The accompanying notes are an integral
part of these unaudited condensed interim financial statements.
The accompanying notes are an integral part
of these unaudited condensed interim financial statements.
The accompanying notes are an integral part
of these unaudited condensed interim financial statements.
The accompanying notes are an integral part
of these unaudited condensed interim financial statements.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
NOTE 1 — ORGANIZATION AND PLAN
OF BUSINESS OPERATIONS
ACE Convergence Acquisition Corp. (the
“Company”) is a blank check company incorporated as a Cayman Islands exempted company on March 31, 2020. The Company
was formed for the purpose of effecting a merger, amalgamation, share exchange, asset acquisition, share purchase, reorganization
or other similar business combination with one or more businesses (a “Business Combination”).
Although the Company is not limited to
a particular industry or sector for purposes of consummating a Business Combination, the Company intends to focus on businesses
in the IT infrastructure software and semiconductor sector. The Company is an early stage and emerging growth company and, as such,
the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of September 30, 2020, the Company had
not commenced any operations. All activity for the period from March 31, 2020 (inception) through September 30, 2020 relates
to the Company’s formation and the initial public offering (“Initial Public Offering”), which is described below.
The Company will not generate any operating revenues until after the completion of a Business Combination, at the earliest. The
Company will generate non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering.
The registration statement for the Company’s
Initial Public Offering was declared effective on July 27, 2020. On July 30, 2020, the Company consummated the Initial Public Offering
of 23,000,000 units (the “Units” and, with respect to the Class A ordinary shares included in the Units offered,
the “Public Shares”), which includes the full exercise by the underwriters of their over-allotment option in the amount
of 3,000,000 Units, at $10.00 per Unit, generating gross proceeds of $230,000,000, which is described in Note 3.
Simultaneously with the closing of the
Initial Public Offering, the Company consummated the sale of 6,600,000 warrants (the “Private Placement Warrants”)
at a price of $1.00 per Private Placement Warrant in a private placement to the Company’s sponsor, ACE Convergence Acquisition
LLC, a Delaware limited liability company (the “Sponsor”), generating gross proceeds of $6,600,000, which is described
in Note 4.
Transaction costs amounted to $13,273,096
consisting of $4,600,000 of underwriting fees, $8,050,000 of deferred underwriting fees and $623,096 of other offering costs.
In addition, at September 30, 2020, cash of $45,023 was held outside of the Trust Account and is available for working capital
purposes.
Following the closing of the Initial Public
Offering on July 30, 2020, an amount of $230,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the Initial
Public Offering and the sale of the Private Placement Warrants was placed in a trust account (the “Trust Account”)
which was invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company
Act, with a maturity of 185 days or less, or in any open-ended investment company that holds itself out as a money market
fund investing solely in U.S. Treasuries and meeting certain conditions under Rule 2a-7 of the Investment Company Act, as
determined by the Company, until the earliest of: (i) the completion of a Business Combination and (ii) the distribution
of the funds in the Trust Account to the Company’s shareholders, as described below.
The Company’s management has broad
discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of the Private
Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business
Combination. The Nasdaq listing rules require that the Business Combination must be with one or more operating businesses or assets
with a fair market value equal to at least 80% of the assets held in the Trust Account (as defined below) (excluding the deferred
underwriting commissions and taxes payable on the income earned on the Trust Account). The Company will only complete a Business
Combination if the post-Business Combination company owns or acquires 50% or more of the issued and outstanding voting securities
of the target or otherwise acquires a controlling interest in the target business sufficient for it not to be required to register
as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”). There
is no assurance that the Company will be able to successfully effect a Business Combination.
The Company will provide the holders of
the public shares (the “Public Shareholders”) with the opportunity to redeem all or a portion of their public shares
upon the completion of the Business Combination, either (i) in connection with a general meeting called to approve the Business
Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek shareholder approval of a
Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The Public Shareholders will
be entitled to redeem their Public Shares, equal to the aggregate amount then on deposit in the Trust Account, calculated as of
two business days prior to the consummation of the Business Combination (initially to be $10.00 per Public Share), including interest
(which interest shall be net of taxes payable), divided by the number of then issued and outstanding public shares, subject to
certain limitations as described in the prospectus. The per-share amount to be distributed to the Public Shareholders who properly
redeem their shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriters (as discussed
in Note 6). There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s
warrants.
ACE CONVERGENCE ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
The Company will proceed with a Business
Combination only if the Company has net tangible assets of at least $5,000,001 and, if the Company seeks shareholder approval,
it receives an ordinary resolution under Cayman Islands law approving a Business Combination, which requires the affirmative vote
of a majority of the shareholders who attend and vote in person or by proxy at a general meeting of the Company. If a shareholder
vote is not required and the Company does not decide to hold a shareholder vote for business or other legal reasons, the Company
will, pursuant to its Amended and Restated Memorandum and Articles of Association, conduct the redemptions pursuant to the tender
offer rules of the Securities and Exchange Commission (“SEC”), and file tender offer documents containing substantially
the same information as would be included in a proxy statement with the SEC prior to completing a Business Combination. If the
Company seeks shareholder approval in connection with a Business Combination, the Company’s Sponsor has agreed to vote its
Founder Shares (as defined in Note 5) and any Public Shares purchased during or after the Initial Public Offering in favor of approving
a Business Combination. Additionally, each Public Shareholder may elect to redeem their Public Shares, without voting, and if they
do vote, irrespective of whether they vote for or against a proposed Business Combination.
Notwithstanding the foregoing, if the Company
seeks shareholder approval of the Business Combination and the Company does not conduct redemptions pursuant to the tender offer
rules, a Public Shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder is
acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of 15% of
the Public Shares without the Company’s prior written consent.
The Sponsor has agreed (a) to waive
its redemption rights with respect to any Founder Shares and Public Shares held by it in connection with the completion of a Business
Combination and (b) not to propose an amendment to the Amended and Restated Memorandum and Articles of Association (i) to
modify the substance or timing of the Company’s obligation to allow redemption in connection with the Company’s initial
Business Combination or to redeem 100% of the Public Shares if the Company does not complete a Business Combination within the
Combination Period (as defined below) or (ii) with respect to any other provision relating to shareholders’ rights or
pre-initial business combination activity, unless the Company provides the Public Shareholders with the opportunity to redeem their
Public Shares upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on
deposit in the Trust Account, including interest (which interest shall be net of taxes payable), divided by the number of then
issued and outstanding Public Shares.
The Company will have until January 30,
2022 (the “Combination Period”) as may be extended from time to time by the Company as a result of a shareholder vote
to amend its Amended and Restated Memorandum and Articles of Association (an “Extension Period”) to consummate a Business
Combination. However, if the Company has not completed a Business Combination within the Combination Period or any Extension Period,
the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible
but not more than ten business days thereafter, redeem 100% of the Public Shares, at a per-share price, payable in cash, equal
to the aggregate amount then on deposit in the Trust Account, including interest (less up to $100,000 of interest to pay dissolution
expenses and which interest shall be net of taxes payable), divided by the number of then issued and outstanding Public Shares,
which redemption will completely extinguish the rights of the Public Shareholders as shareholders (including the right to receive
further liquidating distributions, if any), and (iii) as promptly as reasonably possible following such redemption, subject
to the approval of the Company’s remaining Public Shareholders and its Board of Directors, liquidate and dissolve, subject
in each case to the Company’s obligations under Cayman Islands law to provide for claims of creditors and the requirements
of other applicable law. There will be no redemption rights or liquidating distributions with respect to the Company’s warrants,
which will expire worthless if the Company fails to complete a Business Combination within the Combination Period or any Extension
Period.
The Sponsor has agreed to waive its rights
to liquidating distributions from the Trust Account with respect to the Founder Shares if the Company fails to complete a Business
Combination within the Combination Period or any Extension Period. However, if the Sponsor or any of its respective affiliates
acquire Public Shares, such Public Shares will be entitled to liquidating distributions from the Trust Account if the Company fails
to complete a Business Combination within the Combination Period or any Extension Period. The underwriters have agreed to waive
their rights to their deferred underwriting commission (see Note 6) held in the Trust Account in the event the Company does not
complete a Business Combination within the Combination Period or any Extension Period, and in such event, such amounts will be
included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In
the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will
be less than the Initial Public Offering price per Unit ($10.00).
In order to protect the amounts held in
the Trust Account, the Sponsor has agreed that it will be liable to the Company if and to the extent any claims by a third party
(other than the Company’s independent auditors) for services rendered or products sold to the Company, or a prospective target
business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account
to below (1) $10.00 per Public Share or (2) such lesser amount per Public Share held in the Trust Account as of the date
of the liquidation of the Trust Account due to reductions in the value of trust assets, in each case net of the interest which
may be withdrawn to pay taxes, except as to any claims by a third party who executed a waiver of any and all rights to seek access
to the Trust Account and except as to any claims under the Company’s indemnity of the underwriters of the Initial Public
Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities
Act”). In the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be
responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the
Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers
(other than the Company’s independent auditors), prospective target businesses or other entities with which the Company does
business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the
Trust Account.
ACE CONVERGENCE ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
NOTE 2 — SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed interim
financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America
(“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation
S-X of the Securities and Exchange Commission (the “SEC”). Certain information or footnote disclosures normally included
in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations
of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a
complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying
unaudited condensed interim financial statements include all adjustments, consisting of a normal recurring nature, which are necessary
for a fair presentation of the financial position, operating results and cash flows for the periods presented.
The accompanying unaudited condensed interim
financial statements should be read in conjunction with the Company’s prospectus for its Initial Public Offering as filed
with the SEC on July 28, 2020, as well as the Company’s Current Reports on Form 8-K, as filed with the SEC on July 31, 2020
and August 5, 2020. The interim results for the three months ended September 30, 2020 and for the period from March 31, 2020 (inception)
through September 30, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020 or
for any future periods.
Emerging Growth Company
The Company is an “emerging growth
company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012
(the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable
to other public companies that are not emerging growth companies, including, but not limited to, not being required to comply with
the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced
disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements
of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously
approved.
Further, Section 102(b)(1) of the JOBS
Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private
companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of
securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The
JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply
to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such
extended transition period which means that when a standard is issued or revised and it has different application dates for public
or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies
adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company
which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition
period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of the unaudited condensed
interim financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed interim
financial statements and the reported amounts of revenues and expenses during the reporting periods.
Making estimates requires management to
exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or
set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate,
could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly
from those estimates.
ACE CONVERGENCE ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
Cash and Cash Equivalents
The Company considers all short-term investments
with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents
as of September 30, 2020.
Class A Ordinary Shares Subject to Possible
Redemption
The Company accounts for its Class A ordinary
shares subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”)
Topic 480 “Distinguishing Liabilities from Equity.” Ordinary shares subject to mandatory redemption are classified
as a liability instrument and are measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares that
feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain
events not solely within the Company’s control) are classified as temporary equity. At all other times, ordinary shares are
classified as shareholders’ equity. The Company’s Class A ordinary shares feature certain redemption rights that are
considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, at September 30,
2020, Class A ordinary shares subject to possible redemption are presented as temporary equity, outside of the shareholders’
equity section of the Company’s unaudited condensed balance sheet.
Offering Costs
Offering costs consist of underwriting,
legal, accounting and other expenses incurred through the Initial Public Offering that are directly related to the Initial Public
Offering. Offering costs amounting to $13,273,096 were charged to shareholders’ equity upon the completion of the Initial
Public Offering.
Income Taxes
The Company accounts for income taxes
under ASC Topic 740, “Income Taxes,” which requires an asset and liability approach to financial accounting and reporting
for income taxes.
ASC Topic 740 prescribes a recognition
threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected
to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon
examination by taxing authorities. The Company’s management determined that the Cayman Islands is the Company’s major
tax jurisdiction. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense.
As of September 30, 2020, there were no unrecognized tax benefits and no amounts accrued for interest and penalties. The Company
is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from
its position.
The Company is considered to be an exempted
Cayman Islands company with no connection to any other taxable jurisdiction and is presently not subject to income taxes or income
tax filing requirements in the Cayman Islands or the United States. As such, the Company’s tax provision was zero for the
periods presented.
Net Income (Loss) Per Ordinary Share
Net income (loss) per common share is
computed by dividing net income (loss) by the weighted average number of ordinary shares outstanding for the period. The Company
has not considered the effect of warrants sold in the Initial Public Offering and private placement to purchase 18,100,000 Class A
ordinary shares in the calculation of diluted income (loss) per share, since the exercise of the warrants are contingent upon
the occurrence of future events and the inclusion of such warrants would be anti-dilutive.
The Company’s unaudited condensed
interim statements of operations include a presentation of income (loss) per share for ordinary shares subject to redemption in
a manner similar to the two-class method of income per share. Net income per ordinary share, basic and diluted, for Class A
redeemable ordinary shares is calculated by dividing the interest income earned on the Trust Account of $36,426 for the three
months ended September 30, 2020 and for the period from March 31, 2020 (inception) through September 30, 2020,
by the weighted average number of Class A redeemable ordinary shares since issuance. Net loss per ordinary shares, basic
and diluted for Class B non-redeemable ordinary shares is calculated by dividing the net income (loss), less income attributable
to Class A redeemable ordinary shares, by the weighted average number of Class B non-redeemable ordinary shares outstanding
for the periods. Class B non-redeemable ordinary shares includes the Founder Shares as these shares do not have any redemption
features and do not participate in the income earned on the Trust Account.
ACE CONVERGENCE ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
Concentration of Credit Risk
Financial instruments that potentially
subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times, may
exceed the Federal Depository Insurance Coverage of $250,000. The Company has not experienced losses on this account and
management believes the Company is not exposed to significant risks on such account.
Fair Value of Financial Instruments
The fair value of the Company’s assets
and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates
the carrying amounts represented in the accompanying unaudited condensed interim financial statements, primarily due to their short-term
nature.
Recent Accounting Standards
Management does not believe that any recently
issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s
unaudited condensed interim financial statements.
NOTE 3 — INITIAL PUBLIC OFFERING
Pursuant to the Initial Public Offering,
the Company sold 23,000,000 Units, which includes the full exercise by the underwriters of their over-allotment option in
the amount of 3,000,000 Units, at a purchase price of $10.00 per Unit. Each Unit consists of one Class A ordinary share and
one-half of one redeemable warrant (“Public Warrant”). Each whole Public Warrant entitles the holder to purchase one
Class A ordinary share at an exercise price of $11.50 per whole share (see Note 7).
NOTE 4 — PRIVATE PLACEMENT
Simultaneously with the closing of the
Initial Public Offering, the Sponsor purchased an aggregate of 6,600,000 Private Placement Warrants at a price of $1.00 per Private
Placement Warrant, for an aggregate purchase price of $6,600,000. Each Private Placement Warrant is exercisable to purchase one
Class A ordinary share at a price of $11.50 per share, subject to adjustment (see Note 7). A portion of the proceeds from
the Private Placement Warrants were added to the proceeds from the Initial Public Offering held in the Trust Account. If the Company
does not complete a Business Combination within the Combination Period or any Extension Period, the proceeds from the sale of the
Private Placement Warrants will be used to fund the redemption of the Public Shares (subject to the requirements of applicable
law) and the Private Placement Warrants will expire worthless.
NOTE 5 — RELATED PARTY TRANSACTIONS
Founder Shares
During the period ended June 30, 2020,
the Sponsor purchased 5,750,000 of the Company’s Class B ordinary shares (the “Founder Shares”) for an aggregate
consideration of $25,000. On May 29, 2020, the Sponsor transferred an aggregate of 155,000 Founder Shares to certain members
of the Company’s management team. The Founder Shares included an aggregate of up to 750,000 shares that were subject to forfeiture
depending on the extent to which the underwriters’ over-allotment option was exercised, so that the number of Founder Shares
would equal 20% of the Company’s issued and outstanding ordinary shares after the Initial Public Offering. As a result of
the underwriters’ election to fully exercise their over-allotment option on July 30,2020, 750,000 Founder Shares are no longer
subject to forfeiture.
The Sponsor has agreed, subject to limited
exceptions, not to transfer, assign or sell any of its Founder Shares until the earlier to occur of: (A) one year after the
completion of a Business Combination and (B) subsequent to a Business Combination, (x) if the last reported sale price
of the Class A ordinary shares equals or exceeds $12.00 per share (as adjusted for share sub-divisions, share dividends, rights
issuances, consolidations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period
commencing at least 150 days after a Business Combination, or (y) the date on which the Company completes a liquidation,
merger, amalgamation, share exchange, reorganization or other similar transaction that results in all of the Public Shareholders
having the right to exchange their Class A ordinary shares for cash, securities or other property.
Promissory Note — Related Party
On May 28, 2020, the Company issued
an unsecured promissory note (the “Promissory Note”) to the Sponsor, pursuant to which the Company may borrow up to
an aggregate principal amount of $300,000. The Promissory Note is non-interest bearing and payable on the earlier of (i) December 31,
2020 and (ii) the completion of the Initial Public Offering. The borrowings outstanding under the Promissory Note of $186,760
were repaid as of September 30, 2020.
ACE CONVERGENCE ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
Administrative Services Agreement
The Company entered into an agreement,
commencing on July 28, 2020, to pay the Sponsor up to $10,000 per month for office space, administrative and support services.
Upon completion of a Business Combination or its liquidation, the Company will cease paying these monthly fees. For each of the
three months ended September 30, 2020 and for the period from March 31, 2020 (inception) through September 30, 2020, the Company
incurred $20,000, in fees for these services, of which $20,000 are included in accounts payable and accrued expenses in the accompanying
condensed balance sheets at September 30, 2020.
Working Capital Facility
On August 12, 2020, the Company entered
into a working capital facility (the “Working Capital Facility”) with ASIA-IO Advisors Limited (“ASIO-IO”),
an affiliate of the Company, in the aggregate amount of $1,500,000. The funds from the Working Capital Facility shall be utilized
to finance transaction costs in connection with a Business Combination. The Working Capital Facility is non-interest bearing,
non-convertible and due to be repaid upon the consummation of a Business Combination. In return, the Company deposited $900,000
into an account held by ASIO-IO, from which the Company may make fund withdrawals for up to $1,500,000. Any outstanding amounts
deposited with ASIO-IO upon the completion of a Business Combination or dissolution of the Company, shall be returned to the Company.
Related Party Loans
In order to finance transaction costs in
connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers
and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). Such
Working Capital Loans would be evidenced by promissory notes. The notes may be repaid upon completion of a Business Combination,
without interest, or, at the lender’s discretion, up to $1,500,000 of notes may be converted upon completion of a Business
Combination into warrants at a price of $1.00 per warrant. Such warrants would be identical to the Private Placement Warrants.
In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account
to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans.
As of September 30, 2020, the Company had no outstanding borrowings under the Working Capital Loans.
NOTE 6 — COMMITMENTS AND CONTINGENCIES
Risks and Uncertainties
Management is continuing to evaluate the
impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have
a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the
specific impact is not readily determinable as of the date of these financial statements. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
Registration Rights
Pursuant to a registration rights agreement
entered into on July 27, 2020, the holders of the Founder Shares, Private Placement Warrants and any warrants that may be issued
on conversion of Working Capital Loans (and any Class A ordinary shares issuable upon the exercise of the Private Placement
Warrants or warrants issued upon conversion of the Working Capital Loans and upon conversion of the Founder Shares) are entitled
to registration rights requiring the Company to register such securities for resale (in the case of the Founder Shares, only after
conversion to the Company’s Class A ordinary shares). The holders of these securities will be entitled to make up to
three demands, excluding short form registration demands, that the Company register such securities. In addition, the holders have
certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion
of a Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under
the Securities Act. However, the registration rights agreement provides that the Company will not be required to effect or permit
any registration or cause any registration statement to become effective until termination of the applicable lock-up period. The
Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The underwriters were paid a cash underwriting
discount of $0.20 per Unit, or $4,600,000 in the aggregate. In addition, the underwriters are entitled to a deferred fee of $0.35
per Unit, or $8,050,000 in the aggregate. The deferred fee will become payable to the underwriters from the amounts held in the
Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.
ACE CONVERGENCE ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
NOTE 7 — SHAREHOLDERS’ EQUITY
Preference Shares — The
Company is authorized to issue 5,000,000 preference shares with a par value of $0.0001 per share, with such designations, voting
and other rights and preferences as may be determined from time to time by the Company’s board of directors. At September
30, 2020, there were no preference shares issued or outstanding.
Class A Ordinary Shares — The
Company is authorized to issue 500,000,000 Class A ordinary shares, with a par value of $0.0001 per share. Holders of Class A
ordinary shares are entitled to one vote for each share. At September 30, 2020, there were 1,172,790 Class A ordinary shares
issued and outstanding, excluding 21,827,210 Class A ordinary shares subject to possible redemption.
Class B Ordinary Shares — The
Company is authorized to issue 50,000,000 Class B ordinary shares, with a par value of $0.0001 per share. Holders of the Class B
ordinary shares are entitled to one vote for each share. At September 30, 2020, there were 5,750,000 Class B ordinary shares
issued and outstanding.
Holders of Class A ordinary shares
and Class B ordinary shares will vote together as a single class on all matters submitted to a vote of shareholders, except
as required by law.
The Class B ordinary shares will
automatically convert into Class A ordinary shares at the time of a Business Combination on a one-for-one basis, subject
to adjustment. In the case that additional Class A ordinary shares, or equity-linked securities, are issued or deemed issued
in excess of the amounts sold in the Initial Public Offering and related to the closing of a Business Combination, the ratio at
which Class B ordinary shares shall convert into Class A ordinary shares will be adjusted (unless the holders of a majority
of the issued and outstanding Class B ordinary shares agree to waive such anti-dilution adjustment with respect to any such
issuance or deemed issuance) so that the number of Class A ordinary shares issuable upon conversion of all Class B ordinary
shares will equal, in the aggregate, 20% of the sum of all ordinary shares issued and outstanding upon completion of the Initial
Public Offering plus all Class A ordinary shares and equity-linked securities issued or deemed issued in connection with
the Business Combination, excluding any shares or equity-linked securities issued, or to be issued, to any seller in the Business
Combination.
Warrants — Public
Warrants may only be exercised for a whole number of shares. No fractional shares will be issued upon exercise of the Public Warrants.
The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination
and (b) 12 months from the closing of the Initial Public Offering. The Public Warrants will expire five years from
the completion of a Business Combination or earlier upon redemption or liquidation.
The Company will not be obligated to deliver
any Class A ordinary shares pursuant to the exercise of a Public Warrant and will have no obligation to settle such Public
Warrant exercise unless a registration statement under the Securities Act covering the issuance of the Class A ordinary shares
issuable upon exercise of the Public Warrants is then effective and a current prospectus relating thereto is available, subject
to the Company satisfying its obligations with respect to registration, or a valid exemption from registration is available, including
in connection with a cashless exercise. No Public Warrant will be exercisable for cash or on a cashless basis, and the Company
will not be obligated to issue any shares to holders seeking to exercise their Public Warrants, unless the issuance of the shares
upon such exercise is registered or qualified under the securities laws of the state of the exercising holder, or an exemption
from registration is available.
The Company has agreed that as soon as
practicable, but in no event later than 15 business days, after the closing of a Business Combination, it will use its commercially
reasonable efforts to file with the SEC a registration statement covering the issuance, under the Securities Act, of the Class A
ordinary shares issuable upon exercise of the Public Warrants. The Company will use its commercially reasonable efforts to cause
the same to become effective within 60 business days after the closing of the Business Combination and to maintain the effectiveness
of such registration statement, and a current prospectus relating thereto, until the expiration of the Public Warrants in accordance
with the provisions of the warrant agreement. Notwithstanding the above, if the Class A ordinary shares are, at the time of
any exercise of a Public Warrant, not listed on a national securities exchange such that they satisfy the definition of a “covered
security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants
who exercise their Public Warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities
Act and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement,
but will use its commercially reasonable efforts to qualify the shares under applicable blue sky laws to the extent an exemption
is not available.
Once the Public Warrants become exercisable,
the Company may redeem the Public Warrants:
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•
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in whole and not in part;
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|
|
|
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•
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at a price of $0.01 per Public Warrant;
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ACE CONVERGENCE ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
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•
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upon not less than 30 days’ prior written notice of redemption to each warrant holder; and
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|
|
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•
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if, and only if, the reported last sale price of the Class A ordinary shares for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders equals or exceeds $18.00 per share (as adjusted for share sub-divisions, share dividends, rights issuances, consolidations, reorganizations, recapitalizations and the like).
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If and when the warrants become redeemable
by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities
for sale under all applicable state securities laws.
If the Company calls the Public Warrants
for redemption, as described above, its management will have the option to require any holder that wishes to exercise the Public
Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of ordinary
shares issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a share
dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. However, except as described below,
the Public Warrants will not be adjusted for issuances of ordinary shares at a price below its exercise price. Additionally, in
no event will the Company be required to net cash settle the Public Warrants. If the Company is unable to complete a Business Combination
within the Combination Period or any Extension Period and the Company liquidates the funds held in the Trust Account, holders of
Public Warrants will not receive any of such funds with respect to their Public Warrants, nor will they receive any distribution
from the Company’s assets held outside of the Trust Account with respect to such Public Warrants. Accordingly, the Public
Warrants may expire worthless.
In addition, if (x) the Company issues
additional Class A ordinary shares or equity-linked securities for capital raising purposes in connection with the closing
of a Business Combination at an issue price or effective issue price of less than $9.20 per Class A ordinary share (with such
issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case
of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or such
affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds
from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of a
Business Combination on the date of the consummation of a Business Combination (net of redemptions), and (z) the volume weighted
average trading price of its Class A ordinary shares during the 20 trading day period starting on the trading day prior to
the day on which the Company consummates its Business Combination (such price, the “Market Value”) is below $9.20 per
share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market
Value and the Newly Issued Price, and the $18.00 per share redemption trigger price will be adjusted (to the nearest cent) to be
equal to 180% of the higher of the Market Value and the Newly Issued Price.
The Private Placement Warrants are identical
to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants and
the Class A ordinary shares issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable
or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally,
the Private Placement Warrants will be exercisable on a cashless basis and be non-redeemable, except as described above, so long
as they are held by the initial purchasers or their permitted transferees. If the Private Placement Warrants are held by someone
other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company
and exercisable by such holders on the same basis as the Public Warrants.
NOTE 8 — FAIR VALUE
MEASUREMENTS
The Company classifies its U.S. Treasury
and equivalent securities as held-to-maturity in accordance with ASC Topic 320 “Investments - Debt and Equity Securities.”
Held-to-maturity securities are those securities which the Company has the ability and intent to hold until maturity. Held-to-maturity
treasury securities are recorded at amortized cost on the accompanying balance sheets and adjusted for the amortization or accretion
of premiums or discounts.
At September 30, 2020, assets held
in the Trust Account were comprised of $82 in cash and $230,036,344 in U.S. Treasury securities. During the period from March 31,
2020 (inception) through September 30, 2020, the Company did not withdraw any interest income from the Trust Account.
The gross holding gains and fair value
of held-to-maturity securities at September 30, 2020 are as follows:
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Held-To-Maturity
|
|
Amortized
Cost
|
|
|
Gross
Holding
Loss
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|
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Fair Value
|
|
September 30, 2020
|
|
U.S. Treasury Securities (Mature on 1/28/21)
|
|
$
|
230,036,344
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|
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$
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(4,280
|
)
|
|
$
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230,032,064
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|
ACE CONVERGENCE ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
The fair value of the Company’s financial
assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with
the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants
at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize
the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal
assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify
assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
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Level 1:
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Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
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|
|
|
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Level 2:
|
Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.
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|
|
|
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Level 3:
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Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.
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The following table presents information
about the Company’s assets that are measured at fair value on a recurring basis at September 30, 2020 and indicates the
fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
Description
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Level
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|
|
September 30,
2020
|
|
Assets:
|
|
|
|
|
|
|
Marketable securities held in Trust Account – U.S. Treasury Securities
|
|
|
1
|
|
|
$
|
230,032,064
|
|
|
|
|
|
|
|
|
|
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NOTE 9 — SUBSEQUENT
EVENTS
The Company evaluated subsequent events
and transactions that occurred after the balance sheet date up to the date that the condensed financial statements were issued.
Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in
the condensed financial statements.