UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 6-K

 

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of November 2023

Commission File Number: 001-39911

 

Patria Investments Limited

(Exact name of registrant as specified in its charter)

 

18 Forum Lane, 3rd floor,

Camana Bay, PO Box 757, KY1-9006

Grand Cayman, Cayman Islands

+1 345 640 4900

(Address of principal executive office)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

 

Form 20-F

X

  Form 40-F  

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

 

Yes     No

X

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

 

Yes     No

X

 

 
 

TABLE OF CONTENTS

 

EXHIBIT  
99.1 Patria Investments Limited – Unaudited condensed consolidated interim financial statements for the six and three-month periods ended June 30, 2023 and 2022.

 

 
 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

    Patria Investments Limited
     
     
      By: /s/ Ana Cristina Russo  
        Name: Ana Cristina Russo
        Title: Chief Financial Officer
             

Date: November 3, 2023

 

 

 

Exhibit 99.1

 

Patria Investments Limited

 

Condensed Consolidated Statement of Financial Position

As of June 30, 2023 and December 31, 2022

(In thousands of United States dollars – US$)

 

Assets Note   6/30/2023   12/31/2022   Liabilities and equity Note   6/30/2023   12/31/2022
                       
Cash and cash equivalents 6    22,350   26,519   Client funds payable 7   19,115   23,639
Short term investments 12(a)    205,615   285,855   Consideration payable on acquisition 20(b)   44,860   33,187
Client funds on deposit 7    19,115   23,639   Personnel and related taxes payable 15   14,348   27,076
Accounts receivable 8   108,497   125,405   Taxes payable 16   1,939   878
Project advances 9   6,717   5,693   Carried interest allocation 22(b)   10,307   10,370
Recoverable taxes 11   5,393   5,672   Derivative financial instruments 12(d)   509   1,053
Other current assets 10   10,105   6,853   Commitment subject to possible redemption 20(c)   180,689   234,145
              Other current liabilities 17   9,400   7,652
                         
Current assets     377,792   479,636   Current liabilities     281,167   338,000
                         
Accounts receivable 8   19,338   6,254   Personnel liabilities 15   1,873   1,724
Project advances 9   1,190   947   Consideration payable on acquisition 20(b)   45,340   33,414
Deferred tax assets 18   10,797   1,749   Carried interest allocation 22(b)   13,562   2,080
Other non-current assets 10   2,543   1,948   Gross obligation under put option 20(d)   85,931   73,428
Long-term investments 12(b)   54,244   35,257   Other non-current liabilities 17   14,345   14,134
Derivative financial instruments 12(d)   6,141   6,322              
Investments in associates 12(c)   994   7,977   Non-current liabilities     161,051   124,780
Property and equipment 13   25,412   24,627              
Intangible assets 14   450,975   411,521              
Non-current assets     571,634   496,602   Total liabilities     442,218   462,780
                         
              Capital 28(a)   15   15
              Additional paid-in capital 28(b)   495,310   485,180
              Capital reserves 28(d)   2,241   1,495
              Retained earnings     51,919   77,576
              Cumulative translation adjustment 28(f)   1,602   (11,478)
              Equity attributable to the owners of the Company 551,087   552,788
              Non-controlling interests 28(g)   (43,879)   (39,330)
                         
              Equity     507,208   513,458
                         
Total assets     949,426   976,238   Total liabilities and equity     949,426   976,238

The accompanying notes are integral parts of these condensed consolidated interim financial statements.

 

 

 

Patria Investments Limited

 

Condensed Consolidated Income Statement

For the six and three-month period ended June 30, 2023 and 2022

(In thousands of United States dollars - US$, except earnings per share)

 

      Unaudited three-month period ended June 30,  Unaudited six-month period ended June 30,
   Note  2023  2022  2023  2022
                
Net revenue from services  21   78,591    55,618    152,343    110,606 
                        
Personnel expenses  22   (18,579)   (16,894)   (36,980)   (33,832)
Carried interest allocation  22   (5,738)   -    (11,146)   - 
Deferred consideration  20(b)   (6,829)   (6,111)   (12,940)   (12,222)
Amortization of intangible assets  23   (5,520)   (4,139)   (10,419)   (8,547)
General and administrative expenses  24   (10,165)   (8,898)   (19,111)   (16,334)
Other income/(expenses)  25   (4,191)   (5,078)   (12,634)   (7,245)
Share of equity-accounted earnings  12(c)   64    (997)   (533)   (997)
Net financial income/(expense)  26   708    2,064    451    6,646 
                        
Net Income before income tax      28,341    15,565    49,031    38,075 
                        
Income tax  27   7,685    341    4,554    (3,853)
                        
Net income for the period      36,026    15,906    53,585    34,222 
Attributable to:                       
Owners of the Company      35,701    15,906    52,944    34,222 
Non-controlling interests  28(g)   325    -    641    - 
                        
Basic earnings per thousand shares  28(e)   0.24097    0.10806    0.35808    0.23250 
Diluted earnings per thousand shares  28(e)   0.24081    0.10806    0.35722    0.23250 

 

The accompanying notes are integral parts of these consolidated financial statements. 

Refer to note 2(c) for change in presentation of Consolidated Income Statement.

 

 

 

Patria Investments Limited

 

Condensed Consolidated Statement of Comprehensive Income

For the six and three-month period ended June 30, 2023 and 2022

(In thousands of United States dollars - US$)

 

        Unaudited three-month period ended June 30,   Unaudited six-month period ended June 30,
        2023   2022   2023   2022
                     
Net income for the period   36,026   15,906   53,585   34,222
  Items that will be reclassified to the income statement:                
  Currency translation adjustment   (1,124)   (26,212)   13,080   (12,054)
  Currency translation adjustment – non-controlling interests (2,134)   -   (5,241)   -
                     
Total comprehensive income   32,768   (10,306)   61,424   22,168
  Attributable to:                  
  Owners of the Company   34,577   (10,306)   66,024   22,168
  Non-controlling interests   (1,809)   -   (4,600)   -
                     

The accompanying notes are integral parts of these condensed consolidated interim financial statements.

 

 

 

Patria Investments Limited

Condensed Consolidated Statement of Changes in Equity

For the six-month period ended June 30, 2023 and 2022

(In thousands of United States dollars - US$)

 

      Attributable to owners      
   Note  Capital  Additional paid-in capital 

Other reserves

 

  Retained earnings  Cumulative translation adjustment  Equity  attributable to owners of the Parent  Non-controlling interests  Total Equity
                            
Balance at December 31, 2021      15    485,180    764    87,948    (9,622)   564,285    -    564,285 
                                            
Cumulative translation adjustment      -    -    -    -    (12,054)   (12,054)   -    (12,054)
Net income for the period      -    -    -    34,222    -    34,222    -    34,222 
Dividends declared and paid  28(c)   -    -    -    (53,284)   -    (53,284)   -    (53,284)
Share based incentive plan  28(d)   -    -    325    -    -    325    -    325 
                                            
Balance at June 30, 2022 (unaudited)      15    485,180    1,089    68,886    (21,676)   533,494    -    533,494 
                                            
                                            
Balance at December 31, 2022      15    485,180    1,495    77,576    (11,478)   552,788    (39,330)   513,458 
                                            
Cumulative translation adjustment      -    -    -    -    13,080    13,080    (5,241)   7,839 
Net income for the period      -    -    -    52,944    -    52,944    641    53,585 
Dividends declared  28(c)   -    -    -    (78,601)   -    (78,601)   (2,677)   (81,278)
Share based incentive plan  28(d)   -    -    746    -    -    746    -    746 
Capital contributions received  28(g)   -    -    -    -    -    -    2,728    2,728 
Capital issuance  28(a)   -    10,130    -    -    -    10,130    -    10,130 
                                            
Balance at June 30, 2023 (unaudited)      15    495,310    2,241    51,919    1,602    551,087    (43,879)   507,208 

The accompanying notes are integral parts of these condensed consolidated interim financial statements.

 

 

 

Patria Investments Limited

Condensed Consolidated Statement of Cash Flows

For the six-month period ended June 30, 2023 and 2022

(In thousands of United States dollars - US$)

 

      Unaudited six-month periods ended June 30,
   Note  2023  2022
Cash flows from operating activities         
Net income for the period      53,585    34,222 
Adjustments to net income for the period             
 Depreciation expense      2,308    1,764 
 Amortization expense  23   10,419    8,547 
 Net financial investment income  26   (1,226)   (879)
 Unrealized (gains)/losses on long-term investments  26   8,871    (4,602)
 Unrealized (gains)/losses on derivative financial instruments      254    (2,654)
 Unrealized (gains)/losses on asset-linked receivable      (9,563)   - 
 Contingent consideration adjustments  25   2,196    1,718 
 Gross obligation under put - unwinding  25   4,426    - 
 Deferred consideration adjustments  25   788    - 
 Net gain on associate derecognition  25   4,199    - 
 Interest expense on lease liabilities  26   659    765 
 Deferred income taxes expense  27   (8,635)   1,105 
 Current income taxes expense  27   4,081    2,748 
 Share of equity accounted earnings  12(c)   533    997 
 Share based incentive plan  22   746    325 
 Other non-cash effects      172    84 
              
Changes in operating assets and liabilities             
Accounts receivable      (2)   16,928 
Projects advances      (1,033)   (3,168)
Recoverable taxes      998    (1,826)
Personnel and related taxes      (13,290)   (19,124)
Carried interest allocation      11,419    (6,936)
Deferred consideration payable on acquisition  20(b)   12,222    12,222 
Taxes payable and deferred taxes      (7,379)   (5,335)
Payment of income taxes      (1,433)   (148)
Other assets and liabilities      (3,379)   (2,831)
Net cash provided by operating activities      71,936    33,922 
              
Cash flows from investing activities             
Decrease (increase) in short term investments      22,660    (172,387)
Decrease (increase) in long-term investments      (11,946)   (1,869)
Payment of acquisition payable  20(e)   -    (16,437)
Investment into SPAC trust account  20(c)   (300)   - 
Proceeds from redemptions from the SPAC trust account  20(c)   65,164    - 
Disposal/(Acquisition) of property and equipment  13   (322)   (4,091)
Acquisition of software and computer programs  14   (663)   (387)
Acquisition of investments in associates  12(c)   -    (7,789)
Acquisition of contractual rights – Blue Macaw  14   (4,370)   - 
Acquisition of subsidiaries net of cash acquired – Kamaroopin  29   (1,846)   - 
              
Net cash provided/(used) by investing activities      68,377    (202,960)
              
Cash flows from financing activities             
IPO proceeds – SPAC  5(o)   -    230,000 
IPO transaction costs – SPAC      -    (4,665)
Redemptions from SPAC shareholders  20(c)   (65,164)   - 
Dividends paid to the Company’s shareholders  28(c)   (78,601)   (53,284)
Dividends paid to non-controlling interests in subsidiaries      (1,417)   - 
Capital contributions received from NCI shareholders      2,185    - 
Payment of acquisition payable  20(e)   (998)   - 
Lease payments  20(a)   (727)   (757)
Interest paid on lease liabilities  20(a)   (659)   (765)
Net cash (used)/provided by financing activities      (145,381)   170,529 
              
Foreign exchange variation on cash and cash equivalents in foreign currencies      899    (314)
              
(Decrease)/Increase in cash and cash equivalents      (4,169)   1,177 
Cash and cash equivalents at the beginning of the period  6   26,519    15,264 
Cash and cash equivalents at the end of the period  6   22,350    16,441 
(Decrease)/Increase in cash and cash equivalents      (4,169)   1,177 
Non-cash operating and investing activity             
Addition and disposal of right of use assets      1,126    2,471 
Class A common shares issued      10,130      
Capital contribution from NCI shareholders in lieu of dividend payable to NCI shareholders      1,086      

 

The accompanying notes are integral parts of these condensed consolidated interim financial statements.

 

 

Patria Investments Limited

 

Notes to the unaudited condensed consolidated interim financial statements

As of June 30, 2023 and December 31, 2022 and for the six and three-month periods ended June 30, 2023 and 2022

 

(Amounts in thousands of United States dollars - US$, except where otherwise stated) 

1General information

 

Patria Investments Limited (the "Company") was incorporated in Bermuda on July 6, 2007 as a limited liability exempted company and transferred its registration and domicile to the Cayman Islands on October 12, 2020, registering by way of continuation as a Cayman Islands exempted company with limited liability duly registered with the Cayman Islands Registrar of Companies. The Company also transferred its headquarters from Bermuda to the Cayman Islands on October 12, 2020. Since then, the Company's obligations, whether legal, regulatory, or financial, are in accordance with the applicable laws and regulations of the Cayman Islands.

 

On January 21, 2021, the Company completed its initial public offering ("IPO") registration. The shares offered and sold in the IPO were registered under the Securities Act of 1933, as amended, according to the Company's Registration Statement on Form F-1 (Registration N° 333-251823). The common shares are trading on the Nasdaq Global Select Market ("NASDAQ-GS") under the symbol "PAX".

 

The Company is a public holding company controlled by Patria Holdings Limited. (the “Parent”), which held 55.5% of the Company's common shares as of June 30, 2023 (December 31, 2022: 55.95%). The Parent is ultimately controlled by a group of individuals.

 

The Company and its subsidiaries (collectively, the "Group") are a private markets investment firm focused on investing in Latin America. The Group has a wide range of investment products, including private equity funds, infrastructure development funds, co-investment funds, constructivist equity funds, credit funds, real estate funds and venture capital funds.

 

The Group’s operations include investment offices in Montevideo (Uruguay), São Paulo (Brazil), Bogota (Colombia), and Santiago (Chile), as well as client-coverage offices in New York (United States), London (United Kingdom), Dubai (UAE), and Hong Kong to cover the investor base of its underlying investment products, in addition to its corporate business and management office in Grand Cayman (Cayman Islands).

 

The Group's main executive office is located at 18 Forum Lane, Grand Cayman, Cayman Islands.

 

The unaudited condensed consolidated interim financial statements have been prepared on a going concern basis.

 

These unaudited condensed consolidated interim financial statements for the three-month and six-month periods ended June 30, 2023 and 2022 include the condensed financial information regarding the Company and its subsidiaries, as described in note 5.

 

8 

Patria Investments Limited

 

Notes to the unaudited condensed consolidated interim financial statements

As of June 30, 2023 and December 31, 2022 and for the six and three-month periods ended June 30, 2023 and 2022

 

(Amounts in thousands of United States dollars - US$, except where otherwise stated) 

2Presentation of financial statements

 

a.Statement of compliance and basis of preparation

 

The unaudited condensed consolidated interim financial statements were prepared in accordance with IAS 34 - Interim Financial Reporting issued by the International Accounting Standards Board ("IASB"). These unaudited condensed consolidated interim financial statements should be read together with the annual consolidated financial statements as of December 31, 2022 and 2021 and for the three years in the period ended December 31, 2022 (the “Annual Financial Statements).

 

The board of directors approved the unaudited condensed consolidated interim financial statements on October 26, 2023.

 

b.Functional and presentation currency

 

The unaudited condensed consolidated interim financial statements are presented in United States dollars (USD). The effects of the translation from the functional currency into the presentation currency are recognized in equity under the caption "Cumulative Translation Adjustment".

 

For details regarding the remeasurement of the balances and transactions in foreign currencies to the functional currency of the Company and its subsidiaries, refer to note 5 for the functional currency determined for each entity.

 

c.Change in unaudited condensed consolidated interim Income Statement presentation

 

The Group has revised the presentation of its Condensed Consolidated Interim Income Statement in accordance with IAS 1. Previously, the Condensed Consolidated Interim Income Statement provided a classification of expenses based on its function within the Company. Management has concluded that a classification of expenses based on its nature provides a more meaningful representation of the financial performance of the Group.

 

This change in presentation has no impact on the Group’s prior periods reported net income, earnings per share, Consolidated Statement of Cash Flows and Consolidated Statement of Changes in Equity.

 

d.Use of estimates and judgments

 

The preparation of these unaudited condensed consolidated interim financial statements is in accordance with IAS 34 - Interim Financial Reporting, which requires management to make estimates that affect the amounts reported in the unaudited condensed consolidated interim financial statements and accompanying notes. Management believes that estimates utilized to prepare the unaudited condensed consolidated interim financial statements are prudent and reasonable. Actual results could differ from those estimates and such differences could be material.

 

In preparing these unaudited interim condensed consolidated financial statements, the significant judgements and estimates made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that are set out in the Annual Financial Statements.

 

9 

Patria Investments Limited

 

Notes to the unaudited condensed consolidated interim financial statements

As of June 30, 2023 and December 31, 2022 and for the six and three-month periods ended June 30, 2023 and 2022

 

(Amounts in thousands of United States dollars - US$, except where otherwise stated) 

3Segment information

 

The Group operates through a single reportable operating segment, in accordance with IFRS 8, reflecting how the Group’s executive directors collectively act as the chief operating decision maker to allocate resources and assess performance under the Group's global strategy, which includes integrated product lines.

 

Within its one operating segment, the Company has multiple product lines including private equity, credit, infrastructure, public equities, real estate, and advisory and distribution.

 

4Significant accounting policies

 

These unaudited condensed consolidated interim financial statements were prepared in accordance with policies, accounting practices, and methods for determining estimates consistent to the accounting policies and estimates adopted in the preparation of the Annual Financial Statements. The Group has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective. Several amendments apply for the first time in 2023, but do not have a material impact on the interim condensed consolidated financial statements of the Group.

 

10 

Patria Investments Limited

 

Notes to the unaudited condensed consolidated interim financial statements

As of June 30, 2023 and December 31, 2022 and for the six and three-month periods ended June 30, 2023 and 2022

 

(Amounts in thousands of United States dollars - US$, except where otherwise stated) 

5Group Structure

 

a.Consolidation and subsidiaries

 

The unaudited condensed consolidated financial statements include the entities listed below, which are the Company's direct or indirect subsidiaries:

 

      Country of Incorporation

Functional

Currency

Equity interest

(direct or indirect) (%)

          June 30, 2023 December 31, 2022
Subsidiaries   Principal Activities        
Patria Finance Ltd.   Asset management & administration KY USD 100.00% 100.00%
Patria Brazilian Private Equity III, Ltd.   Investment fund manager KY USD 100.00% 100.00%
PBPE General Partner IV, Ltd.   Investment fund manager KY USD 100.00% 100.00%
PBPE General Partner V, Ltd.   Investment fund manager KY USD 100.00% 100.00%
Patria Brazilian Private Equity General Partner VI, Ltd.   Investment fund manager KY USD 100.00% 100.00%
Patria Brazil Real Estate Fund General Partner II, Ltd.   Investment fund manager KY USD 100.00% 100.00%
Patria Brazil Real Estate Fund General Partner III Ltd.   Investment fund manager KY USD 100.00% 100.00%
Patria Brazil Retail Property Fund General Partner, Ltd.   Investment fund manager KY USD 100.00% 100.00%
Patria Investments UK Ltd.   Investor relations, marketing & administration UK GBP 100.00% 100.00%
Patria Investments US LLC   Investor relations, marketing & administration US USD 100.00% 100.00%
Patria Investments Colombia S.A.S.   Advisory, investor relations & marketing CO COP 100.00% 100.00%
Infrastructure II GP, Ltd.   Investment fund manager KY USD 100.00% 100.00%
Infrastructure III SLP Ltd.   Investment fund manager & advisory KY USD 100.00% 100.00%
Patria Infrastructure General Partner IV Ltd.   Investment fund manager KY USD 100.00% 100.00%
Pátria Investimentos Ltda. ("PILTDA")   Asset management & administration BR BRL 100.00% 100.00%
Patria Investments Latam S.A.   Holding UY USD 100.00% 100.00%
Patria Investments Uruguay Agente de Valores S.A. (formerly Patria Investments Uruguay S.A.)   Advisory, investor relations & marketing UY USD 100.00% 100.00%
Patria Investments Cayman Ltd.   Holding KY USD 100.00% 100.00%
Patria Investments Chile SpA   Advisory, investor relations & marketing CH CLP 100.00% 100.00%
Patria Investments Hong Kong, Ltd.   Investor relations, marketing & administration HK HKD 100.00% 100.00%
Platam Investments Brazil Ltda.   Asset management & administration BR BRL 100.00% 100.00%
Patria Constructivist Equity Fund General Partner II, Ltd.   Investment fund manager KY USD 100.00% 100.00%

11 

Patria Investments Limited

 

Notes to the unaudited condensed consolidated interim financial statements

As of June 30, 2023 and December 31, 2022 and for the six and three-month periods ended June 30, 2023 and 2022

 

(Amounts in thousands of United States dollars - US$, except where otherwise stated) 

PI General Partner V Ltd.   Investment fund manager KY USD 100.00% 100.00%
PPE General Partner VII, Ltd.   Investment fund manager KY USD 100.00% 100.00%
PI Renewables General Partner, Ltd.   Investment fund manager KY USD 100.00% 100.00%
Patria Latam Growth Management Ltd.   Investment fund manager KY USD 100.00% 100.00%
Patria SPAC LLC   Holding & SPAC Sponsor KY USD 100.00% 100.00%
Patria Latin American Opportunity Acquisition Corp. (a) SPAC KY USD 100.00% 100.00%
Moneda Asset Management SpA (“MAM I”)   Holding CH CLP 100.00% 100.00%
Moneda Corredores de Bolsa Limitada (“MCB”)   Broker CH CLP 100.00% 100.00%
Moneda S.A. Administradora General De Fondos   Asset management CH CLP 100.00% 100.00%
Moneda II SpA (“MAM II”)   Holding CH USD 100.00% 100.00%
Moneda International Inc.   Investment fund manager BV USD 100.00% 100.00%
Moneda USA Inc.   Advisory US USD 100.00% 100.00%
Patria KMP Cayman I (f) Holding KY USD - 100.00%
VBI Real Estate Gestão de Carteiras S.A. (“VBI”) (b) Asset management BR BRL 50.00% 50.00%
VBI Administração Fiduciaria e Gestão Ltda   Administration BR BRL 50.00% 50.00%
BREOF Partners Ltda   Holding BR BRL 50.00% 50.00%
VBI ND Empreendimentos Imobiliários Ltda (g) Dormant BR BRL - 50.00%
VBI ND II Empreendimentos Imobiliários Ltda   Dormant BR BRL 50.00% 50.00%
VBI Data Center Empreendimentos Imobiliários Ltda   Dormant BR BRL 50.00% 50.00%
Igah Partners LLC (c) Asset management US USD 100.00% 100.00%
e.Bricks Ventures III GP, LLC   Investment fund manager US USD 100.00% 100.00%
Igah Carry Holding Ltd   Carry vehicle KY USD 100.00% 100.00%
PEVC General Partner IV, Ltd.   Holding KY USD 100.00% 100.00%
Patria Real Estate Latam S.A.S (b) Holding UY USD 98.90% 100.00%
Patria Private Equity Latam S.A.S (d) Holding UY USD 100.00% -
Patria Fund Advisor Ltd. (d) Dormant KY USD 100.00% -
PPE Fund VII, SLP, LP (d) Carry vehicle KY USD 100.00% -
NewCo BlueMacaw Partner Ltda. (e) Holding BR BRL 100.00% -
BlueMacaw S.A. (e) Holding BR BRL 100.00% -
VBI Asset Management Ltda. (e) Asset management BR BRL 100.00% -
KMP I Holding (f) Holding KY USD 100.00% -
Kamaroopin Gestora de Recursos Ltda. (“Kamaroopin”) (f) Asset management BR BRL 100.00% 40%
Hanuman GP Cayman, LLC (“Hanuman”) (f) Asset management KY USD 100.00% 40%
Pat HoldCo Mexico S. de R.L. de C.V. (d) Holding MX MXN 100.00% -
Pat Inmuebles HoldCo Mexico S. de R.L. de C.V. (d) Holding MX MXN 100.00% -

"USD" United States dollars, "BRL" Brazilian Real, "GBP" Pound Sterling, "CLP" Chilean peso, "COP" Colombian peso, "HKD" Hong Kong dollar

"KY" Cayman Islands, "BR" Brazil, "CO" Colombia, "CH" Chile, "UK" United Kingdom, "US" United States, “BV” British Virgin Islands, “MX” Mexico

 

(a)Patria Latin American Opportunity Acquisition Corp. (the “SPAC” or “PLAO”): a special purpose acquisition company incorporated in the Cayman Island and sponsored by Patria SPAC LLC (the “SPAC Sponsor”) for the purpose of effecting a business combination with one or more businesses with a focus in Latin America. On March 14, 2022, PLAO, announced the closing of its IPO. The registration statement on Form S-1 relating to the securities referred to therein and subsequently amended has been filed with the Securities and Exchange Commission (“SEC”) and declared effective on March 9, 2022.

 

The IPO included issuance of 23,000,000 units (“the Units”), including the exercise in full by the underwriters to purchase an additional 3,000,000 Units to cover over-allotments, at a price of US$10.00 per unit. Each Unit consists of one Class A ordinary share of PLAO, par value US$0.0001

 

12 

Patria Investments Limited

 

Notes to the unaudited condensed consolidated interim financial statements

As of June 30, 2023 and December 31, 2022 and for the six and three-month periods ended June 30, 2023 and 2022

 

(Amounts in thousands of United States dollars - US$, except where otherwise stated) 

per share (the “SPAC Class A Ordinary Shares”), and one-half of one redeemable warrant of the Company (each whole warrant, a “Warrant”), with each Warrant entitling the holder thereof to purchase one SPAC Class A Ordinary Share for US$11.50 per share, subject to adjustment. The Units were sold at a price of US$10.00 per Unit, generating gross proceeds from the issuance of US$ 230,000,000.

 

SPAC Class A Ordinary Shares are classified as a liability in accordance with IAS 32, Financial Instruments: Presentation, and based on the terms of the issuance that permits redemption by holders of SPAC Class A Ordinary Shares.

 

Holders of the SPAC Class A Ordinary Shares and holders of the SPAC Class B Ordinary Shares will vote together as a single class on all matters submitted to a vote of PLAO’s shareholders, except when not permitted by law or stock exchange rule; provided that only holders of the SPAC Class B Ordinary Shares shall have the right to vote on the appointment and removal of PLAO’s directors prior to the initial business combination or continuing PLAO in a jurisdiction outside the Cayman Islands (including any special resolution required to amend the constitutional documents of PLAO or to adopt new constitutional documents of PLAO, in each case, as a result of PLAO approving a transfer by way of continuation in a jurisdiction outside the Cayman Islands).

 

Restrictions on the Group’s ability to access or use assets and settle liabilities are included in notes 12(a) and 20(c).

 

On June 12, 2023, the PLAO held an extraordinary general meeting of the PLAO’s shareholders (the “Extraordinary General Meeting”). At the Extraordinary General Meeting, PLAO’s shareholders approved amendments to PLAO’s Amended and Restated Memorandum and Articles of Association to extend the termination date by which PLAO has to consummate an initial business combination from June 14, 2023 (the “Original Termination Date”) to June 14, 2024, in addition to other proposals. Accordingly, PLAO now has up to June 14, 2024 to consummate its initial business combination. In connection with the Extraordinary General Meeting, shareholders holding an aggregate of 6,119,519 of the SPAC’s Class A Ordinary Shares exercised their right to redeem their shares. Following such redemptions, 16,880,481 SPAC Class A Ordinary Shares will remain outstanding. Following the withdrawals from the SPAC’s trust account in connection with redemptions, it is expected that approximately US$179.8 million will remain in the SPAC’s trust account of the approximate US$ 244.9 million that was in the SPAC’s trust account prior to such redemptions. From the date of approval and recurring monthly thereafter until the earlier of the completion of a business combination or liquidation date, the SPAC Sponsor will also deposit into the SPAC’s trust account an aggregate of US$ 0.3 million to execute the extension of the termination date of PLAO. The purpose of the extension is to provide time for PLAO to complete a business combination. Per the terms of the approved extension amendment proposal, if PLAO completes a business combination, it will, at the option of the SPAC Sponsor, repay the amounts loaned under the promissory note or convert a portion of all of the amounts loaned under such a promissory note into warrants, which warrants will be identical to the private placement warrants.

 

Should PLAO not complete the initial business combination within the specified period the SPAC Class A Ordinary Shares will be redeemed from the proceeds held in the trust account, as disclosed in note 12(a).

 

13 

Patria Investments Limited

 

Notes to the unaudited condensed consolidated interim financial statements

As of June 30, 2023 and December 31, 2022 and for the six and three-month periods ended June 30, 2023 and 2022

 

(Amounts in thousands of United States dollars - US$, except where otherwise stated) 

As of June 30, 2023, the Group has not selected any business combination target for PLAO. The expectation is to complete a business combination as soon as the Group identifies a target company.

 

(b)In March 2023, the Group restructured its VBI holding, contributing the interest held by the Company in VBI to Patria Real Estate Latam S.A.S. There was no change in control and total interest held by the Group in VBI. However, there was a dilution of 1.1% in the Company’s direct and indirect interest in Patria Real Estate Latam S.A.S. because of the transaction to acquire assets of Blue Macaw as disclosed in note 5(e) below.

 

(c)Igah Partners LLC (“Igah Ventures” or “Igah”): a subsidiary of the Group acquired through a business combination and serves as manager of venture capital related funds.

 

(d)Newly incorporated subsidiaries without assets, liabilities or operations.

 

(e)On April 3, 2023, VBI acquired a 100% beneficial interest in Blue Macaw (NewCo BlueMacaw Partners Ltda., BlueMacaw S.A. and VBI Asset Management Ltda., collectively) for US$ 4.4 million (BRL 22.2 million) in cash. The Blue Macaw entities are located in Brazil and focus on infrastructure and real estate investments throughout Latin America. The acquisition is part of the Group’s strategy to enhance its share of the Brazilian real estate market through synergies with VBI.

 

The Group accounted for the transaction as an asset acquisition since the principal assets acquired consist of 4 contractual rights relating to the portfolio of management contracts of the investment funds acquired. On acquisition date, the Group recorded US$ 4.4 million in intangible assets related to contractual rights from the asset acquisition. The other assets and acquired and liabilities assumed were not significant.

 

In addition to the upfront payments made by VBI upon closing, the Group has a call option to acquire the remaining interest in Patria Real Estate Latam S.A.S. For the three-month period ending June 30, 2023, the first tranche of the call option was exercised and US$ 0.7 million recorded as an equity-linked compensation cost included under deferred consideration in acquiring a part of the interest of the remaining minority interest held in Patria Real Estate Latam S.A.S. (note 20(b)). 

 

The remaining call option arrangements in the form of contingent payments (2026 and 2028 exercise period) are subject to certain financial metrics and performance criteria in 2026 and 2028. 

 

(f)On April 12, 2023, the Group acquired control of Kamaroopin (Kamaroopin Gestora de Recursos Ltda. and Hanuman GP Cayman, LLC collectively) by acquiring the remaining interest in these companies pursuant to the acquisition agreement for Kamaroopin (note 29 (b)).

 

(g)Entity with limited or no activity that was dissolved during 2023 and had no significant accounting impact.

 

14 

Patria Investments Limited

 

Notes to the unaudited condensed consolidated interim financial statements

As of June 30, 2023 and December 31, 2022 and for the six and three-month periods ended June 30, 2023 and 2022

 

(Amounts in thousands of United States dollars - US$, except where otherwise stated) 

6Cash and cash equivalents

 

   June 30, 2023  December 31, 2022
Cash at bank and on hand   16,361    21,372 
Short-term deposits (a)   455    3,379 
Shares of mutual funds (a)   5,534    1,768 
Cash and cash equivalents   22,350    26,519 

 

(a)Short-term deposits and shares of mutual funds are cash equivalents held for the purposes of meeting short-term cash commitments with maturities of three months or less from the date of acquisition and subject to insignificant risk of changes in value.

 

7Client funds on deposit and client funds payable

 

   June 30, 2023  December 31, 2022
Client funds on deposit   17,324    22,490 
Other receivables from clients (a)   1,791    1,149 
Client funds on deposit and other receivables   19,115    23,639 

 

 

   June 30, 2023  December 31, 2022
Client funds payable (a)   19,115    23,639 
Client funds payable   19,115    23,639 

 

(a)Other receivables from clients and client funds payable are unsettled trades from brokerage activities for client transactions that are entered into and recorded on the date of the transaction. The value of the client trades is payable or receivable until settlement of the transactions.

 

8Accounts receivable

 

Amounts receivable from customers relate to management, incentive, performance fees, reimbursement of expenses from investment funds, and financial advisory services. The Group has not recorded write-offs or allowances for uncollectible accounts receivable for the periods presented.

 

The Group may renegotiate some trade receivables as needed based on estimated realization dates of investments funds. While this renegotiation does not have a material impact on the provision for loss, the Group continue to assess each individual receivable in accordance with the requirements of IFRS 9, Financial Instruments, to ensure that its credit risk assessment remains appropriate and up-to-date.

 

   June 30, 2023  December 31, 2022
Current (a)   108,497    125,405 
Non-current (b)   19,338    6,254 
Accounts receivable   127,835    131,659 

15 

Patria Investments Limited

 

Notes to the unaudited condensed consolidated interim financial statements

As of June 30, 2023 and December 31, 2022 and for the six and three-month periods ended June 30, 2023 and 2022

 

(Amounts in thousands of United States dollars - US$, except where otherwise stated) 

(a)Current balances include US$ 11.4 million and US$ 58.8 million renegotiated in the six-month period ending June 30, 2023 and for the year ending December 31, 2022 respectively related to past management fees due. All renegotiated balances are due by December 31, 2023 noting that the receipt date was renegotiated based on the estimated date of realization of the investment funds’ investments.

 

(b)The non-current balances as of June 30, 2023 are performance fees receivable from Patria Infrastructure Fund III in 2024 of $ 9.8 million, and a receivable from Patria Private Equity Fund V (“PE V”) as disclosed under long term investments in note 12 (b). No interest is charged and the impact of the present value adjustment using the effective interest rate method at the date of initial recognition is not material.

 

9Project advances

 

   June 30, 2023  December 31, 2022
Current   6,717    5,693 
Non-current   1,190    947 
Project advances   7,907    6,640 

 

Project advances represent recoverable advances relating to the development process of new investment funds or to the capture of non-capitalized investment funds. In both cases, the amounts are subject to reimbursement as provided for in the respective agreements between the Group and investors.

 

10Other assets

 

   June 30, 2023  December 31, 2022
Advances to suppliers   2,347    - 
Advances to employees   2,940    2,585 
Prepaid expenses (a)   4,236    3,806 
Other current assets   582    462 
Other current assets   10,105    6,853 
           
Prepaid expenses (a)   232    95 
Deposit/guarantee on lease agreements (b)   1,916    1,782 
Other non-current assets   395    71 
Other non-current assets   2,543    1,948 

 

(a)Prepaid expenses are composed mainly of IT services paid in advance, such as renewal of licenses and technical support services. These items will be recorded as general and administrative expenses in the period they are related to.

 

(b)Deposits and guarantees on lease agreements are subject to reimbursement at the end of the lease contract period. Interest is not charged on these deposits.

 

16 

Patria Investments Limited

 

Notes to the unaudited condensed consolidated interim financial statements

As of June 30, 2023 and December 31, 2022 and for the six and three-month periods ended June 30, 2023 and 2022

 

(Amounts in thousands of United States dollars - US$, except where otherwise stated) 

11Recoverable Taxes

 

   June 30, 2023  December 31, 2022
Income tax recoverable   5,100    5,259 
Other recoverable taxes   293    413 
Recoverable Taxes   5,393    5,672 

 

Recoverable taxes consist mainly of income taxes charged in Brazil and Chile and paid in advance.

 

12Investments

 

a.Short-term investments

 

   June 30, 2023  December 31, 2022
Securities (a)   24,926    45,544 
Investments held in trust account (b)   180,689    240,311 
Short-term investments   205,615    285,855 

 

(a)Securities are liquid investment funds, with portfolios made of term deposits, equities, government bonds, and other short-term liquid securities.

 

(b)Investments held in trust account are investments received through the IPO transaction of PLAO. These funds are restricted and may only be used for purposes of completing an initial business combination or redemption of public shares. These securities are classified and accounted for as Fair Value Through Profit or Loss (“FVTPL”). The investments held in the trust account are comprised ofU.S. government securities.

 

b.Long-term investments

 

   June 30, 2023  December 31, 2022
       
Patria Growth Capital Fund I Fundo de Investimento em Participações Multiestratégia (a)   18,116    14,777 
Lavoro Agro Limited (b)   14,107    - 
KMP Growth Fund II (Cayman), LP (“KMP Growth Fund II”) (c)   8,806    9,463 
Lavoro Agro Fi Nas Cadeias Produtivas Agroindustriais Fiagro Direitos Creditorios (d)   2,356    4,427 
Patria Infra Energia Core FIP EM Infraestrutura   4,402    4,184 
Simba Fundo De Investimento Multimercado   3,894    - 
Other investments   2,563    2,406 
Long-term investments   54,244    35,257 

 

Investments in securities are expected to be maintained until the investment funds' respective termination dates and are measured at FVTPL. As of June 30, 2023, the Group's ownership interest in each of these investments (excluding interest owned indirectly through investment funds in note (a) and (c) below) range from 0.00005% to 6.1% (December 31, 2022: 0.00006% to 13.2%).

 

17 

Patria Investments Limited

 

Notes to the unaudited condensed consolidated interim financial statements

As of June 30, 2023 and December 31, 2022 and for the six and three-month periods ended June 30, 2023 and 2022

 

(Amounts in thousands of United States dollars - US$, except where otherwise stated) 

(a)Patria Growth Capital Fund I Fundo de Investimento em Participações Multiestratégia is a fully owned investment fund that solely includes a late-stage venture capital investment as part of the Group’s growth equity strategy. As of June 30, 2023, this fund has an investment interest of 22.1% (December 31, 2022: 22.1%) is owned in Startse Informações e Sistemas S/A (“Startse”), an entity in Brazil providing an education platform and a crowdfunding platform for startups. The Group elected to measure the investment at fair value through profit or loss in accordance with IFRS 9.

 

(b)The Group purchased shares on behalf of PBPE General Partner V, Ltd.’s investment fund PE V in Lavoro Agro Limited (“Lavoro”) at a price of $3.50 per share for a total investment of approximately US$ 8.2 million. The Group subsequently transferred the respective shares to the investment fund, recognizing a related receivable. Lavoro was a private equity investment of PE V prior to going public and entering into a business combination (closed February 28, 2023) with an independent SPAC entity, TPB Acquisition Corporation I. The investment fund subsequently distributed these shares to the Group to settle the related receivable and a portion of performance fees (total fair value of US$ 23.7 million representing US$ 8.2 million for settlement of the receivable and US$ 15.5 million in performance fees). The investment fund also agreed to cover the spread between US$ 3.50 and US$ 10 per share on the future sale of the shares by the Group. As of June 30, 2023, the receivable from the investment fund amounts to US$ 9.6 million for the commitment to cover the spread.

 

(c)The Group has committed approximately 24% of the capital of KMP Growth Fund II. As of June 30, 2023, KMP Growth Fund II held a 10% interest in one portfolio company (December 31, 2022: 10%), Dr. Consulta Clinica Medica Ltda., a Brazil-based healthcare technology company.

 

(d)An investment is held in Lavoro Agro Fi Nas Cadeias Produtivas Agroindustriais Fiagro Direitos Creditorios (6.1% of the net asset value as of June 30, 2023 and 13.2% as of December 31, 2022), a trust invested in securities related to agribusiness production chains in Brazil, such as agribusiness receivables, real estate receivables backed by credits from agribusiness production chains and liquidity assets within the agribusiness.

 

(e)Following is the breakdown of long-term investments by region:

 

   June 30, 2023  December 31, 2022
       
Brazil   52,396    33,490 
Other   1,847    1,767 
Balance   54,244    35,257 

 

Single investments held through investment funds are allocated in accordance with the country of incorporation of underlying investments

 

18 

Patria Investments Limited

 

Notes to the unaudited condensed consolidated interim financial statements

As of June 30, 2023 and December 31, 2022 and for the six and three-month periods ended June 30, 2023 and 2022

 

(Amounts in thousands of United States dollars - US$, except where otherwise stated) 

c.Investments in associates

 

Set out below are the entities of the Group as of June 30, 2023 and December 31, 2022. The country of incorporation or registration is also their principal place of business, and the proportion of ownership interest is the same as the proportion of voting rights held – there being no change in interest held since acquisition.

 

Entity  December 31, 2022  Changes in Equity  Equity in earnings  Associate derecognized  Other comprehensive income  June 30, 2023
Equity-accounted method                              
Investment in associates (a)   7,977    191    (533)   (6,931)   290    994 

 

The share of profits/(losses), brand and non-contractual customer relationship amortization include the impact from Kamaroopin, previously recognized as an investment in associate up until control was acquired on April 12, 2023 (note 29).

 

Share of equity-accounted earnings
   Three-month period ended June 30,  Six-month period ended June 30,
   2023  2022  2023  2022
Brand amortization*   107    (32)   (9)   (32)
Non-contractual customer relationships amortization *   (1)   (965)   (572)   (965)
Share of profits or (losses) from associates   (42)   -    48    - 
Total   64    (997)   (533)   (997)

 

*Amortization on identifiable intangible assets acquired from investments with significant influence are included in share of equity-accounted earnings in the unaudited condensed consolidated income statement.

 

(a)Associates are composed of

 

i.Uliving Holding S.A. incorporated in Brazil (40% of the total and voting capital as of June 30, 2023 and 36.7% as of December 31, 2022) represents investments in associates of VBI and its main economic activity is holdings of non-financial institutions.

 

(b)No impairment losses on goodwill have been recognized in the current period in respect of goodwill on investments in associates. The Group performs an impairment test annually and when circumstances indicate the carrying value may be impaired.

 

19 

Patria Investments Limited

 

Notes to the unaudited condensed consolidated interim financial statements

As of June 30, 2023 and December 31, 2022 and for the six and three-month periods ended June 30, 2023 and 2022

 

(Amounts in thousands of United States dollars - US$, except where otherwise stated) 

d.Derivative financial instruments

 

The fair value of derivative financial instruments, comprised of forwards, warrants and options is determined in accordance with the following criteria:

 

·Forward exchange contracts – at the market quotation value and the installments receivable or payable are prefixed to a future date, adjusted to present value based on market rates.

 

·Options – option contracts provide the purchaser the right to buy the instrument at a pre-determined base price at a future date.

 

·Warrants – the warrant liabilities issued by PLAO contain features that qualify as embedded derivatives. The fair value has been measured based on the listed market price of such warrants.

 

Forward exchange contracts

 

The Group has previously entered into forward exchange contracts to protect against changes in future cash flows and exchange rate variation of net investments in foreign operations known as Non-Deliverable Forward (“NDF”) contracts. As of June 30, 2023 and 2022 there are no open forward exchange contracts.

 

VBI – option arrangements

 

The business combination with VBI includes a call and put option arrangement (collectively “VBI Option arrangements”) with the non-controlling interest shareholders, exercisable at specified future dates and linked to the second stage of the business combination. The original VBI shareholders granted to the Group a call option arrangement (“VBI call option”) which includes the right for the potential acquisition of the remaining non-controlling interest of VBI. The exercise price will be equal to a pre-determined formula based on the value of VBI’s fee earning assets under management (“AUM”) on the exercise date and adjusted for interest.

 

The Group has no obligation to exercise the VBI call option and can exercise at its discretion in accordance with the VBI call option exercise dates (see below) to be settled in a combination of cash consideration and Class A common shares (the equity portion of consideration will be a maximum of 50% of the total value).

 

In addition, the Group granted a put option arrangement (“VBI put option”) to the non-controlling shareholders of VBI that is linked to the second stage of the business combination. It is exercisable at specified future dates (see below) at the discretion of the non-controlling shareholders and upon expiry of the VBI call option mentioned above. The financial implications of the VBI put option are disclosed under note 20 (d) recognized at the present value of the expected redemption amount payable.

 

The maturity profile of the VBI Option arrangements is detailed below:

 

-The VBI call option shall only be exercisable between the second anniversary of the acquisition closing date (inclusive) and the third anniversary date of the acquisition closing date (inclusive).

 

-The VBI put option shall only be exercisable between the first business day after the third anniversary of the closing date (inclusive) and the fourth anniversary of the closing date (inclusive).

 

20 

Patria Investments Limited

 

Notes to the unaudited condensed consolidated interim financial statements

As of June 30, 2023 and December 31, 2022 and for the six and three-month periods ended June 30, 2023 and 2022

 

(Amounts in thousands of United States dollars - US$, except where otherwise stated) 

The non-controlling shareholders currently have all the economic benefits associated with ownership of shares representing non-controlling interest.

 

The fair value of the VBI Option arrangements is included as part of the consideration of the business combination and the VBI put option is accounted as a financial liability recognized initially at the present value of the redemption amount payable on exercise of the VBI put option by non-controlling shareholders and subsequently measured in accordance with IFRS 9 (Note 20(d)) at amortized cost.

 

The Group used the Monte Carlo model to estimate the fair value associated with the VBI Option arrangements at acquisition date. The Group recognized a financial asset amounting to US$ 6.1 million at acquisition date, based on the projected AUM of VBI during periods when the VBI Option arrangements can be exercised.

 

Igah IV – option arrangements

 

The business combination with Igah IV, includes a call and put option arrangement (collectively “Igah Option arrangements”) with the selling shareholders, exercisable at specified future dates and linked to acquiring the remaining interest in Igah IV The selling shareholders of Igah IV granted to the Group a call option arrangement (“Igah call option”) which includes the right for the potential acquisition of the remaining interest of Igah IV. The exercise price will be equal to a pre-determined formula based on the value of Igah IV’s fundraising activity until the investments fund’s final closing and firm commitments on the exercise date and adjusted for interest and dividends. From the acquisition date, the selling shareholders of Igah IV are entitled to any dividends from the Company’s Class A common shares that the selling shareholders will receive in connection with the settlement of the Igah Option arrangements

 

The Group has no obligation to exercise the Igah call option and can exercise at its discretion in accordance with the Igah call option exercise dates (see below) to be settled in a combination of cash consideration and Class A common shares (the equity portion of consideration will be a maximum of 65% of the total value).

 

In addition, the Group granted a put option arrangement (“Igah put option”) to the selling shareholders of Igah IV. It is exercisable on the same terms and method of settlement as the Igah call option at specified future dates (see below) at the discretion of selling shareholders and upon expiry of the Igah call option mentioned above. The financial implications of the Igah put option are disclosed under note 20 (d) recognized at the present value of the expected redemption amount payable.

 

The maturity profile of the Group’s Igah Option arrangements is detailed below:

 

-The Igah call option shall only be exercisable between the acquisition date (inclusive) and the fifth anniversary date of the acquisition closing date (inclusive).

 

-The Igah put option shall only be exercisable up to 2 months after the expiry of the Igah call option (inclusive).

 

The Group applied the anticipated method of acquisition to recognize Igah IV in accordance with IFRS 10, since, in substance, the Group acquired control of Igah IV, as it will act as a principal in the management of the investment funds, hold decision making rights that provide the Group with the current ability to direct the relevant activities of Igah IV and exposure to the majority of variable compensation arising from Igah IV’s activities.

 

21 

Patria Investments Limited

 

Notes to the unaudited condensed consolidated interim financial statements

As of June 30, 2023 and December 31, 2022 and for the six and three-month periods ended June 30, 2023 and 2022

 

(Amounts in thousands of United States dollars - US$, except where otherwise stated) 

The present value on acquisition date of the redemption amounts payable on exercise of the Igah put option is included as part of the consideration of the business combination and accounted for as a financial liability. The financial liability is subsequently measured in accordance with IFRS 9 (Note 20(d)) at amortized cost. The Igah call option is ignored and not accounted for in accordance with IFRS 9 since, as described above, in substance, the Group effectively acquired this interest on the acquisition date.

 

SPAC – warrant liabilities

 

On March 14, 2022 PLAO concluded its IPO of 23,000,000 Units including the issuance of 3,000,000 Units as a result of the underwriter’s exercise in full of its over-allotment option. Each Unit consists of one SPAC Class A Ordinary Share, par value $0.0001 per share, and one-half of one redeemable warrant of PLAO (each whole warrant, a “Warrant”). The Units were sold at a price of $10.00 per Unit, generating gross proceeds to PLAO of $230,000,000. Additionally, the Units will automatically separate into their component parts and will not be traded after completion of the initial business combination.

 

Each whole Warrant entitles the holder thereof to purchase one SPAC Class A Ordinary Share at a price of $11.50 per share, subject to adjustment. The Warrants will become exercisable 30 days after the completion of the initial business combination and will expire five years after the completion of the initial business combination or earlier upon redemption or liquidation. On the exercise of any Warrant, the Warrant exercise price will be paid directly to the SPAC and not placed in the trust account.

 

The Group recognizes the Warrants as financial liabilities at fair value and remeasures the Warrants at fair value at each reporting period, and any change in fair value is recognized in the Group’s Condensed Consolidated Income Statement. The fair value has been measured based on the listed market price of such Warrants. The expected life of the Warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Group expects to be zero.

 

The SPAC Class A Ordinary Shares and Warrants comprising the Units began separate trading on the 52nd day following the date of PLAO’s IPO. As of June 30, 2023 and December 31, 2022, 11,500,000 Warrants were in issue by PLAO.

 

Redemption of Warrants when the price per SPAC Class A Ordinary Share equals or exceeds $18.00: Once the Warrants become exercisable, PLAO may redeem the outstanding Warrants:

 

·in whole and not in part;

·at a price of $0.01 per Warrant;

·upon a minimum of 30 days’ prior written notice of redemption; and

·if, and only if, the last reported sale price of SPAC Class A Ordinary Shares equals or exceeds $18.00 per share (as adjusted) for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which PLAO sends the notice of redemption to the Warrant holders. 

 

PLAO will not redeem the Warrants as described above unless an effective registration statement under the Securities Act covering the SPAC Class A Ordinary Shares issuable upon exercise of the Warrants is effective and a current prospectus relating to those SPAC Class A Ordinary Shares is available throughout the 30-day redemption period. Any such exercise would not be on a cashless basis and would require the exercising warrant holder to pay the exercise price for each Warrant being exercised.

 

22 

Patria Investments Limited

 

Notes to the unaudited condensed consolidated interim financial statements

As of June 30, 2023 and December 31, 2022 and for the six and three-month periods ended June 30, 2023 and 2022

 

(Amounts in thousands of United States dollars - US$, except where otherwise stated) 

Redemption of Warrants when the price per SPAC Class A Ordinary Share equals or exceeds $10.00: Once the Warrants become exercisable, PLAO may redeem the outstanding Warrants:

 

·in whole and not in part;

 

·at a price of $0.10 per Warrant upon a minimum of 30 days’ prior written notice of redemption; provided that holders will be able to exercise their Warrants on a cashless basis prior to redemption and receive that number of shares determined by reference to the table set forth in the warrant agreement based on the redemption date and the “redemption fair market value” of SPAC Class A Ordinary Shares (as defined below) except as otherwise described in the warrant agreement;

 

·if, and only if, the closing price of SPAC Class A Ordinary Shares equals or exceeds $10.00 per share (as adjusted) for any 20 trading days within the 30-trading day period ending three trading days before the Company sends the notice of redemption to the warrant holders; and

 

·if the closing price of the SPAC 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 is less than $18.00 per share (as adjusted).

 

Solely for the purposes of this redemption provision, the “redemption fair market value” of the SPAC Class A Ordinary Shares shall mean the volume weighted average price of the SPAC Class A Ordinary Shares for the ten (10) trading days immediately following the date on which notice of redemption is sent to the holders of Warrants.

 

No fractional SPAC Class A Ordinary Shares will be issued upon redemption. If, upon redemption, a holder would be entitled to receive a fractional interest in a share, PLAO will round down to the nearest whole number of the number of SPAC Class A Ordinary Shares to be issued to the holder.

 

Below is the composition of the derivative financial instrument portfolio (assets and liabilities) by type of instrument, notional value (representing the exercise price in US Dollars as of reporting date if all financial instruments are exercised) fair value and maturity as of June 30, 2023.

 

23 

Patria Investments Limited

 

Notes to the unaudited condensed consolidated interim financial statements

As of June 30, 2023 and December 31, 2022 and for the six and three-month periods ended June 30, 2023 and 2022

 

(Amounts in thousands of United States dollars - US$, except where otherwise stated) 

 

 

 

Derivative financial instruments  June 30, 2023
   Notional  Fair Value  %  Up to 3 months  From 4 to 12 months  Over 12 months
Assets                  
VBI Call option   93,867    6,141    100    -    -    6,141 
Total   93,867    6,141    100    -    -    6,141 
                               
                               
Liabilities                              
Warrants (i)   132,250    509    100    -    509    - 
                               
Total   132,250    509    100    -    509    - 

 

 

Derivative financial instruments  December 31, 2022
   Notional  Fair Value  %  Up to 3 months  From 4 to 12 months  Over 12 months
Assets                  
VBI Call option   86,698    6,322    100    -    -    6,322 
Total   86,698    6,322    100    -    -    6,322 
                               
                               
Liabilities                              
Warrants (i)   132,250    1,011    96    -    1,011    - 
Forward exchange contracts   4,210    42    4    42    -    - 
Total   135,790    1,053    100    42    1,011    - 

 

 

i.Upon completion of the pending SPAC business combination, the notional value attributed to the Group’s warrants will be reallocated to the new entity. The exercise of these warrants may subsequently yield proceeds to the new entity in exchange for shares in the new entity. The Group’s stake in the new entity will be contingent on the finalized post-combination structure.

 

13Property and equipment

 

Changes in cost     Six-month period ended June 30, 2023
   Opening balance  Additions  Disposals  CTA(*)  Acquisition of subsidiaries  Closing balance
                   
Furniture and fixtures   1,734    86    (3)   114    -    1,931 
Building improvements   11,259    450    (183)   681    -    12,207 
Office equipment   5,354    117    (145)   364    19    5,709 
Right-of-use assets (a)   18,122    1,126    -    1,025    -    20,273 
                               
Total - Cost of fixed assets   36,469    1,779    (331)   2,184    19    40,120 

 

Changes in accumulated depreciation     Six-month period ended June 30, 2023
   Opening balance  Additions  Disposals  CTA(*)  Acquisition of subsidiaries  Closing balance
                   
(-) Furniture and fixtures   (1,161)   (83)   2    (84)   -    (1,326)
(-) Building improvements   (4,516)   (518)   176    (371)   -    (5,229)
(-) Office equipment   (3,332)   (318)   142    (254)   (4)   (3,766)
(-) Right-of-use assets (a)   (2,833)   (1,389)   -    (165)   -    (4,387)
                               
Total - Accumulated depreciation   (11,842)   (2,308)   320    (874)   (4)   (14,708)
Property and equipment, net   24,627    (529)   (11)   1,310    15    25,412 
                               

24 

Patria Investments Limited

 

Notes to the unaudited condensed consolidated interim financial statements

As of June 30, 2023 and December 31, 2022 and for the six and three-month periods ended June 30, 2023 and 2022

 

(Amounts in thousands of United States dollars - US$, except where otherwise stated) 

Changes in cost  Six-month period ended June 30, 2022
   Opening balance  Additions  Disposals  CTA(*)  Closing balance
                
Furniture and fixtures   1,434    126    -    (30)   1,530 
Building improvements   7,460    3,352    -    (419)   10,393 
Office equipment   3,561    613    -    (34)   4,140 
Right-of-use assets (a)   12,624    3,476    (1,005)   (581)   14,514 
                          
Total - Cost of fixed assets   25,079    7,567    (1,005)   (1,064)   30,577 

 

 

Changes in accumulated depreciation  Six-month period ended June 30, 2022
   Opening balance  Additions  Disposals  CTA(*)  Closing balance
                
(-) Furniture and fixtures   (919)   (81)   -    16    (984)
(-) Building improvements   (3,559)   (361)   -    51    (3,869)
(-) Office equipment   (2,724)   (164)   -    (8)   (2,896)
(-) Right-of-use assets (a)   (4,469)   (1,158)   1,199    (74)   (4,502)
                          
Total - Accumulated depreciation   (11,671)   (1,764)   1,199    (15)   (12,251)
Property and equipment, net   13,408    5,803    194    (1,079)   18,326 

(*) CTA – Cumulative translation adjustment

 

As of June 30, 2023 and December 31, 2022 there was no indication that any of these assets were impaired.

 

(a)The Group is a lessee in lease agreements for which the underlying assets are the office spaces located in different jurisdictions (refer to note 20 (a)).

 

(b)Following is the breakdown of the total Property and equipment assets by region:

 

   June 30, 2023  December 31, 2022
       
Brazil   9,621    8,580 
Cayman Islands   1,329    1,350 
Chile   8,028    7,933 
United Kingdom   1,976    2,071 
United States of America   3,969    3,995 
Other   489    698 
Balance   25,412    24,627 

 

Property and equipment assets are allocated based on where the assets are located, and include leasehold improvements, and right-of-use lease assets.

 

25 

Patria Investments Limited

 

Notes to the unaudited condensed consolidated interim financial statements

As of June 30, 2023 and December 31, 2022 and for the six and three-month periods ended June 30, 2023 and 2022

 

(Amounts in thousands of United States dollars - US$, except where otherwise stated) 

14Intangible assets and goodwill

 

Changes in costs        Six-month period ended June 30, 2023
   Opening        Acquisition of     Closing
   balance  Additions  Disposals  subsidiaries  CTA(*)  Balance
                   
Placement agents (a)   42,148    -    (3,308)   -    549    39,389 
Contractual rights (b)   44,156    4,370    -         -    48,526 
Non-contractual customer relationships (c)   110,591    -    -    10,560    4,960    126,111 
Software   3,515    663    -    -    235    4,413 
Brands (c)   19,075    -    -    868    778    20,721 
Goodwill (d) and (e)   276,819    -    -    20,894    6,923    304,636 
                               
Total - Cost of intangible assets   496,304    5,033    (3,308)   32,322    13,445    543,796 
                               

 

Changes in accumulated amortization        Six-month period ended June 30, 2023
   Opening        Acquisition of     Closing
   balance  Additions  Disposals  Subsidiaries  CTA(*)  Balance
                   
(-) Placement agents (a)   (32,503)   (910)   3,308    -    (117)   (30,222)
(-) Contractual rights (b)   (36,577)   (1,263)   -    -    -    (37,840)
(-) Non-contractual customer relationships (c)   (10,653)   (6,110)   -    -    (562)   (17,325)
(-) Software   (1,539)   (304)   -    -    (127)   (1,970)
(-) Brands (c)   (3,511)   (1,832)   -    -    (121)   (5,464)
                               
Total - Accumulated amortization   (84,783)   (10,419)   3,308    -    (927)   (92,821)
                               
Intangible assets, net   411,521    (5,386)   -    32,322    12,518    450,975 

 

 

Changes in costs  Six-month period ended June 30, 2022
   Opening           Closing
   balance  Additions  Disposals  CTA(*)  balance
                
Placement agents (a)   36,804    -    (50)   81    36,835 
Contractual rights (b)   44,156    -    -    -    44,156 
Non-contractual customer relationships (c)   84,705    -    -    (4,037)   80,668 
Software   1,848    387    -    10    2,245 
Brands (c)   15,428    -    -    (754)   14,674 
Goodwill (d) and (e)   242,891    -    -    (6,575)   236,316 
                          
Total - Cost of intangible assets   425,832    387    (50)   (11,275)   414,894 

26 

Patria Investments Limited

 

Notes to the unaudited condensed consolidated interim financial statements

As of June 30, 2023 and December 31, 2022 and for the six and three-month periods ended June 30, 2023 and 2022

 

(Amounts in thousands of United States dollars - US$, except where otherwise stated) 

             
Changes in accumulated amortization  Six-month period ended June 30, 2022
   Opening           Closing
   balance  Additions  Disposals  CTA(*)  Balance
                
(-) Placement agents (a)   (30,996)   (763)   -    (61)   (31,820)
(-) Contractual rights (b)   (34,051)   (1,263)   -    -    (35,314)
(-) Non-contractual customer relationships (c)   (785)   (4,793)   -    356    (5,222)
(-) Software   (839)   (184)   -    (26)   (1,049)
(-) Brands (d)   (253)   (1,544)   -    114    (1,683)
                          
Total - Accumulated amortization   (66,924)   (8,547)   -    383    (75,088)
                          
Intangible assets, net   358,908    (8,160)   (50)   (10,892)   339,806 
                          

 

As of June 30, 2023 and December 31, 2022, there was no impairment indication for any of these assets.

 

(a)Placement agents refer to amounts capitalized relating to agreements with investment placement agents relating to fundraising. These assets are amortized based on the estimated duration of the respective investment funds. In case of an early liquidation of an investment fund, the amortization period is also adjusted.

 

The remaining balance, as of June 30, 2023, is expected to be amortized as shown below:

 

   2023  2024  2025  2026  2027  2028  2029  2030  2031  2032  Total
Placement agent fees
   862    1,682    1,564    771    771    752    746    746    746    527    9,167 

 

(b)Contractual rights refer to:

 

i.the management of the Infrastructure GP II, Ltd. and Infrastructure III SLP, Ltd. investment funds. These rights were recorded as a result of the acquisition of control of the P2 Group on December 25, 2015 from Promon International Inc. The purchase agreement includes contingent consideration that will be paid to Promon International Inc. based on the performance of P2 Brasil Private Infrastructure General Partner II Ltd., expected to be settled only if the performance criteria is achieved. As of the date of these financial statements, no amounts were due relating to these agreements. These intangible assets were recorded based on their respective fair values using estimates of expected future earnings on the acquisition date.

 

ii.contractual rights from four investment funds recognized from the asset acquisition transaction of Blue Macaw

 

27 

Patria Investments Limited

 

Notes to the unaudited condensed consolidated interim financial statements

As of June 30, 2023 and December 31, 2022 and for the six and three-month periods ended June 30, 2023 and 2022

 

(Amounts in thousands of United States dollars - US$, except where otherwise stated) 

Inputs to determine fair value of Blue Macaw contractual rights
  Blue Macaw
Forecast period April 3, 2023 – December 31, 2031
Consumer price index 2%-4.52%
IPCA – Broad National Consumer Price Index 4%-5.96%
Selic 8.75%-12.75%

 

(c)Non-contractual customer relationships refer to client relationships of Moneda, VBI and Igah, acquired for the benefit of the Group through rendering of ordinary business activities by the acquired entities. VBI customer relationships have a longer expected amortization period based on the nature of the capital structure of the underlying investment funds consisting of permanent capital. Brands refer to Moneda and VBI brands acquired through business combination. The table below includes the amortization period:

 

Intangible asset Amortization period
Moneda VBI Igah Blue Macaw Kamaroopin
Non-contractual customer relationships 9 years 29 years 5 years - 5 years
Brands 5 years 8 years - - 8 years
Contractual rights - - - 3-4 years -

 

(d)The goodwill recognized on the acquisition of Moneda, VBI, Igah and Kamaroopin are not deductible for tax purposes and until (i) there is a merger with the acquired company and remains unrecognized unless (ii) the acquired companies are able to generate sufficient taxable income after merger to utilize any tax benefit and (iii) considering the impact from local tax laws and regulations in the countries that the acquired companies operate in after merger.

 

All goodwill recognized during 2022 relates to business combination transactions of which the recoverable amount of acquired entities based on value in use. Key assumptions to determine the value-in-use includes discounted cash flow calculations based on current and past performance forecasts and considering current market indicators listed below for the respective countries in which the entities operate.

 

The key assumptions used to determine the recoverable amount for the cash generating unit were disclosed in the annual consolidated financial statements for the year ended December 31, 2022. As of June 30, 2023, there were no indicators of a potential impairment of goodwill.

 

There were no changes to assumptions between acquisition dates for VBI (July 1, 2022), Igah (November 30, 2022) and most recent impairment test for Moneda (December 31, 2022) and June 30, 2023. The Group performs an impairment test annually and when circumstances indicate the carrying value may be impaired. No impairment losses on goodwill have been recognized in the current and prior year based on determining recoverable amount based on value-in-use.

 

For the six-month period ending June 30, 2023, goodwill was recognized from acquiring control of Kamaroopin according to the following inputs:

 

28 

Patria Investments Limited

 

Notes to the unaudited condensed consolidated interim financial statements

As of June 30, 2023 and December 31, 2022 and for the six and three-month periods ended June 30, 2023 and 2022

 

(Amounts in thousands of United States dollars - US$, except where otherwise stated) 

Inputs to determine fair value of Kamaroopin goodwill
  Kamaroopin and Hanuman
Forecast period April 12, 2023 - December 31, 2031
Annual inflation rate – Brazil 4.00% - 5.96%
Annual inflation rate – United States of America 1.97% - 3.84%
Discount rate 15.9% - 18.8%
Tax rate 34%

 

During the period ended March 31, 2023, the provisional purchase price allocation for the acquisition of VBI and Igah was updated during the measurement period. As a result of adjustments made to the purchase consideration to the fair value of preference dividends payable and the fair value of Igah Option arrangements, the carrying amount of goodwill was increased (as disclosed in note 29).

 

Goodwill from acquisitions of subsidiaries are composed of the following during the six month period ending June 30, 2023:

 

   June 30, 2023
    
VBI   1,966 
Igah   2,455 
Kamaroopin   16,473 
Balance   20,894 

 

(e)The following reflects the composition of goodwill included in intangible assets allocated per acquisition

 

   June 30, 2023  December 31, 2022
       
Moneda   247,619    242,508 
VBI   19,232    15,760 
Igah   21,006    18,551 
Kamaroopin   16,779    - 
Balance   304,636    276,819 

 

(f)The following is the breakdown of intangible assets by region:

 

   June 30, 2023  December 31, 2022
       
Brazil*   62,742    43,762 
Cayman Islands   240,759    224,486 
Chile **   136,865    132,520 
United States of America   10,604    10,747 
Other   5    6 
Balance   450,975    411,521 

29 

Patria Investments Limited

 

Notes to the unaudited condensed consolidated interim financial statements

As of June 30, 2023 and December 31, 2022 and for the six and three-month periods ended June 30, 2023 and 2022

 

(Amounts in thousands of United States dollars - US$, except where otherwise stated) 

Intangible assets are allocated based on where the assets are located and include acquired intangible assets. For acquired intangible assets, we consider that the location of the intangibles is best reflected by the location of the manager of those assets.

 

* Goodwill and fair value adjustments to assets and liabilities allocated to Brazil includes the impact from business combination with VBI and Kamaroopin (excluding Hanuman).

** Goodwill and fair value adjustments to assets and liabilities allocated to Chile includes the impact from Moneda for acquisition of MAM I.

 

15Personnel and related taxes payable

 

   June 30, 2023  December 31, 2022
Personnel and related taxes   1,641    3,280 
Accrued vacation and related charges   3,218    2,563 
Employee profit sharing (a)   9,280    20,321 
Officers’ fund (note 30 (b))   209    912 
Personnel and related taxes payable - current liabilities   14,348    27,076 
           
Officers’ fund (note 30 (b))   -    350 
Strategic bonus (b)   1,873    1,374 
Personnel - non-current liabilities   1,873    1,724 

 

(a)The Group recognizes a provision for payment of profit sharing to employees, according to conditions approved by management, which is recorded as personnel expenses in the condensed Consolidated Income Statement. The balance on December 31, 2022 of US$ 20,321 was fully settled by February 28, 2023.

 

(b)The Group delivers a long-term bonus (the “Strategic bonus”) for a group of its employees in exchange for long terms of service for 5 years. Moneda is responsible for the operation and settlement of the Strategic bonus with the objective to retain key or strategic employees and provide alignment between employees and clients with settlement expected in 2026.

 

16Taxes payable

 

   June 30, 2023  December 31, 2022
Taxes on revenues   939    275 
Income taxes   732    445 
Other taxes payable   268    158 
Taxes payable   1,939    878 

30 

Patria Investments Limited

 

Notes to the unaudited condensed consolidated interim financial statements

As of June 30, 2023 and December 31, 2022 and for the six and three-month periods ended June 30, 2023 and 2022

 

(Amounts in thousands of United States dollars - US$, except where otherwise stated) 

17Other liabilities

 

   June 30, 2023  December 31, 2022
       
Suppliers   4,087    3,256 
Lease liabilities (a)   2,861    2,243 
Dividends payable (b)   2,450    2,085 
Other current liabilities   2    68 
Other current liabilities   9,400    7,652 
           
Lease liabilities (a)   14,102    13,851 
Other non-current liabilities   243    283 
Other non-current liabilities   14,345    14,134 

 

(a)The Group is the lessee in lease agreements for which the underlying assets are the office spaces located in Grand Cayman, London, New York, Montevideo, Santiago and São Paulo as disclosed in note 20.

 

(b)Dividends payable to the previous owners of VBI prior to acquisition by the Group that remain payable on June 30, 2023.

 

18Deferred taxes

 

Deferred tax assets December 31, 2021 (Charged)/credited June 30, 2022   December 31, 2022 (Charged)/credited June 30, 2023
to profit or loss directly to equity / CTA to profit or loss directly to equity / CTA
                   
Derivative options (a) - - - - 6 6,271 268 6,545
Employee profit sharing provision and other personnel accruals (b) 3,998 (1,666) 102 2,434 4,769 (1,539) 258 3,488
Deferred tax on intangible assets from business combination - - - - 776 468 90 1,334
Business combination – earnout - - - - 191 206 26 423
Tax losses - 111 (10) 101 75 (16) 5 64
Tax on Accrual for expenses 108 (18) 22 112 41 (23) 2 20
Tax depreciation of fixed assets (275) 236 2 (37) (558) 47 (50) (561)
Deferred tax on performance fees - IFRS 15 (123) 90 (14) (47) (3,581) 3,103 (182) (660)
Gain from bargain purchase (158) 6 12 (140) (142) 16 (9) (135)
Impact of IFRS 16 (93) 129 (14) 22 176 116 14 306
Other (11) 7 - (4) (4) (14) (9) (27)
                 
                 
Net deferred tax assets 3,446 (1,105) 100 2,441 1,749 8,635 413 10,797

 

(a)Deferred tax on temporary differences from fair value movements of VBI Option arrangements as a result of changes in unobservable inputs impacting the fair value of the VBI Option arrangements to exercise in order to acquire the non-controlling interest of VBI in accordance with the pre-determined inputs of the VBI Option arrangements.

 

(b)Deferred tax on temporary differences in the provision for employee profit-sharing.

 

31 

Patria Investments Limited

 

Notes to the unaudited condensed consolidated interim financial statements

As of June 30, 2023 and December 31, 2022 and for the six and three-month periods ended June 30, 2023 and 2022

 

(Amounts in thousands of United States dollars - US$, except where otherwise stated) 

19Provisions and contingent liabilities

 

For the periods covered by these unaudited condensed consolidated financial statements, the Group was not directly involved in lawsuits for which the possibility of loss was probable. Therefore, no provision was recorded pursuant to IAS 37 (Provisions, Contingent Liabilities, and Contingent Assets) relating to any of the below matters.

 

Taxes

 

In 2017 and 2018, the Company's subsidiaries Patria Investimentos Ltda. ("PILTDA") and Patria Infraestrutura Gestão de Recursos Ltda. ("PINFRA"), became involved in administrative proceedings to defend the exemption of municipal tax over services ("ISS"). In 2019 Municipality of São Paulo obtained a favorable judgment; however, these administrative proceedings gave rise to judicial lawsuits, for which decisions are still pending. PINFRA was subsequently merged into PILTDA on September 30, 2020. As of June 30, 2023, management assisted by external legal counsel assessed the risk of loss relating to these lawsuits as possible and estimated the potential loss for PILTDA as US$ 3,020 (US$ 2,602 as of December 31, 2022) and for PINFRA as US$ 3,300 (US$ 2,842 as of December 31, 2022). As of March 22, 2022, PILTDA was notified of additional administrative proceedings related to the exemption of ISS between 2017 and 2019. Management, assisted by external legal counsel, assessed the risk of loss relating to these additional lawsuits as possible and evaluated the additional potential loss for PILTDA as of June 30, 2023 as US$ 4,238 (US$ 3,623 as of December 31, 2022).

 

During January 2020, PILTDA received infraction notices for an amount as of June 30, 2023 of approximately US$ 6,332 (US$ 5,578 as of December 31, 2022) related to taxes on gross revenue and an amount of approximately US$ 2,432 (US$ 2,148 as of December 31, 2022) related to labor taxes, for which external legal counsel assessed the risk of loss relating to these lawsuits as possible.

 

20Commitments

 

The Group is subject to commitments which occur in the normal course of business. The Group plans to fund these commitments out of existing facilities and internally generated funds.

 

a.Lease commitments

 

The lease commitments in which the Group is a lessee refer to the leasing of its office spaces located in Grand Cayman, London, Montevideo, New York, Santiago and São Paulo. The Condensed Consolidated Statement of Financial Position and the Condensed Consolidated Income Statement discloses the following amounts relating to leases:

 

32 

Patria Investments Limited

 

Notes to the unaudited condensed consolidated interim financial statements

As of June 30, 2023 and December 31, 2022 and for the six and three-month periods ended June 30, 2023 and 2022

 

(Amounts in thousands of United States dollars - US$, except where otherwise stated) 

Amounts recognized in the Condensed Consolidated Statement of Financial Position

 

   June 30, 2023  December 31, 2022
Right-of-use assets   20,273    18,122 
(-) Depreciation of right-of-use assets   (4,387)   (2,833)
Right-of-use assets   15,886    15,289 
           
Lease liabilities (other current liabilities)   2,861    2,243 
Lease liabilities (other non-current liabilities)   14,102    13,851 
Lease liabilities   16,963    16,094 
           

 

Amounts recognized in the Condensed Consolidated Income Statement

 

   Three-month periods ended June 30,  Six-month periods ended June 30,
   2023  2022  2023  2022
Depreciation of right-of-use assets   (722)   (665)   (1,389)   (1,158)
Interest on lease liabilities   (315)   (430)   (659)   (765)
Principal paid   (516)   (384)   (727)   (757)

 

Refer to note 30 liquidity risk disclosures for maturity analysis on lease contracts.

 

Refer to note 31 for disclosures on leases with a related party.

 

b.Consideration payable on acquisition

 

The following table reflects consideration payable from acquisition transactions. No cash settlements were made in the current period.

 

   June 30, 2023  December 31, 2022
Deferred consideration payable – Moneda (i)   23,222    15,889 
Consideration payable on acquisition – Igah (iv)   4,771    4,771 
Consideration payable on acquisition – VBI (iii)   15,933    11,792 
Consideration payable on acquisition - Kamaroopin (ii)   934    735 
           
           
Current liabilities – consideration payable on acquisition   44,860    33,187 
           
Deferred consideration payable (i) – Moneda   15,481    10,592 
Contingent consideration payable on acquisition – Moneda (note 30(b)(i))   13,751    12,891 
Contingent consideration payable on acquisition – VBI (note 30(b)(ii))   10,461    9,072 
Consideration payable on acquisition - Kamaroopin (ii)   -    859 
Contingent consideration payable on acquisition – Kamaroopin (note 30(b)(iii))   5,647    - 
           
Non-current liabilities – consideration payable on acquisition   45,340    33,414 

 

i.The Moneda business combination transaction included US$ 58.7 million expected to be paid to Moneda’s former partners who are currently employees of the Group. The amount to be paid in exchange for their services is subject to a time vesting period, with two equal installments due on December 1, 2023 and December 1, 2024 respectively. This expense is recognized as a compensation expense as the employees render services. For the three-month and six-month periods ended June 30, 2023 and 2022, deferred consideration expenses in the Group’s Consolidated Income Statement were as a result of the following:

 

33 

Patria Investments Limited

 

Notes to the unaudited condensed consolidated interim financial statements

As of June 30, 2023 and December 31, 2022 and for the six and three-month periods ended June 30, 2023 and 2022

 

(Amounts in thousands of United States dollars - US$, except where otherwise stated) 

   Three-month period ended June 30, 2023  Six-month period ended June 30, 2023
Moneda   (6,111)   (12,222)
Blue Macaw (note 5(e))   (718)   (718)
Total deferred consideration   (6,829)   (12,940)

 

ii.Consideration payable for the acquisition of Kamaroopin will be paid in the next 12 months.

 

iii.The consideration payable to VBI is indexed to interbank interest rates (CDI) in Brazil as per the terms of the acquisition agreement. The liability includes the second installment payable to selling shareholder of VBI and a preferred dividend payable to the preferred shareholders of VBI, determined in accordance with the terms of the acquisition agreement.

 

iv.Consideration payable for the acquisition of Igah per terms of the purchase agreement consisting of equity consideration in common shares and preferred dividends payable.

 

v.Cash Settlements during the six-month periods ending June 30, 2023 and 2022.

 

   June 30, 2023  June 30, 2022
Acquisition payable - Moneda   -    (16,437)
Acquisition payable - Kamaroopin   (998)   - 
Acquisition payable – Blue Macaw (note 5(e))   (718)   - 

 

Amounts in relation to Blue Macaw refer to the exercise of a pre-agreed purchase option for an additional stake in a recently acquired asset (note 5(e). This option, referred to as Option 1, was part of the initial acquisition agreement and does not have any performance conditions attached. The expense is recognized as a deferred consideration expense in the Group’s unaudited condensed Consolidated Income Statement due to its non-routine nature and indirect association with a strategic asset acquisition.

 

c.SPAC commitments

 

The holders of SPAC Class A Ordinary Shares of PLAO have the right to redeem their shares in cash at the earliest of (i) upon the completion of PLAO’s initial business combination or (ii) 15 months or up to 21 months (if extended) from the closing of the IPO transaction.

 

The Group accounts for the SPAC Class A Ordinary Shares subject to redemption as a financial liability measured at amortized cost which as of June 30, 2023 was US$ 180.7 million (December 31, 2022: US$ 234.1 million). The instrument was initially recognized at fair value, net of the corresponding eligible transaction costs. The warrant component issued to the shareholders of PLAO is separately accounted for as derivatives and measured at fair value with the change in fair value recorded in the statement of income.

 

Offering costs consist of legal, accounting, underwriting and other costs incurred through the balance sheet date that are directly related to the SPAC’s IPO. Upon the completion of the IPO, the offering costs were allocated using the relative fair values of the SPAC’s Class A Ordinary Shares and its Warrants. The costs allocated to Warrants were recognized in other expenses and those related to the SPAC’s Class A Ordinary Shares were charged against the carrying value of SPAC’s Class A Ordinary Shares. Deferred share issuance expenses for the six-month and three-month period ending June 30, 2023 amounted to US$ 6.2 million and US$ 2.8 million respectively (US$ 3.3 for the three-month and six-month period ending June 30, 2022) in other offering costs which were expensed.

 

34 

Patria Investments Limited

 

Notes to the unaudited condensed consolidated interim financial statements

As of June 30, 2023 and December 31, 2022 and for the six and three-month periods ended June 30, 2023 and 2022

 

(Amounts in thousands of United States dollars - US$, except where otherwise stated) 

The SPAC is subject to laws and regulations enacted by national, regional and local governments. In particular, it is required to comply with certain SEC and other legal requirements. Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming and costly. Those laws and regulations and their interpretation and application may also change from time to time and those changes could have a material adverse effect on the business, investments and results of operations. In addition, a failure to comply with applicable laws or regulations, as interpreted and applied, could have a material adverse effect on the business, including the ability to negotiate and complete an initial business combination, and results of operations.

 

Movements during the period on the Group’s commitment subject to possible redemption are detailed below:

 

Commitment subject to possible redemption
Balance at December 31, 2021   - 
Commitment subject to possible redemption raised   220,458 
IPO expenses - SPAC   10,325 
Interest earned on trust account   3,362 
Balance at December 31, 2022   234,145 
Amortization of SPAC IPO initial cost   6,166 
Interest earned on trust account   5,242 
Redemptions   (65,164)
Deposits   300 
Balance at June 30, 2023   180,869 

  

35 

Patria Investments Limited

 

Notes to the unaudited condensed consolidated interim financial statements

As of June 30, 2023 and December 31, 2022 and for the six and three-month periods ended June 30, 2023 and 2022

 

(Amounts in thousands of United States dollars - US$, except where otherwise stated) 

d.Gross obligation under put option

 

i.VBI –Option arrangements

 

The business combination with VBI (as disclosed in notes 12(d)), included VBI Option arrangements with the non-controlling shareholders, exercisable at specified future dates.

 

The measurement of the put option liability is based on the expected gross redemption amount payable from exercising the VBI Option arrangements and discounting to the present value on acquisition date. The fair value of the underlying business is calculated using a discounted cash flow analysis based on the relevant Group’s subsidiary budgeted cash flows and forecasts. The estimate takes into consideration the projected AUM of VBI during periods when the VBI Option arrangements can be exercised. Accordingly, the measurement of the put option liability is subject to significant estimation uncertainty.

 

Other assumptions contained in the discounted cash flow analysis used by the Group when determining the gross obligation under a put option liability is closely linked to the broader market expectations in the real estate industry and the budgeted cash flows and forecasts of the entities acquired. The financial liability is recorded at amortized cost after recognition.

 

ii.Igah IV –Option arrangements

 

The business combination with Igah IV (as disclosed in notes 12(d)), included Igah Option arrangements with the selling shareholders of Igah IV, exercisable at specified future dates.

 

The measurement of the put option liability is based on the expected gross redemption amount payable from exercising the Igah Option arrangements and discounting to the present value on acquisition date. The fair value of the underlying business is calculated using a discounted cash flow analysis based on the relevant Group’s subsidiary budgeted cash flows and forecasts. The estimate takes into consideration the projected AUM of Igah IV during periods when the Igah Option arrangements can be exercised. Accordingly, the measurement of the put option liability is subject to significant estimation uncertainty.

 

In addition, the selling shareholders of Igah IV are entitled to any dividends from the acquisition date because of equity consideration using Class A common shares to settle the Igah Option arrangement.

 

36 

Patria Investments Limited

 

Notes to the unaudited condensed consolidated interim financial statements

As of June 30, 2023 and December 31, 2022 and for the six and three-month periods ended June 30, 2023 and 2022

 

(Amounts in thousands of United States dollars - US$, except where otherwise stated) 

Other assumptions contained in the discounted cash flow analysis used by the Group when determining the gross obligation under a put option liability are closely linked to the broader market expectations in the private equity and venture capital industry and the budgeted cash flows and forecasts of the entities acquired. The financial liability is recorded at amortized cost after recognition.

 

Movements during the period on the Group’s gross obligation under the VBI put option and the Igah put option are detailed below.

 

Purchase commitments for minority interests shares
    VBI    Igah IV    Total 
Balance at December 31, 2022   65,544    7,884    73,428 
Cumulative translation adjustment   5,622    -    5,622 
Purchase price allocation adjustments   -    2,455    2,455 
Gross obligation adjustments   3,844    582    4,426 
Balance at June 30, 2023   75,010    10,921    85,931 

 

21Revenue from services

 

   Three-month periods ended June 30,  Six-month periods ended June 30,
   2023  2022  2023  2022
Revenue from management fees   63,062    55,606    121,858    110,190 
Revenue from incentive fees   27    61    109    100 
Revenue from performance fees (a)   17,493    33    32,945    33 
Fund fees   80,582    55,700    154,912    110,323 
                     
Revenue from advisory and other ancillary fees   502    860    990    2,005 
                     
Total gross revenue from services   81,084    56,560    155,902    112,328 
                     
Taxes on revenue   (2,493)   (942)   (3,559)   (1,722)
Net revenue from services   78,591    55,618    152,343    110,606 
                     
                     
The following is a breakdown of revenue by region (b):                    
Brazil   11,333    6,510    20,492    12,663 
British Virgin Islands   -    761    23    3,182 
Cayman Islands   53,631    34,329    105,204    67,554 
Chile   12,445    13,429    24,316    26,046 
United States of America   1,182    589    2,308    1,161 
Net revenue from services   78,591    55,618    152,343    110,606 

 

(a)Performance fees are primarily generated when the return of the investment funds surpass the performance hurdle set out in the related charters. Amounts of US$ 15.5 million and $17.5 million are included under performance fees from PE V relating to the Lavoro transaction (note 12(b) and Patria Infrastructure Fund III for the six months ended June 30, 2023.

 

(b)Disclosure of revenue by geographic location is based on the registered domicile of the manager receiving fees. The investment funds managed by the Group attract and retain many global investors that represent the Group's portfolio of clients. None of the Group's individual clients represents more than 10% of the total revenues for the presented periods.

 

37 

Patria Investments Limited

 

Notes to the unaudited condensed consolidated interim financial statements

As of June 30, 2023 and December 31, 2022 and for the six and three-month periods ended June 30, 2023 and 2022

 

(Amounts in thousands of United States dollars - US$, except where otherwise stated) 

 

22Personnel expenses and carried interest allocation

 

   Three-month periods ended June 30,  Six-month periods ended June 30,
   2023  2022  2023  2022
             
Salaries and wages   (9,918)   (8,092)   (19,527)   (16,074)
Officers' Fund   -    (368)   (44)   (1,690)
Rewards and bonuses   (4,641)   (5,332)   (9,277)   (9,631)
Social security contributions and payroll taxes   (1,201)   (1,042)   (2,666)   (2,583)
Restructuring costs – personnel (a)   (784)   -    (1,355)   - 
Share based incentive plan (note 28(d))   (486)   (125)   (746)   (325)
Strategic Bonus   (48)   (708)   (407)   (983)
Other short-term benefits   (1,501)   (1,227)   (2,958)   (2,546)
Personnel expenses   (18,579)   (16,894)   (36,980)   (33,832)
                     
Carried interest allocation (b)   (5,738)   -    (11,146)   - 

 

(a)Restructuring costs of personnel refers to the implementation of streamlining initiatives and cost reduction plan in the operating activities of the Group.

 

(b)This expense refers to the Group’s employees’ right to up to 35% of the performance fees recognized from investments funds. As of June 30, 2023, US$ 23.9 million (US$ 10.3 million current and US$ 13.6 million non-current) remains payable primarily related to performance fees recognized from investment funds.

 

23Amortization of intangible assets

 

   Three-month periods ended June 30,  Six-month periods ended June 30,
   2023  2022  2023  2022
             
Amortization of non-contractual customer relationships (note 14)   (3,321)   (2,335)   (6,110)   (4,793)
Amortization of contractual rights (note 14)   (631)   (632)   (1,263)   (1,263)
Amortization of placement agents’ fees (note 14)   (459)   (312)   (910)   (763)
Amortization of brands (note 14)   (936)   (752)   (1,832)   (1,544)
Amortization of software (note 14)   (173)   (108)   (304)   (184)
Amortization of intangible assets   (5,520)   (4,139)   (10,419)   (8,547)
                     

38 

Patria Investments Limited

 

Notes to the unaudited condensed consolidated interim financial statements

As of June 30, 2023 and December 31, 2022 and for the six and three-month periods ended June 30, 2023 and 2022

 

(Amounts in thousands of United States dollars - US$, except where otherwise stated) 

24General and Administrative expenses

 

   Three-month periods ended June 30,  Six-month periods ended June 30,
   2023  2022  2023  2022
Professional services   (3,235)   (2,720)   (6,161)   (4,889)
IT and telecom services   (1,692)   (1,596)   (3,342)   (3,014)
Rebate fees   (1,338)   (1,133)   (2,456)   (2,168)
Depreciation of right-of-use assets   (722)   (665)   (1,389)   (1,158)
Travel expenses   (843)   (526)   (1,304)   (946)
Marketing and events   (518)   (224)   (931)   (360)
Occupancy expenses   (231)   (419)   (557)   (833)
Depreciation of property and equipment   (489)   (319)   (919)   (606)
Professional services - SPAC   (465)   (454)   (628)   (454)
Insurance   (170)   (276)   (435)   (589)
Taxes and contributions   (172)   (48)   (344)   (415)
Materials and supplies   (47)   (84)   (143)   (163)
Other administrative expenses   (243)   (434)   (502)   (739)
General and Administrative expenses   (10,165)   (8,898)   (19,111)   (16,334)

 

25Other income/(expenses)

 

   Three-month periods ended June 30,  Six-month periods ended June 30,
   2023  2022  2023  2022
Gain on associate derecognition   4,199    -    4,199    - 
Amortization of SPAC IPO initial cost (notes 5(a) and 20(c))   (2,823)   (3,251)   (6,166)   (3,251)
Transaction costs (a)   (843)   (998)   (2,364)   (1,556)
Transaction costs – SPAC   -    -    -    (315)
Contingent consideration adjustments(b)   (1,480)   (878)   (2,196)   (1,718)
Gross obligation adjustments (b)   (2,362)   -    (4,426)   - 
Deferred consideration adjustments (b)   (403)   -    (788)   - 
Integration costs (c)   (323)   -    (722)   - 
Other   (156)   49    (171)   (405)
Other income/(expenses)   (4,191)   (5,078)   (12,634)   (7,245)

 

(a)Transaction costs relate to expenses incurred on acquisition of subsidiaries for business combination.

 

(b)Measurement of the present value of considerations payable (note 20 (b)) and gross obligations under put option (note 20(d)) for acquired businesses, included under other income/(expenses) based on its correlation with the Groups’ expansion strategy through acquisition activity. The movements for the three-month and six-month periods ended June 30, 2023 relates to the unwinding impact from time value of money.

 

(c)Expenses incurred to third party professional service providers assisting in the reorganizing and integration of acquired businesses to improve the Group’s long-term future performance and efficiency.

 

39 

Patria Investments Limited

 

Notes to the unaudited condensed consolidated interim financial statements

As of June 30, 2023 and December 31, 2022 and for the six and three-month periods ended June 30, 2023 and 2022

 

(Amounts in thousands of United States dollars - US$, except where otherwise stated) 

26Net financial income/(expense)

 

   Three-month periods ended June 30,  Six-month periods ended June 30,
   2023  2022  2023  2022
Financial income                    
Net financial investment income   550    442    1,226    879 
Unrealized gains on long-term investments   1,114    125    -    4,602 
Realized gains from long-term investments   513    524    705    1,247 
Unrealized gain on warrant liability   506    2,839    502    2,654 
Unrealized gains on asset-linked receivable (note 12(b))   -    -    9,563    - 
Net exchange variation   648    -    -    - 
Total finance income   3,331    3,930    11,996    9,382 
                     
Financial expenses                    
Unrealized losses on long-term investments   -    -    (8,871)   - 
Realized losses on forward   (57)   -    (252)   - 
Unrealized losses on other derivative financial instruments   (1,564)   -    (756)   - 
Unrealized loss on asset-linked receivable (note 12(b))   (449)   -    -    - 
Commission and brokerage expenses   (117)   (228)   (225)   (455)
Interest on lease liabilities   (315)   (430)   (659)   (765)
Net exchange variation   -    (840)   (444)   (1,097)
Other financial expenses   (121)   (368)   (338)   (419)
Total finance expenses   (2,623)   (1,866)   (11,545)   (2,736)
                     
Net financial income/(expense)   708    2,064    451    6,646 

40 

Patria Investments Limited

 

Notes to the unaudited condensed consolidated interim financial statements

As of June 30, 2023 and December 31, 2022 and for the six and three-month periods ended June 30, 2023 and 2022

 

(Amounts in thousands of United States dollars - US$, except where otherwise stated) 

27Income taxes expenses

 

As an entity headquartered in the Cayman Islands, the Company is subject to a tax neutral regime. However, the Group's subsidiaries headquartered in Brazil, Colombia, Chile, the United Kingdom, the United States of America, and Hong Kong are subject to income taxes as set out by local tax laws.

 

   Three-month periods ended June 30,  Six-month periods ended June 30,
Reconciliation of income tax  2023  2022  2023  2022
             
Income before income taxes   28,341    15,565    49,031    38,075 
                     
Impact of difference in tax rates of foreign subsidiaries   7,685    278    4,554    (3,853)
Nondeductible expenses   -    63    -    - 
                     
Total income taxes   7,685    341    4,554    (3,853)
Current   (2,906)   (1,090)   (4,081)   (2,748)
Deferred   10,591    1,431    8,635    (1,105)
Effective tax rate   (24.4)%   (2.2)%   (9.3)%   10.1%

 

28Equity

 

(a)Capital

 

The Company’s Memorandum and Articles of Association (“Articles of Association”) authorizes the issuance of up to US$100,000, consisting of 1,000,000,000 shares of par value US$0.0001. Of those authorized shares, (i) 500,000,000 are designated as Class A common shares, (ii) 250,000,000 are designated as Class B common shares, and (iii) 250,000,000 are as yet undesignated and may be issued as common shares or shares with preferred rights. Class B common shares are entitled to 10 votes per share and Class A common shares are entitled to one vote per share.

 

The Company currently has a total of 147,875,671 common shares issued and outstanding, of which 54,930,241 are Class A common shares and 92,945,430 are Class B common shares. On June 15, 2023, the Company issued 682,741 Class A common shares (US$ 10.1 million) in part settlement of the Kamaroopin acquisition.

 

Conversion

 

The outstanding Class B common shares are convertible at any time as follows: (1) at the option of the holder, a Class B common share may be converted at any time into one Class A common share or (2) upon the election of the holders of a majority of the then-outstanding Class B common shares, all outstanding Class B common shares may be converted into a like number of Class A common shares. In addition, each Class B common share will convert automatically into one Class A common share upon any transfer, whether or not for value, except for certain transfers described in the Articles of Association. Furthermore, each Class B common share will convert automatically into one Class A common share and no Class B common shares will be issued thereafter if, at any time, the total number of the issued and outstanding Class B common shares is less than 10% of the total number of shares outstanding.

 

41 

Patria Investments Limited

 

Notes to the unaudited condensed consolidated interim financial statements

As of June 30, 2023 and December 31, 2022 and for the six and three-month periods ended June 30, 2023 and 2022

 

(Amounts in thousands of United States dollars - US$, except where otherwise stated) 

As of June 30, 2023 and December 31, 2022, the issued share capital was distributed as follows:

 

   June 30, 2023  December 31, 2022
   Shares  Capital (US$)  Shares  Capital (US$)
Total   147,875,671    14,788    147,192,930    14,720 
Class A   54,930,241    5,493    54,247,500    5,425 
Class B   92,945,430    9,295    92,945,430    9,295 

 

(b)Additional paid-in capital

 

The Additional Paid-in Capital amounts recorded as of June 30, 2023 and December 31, 2022 are presented below:

 

   June 30, 2023  December 31, 2022
Class A   309,208    299,078 
Class B   186,102    186,102 
Total   495,310    485,180 

 

(c)Dividends

 

Dividends are declared and paid to the Company’s shareholders on a pro-rata basis.

 

Dividends declared and paid by the Group to the Company’s shareholders for the six-month period ended June 30, 2023 and 2022 were:

 

Shareholder  2023  2022
      US$*     US$*
Class A   28,968    0.5340    19,638    0.3620 
Class B   49,633    0.5340    33,646    0.3620 
Total   78,601    0.5340    53,284    0.3620 

 

(d)Share based incentive plan

 

The equity incentive programs under the long-term incentive plan (“LTIP”) is a restricted share plan in which eligible participants includes members of the Group’s management and its employees. Beneficiaries under the share based incentive plans, are granted rights to shares based on certain criteria (time and performance vesting conditions). The final eligibility of any beneficiary to participate in the LTIP is determined by the Committee, created and appointed by the Company’s board of directors to administer the equity incentive program.

 

A LTIP was approved and launched on November 28, 2022. From 2022 and the following years 600,000 shares can be granted from the LTIP. As of June 30, 2023, Grants A and B disclosed below has been granted from the LTIP.

 

Grant A

 

Grant A provided to eligible participants (vesting criteria for eligible participants in Grant A commences from January 2022 in accordance with the terms of the LTIP).

 

42 

Patria Investments Limited

 

Notes to the unaudited condensed consolidated interim financial statements

As of June 30, 2023 and December 31, 2022 and for the six and three-month periods ended June 30, 2023 and 2022

 

(Amounts in thousands of United States dollars - US$, except where otherwise stated) 

The defined maximum number of shares under Grant A should not exceed 101,500 (84,506 Performance Restricted Units (“PSUs”) were granted to eligible participants under Grant A and 16,902 PSUs to be further issued subject to the boost grant requirements being met.

 

Grant B

 

Grant B provided to eligible participants (vesting criteria for eligible participants in Grant A commences from January 2023 in accordance with the terms of the LTIP).

 

The defined maximum number of shares under Grant A should not exceed 357,132 (297,610 Performance Restricted Units (“PSUs”) were granted to eligible participants under Grant B and 59,522 PSUs to be further issued subject to the boost grant requirements being met.

 

IPO Grant

 

The IPO Grant was subject to the completion of the IPO registration and approved by the board of director’s meeting on May 19, 2021 and is closed to new participants. The IPO grant mirrors the vesting conditions of Grant A, excluding the commencement date and share price on grant date used for measuring achievement of time and vesting conditions.

 

The defined maximum number of shares under the IPO grant should not exceed 410,115 (289,183 PSUs were granted and 120,932 PSUs to be further issued subject to the boost grant requirements being met) of the issued and outstanding shares of the Company.

 

Set out below is summary of PSU activity for the period ended June 30, 2023.

 

   IPO Grant  Grant A  Grant B
   Number of PSUs (in thousands)
Outstanding December 31, 2021   210    -    - 
Granted   -    -    - 
Forfeited   (13)   -    - 
Outstanding, June 30, 2022   197    -    - 
                
Outstanding, December 31, 2022   184    85    - 
Granted   -    -    298 
Forfeited   -    -    - 
Outstanding, June 30, 2023   184    85    298 

 

The table above reflects the PSU activity for the six-month period ending June 30, 2023 and June 30, 2022. No shares were exercised, expired or vested during the period. Refer to note 22 for expenses incurred for the six and three-month periods ending June 30, 2023 and June 30, 2022.

 

The intention of the Committee as of June 30, 2023 was to settle any future vesting through delivery of Class A common shares to participants.

 

LTIP Grant date Weighted-average fair value
IPO grant January 22, 2021 US$ 15.95
Grant A December 1, 2022 US$  9.15
Grant B January 22, 2023 US$ 10.76

43 

Patria Investments Limited

 

Notes to the unaudited condensed consolidated interim financial statements

As of June 30, 2023 and December 31, 2022 and for the six and three-month periods ended June 30, 2023 and 2022

 

(Amounts in thousands of United States dollars - US$, except where otherwise stated) 

The original weighted-average fair value of PSU shares was determined on the grant date and calculated based on the Monte Carlo simulation model, which incorporates the effects of the performance conditions on the fair value. Dividends were not considered separately in the model since the participants are compensated with more shares when dividends are distributed during the vesting period and because the Total Shareholder Return (“TSR”) performance condition already considers dividends distributed as part of the calculation.

 

(e)Earnings per share (basic and diluted)

 

Basic earnings per share have been calculated based on the Group’s condensed consolidated net income for the period attributable to the holders of the Company’s common shares. The following was considered in assessing the potential dilution on earnings per share assessment:

 

Share based incentive plan (note 28(d)

 

The dilutive effect is dependent on whether vesting conditions are deemed to be met as of the reporting date. As of June 30, 2023 and 2022, the TSR performance condition was not met.

 

Moneda

 

Issuing Class A common shares to potentially settle any contingent consideration payable to Moneda at the end of the contingency period. Events to satisfy the net revenue growth and net income margin conditions as of reporting date have not yet occurred.

 

VBI

 

Issuing Class A common shares to acquire the non-controlling interest of VBI per the VBI call option (note 12(d) to be settled in a combination of cash consideration and Class A common shares (the equity portion of consideration will be a maximum of 50% of the total value). Call options on the shares held by non-controlling shareholders have been excluded from the calculation of diluted earnings per share as their inclusion would be anti-dilutive for the three-month and six-month periods ended June 30, 2023. The VBI call option could potentially dilute basic earnings per share in the future.

 

Igah

 

The basic weighted average number of shares includes the estimated impact of equity consideration from the number of Class A common shares (358,101 shares) to be issued over the next 12 months for the acquisition of Igah, included due to the passage of time being the only requirement. The impact from Igah Option arrangements to be settled in Class A common shares were included in the diluted earnings per share due to applying the anticipated acquisition method for the business combination with Igah.

 

There are no further outstanding financial instruments or agreements convertible into potentially dilutive common shares in the reporting periods.

 

44 

Patria Investments Limited

 

Notes to the unaudited condensed consolidated interim financial statements

As of June 30, 2023 and December 31, 2022 and for the six and three-month periods ended June 30, 2023 and 2022

 

(Amounts in thousands of United States dollars - US$, except where otherwise stated) 

   Three-month periods ended June 30,  Six-month periods ended June 30,
   2023  2022  2023  2022
             
Net income for the period attributable to the Owners of the Company   35,701    15,906    52,944    34,222 
Basic weighted average number of shares*   148,157,912    147,192,930    147,854,471    147,192,930 
Basic earnings per thousand shares   0.24097    0.10806    0.35808    0.23250 
Diluted weighted average number of shares   148,209,383    147,192,930    148,209,383    147,192,930 
Diluted earnings per thousand shares   0.24081    0.10806    0.35722    0.23250 

 

*Includes weighted impact from equity consideration issued for Kamaroopin purchase (682,741 shares) (note 29)

 

(f)Cumulative Translation Adjustments

 

The Company translates the financial information of its subsidiaries from their functional currency to U.S. dollars, which is the Company's and the Group's presentation currency. The effects of the translation are accounted for and presented on Equity under the caption "Cumulative Translation Adjustments".

 

(g)Non-controlling interests

 

As of June 30, 2023 and December 31, 2022, the Group had one subsidiary with non-controlling interests from the acquisition of 50% of VBI on July 1, 2022. As of and for the six-month period ended June 30, 2022, the Group had no non-controlling interests in subsidiaries.

 

           
    Equity(*)   Income / (Loss) (*)
        Three-month periods ended June 30, Six-month periods ended June 30,
  Interest June 30, 2023 December 31, 2022   2023 2022 2023 2022
Non-controlling interest in VBI 50% (43,879) (39,330)   325 - 641 -
     

 

Set below is summarized financial information for the VBI subsidiary that has non-controlling interests. The amounts disclosed are before inter-company eliminations.

 

Summarized Condensed Consolidated Statement of Financial Position  VBI
   June 30, 2023  December 31, 2022
Current assets   5,148    6,647 
Current liabilities   (4,348)   (3,703)
Current net assets   800    2,944 
           
Non-current assets   31,962    27,425 
Non-current liabilities   (681)   (605)
Non-current net assets   31,281    26,820 
           
Net assets   32,081    29,764 
           

 

45 

Patria Investments Limited

 

Notes to the unaudited condensed consolidated interim financial statements

As of June 30, 2023 and December 31, 2022 and for the six and three-month periods ended June 30, 2023 and 2022

 

(Amounts in thousands of United States dollars - US$, except where otherwise stated) 

Summarized Condensed Consolidated Income Statement and Statement of Comprehensive Income  VBI  Allocated to NCI  VBI  Allocated to NCI
   3 month period ended June 30, 2023  3 month period ended June 30, 2023  6 month period ended June 30, 2023  6 month period ended June 30, 2023
Net revenue from services   2,716    1,358    5,032    2,516 
Revenue from management fees   2,936    1,468    5,442    2,721 
Taxes on revenue   (220)   (110)   (410)   (205)
                     
                     
Personnel expenses   (824)   (412)   (1,594)   (797)
Amortization of intangible assets   (316)   (158)   (630)   (315)
General and administrative expenses   (420)   (210)   (778)   (389)
Share of profits of associates   (42)   (21)   (2)   (1)
Net financial income/(expenses)   (142)   (71)   (140)   (70)
                     
Income before income tax   972    486    1,888    944 
                     
Income taxes   (322)   (161)   (606)   (303)
Current   (266)   (133)   (516)   (258)
Deferred   (56)   (28)   (90)   (45)
Net income for the period   650    325    1,282    641 
                     

 

VBI – Non-controlling interest  VBI
   June 30, 2023
Accumulated NCI as of December 31, 2022   (39,330)
Net income for the period   641 
Dividends declared   (2,677)
Capital contributions   2,728 
Cumulative translation adjustment   (5,241)
Accumulated NCI as of June 30, 2023   (43,879)

 

Gross obligation – non-controlling interest

 

The VBI business combination included a VBI put option arrangement related to the non-controlling interest of VBI as disclosed in notes 12 (d). The amounts payable under the option arrangement are recognized as a financial instrument reflecting the present value of the expected gross obligation payable under the VBI put option and included under non-controlling interest in the Condensed Consolidated Statement of Changes in Equity.

 

As of June 30, 2023, the gross obligation had a present value of US$ 75.0 million (originally raised at a present value of US$60.9 million on July 1, 2022).

 

46 

Patria Investments Limited

 

Notes to the unaudited condensed consolidated interim financial statements

As of June 30, 2023 and December 31, 2022 and for the six and three-month periods ended June 30, 2023 and 2022

 

(Amounts in thousands of United States dollars - US$, except where otherwise stated) 

29Business combinations

 

The following table presents the amounts recorded relating to the Group’s business combinations completed in the six-month period ending June 30, 2023 (29(a)) and year ending December 31, 2022 in accordance with IFRS 3. During the measurement period the Group received updates to the valuation of the purchase consideration and goodwill acquired on acquisition.

 

(a)Kamaroopin and Hanuman

 

On April 12, 2023, the Group closed on the transaction with the controlling shareholder of Kamaroopin and Hanuman (collectively “Kamaroopin”) to acquire the remaining 60% interest and enter a business combination with Kamaroopin. The acquisition is structured as a combination between cash and equity consideration.

 

The goodwill from the business combination with Kamaroopin enables the Group to expand and complement its platform of investment funds in growth equity and venture capital by adding investment expertise in startups and early-stage companies. The goodwill recognized on the acquisition of Kamaroopin is not deductible for tax purposes until (i) there is a merger with the acquired company and remains unrecognized unless (ii) the acquired companies are able to generate sufficient taxable income after merger to utilize any tax benefit and (iii) considering the impact from local tax laws and regulations in the countries that the acquired companies operate in after merger.

 

The first tranche of the acquisition of Kamaroopin was signed on December 8, 2021 and closed on February 1, 2022, whereas the second tranche was signed on March 16, 2023 and closed on April 12, 2023. The second stage completed the acquisition of the remaining 60%. As a result, Patria currently owns 100% of Kamaroopin.

 

The acquisition date carrying value of the Group’s previously held equity interest in the acquiree was remeasured to fair value at the acquisition date resulting in a US$ 4.2 million gain recognized in profit or loss in other income (note 25).

 

The acquired businesses contributed revenues of US$ 0.4 million and net profit of US$ 0.1 million to the Group for the period from April 12, 2023 to June 30, 2023. The impact of revenue and net profit from the above transactions, had the acquisition taken place on January 1, 2023, was US$ 1.3 million and US$ 0.7 million respectively. Acquisition-related costs, of US$ 0.2 million, are included in other expenses in the Group’s unaudited Condensed Consolidated Income Statement and in operating cash flows in the unaudited Condensed Consolidated Statement of Cash Flows for the six-month period ending June 30, 2023. Details of the purchase consideration, the net assets acquired and goodwill are listed below and are provisional and pending receipt of the final valuation of those assets.

 

(b)VBI

 

On July 1, 2022, the Group acquired control of VBI’s operations through acquiring 50% of the issued share capital of VBI, an alternative real estate asset manager in Brazil with operations across development and core real estate vehicles, to anchor its Brazil real estate platform. This transaction aligns Patria with highly specialized investment talent building valuable permanent capital.

 

47 

Patria Investments Limited

 

Notes to the unaudited condensed consolidated interim financial statements

As of June 30, 2023 and December 31, 2022 and for the six and three-month periods ended June 30, 2023 and 2022

 

(Amounts in thousands of United States dollars - US$, except where otherwise stated) 

Adjustments includes an increase in purchase consideration related to preference dividends payable by VBI (US$ 2 million) to the previous controlling owners of VBI resulting in an increase to the fair value of goodwill in note 14 for the same amount.

 

(c)Igah

 

On November 30, 2022, the Company acquired 100% interest in a new subsidiary, Igah Partners LLC (“Igah Ventures”), a Brazilian based venture capital firm, 13.2% of PEVC I General Partner IV, Ltd. (“Igah IV”), and 100% of Igah Carry Holding Ltd, an entity for carried interest allocations (collectively referred to as “Igah”). The acquisition of these entities was accounted for as a linked transaction.

 

Igah’s business complements the Group’s existing private equity and growth equity strategies, which are focused on relatively mature companies, by adding investment expertise in startups and early-stage companies.

 

Adjustments includes an increase in purchase consideration (US$ 2.45 million) related to the fair value of Option arrangements included to acquire Igah IV resulting in increase to the fair value of goodwill in note 14 or the same amount.

 

Acquisition date fair value of each major class of identifiable assets and liabilities recognized 
  

100% VBI

July 1, 2022

  100% Igah November 30, 2022  100% Kamaroopin April 12, 2023
Total purchase consideration          
Cash consideration paid (a)   10,815    8,116    2,024 
Consideration payable (b)   10,859    4,771    - 
Contingent consideration payable   8,355    -    4,707 
Preference dividends payable   1,966    -    - 
Option arrangements   (827)   10,339    - 
Equity consideration   -    -    10,130 
Total purchase consideration   31,168    23,226    16,861 
                
                
The assets and liabilities recognized as a result of the acquisition are as follows:               
Cash and cash equivalents   600    36    178 
Accounts receivable   2,462    -    - 
Net working capital   (2,587)   64    (100)
Intangible assets: non-contractual customer relationships   23,246    2,120    10,560 
Intangible assets: brands   3,617    -    868 
Property and equipment   539    -    14 
Lease liability   (420)   -    - 
Net identifiable assets acquired   27,457    2,220    11,520 
                
Less non-controlling interest (c)   (13,729)   -    - 
Less fair value of equity interest previously held   -    -    (11,132)
Add: Goodwill   17,440    21,006    16,473 
Net assets acquired   31,168    23,226    16,861 

 

(a)Purchase consideration – cash outflow for the six-month period ending June 30, 2023 to acquire the subsidiary, net of cash acquired

 

   Kamaroopin
Cash consideration   2,024 
Less: Cash acquired   (178)
Net outflow of cash -investing activities   1,846 

 

48 

Patria Investments Limited

 

Notes to the unaudited condensed consolidated interim financial statements

As of June 30, 2023 and December 31, 2022 and for the six and three-month periods ended June 30, 2023 and 2022

 

(Amounts in thousands of United States dollars - US$, except where otherwise stated) 

30Financial instruments

 

(a)Financial instruments by categories

 

The Group classifies its financial instruments into the categories below:

 

Financial assets  Fair value Level  June 30, 2023  December 31, 2022
          
Financial assets at amortized cost         
Accounts receivable      118,273    131,659 
Client funds on deposit      19,115    23,639 
Project advances      7,907    6,640 
Deposit/guarantee on lease agreement      1,916    1,782 
              
Financial assets at fair value through profit or loss             
Cash and cash equivalents  1   22,350    26,519 
Short term investments  1   205,615    285,855 
Accounts receivable  1   9,562    - 
Long-term investments  1   14,107    - 
Long-term investments  2   13,215    11,017 
Long-term investments - Patria Growth Capital Fund I Fundo de Investimento em Participações Multiestratégia  3   18,116    14,777 
Long-term investments – KMP Growth Fund II  3   8,806    9,463 
Derivative financial instruments – VBI call option  3   6,141    6,322 
              
Financial liabilities             
              
Financial liabilities at amortized cost             
Commitment subject to possible redemption      180,689    234,145 
Gross obligation under put option      85,931    73,428 
Client funds payable      19,115    23,639 
Lease liabilities      16,963    16,094 
Consideration payable on acquisition      21,638    18,157 
Carried interest allocation      23,869    12,450 
Suppliers      4,087    3,256 
              
Financial liabilities at fair value through profit or loss             
Derivative financial instruments - Warrants  1   509    1,011 
Derivative financial instruments – forward exchange contracts  2   -    42 
Contingent consideration payable on acquisition  3   29,859    21,963 

49 

Patria Investments Limited

 

Notes to the unaudited condensed consolidated interim financial statements

As of June 30, 2023 and December 31, 2022 and for the six and three-month periods ended June 30, 2023 and 2022

 

(Amounts in thousands of United States dollars - US$, except where otherwise stated) 

(b)Financial instruments measured at fair value

 

The fair value measurement methodologies are classified according to the following hierarchical levels:

 

·Level 1: measurement based on quotations of identical financial instruments, traded in an active market, without any adjustments;

 

·Level 2: valuation techniques based on observable inputs. This category covers financial instruments that are valued using: (i) quotations of similar financial instruments, traded in an active market; (ii) quotations of identical or similar financial instruments, traded in a fairly inactive market; and (iii) other valuation techniques in which all significant inputs are directly or indirectly observable in market input;

 

·Level 3: valuation techniques based on unobservable inputs. This category covers all financial instruments whose valuation techniques are based on inputs not observable in market inputs when such inputs have a significant impact on the measurement of their fair values. This category includes financial instruments that are valued based on quotations of similar financial instruments that, however, require adjustments and assumptions to ensure that their fair values reflect the differences among them.

 

Refer to table above for fair value measurement methodologies (“Fair value level”) applied to financial assets and financial liabilities measured at fair value.

 

Transfers

 

Transfers into and out of fair value hierarchy levels are analyzed at the end of each consolidated financial statement reporting period. A transfer into Level 3 would be deemed to occur where there is a change in liquidity or other inputs used in the valuation of the financial instrument

 

There were no transfers between Levels 1, 2 and 3 for fair value measurements as of and for the three-month and six-month periods ended June 30, 2023. As of and for the year ended December 31, 2022, the Group had the below transfers to and from level 3.

 

Transfer to Level 3 fair value measurement

 

From June 30, 2022, the investment in Patria Growth Capital Fund I Fundo de Investimento em Participações Multiestratégia was transferred to Level 3 after considering the change in valuation methodology from previously using the transaction cost price to applying a discounted cash flow model at the reporting date.

 

Transfer from Level 3 fair value measurement

 

As of June 30, 2022, the Warrants were transferred out of Level 3 into Level 1. The fair value of the Warrants issued in connection with the IPO of PLAO was measured at fair value using a Monte Carlo simulation model as of March 31, 2022. From June 30, 2022, the fair value of the Warrants issued have been measured based on the listed market price of such warrants, a Level 1 measurement.

 

Unobservable inputs

 

The following analysis illustrates specific valuation techniques, unobservable inputs used to value Level 3 financial instruments and the sensitivity to reasonable changes in the most significant underlying variables used in measurement:

 

50 

Patria Investments Limited

 

Notes to the unaudited condensed consolidated interim financial statements

As of June 30, 2023 and December 31, 2022 and for the six and three-month periods ended June 30, 2023 and 2022

 

(Amounts in thousands of United States dollars - US$, except where otherwise stated) 

Description Note Valuation technique Unobservable inputs Range of unobservable inputs Sensitivity Financial impact*
Consideration payable on acquisition Contingent consideration payable on acquisition - Moneda 20 (b) Discounted cash flow

Discount rate

Probability adjusted net revenue and net income

 

13.9% - 16.8%

 

50 basis points US$ 0.1 million
               
Consideration payable on acquisition Contingent consideration payable on acquisition – VBI 20 (b) Discounted cash flow

Discount rate 

Projected AUM

 

13.7% - 14.7%

 

1% to 26% AUM growth

 

10% less growth US$ 0.1 million
               
Long-term investments Patria Growth Capital Fund I Fundo de Investimento em Participações Multiestratégia - Startse 12 (b) Discounted cash flow

Discount rate

Expected cash flows

 

16.7% - 18% 70 basis points US$ 0.7 million
               
Long-term investments KMP Growth II – Dr Consulta 12 (b) Discounted cash flow

Discount rate 

Expected cash flows

 

16.0% - 18.0% 100 basis points

US$ 1.0 million

 

               
Derivative financial instruments VBI call option 12 (d) Monte Carlo simulation Projected AUM at option exercise date 50% greater/(lower) than projected AUM 36.11% volatility

US$ 3.1 million

 

               
Consideration payable on acquisition Contingent consideration payable on acquisition – Kamaroopin 20 (b) Discounted cash flow

Discount rate

Projected fundraising activity

 

11.5% - 13.7% 100 basis points

US$ 1.2 million

 

               

* Increase (decrease in discount rate) or decrease (increase in discount rate) the discounted fair value

 

Contingent consideration

 

The ultimate settlement of contingent consideration could deviate from current estimates based on the actual results of these financial measures. The liability is re-measured each reporting period and the change in fair value of contingent consideration is presented on the accompanying Condensed Consolidated Income Statement in other income or expenses as fair value gains/(losses) on contingent consideration.

 

(i)Moneda business combination

 

The Group is required to make contingent payments, subject to the acquired entities achieving certain revenue and profitability targets. The contingent consideration payment has a maximum earnout of US$ 71 million for the business combination. The fair value of the contingent consideration liability recognized upon acquisition was estimated by discounting to present value the probability weighted contingent payments expected to be made. A probabilistic scenario approach using the pre-determined net income and net revenue metrics (measurement period up to December 31, 2023) within the purchase agreement was used to estimate expected undiscounted contingent consideration payable and a discount rate range was applied to determine the fair value of contingent consideration at acquisition date and payable in 2024. Between acquisition date and June 30, 2023, there has been a decrease from US$ 25.5 million to US$ 13.8 million in the present value of contingent consideration payable due to actual lower net income margins achieved in addition to impacts being from discounting between acquisition date and reporting date.

 

51 

Patria Investments Limited

 

Notes to the unaudited condensed consolidated interim financial statements

As of June 30, 2023 and December 31, 2022 and for the six and three-month periods ended June 30, 2023 and 2022

 

(Amounts in thousands of United States dollars - US$, except where otherwise stated) 

(ii)VBI business combination

 

The Group is required to make contingent payments, subject to the acquired entity achieving certain AUM targets. The contingent consideration payment (payable in BRL) as of June 30, 2023 had fair value of US$ 10.5 million for the business combination with VBI. The fair value of the contingent consideration liability upon acquisition was US$ 8.4 million and was estimated on acquisition date by projecting future AUM between the 2nd and 5th anniversary from the acquisition closing date, to estimate the undiscounted contingent consideration payable and applying a discount rate range to determine the fair value of contingent consideration to be settled in cash on the later of the 2nd anniversary from the acquisition closing date or ten business days after achieving the fundraising targets.

 

(iii)Kamaroopin business combination

 

The Group is required to make contingent payments, subject to the acquired entity achieving certain fundraising objectives per the terms of the purchase agreement (earn-out range between US$ 4.0 million and US$ 10.1 million). The contingent consideration payment (payable in BRL) had a fair value of US$ 4.7 million and US$ 5.6 million on acquisition date and June 30, 2023 respectively. The fair value was estimated on acquisition date by projecting future fundraising activity within a 30 month period from acquisition date to estimate the undiscounted contingent consideration payable in accordance with a predetermined range of payments that is based on the level of fundraising and applying a discount rate range to determine the fair value of contingent consideration to be settled in the Company’s Class A common shares by March 30, 2027.

 

Long-term investments

 

The fair values were calculated based on the underlying investment’s cash flows discounted using an unobservable input discount rate range. The change in fair value of the Level 3 investment is presented on the accompanying Condensed Consolidated Income Statement in net financial income or expenses as unrealized gains/(losses) on long-term investments.

 

Derivative financial instruments

 

(i)VBI Call option

 

The VBI call option was valued using a Monte Carlo simulation, which is considered to be a Level 3 fair value measurement. The Group estimates volatility based on a group of comparable market participants. The risk-free interest rate is based on the risk-free rate as disclosed by B3 (Brasil, Bolsa, Balcão). The expected life of the VBI Option arrangements are assumed to be equivalent to the remaining contractual term. The derivative was recorded as a financial asset in the Group’s Condensed Consolidated Statement of Financial Position. The impact from this transaction is presented in note 12(d).

 

The following table presents a reconciliation of financial instruments measured at fair value on a recurring basis using significant unobservable inputs (Level 3) as of June 30, 2023 and December 31, 2022.

 

52 

Patria Investments Limited

 

Notes to the unaudited condensed consolidated interim financial statements

As of June 30, 2023 and December 31, 2022 and for the six and three-month periods ended June 30, 2023 and 2022

 

(Amounts in thousands of United States dollars - US$, except where otherwise stated) 

   Contingent consideration payable  Long term investments at fair value through profit or loss  VBI call option  Total
Fair value of Level 3 financial instruments at December 31, 2022   21,963    24,240    6,322    52,525 
Cumulative translation adjustment   275    2,955    572    3,802 
Additions   5,425    -    -    5,425 
Settlements   (718)   -    -    (718)
Changes in fair value   2,914    (273)   (753)   1,888 
Fair value of Level 3 financial instruments at June 30, 2023   29,859    26,922    6,141    62,922 

*Changes in fair value include impact from price risk and/or foreign exchange rate risk

 

(c)Financial instruments measured at amortized costs

 

As of June 30, 2023, and December 31, 2022, the book values of the financial instruments measured at amortized cost correspond approximately to their fair values because the majority are short-term financial assets and liabilities or the impact of the time value of money is not material except for transactions related to the gross obligation under put option (note 20(d)) measured at amortized cost is a non-current liability that has a future gross redemption amounts as reflected in the liquidity risk under note 29(d)(ii).

 

(d)Risk management

 

The Group is exposed to the following risks arising from the use of financial instruments:

 

(i)Credit risk

(ii)Liquidity risk

(iii)Market risk

 

The Group determines concentrations of risk by assessing the nature, extent, and impact of risks in its investment portfolio. This assessment considers a range of factors that are relevant to its investment strategy and objectives, including geographic concentration, industry concentration, counterparty risk, market risk, and liquidity risk.

 

To manage concentrations of risk, the Group uses various risk management strategies, including diversification, hedging, and monitoring of counterparty credit risk. The Group also regularly reports on its risk management activities and the effectiveness of its risk management policies and procedures to its board of directors, investors, and other stakeholders.

 

While the Group uses quantitative measures, such as percentages of its portfolio invested in particular regions or industries, to help determine concentrations of risk, it also uses its judgment and experience in assessing the overall impact of concentrations of risk on its investment portfolio and making informed investment decisions.

 

i.Credit risk

 

Credit risk is the possibility of incurring a financial loss if a client or a counterpart in a financial instrument fails to perform its contractual obligations.

 

The Group has low exposure to credit risk because its customer base is formed by investors in each investment fund. These investors are required to comply with the capital calls in order to repay related

 

53 

Patria Investments Limited

 

Notes to the unaudited condensed consolidated interim financial statements

As of June 30, 2023 and December 31, 2022 and for the six and three-month periods ended June 30, 2023 and 2022

 

(Amounts in thousands of United States dollars - US$, except where otherwise stated) 

investment fund expenses. If capital calls are not complied with, the participation of that investor is diluted among the remaining investors of the investment fund. In addition, management fees could be settled by the sale of the underlying investments kept by the investment funds. The cash and the short-term investments are maintained in large banks with high credit ratings. Furthermore, the accounts receivable as of June 30, 2023 and December 31, 2022 are composed mainly of management fees and performance fees of investment funds, and also of advisory fees and reimbursement of expenses to be received from investees of such investment funds.

 

The amounts receivable and project advances as of June 30, 2023, are expected to be received as demonstrated below:

 

   Overdue  Due in   
   Less than 90 days  91 to 180 days  181 to 270 days  271 to 360 days  Over 360 days  01 to 90 days  91 to 180 days  181 to 270 days  271 to 360 days  Over 360 days  Total
                                  
Accounts Receivable (note 8)   2,672    785    655    58    592    14,041    87,084    -    2,610    19,338    127,835 
Project Advances   -    -    -    -    -    2,441    438    1,358    2,480    1,190    7,907 
Total   2,672    785    655    58    592    16,482    87,522    1,358    5,090    20,528    135,742 

 

ii.Liquidity Risk

 

Liquidity risk is the possibility that an entity will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial assets which might affect the Group's payment ability, taking into consideration the different currencies and settlement terms of its financial assets and financial liabilities.

 

The Group performs the financial management of its cash and cash equivalents and short term investments, keeping them available for paying its obligations and reducing its exposure to liquidity risk. In addition, the Group has the option for certain financial instruments to be settled either in cash or through its own equity instruments, Class A common shares.

 

54 

Patria Investments Limited

 

Notes to the unaudited condensed consolidated interim financial statements

As of June 30, 2023 and December 31, 2022 and for the six and three-month periods ended June 30, 2023 and 2022

 

(Amounts in thousands of United States dollars - US$, except where otherwise stated) 

Expected future payments for financial liabilities as of June 30, 2023, are shown below.

 

   Expected liabilities to be paid in
   01 to 60 days  61 to 120 days  121 to 180 days  181 to 360 days  Over 360 days  Total
Suppliers   4,087    -    -    -    -    4,087 
Leases (a)   756    686    671    1,991    16,755    20,859 
Carried interest allocation   -    -    -    10,307    13,562    23,869 
Consideration payable on acquisition   -    -    15,933    934    -    16,867 
Contingent consideration payable on acquisition (a)   -    -    -    -    35,519    35,519 
Commitment subject to possible redemption (a) and (c)   -    -    -    -    180,689    180,689 
Gross obligation under put option (a) and (b)   -    -    -    -    108,600    108,600 
Derivative financial instruments   -    -    -    509    -    509 
Total   4,843    686    16,604    13,741    355,125    390,999 

 

(a)Amounts reflect undiscounted future cash outflows to settle financial liabilities.

(b)Liability to be partly settled with Class A common shares

(c)Settled with proceeds held in SPAC’s trust account

 

iii.Market risk

 

Market risk is defined as the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices, such as interest rate, foreign exchange rate, and security prices. The Group's policy is to minimize its exposure to market risk.

 

The marketable securities as of June 30, 2023 and December 31, 2022 consist primarily of mutual fund money markets which reduces the Group’s exposure to market risk and investment funds whose portfolios, dependent on the investment strategy are composed of product lines as discussed under Segment information (note 3). To manage its price risk arising from investment funds, the Group diversifies its portfolio. Diversification of the portfolio is done in accordance with the limits set by the Group. The Group has acquired Warrants as it relates to the SPAC PLAO that are listed. The fair value of the Warrants are subject to changes in market prices. However, the Group has determined that the exposure to market risk from the warrants is not significant and therefore no sensitivity analysis is presented.

 

During the six-month period ended June 30, 2023 and 2022 the Group held no other derivative warrant financial instruments.