UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period
ended
or
For the transition period from __________ to __________
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Securities registered pursuant to Section 12(b) of the Act:
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| The | ||||
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| The |
Indicate by check mark
whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
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whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of July 30, 2024,
there were
THUNDER BRIDGE CAPITAL PARTNERS IV, INC.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2024
TABLE OF CONTENTS
i
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
THUNDER BRIDGE CAPITAL PARTNERS IV, INC.
CONDENSED BALANCE SHEETS
| June 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Cash held in Trust Account | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Income taxes payable | ||||||||
| Excise Taxes payable | ||||||||
| Redemptions payable, | ||||||||
| WCL Promissory Note payable - related party | ||||||||
| 2024 Promissory Note Payable - related party | ||||||||
| Total current liabilities | ||||||||
| Warrant liability | ||||||||
| Deferred underwriting fee payable | ||||||||
| Total liabilities | ||||||||
| Commitments | ||||||||
| Shares subject to possible redemption, | ||||||||
| Stockholders’ Equity (Deficit): | ||||||||
| Preferred stock, $ | ||||||||
| Class A Common Stock, $ | ||||||||
| Class B Common Stock, $ | ||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity (deficit) | ( | ) | ( | ) | ||||
| Total liabilities and stockholders’ equity (deficit) | $ | $ | ||||||
See accompanying notes to the unaudited condensed financial statements.
1
THUNDER BRIDGE CAPITAL PARTNERS IV, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Formation costs and other operating expenses | $ | $ | $ | $ | ||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (loss): | ||||||||||||||||
| Interest income | ||||||||||||||||
| Change in fair value of warrant liability | ( | ) | ( | ) | ( | ) | ||||||||||
| Income (loss) before income taxes | ( | ) | ( | ) | ||||||||||||
| Provision for income taxes | ||||||||||||||||
| Net (loss) income | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Weighted average shares redeemable outstanding Class A Common Stock | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Weighted average shares outstanding non-redeemable Class A and Class B Common Stock | $ | $ | ||||||||||||||
| $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
See accompanying notes to the unaudited condensed financial statements.
2
THUNDER BRIDGE CAPITAL PARTNERS IV, INC.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
(UNAUDITED)
| Class A | Class B | Additional | Total Stockholders’ |
|||||||||||||||||||||||||
| Common Stock | Common Stock | Paid in | Accumulated | Equity | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||||||||
| Balance - December 31, 2022 | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||
| Common Stock subject to redemption | - | - | ( |
) | ( |
) | ||||||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||
| Balance - March 31, 2023 | ( |
) | ( |
) | ||||||||||||||||||||||||
| Conversion of Class B Common Stock to Class A Common Stock | ( |
) | ( |
) | - | - | - | |||||||||||||||||||||
| Common Stock subject to redemption | - | - | ( |
) | ( |
) | ||||||||||||||||||||||
| Excise Tax imposed on Common Stock redemption | - | - | ( |
) | ( |
) | ||||||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||
| Balance - June 30, 2023 | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||
| Balance - December 31, 2023 | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||
| Common Stock subject to redemption | - | - | ||||||||||||||||||||||||||
| Net Loss | - | - | ( |
) | ( |
) | ||||||||||||||||||||||
| Balance - March 31, 2024 | ( |
) | ( |
) | ||||||||||||||||||||||||
| Common Stock subject to redemption | - | - | ( |
) | ( |
) | ||||||||||||||||||||||
| Excise Tax imposed on Common Stock redemption | - | - | ( |
) | ( |
) | ||||||||||||||||||||||
| Net income | - | - | ( |
) | ( |
) | ||||||||||||||||||||||
| Balance - June 30, 2024 | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||
See accompanying notes to the unaudited condensed financial statements.
3
THUNDER BRIDGE CAPITAL PARTNERS IV, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| For the Six Months Ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Cash flow from operating activities: | ||||||||
| Net (loss) income | $ | ( | ) | $ | ||||
| Adjustments to reconcile net (loss) income to net cash used in operating activities: | ||||||||
| Interest earned in Trust Account | ( | ) | ( | ) | ||||
| Change in fair value of Warrant liability | - | |||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses | ( | ) | ||||||
| Accounts payable and accrued expenses | ||||||||
| Income taxes payable | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Proceeds from redemption of Trust Account | ||||||||
| Net cash provided by investing activities | ||||||||
| Cash flows from financing activities: | ||||||||
| Proceeds from WCL Promissory Note payable - related party | ||||||||
| Proceeds from 2024 Promissory Note payable - related party | ||||||||
| Net cash provided by financing activities | ||||||||
| Net change in cash | ( | ) | ||||||
| Cash at the beginning of the period | ||||||||
| Cash at the end of the period | $ | $ | ||||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid during the period for: | ||||||||
| Income taxes | $ | $ | ||||||
| Supplemental disclosures of noncash activities: | ||||||||
| Excise Tax liabilities accrued for Common Stock with redemptions | $ | $ | ||||||
| Reclassification of shares subject to possible redemption to redemptions payable | $ | $ | ||||||
See accompanying notes to the unaudited condensed financial statements.
4
THUNDER BRIDGE CAPITAL
PARTNERS IV, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Thunder Bridge Capital Partners IV, Inc. (the “Company”) is a blank check company incorporated in Delaware on January 7, 2021. The Company was formed for the purpose of effectuating a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more businesses (the “Business Combination”). The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of June 30, 2024, the Company had not yet commenced any operations. All activity from the period of January 7, 2021(inception) through June 30, 2024 related to the Company’s formation, the initial public offering that was consummated by the Company on July 2, 2021 (the “Initial Public Offering”), and subsequent to the completion of the Initial Public Offering, identifying a target company for and consummating a Business Combination. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company generates non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering.
The Registration Statement
on Form S-1 for the Initial Public Offering, initially filed with the Securities and Exchange Commission (the “SEC”) on
March 12, 2021, as amended (File No. 333-254359) was declared effective on June 29, 2021 (the “IPO Registration Statement”).
On July 2, 2021, the Company consummated the Initial Public Offering of
Simultaneously with the closing
of the Initial Public Offering, the Company consummated the sale of
Following the closing of the
Initial Public Offering on July 2, 2021, an amount of $
Transaction costs of the Initial
Public Offering and the Private Placement amounted to $
On August 9, 2021, the underwriters
of the Initial Public Offering exercised the over-allotment option in part and purchased an additional
5
THUNDER BRIDGE CAPITAL
PARTNERS IV, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
The Company’s executive
officers and directors (“Management”) has broad discretion with respect to the specific application of the net proceeds of
the Initial Public Offering and the Private Placement, although substantially all of the net proceeds are intended to be applied generally
toward consummating a Business Combination. The rules of the Nasdaq Stock Market LLC (“Nasdaq”) provide that the Business
Combination must be with one or more target businesses that together have a fair market value equal to at least
The Company will provide its
holders of the outstanding Public Shares (the “Public Stockholders”) with the opportunity to redeem all or a portion of their
Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the
Business Combination or (ii) by means of a tender offer. In connection with a proposed Business Combination, the Company may seek stockholder
approval of a Business Combination at a meeting called for such purpose at which Public Stockholders may seek to redeem their Public Shares,
regardless of whether they vote for or against a Business Combination. The Company will proceed with a Business Combination only if the
Company has net tangible assets of at least $
If the Company seeks stockholder
approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the amended and restated certificate
of incorporation of the Company currently in effect, as amended (the “Amended and Restated Charter”), provides that, a Public
Stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as
a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)),
will be restricted from seeking redemption rights with respect to
The Public Stockholders will
be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account ($
If a stockholder vote is not required and the Company does not decide to hold a stockholder vote for business or other legal reasons, the Company will, pursuant to the Amended and Restated Charter, offer such redemption pursuant to the tender offer rules of the SEC, and file tender offer documents containing substantially the same information as would be included in a proxy statement with the SEC prior to completing a Business Combination.
6
THUNDER BRIDGE CAPITAL
PARTNERS IV, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
The Sponsor has agreed (i) to vote its Founder Shares (as defined in Note 5), the Private Placement Shares and any Public Shares purchased during or after the Initial Public Offering in favor of a Business Combination, (ii) not to propose an amendment to the Amended and Restated Charter with respect to the Company’s pre-Business Combination activities prior to the consummation of a Business Combination unless the Company provides dissenting Public Stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment; (iii) not to redeem any shares (including the Founder Shares) and Private Placement Units (including underlying securities) into the right to receive cash from the Trust Account in connection with a stockholder vote to approve a Business Combination (or to sell any shares in a tender offer in connection with a Business Combination if the Company does not seek stockholder approval in connection therewith) or a vote to amend the provisions of the Amended and Restated Charter relating to stockholders’ rights of pre-Business Combination activity and (iv) that the Founder Shares and Private Placement Units (including underlying securities) shall not participate in any liquidating distributions upon winding up if a Business Combination is not consummated. However, the Sponsor will be entitled to liquidating distributions from the Trust Account with respect to any Public Shares purchased during or after the Initial Public Offering if the Company fails to complete its Business Combination.
The Sponsor has agreed that
it will be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company,
or a prospective target business with which the Company has entered into a written letter of intent, confidentiality or similar agreement
or Business Combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $
The Company completed its
Initial Public Offering, at which time, capital in excess of the funds deposited in the Trust Account and/or used to fund offering expenses
was released to the Company for general working capital purposes. Additionally, the Sponsor executed the (i) WCL Promissory Note (as defined
in Note 5) and (ii) 2024 Promissory Note (as defined in Note 5) to loan the Company up to $
Extensions of the Combination Period
The Company initially had
until July 2, 2023, 24 months from the closing of the Initial Public Offering, to consummate its initial Business Combination
(the “Combination Period”). On June 21, 2023, the Company held a special meeting of its stockholders in lieu of
an annual meeting of stockholders (the “2023 Special Meeting”) at which its stockholders approved, among other things,
an amendment to the Amended and Restated Charter to (i) extend the Combination Period from July 2, 2023 to July 2, 2024 (or such earlier
date as determined by the Company’s board of directors (the “Board of Directors”)) (the “First Extension Amendment
Proposal”) and (ii) provide for the right of a holder of shares of Class B Common Stock, to convert such shares into shares
of Class A Common Stock on a one-for-one basis prior to the closing of a Business Combination (the “Founder Share Amendment Proposal”
and together with the First Extension Amendment Proposal, the “Charter Amendment Proposals”). In connection with the vote
to approve the Charter Amendment Proposals, Public Stockholders holding
7
THUNDER BRIDGE CAPITAL
PARTNERS IV, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
On June 26, 2024, the Company held a special meeting of its stockholders in lieu of an annual meeting of stockholders (the “2024 Special Meeting”) at which its stockholders approved, among other things, an amendment to the Amended and Restated Charter to extend the Combination Period from July 2, 2024 to January 2, 2025 (or such earlier date as determined by the Board of Directors) (the “Second Extension Amendment Proposal”).
As a result of the Founder
Share Conversion (as defined in Note 5) and the 2023 Redemptions, as of June 30, 2024 and December 31, 2023, there were
If the Company has not completed
a Business Combination by the end of the Combination Period, pursuant to the Amended and Restated Charter, the Company will (i) cease
all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but no more than ten business days thereafter,
redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including
interest earned on the funds held in the Trust Account and not previously released to the Company to pay taxes (less up to $
Inflation Reduction Act of 2022
On August 16, 2022, the Inflation
Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things, a new U.S.
federal
Any redemption or other repurchase that occurs after December 31, 2022, in connection with a Business Combination, extension vote or otherwise, may be subject to the Excise Tax. Whether and to what extent the Company would be subject to the Excise Tax in connection with a Business Combination, extension vote or otherwise would depend on a number of factors, including (i) the fair market value of the redemptions and repurchases in connection with the Business Combination, extension or otherwise, (ii) the structure of a Business Combination, (iii) the nature and amount of any “PIPE” or other equity issuances in connection with a Business Combination (or otherwise issued not in connection with a Business Combination but issued within the same taxable year of a Business Combination) and (iv) the content of regulations and other guidance from the Treasury. In addition, because the Excise Tax would be payable by the Company and not by the redeeming holder, the mechanics of any required payment of the Excise Tax have not been determined. The foregoing could cause a reduction in the cash available on hand to complete a Business Combination and in the Company’s ability to complete a Business Combination.
8
THUNDER BRIDGE CAPITAL
PARTNERS IV, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
In connection with the stockholders’
vote at the 2023 Special Meeting, Public Stockholders exercised their right to redeem
Nasdaq Notice
On October 24, 2023, the
Company received a letter (the “Total Stockholders Notice”) from the Listing Qualifications Department of Nasdaq (the
“Nasdaq Staff”) notifying the Company that it was not in compliance with Nasdaq Listing Rule 5450(a)(2), which requires the
Company to maintain at least
On October 26, 2023, the Company filed a Current Report on Form 8-K to disclose its receipt of the Total Stockholders Notice in accordance with Nasdaq Listing Rule 5810(b).
On
December 8, 2023, the Company submitted its plan to meet the requirements under the Total Stockholders Rule. On December 13, 2023, the
Company received a letter from the Nasdaq Staff granting it until April 22, 2024 to file documentation with the Nasdaq Staff from its
transfer agent, or independent source, that demonstrates that its Common Stock has a minimum of
On April 26, 2024, the Company received a letter from the Nasdaq Staff (i) confirming receipt of the submitted documentation, (ii) determining that the Company is in compliance with the Total Stockholders Rule and (iii) declaring the matter now closed.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) as determined by the FASB ASC and pursuant to the accounting and disclosure rules and regulations of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, the accompanying unaudited condensed financial statements do not include all of the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of Management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented. The accompanying condensed balance sheet at December 31, 2023 has been derived from the audited financial statements at that date, but does not include all disclosures, including notes, required by GAAP for complete financial statements.
9
THUNDER BRIDGE CAPITAL
PARTNERS IV, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Correction of an Immaterial Error in Previously Issued Financial Statements
During the three months
ended December 31, 2023, the Company determined that it had made an error when calculating its December 31, 2022 accrual for legal fees
in connection with the Coincheck Business Combination. Accordingly, the Company recorded an adjustment and concurrently corrected
for an underaccrual of income taxes as of December 31, 2022 and revised the December 31, 2022 balances presented herein.
The revised reported amount of $(
Liquidity, Capital Resources and Going Concern
As of June 30, 2024, the Company
had a working capital deficit of approximately $
The Company’s liquidity
needs to date have been satisfied through (i) a contribution of $
In connection with the Company’s assessment of going concern considerations in accordance with FASB ASC Topic 205-40, “Presentation of Financial Statements - Going Concern” (“ASC 205-40”), the Company has evaluated its liquidity and financial condition and determined that it is probable the Company will not be able to meet its obligations over the period of one year from the issuance date of the accompanying unaudited condensed financial statements. In addition, while the Company plans to seek additional funding or to consummate an initial Business Combination, there is no guarantee the Company will be able to borrow such funds from its Sponsor, an affiliate of the Sponsor, or certain of the Company’s officers and directors in order to meet its obligations through the earlier of the consummation of an initial Business Combination or one year from this filing. The Company has determined that the uncertainty surrounding its liquidity condition raises substantial doubt about its ability to continue as a going concern. The accompanying unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
In connection with the vote to approve the Charter Amendment Proposals
and the 2023 Redemptions, the Company received $
For the six months ended June 30, 2024, the Company made payments for operating expenses, including taxes, as well as other expenses and obligations.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
10
THUNDER BRIDGE CAPITAL
PARTNERS IV, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company, which is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of the accompanying unaudited condensed financial statements in conformity with GAAP requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the accompanying unaudited condensed financial statements and the reported amounts of revenues and expenses during the reporting period.
Making estimates requires Management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the accompanying unaudited condensed financial statements, which Management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.
The Company had $
Income Taxes
The Company complies with the accounting and reporting requirements of FASB ASC Topic 740, “Income Taxes” (“ASC 740”), which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits, if any, as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of June 30, 2024 and December 31, 2023. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
The Company has identified the United States as its only “major” tax jurisdiction.
11
THUNDER BRIDGE CAPITAL
PARTNERS IV, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Offering Costs
The Company complies with
the requirements of FASB ASC Topic 340-10-S99-1 and SEC Staff Accounting Bulletin Topic 5A, “Expenses of Offering”. Offering
costs consist principally of professional and registration fees incurred through the balance sheet date that are related to the Initial
Public Offering. Offering costs are charged against the carrying value of Class A Common Stock or the statement of operations based on
the relative value of the Class A Common Stock and the Public Warrants to the proceeds received from the Units sold upon the completion
of the Initial Public Offering. Accordingly, offering costs in the aggregate of $
Cash Held in Trust Account
On June 22, 2023, the Company instructed Continental to liquidate the investments held in the Trust Account as of July 1, 2023, and instead to hold the funds in the Trust Account in an interest-bearing demand deposit account at JPMorgan Chase Bank, N.A., with Continental continuing to act as trustee, until the earlier of the consummation of the Business Combination or liquidation. As a result, at June 30, 2024 and December 31, 2023, the assets held in the Trust Account were held in an interest-bearing demand deposit account at a bank.
Shares Subject to Possible Redemption
All of the Class A Common
Stock sold as part of the Units in the Initial Public Offering contain a redemption feature that allows for the redemption of such shares
(i) in connection with the Company’s liquidation, (ii) if there is a shareholder vote or tender offer in connection with the Business
Combination and (iii) in connection with certain amendments to the Amended and Restated Charter. In accordance with ASC 480, conditionally
redeemable Class A Common Stock (including Class A Common Stock that feature redemption rights that are either within the control
of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified
as temporary equity. At all other times, such shares are classified as stockholders’ equity. Ordinary liquidation events, which
involve the redemption and liquidation of all of the entity’s equity instruments, are excluded from the provisions of ASC 480. Accordingly,
as of June 30, 2024 and December 31, 2023,
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable shares of Common Stock to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable shares of Common Stock are affected by charges against shares of Common Stock and accumulated deficit.
Net Income (Loss) Per Share of Common Stock
The Company complies with the accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. The Company has two classes of shares, the (i) Class A Common Stock subject to possible redemption and non-redeemable Class A Common Stock and (ii) Class B Common Stock. Income and losses are shared pro rata between the two classes of shares. Net income (loss) per share of Common Stock is computed by dividing net income (loss) by the weighted average number of Common Stock outstanding during the period.
The calculation of diluted net income (loss) per share does not consider the effect of the (i) Public Warrants issued in connection with the Initial Public Offering, (ii) sale of the Private Placement Warrants in the Private Placement and (iii) shares of Common Stock and Warrants issuable upon the conversion of the WCL Promissory Note, because the exercise of the Warrants and the conversion of the WCL Promissory Note is contingent upon the occurrence of future events.
12
THUNDER BRIDGE CAPITAL
PARTNERS IV, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Net Income (Loss) | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Accretion of redeemable Common Stock to redemption amount | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Excise Taxes on stock redemption | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net income (loss) including accretion of temporary equity to redemption value and Excise Taxes on stock redemption | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||||||||
| Redeemable | Non- redeemable | Redeemable | Non- redeemable | Redeemable | Non- redeemable | Redeemable | Non- redeemable | |||||||||||||||||||||||||
| Basic and diluted net income (loss) per share | ||||||||||||||||||||||||||||||||
| Numerator: | ||||||||||||||||||||||||||||||||
| Allocation of net income (loss) including accretion of temporary equity to redemption value | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||
| Accretion of redeemable Common Stock to redemption value | ||||||||||||||||||||||||||||||||
| Excise Taxes on stock redemption | ||||||||||||||||||||||||||||||||
| Net income (loss) | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||
| Denominator: | ||||||||||||||||||||||||||||||||
| $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||||
Concentration of Credit Risk
Financial instruments that
potentially subject the Company to concentration of credit risk consist of a cash account in a financial institution which, at times may
exceed the Federal Depository Insurance Corporation coverage limit of $
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under FASB ASC Topic 820, “Fair Value Measurement,” approximates the carrying amounts represented in the accompanying condensed balance sheets, primarily due to their short-term nature.
Derivative Financial Instruments
The Company accounts for derivative financial instruments in accordance with FASB ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value upon issuance and remeasured at each reporting date, with changes in the fair value reported in the accompanying unaudited condensed statements of operations. The classification of derivative financial instruments is evaluated at the end of each reporting period.
13
THUNDER BRIDGE CAPITAL
PARTNERS IV, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the accompanying condensed balance sheets as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date.
Warrants
The Company accounts for the Warrants as liability-classified instruments based on an assessment of the Warrant’s specific terms and applicable authoritative guidance in ASC 480 and ASC 815. The assessment considers whether the Warrants (i) are freestanding financial instruments pursuant to ASC 480, (ii) meet the definition of a liability pursuant to ASC 480, and (iii) meet all of the requirements for equity classification under ASC 815, including whether the Warrants are indexed to the Company’s own Common Stock and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of Warrant issuance and as of each subsequent reporting period while the Warrants are outstanding. Because the Company does not control the occurrence of events, such as a tender offer or exchange, that may trigger cash settlement of the Warrants where not all of the stockholders also receive cash, the Warrants do not meet the criteria for equity treatment thereunder, as such, the Warrants must be recorded as derivative liability.
For issued or modified Warrants that meet all of the criteria for equity classification, the Warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified Warrants that do not meet all the criteria for equity classification, the Warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the Warrants are recognized as a non-cash gain or loss on the accompanying unaudited condensed statements of operations.
Recently Issued Accounting Standards
Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the accompanying unaudited condensed financial statements.
Subsequent Events
Management of the Company evaluates events that have occurred after the balance sheet date of June 30, 2024 through the date the accompanying unaudited condensed financial statements were issued. Based upon the review, Management did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the accompanying unaudited condensed financial statements, except as follows:
In connection with the 2024
Special Meeting and the vote to approve the Second Extension Amendment Proposal, Public Stockholders holding
As a result of the 2024 Redemptions,
there are
On July 18, 2024, the Company received a written notice (the “36-Month Notice”) from the Nasdaq Staff indicating that unless the Company timely requests a hearing before the Nasdaq Hearings Panel, trading of the Company’s securities on Nasdaq would be suspended due to the Company’s non-compliance with Nasdaq Listing Rule IM-5101-2 (the “36-Month Rule”), which requires that a special purpose acquisition companies (“SPAC”) complete one or more business combinations within 36 months of the effectiveness of its initial public offering registration statement. The Company timely requested a hearing before the Nasdaq Hearings Panel to appeal the 36-Month Notice. On July 25, 2024, Nasdaq granted the Company’s hearing request, which stayed the suspension of trading of the Company’s securities on Nasdaq until the hearing process concludes and the Nasdaq Hearings Panel issues a written decision. There can be no assurance that the Company will be able to satisfy Nasdaq’s continued listing requirements, regain compliance with the 36-Month Rule, and maintain compliance with other Nasdaq listing requirements.
On July 29, 2024, the underwriters of the Initial Public Offering agreed to waive their rights to the deferred underwriting commission held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period, pursuant to the Underwriting Agreement, dated June 29, 2021, the Company entered into with Morgan Stanley & Co. LLC (the “Underwriting Agreement”), and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares in the event of the Company’s liquidation (see Note 1).
14
THUNDER BRIDGE CAPITAL
PARTNERS IV, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 3. INITIAL PUBLIC OFFERING
On July 2, 2021, the Company
consummated its Initial Public Offering of
On August 9, 2021, the underwriter
of the Initial Public Offering exercised the over-allotment option in part and purchased an additional
NOTE 4. PRIVATE PLACEMENT
On July 2, 2021, simultaneously
with the Initial Public Offering, the Sponsor purchased an aggregate of
Each Private Placement Unit
is identical to the Units offered in the Initial Public Offering, except there will be no redemption rights or liquidating distributions
from the Trust Account with respect to the Private Placement Shares or Private Placement Warrants, which will expire worthless if the
Company does not consummate a Business Combination within the Combination Period. The Company recorded the excess of the fair value of
the Private Placement Warrants over the proceeds of $
NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
On February 8, 2021, the Company
issued an aggregate of
The Sponsor has agreed not
to transfer, assign or sell any of its Founder Shares until the earlier to occur of: (i) one year after the completion of a Business Combination
or (ii) the date on which the Company completes a liquidation, merger, capital stock exchange or similar transaction that results in the
Company’s stockholders having the right to exchange their shares of Common Stock for cash, securities or other property. Notwithstanding
the foregoing, if the last reported sale price of the Class A Common Stock equals or exceeds $
15
THUNDER BRIDGE CAPITAL
PARTNERS IV, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
On June 29, 2023, following
the approval of the Founder Share Amendment Proposal by the Company’s stockholders at the 2023 Special Meeting, the Company issued
an aggregate of
Related Party Loans
In order to finance transaction
costs in connection with a Business Combination, the Sponsor, an affiliate of the Sponsor, or the Company’s officers and directors
may, but are not obligated to, loan the Company funds as may be required (the “Working Capital Loans”). Such Working Capital
Loans would be evidenced by promissory notes. The promissory notes would either be repaid upon consummation of a Business Combination,
without interest, or, at the lender’s discretion, up to $
The fair value of the WCL
Promissory Note as of June 30, 2024 and December 31, 2023 was $
On
March 28, 2024, the Company issued a promissory note to the Sponsor in the principal amount of up to $
Administrative Services Agreement
On
June 29, 2021, the Company entered into an Administrative Services Agreement with First Capital Group, LLC, an affiliate of the Sponsor
(“First Capital”, and such agreement, the “Administrative Services Agreement”). Pursuant to the Administrative
Services Agreement, commencing on July 2, 2021, through the earlier of the consummation of a Business Combination or the Company’s
liquidation, the Company pays First Capital a total of $
Advisory Agreement
On
June 29, 2021, the Company entered into an Advisory Agreement with an affiliate of its Chief Executive Officer (the “Advisory Agreement”).
Pursuant to the Advisory Agreement, commencing on July 2, 2021, through the earlier of the consummation of a Business Combination
or the Company’s liquidation, the Company pays such affiliate a monthly fee of $
16
THUNDER BRIDGE CAPITAL PARTNERS IV, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 6. COMMITMENTS
Registration Rights
The holders of the Founder Shares, Private Placement Units and any units that may be issued upon conversion of the Working Capital Loans (and in each case holders of their component securities, as applicable) are entitled to registration rights pursuant to a registration rights agreement entered into in connection with the Initial Public Offering, requiring the Company to register such securities for resale (in the case of the Founder Shares, only after conversion to Class A Common Stock). The holders of the majority of these securities are entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the consummation of a Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
Pursuant to the Underwriting Agreement, the Company granted the underwriters
of the Initial Public Offering a
The underwriters were paid
a cash underwriting discount of two percent (
NOTE 7. WARRANTS
The Public Warrants may only
be exercised for a whole number of shares. No fractional shares will be issued upon exercise of the Public Warrants. The Public Warrants
will become exercisable on the later of (i) 30 days after the consummation of a Business Combination or (ii) 12 months from the closing
of the Initial Public Offering. The Public Warrants will expire
The Company will not be obligated to deliver any Class A Common Stock pursuant to the exercise of a Public Warrant and will have no obligation to settle such Public Warrant exercise unless a registration statement under the Securities Act covering the issuance of the Class A Common Stock issuable upon exercise of the Public Warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect to registration. No Public Warrant will be exercisable for cash or on a cashless basis, and the Company will not be obligated to issue any shares to holders seeking to exercise their Public Warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder, or an exemption from registration is available.
The Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of the Business Combination, it will use its best efforts to file with the SEC, and within 60 business days following the Business Combination to have declared effective, a registration statement covering the issuance of the shares of Class A Common Stock issuable upon exercise of the Warrants and to maintain a current prospectus relating to those shares of Class A Common Stock until the Warrants expire or are redeemed. If a registration statement covering the shares of Class A Common Stock issuable upon exercise of the Warrants is not effective by the 60th business day after the closing of a Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise Warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption.
17
THUNDER BRIDGE CAPITAL PARTNERS IV, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Once the Public Warrants become exercisable, the Company may redeem the Public Warrants for redemption:
| ● | in whole and not in part; |
| ● | at a price of $ |
| ● | upon not less than |
| ● | if, and only if, the reported last sale price of the Class A Common Stock equals or exceeds $ |
In addition, once the Public Warrants become exercisable, the Company may redeem the Public Warrants for redemption:
| ● | in whole and not in part; |
| ● | at a price of $ |
| ● | upon not less than |
| ● | if, and only if, the last reported sale price of the Class A Common Stock equals or exceeds $ |
| ● | if, and only if, the last reported sale price of the Class A Common Stock equals or exceeds $ |
If and when the Public Warrants become redeemable by the Company, it may exercise its redemption rights even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws; provided, that the Company will use its best efforts to register or qualify such shares of Common Stock under the blue sky laws of the state of residence in those states in which the Public Warrants were offered by the Company in the Initial Public Offering.
18
THUNDER BRIDGE CAPITAL PARTNERS IV, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
The exercise price and number of shares of Class A Common Stock issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a share dividend, or recapitalization, reorganization, merger or consolidation. Additionally, in no event will the Company be required to net cash settle the Public Warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of the Public Warrants will not receive any of such funds with respect to their Public Warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such Public Warrants. Accordingly, the Public Warrants may expire worthless.
In addition, if (i) the Company
issues additional shares of Class A Common Stock or equity-linked securities for capital raising purposes in connection with the closing
of its initial Business Combination at an issue price or effective issue price of less than $
The Private Placement Warrants
are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants
will and the shares of Class A Common Stock issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable
or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private
Placement Warrants will be exercisable on a cashless basis and will be non-redeemable so long as they are held by the initial purchasers
or their permitted transferees (other than in the case the Public Warrants are redeemed for $
The Warrant Agreement contains
an Alternative Issuance provision that if less than
At June 30, 2024 and December
31, 2023, there were (i)
19
THUNDER BRIDGE CAPITAL PARTNERS IV, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
The Company accounts for the
The Company believes that the adjustments to the exercise price of the Warrants is based on a variable that is not an input to the fair value of a “fixed-for-fixed” option as defined under ASC 815–40, and thus the Warrants are not eligible for an exception from derivative accounting. The accounting treatment of derivative financial instruments requires that the Company record a derivative liability upon the closing of the Initial Public Offering. Accordingly, the Company classifies each Warrant as a liability at its fair value and the Warrants have been allocated a portion of the proceeds from the issuance of the Units equal to its fair value determined by the Monte Carlo simulation. This liability is subject to re-measurement at each balance sheet date. With each such remeasurement, the Warrant liability will be adjusted to fair value, with the change in fair value recognized in the accompanying unaudited condensed statements of operations. The Company will reassess the classification at each balance sheet date. If the classification changes as a result of events during the period, the Warrants will be reclassified as of the date of the event that causes the reclassification.
NOTE 8. STOCKHOLDERS’ EQUITY (DEFICIT)
Preferred Stock
The Company is authorized
to issue
Class A Common Stock
The Company is authorized
to issue up to
In connection with the 2024
Special Meeting and the vote to approve the Second Extension Amendment Proposal, Public Stockholders holding
Class B Common Stock
The Company is authorized
to issue up to
Holders of Class A Common Stock and Class B Common Stock vote together as a single class on all other matters submitted to a vote of stockholders, except as required by law; provided that only holders of Class B Common Stock have the right to vote for the election of directors prior to the Business Combination.
20
THUNDER BRIDGE CAPITAL PARTNERS IV, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
The shares of Class B Common Stock will automatically convert into shares of Class A Common Stock at the time of the Business Combination on a one-for-one basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like.
The Company may issue additional Common Stock or preferred stock to complete its Business Combination or under an employee incentive plan after completion of its Business Combination.
NOTE 9. FAIR VALUE MEASUREMENTS
“Fair value” is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
| ● | “Level 1”, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; |
| ● | “Level 2”, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
| ● | “Level 3”, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.
| June 30, | December 31, | |||||||||||
| Description | Level | 2024 | 2023 | |||||||||
| Assets: | ||||||||||||
| Cash held in Trust Account (1) | 1 | $ | $ | |||||||||
| Liabilities: | ||||||||||||
| Public Warrants (1) | 1 | $ | $ | |||||||||
| Private Placement Warrants (1) | 2 | |||||||||||
| WCL Promissory Note payable – related party (1) | 3 | |||||||||||
| 2024 Promissory Note payable – related party | 3 | - | ||||||||||
| (1) |
The Warrants are accounted for as liabilities in accordance with ASC 815-40 and are presented within Warrant liabilities on the accompanying condensed balance sheets. The Warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of Warrant liabilities in the accompanying unaudited condensed statements of operations.
21
THUNDER BRIDGE CAPITAL PARTNERS IV, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Subsequent Measurement
The warrants are measured at fair value on a recurring basis. The subsequent measurement of the Public Warrants as of June 30, 2024 and December 31, 2023, is classified as Level 1 due to the use of an observable market quote in an active market under the ticker “THCPW”. As the transfer of Private Placement Warrants to anyone outside of a small group of individuals who are permitted transferees would result in the Private Placement Warrants having substantially the same terms as the Public Warrants, the Company determined that the fair value of each Private Placement Warrant is classified as Level 2, due to the use of observable inputs.
| Input | June 30, 2024 | |||
| Risk-free interest rate | % | |||
| Expected term (years) | ||||
| Expected term to consummate the Business Combination (years) | ||||
| Expected Volatility | % | |||
| Exercise Price | ||||
| Stock price | ||||
As of June 30, 2024, the aggregate
values of the Private Placement Warrants and Public Warrants were approximately $
| Private | ||||||||||||
| Placement Warrants | Public Warrants | Warrant Liabilities | ||||||||||
| Fair value as of December 31, 2023 | $ | $ | $ | |||||||||
| Change in valuation inputs and other assumptions | ||||||||||||
| Fair value as of June 30, 2024 | $ | $ | $ | |||||||||
| Private | ||||||||||||
| Placement Warrants | Public Warrants | Warrant Liabilities | ||||||||||
| Fair value as of December 31, 2022 | $ | $ | $ | |||||||||
| Change in valuation inputs and other assumptions | ||||||||||||
| Fair value as of June 30, 2023 | $ | $ | $ | |||||||||
22
THUNDER BRIDGE CAPITAL PARTNERS IV, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 10. BUSINESS COMBINATION
On March 22, 2022, the Company entered into a business combination agreement (as amended, the “Coincheck Business Combination Agreement”), by and among the Company, Coincheck Group B.V., a Dutch private limited liability company (besloten vennootschap met beperkte aansprakelijkheid) (“PubCo”), M1 Co G.K., a Japanese limited liability company (“HoldCo”), Coincheck Merger Sub, Inc., a Delaware corporation (“Merger Sub”), and Coincheck, Inc., a Japanese joint stock company (godo kaisha) (“Coincheck” and collectively, with the Company, PubCo, HoldCo and Merger Sub, the “Coincheck Business Combination Parties”). On May 31, 2023, the Coincheck Business Combination Parties entered into an amendment to the Coincheck Business Combination Agreement, extending the Termination Date (as defined in the Coincheck Business Combination Agreement) from July 2, 2023 to July 2, 2024, and providing an additional termination right for the Company and for Coincheck, if at any time prior to Closing (as defined in the Coincheck Business Combination Agreement), the Common Stock or Warrants are delisted on the Nasdaq Global Market, subject to an available cure period. On May 28, 2024, the Coincheck Business Combination Parties entered into a second amendment to the Coincheck Business Combination Agreement, extending the Termination Date from July 2, 2024 to January 2, 2025.
If the Coincheck Business Combination Agreement is approved by the Company’s stockholders, and the transactions contemplated by the Coincheck Business Combination Agreement are consummated, (i) Coincheck equityholders will conduct a share exchange pursuant to which they will receive shares of PubCo and Coincheck will become a wholly owned subsidiary of PubCo and (ii) the Company will merge with and into a wholly-owned subsidiary of PubCo, with the Company continuing as the surviving corporation and a wholly owned subsidiary of PubCo, with Company stockholders and warrantholders receiving identical numbers of securities of PubCo (collectively, the “Coincheck Business Combination”).
As consideration for the Coincheck
Business Combination, Coincheck equityholders will receive approximately $
The consummation of the Coincheck
Business Combination is subject to customary closing conditions, as well as a minimum cash condition of $
The foregoing description of the Coincheck Business Combination Agreement is subject to and qualified in its entirety by reference to the full text of the (i) Coincheck Business Combination Agreement, a copy of which was filed with the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as filed with the SEC on April 1, 2024 (the “2023 Annual Report”), (ii) amendment to the Coincheck Business Combination Agreement, a copy of which was filed with the 2023 Annual Report and (iii) second amendment to the Coincheck Business Combination Agreement, a copy of which is filed as Exhibit 2.1 to this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2024 (this “Report”). Other than as specifically discussed, this Report and the 2023 Annual Report do not give effect to the proposed Coincheck Business Combination.
23
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Cautionary Note Regarding Forward-Looking Statements
All statements other than statements of historical fact included in this Report including, without limitation, statements under this Item regarding our financial position, business strategy and the plans and objectives of Management for future operations, are forward-looking statements. When used in this Report, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions, as they relate to us or our Management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of our Management, as well as assumptions made by, and information currently available to, our Management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors detailed in our filings with the SEC. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety by this paragraph.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto included in this Report under “Item 1. Financial Statements”.
Overview
We are a blank check company incorporated as a Delaware corporation and formed for the purpose of effecting a Business Combination. We intend to effectuate our initial Business Combination using cash from the proceeds of our Initial Public Offering and the Private Placement, the proceeds of the sale of our securities in connection with our initial Business Combination (pursuant to any backstop agreements we may enter into), our shares, debt or a combination of cash, stock and debt.
The issuance of additional shares in connection with an initial Business Combination to the owners of the target or other investors:
| ● | may significantly dilute the equity interest of holders of our Common Stock; |
| ● | may subordinate the rights of holders of our Common Stock if preferred stock is issued with rights senior to those afforded our Common Stock; |
| ● | could cause a change in control if a substantial number of shares of our Common Stock is issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors; |
| ● | may have the effect of delaying or preventing a change of control of us by diluting the stock ownership or voting rights of a person seeking to obtain control of us; and |
| ● | may adversely affect prevailing market prices for our Units, Public Shares and/or Public Warrants. |
Similarly, if we issue debt securities or otherwise incur significant debt to bank or other lenders or the owners of a target, it could result in:
| ● | default and foreclosure on our assets if our operating revenues after an initial Business Combination are insufficient to repay our debt obligations; |
| ● | acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant; |
| ● | our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand; |
24
| ● | our inability to obtain necessary additional financing if the debt security contains covenants restricting our ability to obtain such financing while the debt security is outstanding; |
| ● | our inability to pay dividends on our Common Stock; |
| ● | using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our Common Stock if declared, our ability to pay expenses, make capital expenditures and acquisitions, and fund other general corporate purposes; |
| ● | limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate; |
| ● | increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; |
| ● | limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, and execution of our strategy; and |
| ● | other purposes and other disadvantages compared to our competitors who have less debt. |
On January 24, 2024, the SEC adopted new rules and regulations for SPACs, which became effective on July 1, 2024, that will affect SPAC Business Combination transactions (the “2024 SPAC Rules”). The 2024 SPAC Rules require, among other matters, (i) additional disclosures relating to SPAC Business Combination transactions; (ii) additional disclosures relating to dilution and to conflicts of interest involving sponsors and their affiliates in both SPAC initial public offerings and Business Combination transactions; (iii) additional disclosures regarding projections included in SEC filings in connection with proposed Business Combination transactions; and (iv) the requirement that both the SPAC and its target company be co-registrants for Business Combination registration statements. In addition, the SEC’s adopting release provided guidance describing circumstances in which a SPAC could become subject to regulation under the Investment Company Act, including its duration, asset composition, business purpose, and the activities of the SPAC and its management team in furtherance of such goals. The 2024 SPAC Rules may materially affect our ability to negotiate and complete our initial Business Combination and may increase the costs and time related thereto.
Recent Developments
In connection with the 2024 Special Meeting and the vote to approve the Second Extension Amendment Proposal, Public Stockholders holding 592,601 Public Shares properly exercised their right to redeem such Public Shares for cash at a redemption price of approximately $10.64 per share, for an aggregate redemption amount of approximately $6.3 million. The 2024 Redemptions were effected on July 2, 2024.
As a result of the 2024 Redemptions, there are 9,485,736 shares of Class A Common Stock issued and outstanding.
On July 18, 2024, we received the 36-Month Notice from the Nasdaq Staff indicating that unless we timely request a hearing before the Nasdaq Hearings Panel, trading of our securities on Nasdaq would be suspended due to our non-compliance with the 36-Month Rule, which requires that a SPAC complete one or more business combinations within 36 months of the effectiveness of its initial public offering registration statement. We timely requested a hearing before the Nasdaq Hearings Panel to appeal the 36-Month Notice. On July 25, 2024, Nasdaq granted our hearing request, which stayed the suspension of trading of our securities on Nasdaq until the hearing process concludes and the Nasdaq Hearings Panel issues a written decision. There can be no assurance that we will be able to satisfy Nasdaq’s continued listing requirements, regain compliance with the 36-Month Rule, and maintain compliance with other Nasdaq listing requirements.
On July 29, 2024, the underwriters of the Initial Public Offering agreed to waive their rights to the deferred underwriting commission held in the Trust Account in the event we do not complete a Business Combination within the Combination Period, pursuant to the Underwriting Agreement,, and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares in the event of our liquidation (as described elsewhere in this Report).
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Coincheck Business Combination
On March 22, 2022, we entered into the Coincheck Business Combination Agreement, by and among the Coincheck Business Combination Parties, as amended on May 31, 2023 and May 28, 2024. The Coincheck Business Combination Agreement was unanimously approved by our Board of Directors. If the Coincheck Business Combination Agreement is approved by our stockholders, and the Coincheck Business Combination is consummated, (i) Coincheck equityholders will conduct a share exchange pursuant to which they will receive shares of PubCo and Coincheck will become a wholly owned subsidiary of PubCo and (ii) we will merge with and into a wholly owned subsidiary of PubCo, with our Company continuing as the surviving corporation and a wholly owned subsidiary of PubCo, with our stockholders and warrantholders, receiving identical numbers of securities of PubCo.
For a full description of the Coincheck Business Combination Agreement and the proposed Coincheck Business Combination, please see “Item 1. Business” of our 2023 Annual Report.
Extensions of Our Combination Period
We initially had until July 2, 2023, 24 months from the closing of the Initial Public Offering, to consummate our initial Business Combination. On June 21, 2023, we held the 2023 Special Meeting at which our stockholders approved, among other things, the Charter Amendment Proposals. In connection with the vote to approve the Charter Amendment Proposals, the holders of 20,135,697 shares of Class A Common Stock properly exercised their right to redeem their Public Shares for cash at a redemption price of approximately $10.28 per share, for an aggregate redemption amount of approximately $207.1 million in the 2023 Redemptions. The 2023 Redemptions were effected on July 3, 2023. On June 26, 2024, we held the 2024 Special Meeting at which our stockholders approved, among other things, the Second Extension Amendment Proposal.
Founder Share Conversion
On June 29, 2023, following the approval by our stockholders of the Founder Share Amendment Proposal at the 2023 Special Meeting, we issued an aggregate of 5,913,195 shares of Class A Common Stock to the Sponsor, upon the conversion of an equal number of Class B Common Stock held by the Sponsor in the Founder Share Conversion. The 5,913,195 shares of Class A Common Stock issued in connection with the Founder Share Conversion are subject to the same restrictions as applied to the Class B Common Stock before the Founder Share Conversion, including, among other things, certain transfer restrictions, waiver of redemption rights and the obligation to vote in favor of an initial Business Combination as described in the IPO Registration Statement; consequently, the shares of Class A Common Stock issued in connection with the Founder Share Conversion are not registered under the Securities Act and will remain unregistered until registration is demanded by the Sponsor.
Following the Founder Share Conversion and the 2023 Redemptions, (i) there were 10,078,337 shares of Class A Common Stock and one share of Class B Common Stock issued and outstanding and (ii) the Sponsor held approximately 65.1% of the issued and outstanding shares of Common Stock at June 30, 2024.
Nasdaq Notice
On October 24, 2023, we received the Total Stockholders Notice from the Nasdaq Staff notifying the us that we were not in compliance with the Total Stockholders Rule. The Total Stockholders Notice stated that we had until December 8, 2023 to provide Nasdaq with a plan to regain compliance. If the plan was accepted, Nasdaq Staff may grant an extension of up to 180 calendar days from the date of the Total Stockholders Notice to evidence compliance. If Nasdaq Staff did not accept our plan, the Company would have the opportunity to appeal that decision to a Nasdaq Hearings Panel. The Total Stockholders Notice had no immediate effect on the listing of our securities, and our securities continued to trade on the Nasdaq Global Market.
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On October 26, 2023, we filed a Current Report on Form 8-K to disclose our receipt of the Total Stockholders Notice in accordance with Nasdaq Listing Rule 5810(b).
On December 8, 2023, we submitted our plan to meet the requirements under the Total Stockholders Rule. On December 13, 2023, we received a letter from the Nasdaq Staff granting us until April 22, 2024 to file documentation with the Nasdaq Staff from our transfer agent, or independent source, that demonstrates that our Common Stock has a minimum of 400 total holders. We submitted such documentation to the Nasdaq Staff on April 17, 2024.
On April 26, 2024, we received a letter from the Nasdaq Staff (i) confirming receipt of the submitted documentation, (ii) determining that we are in compliance with the Total Stockholders Rule and (iii) declaring the matter now closed.
Results of Operations
For the three months ended June 30, 2024 and 2023, we had net income (loss) of $(123,955) and $2,138,445, respectively. The net income (loss) consisted of formation and operating costs of $363,669 and $379,717, interest income of $387,021 and $2,849,285, income (loss) from the change in fair value of our Warrant liability of $(97,203) and $(51,194) and a provision of income taxes of $50,104 and $279,939, respectively.
For the six months ended June 30, 2024 and 2023, we had net income (loss) of $(350,829) and $3,925,888, respectively. The net income (loss) consisted of formation and operating costs of $571,142 and $715,807, interest income of $774,540 and $5,392,753, income (loss) from the change in fair value of our Warrant liability of $(438,711) and $0 and a provision of income taxes of $115,516 and $751,058, respectively.
Since the consummation of our Initial Public Offering through June 30, 2024, our activity has been limited to the evaluation of potential initial Business Combination candidates, and consummating the initial Business Combination, and we will not be generating any operating revenues until the closing and completion of our initial Business Combination. We are incurring increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.
Factors That May Adversely Affect Our Results of Operations
Our results of operations and our ability to complete an initial Business Combination may be adversely affected by various factors that could cause economic uncertainty and volatility in the financial markets, many of which are beyond our control. Our business could be impacted by, among other things, downturns in the financial markets or in economic conditions, increases in oil prices, inflation, increases in interest rates, supply chain disruptions, declines in consumer confidence and spending, public health considerations, and geopolitical instability, such as the military conflicts in Ukraine and the Middle East. We cannot at this time predict the likelihood of one or more of the above events, their duration or magnitude or the extent to which they may negatively impact our business and our ability to complete an initial Business Combination.
Liquidity, Capital Resources and Going Concern
As indicated in the unaudited condensed financial statements and the notes thereto included in “Item 1. Financial Statements”, we had $512 held outside of the Trust Account that is available to us to fund our working capital requirements and approximately $37,529,874 held inside the Trust Account as of June 30, 2024.
Prior to the consummation of our Initial Public Offering, our only sources of liquidity were an initial purchase of Founder Shares for $25,000 by the Sponsor, and a total of $105,000 of loans and advances by the Sponsor.
On July 2, 2021, we consummated our Initial Public Offering in which we sold 22,500,000 Units at a price of $10.00 per Unit generating gross proceeds of $225,000,000 before underwriting fees and expenses. Simultaneously with the consummation of our Initial Public Offering, we consummated the Private Placement of 625,000 Private Placement Units, generating gross proceeds, before expenses, of $6,250,000. Each Private Placement Unit consists of one Public Share and one-fifth of one Public Warrant. Each whole Public Warrant entitles the holder to purchase one Public Share at an exercise price of $11.50 per whole share.
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On August 9, 2021, the underwriters of the Initial Public Offering exercised the over-allotment option in part and purchased an additional 1,152,784 Over-Allotment Units, generating gross proceeds of $11,527,840 and consummated a sale of an additional 23,055 Private Placement Units to the Sponsor at a price of $10.00 per Private Placement Unit, generating gross proceeds of $230,550. Following the Over-Allotment, an additional $11,527,840 of proceeds was placed in the Trust Account. In connection with the partial exercise of the over-allotment option, 555,554 shares of Class B Common Stock were forfeited for no consideration.
In connection with our Initial Public Offering and the Over-Allotment, we incurred offering costs of $12,793,700 (including an underwriting fee of $4,730,557 and deferred underwriting commissions of $8,278,474). Other incurred offering costs consisted principally of formation and preparation fees related to our Initial Public Offering. A total of $236,527,840, comprised of $231,797,283 of the proceeds from the Initial Public Offering and the underwriters’ exercise of the over-allotment option and $4,730,557 of the proceeds of the Private Placement, was placed in the Trust Account, established for the benefit of our Public Stockholders.
On June 22, 2023, we instructed Continental to liquidate the investments held in the Trust Account as of July 1, 2023, and instead to hold the funds in the Trust Account in an interest-bearing demand deposit account at JPMorgan Chase Bank, N.A., with Continental continuing to act as trustee, until the earlier of the consummation of our initial Business Combination or our liquidation. As a result, at June 30, 2024, the assets held in the Trust Account were invested in an interest-bearing demand deposit account at a bank and are no longer invested in U.S. government securities or money market funds invested in U.S. government securities.
On March 25, 2022, the Sponsor executed the WCL Promissory Note, representing a Working Capital Loan from the Sponsor to us, of up to $1,500,000. At June 30, 2024 and December 31, 2023, there was $896,000 and $781,000 outstanding under the WCL Promissory Note, respectively, and $0 and $115,000 remained available to finance transaction costs in connection with the initial Business Combination. Through June 30, 2024, we had borrowed $1,500,000 and repaid $604,000 of the total advanced.
On March 28, 2024, we issued the 2024 Promissory Note to the Sponsor in the principal amount of up to $1,000,000. The 2024 Promissory Note bears no interest and is repayable in full upon the earlier of (i) the date of the consummation of the initial Business Combination, and (ii) the date of our liquidation. On May 15, 2024, we amended and restated the 2024 Promissory Note to increase the principal amount from up to $1,000,000 to up to $2,000,000. The rest of the terms of the 2024 Promissory Note remain the same. At June 30, 2024, there was approximately $1,109,000 outstanding under the 2024 Promissory Note and approximately $891,000 remained available to borrow under the 2024 Promissory Note.
As of June 30, 2024, we had a working capital deficit of approximately $12,499,000, including approximately $1,000 in our operating bank account.
Our liquidity needs to date have been satisfied through (i) a contribution of $25,000 from the Sponsor to cover certain expenses in exchange for the issuance of the Founder Shares, (ii) an advance from an affiliate of the Sponsor of the payment of certain formation and operating costs on our behalf, (iii) the proceeds from the consummation of the Private Placement not held in the Trust Account and (iv) borrowings under the WCL Promissory Note and the 2024 Promissory Note.
In connection with our assessment of going concern considerations in accordance with ASC 205-40, we have evaluated our liquidity and financial condition and determined that it is probable we will not be able to meet our obligations over the period of one year from the issuance date of the unaudited condensed financial statements included in “Item 1. Financial Statements”. In addition, while our plans to seek additional funding or to consummate an initial Business Combination, there is no guarantee we will be able to borrow such funds from our Sponsor, an affiliate of the Sponsor, or certain of our officers and directors in order to meet our obligations through the earlier of the consummation of an initial Business Combination or one year from this filing. We have determined that the uncertainty surrounding our liquidity condition raises substantial doubt about our ability to continue as a going concern. The unaudited condensed financial statements included in “Item 1. Financial Statements” do not include any adjustments that might result from the outcome of this uncertainty.
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Contractual Obligations
At June 30, 2024, we did not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities other than the deferred underwriting fee payable of $8,278,474 and the Warrant liability of $828,821.
The underwriters of the Initial Public Offering were paid a cash underwriting fee of 2% of gross proceeds of the Initial Public Offering and the over-allotment option, or $4,730,557. In addition, the underwriters are entitled to aggregate deferred underwriting commissions of $8,278,474 consisting of 3.5% of the gross proceeds of the Initial Public Offering. The deferred underwriting commissions will become payable to the underwriters from the amounts held in the Trust Account solely in the event that we complete an initial Business Combination, subject to the terms of the Underwriting Agreement.
We have entered into the Administrative Services Agreement with First Capital, an affiliate of our Sponsor, pursuant to which we pay a total of $10,000 per month for office space, administrative and support services to such affiliate. Upon completion of our initial Business Combination or our liquidation, we will cease paying these monthly fees. Accordingly, in the event the consummation of our initial Business Combination takes the maximum 42 months, an affiliate of our Sponsor will be paid a total of $420,000 ($10,000 per month) for office space, administrative and support services. Under the Administrative Services Agreement, we had incurred $30,000 and $30,000 for the three months ended June 30, 2024 and 2023 and $60,000 and $60,000 for the six months ended June 30, 2024 and 2023, respectively. Administrative Service fees included in accrued expenses were $160,000 and $110,000 at June 30, 2024 and December 31, 2023, respectively.
We have entered into the Advisory Agreement with an affiliate of our Chief Executive Officer, pursuant to which we pay a total of $20,000 per month for advisory services relating to our search for and consummation of an initial Business Combination. Upon completion of our initial Business Combination or our liquidation, we will cease paying these monthly fees. Accordingly, in the event the consummation of our initial Business Combination takes the maximum 42 months, an affiliate of our Chief Executive Officer will be paid a total of $840,000 ($20,000 per month) for such advisory services and will be entitled to be reimbursed for any out-of-pocket expenses. Under the Advisory Agreement, we had incurred $60,000 and $60,000 for the three months ended June 30, 2024 and 2023, respectively and $120,000 and $120,000 for the six months ended June 30, 2024 and 2023, respectively. Advisory Agreement fees included in accrued expenses were $260,000 and $180,000 at June 30, 2024 and December 31, 2023, respectively.
Critical Accounting Estimates
The preparation of unaudited condensed financial statements and related disclosures in conformity with GAAP requires our Management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following as our critical accounting policies:
Liquidity and Going Concern Consideration
In connection with our assessment of going concern considerations in accordance with ASC 205-40, we have until January 2, 2025 to consummate a Business Combination. It is uncertain that we will be able to consummate a Business Combination by this time. If we do not complete our Business Combination within the Combination Period, we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the Common Stock sold as part of the Units in the Initial Public Offering, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest (which interest shall be net of franchise and income taxes payable and less up to $100,000 of such net interest which may be distributed to us to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish Public Stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and the Board of Directors, dissolve and liquidate, subject in each case to our obligations under the DGCL to provide for claims of creditors and the requirements of other applicable law.
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In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be less than the Initial Public Offering price per Unit in the Initial Public Offering. In addition, if we fail to complete our Business Combination within the Combination Period, there will be no redemption rights or liquidating distributions with respect to the Warrants, which will expire worthless. Management has determined that the liquidity condition and mandatory liquidation, should a Business Combination not occur, and potential subsequent dissolution raises substantial doubt about our ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should we be required to liquidate after January 2, 2025. The amount of time remaining to finalize a Business Combination does raise substantial doubt in our Company as a going concern.
In addition, at June 30, 2024 and December 31, 2023, we had current liabilities of $12,540,156 and $5,977,615, respectively, and working capital (deficit) of $(12,499,141) and $(5,959,611), respectively. These amounts include accrued expenses owed to professionals, consultants, advisors and others who are working on seeking a Business Combination. Such work is continuing after June 30, 2024 and amounts are continuing to accrue. In order to finance ongoing operating costs, the Sponsor or an affiliate of the Sponsor may provide us with additional working capital via the 2024 Promissory Note.
In connection with the vote to approve the Charter Amendment Proposals and the 2023 Redemptions, and during 2023, we received $1,565,444 from Continental, the Trustee of the Trust Account, from the excess interest in the Trust Account, pursuant to our letter of instructions requesting a withdrawal sufficient to meet any potential estimated tax obligations. In connection with the vote to approve the Second Extension Amendment Proposal and the 2024 Redemptions, we received $518,050 from Continental, from the excess interest in the Trust Account, pursuant to our letter of instructions requesting a withdrawal sufficient to meet any potential estimated tax obligations. We anticipate continuing to make payments on our operating expenses, including taxes as they become due and payable through a combination of cash held on the balance sheet and advances from the WCL Promissory Note and 2024 Promissory Note. We estimate as of June 30, 2024, income taxes payable of $330,970. As of June 30, 2024, our cash balances are insufficient to pay our estimated income tax obligation. The Sponsor has advised us that it is prepared to honor advances to meet our income tax obligations, less any cash held on our balance sheet, as they become due.
For the six months ended June 30, 2024, we made payments for operating expenses, including taxes, as well as other expenses and obligations.
Emerging Growth Company
We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. We have elected not to opt out of such extended transition period. which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company, which is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Recent Accounting Pronouncements
Management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the unaudited condensed financial statements and notes thereto included in “Item 1. Financial Statements”.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this Item.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our Management, including our Chief Executive Officer and Chief Financial Officer (together, the “Certifying Officers”), or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our Management, including our Certifying Officers, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on the foregoing, our Certifying Officers concluded that our disclosure controls and procedures were not effective as of the end of the quarterly period ended June 30, 2024. The material weakness was due to an ineffective control environment surrounding the lack of effectively designed controls to properly evaluate and assess certain period end expense accruals. Such ineffective control environment led to a misstatement that was corrected prior to the issuance of the financial statements contained in the 2023 Annual Report. This deficiency represents a material weakness in our internal control over financial reporting as of December 31, 2023 because it created a possibility that a material misstatement to our financial statements might not be detected or prevented on a timely basis.
In light of this material weakness, we have enhanced our processes to identify and appropriately apply applicable accounting requirements to better evaluate and understand the nuances of the complex accounting standards that apply to our financial statements including making greater use of third-party professionals with whom we consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects. We believe our efforts will enhance our controls relating to accounting for complex financial transactions, but we can offer no assurance that our controls will not require additional review and modification in the future as industry accounting practice may evolve over time.
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Changes in Internal Control Over Financial Reporting
Other than as discussed above, there have been no changes to our internal control over financial reporting during the quarterly period ended June 30, 2024 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
To the knowledge of our Management, there is no material litigation currently pending or contemplated against us, any of our officers or directors in their capacity as such or against any of our property.
Item 1A. Risk Factors.
As a smaller reporting company under Rule 12b-2 of the Exchange Act, we are not required to include risk factors in this Report. For additional risks relating to our operations, see the section titled “Risk Factors” contained in our (i) IPO Registration Statement, (ii) Annual Reports on Form 10-K for the years ended December 31, 2021 and 2022, as filed with the SEC on March 30, 2022 and March 31, 2023, respectively, (iii) 2023 Annual Report, (iv) Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2022, June 30, 2022, September 30, 2022, March 31, 2023, June 30, 2023 and September 30, 2023, as filed with the SEC on May 16, 2022, July 27, 2022, November 14, 2022, May 15, 2023, August 18, 2023 and November 14, 2023, respectively, and (v) Definitive Proxy Statement on Schedule 14A, as filed with the SEC on June 11, 2024. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risks could arise that may also affect our business or ability to consummate an initial Business Combination. We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future filings with the SEC.
For risks related to Coincheck and the Coincheck Business Combination, please see the Registration Statement on Form F-4 filed by PubCo (relating to the Coincheck Business Combination and containing a proxy statement of our Company), a preliminary version of which was filed with the SEC on May 7, 2024.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Unregistered Sales of Equity Securities
None.
Use of Proceeds
For a description of the use of proceeds generated in our Initial Public Offering and Private Placement, see Part II, Item 2 of our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2021, as filed with the SEC on August 16, 2021. There has been no material change in the planned use of proceeds from the Initial Public Offering and Private Placement as described in the IPO Registration Statement. The specific investments in our Trust Account may change from time to time.
On June 22, 2023, we instructed Continental to liquidate the investments held in the Trust Account as of July 1, 2023, and instead to hold the funds in the Trust Account in an interest-bearing demand deposit account at JPMorgan Chase Bank, N.A, with Continental continuing to act as trustee, until the earlier of the consummation of our initial Business Combination or our liquidation. As a result, following the liquidation of investments in the Trust Account, the remaining proceeds from the Initial Public Offering and Private Placement are no longer invested in U.S. government securities or money market funds invested in U.S. government securities.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
On June 26, 2024, we held the 2024 Special Meeting and our stockholders approved, among other things, the Second Extension Amendment Proposal, which extended the date by which we must consummate a Business Combination from July 2, 2024 to January 2, 2025 (or such earlier date as determined by the Board of Directors). In connection with the 2024 Special Meeting and the vote to approve the Second Extension Amendment Proposal, Public Stockholders holding 592,601 Public Shares properly exercised their right to redeem such Public Shares for cash at a redemption price of approximately $10.64 per share, for an aggregate redemption amount of approximately $6.3 million. The 2024 Redemptions were effected on July 2, 2024.
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There were no such repurchases of our equity securities by us or an affiliate during the quarterly period covered by this Report.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable
Item 5. Other Information.
Trading Arrangements
During the quarterly period
ended June 30, 2024, none of our directors or officers (as defined in Rule 16a-1(f) promulgated under the Exchange Act)
Additional Information
None.
Item 6. Exhibits.
The following exhibits are filed as part of, or incorporated by reference into, this Report.
| * | Filed herewith. |
| ** | Furnished herewith. |
| (1) | Incorporated by reference to the Company’s Current Report on Form 8-K, as filed with the SEC on May 30, 2024. |
| (2) | Incorporated by reference to the Company’s Current Report on Form 8-K, as filed with the SEC on July 2, 2024. |
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SIGNATURES
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.
| THUNDER BRIDGE CAPITAL PARTNERS IV, INC. | ||
| Dated: July 30, 2024 | /s/ Gary A. Simanson | |
| Name: | Gary A. Simanson | |
| Title: | Chief Executive Officer | |
| (Principal Executive Officer) | ||
| Dated: July 30, 2024 | /s/ William A. Houlihan | |
| Name: | William A. Houlihan | |
| Title: | Chief Financial Officer | |
| (Principal Financial and Accounting Officer) | ||
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