganization” within the meaning of Section 368(a) of the Code or otherwise qualifies for nonrecognition treatment. Furthermore, such treatment is not a condition to FATP’s or Avanseus’ obligation to complete the Business Combination. |
U.S. HOLDERS OF FATP CLASS A ORDINARY SHARES AND FATP WARRANTS SHOULD CONSULT WITH, AND RELY SOLELY UPON, THEIR TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS, AS WELL AS ANY TAX CONSEQUENCES OF THE BUSINESS COMBINATION UNDER THE LAWS OF ANY STATE, LOCAL, NON-U.S. OR OTHER TAXING JURISDICTION.
| Q: | What are the U.S. federal income tax consequences of exercising my redemption rights? |
| A: | FATP shareholders who exercise their redemption rights to receive cash from the trust account in exchange for their FATP Ordinary Shares generally will be required to treat the transaction as a sale of such shares and recognize gain or loss upon the redemption in an amount equal to the difference, if any, between the amount of cash received and the tax basis of the FATP Ordinary Shares redeemed. Such gain or loss should be treated as capital gain or loss if such shares were held as a capital asset on the date of the redemption. A stockholder’s tax basis in his, her or its FATP Ordinary Shares generally will equal the cost of such shares. |
Please see the section entitled “Material Tax Considerations — United States Federal Income Tax Considerations — Effects to U.S. Holders of Exercising Redemption Rights” for additional information. We urge you to consult your tax advisors regarding the tax consequences of exercising your redemption rights.
| Q: | How many votes do I have at the General Meeting? |
| A: | FATP shareholders are entitled to one vote at the General Meeting for each FATP Share held of record as of [●], 2022, the record date for the General Meeting (the “record date”). As of the close of business on the record date, there were [●] FATP Shares outstanding. This includes [●] FATP Class A Ordinary Shares and [●] FATP Class B Ordinary Shares. |
| Q: | What vote is required to approve the proposals presented at the General Meeting? |
| A: | The following votes are required for each proposal at the General Meeting: |
| ● | Business Combination Proposal — The approval of the Business Combination Proposal will require an ordinary resolution, which means a resolution passed by a simple majority of the votes cast by those shareholders of FATP who, being entitled to do so, attend, in person or by proxy, and vote thereupon at the General Meeting. |
| ● | Articles Amendment Proposal — The authorization of the Articles Amendment Proposal will require a special resolution, which means a resolution that is passed by at least two-thirds of the votes cast by those shareholders of FATP who, being entitled to do so, attend, in person or by proxy, and vote thereupon at the General Meeting. |
| ● | Share Issuance Proposal — The approval of the Share Issuance Proposal will require approval by a majority of the votes cast by those shareholders of FATP who, being entitled to do so, attend, in person or by proxy, and vote thereupon at the General Meeting. |
| ● | Incentive Plan Proposal — The approval of the Incentive Plan Proposal will require a general resolution, which means a resolution passed by a simple majority of the votes cast by those shareholders of FATP who, being entitled to do so, attend, in person or by proxy, and vote thereupon at the General Meeting. |
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| ● | Adjournment Proposal — The approval of the Adjournment Proposal will require the consent of the meeting, which means a simple majority of the votes that are cast by those shareholders of FATP who are present, in person or by proxy, and vote thereupon at the General Meeting. |
For purposes of the General Meeting, an abstention occurs when a shareholder attends the meeting and does not vote or returns a proxy with an “abstain” vote.
If you are a FATP shareholder that attends the General Meeting and fails to vote on the Business Combination, Articles Amendment, Share Issuance or Adjournment Proposals, or if you respond to such proposals with an “abstain” vote, your failure to vote or “abstain” vote in each case will have no effect on the vote count for such proposals.
| Q: | What constitutes a quorum at the General Meeting? |
| A: | A quorum will be present at the General Meeting if the holders of a majority of the issued and outstanding FATP Shares entitled to vote at the General Meeting are present in person or by proxy. If a quorum is not present within half an hour from the time designated for the General Meeting to commence, the meeting shall stand adjourned to the same day in the next week at the same time and/or place or to such other day, time and/or place as the FATP Board may determine. |
As of the record date, holders of [●] FATP Shares would be required to be present, in person or by proxy, at the General Meeting to achieve a quorum.
| Q: | How do the insiders of FATP intend to vote on the proposals? |
| A: | Shareholders of the Sponsor, which include all of FATP’s directors and executive officers or companies controlled by them (who we refer to as the “Sponsor’s Shareholders”), to whom the Sponsor has transferred FATP Class B Ordinary Shares, beneficially own and are entitled to vote an aggregate of 2,125,000 FATP Class B Ordinary Shares, which constitute approximately 14.7% of the outstanding FATP Ordinary Shares. The Anchor Investors (or their transferees) own the remaining 750,000 FATP Class B Ordinary Shares. The Sponsor’s Shareholders and the Anchor Investors are required by the investment agreements they entered into with the Sponsor to vote their FATP Class B Ordinary Shares in favor of the Business Combination Proposal, in favor of the Articles Amendment Proposal, in favor of the Share Issuance Proposal, in favor of the Incentive Plan Proposal and in favor of the Adjournment Proposal, if presented at the General Meeting. (The Anchor Investors are not obligated to vote any of their FATP Class A Ordinary Shares in favor of any of the proposals.) As a result, in addition to the FATP Class B Ordinary Shares held by the Sponsor’s Shareholders and the Anchor Investors: (i) assuming all outstanding FATP Shares are voted, FATP would need 38% of the outstanding FATP Shares to vote in favor to have the Business Combination Proposal approved, 59% of the outstanding FATP Shares to vote in favor to have the Articles Amendment Proposal approved, 38% of the outstanding FATP Shares to vote in favor to have the Share Issuance Proposal approved and 38% of the outstanding FATP Shares to vote in favor to have the Incentive Plan Proposal approved; and (ii) assuming only the minimum number of FATP Shares representing a quorum are voted, FATP would need 6.5% of the outstanding FATP Shares to vote in favor to have the Business Combination Proposal approved, 17% of the outstanding FATP Shares to vote in favor to have the Articles Amendment Proposal approved, 6.5% of the outstanding FATP Shares to vote in favor to have the Share Issuance Proposal approved and 6.5% of the outstanding FATP Shares to vote in favor to have the Incentive Plan Proposal approved. |
| Q: | What interests do FATP’s directors and officers have in the Business Combination? |
| A: | When considering the FATP Board’s recommendation to vote in favor of approving the Business Combination Proposal, the Articles Amendment Proposal, the Share Issuance Proposal and the Incentive Plan Proposal, FATP shareholders should keep in mind that the Sponsor and FATP’s directors and executive officers, have interests in such proposals that are different from, or in addition to (and which may conflict with), those of FATP shareholders generally. These interests include, among other things, the interests listed below: |
| ● | the fact that the Sponsor’s Shareholders and FATP’s directors and officers have agreed not to redeem any FATP Class B Ordinary Shares held by them in connection with a shareholder vote to approve the Business Combination; |
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| ● | the fact that the Sponsor paid an aggregate of $25,000 for the 2,875,000 FATP Class B Ordinary Shares currently owned by the Sponsor’s Shareholders and the Anchor Investors, and such securities will have a significantly higher value after the Business Combination. As of September 23, 2022, the most recent practicable date prior to the date of this proxy statement/prospectus, the aggregate market value of these shares, if unrestricted and freely tradable, would be $28,635,000, based upon a closing price of $9.96 per public share on Nasdaq (and will have zero value if neither the Business Combination nor any other business combination is completed on or before the Final Redemption Date); |
| ● | the fact that the Sponsor paid $2,865,000 to purchase an aggregate of 2,865,000 Private Warrants currently owned by the Sponsor’s Shareholders at a price of $1.00 per Private Warrant, each exercisable to purchase one FATP Class A Ordinary Share at $11.50, subject to adjustment, and the Private Warrants would be worthless — and the entire $2,865,000 warrant investment would be lost — if FATP does not consummate a business combination by the Final Redemption Date. As of September 30, 2022, the estimated fair value of the Private Warrants was $142,964; |
| ● | the fact that given the very low purchase price (of $25,000 in aggregate) that the Sponsor paid for the FATP Class B Ordinary Shares as compared to the price of the FATP Shares sold in the FATP IPO and the substantial number of FATP Class A Ordinary Shares that the Sponsor’s Shareholders will receive upon conversion of the FATP Class B Ordinary Shares in connection with the Business Combination, the Sponsor’s Shareholders may earn a positive rate of return on their investment even if the FATP Class A Ordinary Shares trade below the price initially paid for the FATP Class A Ordinary Shares in the FATP IPO and the FATP public shareholders experience a negative rate of return following the completion of the Business Combination; |
| ● | the fact that the Sponsor’s Shareholders and FATP’s directors and executive officers have agreed to waive their rights to liquidating distributions from the trust account with respect to any FATP Shares (other than public shares) held by them if FATP fails to complete an initial business combination by the Final Redemption Date. As a result of waiving liquidating distributions, if FATP fails to complete an initial business combination by the Final Redemption Date, the Sponsor’s Shareholders and FATP’s directors and executive officers would lose $2,865,000 for the purchase of the Private Warrants, and $25,000 for the purchase of the FATP Class B Ordinary Shares; |
| ● | the fact that FATP’s directors and officers have agreed to waive their redemption rights with respect to the FATP Shares (other than public shares) held by them for no consideration; |
| ● | the fact that, with respect to redemptions, holders of FATP Class B Ordinary Shares may have different incentives than holders of FATP Class A Ordinary Shares with respect to the completion of any proposed business combination and/or the exercise of a right to redeem. In particular, holders of FATP Class B Ordinary Shares are not entitled to participate in any redemption with respect to such shares. The value of the FATP Class B Ordinary Shares is dependent on FATP’s consummation of a business combination. In the event that FATP does not consummate a business combination, the FATP Class B Ordinary Shares would be rendered valueless. Holders of FATP Class A Ordinary Shares, on the other hand, will ultimately be entitled to exercise redemption rights and receive the value of their redeemed shares even if FATP does not complete a business combination. Therefore, the interests of holders of FATP Class A Ordinary Shares and FATP Class B Ordinary Shares may not be aligned. Holders of FATP Class A Ordinary Shares should form their own independent views as to whether or not to redeem or whether or not to vote in favor of the Business Combination Proposal; |
| ● | the fact that the Sponsor’s Shareholders and FATP’s officers and directors will lose their entire investment in FATP and will not be reimbursed for any out-of-pocket expenses if FATP does not consummate an initial business combination by the Final Redemption Date; |
| ● | the fact that the Sponsor (including its representatives and affiliates) and FATP’s directors and executive officers and officers, are, or may in the future become, affiliated with entities that are engaged in a similar business to FATP. The Sponsor and FATP’s directors and officers are not prohibited from sponsoring, or otherwise becoming involved with, any other blank check companies prior to completing the Business Combination. Accordingly, if any of FATP’s officers or directors becomes aware of a business combination opportunity that is suitable for an entity to which he or she has then current |
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| fiduciary or contractual obligations, he or she will honor his or her fiduciary or contractual obligations to present such business combination opportunity to such entity, subject to their fiduciary duties under Cayman Islands law. |
| ● | If the trust account is liquidated, including in the event that FATP is unable to complete an initial business combination, the Sponsor has agreed that it will indemnify FATP if and to the extent that any claims by a third party (other than the independent public accounting firm) for services rendered or products sold to FATP, or a prospective target business with which FATP has entered into a written letter of intent, confidentiality or similar agreement or business combination agreement, reduce the amount of funds in the trust account to below the lesser of (i) $10.00 per public share and (ii) the actual amount per public share held in the trust account as of the date of the liquidation of the trust account, if less than $10.00 per public share due to reductions in the value of the trust assets, less taxes payable, provided that such indemnification will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the trust account (whether or not such waiver is enforceable) nor will it apply to any claims under our indemnity of the underwriters of the FATP IPO against certain liabilities, including liabilities under the Securities Act. |
| Q: | I am a FATP shareholder. Do I have redemption rights? |
| A: | Yes. Pursuant to the Existing FATP Articles, in connection with the completion of the Business Combination, commencing on [●] holders of FATP Shares may elect to have their shares redeemed for cash at the applicable redemption price per share calculated in accordance with the Existing FATP Articles. For illustrative purposes, as of September 30, 2022, this would have amounted to approximately $10.07 per share less any owed but unpaid taxes on the funds in the trust account. There are currently no owed but unpaid income taxes on the funds in the trust account. However, the proceeds deposited in the trust account could become subject to the claims of FATP’s creditors, if any, which would have priority over the claims of FATP shareholders. Therefore, the per share distribution from the trust account in such a situation may be less than originally expected due to such claims. FATP expects that the funds to be distributed to FATP shareholders electing to redeem their shares will be distributed promptly after the consummation of the Business Combination. If a holder exercises its redemption rights, then such holder will be exchanging its FATP Shares for cash. Such a holder will be entitled to receive cash for its FATP Shares only if it properly demands redemption and delivers its shares (either physically or electronically) to FATP’s transfer agent, Continental, two business days prior to the General Meeting. A holder of FATP Shares, together with any affiliate of such holder and any person with whom such holder is acting in concert or as a “group” (as defined under Section 13(d)(3) of the Exchange Act), may not seek to have more than 15% of the aggregate public shares redeemed without the consent of FATP. Pursuant to the Existing FATP Articles, FATP may not consummate the Business Combination if, upon the consummation of the Business Combination, FATP does not have at least $5,000,001 in net tangible assets after giving effect to the payment of amounts that FATP will be required to pay to redeeming shareholders upon consummation of the Business Combination. See the section titled “General Meeting of FATP Shareholders — Redemption Rights” for the procedures to be followed if you wish to redeem your FATP Shares for cash. In addition, the Business Combination Agreement provides that the obligation of each party to close the Business Combination Transactions is conditioned on FATP public shareholders requesting redemption of at least an aggregate of 5,200,000 FATP Class A Ordinary Shares. |
| Q: | Will how I vote affect my ability to exercise redemption rights? |
| A: | No. You may exercise your redemption rights regardless of whether you vote or, if you vote, irrespective of whether you vote “FOR” or “AGAINST” or “ABSTAIN” from voting on the Business Combination Proposal, the Articles Amendment Proposal, the Share Issuance Proposal, the Incentive Plan Proposal or the Adjournment Proposal. As a result, the Business Combination Proposal can be approved by shareholders who shall redeem their FATP Shares and no longer remain FATP shareholders, leaving shareholders who choose not to redeem their FATP Shares holding shares in a company with a potentially less liquid trading market for its stock, fewer shareholders and the potential inability to meet the Nasdaq listing standards. See also “What will be the relative equity stakes of FATP shareholders, the Avanseus shareholders and the PIPE Investors in New Avanseus upon completion of the Business Combination?” |
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| Q: | How do I exercise my redemption rights? |
| A: | If you are a FATP shareholder and wish to exercise your right to have your FATP Shares redeemed, you must |
| ● | submit a written request to Continental, FATP’s transfer agent, in which you (i) request that FATP redeem all or a portion of your FATP Shares for cash and (ii) identify yourself as the beneficial holder of the FATP Shares and provide your legal name, phone number and address, and |
| ● | deliver your shares or share certificates (if any) and other redemption forms (as applicable) to Continental, FATP’s transfer agent, physically or electronically through DWAC. |
Holders must complete the procedures for electing to redeem their shares in the manner described above prior to [●], 2022, two business days before the scheduled General Meeting in order for their shares to be redeemed.
The address of Continental, FATP’s transfer agent, is listed under the question “Who can help answer my questions?” below.
If a public FATP shareholder properly exercises its right to redeem all or a portion of the public shares that it holds and timely delivers its shares or share certificates (if any) and other redemption forms (as applicable) to Continental, FATP will redeem such public shares for a per share price, payable in cash, equal to the aggregate amount then on deposit in the trust account as of two business days prior to the consummation of the Business Combination, including interest earned on the funds held in the trust account and not previously released to FATP to pay taxes, divided by the number of then-outstanding public shares.
For illustrative purposes, as of September 30, 2022, this would have amounted to approximately $10.07 per issued and outstanding public share less any owed but unpaid taxes on the funds in the trust account. There are currently no owed but unpaid income taxes on the funds in the trust account. However, the proceeds deposited in the trust account could become subject to the claims of FATP’s creditors, if any, which would have priority over the claims of FATP shareholders. Therefore, the per share distribution from the trust account in such a situation may be less than originally expected due to such claims. FATP expects that the funds to be distributed to FATP shareholders electing to redeem their FATP Shares will be distributed promptly after the consummation of the Business Combination.
A holder of FATP Shares, together with any affiliate of such holder and any person with whom such holder is acting in concert or as a “group” (as defined under Section 13(d)(3) of the Exchange Act), may not seek to have more than 15% of the aggregate public shares redeemed without the consent of FATP. Under the Existing FATP Articles, the Business Combination may not be consummated if FATP has net tangible assets of less than $5,000,001 either immediately prior to or upon consummation of the Business Combination after taking into account the redemption for cash of all public shares properly demanded to be redeemed by holders of FATP Shares. In addition, the Business Combination Agreement provides that the obligation of each party to close the Business Combination Transactions is conditioned on FATP public shareholders requesting redemption of at least an aggregate of 5,200,000 FATP Class A Ordinary Shares.
A FATP shareholder that requests to have FATP Shares redeemed may withdraw such request at any time up to the date of the General Meeting.
Any corrected or changed written exercise of redemption rights must be received by Continental, FATP’s transfer agent, two business days prior to the General Meeting. FATP will not honor any request for redemption unless the holder’s shares and other redemption forms (as applicable) have been delivered (either physically or electronically) to Continental at least two business days prior to the vote at the General Meeting.
See the section titled “General Meeting of FATP Shareholders — Redemption Rights” for the procedures to be followed if you wish to redeem your shares for cash.
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| Q. | What happens if a substantial number of FATP shareholders vote in favor of the Business Combination Proposal, the Articles Amendment Proposal, the Share Issuance Proposal and the Incentive Plan Proposal and exercise their redemption rights? |
| A: | FATP shareholders may vote in favor of the Business Combination, the Articles Amendment Proposal, the Share Issuance Proposal and the Incentive Plan Proposal and exercise their redemption rights. Accordingly, the Business Combination may be consummated even though the funds available from the trust account and the number of FATP shareholders are substantially reduced as a result of redemption by FATP shareholders. Pursuant to the Existing FATP Articles, FATP may not consummate the Business Combination if, upon the consummation of the Business Combination, FATP does not have at least $5,000,001 in net tangible assets after giving effect to the payment of amounts that FATP shall be required to pay to redeeming shareholders upon consummation of the Business Combination. In addition, one of the conditions to the closing of the Business Combination Transactions contained in the Business Combination Agreement is that the holders of at least 5,200,000 public shares elect to redeem their public shares in connection with the Business Combination. However, the Sponsor has agreed not to redeem its shares. In the event of significant redemptions, with fewer shares and fewer FATP shareholders, the trading market for New Avanseus Ordinary Shares may be less liquid than the market for FATP Shares was prior to the Business Combination. In addition, in the event of significant redemptions, New Avanseus may not be able to meet the Nasdaq listing standards. |
| Q: | Do I have appraisal rights if I object to the Business Combination? |
| A: | Holders of FATP Class A Ordinary Shares and FATP Warrants do not have appraisal or dissenters’ rights in connection with the Business Combination. See the section entitled “Appraisal Rights” for additional information. |
| Q: | What happens to the funds deposited in the trust account after consummation of the Business Combination? |
| A: | FATP placed a total of $115,000,000 of the net proceeds of the FATP IPO (including the net proceeds of the underwriters’ exercise of their over-allotment option) and simultaneous private placements in the trust account immediately following the FATP IPO. After consummation of the Business Combination, the funds in the trust account will be released to pay holders of the FATP Shares who exercise redemption rights and to pay fees and expenses incurred in connection with the Business Combination (including fees of an aggregate of approximately $4,025,000 to certain underwriters in connection with the FATP IPO). Any remaining funds will remain on the balance sheet of New Avanseus after Closing in order to fund New Avanseus’ existing operations and support new and existing growth initiatives. |
One of the conditions to the closing of the Business Combination contained in the Business Combination Agreement is that FATP has cash and cash equivalents of at least $25,000,000 in working capital for general corporate purposes after the giving effect of all redemptions and taking into account the PIPE Investments and the payment of expenses related to the Business Combination and including amounts remaining on deposit in the trust account.
| Q: | What happens if the Business Combination is not consummated? |
| A: | If FATP does not complete the Business Combination (or another initial business combination) by October 15, 2022 (or January 15, 2023 if FATP has filed a proxy statement, registration statement or similar filing for an initial business combination by October 15, 2022 but has not completed the initial business combination by October 15, 2022, or by July 15, 2023 if FATP extends the period of time to consummate a business combination, as described in more detail in this proxy statement/prospectus, or as extended by FATP’s shareholders in accordance with the Existing FATP Articles) (such date the “Final Redemption Date”), FATP must redeem 100% of the public shares, at a per-share price, payable in cash, equal to the amount then held in the trust account (net of taxes payable and less up to $100,000 of interest to pay dissolution expenses) divided by the number of then-outstanding public shares. |
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| Q: | What else do I need to know now? |
| A: | FATP urges you to read carefully and consider the information contained in this proxy statement/prospectus, including the annexes, and to consider how the Business Combination will affect you as a shareholder of FATP. Shareholders should then vote as soon as possible in accordance with the instructions provided in this proxy statement/prospectus and on the enclosed proxy card. |
| Q: | How do I attend the General Meeting? |
| A: | The General Meeting will be held virtually at [●] AM Eastern time, on [●], 2023 via live webcast at https://www.cstproxy.com/fatprojects/2022. If you are a holder of record of FATP Shares on the record date, you will be able to attend the General Meeting online and vote during the General Meeting and examine the list of holders of record of FATP Shares by visiting https://www.cstproxy.com/fatprojects/2022 and entering the control number on your proxy card, voting instruction form or notice included in your proxy materials; shareholders who attend the General Meeting in such manner will be considered present in person at the General Meeting. |
| Q: | How do I vote? |
| A: | If you are a holder of record of FATP Shares on the record date, you may vote remotely at the General Meeting or by submitting a proxy for the General Meeting. The General Meeting will be held virtually at [●] AM Eastern time, on [●], 2023 via live webcast at https://www.cstproxy.com/fatprojects/2022. You will be able to attend the General Meeting online and vote during the General Meeting by visiting https://www.cstproxy.com/fatprojects/2022 and entering the control number on your proxy card, voting instruction form or notice included in your proxy materials. Please note that you will not be able to vote or ask questions if you choose to participate telephonically. You may submit your proxy by completing, signing, dating and returning the enclosed proxy card in the accompanying pre-addressed postage paid envelope. If you hold your shares in “street name,” which means your shares are held of record by a broker, bank or nominee, you should contact your broker, bank or nominee to ensure that votes related to the shares you beneficially own are properly counted. In this regard, you must provide the broker, bank or nominee with instructions on how to vote your shares or, if you wish to attend the meeting and vote remotely, obtain a proxy from your broker, bank or nominee and a control number from Continental, available once you have received your proxy by emailing proxy@continentalstock.com. |
| Q: | If my shares are held in “street name,” will my broker, bank or nominee automatically vote my shares for me? |
| A: | No. As disclosed in this proxy statement/prospectus, your broker, bank, or nominee cannot vote your shares on the Business Combination Proposal, the Articles Amendment Proposal, the Share Issuance Proposal or the Incentive Plan Proposal unless you provide instructions on how to vote in accordance with the information and procedures provided to you by your broker, bank, or nominee. If you are a FATP shareholder holding your shares in “street name” and you do not instruct your broker, bank, or other nominee on how to vote your shares, your broker, bank or other nominee will not vote your shares on the Business Combination Proposal, the Articles Amendment Proposal, the Share Issuance Proposal, the Incentive Plan Proposal or the Adjournment Proposal. Such abstentions and broker non-votes will have no effect on the outcome of the vote count for any of the proposals. |
| Q: | May I change my vote after I have mailed my signed proxy card? |
| A: | Yes. Shareholders may send a later-dated, signed proxy card to Continental at the address set forth below so that it is received by Continental prior to the vote at the General Meeting or attend the General Meeting by visiting https://www.cstproxy.com/fatprojects/2022 and entering the control number on your proxy card, voting instruction form or notice included in your proxy materials and voting. Shareholders may also revoke their proxy by sending a notice of revocation to Continental, which must be received by Continental prior to the vote at the General Meeting. |
| Q: | What happens if I fail to take any action with respect to the General Meeting? |
| A: | If you fail to take any action with respect to the General Meeting (or the related redemption of your shares), you will continue to be a shareholder of FATP/New Avanseus. |
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| Q: | What should I do if I receive more than one set of voting materials? |
| A: | Shareholders may receive more than one set of voting materials, including multiple copies of this proxy statement/prospectus and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a holder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please complete, sign, date and return each proxy card and voting instruction card that you receive in order to cast a vote with respect to all of your FATP Shares. |
| Q: | What happens if I sell my FATP Shares before the General Meeting? |
| A: | The record date for the General Meeting is earlier than the date of the General Meeting and earlier than the date the Business Combination is expected to be completed. If you transfer your FATP Shares after the record date, but before the General Meeting date, then unless you grant a proxy to the transferee, you will retain your right to vote at the General Meeting. |
| Q: | Who will solicit and pay the cost of soliciting proxies for the General Meeting? |
| A: |
FATP will pay the cost of soliciting proxies for the General Meeting. FATP has engaged Laurel Hill Advisory Group, LLC (“Laurel Hill”) to assist in the solicitation of proxies for the General Meeting. FATP has agreed to pay Laurel Hill a fixed fee of $[●], plus disbursements, and to pay $[●] for each holder’s proxy solicited by Laurel Hill, to reimburse Laurel Hill for its reasonable and documented costs and expenses and to indemnify Laurel Hill and its affiliates against certain claims, liabilities, losses, damages and expenses. FATP will also reimburse banks, brokers and other custodians, nominees and fiduciaries representing beneficial owners of FATP Shares for their expenses in forwarding soliciting materials to beneficial owners of FATP Shares and in obtaining voting instructions from those owners. FATP’s directors and officers may also solicit proxies by telephone, by facsimile, by mail, on the internet or in person. They will not be paid any additional amounts for soliciting proxies. |
| Q: | Where can I find the voting results of the General Meeting? |
| A: | FATP will announce the preliminary voting results at the General Meeting. In addition, FATP will publish final voting results of the General Meeting in a Current Report on Form 8-K that it files with the SEC within four business days after the General Meeting. |
| Q: | Who can help answer my questions? |
| A: | If you have questions about the proposals or if you need additional copies of this proxy statement/prospectus or the enclosed proxy card you should contact FATP’s proxy solicitor as follows: |
Individuals call toll-free (tolls apply if calling from outside the United States): +1 (855) 414-2266. Banks and brokers call: +1 (855) 414-2266 Email: FATP@laurelhill.com. This proxy statement/prospectus and the notice of the General Meeting will be available at https://www.cstproxy.com/fatprojects/2022.
To obtain timely delivery, shareholders must request the materials no later than [●], 2022, or five business days prior to the General Meeting.
You may also obtain additional information about FATP from documents filed with the SEC by following the instructions in the section entitled “Where You Can Find More Information.”
If you are a holder of FATP Shares and you intend to seek redemption of your shares, you will need to deliver your shares (either physically or electronically) to FATP’s transfer agent at the address below at least two business days prior to the General Meeting. If you have questions regarding the certification of your position or delivery of your shares for redemption, please contact FATP’s transfer agent as follows:
Continental Stock Transfer & Trust Company
One State Street Plaza, 30th Floor
New York, NY 10004
Attention: __________
Email: ________________
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QUESTIONS AND ANSWERS ABOUT THE PROPOSED BUSINESS COMBINATION — AVANSEUS SHAREHOLDERS
| Q: | Why am I receiving this proxy statement/ prospectus? |
| A: | Avanseus shareholders are being asked to enter into a Share Exchange Agreement with FATP whereby each Avanseus Ordinary Share and Avanseus Non-Voting Share that they own will be exchanged for 0.318496 FATP Class A Ordinary Shares (rounded down to the nearest whole share), in accordance with the Business Combination Agreement that is described in this proxy statement/prospectus, pursuant to which Avanseus will thereby become a wholly-owned subsidiary of FATP, all as further described in this proxy statement/prospectus. The Business Combination Agreement also provides that each Avanseus Restricted Share Award outstanding with respect to Avanseus Ordinary Shares or Avanseus Non-Voting Shares that is not vested at the effective time of the Exchange will be amended to provide that FATP assumes and replaces Avanseus as the grantor of Unvested Grant Shares and the grantee becomes entitled to receive 0.318496 FATP Class A Ordinary Shares in place of each unvested Avanseus Share if and when vesting occurs, pursuant to an Unvested Restricted Share Amendment to be entered into between each holder of Unvested Grant Shares, FATP, and Avanseus. This constitutes an offer by FATP of the FATP Class A Ordinary Shares that will be issued in the Exchange and in exchange for the Avanseus Restricted Share Awards, and this joint proxy statement/prospectus is a prospectus of FATP with respect to FATP’s offer and issuance of such FATP Class A Ordinary Shares. As a shareholder of Avanseus, you are being offered such FATP Class A Ordinary Shares in connection with the Business Combination, including the Exchange, and that is why you are receiving this proxy statement/prospectus. |
| Q: | What do I need to do now? Do I need to vote? |
| A: | Avanseus shareholders are not being asked to vote on the Business Combination or any other matter. Consummation of the Business Combination, however, is conditioned on (i) each Avanseus shareholder executing a Share Exchange Agreement and delivering to FATP such executed Share Exchange Agreement, along with all of his, her, or its original certificates for their Avanseus Shares and any other documents that FATP may reasonably request, and (ii) each holder of an Avanseus Restricted Share Award executing and delivering to FATP and Avanseus an Unvested Restricted Share Amendment. While FATP can waive these requirements, we do not expect that they will do so. Therefore, we urge you to read carefully and consider the information contained in this proxy statement/prospectus, including the annexes, and consider how the Business Combination will affect you as a shareholder of Avanseus, and then execute a Share Exchange Agreement and/or Unvested Restricted Share Amendment, as applicable, and submit them, along with your share certificates and any other requested documentation, to FATP in accordance with the instructions at https://fatprojectscorp.com/investor-relations/Avanseus, to: |
Fat Projects Acquisition Corp
c/o Pinsent Masons
182 Cecil Street
#32-01 Frasers Tower
Singapore 069547
Attn: Mark Tan, Mark.Tan@pinsentmasons.com
as soon as possible, but in any case no later than [●], 2023, the date of the General Meeting at which FATP shareholders will vote on whether to approve the Business Combination and certain related proposals.
| Q: | Why did the board of directors of Avanseus agree to the Business Combination? |
| A: | Avanseus requires additional capital to expand its business and otherwise carry out its current business plan. The Business Combination will provide Avanseus with an immediate source of additional capital as well as access to the U.S. capital markets. |
| Q: | Who can help answer my questions? |
| A: | If you have questions about the Exchange or any other aspects of the Business Combination, or if you need additional copies of this proxy statement/prospectus, please contact FATP on its website at https://fatprojectscorp.com/investor-relations/ or by sending a written request to FATP at Fat Projects Acquisition Corp, 27 Bukit Manis Road, Singapore, 099892 or investor@fatprojects.com or by telephone at +65 8590-2056. |
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| Q: | What happens if the Business Combination is not consummated? |
| A: | If FATP and Avanseus do not complete the Business Combination by October 15, 2022 (or January 15, 2023 if FATP has filed a proxy statement, registration statement, or similar filing for an initial business combination by October 15, 2022 but has not completed the initial business combination by October 15, 2022, or by July 15, 2023 if FATP extends the period of time to consummate a business combination, as described in more detail in this proxy statement/prospectus, or as extended by FATP’s shareholders in accordance with the Existing FATP Articles), FATP must redeem 100% of the public shares (unless it enters into another business combination within such time periods), meaning that the Business Combination will not be consummated, in which case Avanseus will remain an independent company, and you will continue to hold the shares you own in Avanseus. Similarly, if one or both of FATP and Avanseus terminate the Business Combination Agreement in accordance with its terms, the Business Combination will not be consummated, Avanseus will remain an independent company, and you will continue to hold the shares you own in Avanseus. |
QUESTIONS AND ANSWERS ABOUT THE PROPOSED BUSINESS COMBINATION — FATP SHAREHOLDERS AND AVANSEUS SHAREHOLDERS
| Q: | What is expected to happen in the Business Combination? |
| A: | In accordance with the terms and subject to the conditions of the Business Combination Agreement, the parties to the Business Combination Agreement have agreed that, in connection with the Closing, the parties will undertake a series of transactions pursuant to which (i) each holder of Avanseus Ordinary Shares and Avanseus Non-Voting Shares will exchange each such outstanding Avanseus share for 0.318496 FATP Class A Ordinary Shares (rounded down to the nearest whole share), and Avanseus will thereby become a wholly-owned subsidiary of FATP, and (ii) each Avanseus Restricted Share Award outstanding with respect to Avanseus Ordinary Shares or Avanseus Non-Voting Shares that is not vested at the effective time of the Exchange will be amended to provide that FATP assumes and replaces Avanseus as the grantor of Unvested Grant Shares and the grantee becomes entitled to receive 0.318496 FATP Class A Ordinary Shares in place of each unvested Avanseus Share if and when vesting occurs. The Exchange and the other transactions contemplated by the Business Combination Agreement are referred to as the “Business Combination.” |
For more information on the Exchange, see the section titled “The Business Combination Proposal; Terms of the Business Combination — General Description of the Business Combination Transactions — The Exchange.”
| Q: | What is the PIPE Investment (private placement)? |
| A: | The Business Combination Agreement provides that FATP will use its commercially reasonable efforts to enter into and consummate subscription agreements in form and substance mutually acceptable to FATP and Avanseus with investors mutually reasonably acceptable to FATP and Avanseus pursuant to which such investors will agree to purchase up to an aggregate of $35 million of (i) FATP Series A Convertible Preference Shares, which shares will be convertible into FATP Class A Ordinary Shares, and (ii) FATP Class A Ordinary Shares, with such purchases to be consummated prior to or substantially currently with the closing of the Exchange. None of the Sponsor, FATP’s directors, officers, nor their affiliates will participate in the PIPE Investment. |
| Q: | What conditions must be satisfied to complete the Business Combination? |
| A: | There are a number of closing conditions to the Business Combination, including, but not limited to, the following: |
| ● | the effectiveness of the registration statement on Form S-4 of which this proxy statement/prospectus is a part and the absence of any issued or pending stop order by the SEC with respect thereto; |
| ● | approval by the FATP shareholders of the Business Combination Proposal and any other matters requiring such approval; |
| ● | all of Avanseus’ shareholders irrevocably submitting a duly executed Share Exchange Agreement and all of his, her, or its original certificates for Avanseus Shares for exchange for FATP Class A Ordinary |
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| Shares and each holder of an Avanseus Restricted Share Award that includes Unvested Grant Shares submitting to FATP and Avanseus a duly executed Unvested Restricted Share Amendment no later than the date of the General Meeting (and all of the outstanding Avanseus Preference Shares having been previously been converted into Avanseus Ordinary Shares); |
| ● | FATP’s filing, to the extent required, of a “Listing of Additional Shares Notification Form” with Nasdaq with respect to the FATP Class A Ordinary Shares to be issued in connection with the Business Combination Transactions, and Nasdaq having completed its review thereof; |
| ● | the accuracy of representations and warranties to various standards, from de minimis to material adverse effect; |
| ● | FATP having at least $5,000,001 of net tangible assets remaining after accounting for FATP’s redemption of the public shares and the proceeds from FATP’s sale of FATP Shares pursuant to the PIPE Subscription Agreements; |
| ● | FATP having at least $25,000,000 in funds comprised of cash and cash equivalents (as defined in the Business Combination Agreement) remaining for general corporate purposes after giving effect to the payment of FATP’s and Avanseus’ expenses in connection with the Business Combination Transactions; |
| ● | Crystal Technology Services Pte. Ltd. executing and delivering to FATP and Avanseus a new warrant agreement for the purchase of 1,000,000 FATP Class A Ordinary Shares and its agreement that the current warrant to purchase Avanseus Shares has been terminated; |
| ● | Certain key executives of Avanseus entering into restrictive covenant agreements with FATP in the form attached to the Business Combination Agreement as Exhibit I; |
| ● | the absence of a legal prohibition on consummating the Business Combination Transactions; |
| ● | the holders of the FATP public shares having properly elected to have FATP redeem at least 5,200,000 FATP public shares; |
| ● | material compliance by each of FATP and Avanseus with its pre-closing covenants; and |
| ● | the bring-down to Closing of the representations and warranties of both for FATP and Avanseus. |
For a summary of all of the conditions that must be satisfied or waived prior to completion of the Business Combination, see the section entitled “The Business Combination Proposal; Terms of the Business Combination — The Business Combination Agreement.”
| Q: | When do you expect the Business Combination to be completed? |
| A: | FATP and Avanseus expect to consummate the Business Combination promptly following the satisfaction, or waiver, of the conditions precedent to Closing set forth in the Business Combination Agreement, including the approval of the Business Combination Proposal, the Articles Amendment Proposal, the Share Issuance Proposal and the Incentive Plan Proposal by the holders of FATP Shares. For a description of the conditions for the completion of the Business Combination, see the section entitled “The Business Combination Proposal; Terms of the Business Combination — The Business Combination Agreement — Conditions to Closing.” However, there can be no assurance that such conditions will be satisfied or waived or that the Business Combination will occur. |
| Q: | What will be the relative equity stakes of FATP shareholders, the Avanseus shareholders and the PIPE Investors in New Avanseus upon completion of the Business Combination? |
| A: | Upon consummation of the Exchange, the former security holders of Avanseus will all become security holders of New Avanseus. |
The following table illustrates varying ownership levels in New Avanseus immediately following the consummation of the Business Combination based on the Minimum Redemption Scenario, the 75% Redemption Scenario, and the Maximum Redemption Scenario assuming a Closing Date of September 30, 2022. The following table does not include any New Avanseus Ordinary Shares issuable upon the exercise of the FATP Warrants.
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Please see “Risk Factors — Risks Related to Redemption of FATP Shares.” There is no guarantee that a shareholder’s decision whether to redeem his, her, or its shares for a pro rata portion of the trust account will put the shareholder in a better future economic position.
| Minimum Redemption | 75% Redemption | Contractual Maximum Redemption |
||||||||||||||||||||||
| Shares | Percentage | Shares | Percentage | Shares | Percentage | |||||||||||||||||||
| FATP public stockholders | 6,300,000 | 33.8 | % | 5,450,218 | 30.6 | % | 3,433,624 | 21.7 | % | |||||||||||||||
| FATP Sponsor’s Shareholders, Anchor Investors (FATP Class B Ordinary Shares), and underwriter | 2,990,000 | 16.0 | % | 2,990,000 | 16.8 | % | 2,990,000 | 19.0 | % | |||||||||||||||
| Avanseus shareholders | 9,350,307 | 50.2 | % | 9,350,307 | 52.6 | % | 9,350,307 | 59.3 | % | |||||||||||||||
| Total | 18,640,307 | 100 | % | 17,790,525 | 100 | % | 15,773,931 | 100 | % | |||||||||||||||
The numbers of shares and percentage interests set forth above reflect different redemption scenarios set forth below.
| ● | Assuming the Minimum Redemption Scenario: This presentation assumes that FATP public shareholders holding 5,200,000 FATP public shares exercise their redemption rights with respect to such public shares. |
| ● | Assuming the 75% Redemption Scenario: This presentation assumes that FATP public shareholders holding approximately 53% of the public shares exercise their redemption rights with respect to such public shares, which is approximately 75% of the FATP public shares assumed to be redeemed under the Maximum Redemption Scenario. This scenario assumes that 6,049,782 FATP public shares are redeemed for an aggregate redemption payment of approximately $61.0 million inclusive of a pro rata portion of interest accrued on the trust account. |
| ● | Assuming Maximum Redemption Scenario: This presentation assumes that FATP public shareholders holding approximately 70% of the FATP public shares exercise their redemption rights with respect to such public shares. This scenario assumes that 8,066,376 FATP public shares are redeemed for an aggregate redemption payment of approximately $81.2 million inclusive of a pro rata portion of interest accrued on the trust account. The Maximum Redemption Scenario is based on the maximum permitted amount of redemptions while still satisfying the requirement of having cash and cash equivalents comprising working capital to be used for general corporate purposes, including funds remaining in the trust account (after giving effect to the completion and payment of the share redemption) and the proceeds of any PIPE Investment, after giving effect to the payment of FATP’s and Avanseus’ expenses in connection with the Business Combination Transactions equal to at least $25 million. |
| (1) | For a more detailed description of share ownership upon consummation of the Business Combination, see “Beneficial Ownership of Securities.” |
| (2) | Assuming the Maximum Redemption Scenario, 8,066,376 of the FATP public shares will be redeemed for their pro rata shares of the funds in the trust account, which is derived from the number of shares that could be redeemed in connection with the Business Combination assuming (i) a redemption price of $10.07 per share and (ii) funds in the amount of $115,803,480 held in the trust account as of September 30, 2022, such that FATP would still satisfy the contractual requirement to have at least $25,000,000 in net tangible assets either immediately prior to or upon consummation of the Business Combination. As of September 30, 2022, FATP had total assets of $116,208,331, of which $115,803,480 are investments held in the trust account. You should note that FATP and Avanseus are required to proceed with the Business Combination only if FATP has the contractually required net tangible assets of at least $25,000,000 after accounting for public share redemptions and the proceeds of any PIPE Investment. If the actual facts differ from these assumptions, these numbers will be different. |
Pursuant to the Existing FATP Articles, in connection with the completion of the Business Combination, holders of FATP Shares may elect to have their shares redeemed for cash at the applicable redemption price per share calculated in accordance with the Existing FATP Articles. Payment for such redemptions will come from the trust account.
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SUMMARY OF THE PROXY STATEMENT/PROSPECTUS
This summary highlights selected information from this proxy statement/prospectus and does not contain all of the information that is important to you. To better understand the proposals to be submitted for a vote at the General Meeting, including the Business Combination, you should read this entire document carefully, including the Business Combination Agreement attached as Annex A to this proxy statement/prospectus. The Business Combination Agreement is the legal document that governs the Business Combination and the other transactions that will be undertaken in connection with the Business Combination. It is also described in detail in this proxy statement/prospectus in the section entitled “The Business Combination Proposal; Terms of the Business Combination — The Business Combination Agreement.”
The Parties to the Business Combination
Avanseus
Avanseus is a software company specializing in building enterprise solutions enabled by analytics, artificial intelligence, machine learning, and cognitive computing. Avanseus’ current focus is predictive operations and maintenance software, primarily in the telecommunications sector. It has developed and own proprietary technology that can scale across various industries.
Avanseus is a Singapore private company limited by shares. The mailing address of Avanseus’ principal executive office is 230 Victoria Street, #15-01/08, Bugis Junction, Singapore 188024, and its phone number is +65 69701689. Avanseus’ corporate website address is www.avanseus.com. The information contained on, or that can be accessed through, Avanseus’ website is not deemed to be incorporated by reference in, and is not considered part of, this proxy statement/prospectus. After the consummation of the Exchange, Avanseus will become a wholly-owned subsidiary of FATP.
FATP
FATP is a blank check company incorporated on April 16, 2021, with company registration number 374480, 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. Based on its business activities, FATP is a “shell company,” as defined under the Exchange Act, because it has no operations and nominal assets consisting almost entirely of cash.
Before the completion of an initial business combination, any vacancy on the FATP Board may be filled by a nominee chosen by holders of a majority of FATP Class B Ordinary Shares. In addition, before the completion of an initial business combination, holders of a majority of FATP Class B Ordinary Shares may remove a member of the FATP Board for any reason.
On October 15, 2021, FATP consummated its initial public offering of 11,500,000 Units, each consisting of one FATP Class A Ordinary Share and one redeemable warrant, including the exercise in full of the underwriters 45-day option to purchase up to an additional 1,500,000 Units, at $10.00 per Unit, and a private placement of 2,865,000 Private Warrants to the Sponsor at a purchase price of $1.00 per Private Warrant. Each warrant entitles the holder thereof to purchase one FATP Class A Ordinary Share at a price of $11.50 per share, subject to adjustment. Prior to the FATP IPO, FATP sold 2,875,000 FATP Class B Ordinary Shares to the Sponsor for an aggregate purchase price of $25,000. Such FATP Class B Ordinary Shares will automatically be converted into New Avanseus Ordinary Shares on a one-for-one basis, subject to certain adjustments, upon the closing of the Business Combination.
Following the closing of the FATP IPO, FATP placed $115 million of the net proceeds from the FATP IPO and the sale of the Private Warrants in the trust account. The trust account may be invested only in U.S. government treasury bills with a maturity of 180 days or less or in money market funds investing solely in United States Treasuries and meeting certain conditions under Rule 2a-7 under the Investment Company Act of 1940, as amended, which invest only in direct U.S. government obligations. As of September 30, 2022, funds in the trust account totalled $115,803,480. Except with respect to interest earned on the funds in the trust account that may be released to pay income taxes and up to $100,000 of interest that may be used for FATP’s dissolution expenses, the funds held in the trust account will not be released from the trust account until the earliest of (i) the completion of FATP’s initial business combination, (ii) the redemption of any public shares properly submitted in connection with a shareholder
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vote to amend the Existing FATP Articles (a) to modify the substance or timing of FATP’s obligation to allow redemption in connection with FATP’s initial business combination or certain amendments to the Existing FATP Articles prior thereto or to redeem 100% of FATP’s public shares if FATP does not complete its initial business combination by the Final Redemption Date or (b) with respect to any other provision relating to shareholders’ rights or pre-business combination activity, and (iii) the redemption of FATP’s public shares if FATP is unable to complete an initial business combination by the Final Redemption Date, subject to applicable law.
The FATP Units are traded on Nasdaq under the symbol “FATPU,” the FATP Class A Ordinary Shares are traded on Nasdaq under the symbol “FATP,” and the Public Warrants are traded on Nasdaq under the symbol “FATPW.”
FATP’s principal executive office is located at 27 Bukit Manis Road, Singapore, 099892, and its telephone number is +65 8590 2056. FATP’s corporate website address is www.fatprojectscorp.com. FATP’s website and the information contained on, or that can be accessed through, the website is not deemed to be incorporated by reference in, and is not considered part of, this proxy statement/prospectus.
The Business Combination Proposal; Terms of the Business Combination
On August 26, 2022, FATP and Avanseus entered into the Business Combination Agreement, which, subject to the terms and conditions set forth therein, (i) anticipates that each holder of Avanseus Ordinary Shares and Avanseus Non-Voting Shares will exchange each such outstanding Avanseus Share for 0.318496 FATP Class A Ordinary Shares (rounded down to the nearest whole share), for a total of 9,350,307 FATP Class A Ordinary Shares (the “Exchange” and, together with the other transactions contemplated by the Business Combination Agreement, the “Business Combination”), and provides that Avanseus will thereby become a wholly-owned subsidiary of FATP, and (ii) provides that each Avanseus Restricted Share Award outstanding with respect to Avanseus Ordinary Shares or Avanseus Non-Voting Shares that is not vested at the effective time of the Exchange will be amended to provide that FATP assumes and replaces Avanseus as the grantor of Unvested Grant Shares and the grantee becomes entitled to receive 0.318496 FATP Class A Ordinary Shares in place of each unvested Avanseus share if and when vesting occurs, for a total of 149,693 FATP Class A Ordinary Shares. Capitalized terms in this summary of the Business Combination Proposal not otherwise defined in this proxy statement/prospectus will have the meanings ascribed to them in the Business Combination Agreement.
For more information on the Exchange and the Business Combination Proposal, see the section titled “The Business Combination Proposal; Terms of the Business Combination — The Business Combination Agreement — General Description of the Business Combination Transactions — The Exchange.”
Conditions to Closing
In addition to the approval of the Business Combination Proposal, the Articles Amendment Proposal, the Share Issuance Proposal and the Incentive Plan Proposal, unless waived by the parties to the Business Combination Agreement, the closing of the Business Combination is subject to a number of conditions set forth in the Business Combination Agreement. One of the conditions to the closing of the Business Combination is that the holders of at least 5,200,000 public shares elect to redeem their shares in connection with the Business Combination. However, there can be no assurance that such conditions will be satisfied or waived or that the Business Combination will occur.
For more information about the closing conditions to the Business Combination, see the section titled “The Business Combination Proposal; Terms of the Business Combination — The Business Combination Agreement — General Description of the Business Combination Transactions — The Exchange.”
Related Agreements
PIPE Investment (Private Placement)
The Business Combination Agreement provides that FATP will use its commercially reasonable efforts to enter into and consummate subscription agreements in form and substance mutually acceptable to FATP and Avanseus (the “PIPE Subscription Agreements”) with investors mutually reasonably acceptable to FATP and Avanseus (the “PIPE Investors”) pursuant to which the PIPE Investors will agree to purchase up to an aggregate of $35 million of (i) FATP
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Series A Convertible Preference Shares, which shares will be convertible into FATP Class A Ordinary Shares, and (ii) FATP Class A Ordinary Shares, with such purchases to be consummated prior to or substantially currently with the closing of the Exchange (the “PIPE Investment”).
Avanseus Holders Support Agreement
Concurrently with the execution of the Business Combination Agreement, FATP, Avanseus and certain shareholders of Avanseus entered into the Avanseus Holders Support Agreement. For more information, see the section titled “The Business Combination Proposal; Terms of the Business Combination—Related Agreements.”
Sponsor Support Agreement
Concurrently with the execution of the Business Combination Agreement, FATP, the Sponsor and Avanseus entered into the Sponsor Support Agreement. For more information, see the section titled “The Business Combination Proposal; Terms of the Business Combination—Related Agreements.”
Crystal Technology Warrant
Crystal Technology Services Pte. Ltd. (“Crystal Technology”) currently holds warrants to acquire Avanseus Ordinary Shares under a warrant agreement with Avanseus (the “Old Crystal Technology Services Warrant”). All of the remaining currently unvested warrants under the Old Crystal Technology Services Warrant will expire un-exercisable as a consequence of the closing of the Exchange. The Business Combination Agreement provides for FATP to enter into a new Warrant Agreement with Crystal Technology in the form attached to the Business Combination Agreement (the “New Crystal Technology Services Warrant”) that provides for the issuance to Crystal Technology of warrants to acquire FATP Class A Ordinary Shares subject to vesting criteria set forth therein and requires Crystal Technology to confirm the termination of the Old Crystal Technology Services Warrant. If all of the warrants under the New Crystal Technology Services Warrant vest, Crystal Technology will be entitled to exercise the warrants for an aggregate of 1,000,000 FATP Class A Ordinary Shares subject to customary adjustments, such as for share splits, as provided therein.
For more information, see the section titled “The Business Combination Proposal; Terms of the Business Combination —Related Agreements.”
Registration Rights Agreement
Concurrently with the execution of the Business Combination Agreement, FATP, the Sponsor and certain shareholders of Avanseus (the “Avanseus Holders”) entered into a registration rights agreement (the “Registration Rights Agreement”), to be effective upon the closing of the Exchange, pursuant to which, among other things, New Avanseus will agree to undertake certain resale shelf registration obligations in accordance with the Securities Act and the Sponsor and the Avanseus Holders have been granted certain demand and piggyback registration rights. Additionally, New Avanseus may enter into other registration rights agreements from time to time. See “Shares Eligible for Future Sale — Registration Rights.”
For more information, see the section titled “The Business Combination Proposal; Terms of the Business Combination — Related Agreements.”
FATP’s Board of Directors’ Reasons for the Approval of the Business Combination
FATP was formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization, or similar business combination with one or more business entities. As described above, the FATP Board sought to do so by using the networks and industry experience of both the Sponsor, the FATP Board and FATP management to identify and acquire one or more businesses.
In evaluating the transaction with Avanseus, the FATP Board consulted with its legal counsel and tax, accounting and other advisors. In determining that the terms and conditions of the Business Combination Agreement and the transactions contemplated thereby are in FATP’s best interests, the FATP Board considered and evaluated a number of factors, including, but not limited to, the factors discussed below. In light of the number and wide variety of factors considered in connection with its evaluation of the Business Combination Agreement and the transactions
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contemplated thereby, the FATP Board did not consider it practicable to, and did not attempt to, quantify or otherwise assign relative weights to the specific factors that the FATP Board considered in reaching its determination and supporting its decision. The FATP Board viewed its decision as being based on all of the information available and the factors presented to and considered by the FATP Board. In addition, individual directors may have given different weight to different factors. The FATP Board realized that there can be no assurance about future results, including results considered or expected as disclosed in the reasons as set forth below. This explanation of FATP’s reasons for the Business Combination and all other information presented in this section is forward-looking in nature and, therefore, should be read in light of the factors discussed under “Forward-Looking Statements.”
The FATP Board considered a number of factors pertaining to the Business Combination Agreement and the transactions contemplated thereby, including, but not limited to:
| ● | Avanseus Satisfies a Number of Acquisition Criteria that FATP had Established to Evaluate Prospective Business Combination Targets. The FATP Board determined that Avanseus satisfies a number of the criteria and guidelines that FATP established at its initial public offering, including (i) operating in a large and growing total-addressable market, (ii) having a leading technology and proprietary intellectual property highly relevant to the evolution of 5G and 6G use cases across multiple industries, (iii) having potential to deliver sustainable long-term top-line growth, (iv) operating in Southeast Asia and (v) providing an opportunity to partner with a world-class management team capable of scaling a business around the globe. |
| ● | Compelling Valuation. The implied pro forma enterprise value in connection with the Business Combination of approximately $135 million, which the FATP Board believes represents an attractive valuation relative to selected comparable companies in the industrial software and vertical software spaces. |
The Articles Amendment Proposal
The shareholders of FATP will vote on a proposal relating to the adoption of the Amended FATP Articles. Please see the section entitled “The Articles Amendment Proposal.”
The Share Issuance Proposal
The shareholders of FATP will vote on a proposal relating to the issuance of [●] FATP Class A Ordinary Shares and [●] FATP Preference Shares. Please see the section entitled “The Share Issuance Proposal.”
The Incentive Plan Proposal
The shareholders of FATP will vote on a proposal relating to the adoption of the New Avanseus Incentive Plan. Please see the section entitled “The Incentive Plan Proposal.”
The Adjournment Proposal
If, based on the tabulated vote, there are insufficient votes at the time of the General Meeting to authorize FATP to consummate the Business Combination, the FATP Board may (and FATP is required under the Business Combination Agreement to) submit a proposal to adjourn the General Meeting to a later date or dates, if necessary, to permit further solicitation of proxies. Please see the section entitled “The Adjournment Proposal.”
Date, Time and Place of General Meeting of FATP Shareholders
The General Meeting of the shareholders of FATP will be held at [●] AM, Eastern time, on [●], 2023 virtually via live webcast at https://www.cstproxy.com/fatprojects/2022 to consider and vote upon the Business Combination Proposal, the Articles Amendment Proposal, the Share Issuance Proposal, the Incentive Plan Proposal and if necessary, the Adjournment Proposal.
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Voting Power; Record Date
Shareholders will be entitled to vote or direct votes to be cast at the General Meeting if they owned FATP Shares at the close of business on [●], 2022, which is the record date for the General Meeting. Shareholders will have one vote for each FATP Share owned at the close of business on the record date. If your shares are held in “street name” or are in a margin or similar account, you should contact your broker, bank or nominee to ensure that votes related to the shares you beneficially own are properly counted. Warrants do not have voting rights. On the record date, there were [●] FATP Shares outstanding, of which [●] were held by the Sponsor’s Shareholders and certain directors and advisors of FATP.
Quorum and Vote of FATP shareholders
A quorum of FATP shareholders is necessary to hold a valid meeting. A quorum will be present at the General Meeting if the holders of a majority of the outstanding shares entitled to vote at the General Meeting are present in person or by proxy. An abstention or broker non-vote will be counted towards the quorum requirement but will not count as a vote cast at the General Meeting and therefore will have no effect on the outcome of the vote on the proposals. The proposals presented at the General Meeting will require the following votes:
| ● | The approval of the Business Combination Proposal will require an ordinary resolution, which means a resolution passed by a simple majority of the votes cast by those FATP shareholders who, being entitled to do so, attend, in person or by proxy, and vote thereupon at the General Meeting. |
| ● | The approval of the Articles Amendment Proposal will require a special resolution, which means a resolution that is passed by a majority of at least two-thirds of the votes cast by those FATP shareholders who, being entitled to do so, attend, in person or by proxy, and vote thereupon at the General Meeting. |
| ● | The approval of the Share Issuance Proposal will require approval by a majority of the votes that are cast by those FATP shareholders who are present, in person or by proxy, and vote thereupon at the General Meeting. |
| ● | The approval of the Incentive Plan Proposal will require a general resolution, which means a resolution that is passed by a simple majority of the votes cast by those FATP shareholders who, being entitled to do so, attend, in person or by proxy, and vote thereupon at the General Meeting. |
| ● | The approval of the Adjournment Proposal if presented will require the consent of the meeting, which means a simple majority of the votes that are cast by those FATP shareholders who are present, in person or by proxy, and vote thereupon at the General Meeting. |
| ● | An abstention or broker non-vote will be counted towards the quorum requirement but will not count as a vote cast at the General Meeting and therefore will not have an effect on the outcome of the vote on the proposals. |
Redemption Rights
Pursuant to the Existing FATP Articles, a public FATP shareholder may request that FATP redeem all or a portion of its FATP Shares for cash if the Business Combination is consummated. As a holder of FATP Shares, you will be entitled to receive cash for any FATP Shares to be redeemed only if you:
| (i) | hold FATP Shares; |
| (ii) | submit a written request to Continental, FATP’s transfer agent, in which you (a) request that FATP redeem all or a portion of your FATP Shares for cash, and (b) identify yourself as the beneficial holder of the FATP Shares and provide your legal name, phone number and address; and |
| (iii) | deliver your shares or share certificates (if any) and other redemption forms (as applicable) to Continental, FATP’s transfer agent, physically or electronically through The Depository Trust Company’s (“DTC”) DWAC System. |
| (iv) | separate your FATP Shares from the FATP Warrants prior to exercising redemption rights with respect to the FATP Shares. |
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Holders of FATP Shares must complete the procedures for electing to redeem their public shares in the manner described above prior to [●], 2022 (two business days before the General Meeting) in order for their FATP Shares to be redeemed.
The redemption rights include the requirement that a holder must identify itself in writing as a beneficial holder and provide its legal name, phone number and address to Continental in order to validly redeem its shares.
If the Business Combination is not consummated, the public shares will be returned to the respective holder, broker or bank. If the Business Combination is consummated, and if a public FATP shareholder properly exercises its right to redeem all or a portion of the public shares that it holds and timely delivers its shares or share certificates (if any) and other redemption forms (as applicable) to Continental, FATP will redeem such public shares for a per-share price, payable in cash, equal to the pro rata portion of the amount on deposit in the trust account as of two business days prior to the consummation of the Business Combination, including interest earned on the funds held in the trust account and not previously released to FATP. If a public FATP shareholder exercises its redemption rights in full, then it will be electing to exchange its public shares for cash and will no longer own public shares. See “General Meeting of FATP Shareholders — Redemption Rights” for a detailed description of the procedures to be followed if you wish to redeem your public shares for cash.
A FATP shareholder, together with any affiliate of such holder and any person with whom such holder is acting in concert or as a “group” (as defined under Section 13(d)(3) of the Exchange Act), may not seek to have more than 15% of the aggregate public shares redeemed without the consent of FATP.
A FATP shareholder that requests redemption of its public shares may withdraw such request at any time up to the date of the General Meeting. See “General Meeting of FATP Shareholders — Redemption Rights” for a detailed description of the procedures to be followed if you wish to redeem your public shares for cash.
No Appraisal Rights
The Cayman Islands Companies Act prescribes when shareholder appraisal rights will be available and sets the limitations on such rights. Where such rights are available, shareholders are entitled to receive fair value for their shares. However, regardless of whether such rights are or are not available, shareholders are still entitled to exercise the rights of redemption as set out herein, and FATP has determined that the redemption proceeds payable to shareholders who exercise such redemption rights represents the fair value of those shares.
Holders of FATP Class A Ordinary Shares and FATP Warrants do not have appraisal or dissenters’ rights in connection with the Business Combination.
Proxy Solicitation
Proxies may be solicited by mail, telephone or in person. FATP has engaged Laurel Hill to assist in the solicitation of proxies.
If a shareholder grants a proxy, it may still vote its shares at the General Meeting if it revokes its proxy before the General Meeting. A shareholder may also change its vote by submitting a later-dated proxy as described in the section entitled “General Meeting of FATP Shareholders — Revoking Your Proxy.”
Interests of FATP’s Directors and Officers in the Business Combination
When considering the FATP Board’s recommendation to vote in favor of approving the Business Combination Proposal, the Articles Amendment Proposal, the Share Issuance Proposal and the Incentive Plan Proposal, FATP shareholders should keep in mind that the Sponsor and FATP’s directors and executive officers, have interests in such proposals that are different from, or in addition to (and which may conflict with), those of FATP shareholders generally. These interests include, among other things, the interests listed below:
| ● | the fact that the Sponsor’s Shareholders and FATP’s directors and officers have agreed not to redeem any FATP Class B Ordinary Shares held by them in connection with a shareholder vote to approve the Business Combination; |
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| ● | the fact that the Sponsor paid an aggregate of $25,000 for the 2,875,000 FATP Class B Ordinary Shares currently owned by the Sponsor’s Shareholders and the Anchor Investors, and such securities will have a significantly higher value after the Business Combination. As of September 23, 2022, the most recent practicable date prior to the date of this proxy statement/prospectus, the aggregate market value of these shares, if unrestricted and freely tradable, would be $28,635,000, based upon a closing price of $9.96 per public share on Nasdaq (and will have zero value if neither the Business Combination nor any other business combination is completed on or before the Final Redemption Date); |
| ● | the fact that the Sponsor paid $2,865,000 to purchase an aggregate of 2,865,000 Private Warrants currently owned by the Sponsor’s Shareholders at a price of $1.00 per Private Warrant, each exercisable to purchase one FATP Class A Ordinary Share at $11.50, subject to adjustment, and the Private Warrants would be worthless — and the entire $2,865,000 warrant investment would be lost — if FATP does not consummate a business combination by the Final Redemption Date. As of September 30, 2022, the estimated fair value of the Private Warrants was $142,964; |
| ● | the fact that given the very low purchase price (of $25,000 in aggregate) that the Sponsor paid for the FATP Class B Ordinary Shares as compared to the price of the FATP Shares sold in the FATP IPO and the substantial number of FATP Class A Ordinary Shares that the Sponsor’s Shareholders will receive upon conversion of the FATP Class B Ordinary Shares in connection with the Business Combination, the Sponsor’s Shareholders may earn a positive rate of return on their investment even if the FATP Class A Ordinary Shares trade below the price initially paid for the FATP Class A Ordinary Shares in the FATP IPO and the FATP public shareholders experience a negative rate of return following the completion of the Business Combination; |
| ● | the fact that the Sponsor’s Shareholders and FATP’s directors and executive officers have agreed to waive their rights to liquidating distributions from the trust account with respect to any FATP Shares (other than public shares) held by them if FATP fails to complete an initial business combination by the Final Redemption Date. As a result of waiving liquidating distributions, if FATP fails to complete an initial business combination by the Final Redemption Date, the Sponsor’s Shareholders and FATP’s directors and executive officers would lose $2,865,000 for the purchase of Private Warrants, and $25,000 for the purchase of the FATP Class B Ordinary Shares; |
| ● | the fact that FATP’s directors and officers have agreed to waive their redemption rights with respect to the FATP Shares (other than public shares) held by them for no consideration; |
| ● | the fact that, with respect to redemptions, holders of FATP Class B Ordinary Shares may have different incentives than holders of FATP Class A Ordinary Shares with respect to the completion of any proposed business combination and/or the exercise of a right to redeem. In particular, holders of FATP Class B Ordinary Shares are not entitled to participate in any redemption with respect to such shares. The value of the FATP Class B Ordinary Shares is dependent on FATP’s consummation of a business combination. In the event that FATP does not consummate a business combination, the FATP Class B Ordinary Shares would be rendered valueless. Holders of FATP Class A Ordinary Shares, on the other hand, will ultimately be entitled to exercise redemption rights and receive the value of their redeemed shares even if FATP does not complete a business combination. Therefore, the interests of holders of FATP Class A Ordinary Shares and FATP Class B Ordinary Shares may not be aligned. Holders of FATP Class A Ordinary Shares should form their own independent views as to whether or not to redeem or whether or not to vote in favor of the Business Combination Proposal; |
| ● | the fact that the Sponsor’s Shareholders and FATP’s officers and directors will lose their entire investment in FATP and will not be reimbursed for any out-of-pocket expenses if FATP does not consummate an initial business combination by the Final Redemption Date; |
| ● | the fact that the Sponsor (including its representatives and affiliates) and FATP’s directors and officers, are, or may in the future become, affiliated with entities that are engaged in a similar business to FATP. The Sponsor and FATP’s directors and officers are not prohibited from sponsoring, or otherwise becoming involved with, any other blank check companies prior to completing the Business Combination. Accordingly, if any of FATP’s officers or directors becomes aware of a business combination opportunity that is suitable for an entity to which he or she has then current fiduciary or |
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| contractual obligations, he or she will honor his or her fiduciary or contractual obligations to present such business combination opportunity to such entity, subject to their fiduciary duties under Cayman Islands law. |
| ● | If the trust account is liquidated, including in the event that FATP is unable to complete an initial business combination, the Sponsor has agreed that it will indemnify FATP if and to the extent that any claims by a third party (other than the independent public accounting firm) for services rendered or products sold to FATP, or a prospective target business with which FATP has entered into a written letter of intent, confidentiality or similar agreement or business combination agreement, reduce the amount of funds in the trust account to below the lesser of (i) $10.00 per public share and (ii) the actual amount per public share held in the trust account as of the date of the liquidation of the trust account, if less than $10.00 per public share due to reductions in the value of the trust assets, less taxes payable, provided that such indemnification will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the trust account (whether or not such waiver is enforceable) nor will it apply to any claims under our indemnity of the underwriters of the FATP IPO against certain liabilities, including liabilities under the Securities Act. |
The Sponsor’s Shareholders, which include all of FATP’s directors and executive officers or companies controlled by them, have agreed or are otherwise obligated to, among other things, vote all of their FATP Shares in favor of the proposals being presented at the General Meeting and waive their redemption rights with respect to their FATP Shares in connection with the consummation of the Business Combination. As of the date of this proxy statement/prospectus, the Sponsor’s Shareholders in the aggregate own approximately 14.7% of the issued and outstanding FATP Ordinary Shares.
The existence of financial and personal interests of one or more of FATP’s directors results in conflicts of interest on the part of such director(s) between what he, she, or they may believe is in the best interests of FATP and what he, she, or they may believe is best for himself, herself, or themselves in determining to recommend that shareholders vote for the proposals. In addition, FATP’s officers and directors have interests in the Business Combination that may conflict with your interests as a shareholder.
In addition to the above, please see “Risk Factors — Risks Relating to FATP and the Business Combination” and “Information Related to FATP — Our Past Blank Check Experience and Conflicts of Interest” for additional information on interests of FATP’s directors and officers.
Recommendation to Shareholders
The FATP Board believes that each of the proposals to be presented at the General Meeting is fair to, and in the best interests of, FATP and unanimously recommends that its shareholders vote “FOR” the Business Combination Proposal, “FOR” the Articles Amendment Proposal, “FOR” the Share Issuance Proposal, “FOR” the Incentive Plan Proposal and “FOR” the Adjournment Proposal, if presented.
Certain Information Relating to FATP
Emerging Growth Company
FATP is an “emerging growth company” as defined in Rule 405 of the Securities Act. New Avanseus will remain an “emerging growth company” until the earliest to occur of (i) the last day of the fiscal year (a) following the fifth anniversary of the closing of the Business Combination, (b) in which New Avanseus has total annual gross revenue of at least $1,235,000,000 or (c) in which New Avanseus is deemed to be a large accelerated filer, which means the market value of New Avanseus Ordinary Shares held by non-affiliates exceeds $700 million as of the last business day of New Avanseus’ prior second fiscal quarter, New Avanseus has been subject to Exchange Act reporting requirements for at least 12 calendar months; and filed at least one annual report, and (ii) the date on which New Avanseus issued more than $1.0 billion in non-convertible debt during the prior three-year period. New Avanseus intends to take advantage of exemptions from various reporting requirements that are applicable to most other public companies, whether or not they are classified as “emerging growth companies,” including, but not limited to, an exemption from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that New Avanseus’ independent registered public accounting firm provide an attestation report on the effectiveness of its internal control over financial reporting and reduced disclosure obligations regarding executive compensation.
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Material Tax Consequences
United States
For a discussion of the material U.S. federal income tax considerations for holders of FATP Class A Ordinary Shares with respect to the exercise of their redemption rights, see the section entitled “U.S. Holders — Redemption of Class A Ordinary Share” for additional information. The consequences of a redemption to any particular public shareholder will depend on that shareholder’s particular facts and circumstances. Accordingly, we urge you to consult your tax advisor to determine your tax consequences from the exercise of your redemption rights, including the applicability and effect of U.S. federal, state, local and non-U.S. income and other tax laws in light of your particular circumstances.
Singapore
For Singapore tax purposes, the Exchange is expected to be a tax-free transaction to Avanseus and FATP, and to Singapore-resident shareholders. Shareholders who are subject to tax outside Singapore should consult their own tax advisors to understand the tax implications of the Exchange.
For Singapore individual shareholders, on the basis these shareholders hold shares in Avanseus SG as personal long-term investments, gains on the sale of shares in Avanseus SG in exchange for shares in FATP should not be subject to Singapore taxes.
For Singapore corporate shareholders, gains recognized on the transfer of shares in Avanseus should not be subject to tax where such gains are capital in nature or where conditions under Section 13W of the Singapore Income Tax Act applies (see discussion below in “Material Tax Considerations” for additional details).
There should also not be adverse Singapore tax implications on the issuance and subscription of shares in the FATP.
Anticipated Accounting Treatment
The Business Combination will be accounted for as a capital reorganization, in accordance with IFRS. Under this method of accounting, FATP would be expected to be treated as the “acquired” company for financial reporting purposes, and Avanseus will be the accounting “acquirer”. This determination was primarily based on the assumption that:
| ● | Avanseus’ current shareholders will hold a majority of the voting power of New Avanseus post Business Combination; |
| ● | Avanseus’ operations will substantially comprise the ongoing operations of New Avanseus; |
| ● | Avanseus is the larger entity in terms of substantive operations and employee base; and |
| ● | Avanseus’ senior management will comprise the senior management of New Avanseus. |
Another determining factor was that FATP does not meet the definition of a “business” pursuant to IFRS 3, and thus, for accounting purposes, the Business Combination will be accounted for as a capital reorganization, within the scope of IFRS 2. The net assets of FATP will be stated at historical cost, with no goodwill or other intangible assets recorded. Any excess of fair value of shares issued to FATP over the fair value of FATP’s identifiable net assets acquired represents compensation for the service of a stock exchange listing for its shares and is expensed as incurred. The Business Combination Agreement provides that it is a condition to the obligation of each of FATP and Avanseus to close the Business Combination Transactions that public holders of FATP’s Class A Ordinary Shares elect the Minimum Redemption Scenario. The Minimum Redemption Scenario ensures that Avanseus is the acquiror for accounting purposes for all scenarios for which pro forma combined financial information of FATP and Avanseus is included in this proxy statement/prospectus.
Regulatory Matters
The Business Combination Agreement and the transactions contemplated by the Business Combination Agreement are not subject to a closing condition that any federal, state or foreign regulatory requirement or approval be obtained, except for filings with the Registrar of Companies of the Cayman Islands necessary to effectuate the transactions contemplated by the Business Combination Agreement and filings with ACRA in connection with the Exchange.
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Risk Factor Summary
In evaluating the proposals to be presented at the General Meeting of the shareholders of FATP or the offer to exchange Avanseus Ordinary Shares and Avanseus Non-Voting Shares for FATP Class A Ordinary Shares in the Exchange, a shareholder should carefully read this proxy statement/prospectus and especially consider the factors discussed in the section titled “Risk Factors.”
The consummation of the Business Combination and the business and financial condition of New Avanseus subsequent thereto are subject to numerous risks and uncertainties, including those highlighted in the section titled “Risk Factors.” The occurrence of one or more of the events or circumstances described below, alone or in combination with other events or circumstances, may adversely affect FATP’s and/or Avanseus’ ability to effect the Business Combination, and may have an adverse effect on the business, cash flows, financial condition and results of operations of FATP and/or Avanseus prior to the Business Combination and that of New Avanseus subsequent to the Business Combination. Such risks include, but are not limited to:
| ● | Avanseus operates in emerging and evolving markets, which may develop more slowly or differently than expected. If its target markets do not grow as it expects, or if it cannot expand its solutions and applications to meet the demands and evolving standards and rapid technological changes of these markets in a timely and cost-effective manner, Avanseus’ business, operating results, and financial condition could be adversely affected; |
| ● | Avanseus has a limited operating history, making it difficult to forecast its future results of operations; |
| ● | Avanseus’ recent growth may not be indicative of its future growth, and it may not be able to sustain its revenue growth rate in the future. Further, if Avanseus is unable to manage its growth effectively, its revenue and profits could be adversely affected; |
| ● | Avanseus may be unable to recruit or retain personnel with the necessary skills to operate and grow its business, and as a result its business, operating results, and financial condition could be adversely affected; |
| ● | Changes in laws and regulations related to the internet or changes in the internet infrastructure itself may diminish the demand for Avanseus’ solutions and applications, and could adversely affect Avanseus’ business, operating results, and financial condition; |
| ● | Uncertainties with respect to laws and regulations in the countries in which Avanseus operates could adversely affect its business, financial condition, and results of operations; |
| ● | Avanseus’ historical financial results and the unaudited pro forma condensed combined financial statements included elsewhere in this proxy statement/prospectus may not be indicative of Avanseus’ future consolidated results of operations or financial condition going forward, and the unaudited pro forma condensed combined financial statements included elsewhere in this proxy statement/prospectus may not be indicative of what Avanseus’ actual financial position or results of operations would have been; |
| ● | The projected financial and operating information in this proxy statement/prospectus relies in large part upon assumptions and analyses developed by Avanseus. If these assumptions or analyses prove to be incorrect, Avanseus’ actual operating results may be materially different from its forecasted results; |
| ● | The Business Combination Agreement remains subject to conditions that FATP and Avanseus cannot control and if such conditions are not satisfied or waived, the Business Combination may not be consummated; |
| ● | The Business Combination may be completed even though material adverse effects may result from the announcement of the Business Combination, industry-wide changes, and other causes; and |
| ● | The other risks and uncertainties discussed in “Risk Factors” and elsewhere in this proxy statement/prospectus. |
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SELECTED HISTORICAL FINANCIAL DATA OF FATP
The following tables present FATP’s selected historical financial information derived from FATP’s audited financial statements included elsewhere in this proxy statement/prospectus as of December 31, 2021 and for the period from April 16, 2021 (inception) through December 31, 2021 and FATP’s unaudited financial statements included elsewhere in this proxy statement/prospectus as of September 30, 2022 and for the nine months ended September 30, 2022.
The financial data set forth below should be read in conjunction with, and is qualified by reference to, “FATP’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and notes thereto included elsewhere in this proxy statement/prospectus. FATP’s financial statements are prepared and presented in accordance with U.S. GAAP.
| For the nine months ended September 30, 2022 |
For the period from April 16, 2021 (inception) to September 30, 2021 |
For the period from April 16, 2021 (inception) to December, 2021 |
||||||||||
| Income Statement Data: | ||||||||||||
| Loss from operations | $ | (1,706,360 | ) | $ | (50,293 | ) | $ | (241,834 | ) | |||
| Net loss | $ | (913,423 | ) | $ | (50,293 | ) | $ | (231,291 | ) | |||
| Weighted average shares outstanding, Class A ordinary share subject to possible redemption | 11,500,000 | - | 3,450,000 | |||||||||
| Basic and diluted net loss per share, Class A ordinary share subject to possible redemption | $ | (0.06 | ) | $ | - | $ | (0.04 | ) | ||||
| Weighted average shares outstanding, Non-redeemable Class A and Class B ordinary share | 2,990,000 | 2,500,000 | 2,589,308 | |||||||||
| Basic and diluted net loss per share, Non-redeemable Class A and Class B ordinary share | $ | (0.06 | ) | $ | (0.02 | ) | $ | (0.04 | ) | |||
| September 30, 2022 |
December 31, 2021 |
|||||||
| Balance Sheet Data: | ||||||||
| Investments held in the trust account | $ | 115,803,480 | $ | 115,010,543 | ||||
| Total assets | $ | 116,208,331 | $ | 116,091,073 | ||||
| Total liabilities | $ | 5,192,152 | $ | 4,161,471 | ||||
| Ordinary shares subject to possible redemption | $ | 115,803,480 | $ | 115,000,000 | ||||
| Total stockholders’ deficit | $ | (4,787,301 | ) | $ | (3,070,398 | ) | ||
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SELECTED HISTORICAL FINANCIAL DATA OF AVANSEUS
The following tables present Avanseus’ selected historical financial information derived from Avanseus’ audited financial statements included elsewhere in this proxy statement/prospectus as of December 31, 2021 and December 31, 2020 and for the full years then ended and Avanseus’ unaudited financial statements included elsewhere in this proxy statement/prospectus as of June 30, 2022 and for the six months ended June 30, 2022.
The financial data set forth below should be read in conjunction with, and is qualified by reference to, “Avanseus’ Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and notes thereto included elsewhere in this proxy statement/prospectus. Avanseus’ financial statements are prepared and presented in accordance with IFRS.
| Six Months Ended | Year Ended | |||||||||||||||
| June 30, | December 31, | |||||||||||||||
| (amounts in USD) | 2022 | 2021 | 2021 | 2020 | ||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
| Consolidated Statement of Profit or Loss Data | ||||||||||||||||
| Revenue | 2,870,441 | 1,395,727 | 4,012,815 | 3,165,357 | ||||||||||||
| Cost of sales | (204,005 | ) | (349,264 | ) | (800,896 | ) | (726,453 | ) | ||||||||
| Gross Profit | 2,666,436 | 1,046,463 | 3,211,919 | 2,438,904 | ||||||||||||
| Other operating expenses | (1,972,650 | ) | (1,133,743 | ) | (2,284,819 | ) | (2,669,908 | ) | ||||||||
| Other income | 9,765 | 1,319 | 17,841 | 50,570 | ||||||||||||
| Other (losses)/gains | (54,101 | ) | (10,894 | ) | (72,090 | ) | 197,589 | |||||||||
| Profit (loss) before income tax | 649,450 | (96,855 | ) | 872,851 | 17,155 | |||||||||||
| Income tax expense | (29,380 | ) | (19,172 | ) | (48,049 | ) | (45,974 | ) | ||||||||
| Net profit/(loss) | 620,070 | (116,027 | ) | 824,802 | (28,819 | ) | ||||||||||
| Basic earnings/(loss) per share | 0.03 | (0.01 | ) | 0.04 | (0.00 | ) | ||||||||||
| Diluted earnings/(loss) per share | 0.02 | (0.01 | ) | 0.03 | (0.00 | ) | ||||||||||
| Consolidated Statement of Cash Flows Data | ||||||||||||||||
| Net cash flows used in operating activities | 418,176 | 743,025 | 1,497,124 | 205,156 | ||||||||||||
| Net cash flows used in investing activities | (3,448 | ) | (73,630 | ) | (87,608 | ) | (10,159 | ) | ||||||||
| Net cash flows from financing activities | 2,108,000 | - | - | 1,000,000 | ||||||||||||
| Consolidated Balance Sheet Data | ||||||||||||||||
| Cash and bank balances | 5,892,029 | 3,408,708 | 3,408,708 | 2,010,415 | ||||||||||||
| Total assets | 6,541,898 | 4,441,185 | 4,441,185 | 4,348,130 | ||||||||||||
| Total liabilities | 1,122,443 | 1,830,489 | 1,830,489 | 2,691,936 | ||||||||||||
| Total equity | 5,419,455 | 2,610,696 | 2,610,696 | 1,656,194 | ||||||||||||
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SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The unaudited pro forma condensed combined financial statements do not necessarily reflect what the combined company’s financial condition or results of operations would have been had the Business Combination and the PIPE Investment occurred on the dates indicated. The unaudited pro forma condensed combined financial statements also may not be useful in predicting the future financial condition and results of operations of the combined company. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors. The unaudited pro forma condensed combined financial statements are presented for illustrative purposes only.
The unaudited pro forma condensed combined financial information has been prepared using the assumptions below with respect to the potential redemption into cash of FATP Class A Ordinary Shares:
| ● | Assuming the Minimum Redemption Scenario: FATP public shareholders holding 5,200,000 FATP Class A Ordinary Shares will exercise their redemption rights for $52.4 million upon consummation of the Business Combination at a redemption price of approximately $10.07 per share. |
| ● | Assuming the Maximum Redemption Scenario: This presentation assumes that FATP public shareholders holding 8,066,376 FATP Class A Ordinary Shares will exercise their redemption rights for $81.2 million upon consummation of the Business Combination at a redemption price of approximately $10.07 per share. The Business Combination Agreement contains a condition to the closing of the Business Combination that FATP will have cash and cash equivalents comprising working capital to be used for general corporate purposes, including funds remaining in the rust account (after giving effect to the completion and payment of the redemption of the FATP public shares) and the proceeds of any PIPE Investment, after giving effect to the payment of FATP’s and Avanseus’ expenses in connection with the Business Combination Transactions equal to at least $25 million. |
The following table sets out share ownership of New Avanseus on a pro forma basis assuming the Minimum Redemption Scenario and the Maximum Redemption Scenario, and is based on Avanseus Shares outstanding as of September 30, 2022:
| Minimum Redemption Scenario | Maximum Redemption Scenario | |||||||
| Avanseus shareholders | 9,350,307 | 9,350,307 | ||||||
| FATP public shareholders | 6,300,000 | 3,433,624 | ||||||
| Sponsor’s Shareholders, Anchor Investors (FATP Class B Ordinary Shares), and underwriter | 2,990,000 | 2,990,000 | ||||||
| Total | 18,640,307 | 15,773,931 | ||||||
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The following table sets out summary data derived from the unaudited pro forma condensed combined statement of financial position and the unaudited pro forma condensed combined statement of operations. The summary unaudited pro forma condensed combined balance sheet as of September 30, 2022, gives effect to the Business Combination as if it had occurred on September 30, 2022. The summary unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2022, and for the year ended December 31, 2021, gives effect to the Business Combination as if it had occurred on January 1, 2021:
Pro Forma Combined (in thousands, except share and per share amounts) | ||||||||
| Minimum Redemption Scenario | Maximum Redemption Scenario | |||||||
| Summary Unaudited Pro Forma Condensed Combined Statement of Operations Data For the Nine Months Ended September 30, 2022 | ||||||||
| Net income | $ | 4,727 | $ | 4,727 | ||||
| Net income per share – basic and diluted | $ | 0.25 | $ | 0.30 | ||||
| Weighted average shares outstanding – basic and diluted | 18,640,307 | 15,773,931 | ||||||
| Summary Unaudited Pro Forma Condensed Combined Statement of Operations Data For the Year Ended December 31, 2021 | ||||||||
| Net loss | $ | (37,058 | ) | $ | (37,058 | ) | ||
| Net loss per share – basic and diluted | $ | (1.99 | ) | $ | (2.35 | ) | ||
| Weighted average shares outstanding of common stock – basic and diluted | 18,640,307 | 15,773,931 | ||||||
| Summary Unaudited Pro Forma Condensed Combined Balance Sheet Data As of September 30, 2022 | ||||||||
| Total assets | $ | 60,567 | $ | 31,703 | ||||
| Total liabilities | $ | 2,019 | $ | 2,019 | ||||
| Total equity | $ | 58,548 | $ | 29,684 | ||||
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FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus includes statements that express FATP’s and Avanseus’ opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results of operations or financial condition and therefore are, or may be deemed to be, “forward-looking statements.” These forward-looking statements can generally be identified by the use of forward-looking terminology, including the terms “believes,” “estimates,” “anticipates,” “expects,” “seeks,” “projects,” “intends,” “plans,” “may,” “will” or “should” or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this proxy statement/prospectus and include statements regarding FATP’s and Avanseus’ intentions, beliefs or current expectations concerning, among other things, the Business Combination, the benefits and synergies of the Business Combination, including anticipated cost savings, results of operations, financial condition, liquidity, prospects, growth, strategies, future market conditions or economic performance and developments in the capital and credit markets and expected future financial performance, the markets in which Avanseus operates, and statements regarding Avanseus’ business plans and growth expectations, as well as any information concerning possible or assumed future results of operations of the combined company after the consummation of the Business Combination. Such forward-looking statements are based on available current market material and management’s expectations, beliefs and forecasts concerning future events impacting FATP and Avanseus. Factors that may impact such forward-looking statements include:
| ● | The development of the emerging and evolving markets in which Avanseus operates, including the risk that such markets may develop more slowly or differently than we expect; |
| ● | Avanseus’ and New Avanseus’ ability to manage their future growth; |
| ● | Developments related to the COVID-19 pandemic, including, among others, with respect to stay-at-home orders, social distancing measures, the success of vaccine rollouts, numbers of COVID-19 cases and the occurrence of new COVID-19 strains that might evade existing control measures and lead to the worsening or extension of adverse economic or movement control measures; |
| ● | The regulatory environment and changes in laws, regulations, or policies in the jurisdictions in which Avanseus operates; |
| ● | Political instability in the jurisdictions in which Avanseus operates; |
| ● | The ongoing impact of the Russian invasion of Ukraine on energy prices and the possibility that potential customers of Avanseus may need to shift more of their spending to paying their energy costs, leaving them less likely to purchase Avanseus’ solutions; |
| ● | The overall economic environment and general market and economic conditions in the jurisdictions in which Avanseus operates; |
| ● | Anticipated technology trends and developments and Avanseus’ ability to address those trends and developments with its solutions and applications; |
| ● | The ability to protect information technology systems and platforms against security breaches (which includes physical and/or cybersecurity breaches either by external actors or rogue employees) or otherwise protect confidential information; |
| ● | Man-made or natural disasters, including war, acts of international or domestic terrorism, civil disturbances, occurrences of catastrophic events and acts of God such as floods, earthquakes, wildfires, typhoons and other adverse weather and natural conditions that affect Avanseus’ business or assets; |
| ● | The inability to recruit or retain personnel with the necessary skills to operate and grow Avanseus’ business; |
| ● | The loss of key personnel and the inability to replace such personnel on a timely basis or on acceptable terms; |
| ● | Exchange rate fluctuations; |
| ● | Changes in interest rates or rates of inflation; |
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| ● | Legal, regulatory, and other proceedings; |
| ● | Tax laws and the interpretation and application thereof by tax authorities in the jurisdictions where Avanseus operates; |
| ● | The number and percentage of FATP shareholders voting against the Business Combination Proposal, the Articles Amendment Proposal, the Share Issuance Proposal, and/or the Incentive Plan Proposal, and/or seeking redemption; |
| ● | The occurrence of any event, change or other circumstances that could give rise to the termination of the Business Combination Agreement; and |
| ● | The other risks and uncertainties discussed in this proxy statement/prospectus. |
The forward-looking statements contained in this proxy statement/prospectus are based on FATP’s and Avanseus’ current expectations and beliefs concerning future developments and their potential effects on the Business Combination and New Avanseus. There can be no assurance that future developments affecting FATP and/or Avanseus will be those that FATP or Avanseus has anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond either FATP’s or Avanseus’ control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under the heading “Risk Factors.” Should one or more of these risks or uncertainties materialize, or should any of the assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. FATP and Avanseus will not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
Before a FATP shareholder grants its proxy, instructs how its vote should be cast or votes on the Business Combination Proposal, the Articles Amendment Proposal, the Share Issuance Proposal, the Incentive Plan Proposal, or the Adjournment Proposal, or an Avanseus shareholder enters into a Share Exchange Agreement or an Unvested Restricted Share Amendment, he, she, or it should be aware that the occurrence of the events described in the “Risk Factors” section and elsewhere in this proxy statement/prospectus may adversely affect FATP, Avanseus, and/or New Avanseus.
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RISK FACTORS
You should carefully consider the following risk factors, together with all of the other information included in this proxy statement/prospectus, before, if you are a FATP shareholder, you decide whether to vote or instruct your vote to be cast to approve the proposals described in this proxy statement/prospectus or, if you are an Avanseus shareholder, whether to enter into a Share Exchange Agreement and/or an Unvested Restricted Share Amendment. Certain of the following risk factors apply to the business and operations of Avanseus and will also apply to the business and operations of New Avanseus following the completion of the Business Combination. The occurrence of one or more of the events or circumstances described in these risk factors, alone or in combination with other events or circumstances, may adversely affect FATP’s and Avanseus’ ability to complete or realize the anticipated benefits of the Business Combination, and may have a material adverse effect on the business, financial condition, results of operations, prospects, and trading price of New Avanseus following the Business Combination. The risks discussed below may not prove to be exhaustive and are based on certain assumptions made by FATP and Avanseus, which later may prove to be incorrect or incomplete. New Avanseus, FATP and Avanseus may face additional risks and uncertainties that are not presently known or that FATP and Avanseus currently deem immaterial but that may also ultimately have an adverse effect on FATP, Avanseus, and/or New Avanseus.
Risks Related to Avanseus’ Business and Industry
We operate in emerging and evolving markets, which may develop more slowly or differently than we expect. If our markets do not grow as we expect, or if we cannot expand our solutions and applications to meet the demands and evolving standard of these markets, our revenue may decline or fail to grow, and we may not be able to continue to operate profitably.
The predictive maintenance, health and performance management, and energy management software markets are at an early stage of development. There is considerable uncertainty over the size and rate at which these markets will grow, as well as whether our solutions and applications will be widely accepted. Moreover, these markets are subject to rapid technological changes, evolving industry standards, changing regulations, and changing customer needs, requirements, and preferences. The success of our business will depend, in part, on our ability to adapt and respond effectively to these changes on a timely basis. If we are unable to develop and launch new solutions and applications or provide enhancements and new features to keep pace with rapid technological and industry changes, our business, results of operations, and financial condition could be adversely affected. If new technologies emerge that are able to deliver competitive software solutions and applications at lower prices or more efficiently or securely, such technologies could adversely impact our ability to compete effectively.
Our solutions and applications must also integrate with a variety of networks, hardware, software, and technologies, and we need to continuously modify and enhance our solutions and applications to adapt to changes and innovation. For example, if customers adopt new software, we may be required to develop new versions of our solutions and applications to be compatible with such new software. This development effort may require significant resources, which would adversely affect our business, results of operations, and financial condition. Any failure of our solutions and applications to operate effectively with evolving or new software and technologies could reduce the demand for our solutions and applications. If we are unable to respond to these changes in a cost-effective manner, our solutions and applications may become less marketable and less competitive or obsolete, and our business, results of operations, and financial condition could be adversely affected.
We have a limited operating history, making it difficult to forecast our future results of operations.
We commenced our operations in June 2015. Our relatively limited operating history makes it difficult to evaluate our current business and prospects, and to plan for our anticipated future growth. As a result of our limited operating history, our ability to accurately forecast our future results of operations is limited and subject to a number of uncertainties, including our ability to plan for and model future growth. Our historical revenue growth should not be considered indicative of our future performance.
Further, in future periods, our revenue growth could slow down or our revenue could decline for a number of reasons, including slowing demand for our offerings, increased competition, changes to technology, a decrease in the growth of our overall target markets, or our failure, for any reason, to continue to take advantage of growth opportunities. We have also encountered, and will continue to encounter, risks and uncertainties frequently
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experienced by growing companies in rapidly-changing industries, such as the risks and uncertainties described below. If our assumptions regarding these risks and uncertainties and our future revenue growth are incorrect, or if we do not address these risks successfully, our operating and financial results could differ materially from our expectations, and our business could suffer.
FATP’s Board valued Avanseus primarily using Avanseus’ projected revenues for a single year, 2023, which assumed that Avanseus would obtain new customers while not losing any current customers.
FATP used 2023 forecast revenue as its primary metric for valuing Avanseus and used 2023 gross profit and gross profit margin as supplemental metrics. FATP based its valuation primarily on projected revenues rather than historic revenues because Avanseus is a growth stage technology company, and FATP believes that historical financial performance is not a good indicator of future potential for such companies. FATP limited its valuation to 2023 projections because (i) the further in the future one tries to project, the more uncertain the projections become, particularly for growth-stage technology companies compared to more mature operating companies, and (ii) public companies, which FATP used for comparison, tend to only publicize one-year forecasts, so longer-term forecasts for comparable companies were not readily available.
Avanseus provided FATP with 2023 forecasts that included detailed forecasts for existing and new customers identified by name. In discussions of Avanseus’ projections, Avanseus was able to clearly articulate its plan to achieve the 2023 revenue target based on their already-booked sales with existing customers, the revenue that will be delivered as part of those contracts in 2023, and the pipeline of new business consisting of (i) expansion of existing business for existing customers to other business units and/or markets of those same customers, (ii) expansion of the business with additional use cases with existing customers, such as data center energy management and (iii) expansion of the business through new customers for whom proof-of-concepts are already being conducted. The 2023 forecasts assumed that Avanseus would retain all of its existing 2022 customers while adding new customers. FATP believed this assumption was reasonable based on Avanseus’ historic customer retention.
While Avanseus provided FATP with forecasts for 2024 and 2025, the support for these forecasts was not nearly as detailed as the forecasts for 2022 and 2023, and FATP did not believe it reasonably possible to forecast results this far into the future. Consequently, FATP did not use the 2024 or 2025 forecasts in valuing Avanseus.
FATP believes that valuations of mature companies typically use multiple years of historical financial data and projections of up to five years. Valuations are inherently uncertain, however, and there can be no assurance that Avanseus’ projections and FATP’s valuation of Avanseus are not more uncertain than the typical valuation for a more typical mature company. Avanseus’ actual value and/or the market’s perception of the value of Avanseus after the Closing could be substantially less that FATP’s valuation included in this proxy statement/prospectus, and you could experience a significant material diminishment in the value of your investment in the combined company, if the post-Closing market price reflects a valuation of Avanseus that is substantially less than the value ascribed to Avanseus by FATP as set forth in this proxy statement/prospectus. For additional information on Avanseus’ projections and FATP’s valuation of Avanseus, see the sections titled “FATP’S Valuation of Avanseus” and “Certain Projected Financial Information Of Avanseus.”
We have a history of losses prior to the year ended December 31, 2021, anticipate increasing our operating expenses in the future, and may not be able to sustain profitability in the future.
We incurred net losses in each fiscal year since our inception except for the year ended December 31, 2021. As of December 31, 2021, we had accumulated losses of $6.0 million. We expect to continue to incur significant costs and expenses associated with the operation and development of an expanding business. These costs and expenses include, but are not limited to, product development and enhancement, sales and marketing, and personnel. These efforts may prove more expensive than we currently anticipate, and we may not succeed in increasing our revenue sufficiently, or at all, to offset these higher expenses and to sustain profitability. Growth of our revenue may slow or revenue may decline for a number of possible reasons, including a decrease in our ability to attract and retain both direct and indirect (i.e., those who purchase through resellers) customers, a failure to increase our number of channel partners, increasing competition, decreasing growth of our overall markets, and an inability to timely and cost-effectively introduce new solutions and applications that are favorably received by customers and partners. If we are unable to meet these risks and challenges as we encounter them, our business and operating results may be adversely affected, and we may not be able to sustain or increase our profitability.
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Our recent growth may not be indicative of our future growth, and we may not be able to sustain our revenue growth rate in the future. Our growth also makes it difficult to evaluate our future prospects and may increase the risk that we will not be successful.
We have experienced rapid growth since the inception of our operations. Our revenue increased by 26.8%, 26.7%, and 146.2%, respectively, during the years ended December 31, 2021, 2020, and 2019, in each case compared to the prior year. You should not, however, rely on the revenue growth of any prior period as an indication of our future performance. We cannot assure you that we will be able to manage our growth at the same rate as we did in the past or avoid any decline in the future. To maintain our growth, we need to attract more customers, expand the number of our channel partners, and hire more qualified research and development and Design Studio staff, among other things. Moreover, our current and planned staffing, systems, policies, procedures, and controls may not be adequate to support our future operations. To effectively manage the expected growth of our operations and personnel, we will also be required to refine our operational, financial, and management controls and reporting systems and procedures. If we fail to efficiently manage the expansion of our business, our costs and expenses may increase faster than we planned and we may not successfully attract a sufficient number of customers in a cost-effective manner, respond timely to competitive challenges, or otherwise execute our business plan. Our growth requires significant financial resources and will continue to place significant demands on our management. There is no guarantee that we will be able to effectively manage any future growth in an efficient, cost-effective, and timely manner, or at all. Our growth in a relatively short period of time is not necessarily indicative of results that we may achieve in the future. If we fail to effectively manage the growth of our business and operations, our reputation, results of operations, and overall business and prospects could be negatively impacted.
The projections and forecasts presented in this proxy statement/prospectus may not be an indication of the actual results of the transaction or our future results.
This proxy statement/prospectus contains projections and forecasts prepared by Avanseus. None of the projections and forecasts included in this proxy statement/prospectus have been prepared with a view toward public disclosure other than to certain parties involved in the Business Combination or toward complying with SEC guidelines or IFRS. The projections and forecasts were prepared based on numerous variables and assumptions, which are inherently uncertain and may be beyond the control of Avanseus and FATP, and exclude, among other things, transaction-related expenses. Important factors that may affect actual results and results of Avanseus’ operations following the Business Combination or that could lead to such projections and forecasts not being achieved include, but are not limited to, client demand for Avanseus’ solutions and applications, an evolving competitive landscape, regulatory changes in a highly-regulated environment, successful management and retention of key personnel, unexpected expenses, and general economic conditions. While Avanseus assumes responsibility for the accuracy and completeness of the projections and forecasts to the extent included in this proxy statement/prospectus, we caution you not to place undue reliance on the projections, as the projections may be materially different than actual results.
The projections and forecasts presented in this proxy statement/prospectus have been prepared by Avanseus’ management. Investors and others should note that the projections and forecasts have not been independently verified or confirmed by FATP or any third party. In particular, none of BF Borgers CPA PC, Marcum LLP, nor any independent accountants, have audited, reviewed, examined, compiled, or applied agreed-upon procedures with respect to the projections and forecasts, and none of them have expressed an opinion or any other form of assurance with respect to the projections and forecasts.
We have been growing rapidly and expect to continue to invest in our growth for the foreseeable future. If we are unable to manage our growth effectively, our revenue and profits could be adversely affected.
We have experienced rapid growth in a relatively short period of time. Our revenue grew from $320 thousand during the year ended December 31, 2017, to $4.0 million in the year ended December 31, 2021.
We plan to continue to expand our operations and headcount significantly, and we anticipate that further significant expansion will be required. While we plan to ramp-up our indirect sales operations, our direct sales operations will need to increase as well as we continue to expand our operations into other countries and industries in the future, which will place additional demands on our resources and operations. Our future operating results depend to a large extent on our ability to manage this expansion and growth successfully. Sustaining our growth will place significant demands on our management as well as on our administrative, operational, and financial resources. To manage our growth, we must continue to improve our operational, financial, and management information systems and expand,
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motivate, and manage our workforce. If we are unable to manage our growth successfully without compromising our quality of service or our profit margins, or if new systems that we implement to assist in managing our growth do not produce the expected benefits, our revenue and profits could be harmed. Risks that we face in undertaking future expansion include:
| ● | effectively recruiting, integrating, training, and motivating a large number of new employees, including our direct sales force, while retaining existing employees, maintaining the beneficial aspects of our corporate culture, and effectively executing our business plan; |
| ● | satisfying existing customers and attracting new customers; |
| ● | successfully improving and expanding the capabilities of our software platform and introducing new solutions and applications; |
| ● | expanding our channel partner ecosystem; |
| ● | controlling expenses and investments in anticipation of expanded operations; |
| ● | implementing and enhancing our administrative, operational, and financial infrastructure, systems, and processes; |
| ● | addressing new markets; and |
| ● | expanding operations into other countries, including the United States. |
If we are not able to introduce new features or solutions successfully and to make enhancements to our existing solutions and applications, our business and results of operations could be adversely affected.
To attract new customers and keep our existing customers engaged, we must continuously introduce new solutions and applications and upgrade our existing offerings to meet their evolving preferences. It is difficult to predict the preferences of a particular customer or a specific group of customers. Changes and upgrades to our existing solutions may not be well received by our customers and their end users, and newly-introduced solutions may not achieve success as expected. For example, we may introduce predictive operations solutions or energy management solutions for data centers or industrial plants, for which we have little or no prior experience. Such efforts may require us to contribute a substantial amount of additional human capital and financial resources. We cannot assure you that any of such new solutions will achieve market acceptance or generate sufficient revenues to adequately compensate for the costs and expenses incurred pursuant to our development and promotion efforts. Enhancements and new solutions and applications that we develop may not be introduced in a timely or cost-effective manner, may contain errors or defects, or may not achieve the broad market acceptance necessary to generate significant revenue. If we fail to improve our existing solutions and introduce new ones in a timely or cost-effective manner, our ability to attract and retain customers may be impaired, and our financial performance and prospects may be adversely affected.
If we are unable to develop and release product and service enhancements and new solutions and applications to respond to rapid technological changes in a timely and cost-effective manner, our business, operating results, and financial condition could be adversely affected.
The markets for our software platform are characterized by rapid technological change, frequent new product and service introductions and enhancements, changing customer demands, and evolving industry standards. The introduction of solutions and applications embodying new technologies can quickly make existing solutions and applications obsolete and unmarketable. Data management, machine learning, and analytics platforms and applications are inherently complex, and it can take a long time and require significant research and development expenditures to develop and test new or enhanced solutions and applications. The success of any enhancements or improvements to our existing solutions or any new solutions and applications depends on several factors, including timely completion, competitive pricing, adequate quality testing, integration with existing technologies, and overall market acceptance.
Our ability to grow our customer base and generate revenue from customers will depend heavily on our ability to enhance and improve our solutions and applications, to develop additional functionality and use cases, introduce new features and applications, and interoperate across an increasing range of devices, operating systems, and third-party applications. Our customers may require features and capabilities that our current solutions and
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applications do not have or may face use cases that our current solutions and applications do not address. We invest significantly in research and development, and our goal is to focus our spending on measures that improve quality and ease of adoption and create organic customer demand for our solutions and applications. When we develop a new enhancement or improvement to our solutions, we typically incur expenses and expend resources upfront to develop, market, and promote the new enhancement and improvement. Therefore, when we develop and introduce new enhancements and improvements to our solutions, they must achieve high levels of market acceptance in order to justify the amount of our investment in developing and bringing them to market. There is no assurance that our enhancements to our solutions or our new application experiences, functionality, use cases, features, or capabilities will be compelling to our customers or gain market acceptance. If our research and development investments do not accurately anticipate customer demand, or if we fail to develop our solutions and applications in a manner that satisfies customer preferences in a secure, timely, and cost-effective manner, we may fail to retain our existing customers or increase demand for our solutions and applications.
Moreover, even if we introduce new solutions and applications, we may experience a decline in revenue from sales of our existing solutions and applications that is not offset by revenue from the new ones. For example, customers may delay ordering licenses and/or subscriptions of new solutions and applications to permit them to make a more thorough evaluation or until industry and marketplace reviews become widely available. Some customers may hesitate to migrate to new solutions and applications due to concerns regarding the complexity of migration and the solutions and applications infancy issues on performance. In addition, we may lose existing customers who choose a competitor’s solutions rather than migrate to our new ones. This could result in a temporary or permanent revenue shortfall and adversely affect our business.
Any failure of our solutions and applications to operate effectively with future infrastructure platforms and technologies could reduce the demand for our solutions and applications. If we are unable to respond to these changes in a timely and cost-effective manner, our solutions and applications may become less marketable, less competitive, or obsolete, and our operating results may be adversely affected.
The introduction of new AI platforms and applications by competitors or the development of entirely new technologies to replace existing offerings could make our solutions and applications obsolete or adversely affect our business, results of operations, and financial condition. We may experience difficulties with software development, design, or marketing that could delay or prevent our development, introduction, or implementation of new solutions and applications or application experiences, features, or capabilities. We have in the past experienced delays in our internally-planned release dates of new features and capabilities, and there can be no assurance that new solution or application features or capabilities will be released according to schedule. Any delays could result in adverse publicity, loss of revenue or market acceptance, or claims by customers brought against us, all of which could harm our business. Moreover, new productivity features for our solutions and applications may require substantial investment, and we have no assurance that such investments will be successful. If customers do not widely adopt our new solution and application features and capabilities, we may not be able to realize a return on our investment. If we are unable to develop, license, or acquire new features and capabilities to our solutions and applications on a timely and cost-effective basis, or if such enhancements do not achieve market acceptance, our business could be harmed.
If we are unable to attract new customers and expand sales to existing customers, our revenue growth could be slower than we expect, and our business may be harmed.
Our future revenue growth depends in part upon increasing our customer base, including both our direct and our indirect customers. Our ability to achieve significant growth in revenue in the future will depend, in large part, upon the effectiveness of our marketing efforts, both domestically and internationally, and our ability to attract new customers and channel partners. This may be particularly challenging where an organization has already invested substantial personnel and financial resources to integrate traditional data analytics tools into its business, as such organization may be reluctant or unwilling to invest in new solutions and applications. If we fail to attract new customers and maintain and expand those customer relationships, our revenue will grow more slowly than expected and our business will be harmed.
Our future revenue growth also depends upon expanding sales and renewals of licenses and/or subscriptions to our software to existing customers. If our direct customers do not purchase additional licenses or capabilities and/or our reseller customers do not purchase new licenses for upgraded versions of our software after their initial term that includes upgrades has expired, our revenue may grow more slowly than expected, may not grow at all, or may
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decline. Additionally, increasing incremental sales to our current customer base requires sophisticated and costly sales efforts that are targeted at senior management. For example, during the years ended December 31, 2021 and 2020, sales and marketing expenses represented 20.2% and 23.3% of our revenue, respectively. We plan to continue expanding our sales efforts, both domestically and internationally through indirect but also direct channels, but we may be unable to hire qualified sales personnel, may be unable to successfully train those sales personnel that we are able to hire, and sales personnel may not become fully productive on the timelines that we have projected or at all. Additionally, although we dedicate significant resources to sales and marketing programs, including internet and other online advertising, these sales and marketing programs may not have the desired effect and may not expand sales. We cannot assure you that our efforts will result in increased sales to existing customers and/or additional revenue. If our efforts to upsell to our customers are not successful, our business and operating results would be adversely affected.
Customers that purchase from us directly generally enter into license agreements with one- to three-year terms and have no obligation or contractual right to renew their licenses after the expiration of their initial license period, while our reseller customers purchase a perpetual license that generally includes upgrades to the licensed software solutions but only for an initial term, generally five years, after which the license is only for the most recent version of the applicable software solution(s) at the end of such term and not for any future upgrades to such software. Moreover, our direct customers that do renew their licenses may renew for lower amounts or for shorter periods. Similarly, while our reseller customers may purchase a new license when the software for which they continue to have a license after the initial term of their agreement becomes obsolete, they are not obligated to do so. Customer renewal rates, including the rate at which our reseller customers purchase new licenses for our upgraded solutions, may decline or fluctuate as a result of a number of factors, including the breadth of early deployment, reductions in our customers’ or their end-users’ spending levels, our pricing or pricing structure, the pricing or capabilities of products or services offered by our competitors, our customers’ and our channel partners’ customers’ or end users’ satisfaction or dissatisfaction with our solutions, or the effects of economic conditions. If our customers do not renew their agreements or enter into new agreements with us, or renew or enter into new agreements on terms that our less favorable to us, our revenue may decline.
Our ability to sell licenses and/or subscriptions to our solutions could be harmed by real or perceived material defects or errors.
The software technology underlying our solutions is inherently complex and may contain material defects or errors, particularly when new applications are first introduced, when new features or capabilities are released, or when integrated with new or updated third-party hardware or software. There can be no assurance that our existing and new solutions and applications will not contain defects or errors. Any real or perceived errors, failures, vulnerabilities, or bugs in our solutions and applications could result in negative publicity or lead to data security, access, retention, or other performance issues, all of which could harm our business. Correcting such defects or errors may be costly and time-consuming and could harm our business. Moreover, the harm to our reputation and legal liability related to such defects or errors may be substantial and would harm our business.
If we are unable to ensure that our solutions and applications interoperate with a variety of software applications that are developed by others, including our channel partners, we may become less competitive and our results of operations may be harmed.
Our solutions and applications must integrate with a variety of hardware and software platforms, and we need to continuously modify and enhance our solutions and applications to adapt to changes in hardware and software technologies. In particular, we have developed our solutions and applications to be able to easily integrate with key third-party applications, including the applications of software providers that compete with us as well as our partners. We are typically subject to standard terms and conditions of such providers, which govern the distribution, operation, and fees of such software systems, and that are subject to change by such providers from time to time. Our business will be harmed if any provider of such software systems:
| ● | discontinues or limits our access to its software; |
| ● | modifies its terms of service or other policies, including fees charged to, or other restrictions, on us or other software applications’ developers; |
| ● | changes how information is accessed by us or our customers; |
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| ● | establishes more favorable relationships with one or more of our competitors; or |
| ● | develops or otherwise favors its own competitive offerings over our solutions and applications. |
Third-party services and products are constantly evolving, and we may not be able to modify our solutions and applications to assure their compatibility with that of other third parties as they continue to develop or emerge in the future or we may not be able to make such modifications in a timely and cost-effective manner. In addition, some of our competitors may be able to disrupt the operations or compatibility of our solutions and applications with their products or services or exert strong business influence on our ability to, and terms on which we, operate our solutions. Should any of our competitors modify their products or standards in a manner that degrades the functionality of our solutions and applications or gives preferential treatment to our competitors or competitive products, whether to enhance their competitive position or for any other reason, the interoperability of our solutions and applications with these products could decrease and our business, results of operations, and financial condition would be harmed. If we are not permitted or able to integrate with these and other third-party applications in the future, our business, results of operations, and financial condition would be harmed.
We are subject to risks as a result of our dependence on information technology systems and reliance on third parties.
Our operations depend in part upon information technology, or IT, systems. Our IT systems are subject to disruption, damage, or failure from many sources, including computer viruses, security breaches, natural disasters, power loss, and defects in design. To date, we have not experienced any material losses relating to IT system disruptions, damage, or failure, but there are no assurances that we will not incur such losses in the future. Any of these and other events could result in IT systems failures, operational delays, production downtimes, destruction or corruption of data, security breaches, or other manipulation or improper use of our systems and networks.
Further, we are dependent on third party mobile networks such as those provided by major telecommunications companies to provide services. These third-party networks are controlled by third parties and are subject to compromise or failure. Extended disruptions of such networks could adversely affect our business and financial results.
We could suffer disruptions, outages, defects, and other performance and quality problems with our solutions or with the public cloud and internet infrastructure on which they rely.
Our business depends on our solutions and applications to be available without disruption. We have experienced, and may in the future experience, disruptions, outages, defects, and other performance and quality problems with our solutions and applications. We have also experienced, and may in the future experience, disruptions, outages, defects, and other performance and quality problems with the public cloud and internet infrastructure on which our solutions and applications rely. These problems can be caused by a variety of factors, including introductions of new functionality, vulnerabilities and defects in proprietary and open source software, human error or misconduct, capacity constraints, and design limitations, as well as from internal and external security breaches, malware and viruses, ransomware, cyber events, denial or degradation of service attacks, or other security-related incidents.
Further, if our contractual and other business relationships with our public cloud providers are terminated, suspended, or suffer a material change to which we are unable to adapt, such as the elimination of services or features on which we depend, we could be unable to provide our solutions and applications and could experience significant delays and incur additional expense in transitioning customers to a different public cloud provider.
These issues will be an acute risk as we move to a software-as-a-service licensing model, as under that model our solutions will run on Avanseus’ own infrastructure through which customers will access the software solutions they have subscribed for, instead of operating on the infrastructure of the customers or ultimate users of the software. Any disruptions, outages, defects, and other security performance and quality problems with our solutions and applications or with the public cloud and internet infrastructure on which they rely, or any material change in our contractual and other business relationships with our public cloud providers, could result in reduced use of our solutions and applications, increased expenses, including significant, unplanned capital investments and/or service credit obligations, and harm to our brand and reputation, any of which could have a material adverse effect on our business, financial condition, and results of operations.
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If we fail to develop, maintain, and enhance our brand and reputation cost-effectively, our business and financial condition may be adversely affected.
We believe that developing, maintaining, and enhancing awareness and integrity of our brand and reputation in a cost-effective manner are important to achieving widespread acceptance of our solutions and applications and are important elements in attracting new customers and channel partners and maintaining existing customers and partners, each of which includes resellers. We believe that the importance of our brand and reputation will increase as competition in our market further intensifies. Successful promotion of our brand depends on the effectiveness of our marketing efforts, our ability to provide a reliable and useful solutions and applications at competitive prices, the perceived value of our solutions and applications, our ability to maintain our customers’ and partners’ trust, our ability to continue to develop additional functionality and use cases, and our ability to differentiate our solutions and applications and capabilities from competitive offerings. Brand promotion activities may not yield increased revenue, and even if they do, the increased revenue may not offset the expenses we incur in building and maintaining our brand and reputation. We also rely on our customer base and existing channel partners in a variety of ways, including to give us feedback on our solutions and applications. If we fail to promote and maintain our brand successfully or to maintain loyalty among our customers and channel partners, or if we incur substantial expenses in an unsuccessful attempt to promote and maintain our brand, we may fail to attract new customers and partners or retain our existing customers and partners and our business and financial condition may be adversely affected. Any negative publicity relating to our employees, partners, or others associated with these parties may also tarnish our own reputation simply by association and may reduce the value of our brand. Damage to our brand and reputation may result in reduced demand for our solutions and applications and increased risk of losing market share to our competitors. Any efforts to restore the value of our brand and rebuild our reputation may be costly and may not be successful.
Changes in worldwide capital spending and continued economic growth may have a material adverse effect on us.
One factor that significantly affects Avanseus’s financial results is the impact of economic conditions on the willingness of our current and potential customers and the customers of our resellers to make capital investments. Changes in economic growth or the global economy could lead customers to be cautious about capital spending, which places additional pressure on departments to demonstrate acceptable return on investment. Uncertain worldwide economic and political environments and uncertain policy directives would make it difficult for Avanseus, its customers, and its suppliers to accurately predict future product demand, which could result in an inability to satisfy demand for our solutions and a loss of market share. Our revenues may decline in such circumstances and profit margins could be eroded, or we could incur significant losses.
Moreover, economic conditions worldwide may contribute to slowdowns in the markets in which we operate, resulting in reduced demand for our solutions as a result of customers and customers of our resellers choosing to refrain from capital investments.
Turmoil in the geopolitical environment in many parts of the world, including terrorist activities and military actions, as well as political and economic issues in many regions, may put pressure on global economic conditions. Avanseus’s business and financial results and its ability to expand into other international markets may also be affected by changing economic conditions particularly germane to that sector or to particular customer markets within that sector.
If we are unable to recruit or retain personnel with the necessary skills to operate and grow our business, our business, operating results, and financial condition could be adversely affected.
Our future success depends upon our ability to continue to attract, develop, motivate, and retain highly skilled managerial, sales and marketing, technical, financial, and administrative personnel necessary to guide our operations and support and grow our business. The market for this talent is, and we expect will remain, highly competitive.
In addition, because of the highly technical nature of our solutions and applications, we must attract and retain highly skilled engineering and development personnel. The technical personnel that we require to develop our products and solutions are in high demand, particularly technical personnel with a combination of AI, domain, and real-time application expertise as there are comparatively few persons with those skills. Further, in order to execute our business plan we must be able to attract and retain the requisite personnel with experience in those industry domains, including data centers and manufacturing, that we intend to expand into, given that most of our current personnel have experience solely or primarily in the telecommunications industry.
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We may not be able to retain our current key employees or attract, train, assimilate, or retain other highly skilled personnel in the future. We may incur significant costs to attract and retain highly skilled personnel, and we may lose new employees to our competitors or other technology companies before we realize the benefit of our investment in recruiting and training them. As we move into new geographies, we will need to attract and recruit skilled personnel in those areas. In particular as we enter more into high-cost countries, the cost of attracting and retaining skilled personnel may materially increase compared to what we have experienced in the past in this regard.
Our future success also depends in large part on the continued service of senior management and other key personnel. In particular, we are highly dependent on the services of Bhargab Mitra, our Chief Executive Officer and a co-founder, Giuseppe Donagemma, our Chairman, Chiranjib Bhandary, our Chief Technology Officer, and Dionisio (Dennis) Lorenzin, our Chief Product Officer, whom are critical to the development of our technology, solutions, future vision, and strategic direction. We rely on our leadership team in the areas of operations, security, marketing, sales, support, and general and administrative functions, and on individual contributors on our research and development team. Although we have entered into employment agreements with most of our senior management and other key personnel, the existence of such agreements does not assure that we will retain their services. Our senior management team provides valuable services to us and it would be difficult for us to find suitable replacements.
If we lose the services of senior management or other key personnel, or if we are unable to attract, train, assimilate, and retain suitably-qualified individuals who are capable of meeting our growing technical, operational, and managerial requirements, on a timely basis or at all, our solution development efforts could be delayed and we may be unable to execute our business plan, which could adversely affect our business, prospects, operating results, and financial condition. Volatility or lack of performance in our stock price may also affect our ability to attract and retain our personnel. In addition, to the extent we hire personnel from competitors, we also may be subject to allegations that they have been improperly solicited or divulged proprietary or other confidential information.
Our revenue growth depends in part on the success of our strategic relationships with third parties, including channel partners, and if we are unable to establish and maintain successful relationships with them, our business, operating results, and financial condition could be adversely affected.
An integral part of our expansion plans requires partnerships with large players, like global system integrators, that can give us exposure in those parts of the world where we may have no or a limited presence and/or with those customers with whom our sales personnel may have challenges engaging. We are also engaging with large cloud infrastructure providers in order to ensure that our software is seamlessly operating within their own environments and has the further potential to become an integral part of their ecosystems (that is, being featured in their marketplaces and becoming part of their sales proposition). We anticipate that we will continue to establish and maintain relationships with such third parties.
We plan to continue to establish and maintain similar strategic relationships in certain industry verticals and otherwise, and we expect our strategic partners to become an increasingly important aspect of our business. These strategic relationships, however, could limit our ability in the future to compete in certain industry verticals and, depending on the success of our third-party partners and the industries that those partners operate in generally, may negatively impact our business because of the nature of strategic alliances, exclusivity provisions, or otherwise. We work closely with select vendors to design solutions and use cases to specifically address the needs of certain industry verticals or use cases within those verticals. As our agreements with our reseller customers terminate or expire, we may be unable to renew or replace these agreements on comparable terms, or at all.
Our future revenue growth and ability to sustain profitability depends in part on our ability to identify, establish, and retain successful strategic partner relationships in various geographic locations, including in the United States, as our presence, geography-wise, is limited due to our current size, which will take significant time and resources and involve significant risk. To the extent we do identify such partners, we will need to negotiate the terms of a commercial agreement with them under which the partner would distribute our solutions and applications. We cannot be certain that we will be able to negotiate commercially attractive terms with any strategic partner, if at all. In addition, our strategic partners must be trained to distribute our solutions and applications. In order to develop and expand our distribution channel, we must develop and improve our processes for channel partner introduction and training. If we do not succeed in identifying suitable strategic partners or maintain our relationships with such partners, our business, prospects, operating results, and financial condition may be adversely affected.
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Moreover, we cannot guarantee that the partners with whom we have strategic relationships will continue to devote the resources necessary to expand our reach and increase our distribution. In addition, customer satisfaction with services and other support from our strategic partners may be less than anticipated, negatively impacting anticipated revenue growth and results of operations. We cannot be certain that these partners will prioritize or provide adequate resources to selling our solutions and applications. Further, some of our strategic partners offer competing platforms and applications or also work with our competitors. As a result of these factors, many of the companies with whom we have strategic alliances may choose to pursue alternative technologies and develop alternative platforms and applications in addition to or in lieu of our solutions and applications, either on their own or in collaboration with others, including our competitors. We cannot assure you that our strategic partners will continue to cooperate with us. In addition, actions taken or omitted to be taken by such parties may adversely affect us. Moreover, we rely on our channel partners to operate in accordance with the terms of their contractual agreements with us. For example, our agreements with our channel partners limit the terms and conditions pursuant to which they are authorized to resell or distribute our solutions and applications and offer technical support and related services. If we are unsuccessful in establishing or maintaining our relationships with third parties, or if our strategic partners do not comply with their contractual obligations to us, our business, operating results, and financial condition may be adversely affected. Even if we are successful in establishing and maintaining these relationships with third parties, we cannot assure you that these relationships will result in increased customer usage of our solutions and applications or increased revenue to us.
Any failure to offer high-quality maintenance and support services for our customers may harm our relationships with our customers and, consequently, our business.
Once our solutions and applications are deployed, our customers depend on our maintenance and support teams to resolve technical and operational issues relating to our solutions and applications. Our ability to provide effective customer maintenance and support is largely dependent on our ability to attract, train, and retain qualified personnel with experience in supporting customers with solutions and applications such as ours and maintaining the same. The number of our customers has grown significantly and that has and will continue to put additional pressure on our customer maintenance and support teams. We may be unable to respond quickly enough to accommodate short-term increases in customer demand for technical support or maintenance assistance. We also may be unable to modify the future, scope, and delivery of our maintenance services and technical support to compete with changes in the technical services provided by our competitors. Increased customer demand for maintenance and support services, without corresponding revenue, could increase costs and negatively affect our operating results. In addition, if we experience increased customer demand for support and maintenance, we may face increased costs that may harm our results of operations. Further, as we continue to grow our operations and support our global customer base, we need to be able to continue to provide efficient support and effective maintenance that meets our customers’ needs globally at scale. Customers receive additional maintenance and support features, and the number of our customers has grown significantly, which will put additional pressure on our organization. If we are unable to provide efficient customer maintenance and support globally at scale or if we need to hire additional maintenance and support personnel, our business may be harmed. Our ability to attract new customers is highly dependent on our business reputation and on positive recommendations from our existing customers. Any failure to maintain high-quality maintenance and support services, a failure of channel parties to maintain high-quality maintenance and support services, or a market perception that we do not maintain high-quality maintenance and support services for our customers would harm our business.
If we or our third-party service providers experience a security breach or unauthorized parties otherwise obtain access to our customers’ data, our data, or our solutions may be perceived as not being secure, our reputation may be harmed, demand for our solutions may be reduced, and we may incur significant liabilities.
Our solutions and applications process, store, and transmit our customers’ proprietary and sensitive data, including data that indicate the quality of service they provide to their end users and their end users’ data, such as their phone identifier, and may in the future potentially include personal and financial data. Our solutions and applications are built to be available on the infrastructure of third-party public cloud providers such as VMware Marketplace and Red Hat Marketplace. As we pivot to a software-as-a-service licensing model, we will also need to use third-party service providers like cloud providers to help us deliver services to our customers. These vendors may store or process personal information or other confidential information of our employees, our partners, or our customers. We collect such information from individuals located in the various countries in which our customers are located and may store
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or process such information outside the country in which it was collected. While we and our third-party service providers have implemented security measures designed to protect against security breaches, these measures could fail or may be insufficient, resulting in the unauthorized disclosure, modification, misuse, unavailability, destruction, or loss of our or our customers’ data or other sensitive information. Any security breach of our operational systems, physical facilities, or even the systems of our third-party partners, or the perception that one has occurred, could result in litigation, indemnity obligations, regulatory enforcement actions, investigations, fines, penalties, mitigation and remediation costs, disputes, reputational harm, diversion of management’s attention, and other liabilities and damage to our business. Even though we do not control the security measures of third parties, we may be responsible for any breach of such measures or suffer reputational harm even where we do not have recourse to the third party that caused the breach. In addition, any failure by our partners to comply with applicable law or regulations could result in proceedings against us by governmental entities or others.
Cyberattacks, denial-of-service attacks, ransomware attacks, business email compromises, computer malware, viruses, social engineering (including phishing), and other malicious internet-based activity are prevalent in our industry and our customers’ industries and continue to increase. In addition, we may experience attacks, unavailable systems, unauthorized access, or disclosure due to employee or other theft or misuse, denial-of-service attacks, sophisticated attacks by nation-state and nation-state supported actors, and advanced persistent threat intrusions. We cannot guarantee that our security measures will be sufficient to protect against unauthorized access to or other compromise of the personal information and/or other confidential information of our partners, our customers, and our customers’ end-users. The techniques used to sabotage, disrupt, or obtain unauthorized access to our solutions, systems, networks, or physical facilities in which data is stored or through which data is transmitted change frequently, and we may be unable to implement adequate preventative measures or stop security breaches while they are occurring. The recovery systems, security protocols, network protection mechanisms, and other security measures that we have integrated into our solutions, applications, systems, networks, and physical facilities, which are designed to protect against, detect, and minimize security breaches, may not be adequate to prevent or detect service interruption, system failure, or data loss. Our solutions, systems, networks, and physical facilities could be breached, or personal information could be otherwise compromised, due to employee error or malfeasance, if, for example, third parties attempt to fraudulently induce our employees or our customers to disclose information or usernames and/or passwords, or otherwise compromise the security of our solutions, networks, systems and/or physical facilities. Third parties may also exploit vulnerabilities in, or obtain unauthorized access to, platforms, applications, systems, networks, and/or physical facilities utilized by our channel partners. We have previously been, and may in the future become, the target of cyber-attacks by third parties seeking unauthorized access to our or our customers’ data or to disrupt our operations or ability to provide our services. While we have been successful in preventing such unauthorized access and disruption in the past, we may not continue to be successful against these or other attacks in the future.
We have contractual and legal obligations to notify relevant stakeholders of security breaches. Most jurisdictions have enacted laws requiring companies to notify individuals, regulatory authorities, and others of security breaches involving certain types of data. In addition, our agreements with certain customers and partners may require us to notify them in the event of a security breach involving customer or partner data on our systems or those of subcontractors processing customer or partner data on our behalf. Such mandatory disclosures are costly, could lead to negative publicity, may cause our customers to lose confidence in the effectiveness of our security measures, and could require us to expend significant capital and other resources to respond to or alleviate problems caused by the actual or perceived security breach and may cause us to breach customer contracts. Depending on the facts and circumstances of such an incident, these damages, penalties, and costs could be significant and may not be covered by insurance or could exceed our applicable insurance coverage limits. Any of these results could materially adversely affect our financial performance. Our agreements with certain customers may require us to use industry-standard, reasonable, or other specified measures to safeguard sensitive personal information or confidential information, and any actual or perceived breach of such measures may increase the likelihood and frequency of customer audits under our agreements, which is likely to increase the costs of doing business. An actual or perceived security breach could lead to claims by our customers, or other relevant stakeholders that we have failed to comply with such legal or contractual obligations. As a result, we could be subject to legal action or our customers could end their relationships with us. There can be no assurance that any limitations of liability in our contracts, which we have in certain agreements, would be enforceable or adequate or would otherwise protect us from liabilities or damages.
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Litigation resulting from security breaches may adversely affect our business. Unauthorized access to our solutions, systems, networks, or physical facilities could result in litigation with our customers or other relevant stakeholders. These proceedings could force us to spend money in defense or settlement, divert management’s time and attention, increase our costs of doing business, or adversely affect our reputation. We could be required to fundamentally change our business activities and practices or modify our solutions’ capabilities in response to such litigation, which could have an adverse effect on our business. If a security breach were to occur, and the confidentiality, integrity, or availability of our data or the data of our partners or our customers was disrupted, we could incur significant liability, or our solutions, applications, systems, or networks may be perceived as less desirable, which could negatively affect our business and damage our reputation.
If we fail to detect or remediate a security breach in a timely manner, or a breach otherwise affects a large amount of data of one or more customers, or if we suffer a cyberattack that impacts our ability to operate our solutions and applications, we may suffer material damage to our reputation, business, financial condition, and results of operations. Further, our insurance coverage may not be adequate for data security, indemnification obligations, or other liabilities. Depending on the facts and circumstances of such an incident, the damages, penalties, and costs could be significant and may not be covered by insurance or could exceed our applicable insurance coverage limits. In addition, we cannot be sure that our existing insurance coverage and coverage for errors and omissions will continue to be available on acceptable terms or that our insurers will not deny coverage as to any future claim. Our risks are likely to increase as we continue to expand our solutions and applications, grow our customer base, and process, store, and transmit increasingly large amounts of proprietary and sensitive data.
Our solutions and applications rely on the stable performance of servers, networks, IT infrastructure, and data processing systems, and any disruption to such servers, networks, assets, or systems due to internal or external factors could diminish demand for our solutions and applications, harm our business, our reputation and results of operations and subject us to liability.
We rely in part, and as we pivot to a software-as-a-service model will increasingly rely, upon the stable performance of our servers, networks, IT infrastructure, and data processing systems for provision of our solutions and applications. Disruptions to such servers, networks, assets, or systems may occur due to internal or external factors, such as inappropriate maintenance, defects in the servers, cyber-attacks or other malicious attacks or hacks targeted at us, occurrence of catastrophic events or human errors. Such disruptions could result in negative publicity, loss of or delay in market acceptance of our solutions and applications, loss of competitive position, lower customer retention or claims by customers for losses sustained by them, or loss, destruction, or unauthorized use of, or access to, data (including personal data for which we may incur liability under applicable data protection laws). In such an event, we may need to expend additional resources to bring the incident to an end, mitigate the liability associated with the fallout of such incident, make notifications to regulators and individuals affected, replace damaged systems or assets, defend ourselves in legal proceedings, and compensate customers or end users. In addition, we may not carry insurance to compensate us for any losses that may result from claims arising from disruption in servers. As a result, our reputation and our brand could be harmed, and our business, results of operations, and financial condition may be adversely affected.
Future acquisitions of other companies or their business, products, technologies, or personnel could require significant management attention, disrupt our business, dilute shareholder value, and adversely affect our operating results.
Our business strategy includes acquiring complimentary companies and/or their business and personnel; we may also seek to acquire complementary products and technologies without acquiring an entire company or its business. See “Avanseus’ Business — Growth Strategy — M&A Activity.” Negotiating these transactions can be time-consuming, difficult, and expensive, and our ability to consummate these transactions may be subject to third-party approvals, such as government regulatory approvals, that are beyond our control. Consequently, we can make no assurance that these transactions, once undertaken and announced, will close. Further, we cannot be certain that we will be able to identify suitable acquisition targets that are available for purchase at reasonable prices. Even if we able to identify such candidates, we may be unable to consummate an acquisition on suitable terms, any of which would have an adverse impact on our business strategy, prospects, and growth plan.
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These kinds of acquisitions or investments may result in unforeseen operating difficulties and expenditures. If we acquire businesses or technologies, we may not be able to integrate the acquired personnel, operations, and technologies successfully or effectively manage the combined business following the acquisition. We also may not achieve the anticipated benefits from the acquired business due to a number of factors, including:
| ● | inability to integrate or benefit from acquired technologies or services in a profitable manner; |
| ● | unanticipated costs or liabilities associated with the acquisition; |
| ● | incurrence of acquisition-related costs; |
| ● | difficulty integrating the accounting systems, operations, and personnel of the acquired business; |
| ● | challenges in combining product offerings and entering into new markets in which we may not have experience; |
| ● | difficulties and additional expenses associated with supporting legacy products and hosting infrastructure of the acquired business; |
| ● | distraction of management from normal business operations; |
| ● | adverse effects to the existing business relationships with business partners and customers of both Avanseus and the acquired company as a result of the acquisition; |
| ● | the potential loss of key employees; |
| ● | use of resources that are needed in other parts of our business; and |
| ● | use of substantial portions of our available cash to consummate the acquisition. |
Moreover, we cannot assure you that the anticipated benefits of any acquisition would be realized or that we would not be exposed to unknown liabilities as a result of any such acquisition.
In connection with these types of transactions, we may issue additional equity securities that would dilute our shareholders, use cash that we may need in the future to operate our business, incur debt on terms unfavorable to us or that we are unable to repay, incur large charges or substantial liabilities, encounter difficulties integrating diverse business cultures, and become subject to adverse tax consequences, substantial depreciation, or deferred compensation charges. These challenges related to acquisitions or investments could adversely affect our business, prospects, operating results, and financial condition.
Negative publicity about us, our solutions and support, and our directors and management may adversely affect our reputation and business.
We may, from time to time, receive negative publicity, including negative internet and blog postings, ratings, or comments on social media platforms or through traditional media about Avanseus, our business, our directors and management, our brands, our solutions, our support, or our suppliers. Certain of such negative publicity may be the result of malicious harassment or unfair competition acts by third parties. We may even be subject to government or regulatory investigation as a result of such third-party conduct and may be required to spend significant time and incur substantial costs to defend ourselves against such third-party conduct, and we may not be able to conclusively refute each of the allegations within a reasonable period of time, or at all.
We may receive complaints from our customers and partners about our solutions and applications, pricing, and customer support. If we do not handle such complaints effectively, our brand and reputation may suffer and our customers and partners may lose confidence in us and may reduce or cease their use of our solutions and applications. Our success depends, in part, on our ability to generate positive customer feedback and minimize negative feedback on social media channels where existing and potential customers and their employees who use our solutions and applications in their jobs seek and share information. If any of our customers, partners, or their employees are dissatisfied with actions we take or changes we make to our solutions and applications, their online commentary could negatively affect our brand and reputation. Complaints or negative publicity about us, our solutions and applications could materially and adversely impact our ability to attract and retain customers and partners as well as our business, results of operations, and financial condition.
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Our business is subject to the risks of earthquakes, fire, floods, pandemics, and other natural catastrophic events, and to interruption by man-made problems such as power disruptions or terrorism.
A significant natural disaster, such as an earthquake, fire, flood, or pandemic, occurring at our headquarters, at one of our local offices and facilities, or where a business partner is located could adversely affect our business, operating results, and financial condition. Further, if a natural disaster or man-made problem were to affect our service providers, this could adversely affect the ability of our customers to use our solutions and applications. In addition, natural disasters and acts of terrorism could cause disruptions in our or our customers’ businesses, national economies, or the world economy as happened as a result of the COVID-19 pandemic. We also rely on our network and third-party infrastructure and enterprise applications and internal technology systems for our engineering, sales and marketing, and operations activities. Although we maintain incident management and disaster response plans, in the event of a major disruption caused by a natural disaster or man-made problem, we may be unable to continue our operations and may endure system interruptions, reputational harm, delays in our development activities, lengthy interruptions in service, breaches of data security, and loss of critical data, particularly as Avanseus pivots to a software-as-a-service sales model as we would then be providing our solutions through our own cloud subscription, any of which could adversely affect our business, operating results, and financial condition.
In addition, computer malware, viruses, and hacking, fraudulent use attempts, and phishing attacks have become more prevalent in our industry and have impacted some of our customers in the past and may occur in our operation in the future. Any failure to maintain performance, reliability, security, integrity, and availability of our solutions and applications and technical infrastructure, including third-party infrastructure and services upon which we rely, may expose us to significant consequences, including legal and financial exposure and loss of customers, and give rise to litigation, consumer protection actions, or harm to our reputation, and as a result, may hinder our ability to retain existing and attract new customers and partners.
Currently, all of our operations are conducted, and all of our revenue is attributable to sales, in a number of countries and outside the United States, and our operating results therefore may be materially affected by the economic, political, military, regulatory, and other risks generated as a result of operations and sales in various countries, in particular, the recent and any future increases in energy prices.
Our operations are, and in the foreseeable future most of our operations will be, conducted in various countries and primarily outside of the United States, and customers outside the United States account for a significant portion of our total revenue and will for the foreseeable future. Our operating results are therefore subject to additional risks as compared to companies that operate primarily in the United States, including:
| ● | unexpected changes in regulatory or environmental requirements, tariffs, and other barriers, including, for example, international trade disputes, changes in climate regulations, and sanctions or other regulatory restrictions imposed by various governments; |
| ● | less effective protection of intellectual property; |
| ● | requirements of foreign laws and other governmental controls; |
| ● | difficulties in collecting trade accounts receivable in other countries; |
| ● | adverse tax consequences; |
| ● | the challenges of managing legal disputes in foreign jurisdictions. |
| ● | difficulties in staffing and managing foreign operations; |
| ● | limited protection for the enforcement of contract and intellectual property rights in certain countries where we may sell our solutions or work with suppliers or other third parties; |
| ● | potentially longer sales and payment cycles and potentially greater difficulties in collecting accounts receivable; |
| ● | laws and business practices favoring local competition; |
| ● | being subject to a wide variety of complex foreign laws, treaties, and regulations and adjusting to any unexpected changes in such laws, treaties, and regulations, including local labor laws; |
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| ● | strict laws and regulations governing privacy and data security, including the European Union’s General Data Protection Regulation; |
| ● | tariffs, trade barriers, and other regulatory or contractual limitations on our ability to sell or develop our solutions in certain foreign markets; |
| ● | changes in regulatory requirements, including export controls, tariffs, and embargoes, other trade restrictions, competition, corporate practices, and data privacy concerns; |
| ● | seasonal reductions in business activity in certain parts of the world, particularly during the summer months in Europe and at year end globally; |
| ● | rapid changes in government, economic, and political policies, and conditions; and |
| ● | political or civil unrest or instability, acts of war, terrorism or epidemics, and other similar outbreaks or events. |
In the event that we are unable to adequately staff and maintain our foreign operations, we could face difficulties managing our international operations.
In addition, the continuing conflict between Ukraine and Russia, and the financial and economic sanctions and import and/or export controls imposed on Russia by the United States, the United Kingdom, the European Union, Canada, and others, in addition to exacerbating the above-mentioned adverse effects on our operations and on the wider global economy and market conditions, has had, and may continue to have, particularly if there should be an escalation of that conflict, the effect of causing significant increases in energy prices in Europe and other parts of the world. This has already resulted, and may continue to result, in our customers and potential customers (both direct and indirect) diverting a larger proportion of their available cash towards paying their energy bills and delaying capital investments, particularly for purchases of software solutions such as ours, which may be seen as more of a “luxury” purchase under such conditions. Any of these impacts or increases in these conditions could, in turn, have a material adverse effect on our business, financial condition, cash flows, and results of operations and could cause the market value of our securities to decline.
We have limited business insurance coverage, so that any uninsured occurrence of business disruption may result in substantial costs to us and the diversion of our resources, which could have an adverse effect on our results of operations and financial condition.
Our business insurance is limited; we do not maintain any liability insurance or property insurance policies covering our equipment and facilities for injuries, death, or losses due to fire, earthquake, flood, or any other disaster. We have determined that the costs of insuring for related risks and the difficulties associated with acquiring such insurance on commercially reasonable terms make it impractical. Any uninsured damage to our facilities or technology infrastructures or disruption of our business operations could require us to incur substantial costs and divert our resources, which could have an adverse effect on our business, financial condition, and results of operations.
If the market for predictive maintenance, health and performance management, and energy management software solutions fails to grow as we expect, or if businesses fail to adopt our solutions, our business, operating results, and financial condition could be adversely affected.
More than 90% or our total revenues is generated through the licensing of our software. We expect these sales to account for a large portion of our revenue for the foreseeable future. Although demand for predictive maintenance, artificial intelligence-based management solutions, and energy management software has grown in recent years, the market continues to evolve and may not continue to develop and grow as we expect. Even if it does so grow, we cannot be sure that businesses will adopt our solutions. Our future success will depend in large part on our ability to further penetrate the existing market for these solutions and be able to capture portions of the expected growth. Our ability to do so depends on a number of factors, including the cost, performance, and perceived value associated with our solutions, as well as customers’ and channel partners’ willingness to adopt a different approach to infrastructure maintenance and energy management. We have spent, and intend to keep spending, considerable resources to educate potential customers and channel partners’ about AI-based software solutions in general and our solutions in particular. We cannot be sure, however, that these expenditures will help our solutions achieve any additional market acceptance. Furthermore, potential customers may have made significant investments in legacy analytics software
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systems and may be unwilling to invest in new solutions and applications. In addition, resistance from consumer and privacy groups to increased commercial collection and use of data on spending patterns and other personal behavior and governmental restrictions on the collection and use of personal data may impair the further growth of this market by reducing the value of data to organizations, as may other developments. If these markets fail to grow or grow more slowly than we currently expect or businesses fail to adopt our solutions, our business, operating results, and financial condition could be adversely affected.
The estimates of market opportunity and forecasts of market growth included in this prospectus may prove to be inaccurate, and any real or perceived inaccuracies may harm our reputation and negatively affect our business.
Market opportunity estimates and growth forecasts included in this prospectus are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate. The variables that go into the calculation of our market opportunity are subject to change over time, and there is no guarantee that any particular number or percentage of addressable companies or end users covered by our market opportunity estimates will purchase our solutions and applications at all or generate any particular level of revenue for us. Even if the markets in which we compete meets the size estimates and growth forecasted in this proxy statement/prospectus, our business could fail to grow for a variety of reasons, including reasons outside of our control, such as competition in our industry.
Because we recognize revenue from licenses we sell to our direct customers over the licensing term, downturns or upturns in new sales and renewals may not be immediately reflected in our operating results and may be difficult to discern.
We generally recognize revenue from customers that we sell to directly, which currently represents approximately 25% of our revenues, ratably over the terms of their licenses. Therefore, a portion of the revenue we report in each quarter is derived from the recognition of deferred revenue relating to licenses entered into during previous quarters. Consequently, a decline in new or renewed licenses to our direct customers in any single quarter may have a small impact on our revenue for that quarter but negatively affect our revenue in future quarters. Accordingly, the effect of significant downturns in sales and market acceptance of our solutions and applications, and potential changes in our rate of renewals, may not be fully reflected in our operating results until future periods. We may also be unable to reduce our operating expenses in the event of a significant deterioration in sales. In addition, a significant majority of our costs are expensed as incurred, while a portion of our revenue is recognized over the life of the agreement with our customer. As a result, increased growth in the number of our direct customers could continue to result in our recognition of more costs than revenue in the earlier periods of the terms of our licensing agreements.
Competition from software offered by current competitors and new market entrants, as well as from internally-developed solutions by our customers, could adversely affect our ability to sell our software products and could result in pressure to price our software products in a manner that reduces our margins.
The market for our solutions and applications is intensely competitive and characterized by rapid changes in technology, customer requirements, industry standards, and frequent new platform and application introductions and improvements. We face challenges in selling our solutions to large companies that have internally developed their own proprietary software solutions, and we face competition from well-established vendors as well as new entrants in our markets. Many of our current and potential competitors have greater financial, technical, marketing, service, and other resources than we have. As a result, these companies may be able to offer lower prices, additional solutions and applications, or other incentives that we cannot match or offer. These competitors may be in a stronger position to respond more quickly to new technologies and may be able to undertake more extensive marketing campaigns. In addition, many of our competitors have established, and may in the future continue to establish, cooperative relationships with third parties to improve their product offerings and to increase the availability of their products in the marketplace. Competitors with greater financial resources may make strategic acquisitions to increase their ability to gain market share or improve the quality or marketability of their products.
Competition could seriously impede our ability to sell additional software products and related support services on terms favorable to us. Businesses may continue to enhance their internally-developed solutions, rather than investing in commercial software such as ours. Our current and potential commercial competitors may develop and market new technologies that render our existing or future solutions obsolete, unmarketable, or less competitive. In addition, if these competitors develop solutions with similar or superior functionality to our solutions, we may need
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to decrease the prices for our solutions in order to remain competitive. If we are unable to maintain attractive pricing due to competitive pressures, our margins will be reduced and our operating results will be negatively affected. We cannot ensure that we will be able to compete successfully against current or future competitors or that competitive pressures will not materially adversely affect our business, financial condition, and operating results.
Fluctuations in foreign currency exchange rates could result in declines in our reported revenue and operating results.
Our operations our conducted entirely outside of the United States and most of our operations will continue to be conducted outside the U.S. going forward. As a result, even though most of our revenue is denominated in U.S. dollars, most of our expenses are denominated in currencies other than the U.S. dollar; as we report our operating results in U.S. dollars, our reported operating results are subject to effects of fluctuations in currency exchange rates. Foreign currency risk arises primarily from the non-U.S. dollar operating expenses for our non-U.S. operations. Fluctuations in the exchange rates between the U.S. dollar and other currencies could result in the dollar equivalent of such expenses being higher. This could have a negative impact on our operating results. Although we may in the future decide to undertake foreign exchange hedging transactions to cover a portion of our foreign currency exchange exposure, we currently do not hedge our exposure to foreign currency exchange risks.
Although we expect an increasing number of our sales contracts may be denominated in currencies other than the U.S. dollar in the future, the majority of our sales contracts have historically been denominated in U.S. dollars, and therefore, most of our revenue has not been subject to foreign currency risk. However, a strengthening of the U.S. dollar could increase the real cost of our solutions and applications to our customers outside of the United States, which could adversely affect our business, operating results, financial condition, and cash flows. In addition, we incur expenses for employee compensation and other operating expenses at our non-U.S. locations in the local currency. Fluctuations in the exchange rates between the U.S. dollar and other currencies could result in the dollar equivalent of such expenses being higher. We cannot predict the impact of foreign currency fluctuations, and foreign currency fluctuations in the future may adversely affect our revenue and operating results. Although we may in the future decide to undertake foreign exchange hedging transactions to cover a portion of our foreign currency exchange exposure, we currently do not hedge our exposure to foreign currency exchange risks and have no current intentions to do so. Any hedging policies we may implement in the future may not be successful, and the cost of those hedging techniques may have a significant negative impact on our operating results.
Risks Related to Avanseus’ Intellectual Property and Technology
We could incur substantial costs in protecting or defending our intellectual property rights, and any failure to protect our intellectual property could adversely affect our business, operating results, and financial condition.
Our success depends, in part, on our ability to protect our brand, trade secrets, trademarks, patents, domain names, copyrights, and proprietary methods and technologies, whether registered or not, that we develop under patent and other intellectual property laws of the United States, Singapore, India, and other jurisdictions, so that we can prevent others from using our inventions and proprietary information. We currently rely on patents, trademarks, copyrights, and trade secret law to protect our intellectual property rights. We cannot assure you, however, that any of our intellectual property rights will not be challenged, invalidated, or circumvented, or that our intellectual property will be sufficient to provide us with competitive advantages.
In addition, we may be subject to allegation of infringement of other parties’ proprietary rights, and other parties may misappropriate our intellectual property rights, which would cause us to suffer economic or reputational damages. Because of the rapid pace of technological change, we cannot assure you that all of our proprietary technologies and similar intellectual property rights can be patented in a timely or cost-effective manner, or at all.
We maintain and facilitate certain technical measures and access control mechanisms internally to ensure secure access to our proprietary information by our employees and consultants. We also maintain internal policies requiring our employees and consultants to enter into confidentiality agreements to control access to our proprietary information. If our employees and consultants do not fully comply with these internal policies, however, such policies may not effectively prevent disclosure of our confidential information, and it may be possible for unauthorized parties to copy our software or other proprietary technology or information, or to develop similar software independently without our having an adequate remedy for unauthorized use or disclosure of our confidential information.
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In addition, the laws of some countries do not protect intellectual property and other proprietary rights to the same extent as the laws of the United States. Statutory laws and regulations are subject to judicial interpretation and enforcement and may not be applied consistently due to the lack of clear guidance on statutory interpretation. Confidentiality, invention assignment and non-compete agreements may be breached by counterparties, and there may not be adequate remedies available to us for any such breach. Accordingly, we may not be able to effectively protect our intellectual property rights or to enforce our contractual rights. To the extent we expand our international activities, our exposure to unauthorized copying, transfer, and use of our proprietary technology or information may increase.
Preventing any unauthorized use of our intellectual property is difficult and costly and the steps we take may be inadequate to prevent the misappropriation of our intellectual property. Litigation may be necessary in the future to enforce our intellectual property rights, determine the validity and scope of our proprietary rights or those of others, or defend against claims of infringement or invalidity. Such litigation could be costly, time-consuming, and distracting to management, and may result in a diversion of significant resources, the narrowing or invalidation of portions of our intellectual property and have an adverse effect on our business, operating results, and financial condition. Our efforts to enforce our intellectual property rights may be met with defenses, counterclaims, and countersuits attacking the validity and enforceability of our intellectual property rights or alleging that we infringe the counterclaimant’s own intellectual property. Any of our patents, trade secrets, copyrights, trademarks, or other intellectual property rights could be challenged by others or invalidated through administrative process or litigation. We can provide no assurance that we will prevail in such litigation. In addition, our proprietary methods and technologies that are regarded as trade secrets may be leaked or otherwise become available to, or be independently discovered by, our competitors and in these cases we would not be able to assert any trade secret rights against those parties. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and the failure to obtain or maintain trade secret protection could adversely affect our competitive business position. To the extent that our employees or consultants use intellectual property owned by others in their work for us, disputes may arise as to the rights in related know-how and inventions.
There can be no assurance that our particular ways and means of protecting our intellectual property and proprietary rights, including business decisions about when to file patent applications and trademark applications, will be adequate to protect our business or that our competitors will not independently develop similar technology. We could be required to spend significant resources to monitor and protect our intellectual property rights. If we fail to protect and enforce our intellectual property and proprietary rights adequately, our competitors might gain access to our technology and our business, operating results, and financial condition could be adversely affected.
We may in the future become involved in legal proceedings, litigation, and disputes relating to alleged infringement of intellectual property rights, which could adversely affect our business, operating results, and financial condition.
There is considerable patent and other intellectual property development activity in our industry. Our future success depends, in part, on not infringing the intellectual property rights of others. Our competitors or other third parties may in the future claim that our solutions and applications and underlying technology infringe on their intellectual property rights, and we may be found to be infringing on such rights. We may be unaware of the intellectual property rights of others that may cover some or all of our technology, and therefore we cannot be certain that our solutions and applications do not infringe patents, copyrights, trademarks, or other intellectual property rights, so infringement claims might be asserted against us. Any claims or litigation could cause us to incur significant expenses and, if successfully asserted against us, could require that we pay substantial damages or ongoing royalty or licensing payments, require us to change our technology or our business practices, prevent us from offering our solutions and applications, require us to develop alternative non-infringing technology, or require that we comply with other unfavorable terms, any of which could have a material adverse effect on our business and results of operations. We may also be obligated to indemnify our customers in connection with any such litigation and to obtain licenses or modify our solutions and applications, which could further exhaust our resources. Even if we were to prevail in the event of claims or litigation against us, any claim or litigation regarding intellectual property could be costly and time-consuming and divert the attention of our management and other employees from our business. Patent infringement, trademark infringement, trade secret misappropriation and other intellectual property claims, and proceedings brought against us, whether successful or not, could harm our reputation, business, operating results, and financial condition.
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We depend on technology and data licensed to us by third parties that may be difficult to replace or cause errors or failures that may impair or delay implementation of our solutions and applications or force us to pay higher license fees.
We license third-party technologies and data that we incorporate into, use to operate, and provide with our solutions. We cannot assure you that the licenses for such third-party technologies or data will not be terminated or that we will be able to license third-party software or data for future solutions and applications. In addition, we may be unable to renegotiate acceptable third-party replacement license terms in the event of termination, or we may be subject to infringement liability if third-party software or data that we license is found to infringe intellectual property or privacy rights of others. In addition, the data that we license from third parties for potential use in our solutions may contain errors or defects, which could negatively impact the analytics that our customers perform on or with such data. This may have a negative impact on how our solutions and applications are perceived by our current and potential customers and could materially damage our reputation and brand.
Changes in or the loss of third-party licenses could lead to our software platform becoming inoperable or the performance of our software platform being materially reduced resulting in our potentially needing to incur additional research and development costs to ensure continued performance of our software solutions and applications or a material increase in the costs of licensing, and we may experience decreased demand for our solutions.
Indemnity provisions in various agreements potentially expose us to substantial liability for intellectual property infringement and other losses.
Our agreements with customers generally include indemnification provisions under which we agree to indemnify them for losses suffered or incurred as a result of claims of intellectual property infringement, or other liabilities relating to or arising from our software, related services, or other contractual obligations. Large indemnity payments could harm our business, results of operations, and financial condition. Although we normally contractually limit our liability with respect to such indemnity obligations, generally, those limitations may not be fully enforceable in all situations, and we may still incur substantial liability under those agreements. Any dispute with a customer with respect to such obligations could have adverse effects on our relationship with that customer and other existing customers and new customers and harm our business and results of operations.
Our use of third-party open source software could negatively affect our ability to offer and sell licenses and/or subscriptions to our solutions and applications and subject us to possible litigation.
A portion of the technologies we use incorporates third-party open source software, and we may incorporate third-party open source software in our solutions in the future. Open source software is generally licensed by its authors or other third parties under open source licenses. From time to time, companies that use third-party open source software have faced claims challenging the use of such open source software and requesting compliance with the open source software license terms. Accordingly, we may be subject to suits by parties claiming ownership of what we believe to be open source software or claiming non-compliance with the applicable open source licensing terms. Some open source software licenses require end users who use, distribute, or make available across a network software and services that include open source software to offer aspects of the technology that incorporates the open source software for no cost. We may also be required to make publicly available source code (which in some circumstances could include valuable proprietary code) for modifications or derivative works we create based upon, incorporating, or using the open source software and/or to license such modifications or derivative works under the terms of the particular open source license. While we employ practices designed to monitor our compliance with the licenses of third-party open source software and protect our valuable proprietary source code, we may inadvertently use third-party open source software in a manner that exposes us to claims of non-compliance with the terms of their licenses, including claims of intellectual property rights infringement or for breach of contract. Furthermore, there exists today an increasing number of types of open source software licenses, almost none of which have been tested in courts of law to provide guidance of their proper legal interpretations. If we were to receive a claim of non-compliance with the terms of any of these open source licenses, we could be required to incur significant legal expenses defending against those allegations and could be subject to significant damages, enjoined from offering or selling our solutions that contained the open source software, and required to comply with the foregoing conditions, and we may be required to publicly release certain portions of our proprietary source code. We could also be required to expend substantial time and resources to re-engineer some of our software. Any of the foregoing could disrupt and harm our business.
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In addition, the use of third-party open source software typically exposes us to greater risks than the use of third-party commercial software because open source licensors generally do not provide warranties or controls on the functionality or origin of the software. Use of open source software may also present additional security risks because the public availability of such software may make it easier for hackers and other third parties to determine how to compromise our solutions. Any of the foregoing could harm our business and could help our competitors develop platforms and applications that are similar to or better than ours.
Because of the characteristics of open source software, there may be fewer technology barriers to entry by new competitors and it may be relatively easy for new and existing competitors with greater resources than we have to compete with us.
One of the characteristics of open source software is that the governing license terms generally allow liberal modifications of the code and distribution thereof to a wide group of companies and/or individuals. As a result, others could easily develop new platforms and applications based upon those open source programs that compete with existing open source software that we support and incorporate into our solutions and applications. Such competition with use of the open source projects that we utilize can materialize without the same degree of overhead and lead time required by us, particularly if the customers do not value the differentiation of our proprietary components. It is possible for new and existing competitors with greater resources than ours to develop their own open source software or hybrid proprietary and open source software offerings, potentially reducing the demand for, and putting price pressure on, our solutions. In addition, it is possible that some competitors could make open source software available for free download and use or position competing open source software as a loss leader. We cannot guarantee that we will be able to compete successfully against current and future competitors or that competitive pressure and/or the availability of open source software will not result in price reductions, reduced operating margins, and loss of market share, any one of which could seriously harm our business.
Risks Related to Regulatory Compliance and Legal Matters
Changes in laws and regulations related to the internet or changes in the internet infrastructure itself may diminish the demand for our solutions and applications, and could adversely affect our business, operating results, and financial condition.
The future success of our business depends on the continued use of the internet as well as continued demand for smart devices and our solutions and applications. Singapore, India, and other countries in which we do business have in the past adopted, and may in the future adopt, laws or regulations affecting the use of the internet as a commercial medium. Changes in these laws or regulations could require us to modify our solutions and applications in order to comply with these changes. In addition, government agencies or private organizations have imposed and may impose additional taxes, fees, or other charges for accessing the internet or commerce conducted via the internet. These laws or charges could limit the growth of internet-related commerce or communications generally or result in reductions in the demand for internet-based solutions and applications such as our solutions. In addition, the use of the internet as a business tool could be adversely affected due to delays in the development or adoption of new standards and protocols to handle increased demands of internet activity, security, reliability, cost, ease-of-use, accessibility, and quality of service. The performance of the internet and its acceptance as a business tool has been adversely affected by “viruses,” “worms,” and similar malicious programs. If the use of the internet is reduced as a result of these or other issues, then demand for our solutions and applications could decline, which could adversely affect our business, operating results, and financial condition.
Avanseus’ business is subject to complex and evolving domestic and foreign laws and regulations. Many of these laws and regulations are subject to change and uncertain interpretation, and could result in claims, changes to Avanseus’ business practices, increased cost of operations, or declines in adoption of our solutions, or otherwise harm Avanseus’ business.
Avanseus is subject to a variety of laws and regulations in the countries in which it conducts its operations and sells its solutions that involve matters central to its business, including user privacy, data protection, intellectual property, distribution, contracts and other communications, competition, consumer protection, and taxation. These laws and regulations are often more restrictive than those in the United States. Such laws and regulations are constantly evolving and can be subject to significant change. In addition, the application and interpretation of these laws and regulations are often uncertain, particularly in the new and rapidly-evolving industry in which Avanseus operates.
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Existing and proposed laws and regulations may be costly to comply with and can delay or impede the development of new solutions and applications, result in negative publicity, increase our operating costs, require significant management time and attention, and subject us to claims or other remedies, including fines or demands that we modify or cease existing business practices, all of which could have a negative impact on our ability to execute our business plan and on our business, prospectus, financial condition, and operating results.
The Committee on Foreign Investment in the United States may delay, prevent, or impose conditions on the Business Combination.
The Committee on Foreign Investment in the United States (“CFIUS”) has authority to review certain direct or indirect foreign investments in U.S. businesses. Among other things, CFIUS is authorized to require certain foreign investors to make mandatory filings and to self-initiate national security reviews of certain foreign direct and indirect investments in U.S. businesses if the parties to that investment choose not to file voluntarily. With respect to transactions that CFIUS considers to present unresolved national security concerns, CFIUS has the power to suspend transactions, impose mitigation measures, and/or recommend that the President block pending transactions or order divestitures of completed transactions when national security concerns cannot be mitigated. Whether CFIUS has jurisdiction to review an acquisition or investment transaction depends on, among other factors, the nature and structure of the transaction, whether the target company is a U.S. business, the level of beneficial ownership and voting interests acquired by foreign persons, and the nature of any information, control or governance rights received by foreign persons. For example, any investment that results in “control” of a U.S. business by a foreign person is within CFIUS’ jurisdiction. CFIUS’ expanded jurisdiction under the Foreign Investment Risk Review Modernization Act of 2018 and implementing regulations further includes investments that do not result in control of a U.S. business by a foreign person but that afford foreign persons certain information or governance rights in a “TID U.S. business,” that is, a U.S. business that: (i) produces, designs, tests, manufactures, fabricates, or develops “critical technologies”; (ii) owns or operates certain “critical infrastructure”; and/or (iii) maintains or collects “sensitive personal data,” all as defined in the CFIUS regulations.
The Sponsor is a “foreign person” under CFIUS’ regulations. The Sponsor is organized under the laws of Singapore and its principal place of business is in Singapore. Fat Acquisition Corp Pte. Ltd., a Singapore private company limited by shares (the “Founder”), exercises control over the Sponsor. Fat Projects Pte. Ltd., a Singapore exempt private company limited by shares (“Fat Projects”), exercises control over the Founder. In addition, the Sponsor, the Founder and Fat Projects have substantial ties to foreign persons, given that certain of the members of their boards of directors and management are foreign persons and foreign persons provided a majority of the funds invested in the Sponsor.
As Avanseus is not currently conducting any business in the United States, FATP believes that Avanseus should not be considered a U.S. business for CFIUS purposes.
CFIUS has broad discretion to interpret its regulations, and we cannot predict whether CFIUS may seek to review the Business Combination. If CFIUS were to determine that the Business Combination or any portion thereof is within its jurisdiction, it might request that the parties submit a filing with respect to the Business Combination. A CFIUS review of the Business Combination could delay the completion of the Business Combination, and, if CFIUS identifies unresolved national security concerns as part of that review, CFIUS could impose conditions with respect to the Business Combination, recommend that the President of the United States prohibit the Business Combination, or, if the Closing has occurred, recommend that the President of the United States order FATP to divest all or a portion of the Avanseus Shares that FATP acquired without first obtaining CFIUS approval. Moreover, should CFIUS determine that any party to the Business Combination was required to make a filing with CFIUS but failed to do so, CFIUS could impose on such party the greater of a civil penalty not to exceed $250,000 or the value of the relevant transaction.
The time necessary for CFIUS review of the Business Combination or a decision by CFIUS to prohibit the Business Combination may also prevent the Business Combination from occurring prior to the Final Redemption Date.
These risks may limit the attractiveness of, and/or delay or prevent FATP from pursuing, the Business Combination or, should the Business Combination not be completed, another business combination with certain target companies that FATP believes would otherwise be attractive to its and its shareholders.
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If FATP is unable to consummate the Business Combination, or another business combination, prior to the Final Redemption Date, FATP will be required to wind up, redeem its public shares, and liquidate. In such event, FATP’s shareholders will miss the opportunity to benefit from an investment in a target company and the appreciation in value of such investment through a business combination. Additionally, there will be no redemption rights or liquidating distributions with respect to the FATP Warrants, which will expire worthless in the event of FATP winding up.
In addition, depending on New Avanseus’ ultimate share ownership following the Business Combination and other factors, New Avanseus may be deemed to be a foreign person under CFIUS’ regulations. If a future particular proposed investment by New Avanseus in a U.S. business falls within CFIUS’ jurisdiction, New Avanseus may determine that it is required to make a mandatory filing with CFIUS or that it will submit a filing to CFIUS on a voluntary basis or, if a filing is not mandatory, New Avanseus may determine to proceed with such investment without submitting to CFIUS and risk CFIUS intervention, before or after closing such investment.
General Risk Factors Applicable to Avanseus
The COVID-19 pandemic has adversely affected, and is expected to continue to pose risks, to our business, results of operations, financial condition and cash flows, and other epidemics or outbreaks of infectious diseases may have a similar impact.
In March 2020, the World Health Organization categorized COVID-19 as a pandemic. The spread of the outbreak has caused significant disruptions in the global economies, and the impact may continue to be significant. We are subject to risks and uncertainties as a result of the COVID-19 pandemic. We continue to evaluate the global risks and the slowdown in business activity related to COVID-19, including the potential impacts on our employees, customers, suppliers, and financial results. For the fiscal years ended December 31, 2020 and 2021, COVID-19 required temporary closures of our Indian facility. Since January 1, 2022 to the date of this proxy statement/prospectus, there have been outbreaks of the Omicron variant of the COVID-19. The travel restrictions, mandatory COVID-19 tests, quarantine requirements, and/or temporary closure of office buildings and facilities have been imposed by local governments. Although our operations have not been materially and negatively impacted by such outbreaks, the local governments may issue new orders of office closure, travel, and transportation restrictions due to the resurgence of the COVID-19 and outbreak of new variants, which may have material negative impact to our business and financial condition. The COVID-19 pandemic or other epidemics or outbreaks of infectious diseases could materially adversely impact our results of operations, financial condition, and liquidity in several ways. In particular, the continued spread of COVID-19 and efforts to contain the virus could:
| ● | impair our ability to manage day-to-day service and product delivery; |
| ● | cause disruptions in or closures of the Company’s operations or those of its customers and suppliers; |
| ● | impact global liquidity and the availability of capital; |
| ● | cause us to experience an increase in costs as a result of our emergency measures, delayed payments from customers and uncollectible accounts; |
| ● | cause delays and disruptions in the supply chain resulting in disruptions in the commercial operation of our businesses; |
| ● | cause limitations on our employees’ ability to work and travel; |
| ● | impact availability of qualified personnel; |
| ● | increase cybersecurity risks as remote working environments may be less secure and more susceptible to hacking attacks, including phishing and social engineering attempts that seek to exploit the COVID-19 pandemic; and |
| ● | cause other unpredictable events. |
As the situation surrounding COVID-19 remains fluid, it is difficult to predict the duration of the pandemic and the impact on our business, operations, financial condition, and cash flows. The severity of the impact on our business going forward will depend on a number of factors, including, but not limited to, the duration and severity of the
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pandemic (including the advent of variants and the impact of vaccination on infection and hospitalization rates), the extent and severity of the impact on our customers and channel partners, the effect of applicable regulations regarding safety measures to address the spread of COVID-19, and the impact of the global business and economic environment on liquidity and the availability of capital, all of which are uncertain and cannot be predicted. Due to the evolving and uncertain nature of this event, we cannot predict at this time the full extent to which the COVID-19 pandemic will adversely impact our business, results, and financial condition, which will depend on many factors that are not known at this time.
Our quarterly results and key metrics are likely to fluctuate significantly and may not fully reflect the underlying performance of our business.
Our quarterly results of operations and key metrics may vary significantly in the future as they have in the past, particularly in light of our dependence on a limited number of high-value customer contracts, and period-to-period comparisons of our results of operations and key metrics may not be meaningful. Accordingly, the results of any one quarter should not be relied upon as an indication of future performance. Our quarterly results of operations and key metrics may fluctuate as a result of a variety of factors, many of which are outside of our control, and as a result, may not fully reflect the underlying performance of our business. Fluctuation in quarterly results may negatively impact the value of our securities. Factors that may cause fluctuations in our quarterly results of operations and key metrics include, without limitation, those listed elsewhere in this Risk Factors section and those listed below:
| ● | our ability to generate significant revenue from new offerings; |
| ● | our ability to expand our number of partners and distribution of our solutions and applications; |
| ● | our ability to hire and retain employees, in particular those responsible for the selling or marketing of our solutions and applications; |
| ● | our ability to develop and retain talented sales personnel who are able to achieve desired productivity levels in a reasonable period of time and provide sales leadership in areas in which we are expanding our sales and marketing efforts; |
| ● | changes in the way we organize and compensate our sales teams; |
| ● | the timing of expenses and recognition of revenue; |
| ● | our ability to increase sales to large organizations as well as increase sales to a larger number of smaller customers; |
| ● | the length of sales cycles; |
| ● | the amount and timing of operating expenses related to the maintenance and expansion of our business, operations, and infrastructure, as well as international expansion and entry into operating leases; |
| ● | timing and effectiveness of new sales and marketing initiatives; |
| ● | changes in our pricing policies or those of our competitors; |
| ● | the timing and success of new or upgraded solutions, applications, features, and functionality by us or our competitors; |
| ● | changes in the competitive dynamics of our industry, including consolidation among competitors; |
| ● | changes in laws and regulations that impact our business; |
| ● | the timing of expenses related to any future acquisitions; |
| ● | health epidemics or pandemics, such as the coronavirus, or COVID-19, pandemic; |
| ● | civil unrest and geopolitical instability; and |
| ● | general political, economic, and market conditions. |
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We may need additional capital, and we cannot be certain that additional financing will be available on favorable terms, or at all.
Historically, we have funded our operations and capital expenditures primarily through debt and equity issuances and cash generated from our operations. Although we currently anticipate that our existing cash and cash equivalents and cash flow from operations will be sufficient to meet our cash needs for the foreseeable future, we may require additional financing. We evaluate financing opportunities from time to time, and our ability to obtain financing will depend, among other things, on our development efforts, business plans, operating performance, and condition of the capital markets at the time we seek financing. Future sales and issuances of our capital stock or rights to purchase our capital stock could result in substantial dilution to our existing stockholders. We may sell ordinary shares, non-voting shares, convertible securities, and other equity securities in one or more transactions at prices and in a manner as we may determine from time to time. If we sell any such securities in subsequent transactions, our then-current investors may be materially diluted. New investors in such subsequent transactions could gain rights, preferences, and privileges senior to those of holders of our existing security holders. Any debt financing that we may secure in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities. We cannot assure you that additional financing will be available to us on favorable terms when required, or at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support our business growth and development efforts and to respond to business challenges could be significantly impaired, and our business, operating results, and financial condition may be adversely affected.
Risks Relating to FATP and the Business Combination
FATP’s current directors and executive officers and their affiliates have interests that are different than, or in addition to (and which may conflict with), the interests of its shareholders, and therefore potential conflicts of interest exist in recommending that shareholders vote in favor of approval of the Business Combination. Such conflicts of interests include that the Sponsor as well as FATP’s officers and directors will lose their entire investment in FATP if the Business Combination or another business combination is not completed before the Final Redemption Date.
When considering the FATP Board’s recommendation to vote in favor of approving the Business Combination Proposal, the Articles Amendment Proposal, the Share Issuance Proposal and the Incentive Plan Proposal, FATP shareholders should keep in mind that the Sponsor and FATP’s directors and executive officers, have interests in such proposals that are different from, or in addition to (and which may conflict with), those of FATP shareholders generally. These interests include, among other things, the interests listed below:
| ● | the fact that the Sponsor’s Shareholders and FATP’s directors and officers have agreed not to redeem any FATP Class B Ordinary Shares held by them in connection with a shareholder vote to approve the Business Combination; |
| ● | the fact that the Sponsor paid an aggregate of $25,000 for the 2,875,000 FATP Class B Ordinary Shares currently owned by the Sponsor’s Shareholders and the Anchor Investors, and such securities will have a significantly higher value after the Business Combination. As of September 23, 2022, the most recent practicable date prior to the date of this proxy statement/prospectus, the aggregate market value of these shares, if unrestricted and freely tradable, would be $28,635,000, based upon a closing price of $9.96 per public share on Nasdaq (and will have zero value if neither the Business Combination nor any other business combination is completed on or before the Final Redemption Date); |
| ● | the fact that the Sponsor paid $2,865,000 to purchase an aggregate of 2,865,000 Private Warrants currently owned by the Sponsor’s Shareholders at a price of $1.00 per Private Warrant, each exercisable to purchase one FATP Class A Ordinary Share at $11.50, subject to adjustment, and the Private Warrants would be worthless — and the entire $2,865,000 warrant investment would be lost — if FATP does not consummate a business combination by the Final Redemption Date. As of September 30, 2022, the estimated fair value of the Private Warrants was $142,964; |
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| ● | the fact that given the very low purchase price (of $25,000 in aggregate) that the Sponsor paid for the FATP Class B Ordinary Shares as compared to the price of the FATP Shares sold in the FATP IPO and the substantial number of FATP Class A Ordinary Shares that the Sponsor’s Shareholders will receive upon conversion of the FATP Class B Ordinary Shares in connection with the Business Combination, the Sponsor’s Shareholders may earn a positive rate of return on their investment even if the FATP Class A Ordinary Shares trade below the price initially paid for the FATP Class A Ordinary Shares in the FATP IPO and the FATP public shareholders experience a negative rate of return following the completion of the Business Combination; |
| ● | the fact that the Sponsor’s Shareholders and FATP’s directors and executive officers have agreed to waive their rights to liquidating distributions from the trust account with respect to any FATP Shares (other than public shares) held by them if FATP fails to complete an initial business combination by the Final Redemption Date. As a result of waiving liquidating distributions, if FATP fails to complete an initial business combination by the Final Redemption Date the Sponsor’s Shareholders and FATP’s directors and executive officers would lose $2,865,000 for the purchase of Private Warrants, and $25,000 for the purchase of the FATP Class B Ordinary Shares; |
| ● | the fact that FATP’s directors and officers have agreed to waive their redemption rights with respect to the FATP Shares (other than public shares) held by them for no consideration; |
| ● | the fact that, with respect to redemptions, holders of FATP Class B Ordinary Shares may have different incentives than holders of FATP Class A Ordinary Shares with respect to the completion of any proposed business combination and/or the exercise of a right to redeem. In particular, holders of FATP Class B Ordinary Shares are not entitled to participate in any redemption with respect to such shares. The value of the FATP Class B Ordinary Shares is dependent on FATP’s consummation of a business combination. In the event that FATP does not consummate a business combination, the FATP Class B Ordinary Shares would be rendered valueless. Holders of FATP Class A Ordinary Shares, on the other hand, will ultimately be entitled to exercise redemption rights and receive the value of their redeemed shares even if FATP does not complete a business combination. Therefore, the interests of holders of FATP Class A Ordinary Shares and FATP Class B Ordinary Shares may not be aligned. Holders of FATP Class A Ordinary Shares should form their own independent views as to whether or not to redeem or whether or not to vote in favor of the Business Combination Proposal; |
| ● | the fact that the Sponsor’s Shareholders and FATP’s officers and directors will lose their entire investment in FATP and will not be reimbursed for any out-of-pocket expenses if FATP does not consummate an initial business combination by the Final Redemption Date; |
| ● | the fact that the Sponsor (including its representatives and affiliates) and FATP’s directors and officers, are, or may in the future become, affiliated with entities that are engaged in a similar business to FATP. The Sponsor and FATP’s directors and officers are not prohibited from sponsoring, or otherwise becoming involved with, any other blank check companies prior to completing the Business Combination. Accordingly, if any of FATP’s officers or directors becomes aware of a business combination opportunity that is suitable for an entity to which he or she has then current fiduciary or contractual obligations, he or she will honor his or her fiduciary or contractual obligations to present such business combination opportunity to such entity, subject to their fiduciary duties under Cayman Islands law. |
| ● | If the trust account is liquidated, including in the event that FATP is unable to complete an initial business combination, the Sponsor has agreed that it will indemnify FATP if and to the extent that any claims by a third party (other than the independent public accounting firm) for services rendered or products sold to FATP, or a prospective target business with which FATP has entered into a written letter of intent, confidentiality or similar agreement or business combination agreement, reduce the amount of funds in the trust account to below the lesser of (i) $10.00 per public share and (ii) the actual amount per public share held in the trust account as of the date of the liquidation of the trust account, if less than $10.00 per public share due to reductions in the value of the trust assets, less taxes payable, provided that such indemnification will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the trust account (whether or not such waiver is enforceable) nor will it apply to any claims under our indemnity of the underwriters of the FATP IPO against certain liabilities, including liabilities under the Securities Act. |
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The Sponsor’s Shareholders, which include all of FATP’s directors and executive officers or companies controlled by them, have agreed or are otherwise obligated to, among other things, vote all of their FATP Shares in favor of the proposals being presented at the General Meeting and waive their redemption rights with respect to their FATP Shares in connection with the consummation of the Business Combination. As of the date of this proxy statement/prospectus, the Sponsor’s Shareholders in the aggregate own approximately 14.7% of the issued and outstanding FATP Ordinary Shares.
The existence of financial and personal interests of one or more of FATP’s directors results in conflicts of interest on the part of such director(s) between what he, she, or they may believe is in the best interests of FATP and what he, she, or they may believe is best for himself, herself, or themselves in determining to recommend that shareholders vote for the proposals. In addition, FATP’s officers and directors have interests in the Business Combination that may conflict with your interests as a shareholder.
In addition to the above, please see “Risk Factors — Risks Relating to FATP and the Business Combination” and “Information Related to FATP — Our Past Blank Check Experience and Conflicts of Interest” for additional information on interests of FATP’s directors and officers.
The personal and financial interests of the Sponsor as well as FATP’s directors and officers may have influenced their motivation in identifying and selecting Avanseus as a business combination target, completing an initial business combination with Avanseus and influencing the operation of the business following the Business Combination. In considering the recommendations of the FATP Board to vote for the Business Combination and other proposals, you should consider these interests.
The Sponsor’s Shareholders may benefit from the completion of a business combination with a target that would not be beneficial to the FATP public shareholders, and if FATP liquidates after failing to complete a business combination, the Sponsor’s Shareholders will likely receive little or no distribution in liquidation with respect to their FATP securities, consequently, the Sponsor has an incentive to complete a business combination with a less-favorable target rather than liquidating.
The Sponsor paid $25,000 to purchase 2,875,000 FATP Class B Ordinary Shares (or approximately $0.009 per share) and $1.00 each to purchase 2,865,000 Private Warrants, whereas the FATP public shareholders purchased Units at $10.00 per Unit in the FATP IPO. Thus, a gain can be realized on the FATP securities initially purchased by the Sponsor if the post-Closing market price of the combined company is more than $1.01 per share, which is much lower than the market price necessary for the FATP public shareholders to realize a gain, which is more than $10.00 per share (if the entire value of the Units sold in the FATP IPO is ascribed to the FATP Class A Ordinary Shares included in the Units). Conversely, if FATP does not complete a business combination and liquidates, only the FATP public shareholders are entitled to receive proceeds from the trust account, and there will likely be very few assets of FATP outside the trust account for the Sponsor’s Shareholders to receive. Consequently, the Sponsor may have an incentive to complete a business combination in circumstances in which the FATP public shareholders would prefer to liquidate.
The exercise of FATP’s directors’ and executive officers’ discretion in agreeing to changes or waivers in the terms of the Business Combination Agreement may result in a conflict of interest when determining whether such changes to the terms of the Business Combination Agreement or waivers of conditions are appropriate and in FATP’s best interest.
In the period leading up to the Closing, events may occur that, pursuant to the Business Combination Agreement, would require FATP to agree to amend the Business Combination Agreement, to consent to certain actions taken by Avanseus or to waive rights that FATP is entitled to under the Business Combination Agreement. Such events could arise because of changes in the course of Avanseus’ business, a request by Avanseus to take actions that would otherwise be prohibited by the terms of the Business Combination Agreement or the occurrence of other events that would have a material adverse effect on Avanseus’ business or could entitle FATP to terminate the Business Combination Agreement. In any of such circumstances, it would be at FATP’s discretion, acting through the FATP Board, to grant its consent or waive those rights; provided that under the terms of the Business Combination Agreement, such consent or waiver in certain cases may not be unreasonably withheld, conditioned, delayed or denied. The existence of financial and personal interests of one or more of the directors results in conflicts of interest on the part of such director(s) between what he, she or they may believe is best for FATP
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and what he, she or they may believe is best for himself, herself or themselves (or entities with which he or she is affiliated including the Sponsor) in determining whether or not to take the requested action. As of the date of this proxy statement/prospectus, FATP does not believe that there will be any changes or waivers that the FATP Board would be likely to approve after shareholder approval of the Business Combination Proposal, the Articles Amendment Proposal, the Share Issuance Proposal and the Incentive Plan Proposal have been obtained. While certain changes could be made without further shareholder approval, FATP will circulate a new or amended proxy statement/prospectus and resolicit FATP shareholders if changes to the terms of the Business Combination Agreement that would have a material impact on its shareholders are required prior to the vote on the Business Combination Proposal, the Articles Amendment Proposal, the Share Issuance Proposal and the Incentive Plan Proposal. As a matter of Cayman Island law, the directors of FATP are under a fiduciary duty to act in the best interest of FATP.
FATP may be forced to close the Business Combination even if FATP determines it is no longer in FATP shareholders’ best interest. Public FATP shareholders are protected from a material adverse event of FATP or Avanseus arising between the date of the Business Combination Agreement and the Closing, primarily by the right to redeem their public shares for a pro rata portion of the funds held in the trust account, calculated as of two business days prior to the vote at the General Meeting. If a material adverse event were to occur after approval of the Business Combination Proposal, the Articles Amendment Proposal, the Share Issuance Proposal and the Incentive Plan Proposal at the General Meeting, FATP may be forced to close the Business Combination even if it determines that it is no longer in its shareholders’ best interest to do so (as a result of such material adverse event), which could have a significant negative impact on FATP’s business, financial condition or results of operations.
The Sponsor’s Shareholders, FATP’s directors and officers, and the Anchor Investors have agreed or are otherwise obligated to vote all of their FATP Class B ordinary Share in favor of the Business Combination, regardless of how FATP’s public shareholders vote.
The Sponsor’s Shareholders, FATP’s directors and officers, and the Anchor Investors who purchased FATP Class B Ordinary Shares from the Sponsor have agreed or are otherwise obligated to vote all of their FATP Class B Ordinary Shares in favor of all the proposals being presented at the General Meeting, including the Business Combination Proposal. (The Anchor Investors are not obligated to vote their Class A Ordinary Shares in favor of the Business Combination Proposal.) In addition, the Sponsor and members of FATP’s management team also may from time to time purchase FATP Class A Ordinary Shares before the record date for the General Meeting. Under the Existing FATP Articles, FATP may complete the Business Combination only if it obtains the requisite votes as described under “General Meeting of FATP Shareholders.” As a result, in addition to the 2,875,000 FATP Class B Ordinary Shares held by the Sponsor’s Shareholders, FATP directors and officers, and the Anchor Investors, FATP would need 4,370,001, or 38% (assuming all issued and outstanding shares are voted), or 747,502, or 6.5% (assuming only the minimum number of shares representing a quorum are voted), of the 11,500,000 public shares sold in the FATP IPO to be voted in favor of the Business Combination Proposal, the Share Issuance Proposal and the Incentive Plan Proposal in order to have those proposals approved and 6,785,000, or 59% (assuming all issued and outstanding shares are voted), or 1,955,001, or 17% (assuming only the minimum number of shares representing a quorum are voted), of the 11,500,000 public shares sold in the FATP IPO to be voted in favor of the Articles Amendment Proposal in order to have the Articles Amendment Proposal approved. Accordingly, the agreement by or other obligation of the Sponsor’s Shareholders, each member of FATP’s management team and the Anchor Investors to vote their FATP Class B Ordinary Shares in favor of the Business Combination Proposal, the Articles Amendment Proposal, the Share Issuance Proposal and the Incentive Plan Proposal will increase the likelihood that FATP will receive the requisite shareholder approval for such proposals.
FATP is dependent upon its officers and directors and their loss could adversely affect FATP’s ability to complete the Business Combination.
FATP’s operations are dependent upon a relatively small group of individuals and, in particular, its executive officers and directors. FATP’s ability to complete its Business Combination depends on the continued service of its offi