UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(MARK ONE)
For the quarter ended
For the transition period from to
Commission file number:
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Securities registered pursuant to Section 12(b) of the Act:
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Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
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 definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ | Accelerated filer ☐ |
Smaller reporting company | |
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of August 19, 2024, there were
EXCELFIN ACQUISITION CORP.
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2024
TABLE OF CONTENTS
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PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
EXCELFIN ACQUISITION CORP.
CONDENSED BALANCE SHEETS
(UNAUDITED)
| June 30, |
| December 31, | |||
| 2024 |
| 2023 | |||
ASSETS | ||||||
Current Assets: | ||||||
Cash | $ | | $ | | ||
Prepaid expenses |
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Total Current Assets | | | ||||
Cash held in trust |
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Income Tax Receivable | | — | ||||
Deferred Tax Asset | | | ||||
Total Assets | $ | | $ | | ||
LIABILITIES, COMMON STOCK SUBJECT TO POSSIBLE REDEMPTION AND STOCKHOLDERS’ DEFICIT |
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Current Liabilities: | ||||||
Accounts payable and accrued expenses | $ | | $ | | ||
Excise tax payable | | | ||||
Income taxes payable | — | | ||||
Franchise tax payable | | | ||||
Unrecognized tax benefit | | | ||||
Accrued offering costs | |
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Due to related parties | |
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Working capital loan - Sponsor | |
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Total Current Liabilities |
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Deferred underwriting compensation | |
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Total liabilities | | | ||||
Commitments and Contingencies (Note 6) |
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Common stock, subject to possible redemption ( | |
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Stockholders’ deficit: |
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Preferred stock, $ |
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Class A common stock, $ |
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Additional paid-in capital |
| — |
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Accumulated deficit |
| ( |
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Total Stockholders’ Deficit: |
| ( |
| ( | ||
Total Liabilities, Common Stock Subject to Possible Redemption and Stockholders’ Deficit | $ | | $ | | ||
The accompanying notes are an integral part of these unaudited condensed financial statements.
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EXCELFIN ACQUISITION CORP.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three Months | For the Six Months | |||||||||||
Ended | Ended | |||||||||||
June 30, | June 30, | |||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 | |||||
EXPENSES | ||||||||||||
Financial services and admin fee - related party | $ | | $ | | $ | | $ | | ||||
Franchise tax | | | | | ||||||||
General and administrative | | | | | ||||||||
TOTAL EXPENSES | | | | | ||||||||
OTHER INCOME | ||||||||||||
Income earned on Cash and Investments held in Trust Account | | | | | ||||||||
TOTAL OTHER INCOME | | | | | ||||||||
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Net (loss) before provision for income taxes | ( | ( | ( | ( | ||||||||
Provision for income taxes | | | | | ||||||||
Net (loss) | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Weighted average number of shares Class A redeemable common stock outstanding, basic and diluted | | | | | ||||||||
Basic and diluted net (loss) per share of Class A redeemable common stock | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Weighted average number of shares of Class A & Class B non - redeemable common stock outstanding, basic and diluted | | | | | ||||||||
Basic and diluted net (loss) per share of Class A & Class B non - redeemable common stock | $ | ( | $ | ( | $ | ( | $ | ( | ||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
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EXCELFIN ACQUISITION CORP.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024
Class B | Additional | |||||||||||||
Common Stock | Paid-In | Accumulated | Stockholders’ | |||||||||||
| Shares |
| Amount |
| Capital |
| Deficit |
| Deficit | |||||
Balance as of January 1, 2024 | | $ | | $ | — | $ | ( | $ | ( | |||||
Current period remeasurement to redemption value | — | — | — | ( | ( | |||||||||
Capital contribution from Sponsor | — | — | — | | | |||||||||
Net loss | — | — | — | ( | ( | |||||||||
Balance as of March 31, 2024 | | $ | | $ | — | $ | ( | $ | ( | |||||
Current period remeasurement to redemption value | — | — | — | | | |||||||||
Excise tax on Class A common stock redemption | — | — | — | ( | ( | |||||||||
Net loss | — | — | — | ( | ( | |||||||||
Balance as of June 30, 2024 | | | — | $ | ( | $ | ( | |||||||
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023
Class B | Additional | |||||||||||||
Common Stock | Paid-In | Accumulated | Stockholders’ | |||||||||||
| Shares |
| Amount |
| Capital |
| Deficit |
| Deficit | |||||
Balance as of January 1, 2023 | | $ | | $ | — | $ | ( | $ | ( | |||||
Current period remeasurement to redemption value | — | — | — | ( | ( | |||||||||
Net income | — | — | — | | | |||||||||
Balance as of March 31, 2023 | | $ | | $ | — | $ | ( | $ | ( | |||||
Current period remeasurement to redemption value | — | — | — | ( | ( | |||||||||
Excise tax on Class A common stock redemption | — | — | — | ( | ( | |||||||||
Net loss | — | — | — | ( | ( | |||||||||
Balance as of June 30, 2023 | | | — | $ | ( | $ | ( | |||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
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EXCELFIN ACQUISITION CORP.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the | For the | |||||
Six Months | Six Months | |||||
Ended | Ended | |||||
June 30, | June 30, | |||||
| 2024 |
| 2023 | |||
Cash Flows From Operating Activities: |
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Net (loss) | $ | ( | $ | ( | ||
Adjustments to reconcile net (loss) to net cash used in operating activities: |
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Income earned on Cash and Investments held in Trust Account | ( | ( | ||||
Changes in operating assets and liabilities: |
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Due to related parties | — | ( | ||||
Prepaid expenses | ( | | ||||
Income tax payable (receivable) | ( | ( | ||||
Franchise tax payable | | ( | ||||
Unrecognized tax benefit | | — | ||||
Deferred tax asset | | — | ||||
Accounts payable and accrued expenses | | | ||||
Net Cash Used in Operating Activities |
| ( | ( | |||
Cash Flows From Investing Activities: | ||||||
Cash redemption withdrawn from Trust Account | | | ||||
Deposits into Trust Account | ( | — | ||||
Withdrawal of trust account funds for taxes | | | ||||
Net Cash Provided by Investing Activities | | | ||||
Cash Flows From Financing Activities: | ||||||
Payments made in relation to redemptions of Class A common stock | ( | ( | ||||
Payments for offering costs | — | ( | ||||
Capital contribution from Sponsor | | — | ||||
Advances from related party | | — | ||||
Proceeds from Working Capital Loan | — | | ||||
Net Cash Used in Financing Activities | ( | ( | ||||
Net change in cash | | ( | ||||
Cash at beginning of period | | | ||||
Cash at end of period | $ | | $ | | ||
Supplemental disclosure of cash flow information: | ||||||
Cash Paid for Taxes | $ | | $ | | ||
Supplemental Disclosure of Non-cash Financing Activities: | ||||||
Current period remeasurement to redemption value | $ | | $ | | ||
Excise tax on Class A common stock redemptions | $ | | $ | | ||
The accompanying notes are an integral part of these unaudited Condensed financial statements.
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ExcelFin Acquisition Corp.
Notes to Unaudited Condensed Financial Statements
NOTE 1 — DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS AND LIQUIDITY
ExcelFin Acquisition Corp. (the “Company”) was incorporated in Delaware on March 15, 2021. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with
The Company is not limited to a particular industry or sector for purposes of consummating a 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 commenced any operations. All activity for the period from March 15, 2021 (inception) through June 30, 2024 relates to the Company’s formation and initial public offering (“Initial Public Offering”), which is described below. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering. The Company has selected December 31 as its fiscal year end.
The registration statement for the Company’s Initial Public Offering was declared effective on October 21, 2021. On October 25, 2021, the Company consummated the Initial Public Offering of
Simultaneously with the closing of the Initial Public Offering, the Company consummated the private sale (the “Private Placement”) of an aggregate of
On October 25, 2021, the underwriters purchased an additional
As of October 25, 2021, transaction costs amounted to $
Following the closing of the Initial Public Offering on October 25, 2021, an amount of $
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Company’s initial public offering, the Company instructed American Stock Transfer & Trust Company, the trustee with respect to the Trust Account (the “Trustee”), to liquidate the U.S. government treasury obligations or money market funds held in the Trust Account and to hold all funds in the Trust Account in cash in an interest bearing account until the earlier of consummation of our initial business combination or liquidation. In connection with such instructions, on October 26, 2023, the Company and the Trustee entered into an amendment to the Investment Management Trust Agreement dated October 25, 2021, which governs the investment of monies held in the Trust Account, to specifically allow the investment of those funds into an interest bearing account.
On April 13, 2023, the Company held a special meeting of stockholders (the “First Extension Meeting”) to vote on a proposal to extend the date by which the Company must complete its initial business combination from April 25, 2023 to October 25, 2023 (the “First Extension Amendment Proposal”), and the stockholders approved the First Extension Amendment Proposal at that meeting. In connection with the vote to approve the First Extension Amendment Proposal, the holders of
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete one or more initial Business Combinations with one or more operating businesses or assets with a fair market value equal to at least
In connection with the redemptions, the Company recorded an excise tax liability of $
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In connection with the First Extension Meeting, the Company and the Sponsor, entered into non-redemption agreements (the “Non-Redemption Agreements”) with unaffiliated third parties, pursuant to which such third parties agreed not to redeem (or to validly rescind any redemption requests on) an aggregate of
Business Combination Agreement
On June 26, 2023, the Company, Betters Medical Investment Holdings Limited, a Cayman Islands exempted company (“Betters”), Baird Medical Investment Holdings Limited, a Cayman Islands exempted company and a direct, wholly owned subsidiary of Betters (“PubCo”), Betters Medical Merger Sub, Inc., a Delaware corporation and a direct, wholly owned subsidiary of PubCo (“Merger Sub” and, together with PubCo, each, individually, an “Acquisition Entity” and, collectively, the “Acquisition Entities”), and Tycoon Choice Global Limited, a business company limited by shares incorporated under the Laws of the British Virgin Islands and a direct, wholly owned subsidiary of Betters (“Tycoon”), entered into a Business Combination Agreement (the “Business Combination Agreement”). The Business Combination Agreement and the transactions contemplated thereby (the “Transactions”) were unanimously approved by the Company’s board of directors. The Transactions were also unanimously approved by the board of directors of each of PubCo, Merger Sub, Betters and Tycoon, approved by the stockholders of Betters, approved by the sole stockholder of Tycoon and approved by the sole stockholder of Merger Sub.
On March 11, 2024, the Parties entered into a First Amendment to the Business Combination Agreement, the primary terms of which are:
| ● | (x) |
| ● | The Betters Earnout Shares shall become fully vested if prior to the eighth anniversary of the Effective Time, the VWAP of PubCo Ordinary Shares is greater than or equal to $ |
| ● | In the event that there is a Change of Control of PubCo prior to the eighth anniversary of the Effective Time, and the corresponding valuation of PubCo Ordinary Shares implied by that Change of Control is greater than or equal to the Price Target, the Betters Earnout Shares shall become fully vested immediately prior to such Change of Control. |
| ● | All references to SPAC Closing Cash needing to be at least $ |
| ● | The Maximum Extension Date has been changed from June 25, 2024 to May 25, 2024. |
On May 16, 2024, the Parties entered into a Second Amendment to the Business Combination Agreement, the primary terms of which were to extend the Maximum Extension Date from May 25, 2024 to August 25, 2024. On June 17, 2024, the Parties entered into a Third Amendment to the Business Combination Agreement, the primary terms of which were to provide that:
| ● | Betters Medical Merger Sub 2, Inc., a Delaware corporation and a direct, wholly owned subsidiary of PubCo (“Merger Sub 2”), and Betters Medical NewCo, LLC, a Delaware limited liability company and a direct, wholly owned Subsidiary of Betters (“NewCo”) are added as parties to the Business Combination Agreement; |
| ● | Prior to Closing, (x) Betters will transfer |
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| ● | Merger Sub 2 will merge with and into Newco, with Newco continuing as the surviving entity and wholly-owned subsidiary of PubCo (the “Second Merger”). |
| ● | In the Second Merger, |
| ● | The $ |
The Company will provide the holders of the outstanding Public Shares (the “Public Stockholders”) with the opportunity to redeem all or a portion of their Public Shares either (i) in connection with a stockholders meeting called to approve the Business Combination or (ii) by means of a tender offer in connection with the Business Combination. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company. The Public Stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially anticipated to be $
If the Company seeks stockholder approval of the Business Combination, the Company will proceed with a Business Combination if a majority of the outstanding shares voted are voted in favor of the Business Combination, or such other vote as required by law or stock exchange rule. If a stockholder vote is not required by applicable law or stock exchange listing requirements and the Company does not decide to hold a stockholder vote for business or other reasons, the Company will, pursuant to its second amended and restated certificate of incorporation (the “Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of the transaction is required by applicable law or stock exchange listing requirements, or the Company decides to obtain stockholder approval for business or other reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks stockholder approval in connection with a Business Combination, the Sponsor has agreed to vote its Founder Shares (as defined in Note 5) and any Public Shares purchased during or after the Public Offering in favor of approving a Business Combination. Additionally, each Public Stockholder may elect to redeem their Public Shares without voting, and if they do vote, irrespective of whether they vote for or against the proposed transaction.
Notwithstanding the foregoing, if the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Certificate of Incorporation 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 redeeming its shares with respect to more than an aggregate of
The holders of the Founder Shares have agreed (a) to waive their redemption rights with respect to the Founder Shares and Public Shares held by them in connection with the completion of a Business Combination and (b) not to propose an amendment to the Certificate of Incorporation (i) to modify the substance or timing of the Company’s obligation to allow redemptions in connection with a Business Combination or to redeem
If the Company has not completed a Business Combination and/or made the monthly required contributions into the Trust Account of $
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reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to the Company’s warrants, which will expire worthless if the Company fails to complete a Business Combination within the Combination Period.
The holders of the Founders Shares have agreed to waive their liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period. However, if the holders of Founder Shares acquire Public Shares in or after the Initial Public Offering, such Public Shares will be entitled to liquidating distributions from the Trust Account if the Company fails to complete a Business Combination within the Combination Period. The underwriters have agreed to waive their rights to their deferred underwriting commission (see Note 6) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than the Initial Public Offering price per Unit ($
In order to protect the amounts held in the Trust Account, the Sponsor has agreed to 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 discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below (i) $
Going Concern and Management’s Plan
As of June 30, 2024, the Company had cash of $
The Company has incurred and expects to continue to incur significant costs in pursuit of its acquisition plans and while the Company believes it has sufficient access to additional sources of capital, if necessary, there is no current commitment on the part of any financing source to provide additional capital and no assurances can be provided that such additional capital will ultimately be available. In addition, the Company currently has less than 12 months from the date these unaudited condensed financial statements were issued to complete a Business Combination and if the Company is unsuccessful in consummating an Initial Business Combination by the end of the Combination Period, which is less than twelve months from the date these unaudited condensed financial statements were issued, it is required to liquidate and dissolve. In connection with the Company’s assessment of going concern considerations in accordance with Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that these factors raise substantial doubt about its ability to continue as a going concern. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty. As is customary for a special purpose acquisition company, if the Company is not able to consummate a Business Combination during the Combination Period, it will cease all operations and redeem the Public Shares. Management plans to continue its efforts to consummate a Business Combination during the Combination Period.
Risks and Uncertainties
Also, on October 7, Hamas launched an attack on Israel resulting in Israel declaring war on Hamas. It is Hamas’s announced intent to instigate a regional war on Israel by those countries sympathetic to its cause. Additionally, the Russian Federation and Ukraine remain at war. The Company’s ability to consummate a Business Combination, or the operations of a target business with which the Company ultimately consummates a Business Combination, may be materially and adversely affected by these military actions and related
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sanctions. In addition, the Company’s ability to consummate a transaction may be dependent on the ability to raise equity and debt financing which may be impacted by these events, including as a result of increased market volatility, or decreased market liquidity in third-party financing being unavailable on terms acceptable to the Company or at all. The impact of this action and related sanctions on the world economy and the specific impact on the Company’s financial position, results of operations or ability to consummate a Business Combination are not yet determinable. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
On January 24, 2024, the SEC issued final rules (“Final Rules”) which became effective on July 1, 2024, relating to, among other items, enhancing disclosures in business combination transactions involving SPACs and private operating companies; amending the financial statement requirements applicable to transactions involving shell companies; effectively limiting the use of projections in SEC filings in connection with proposed business combination transactions; increasing the potential liability of certain participants in proposed business combination transactions; and the extent to which SPACs could become subject to regulation under the Investment Company Act of 1940. These rules may materially adversely affect our ability to engage financial and capital market advisors, negotiate and complete the Business Combination and may increase the costs and time related thereto.
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 U.S. 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.
The Company determined that the $
During the second quarter of 2024, the IRS issued final regulations with respect to the timing and payment of excise tax. Pursuant to those regulations, the Company would need to file a return and remit payment of any liability incurred during the period from January 1, 2023, to December 31, 2023, on or before October 31, 2024.
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The Company is currently evaluating its options with respect to payment of this obligation. If the Company is unable to pay its obligation in full, it will be subject to additional interest and penalties which are currently estimated at
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The accompanying unaudited condensed financial statements are presented in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) and pursuant to the rules and regulations of the SEC.
Certain information and note disclosures normally included in the unaudited condensed financial statements prepared in accordance with US GAAP have been condensed. As such, except as disclosed herein, the information included in these unaudited condensed financial statements should be read in conjunction with the audited condensed financial statements as of December 31, 2023 filed with the SEC on the Form 10-K. In the opinion of the Company’s management, these unaudited condensed financial statements include all adjustments, which are only of a normal and recurring nature, necessary for a fair statement of the Company’s financial position as of June 30, 2024, and the Company’s results of operations and cash flows for the periods presented. The results of operations for the three and six months ended June 30, 2024, are not necessarily indicative of the results to be expected for the full year ending December 31, 2024. Certain reclassifications revisions have been made to prior-period financial statements to conform to the current-period presentation.
Emerging Growth Company
The Company is an “emerging growth company”, as defined in Section 2(a) of the Securities Act of 1933, as amended (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.
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 unaudited condensed financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of the unaudited condensed financial statements in conformity with US GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements and the reported amounts of 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 balance sheet, which management considered in formulating
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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.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentration of credit risk consist of cash accounts in a financial institution which, at times, may exceed the Federal depository insurance coverage of $250,000. The Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts, however, in the event of a financial institution failure, cash balances in excess of $250,000 may be unrecoverable to the Company.
Cash and cash equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents as of June 30, 2024 and December 31, 2023.
Interest-bearing Cash held in Trust Account
As of June 30, 2024 and December 31, 2023, the Company had approximately $
Offering Costs associated with an Initial Public Offering
The Company complies with the requirements of the Financial Accounting Standards Board (“FASB”) ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A, “Expenses of Offering.” Offering costs associated with the Units were allocated between temporary equity and the Public Warrants by the relative fair value method. Offering costs of $
Class A common stock subject to possible redemption
The Company accounts for its common stock subject to possible redemption in accordance with the guidance enumerated in ASC 480. Common stock subject to mandatory redemption are classified as a liability instrument and are measured at fair value. Conditionally redeemable common stock (including 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, common stock are classified as stockholders’ equity. The Company’s Class A common stock feature certain redemption rights that are considered by the Company to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, as of June 30, 2024 and December 31, 2023, the Class A common stock subject to possible redemption in the amount of $
As of June 30, 2024 and December 31, 2023, the Class A common stock reflected in the balance sheets is reconciled in the following table:
Class A common stock subject to possible redemption – December 31, 2022 |
| $ | |
Remeasurement adjustment of carrying value to redemption value | | ||
Redemptions and withdrawals | ( | ||
Class A common stock subject to possible redemption – December 31, 2023 | | ||
Remeasurement adjustment of carrying value to redemption value | | ||
Redemptions and withdrawals | ( | ||
Class A common stock subject to possible redemption – June 30, 2024 | $ | |
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Net (loss) per share
Net (loss) income per share is computed by dividing net (loss) income by the weighted average number of shares of common stock outstanding during the period. The Company applies the two-class method in calculating earnings and losses per share. Earnings and losses are shared pro rata between the two classes of shares. The calculation of diluted (loss) income per share of common stock does not consider the effect of the warrants issued in connection with the (i) Public Offering and (ii) Private Placement, since their inclusion would be anti-dilutive under the two-class method. As a result, diluted earnings and losses per share of common stock is the same as basic earnings and losses per share of common stock for the periods presented. The warrants are exercisable to purchase shares of
The following table reflects the calculation of basic and diluted net (loss) income per common share (in dollars, except per share amounts):
For the | For the | |||||
Three Months Ended | Three Months Ended | |||||
June 30, | June 30, | |||||
| 2024 |
| 2023 | |||
Class A redeemable common stock | ||||||
Numerator: (Loss) allocable to Class A redeemable common stock | $ | ( |
| $ | ( | |
Denominator: Basic and diluted weighted average shares outstanding |
| |
| | ||
Basic and diluted net (loss) per share, Class A redeemable common stock | $ | ( | $ | ( | ||
Class A & B non-redeemable common stock |
|
| ||||
Numerator: (Loss) allocable to Class A & B non-redeemable common stock | $ | ( | $ | ( | ||
Denominator: Basic and diluted weighted average shares outstanding |
| |
| | ||
Basic and diluted net (loss) per share, Class A & B non-redeemable common stock | $ | ( | $ | ( | ||
For the | For the | |||||
Six Months Ended | Six Months Ended | |||||
June 30, | June 30, | |||||
| 2024 |
| 2023 | |||
Class A redeemable common stock |
|
|
|
|
| |
Numerator: (Loss) allocable to Class A redeemable common stock | $ | ( |
| $ | ( | |
Denominator: Basic and diluted weighted average shares outstanding |
| |
|
| | |
Basic and diluted net (loss) per share, Class A redeemable common stock | $ | ( |
| $ | ( | |
Class A & B non-redeemable common stock |
|
|
| |||
Numerator: (Loss) allocable to Class A & B non-redeemable common stock | $ | ( |
| $ | ( | |
Denominator: Basic and diluted weighted average shares outstanding |
| |
|
| | |
Basic and diluted net (loss) per share, Class A & B non-redeemable common stock | $ | ( |
| $ | ( | |
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the unaudited condensed financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. 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 unaudited condensed financial statements 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 as income tax expense. There were $
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accrued for interest and penalties as of June 30, 2024, and 2023, respectively. 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’s effective tax rate was (
While ASC 740 identifies usage of the effective annual tax rate for purposes of an interim provision, it does allow for estimating individual elements in the current period if they are significantly unusual or infrequent. Computing the ETR for the Company is complicated due to the potential impact of the Company’s change in fair value of warrants for any other change in fair value of a complex financial instrument), the timing of any potential Business Combination expenses and the actual interest income that will be recognized during the year. The Company has taken a position as to the calculation of income tax expenses in the current period based on 740-270-25-3 which states, “if an entity is unable to estimate a part of its ordinary income (or loss) or the related tax (or benefit) but is otherwise able to make a reliable estimate, the tax (or benefit) applicable to the item that cannot be estimated shall be reported in the interim period in which the item is reported.” The Company believes its calculation to be a reliable estimate and allows it to properly take into account the unusual elements that can impact its annualized book income and its impact on ETR. As such, the Company is computing its taxable income (loss) and associated income tax provision based on actual results through June 30, 2024.
Fair Value of Financial Instruments
Fair value is defined as the price that would be received for sale of an asset or paid to transfer of a liability, in an orderly transaction between market participants at the measurement date. US 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. |
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with 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 on the grant date and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. 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 balance sheet 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 warrants as equity-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 are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s
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control, among other conditions for equity classification. This assessment is conducted at the time warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all of 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.
Recent Accounting Standards
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which requires disclosures of incremental income tax information within the rate reconciliation and expanded disclosures of income taxes paid, among other disclosure requirements. ASU 2023-09 is effective for the fiscal year beginning after December 15, 2024. Early adoption is permitted. The Company’s management does not believe the adoption of ASU 2023-09 will have a material impact on its financial statements and disclosures.
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s unaudited condensed financial statements.
NOTE 3 — INITIAL PUBLIC OFFERING
Pursuant to the Initial Public Offering, the Company sold
On October 25, 2021, the underwriters purchased an additional
NOTE 4 — PRIVATE PLACEMENT
Simultaneously with the closing of the Initial Public Offering, the Company consummated the private sale (the “Private Placement”) of an aggregate of
A portion of the proceeds from the Private Placement Units was added to the proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private Placement Units held in the Trust Account will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Private Placement Units will be worthless.
The Private Placement Warrants (including the Class A common stock issuable upon exercise of the Private Placement Warrants) will not be transferable, assignable or salable until
NOTE 5 — RELATED PARTY TRANSACTIONS
Founder Shares
In March 2021, the Sponsor purchased
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overallotment is not exercised in full or in part, so that the number of Founder Shares will equal, on an as-converted basis, approximately
In connection with the First Extension Meeting, the Company and the Sponsor, entered into non-redemption agreements (the “Non-Redemption Agreements”) with unaffiliated third parties, pursuant to which such third parties agreed not to redeem (or to validly rescind any redemption requests on) an aggregate of
The holders of the Founder Shares have agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier to occur of: (A)
In May 2021, each of our independent directors and advisors acquired an equity interest in our sponsor, which owns all of the founder shares. The founder shares are subject to lockup restrictions and will become worthless unless the Company completes a business combination prior to the time the Company is obligated to redeem all of the outstanding Class A common stock. The aggregate fair value of the equity interests in our sponsor transferred to the independent directors and advisors at the date of such transfer was estimated to be $
Working Capital Loan - Related Party
On March 18, 2021, the Sponsor issued an unsecured promissory note to the Company (the “Promissory Note”), pursuant to which the Company may borrow up to an aggregate principal amount of $
The Sponsor has agreed that at the Closing of the Business Combination, all amounts outstanding under the Working Capital Loan will be converted into PubCo Ordinary Shares at a price of $
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Administrative Services Agreement
Commencing on the date the Units are first listed on the New York Stock Exchange, the Company has agreed to pay an affiliate of the Sponsor a total of $
Advances from Related Party
As of June 30, 2024, and December 31, 2023, $
Financial Services Agreement — Related Party
The Company was obligated to pay Fin Capital, an affiliate of our Sponsor, a total of $
Forward Purchase Agreements
In connection with our IPO, two Sponsor Affiliates were granted the right to purchase, pursuant to a forward purchase agreement, up to
Sponsor Funding of Trust Account
In order to fund the trust to the required level, the Sponsor purchased
NOTE 6 — COMMITMENTS AND CONTINGENCIES
Registration Rights
The holders of the Founder Shares, Private Placement Units and warrants that may be issued upon conversion of Working Capital Loans (and any shares of common stock issuable upon the exercise of the Private Placement Warrants or warrants issued upon conversion of
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the Working Capital Loans and upon conversion of the Founder Shares) will be entitled to registration rights pursuant to a registration rights agreement to be signed prior to or on the effective date of Initial Public Offering requiring the Company to register such securities for resale (in the case of the Founder Shares, only after conversion to shares of Class A common stock). The holders of these securities will be entitled to make up to
Underwriting Agreement
The underwriters were paid a cash underwriting discount of $
The Company granted the underwriters a
Business Combination Related Agreement
On February 23, 2023, the Company entered into a capital markets and advisory agreement. Fees are earned and payable on closing of the business combination. The fee is
On July 18, 2023, the Company engaged Roth Capital Partners, LLC (“Roth”) to serve as a capital markets advisor. On September 7, 2023, the Company engaged Haitong International Securities (USA) Inc. (“HTI-USA”) to act as a placement agent in connection with a potential PIPE Investment. Upon the consummation of the Business Combination, each of Roth and HTI-USA will be paid an advisory fee of $
In connection with the First Amendment to the Business Combination Agreement, which was entered into on March 11, 2024, the Board engaged Houlihan Capital, LLC to provide its opinion with respect to the fairness of the transaction, from a financial point of view to the public stockholder of the Company. Houlihan Capital’s fees to the Company for services in connection with issuing the Opinion were $
NOTE 7 — STOCKHOLDERS’ DEFICIT
Preferred Stock—The Company is authorized to issue
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Class A common stock—The Company is authorized to issue
Class B common stock—The Company is authorized to issue
On October 25, 2021, the underwriters exercised the over-allotment option in full to purchase
The shares of Class B common stock will automatically convert into Class A common stock at the time of a Business Combination, or earlier at the option of the holder, on a
Warrants—Public Warrants may only be exercised for a whole number of shares. No fractional warrants will be issued upon separation of the Units and only whole warrants will trade. The Public Warrants will become exercisable on the later of (a)
The Company will not be obligated to deliver any shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act covering the issuance of the shares of Class A common stock issuable upon exercise of the warrants is then effective and a current prospectus relating to those shares of Class A common stock is available, subject to the Company satisfying its obligations with respect to registration, or a valid exemption from registration is available. No 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 warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of residence 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
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Redemption of Warrants When the Price per Share of Class A common stock Equals or Exceeds $
| ● | in whole and not in part; |
| ● | at a price of $ |
| ● | upon a minimum of |
| ● | if, and only if, the last reported sale price of the Class A common stock equals or exceeds $ |
If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
If the Company calls the Public Warrants for redemption, as described above, its management will have the option to require any holder that wishes to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of shares of common stock issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. However, except as described below, the Public Warrants will not be adjusted for issuances of common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the Public Warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of Public Warrants will not receive any of such funds with respect to their Public Warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such Public Warrants. Accordingly, the Public Warrants may expire worthless. In connection with the Business Combination Agreement, the Sponsor has agreed to surrender all of the private placement warrants for no additional consideration.
The Private Placement Warrants are identical to the Public Warrants underlying the Units being sold in the Initial Public Offering, except that the Private Placement Warrants and the Class A common stock issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or saleable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be exercisable on a cashless basis and be non-redeemable, except as described above.
Our Sponsor has purchased an aggregate of
The Company accounted for the
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NOTE 8 — FAIR VALUE MEASUREMENTS
The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.
The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
Level 1—quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2—observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.
Level 3—unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.
Prior to October 26, 2023, Company’s portfolio of investments were comprised of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less and generally have a readily determinable fair value. Such investments are classified as trading securities. However, to mitigate the risk of us being deemed to have been operating as an unregistered investment company (including under the subjective test of Section 3(a)(1)(A) of the Investment Company Act), prior to the 24-month anniversary of the effective date of the registration statement relating to the Company’s initial public offering, the Company instructed American Stock Transfer & Trust Company, the trustee with respect to the Trust Account (the “Trustee”), to liquidate the U.S. government treasury obligations or money market funds held in the Trust Account and to hold all funds in the Trust Account in cash in an interest bearing account until the earlier of consummation of our initial business combination or liquidation. In connection with such instructions, on October 26, 2023, the Company and the Trustee entered into an amendment to the Investment Management Trust Agreement dated October 25, 2021, which governs the investment of monies held in the Trust Account, to specifically allow the investment of those funds into an interest bearing account. Trading securities are presented on the balance sheet at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these securities is included in net gain on investments held in Trust Account in the accompanying statement of operations. The estimated fair values of investments held in the Trust Account are determined using available market information. As of June 30, 2024 and December 31, 2023, the Company had $
The following table presents information about the Company’s assets and liabilities that are measured at fair value as of June 30, 2024 and December 31, 2023:
June 30, | December 31, | ||||||||
Description |
| Level |
| 2024 |
| 2023 | |||
Assets: | |||||||||
Cash held in Trust Account |
| 1 | $ | |
| $ | | ||
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NOTE 9 — SUBSEQUENT EVENTS
The Company’s management has evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the unaudited condensed financial statements were issued. Based upon this review, except as noted below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the unaudited condensed financial statements.
On July 24, 2024, the Company held a special meeting of stockholders (the “Fourth Extension Meeting”) to vote on a proposal to extend the date by which the Company must complete its initial business combination from July 25, 2024 to December 25, 2024 (the “Fourth Extension Amendment Proposal”), and the stockholders approved the Fourth Extension Amendment Proposal at that meeting. In connection with the vote to approve the Fourth Extension Amendment Proposal, the holders of
On July 24, 2024, the Working Capital Loan was amended and restated to extend the maturity date thereof to December 25, 2024.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Overview
We are a blank check company incorporated as a Delaware corporation and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. We intend to effectuate our initial business combination using cash from the proceeds of our IPO and the sale of the private placement warrants, our shares, debt or a combination of cash, shares and debt.
The Issuance of additional shares of our common stock or preferred stock in a business combination:
| ● | may significantly dilute the equity interest of investors in our IPO, which dilution would increase if the anti-dilution provisions in the Class B common stock resulting in the issuance of shares of Class A common stock on a greater than one-to-one basis upon conversion of the Class B common stock; |
| ● | may subordinate the rights of holders of common stock if shares of preferred stock are issued with rights senior to those afforded our common stock; |
| ● | could cause a change of control if a substantial number of shares of our common stock is issued, which could result in the resignation or removal of our present directors and officers; |
| ● | 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; |
| ● | may adversely affect prevailing market prices for our units, Class A common stock and/or warrants; and |
| ● | may not result in adjustment to the exercise price of our warrants. |
Similarly, if we issue debt or otherwise incur significant indebtedness, 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 is payable on demand; |
| ● | our inability to obtain necessary additional financing if the debt contains covenants restricting our ability to obtain such financing while the debt 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, expenses, capital expenditures, acquisitions and 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; and |
| ● | limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, execution of our strategy and other purposes and other disadvantages compared to our competitors who have less debt. |
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RESULTS OF OPERATIONS AND KNOWN TRENDS OR FUTURE EVENTS
As of June 30, 2024, the Company had not commenced any operations. All activity for the period from March 15, 2021 (inception) through June 30, 2024 relates to the Company’s formation and initial public offering (“Initial Public Offering”). The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering.
For the three months ended June 30, 2024, we had a net loss of $858,731, which consists of operating costs of $1,015,684 and tax expense of $41,049, partially offset by interest income on cash held in the trust account of $198,002.
For the three months ended June 30, 2023, we had net loss of $2,378,294, which consists of operating costs of $3,476,487 and tax expense of $278,202, partially offset by interest income on marketable securities held in trust account of 1,376,395.
For the six months ended June 30, 2024, we had a net loss of $2,474,788, which consists of operating costs of $2,838,350 and tax expense of $87,621, partially offset by interest income on cash held in the trust account of $451,183.
For the six months ended June 30, 2023, we had a net loss of $883,903 which consists of operating expenses of $3,984,445 and tax expense of $797,181 partially offset by interest income on marketable securities held in trust account of $3,897,723.
LIQUIDITY, CAPITAL RESOURCES AND GOING CONCERN
Our liquidity needs have been satisfied prior to the completion of our IPO through receipt of $25,000 from the sale of the founder shares to our sponsor and the borrowing of $300,000 under a non-interest bearing unsecured promissory note prior to the IPO. On October 25, 2021 this obligation was exchanged for a non-interest bearing Working Capital Loan of $300,000 due upon the earlier of (i) the date on which a Business Combination is consummated, or (ii) April 25, 2023, later amended to December 25, 2024. As of June 30, 2024, the amount outstanding on this Working Capital Loan was $1,296,654. The Working Capital Loan may be converted upon completion of a Business Combination into warrants at a price of $1.00 per warrant. Such warrants would be identical to the Private Placement Warrants. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans.
On October 25, 2021, we consummated the Initial Public Offering of 23,000,000 Units at a price of $10.00 per Unit, which includes the exercise by the underwriters of the over-allotment option to purchase an additional 3,000,000 Units, generating gross proceeds of $230,000,000. Simultaneously with the closing of the Initial Public Offering, the Company consummated the private sale (the “Private Placement”) of an aggregate of 11,700,000 warrants (the “Private Placement Warrants”) to the Sponsor at a purchase price of $1.00 per Private Placement Warrant, generating gross proceeds to the Company in the amount of $11,700,000.
Following the Initial Public Offering, the exercise of the over-allotment option by the underwriters’ and the sale of the Private Placement Warrants, a total of $234,600,000 was placed in the trust account and we had $2,500,000 of cash held outside of the trust account, after payment of costs related to the Initial Public Offering, and available for working capital purposes. The Company incurred transaction costs amounted to $22,726,465 consisting of $4,600,000 of underwriting fees paid in cash, $8,050,000 of deferred underwriting fees payable, $9,200,000 funded to the trust account and $876,465 of costs related to the Initial Public Offering. As of June 30, 2024, we had cash of $110,602 held outside of the trust account. The $8,050,000 deferred underwriting fees are contingent upon the consummation of the Business Combination. The Company entered into fee waiver agreements with KeyBanc Capital Markets Inc. and UBS Securities LLC on August 7, 2023 and August 11, 2023, respectively. Eighty percent (80%), or $6,440,000 in the aggregate, of the deferred underwriting fees have been waived, leaving $1,610,000 of deferred underwriting fees payable to EXOS Securities LLC upon closing pursuant to the Business Combination Agreement. The Company recorded a reduction of $6,440,000 of deferred underwriting fees payable and a gain on forfeiture of deferred underwriting compensation payable in the period ending September 30, 2023. Although the UBS Securities LLC waiver of $6,037,500 relates only to the business combination that may be consummated pursuant to the Business Combination Agreement with Betters, the Company believes that there is only a remote possibility that the Company could consummate another business combination if the Business Combination Agreement with Betters were to be terminated for any reason.
On April 13, 2023, the Company held a special meeting of stockholders (the “First Extension Meeting”) to vote on a proposal to extend the date by which the Company must complete its initial business combination from April 25, 2023 to October 25, 2023 (the “First
26
Extension Amendment Proposal”), and the stockholders approved the First Extension Amendment Proposal at that meeting. In connection with the vote to approve the First Extension Amendment Proposal, the holders of 18,211,208 shares of the Company’s Class A common stock (representing 79% of the shares of Class A common stock then outstanding) properly exercised their rights to redeem their shares for cash. On October 20, 2023, the Company held a special meeting of stockholders (the “Second Extension Meeting”) to vote on a proposal to extend the date by which the Company must complete its initial business combination from October 25, 2023 to April 25, 2024 (the “Second Extension Amendment Proposal”), and the stockholders approved the Second Extension Amendment Proposal at that meeting. In connection with the vote to approve the Second Extension Amendment Proposal, the holders of 2,587,259 shares of the Company’s Class A common stock (representing 54% of the shares of Class A common stock then outstanding) properly exercised their rights to redeem their shares for cash. The Company deposited $132,000 into the Trust Account providing the extension to complete the initial business combination to January 25, 2024, and subsequently, made three equal monthly deposits in January, February, and March 2024 of $44,031 each extending the initial business combination period to April 25, 2024. On April 25, 2024, the Company held a special meeting of stockholders (the “Third Extension Meeting”) to vote on a proposal to extend the date by which the Company must complete its initial business combination from April 25, 2024 to July 25, 2024 (the “Third Extension Amendment Proposal”), and the stockholders approved the Third Extension Amendment Proposal at that meeting. In connection with the vote to approve the Third Extension Amendment Proposal, the holders of 662,217 shares of the Company’s Class A common stock (representing 30% of the shares of Class A common stock then outstanding) properly exercised their rights to redeem their shares for cash. In connection with those redemptions, approximately $224.0 million was withdrawn from the trust account to fund such redemptions, leaving a balance of approximately $16.8 million. The Company subsequently deposited approximately $38,483 into the Trust Account as was required to effect the initial one-month extension approved as part of the Third Extension Amendment Proposal extending the period for an initial business combination to May 25, 2024, and the ability to continue one month extensions through July 25, 2024 if additional deposits into the Trust Account are made accordingly. Prior to that redemption, approximately $0.4 million was withdrawn from the trust account to pay income and franchise taxes.
On June 26, 2023, we, Betters Medical Investment Holdings Limited, a Cayman Islands exempted company (“Betters”), Baird Medical Investment Holdings Limited, a Cayman Islands exempted company and a direct, wholly owned subsidiary of Betters (“PubCo”), Betters Medical Merger Sub, Inc., a Delaware corporation and a direct, wholly owned subsidiary of PubCo (“Merger Sub” and, together with PubCo, each, individually, an “Acquisition Entity” and, collectively, the “Acquisition Entities”), and Tycoon Choice Global Limited, a business company limited by shares incorporated under the Laws of the British Virgin Islands and a direct, wholly owned subsidiary of Betters (“Tycoon”), entered into a Business Combination Agreement (the “Business Combination Agreement”).
Pursuant to the Business Combination Agreement (a) on August 2, 2023, Betters contributed all of the issued shares of Tycoon held by Betters (“Company Shares”) to PubCo in exchange for PubCo Ordinary Shares such that Tycoon became a wholly-owned subsidiary of PubCo and Betters received in exchange therefor 29,411,764 PubCo Ordinary Shares (the “Share Contribution”) that have an aggregate value equal to Three Hundred Million Dollars ($300,000,000); and (b) after a special meeting of the stockholders of the Company approving the transactions, Merger Sub will merge with and into ExcelFin, with ExcelFin continuing as the surviving entity and wholly-owned subsidiary of PubCo (the “First Merger”). However, 8,823,529 of the PubCo Ordinary Shares issued to Betters (the “Betters Earnout Shares”) will not vest unless and until within the eighth anniversary of the closing of the Business Combination (a) the volume weighted average price of the PubCo Ordinary Shares on Nasdaq is greater than or equal to $12.50 per share for any 20 trading days within a 30-day trading period or (b) a change of control of PubCo occurs with an implied value at or above $12.50 per share.
The Business Combination Agreement provides that at the effective time of the Business Combination (the “Effective Time”):
| (i) | each unit that is issued and outstanding shall be automatically divided, and the holder thereof shall be deemed to hold one share of Class A common stock and one-half of one public warrant; |
| (ii) | each outstanding share of Class A common stock will be exchanged for one PubCo Ordinary Share; and, subject to a vesting requirement for 1,350,000 of such shares held by the Sponsor, each outstanding share of Class B common stock will be cancelled in exchange for one PubCo Ordinary Share; and |
| (iii) | the registered holder of each outstanding public warrant to purchase one share of Class A common stock will receive, in exchange for such warrants, an equal number of warrants to purchase one PubCo Ordinary Share upon the same terms as were applicable to the public warrants. |
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There are currently 5,750,000 shares of Class B common stock outstanding. The Business Combination Agreement provides that each of these shares of Class B common stock will be cancelled in exchange for one PubCo Ordinary Share upon the Closing of the Business Combination. However, 1,350,000 of the PubCo Ordinary Shares issued to the Sponsor in the Business Combination in exchange for Class B common stock (the “Earnout Shares”) will not vest unless and until within the fifth anniversary of the closing of the Business Combination (a) the volume weighted average price of the PubCo Ordinary Shares on Nasdaq is greater than or equal to $12.50 per share over any 20 trading days within any 30-day trading period or (b) a change of control of PubCo occurs.
On March 11, 2024, the Parties entered into a First Amendment to the Business Combination Agreement, the primary terms of which are:
| ● | (x) 20,588,235 PubCo Ordinary Shares to be held by Betters at Closing (70% of such shares) shall be fully vested and freely tradable and (y) 8,823,529 PubCo Ordinary Shares to be held by Betters at Closing (30% of such shares) shall be subject to vesting and forfeiture as described below (the “Betters Earnout Shares”). |
| ● | The Betters Earnout Shares shall become fully vested if prior to the eighth anniversary of the Effective Time, the VWAP of PubCo Ordinary Shares is greater than or equal to $12.50 (the “Price Target”) over any 20 trading days within any 30-day trading period. |
| ● | In the event that there is a Change of Control of PubCo prior to the eighth anniversary of the Effective Time, and the corresponding valuation of PubCo Ordinary Shares implied by that Change of Control is greater than or equal to the Price Target, the Betters Earnout Shares shall become fully vested immediately prior to such Change of Control. |
| ● | All references to SPAC Closing Cash needing to be at least $15.0 million have been removed from the Business Combination Agreement. |
| ● | The Maximum Extension Date has been changed from June 25, 2024 to May 25, 2024. |
On May 16, 2024, the Parties entered into a Second Amendment to the Business Combination Agreement, the primary terms of which were to extend the Maximum Extension Date from May 25, 2024 to August 25, 2024. On June 17, 2024, the Parties entered into a Third Amendment to the Business Combination Agreement, the primary terms of which were to provide that:
| ● | Betters Medical Merger Sub 2, Inc., a Delaware corporation and a direct, wholly owned subsidiary of PubCo (“Merger Sub 2”), and Betters Medical NewCo, LLC, a Delaware limited liability company and a direct, wholly owned Subsidiary of Betters (“NewCo”) are added as parties to the Business Combination Agreement; |
| ● | Prior to Closing, (x) Betters will transfer 1,947,058 PubCo Ordinary Shares to Newco and (y) Cheer Aim Investment Limited and National Hero International Limited, stockholders of Betters, will exchange their ownership interests in Betters for all of the outstanding ownership interests in Newco; |
| ● | Merger Sub 2 will merge with and into Newco, with Newco continuing as the surviving entity and wholly-owned subsidiary of PubCo (the “Second Merger”). |
| ● | In the Second Merger, 1,947,058 PubCo Ordinary Shares transferred by Betters to Newco will be cancelled, and an equal number of PubCo Ordinary Shares will be issued to the Minority Holders; |
| ● | The $5,000,001 net tangible asset closing condition has been removed. |
Closing of the Business Combination is subject to the satisfaction of customary closing conditions, including the filing of a registration statement registering the PubCo Ordinary Shares issuable in the Business Combination and a vote of a majority of the Company’s outstanding shares of common stock in favor thereof.
As of June 30, 2024, we had cash held in the trust account of $17,103,287. We intend to use substantially all of the funds held in the trust account, including any amounts representing interest earned on the trust account (which interest shall be net of taxes payable and
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excluding deferred underwriting commissions) plus the proceeds from the sale of the forward purchase units to complete our initial business combination. We may withdraw interest to pay taxes, if any. Delaware franchise tax is based on our authorized shares or on our assumed par and non-par capital, whichever yields a lower result. Based on the number of shares of our common stock authorized and outstanding and our estimated total gross proceeds after the completion of our IPO, our annual franchise tax obligation is expected to be capped at the maximum amount of annual franchise taxes payable by us as a Delaware corporation of $200,000. Our annual income tax obligations will depend on the amount of interest and other income earned on the amounts held in the trust account. We expect the interest earned on the amount in the trust account will be sufficient to pay our taxes. We expect the only taxes payable by us out of the funds in the trust account will be income and franchise taxes, if any. To the extent that shares of our common stock or debt is used, in whole or in part, as consideration to complete our initial business combination, the remaining proceeds held in the trust account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies..
For the six months ended June 30, 2024, the increase in cash was $65,383. For the six months ended June 30, 2024, cash used in operating activities was $1,364,124. The net loss of $2,474,788 was affected by interest earned on cash held in the trust account of $451,183 and changes in operating assets and liabilities used $1,561,847 of cash for operating activities.
For the six months ended June 30, 2023, the decrease in cash was $171,109. For the six months ended June 30, 2023, cash used in operating activities was $2,077,347. The net loss of $883,903 was affected by interest earned on investments held in the trust account of $3,897,723 and changes in operating assets and liabilities provided $2,704,279 of cash for operating activities.
As of June 30, 2024, we have available to us $110,602 of proceeds held outside the trust account. We will use these funds primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, structure, negotiate and complete a business combination, to pay general and administrative expenses and to pay taxes to the extent the interest earned on the trust account is not sufficient to pay our taxes.
The Company has incurred and expects to continue to incur significant costs in pursuit of its acquisition plans and while the Company believes it has sufficient access to additional sources of capital, if necessary, there is no current commitment on the part of any financing source to provide additional capital and no assurances can be provided that such additional capital will ultimately be available. In addition, the Company currently has less than 12 months from the date these unaudited condensed financial statements were issued to complete a Business Combination and if the Company is unsuccessful in consummating an Initial Business Combination, it is required to liquidate and dissolve. In connection with the Company’s assessment of going concern considerations in accordance with Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that these factors raise substantial doubt about its ability to continue as a going concern. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty. As is customary for a special purpose acquisition company, if the Company is not able to consummate a Business Combination during the Combination Period, it will cease all operations and redeem the Public Shares. Management plans to continue its efforts to consummate a Business Combination during the Combination Period.
In order to fund working capital deficiencies or finance transaction costs in connection with an intended initial business combination, our sponsor or an affiliate of our sponsor or certain of our directors and officers may, but are not obligated to, loan us funds as may be required. If we complete our initial business combination, we may repay such loaned amounts out of the proceeds of the trust account released to us. Otherwise, such loans may be repaid only out of funds held outside the trust account. In the event that our initial business combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts but no proceeds from our trust account would be used to repay such loaned amounts. On October 25, 2021, we exchanged a $300,000 non-interest bearing unsecured promissory note for a non-interest-bearing Working Capital Loan of $300,000 due upon the earlier of (i) the date on which a Business Combination is consummated, or (ii) April 25, 2023, later amended to December 25, 2024. As of June 30, 2024, the amount outstanding on this Working Capital Loan was $1,296,654. Up to $1,500,000 of such working capital loans may be convertible into warrants at a price of $1.00 per warrant at the option of the lender. The warrants would be identical to the private placement warrants issued to our sponsor. The terms of such loans, if any, will be subject to the approval of our audit committee. We do not expect to seek loans from parties other than our sponsor or an affiliate of our sponsor as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our trust account. The Sponsor has agreed that at the Closing of the Business Combination, all amounts outstanding under the Working Capital Loan will be converted into PubCo Ordinary Shares at a price of $10.20 per share. In addition to the Working Capital Loan, the Sponsor advanced capital to the
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Company to fund ongoing business operations. As of June 30, 2024, the amount outstanding on the Advance from Related Party was $1,543,095.
We do not believe we will need to raise additional funds following our IPO in order to meet the expenditures required for operating our business. However, if our estimates of the costs of identifying a target business, undertaking in-depth due diligence and negotiating an initial business combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our initial business combination. Moreover, we may need to obtain additional financing either to complete our initial business combination or because we become obligated to redeem a significant number of our public shares upon completion of our initial business combination, in which case we may issue additional securities or incur debt in connection with such business combination. There is no assurance that the Company’s plans to raise additional capital (to the extent ultimately necessary) or to consummate a Business Combination will be successful or successful within the Combination Period.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The net proceeds of our IPO and the sale of the private placement warrants held in the trust account will be invested in U.S. government treasury bills with a maturity of 185 days or less or in money market funds investing solely in U.S. Treasuries and meeting certain conditions under Rule 2a-7 under the Investment Company Act. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.
RELATED PARTY TRANSACTIONS
In March 2021, our sponsor purchased an aggregate of 5,750,000 founder shares for $25,000, or approximately $0.004 per share. The purchase price of the founder shares was determined by dividing the amount of cash used to purchase such shares by the number of founder shares issued. In connection with the First Extension Meeting, the Company and the Sponsor, entered into non-redemption agreements (the “Non-Redemption Agreements”) with unaffiliated third parties, pursuant to which such third parties agreed not to redeem (or to validly rescind any redemption requests on) an aggregate of 5,020,000 shares of Class A common stock of the Company (“Non-Redeemed Shares”) in connection with the First Extension Meeting. In exchange for the foregoing commitments, the Sponsor has agreed to transfer an aggregate of 1,250,000 Founder Shares held by the Sponsor to such third parties immediately following consummation of an initial business combination provided such parties continue to hold such Non-Redeemed Shares through the First Extension Meeting.
We have entered into an Administrative Services Agreement pursuant to which we will also pay an affiliate of our sponsor a total of $10,000 per month for office space, administrative and support services. Upon completion of our initial business combination or our liquidation, the Administrative Services Agreement will terminate, and we will cease paying these monthly fees.
The Company was obligated to pay Fin Capital, an affiliate of our Sponsor, a total of $112,500 per quarter for consulting, legal, accounting and diligence services until the earlier of December 31, 2022 or the closing of the business combination.
Our audit committee will review and approve all payments that were made by us to our sponsor, directors, officers or our or any of their respective affiliates, which may include reimbursement of any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. There is no cap or ceiling on the reimbursement of out-of-pocket expenses incurred by such persons in connection with activities on our behalf.
On March 18, 2021, our sponsor issued an unsecured promissory note to us (the “promissory note”), pursuant to which we may borrow up to an aggregate principal amount of $300,000. The promissory note is non-interest bearing and payable on the earlier of (i) December 31, 2021 or (ii) the consummation of the IPO. On October 25, 2021, we exchanged a $300,000 the unsecured promissory note for a non-interest-bearing Working Capital Loan of $300,000 due upon the earlier of (i) the date on which a Business Combination is consummated, or (ii) April 25, 2023, later amended to December 25, 2024. As of June 30, 2024 and December 31, 2023, there were $1,296,654, respectively, outstanding under the Working Capital Loan. In order to finance transaction costs in connection with a business combination, the sponsor or an affiliate of the sponsor, or certain of our officers and directors may, but are not obligated to, loan us funds as may be required (“working capital loans”). Such working capital loans would be evidenced by promissory notes. The notes may be repaid upon completion of a business combination, without interest, or, at the lender’s discretion, up to $1,500,000 of the notes may be converted upon completion of a business combination into warrants at a price of $1.00 per warrant. Such warrants would be
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identical to the private placement warrants. In the event that a business combination does not close, we may use a portion of proceeds held outside the trust account to repay the working capital loans but no proceeds held in the trust account would be used to repay the working capital loans.
Our sponsor has purchased an aggregate of 11,700,000 private placement warrants at a price of $1.00 per warrant ($11,700,000 in the aggregate) in a private placement that occurred simultaneously with the closing of our IPO. Each private placement warrant entitles the holder to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment as provided herein. The private placement warrants are identical to the warrants sold as part of the units in our IPO except that: (1) they will not be redeemable by us; (2) they (including the shares of Class A common stock issuable upon exercise of these warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold by our sponsor until 30 days after the completion of our initial business combination; (3) they may be exercised by the holders on a cashless basis; and (4) they (including the shares of Class A common stock issuable upon exercise of these warrants) are entitled to registration rights. In order to extend the completion window from 18 to 21 months, our sponsor has the option to purchase 2,300,000 private placement warrants at any time following the closing of our IPO and prior to the consummation of our initial business combination at a purchase price of $1.00 per private placement warrant. These warrants will have the same terms and conditions as the private placement warrants issued at the closing of our IPO.
In connection with our IPO, two Sponsor Affiliates were granted the right to purchase, pursuant to a forward purchase agreement, up to 6,500,000 forward purchase units, consisting of one share of Class A common stock and one-half of one warrant to purchase one share of Class A common stock, for $10.00 per unit, or an aggregate amount of up to $65,000,000, in a private placement that will close concurrently with the closing of our initial business combination. The Sponsor Affiliates have not elected to purchase any securities under the forward purchase agreement.
Pursuant to a registration rights agreement that we entered into with our initial stockholders upon the closing of our IPO, we may be required to register certain securities for sale under the Securities Act. These holders, and holders of warrants issued upon conversion of working capital loans, if any, are entitled under the registration rights agreement to make up to three demands that we register certain of our securities held by them for sale under the Securities Act and to have the securities covered thereby registered for resale pursuant to Rule 415 under the Securities Act. In addition, these holders have the right to include their securities in other registration statements filed by us. However, the registration rights agreement provides that we will not be required to effect or permit any registration or cause any registration statement to become effective until the securities covered thereby are released from their lock-up restrictions, as described herein. We will bear the costs and expenses of filing any such registration statements.
OFF-BALANCE SHEET ARRANGEMENTS; COMMITMENTS AND CONTRACTUAL OBLIGATIONS; QUARTERLY RESULTS
As of June 30, 2024, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any commitments or contractual obligations. No unaudited quarterly operating data is included in this report as we have conducted no operations to date.
Critical Accounting estimates
The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates.
Class A ordinary shares subject to possible redemption
In connection with the votes to approve extending the date by which the Company must complete its initial business combination, the holders of an aggregate of 21,460,684 shares of the Company’s Class A common stock properly exercised their rights to redeem their shares for cash. In connection with those redemptions, approximately $224.0 million was withdrawn from the trust account to fund such redemptions, leaving a balance of approximately $16.8 million.
The Company accounts for its common stock subject to possible redemption in accordance with the guidance enumerated in ASC 480 “Distinguishing Liabilities from Equity” (“ASC 480”). Common stock subject to mandatory redemption is classified as a liability
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instrument and are measured at fair value. Conditionally redeemable common stock (including common stock that features 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) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s Class A common stock features certain redemption rights that are considered by the Company to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, as of June 30, 2024, and December 31, 2023, the Class A common stock subject to possible redemption in the amount of $16,677,857 and $23,750,019, respectively are presented as temporary equity, outside of the stockholders’ deficit section of the Company’s balance sheets.
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable shares of Class A common stock to equal the redemption value at the end of each reporting period. Immediately upon the closing of the Initial Public Offering, the Company recognized a measurement adjustment from initial book value to redemption amount value. The change in the carrying value of the redeemable Class A common stock resulted in charges against additional paid-in capital and accumulated deficit. The estimates involved in the remeasurement include changes in the value of the Trust Account assets and estimates of income taxes paid or payable that the Company has the ability to withdraw from the Trust Account.
Recent Accounting Standards
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023- 09), which requires disclosures of incremental income tax information within the rate reconciliation and expanded disclosures of income taxes paid, among other disclosure requirements. ASU 2023-09 is effective for the fiscal year beginning after December 15, 2024. Early adoption is permitted. The Company’s management does not believe the adoption of ASU 2023-09 will have a material impact on its financial statements and disclosures.
Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s financial statement.
JOBS ACT
On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We will qualify as an “emerging growth company” and under the JOBS Act will be allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, our unaudited condensed financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates. Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be required to, among other things: (1) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act; (2) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act; (3) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the unaudited condensed financial statements (auditor discussion and analysis); and (4) disclose certain executive compensation-related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our IPO or until we are no longer an “emerging growth company,” whichever is earlier.
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.
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Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial and accounting officer 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 principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the calendar quarter ended June 30, 2024. Based on this evaluation, our principal executive officer and principal financial officer have concluded that, as of the evaluation date, our disclosure controls and procedures were not effective due to the material weaknesses described below.
Following the filing of our Quarterly Report on Form 10-Q for the period ending June 30, 2022, we identified certain clerical errors in the EDGAR version of our unaudited condensed financial statements filed with the SEC. These errors were remedied by restating the June 30, 2022 Form 10-Q, and subsequently, management of the Company has been implementing enhanced management review and reconciliation controls to evaluate EDGAR documents prior to filing to prevent or detect a material misstatement in the financial reporting process. However, as of June 30, 2024 such material weakness is not considered remediated.
In connection with the review of the Quarterly Report on Form 10-Q for the period ending March 31, 2023, it was determined that a related party expense was recorded incorrectly due to ineffective review and reconciliation of such related party transactions. A similar incorrect journal entry was identified during the quarter ended December 31, 2023. While management of the Company has intended to implement enhanced review and reconciliation controls to ensure the timely and accurate recording of related party transactions, as of June 30, 2024 such material weakness is not considered remediated.
In October 2023, we made payments on three separate invoices which payments were later determined by management to have been made in error. Two of the payments were later recovered from the vendors, but it is unlikely that the third payment will be recovered. In addition, there were certain immaterial amounts that were not recorded as expense or prepaid accurately. Our management has conducted a thorough investigation related to these events and has concluded there was a material weakness in our internal control over financial reporting related to our review and approval of cash disbursements.
In connection with the review of the Quarterly Report on Form 10-Q for the period ending June 30, 2024, it was determined that two tax payments were recorded incorrectly. After an internal review of the procedures that resulted in this error, management concluded that a material weakness in internal control over financial reporting existed related to ineffective review and reconciliation of the income tax payable. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim unaudited condensed financial statements will not be prevented or detected on a timely basis.
To address this material weakness management has devoted, and plans to continue to devote, significant effort and resources to the remediation and improvement of our system for verification of which invoices to pay.
| ● | We implemented additional controls related to vendor verification and will introduce mandatory cybersecurity training. |
| ● | We implemented a list of specific points to validate before payments are released, requiring evidence of validation by approvers. |
As we have recently implemented the above controls, it will require additional time to ensure that the control will operate effectively to address our material weakness.
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Changes in Internal Control over Financial Reporting
To address the payment related to material weakness aforementioned material weaknesses associated with EDGAR filings and related party transactions, management of the Company has implemented additional review and reconciliation controls.
The Company has also addressed the weakness associated with vendor management and payment processing. Management has devoted significant efforts and resources to remediate and improve our system for verification of which invoices to pay.
| ● | We implemented additional controls related to vendor verification and will introduce mandatory cybersecurity training. |
| ● | We implemented a list of specific points to validate before payments are released, requiring evidence of validation by approvers. |
| ● | Enhanced reconciliation of tax accounts and communication between parties involved in the tax and financial reporting process including journal entry review |
As we have recently implemented the above controls, it will require additional time to ensure that the control will operate effectively to address our material weakness.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors.
Factors that could cause our actual results to differ materially from those in this Quarterly Report are any of the risks described in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. As of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in our final prospectus of our Initial Public Offering filed with the SEC.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
(a) | Unregistered Sales of Equity Securities |
None.
(b) | Use of Proceeds from the Public Offering |
On October 25, 2021, we consummated our Initial Public Offering of 23,000,000 units generating gross proceeds to the Company of $230,000,000. Of the gross proceeds received from the Initial Public Offering and the Private Placement Warrants, $234,600,000 was placed in a Trust Account. We paid a total of $4,600,000 in underwriting discounts and commissions and $475,558 for other costs and expenses related to the Initial Public Offering. In addition, the underwriters agreed to defer $8,050,000 in underwriting discounts and commission.
The Company entered into fee waiver agreements with KeyBanc Capital Markets Inc. and UBS Securities LLC on August 7, 2023 and August 11, 2023, respectively. Eighty percent (80%), or $6,440,000 in the aggregate, of the deferred underwriting fees have been waived, leaving $1,610,000 of deferred underwriting fees payable to EXOS Securities LLC upon closing pursuant to the Business Combination Agreement. The Company recorded a reduction of $6,440,000 of deferred underwriting fees payable and a gain on forfeiture of deferred underwriting compensation payable in the period ending September 30, 2023. Although the UBS Securities LLC waiver of $6,037,500 relates only to the business combination that may be consummated pursuant to the Business Combination Agreement with Betters, the Company believes that there is only a remote possibility that the Company could consummate another business combination if the Business Combination Agreement with Betters were to be terminated for any reason.
In connection with the votes to approve extending the date by which the Company must complete its initial business combination, the holders of an aggregate of 21,460,684 shares of the Company’s Class A common stock properly exercised their rights to redeem their shares for cash. In connection with those redemptions, approximately $224.0 million was withdrawn from the trust account to fund such redemptions, leaving a balance of approximately $16.8 million.
(c) | Purchases of Equity Securities by the Issuer and Affiliated Purchasers |
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable
Item 5. Other Information
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Item 6. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
No. |
| Description of Exhibit |
2.1 | ||
31.1* |
| |
32.1** |
| |
101.INS* |
| Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
101.SCH* |
| Inline XBRL Taxonomy Extension Schema Document |
101.CAL* |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF* |
| Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB* |
| Inline XBRL Taxonomy Extension Labels Linkbase Document |
101.PRE* |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104 |
| The cover page for the Company’s Quarterly Report on Form 10-Q has been formatted in Inline XBRL and contained in Exhibit 101. |
* | Filed herewith. |
** | Furnished herewith |
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SIGNATURES
Pursuant to the requirements of Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| EXCELFIN ACQUISITION CORP. | |
|
|
|
Date: August 19, 2024 | /s/ Joe Ragan | |
| Name: | Joe Ragan |
| Title: | Chief Executive Officer & Chief Financial Officer |
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