UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended:
Or
For the transition period from to
Commission File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| ||
(Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class: | Trading Symbol(s) | Name of Each Exchange on Which Registered: | ||
The | ||||
The | ||||
The |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject
to 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 the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☑ | Smaller reporting company | ||
Emerging growth company |
If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 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
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.
As of November 9, 2023,
TABLE OF CONTENTS
Part I – FINANCIAL INFORMATION | 1 | |
Item 1. | Financial Statements | 1 |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 21 |
Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 27 |
Item 4. | Controls and Procedures | 27 |
Part II – OTHER INFORMATION | 28 | |
Item 1. | Legal Proceedings | 28 |
Item 1A. | Risk Factors | 28 |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 28 |
Item 3. | Defaults Upon Senior Securities | 28 |
Item 4. | Mine Safety Disclosures | 28 |
Item 5. | Other Information | 28 |
Item 6. | Exhibits | 29 |
SIGNATURES | 30 |
i
PART I – FINANCIAL INFORMATION
Item 1. Unaudited Financial Statements.
ACRI CAPITAL ACQUISITION CORPORATION
CONDENSED BALANCE SHEETS
September 30, 2023 | December 31, 2022 | |||||||
(Unaudited) | ||||||||
Assets | ||||||||
Cash | $ | $ | ||||||
Prepaid expenses | ||||||||
Total Current Assets | ||||||||
Investments held in Trust Account | ||||||||
Total Assets | $ | $ | ||||||
Liabilities, Temporary Equity, and Stockholders’ Deficit | ||||||||
Accrued expenses | $ | $ | ||||||
Franchise tax payable | ||||||||
Income tax payable | ||||||||
Excise tax payable | ||||||||
Promissory note - related party | ||||||||
Total Current Liabilities | ||||||||
Deferred tax liability | ||||||||
Deferred underwriter’s discount | ||||||||
Total Liabilities | ||||||||
Commitments and Contingencies | ||||||||
Common stock subject to possible redemption, | ||||||||
Stockholders’ Deficit: | ||||||||
Preferred stock, $ | ||||||||
Class A common stock, $ | ||||||||
Class B common stock, $ | ||||||||
Additional paid-in capital | ||||||||
Accumulated deficit | ( | ) | ( | ) | ||||
Total Stockholders’ Deficit | ( | ) | ( | ) | ||||
Total Liabilities, Temporary Equity, and Stockholders’ Deficit | $ | $ |
The accompanying notes are an integral part of these unaudited condensed financial statements.
1
ACRI CAPITAL ACQUISITION CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
For the Period from |
||||||||||||||||
January 7, | ||||||||||||||||
For the three months ended |
For the three months ended |
For the nine months ended |
2022 through |
|||||||||||||
September 30, 2023 |
September 30, 2022 |
September 30, 2023 |
September 30, 2022 |
|||||||||||||
Formation and operating costs | $ | $ | $ | $ | ||||||||||||
Franchise tax expenses | ||||||||||||||||
Loss from Operations | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Other income | ||||||||||||||||
Interest earned on investment held in Trust Account | ||||||||||||||||
Income (loss) before income taxes | ( |
) | ||||||||||||||
Income taxes provision | ||||||||||||||||
Net income (loss) | $ | $ | $ | $ | ( |
) | ||||||||||
$ | $ | $ | $ | |||||||||||||
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) |
The accompanying notes are an integral part of these unaudited condensed financial statements.
2
ACRI CAPITAL ACQUISITION CORPORATION
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(Unaudited)
Common Stock | Additional | Total | ||||||||||||||||||||||||||||||||||
Preferred Stock | Class A | Class B | Paid-in | Accumulated | Stockholders’ | |||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||||||||
Balance as of December 31, 2022 | - | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||
Accretion of carrying value to redemption value | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
Excise tax accrual | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
Net income | - | - | - | |||||||||||||||||||||||||||||||||
Balance as of March 31, 2023 | - | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||
Accretion of carrying value to redemption value | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
Net income | - | - | - | |||||||||||||||||||||||||||||||||
Balance as of June 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
Accretion of carrying value to redemption value | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
Excise tax accrual | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
Net income | - | - | - | |||||||||||||||||||||||||||||||||
Balance as of September 30, 2023 | - | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) |
Common Stock | Additional | Total | ||||||||||||||||||||||||||||||||||
Preferred Stock | Class A | Class B | Paid-in | Accumulated | Stockholders’ | |||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||||||||
Balance as of January 7, 2022 (inception) | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||
Founder shares issued to initial stockholder | - | - | - | |||||||||||||||||||||||||||||||||
Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
Balance as of March 31, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
Sale of public units through public offering | - | |||||||||||||||||||||||||||||||||||
Sale of private placement warrants | - | - | - | |||||||||||||||||||||||||||||||||
Underwriters’ discount | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
Other offering expenses | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
Reclassification of common stock subject to redemption | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||
Allocation of offering costs to common stock subject to redemption | - | - | - | |||||||||||||||||||||||||||||||||
Accretion of carrying value to redemption value | - | - | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||
Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
Balance as of June 30, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
Accretion of carrying value to redemption value | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
Net income | - | - | - | |||||||||||||||||||||||||||||||||
Balance as of September 30, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) |
The accompanying notes are an integral part of these unaudited condensed financial statements.
3
ACRI CAPITAL ACQUISITION CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Period from | ||||||||
For the nine months ended | January 7, 2022 (inception) through | |||||||
September 30, 2023 | September 30, 2022 | |||||||
Cash Flows from Operating Activities: | ||||||||
Net Income (Loss) | $ | ( | ) | |||||
Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
Interest earned on investment held in Trust Account | ( | ) | ( | ) | ||||
Deferred taxes | ( | ) | ||||||
Changes in operating assets and liabilities: | ||||||||
Prepaid expenses | ( | ) | ||||||
Accrued expenses | ( | ) | ||||||
Franchise tax payable | ( | ) | ||||||
Income taxes payable | ||||||||
Net Cash Used in Operating Activities | ( | ) | ( | ) | ||||
Cash Flows from Investing Activities: | ||||||||
Purchase of investment held in trust account | ( | ) | ( | ) | ||||
Sale of investment held in trust account | - | |||||||
Net Cash Provided by (Used in) Investing Activities | ( | ) | ||||||
Cash Flows from Financing Activities: | ||||||||
Proceeds from issuance of founder shares | ||||||||
Proceeds from promissory note to related party | ||||||||
Repayment of promissory note to related party | ( | ) | ||||||
Proceeds from public offering | ||||||||
Proceeds from private placement | ||||||||
Payment of underwriter discount | ( | ) | ||||||
Payment of deferred offering costs | ( | ) | ||||||
Redemption of Class A Common Stock | ( | ) | ||||||
Net Cash (Used in) Provided by Financing Activities | ( | ) | ||||||
Net Change in Cash | ( | ) | ||||||
Cash, beginning of period | ||||||||
Cash, end of period | $ | |||||||
Supplemental Disclosure of Cash Flow Information: | ||||||||
Cash paid for income taxes | $ | $ | ||||||
Cash paid for interest | $ | $ | ||||||
Non-cash financing activities: | ||||||||
Deferred underwriters’ marketing fees | $ | $ | ||||||
Change in value of common stock subject to redemption | $ | $ | ||||||
Allocation of offering costs to common stock subject to redemption | $ | - | $ | |||||
Accretion of carrying value to redemption value | $ | $ | ||||||
Excise tax payable | $ | $ | - |
The accompanying notes are an integral part of these unaudited condensed financial statements.
4
ACRI CAPITAL ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(Unaudited)
Note 1 — Organization and Business Operation
Acri Capital Acquisition Corporation (the “Company”) is a newly organized blank check company incorporated as a Delaware corporation on January 7, 2022. The Company was formed for the purpose of entering into a merger, capital stock exchange, asset acquisition, stock purchase, recapitalization, reorganization or similar business combination with one or more businesses (the “Business Combination”). The Company is actively searching and identifying suitable Business Combination target. The company is not limited to a particular industry or geographic region for purposes of consummating an initial Business Combination. The Company has selected December 31 as its fiscal year end.
As of September 30, 2023 and December 31, 2022, the Company had not commenced any operations. For the nine months ended September 30, 2023 and the period from January 7, 2022 (inception) through September 30, 2022, the Company’s efforts have been limited to organizational activities as well as activities related to the initial public offering (the “IPO”). The Company will not generate any operating revenues until after the completion of a Business Combination, at the earliest. The Company generates non-operating income in the form of interest income from the proceeds derived from the IPO.
The registration statement for the Company’s
IPO became effective on June 9, 2022. On June 14, 2022, the Company consummated the IPO of
Substantially concurrently with the closing of
the IPO, the Company completed the sale of
Transaction costs amounted to $
The Company’s initial Business Combination
must occur with one or more target businesses that together have an aggregate fair market value of at least
5
Following the closing of the IPO, $
On February 8, 2023, the Company held a special
meeting of stockholders (the “Special Meeting”). At the Special Meeting, the stockholders of the Company approved the proposal
to amend Company’s amended and restated certificate of incorporation (“Charter”) to amend the amount of monthly
deposit (each, a “Monthly Extension Payment”) required to be deposited in the trust account (the “Trust Account”)
from $
In connection with the votes to approve the Extension
Amendment Proposal,
Following the Special Meeting, the Sponsor deposited
four monthly payments to the Trust Account to extend the Business Combination deadline to July 14, 2023 of $
6
On July 11 2023, the
Company held another special meeting of stockholders (the “Special Meeting II”), at which the stockholders of the Company
approved, among others, the proposal to amend the Charter to allow the Company until July 14, 2023 to consummate an initial business
combination, and, without another stockholder vote, to elect to extend Business Combination deadline on a monthly basis for up to nine
(9) times, up to April 14, 2024, by depositing $
In connection with the Special Meeting II, the stockholders also approved the proposal to amend the Charter to remove the restriction of Company to undertake an initial business combination with any entity with its principal business operations or is headquartered in China (including Hong Kong and Macau).
Pursuant to the Second Amended Charter, the Company
may extend the Business Combination deadline on monthly basis from July 14, 2023 to up to nine times by depositing $
Total outstanding notes amounted to $
The shares of Class A common stock subject to
redemption will be recorded at a redemption value and classified as temporary equity upon the completion of the IPO, in accordance with
the Financial Accounting Standard Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing
Liabilities from Equity.” In such case, the Company will consummate a Business Combination and, solely if the Company has net tangible
assets of at least $
If the Company is unable to complete the initial
Business Combination within the Combination Period, the Company will: (i) cease all operations except for the purpose of winding
up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share
price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held
in the Trust Account and not previously released to the Company to pay the Company’s taxes (less up to $
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 the Business
Combination within the Combination Period. The Sponsor, directors and officers of the Company (the “founders”) have entered
into a letter agreement with the Company, pursuant to which they have agreed (i) to waive their redemption rights with respect to
any Founder Shares (as defined in Note 5) and any Public Shares held by them in connection with the completion of the initial Business
Combination, (ii) waive their redemption rights with respect to their Founder Shares and Public Shares in connection with a stockholder
vote to approve an amendment to the Company’s amended and restated certificate of incorporation (A) to modify the substance
or timing of the Company’s obligation to allow redemption in connection with the initial Business Combination or to redeem
7
The Sponsor has agreed that it will be liable
to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or by 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) $
However, the Company has not asked the Sponsor to reserve for such indemnification obligations, nor has the Company independently verified whether the Sponsor has sufficient funds to satisfy their indemnity obligations and believe that the Sponsor’s only assets are securities of the Company. Therefore, the Company cannot assure that its Sponsor would be able to satisfy those obligations. None of the officers or directors will indemnify the Company for claims by third parties including, without limitation, claims by vendors and prospective target businesses.
Liquidity and Going Concern
As of September 30, 2023, the Company had cash
of $
In addition, under the Company’s Second
Amended Charter provides that the Company will need to complete initial Business Combination by July 14, 2023, which may be extended up
to nine (9) times by an additional one month each time until April 14, 2024. If the Company is unable to complete a Business
Combination within the Combination Period, the Company may seek approval from its stockholders holding no less than
There is no assurance that the Company’s plans to consummate a Business Combination will be successful within the Combination Period and that the Company will obtain enough votes to extend the Combination Period. As a result, management has determined that such additional condition also raise substantial doubt about the Company’s ability to continue as a going concern. The unaudited condensed financial statement does not include any adjustments that might result from the outcome of this uncertainty.
8
Note 2 — 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, and include all normal and recurring adjustments that management of the Company considers necessary for a fair presentation of its financial position and operation results. Interim results are not necessarily indicative of results to be expected for any other interim period or for the full year.
Emerging Growth Company Status
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 auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and 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 of 1934, as amended (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 an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of unaudited condensed financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
Cash
The Company considers all short-term investments
with an original maturity of three months or less when purchased to be cash equivalents. The Company had $
9
Investments held in Trust Account
At September 30, 2023 and December 31, 2022,
we had $
All of the Company’s investments held in the Trust Account are classified as trading securities. Trading securities are presented on the condensed balance sheet at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of investments held in Trust Account are accounted as interest income in the statement of operations.
Fair Value of Financial Instruments
ASC Topic 820 “Fair Value Measurements and Disclosures” defines fair value, the methods used to measure fair value and the expanded disclosures about fair value measurements. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between the buyer and the seller at the measurement date. In determining fair value, the valuation techniques consistent with the market approach, income approach and cost approach shall be used to measure fair value. ASC Topic 820 establishes a fair value hierarchy for inputs, which represent the assumptions used by the buyer and seller in pricing the asset or liability. These inputs are further defined as observable and unobservable inputs. Observable inputs are those that buyer and seller would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs reflect the Company’s assumptions about the inputs that the buyer and seller would use in pricing the asset or liability developed based on the best information available in the circumstances.
The fair value hierarchy is categorized into three levels based on the inputs as follows:
● | Level 1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments and block discounts are not being applied. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these securities does not entail a significant degree of judgment. |
● | Level 2 - Valuations based on (i) quoted prices in active markets for similar assets and liabilities, (ii) quoted prices in markets that are not active for identical or similar assets, (iii) inputs other than quoted prices for the assets or liabilities, or (iv) inputs that are derived principally from or corroborated by market through correlation or other means. |
● | Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement. |
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the accompanying balance sheet, primarily due to their short-term nature.
Warrants
The Company accounts for Warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in FASB ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“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 shares of Class A common stock and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent 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 equity at the time of issuance. For issued or modified Warrants that do not meet all the criteria for equity classification, the Warrants are required to be recorded as liabilities at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the Warrants are recognized as a non-cash gain or loss on the statements of operations.
10
Common Stock Subject to Possible Redemption
The Company accounts for its common stock subject
to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Common stock
subject to mandatory redemption (if any) 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 Public Shares feature certain
redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events.
Accordingly, as of September 30, 2023, common stock subject to possible redemption are presented at redemption value of
$
Offering Costs
The Company complies with the requirements of
FASB ASC Topic 340-10-S99-1, “Other Assets and Deferred Costs – SEC Materials” (“ASC 340-10-S99”)
and SEC Staff Accounting Bulletin Topic 5A, “Expenses of Offering”. Offering costs were $
Net Income (Loss) Per Share
The Company complies with accounting and disclosure requirements of FASB ASC 260, Earnings Per Share. In order to determine the net income (loss) attributable to both the redeemable shares and non-redeemable shares, the Company first considered the undistributed income (loss) allocable to both the redeemable common stock and non-redeemable common stock and the undistributed income (loss) is calculated using the total net loss less any dividends paid. The Company then allocated the undistributed income (loss) ratably based on the weighted average number of shares outstanding between the redeemable and non-redeemable common stock. Any remeasurement of the accretion to redemption value of the common stock subject to possible redemption was considered to be dividends paid to the public stockholders. As of September 30, 2023, the Company has not considered the effect of the Warrants sold in the IPO and private placement in the calculation of diluted net income (loss) per share, since the exercise of the Warrants is contingent upon the occurrence of future events and the inclusion of such Warrants would be anti-dilutive and the Company did not have any other dilutive securities and other contracts that could, potentially, be exercised or converted into common stock and then share in the earnings of the Company. As a result, diluted income (loss) per share is the same as basic income (loss) per share for the periods presented.
For the Three Months Ended | For the Three Months Ended | |||||||
September 30, | September 30, | |||||||
2023 | 2022 | |||||||
Net income (loss) | $ | $ | ||||||
Accretion of carrying value to redemption value | ( | ) | ( | ) | ||||
Net loss including accretion of carrying value to redemption value | $ | ( | ) | $ | ( | ) |
For the Three Months Ended | For the Three Months Ended | |||||||||||||||
September 30, 2023 | September 30, 2022 | |||||||||||||||
Non- | Non- | |||||||||||||||
Redeemable | Redeemable | Redeemable | Redeemable | |||||||||||||
Common | Common | Common | Common | |||||||||||||
Stock | Stock | Stock | Stock | |||||||||||||
Basic and diluted net income/(loss) per share: | ||||||||||||||||
Numerators: | ||||||||||||||||
Allocation of net loss including carrying value to redemption value | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
Accretion of carrying value to redemption value | ||||||||||||||||
Allocation of net income (loss) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
Denominators: | ||||||||||||||||
Weighted-average shares outstanding | ||||||||||||||||
$ | $ | ( | ) | $ | $ | ( | ) |
11
For the Nine Months Ended September 30, 2023 | For the Period from January 7, 2022 (inception) through September 30, 2022 | |||||||
Net income (loss) | $ | $ | ( | ) | ||||
Accretion of carrying value to redemption value | ( | ) | ( | ) | ||||
Net loss including accretion of carrying value to redemption value | $ | ( | ) | $ | ( | ) |
For the Period From | ||||||||||||||||
January 7, 2022 | ||||||||||||||||
For the Nine Months Ended | (inception) through | |||||||||||||||
September 30, 2023 | September 30, 2022 | |||||||||||||||
Non- | Non- | |||||||||||||||
Redeemable | Redeemable | Redeemable | Redeemable | |||||||||||||
Common | Common | Common | Common | |||||||||||||
Stock | Stock | Stock | Stock | |||||||||||||
Basic and diluted net income/(loss) per share: | ||||||||||||||||
Numerators: | ||||||||||||||||
Allocation of net loss including carrying value to redemption value | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
Accretion of carrying value to redemption value | ||||||||||||||||
Allocation of net income (loss) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
Denominators: | ||||||||||||||||
Weighted-average shares outstanding | ||||||||||||||||
$ | $ | ( | ) | $ | $ | ( | ) |
Concentration of Credit Risk
Financial instruments that potentially subject
the Company to concentration of credit risk consist of a cash account in a financial institution. The Company has not experienced losses
on this account and management believes the Company is not exposed to significant risks on such account. As of September 30, 2023, approximately
$
Income Taxes
The Company accounts for income taxes under ASC 740 Income Taxes (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position 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. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition.
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The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of September 30, 2023 and December 31, 2022. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
The Company has identified the United States as its only major tax jurisdiction.
The Company may be subject to potential examination by federal and state taxing authorities in the areas of income taxes. These potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
Recent Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06, “Debt – Debt Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40)”. The amendment in this ASU is to address issues identified as a result of the complexity associated with applying generally accepted accounting principles (GAAP) for certain financial instruments with characteristics of liabilities and equity. For convertible instruments, the Board decided to reduce the number of accounting models for convertible debt instruments and convertible preferred stock. Limiting the accounting models results in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. The amendments in this Update are effective for public business entities that meet the definition of a Securities and Exchange Commission (SEC) filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Board specified that an entity should adopt the guidance as of the beginning of its annual fiscal year. The Company has early adopted this update and it will become effective on January 1, 2023. The Company adoption of this ASU did not have a material effect on the Company’s unaudited condensed financial statements.
On August 16, 2022, President Biden signed into
law the Inflation Reduction Act of 2022 (H.R. 5376) (the “IRA”), which, among other things, imposes a
The excise tax is imposed on the repurchasing
corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is generally
As a result of the
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Note 3 — Investments Held in Trust Account
As of September 30, 2023 and December 31,
2022, assets held in the Trust Account were comprised of $
Description | Level | September 30, 2023 | ||||||
Assets: | ||||||||
Trust Account - U.S. Treasury Securities Money Market Fund | 1 | $ |
Description | Level | December 31, 2022 | ||||||
Assets: | ||||||||
Trust Account - U.S. Treasury Securities Money Market Fund | 1 | $ |
Note 4 — Initial Public Offering
Pursuant to the IPO, the Company sold
All of the
The Company’s redeemable common stock is subject to SEC and its staff’s guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99. If it is probable that the equity instrument will become redeemable, the Company has the option to either accrete changes in the redemption value over the period from the date of issuance (or from the date that it becomes probable that the instrument will become redeemable, if later) to the earliest redemption date of the instrument or to recognize changes in the redemption value immediately as they occur and adjust the carrying amount of the instrument to equal the redemption value at the end of each reporting period. The Company has elected to recognize the changes immediately. The accretion or remeasurement is treated as a deemed dividend (i.e., a reduction to retained earnings, or in absence of retained earnings, additional paid-in capital).
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As of | As of | |||||||
September 30, | December 31, | |||||||
2023 | 2022 | |||||||
Gross proceeds | $ | $ | ||||||
Less: | ||||||||
Proceeds allocated to Public Warrants | ( | ) | ( | ) | ||||
Offering costs of Public Shares | ( | ) | ( | ) | ||||
Redemption | ( | ) | ||||||
Plus: | ||||||||
Accretion of carrying value to redemption value | ||||||||
Common stock subject to possible redemption | $ | $ |
Note 5 — Private Placement
Substantially concurrently with the closing of
the IPO on June 14, 2022, the Company completed the sale of
Note 6 — Related Party Transactions
Founder Shares
On February 4, 2022, the Sponsor acquired
The number of Founder Shares issued was determined
based on the expectation that such Founder Shares would represent
The Founder Shares are identical to the Public Shares. However, the founders have agreed (A) to vote their Founder Shares in favor of any proposed Business Combination, (B) not to propose, or vote in favor of, prior to and unrelated to an initial Business Combination, an amendment to the Company’s certificate of incorporation that would affect the substance or timing of the Company’s redemption obligation to redeem all Public Shares if the Company cannot complete an initial Business Combination within the Combination Period, unless the Company provides public stockholders an opportunity to redeem their Public Shares in conjunction with any such amendment, (C) not to redeem any shares, including Founder Shares and Public Shares into the right to receive cash from the Trust Account in connection with a stockholder vote to approve the Company’s proposed initial Business Combination or sell any shares to us in any tender offer in connection with the Company’s proposed initial Business Combination, and (D) that the Founder Shares shall not participate in any liquidating distribution upon winding up if a Business Combination is not consummated.
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The founder has agreed not to transfer, assign
or sell its Founder Shares until the earlier to occur of: (A) six months after the completion of the Company’s initial
Business Combination, or (B) the date on which the Company completes a liquidation, merger, stock exchange or other similar transaction
that results in all of the public stockholders having the right to exchange their shares of common stock for cash, securities or other
property, and (C) the date on which the last reported sale price of the Company’s Class A common stock equals or exceeds $
Promissory Note — Related Party
On January 20, 2022, the Sponsor has agreed to
loan the Company up to $
In connection with the Monthly Extension Payment
discussed in Note 1, the Company issued four unsecured promissory notes of $
Balance of Promissory Note – related party
amounted to $
Related Party Loans
In addition, in order to finance transaction costs
in connection with an intended initial Business Combination, the Sponsor, or an affiliate of the Sponsor or certain of the Company’s
officers and directors may, but are not obligated to, loan the Company funds as may be required. If the Company completes the initial
Business Combination, it would repay such loaned amounts. In the event that the initial Business Combination does not close, the Company
may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from the Trust Account
would be used for such repayment. Up to $
As of September 30, 2023 and December 31, 2022, the Company had no borrowings under the working capital loans.
Administrative Services Fees
The Company has agreed, commencing on the effective date of the prospectus,
to pay the Sponsor the monthly fee of an aggregate of $
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Note 7 — Commitments & Contingencies
Registration Rights
The holders of the Founder Shares and Private Warrants and Warrants issuable upon the conversion of certain working capital loans will be entitled to registration rights pursuant to a registration rights agreement signed on June 9, 2022 requiring the Company to register such securities for resale. The holders of these securities are entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of the Company’s initial Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The underwriters of the IPO (the “underwriters”)
exercised the option to purchase an additional
The Company paid an underwriting discount of
Right of First Refusal
For a period of twelve (12) months from the
closing of a Business Combination the Company shall give underwriter a right of first refusal to act as lead left bookrunner and lead
left manager and/or lead left placement agent with at least seventy-five percent (
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Note 8 — Stockholders’ Deficit
Preferred Stock — The
Company is authorized to issue
Class A Common Stock — The
Company is authorized to issue
Class B Common Stock — The
Company is authorized to issue
The Class B common stock will automatically convert into shares of the Class A common stock at the time of the initial Business Combination, or at any time prior thereto at the option of the holder, on a one-for-one basis, subject to adjustment pursuant to certain anti-dilution right.
Warrants — On June
14, 2022, the Company issued
Each whole Warrant entitles the registered holder
to purchase one whole share of the Company’s Class A common stock at a price of $
The Company has agreed that as soon as practicable, but in no event later than 30 business days, after the closing of the initial Business Combination, it will use its reasonable best efforts to file, and within 60 business days following its initial Business Combination to have declared effective, a registration statement for the registration, under the Securities Act, of the shares of Class A common stock issuable upon exercise of the Warrants. The Company will use its reasonable best efforts to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the Warrants in accordance with the provisions of the warrant agreement. No Warrants will be exercisable for cash unless the Company has an effective and current registration statement covering the Class A common stock issuable upon exercise of the Warrants and a current prospectus relating to such shares of common stock. Notwithstanding the above, if the Company’s Class A common stock is at the time of any exercise of a Warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Warrants who exercise their Warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event it so elect, it will not be required to file or maintain in effect a registration statement, but it will be required to use its reasonable best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
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In addition, if (x) the Company issues additional
shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of the Company’s
initial Business Combination at an issue price or effective issue price (the “Newly Issued Price”) of less than $
The Company may call the Warrants for redemption,
in whole and not in part, at a price of $
● | in whole and not in part; |
● | upon not less than |
● | if, and only if, the reported last sale price of the Class A common stock equals or exceeds $ |
The Company accounted for the
As of September 30, 2023 and December 31, 2022,
Note 9 — Income Taxes
As of September 30, 2023 and December 31, 2022,
the Company’s deferred tax asset had a full valuation allowance recorded against it. The effective tax rate for the three months
ended September 30, 2023 and 2022 were
Note 10 — Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date through the date the financial statement is issued. The Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statement other than events below.
On October 12,
2023, an aggregate of $
In connection with the
extension payment, the Company issued an unsecured promissory note of $
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CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form 10-Q including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s final prospectus for its initial public offering filed with the U.S. Securities and Exchange Commission (the “SEC”). The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to Acri Capital Acquisition Corporation. References to our “management” or our “management team” refer to our officers and directors, references to the “sponsor” refer to Acri Capital Sponsor LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties. Our actual results may differ significantly from the results, expectations and plans discussed in these forward-looking statements. See “Cautionary Note Concerning Forward-Looking Statements.”
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form 10-Q including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and variations thereof and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s final prospectus for its initial public offering filed with the SEC on June 10, 2022 (dated June 9, 2022). The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Overview
We are a blank check company incorporated as a Delaware corporation on January 7, 2022, 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 (a “Business Combination”). We are actively searching and identifying suitable Business Combination target. We intend to effectuate our Business Combination using cash derived from the proceeds of our initial public offering (the “IPO”) and the sale of warrants (the “Private Placement Warrants”) in a private placement (the “Private Placement”) to the Company’s sponsor Acri Capital Sponsor LLC (the “Sponsor”), potential additional shares, debt or a combination of cash, shares and debt.
We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a Business Combination will be successful.
On June 14, 2022, the Company consummated the IPO of 8,625,000 units (the “Units”) (including 1,125,000 Units issued upon the full exercise of the over-allotment option). Each Unit consists of one share of Class A common stock, $0.0001 par value per share (the “Public Shares”), and one-half of one redeemable warrant, each whole Warrant entitling the holder thereof to purchase one share of Class A common stock (the “Class A common stock”) at an exercise price of $11.50 per share. The Units were sold at an offering price of $10.00 per Unit, generating gross proceeds of $86,250,000 on June 14, 2022.
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Special Meeting I, Related Redemption, Extensions, and Extension Notes
On February 8, 2023, the Company held a special meeting of stockholders (the “Special Meeting I”), at which the stockholders of the Company approved the proposal to amend the Company’s then-existing amended and restated certificate of incorporation to amend the amount of monthly deposit required to be deposited in the trust account (the “Trust Account”) from $0.0333 for each public share to $0.0625 for each public share for, and the Company may extend up to nine (9) times until December 14, 2023 if the Company has not consummated its Business Combination by March 14, 2023 (the nine (9) month anniversary of the closing of its IPO). Upon the stockholders’ approval, on February 9, 2023, the Company filed a certificate of amendment to the Charter which became effective upon filing (the Charter upon the amendment, the “First Amended Charter”). In connection with the Special Meeting I, 4,981,306 shares of Class A common stock of the Company were redeemed and cancelled.
Pursuant to the First Amended Charter, the Company may extend the deadline to complete a Business Combination (the “Combination Deadline”) up to nine times on monthly basis from March 14, 2023 to December 14, 2023, by depositing $227,730.87 each month into the Trust Account, representing $0.0625 per public share. Following the Special Meeting I, the Sponsor deposited four monthly payments to the Trust Account to extend the Combination Deadline to July 14, 2023. The four monthly payments were evidenced by four promissory notes issued by the Company to the Sponsor, each in the principal amount of $227,730.87.
Special Meeting II, Related Redemption, Extensions, and Extension Notes
On July 11, 2023, the Company held another special meeting of stockholders (the “Special Meeting II”), at which the stockholders of the Company approved, among others, the proposal to amend the First Amended Charter to allow the Company until July 14, 2023 to consummate an initial business combination, and, without another stockholder vote, to elect to extend Combination Deadline on a monthly basis for up to nine (9) times, up to April 14, 2024, by depositing $75,000 to the Trust Account. Upon the stockholders’ approval, on July 12, 2023, the Company filed a certificate of amendment to the Charter which became effective upon filing (the Charter upon the amendment, the “Second Amended Charter”). In connection with the Special Meeting II, 388,644 shares of Class A common stock of the Company were redeemed and cancelled.
Pursuant to the Second Amended Charter, the Company may extend the Combination Deadline on monthly basis from July 14, 2023 to up to nine times by depositing $75,000 each month into the Trust Account. Following the Special Meeting II, the Sponsor deposited four monthly payments to the Trust Account to extend the Combination Deadline to November 14, 2023. The four monthly payments were evidenced by four promissory notes issued by the Company to the Sponsor, each in the principal amount of $75,000.
As of the date of this report, we have not entered into any definitive agreements, for the purpose of acquiring, engaging in a share exchange, share reconstruction and amalgamation with, purchasing all or substantially all of the assets of, entering into contractual arrangements with, or engaging in any other similar Business Combination with one or more businesses or entities. We currently have until November 14, 2023 to consummate our Business Combination. However, if we anticipate that we may not be able to consummate our Business Combination by November 14, 2023, we may, but are not obligated to, extend the Combination Deadline for up to another five times by an additional one month each time and may have until April 14, 2024 to consummate our Business Combination.
Target Amendment
At the Special Meeting II, the stockholders also approved the proposal to amend the Charter to remove the restriction of Company to undertake an initial business combination with any entity with its principal business operations or is headquartered in China (including Hong Kong and Macau) (the “Target Amendment”). As result of the Target Amendment, the Company may decide to consummate the Business Combination with an entity with its principal business operations or is headquartered in China (including Hong Kong and Macau), so the combined company may face various legal and operational risks and uncertainties after the business combination. See “Part II – Other Information – Item 1A – Risk Factors” for details.
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Change of Nasdaq Listing Market
On July 7, 2023, Nasdaq approved the Company’s application to list its common stock, units, and warrants on the Capital Market. The Company’s common stock, units, and warrants commenced trading on the Capital Market at the opening of business on July 10, 2023.
Results of Operations
We have neither engaged in any operations nor generated any operating revenues to date except the preparation and completion of the IPO and search for target candidate following the consummation of the IPO. Our activities during the nine months ended September 30, 2023 involved mainly searching for a suitable target for our business combination. We expect that we will incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses in connection with searching for, and completing, a Business Combination.
For the three months ended September 30, 2023 and 2022, we had a net income of $272,860 and $144,688, respectively, from interest income less formation and operating costs. For the nine months ended September 30, 2023 and the period from January 7, 2022 (inception) through September 30, 2022, we had a net income of $727,463 and a net loss of $15,894, respectively, from interest income less formation and operating costs.
Liquidity and Capital Resources
The Company’s liquidity needs up to September 30, 2023 had been satisfied through initial payment from the sponsor of $25,000 and proceeds from the Private Placement.
On June 14, 2022, we consummated the IPO of 8,625,000 Units at a price of $10.00 per unit (including 1,125,000 Units issued upon the fully exercise of the over-allotment option), generating gross proceeds of $86,250,000. Simultaneously with the closing of the IPO and exercise of the over-allotment option in full by the underwriters, we consummated the sale of 5,240,000 warrants as Private Placement Warrants, at a price of $1.00 per warrant, with each warrant entitling the registered holder to purchase one share of the Company’s Class A common stock at a price of $11.50 per share, generating gross proceeds of $5,240,000. Following the closings of the IPO and the sales of the Private Placement Warrants on June 14, 2022, a total of $87,975,000 (or $10.20 per share) was placed in the Trust Account, established for the benefit of the Company’s public stockholders and the underwriters of the IPO with Wilmington Trust, National Association acting as trustee.
As of September 30, 2023, the Company had cash of $52,840 and a working capital deficit of $1,626,672.
In connection with the votes to approve the Extension Amendment Proposal at the Special Meeting, 4,981,306 shares of Class A common stock of the Company were rendered for redemption at $10.33 per share, On July 11 2023, in connection with the Special Meeting II to approve the second Extension Amendment Proposal, 388,644 shares of Class A common stock of the Company were redeemed and cancelled at $10.82 per share, resulting in approximately $36.0 million remaining in the Trust Account as of September 30, 2023.
We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account, excluding deferred underwriting commissions, to complete our Business Combination. We may withdraw interest from the Trust Account to pay taxes, if any. To the extent that our share capital or debt is used, in whole or in part, as consideration to complete a 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.
We intend to use the funds held outside the Trust Account 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.
23
In order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, our sponsor or an affiliate of our sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If the Company completes the Business Combination, it would repay such loaned amounts. In the event that the 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 the Trust Account would be used for such repayment. Up to $3,000,000 of such loans may be convertible into warrant, at a price of $1.00 per warrant at the option of the lender.
We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating a 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 Business Combination. Moreover, we may need to obtain additional financing either to complete our Business Combination or because we become obligated to redeem a significant number of our Public Shares upon completion of our Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination.
In addition, our current charter provides that we will have until July 14, 2023 to complete the Business Combination, which may be extended up to nine (9) times by an additional one month each time until April 14, 2024. From February to June 2023, the sponsor deposited four monthly payments to the Trust Account to extend the Combination Deadline to July 14, 2023. Those payments were evidenced by four promissory notes issued by the Company to the Sponsor, each in the principal amount of $227,730.87 (each, a “First Recharter Extension Note”). From July to October, 2023, the Sponsor deposited four monthly payments to the Trust Account to extend the Combination Deadline to November 14, 2023 which were evidenced by four promissory notes issued by the Company to the Sponsor, each in the principal amount of $75,000 (each, a “Second Recharter Extension Note”, collectively with First Recharter Extension Note, the “Extension Note(s)”).
The Extension Notes are non-interest bearing and are each payable (subject to the waiver against trust provisions) on the earlier of (i) consummation of the Company’s Business Combination and (ii) the date of the liquidation of the Company. The Extension Notes principal balance may be prepaid at any time, at the election of the Company. The holder of each of the Extension Notes has the right, but not the obligation, to convert each Extension Note, in whole or in part, respectively, into Private Placement Warrants of the Company, as described in the prospectus of the Company (File Number 333-263477), by providing the Company with written notice of its intention to convert the Extension Note at least two (2) business days prior to the closing of the Company’s Business Combination. The number of Warrants to be received by the holder in connection with such conversion shall be an amount determined by dividing (x) the sum of the outstanding principal amount payable to the holder, by (y) $1.00.
If we are unable to complete a Business Combination within the Combination Period, we may seek approval from our stockholders holding no less than 65% or more of the votes to approve to extend the Completion Period, if we fail to obtain approval from our stockholders for such extension or we do not seek such extension, the Company will cease all operations.
As a result, management has determined that such additional condition also raise substantial doubt about the Company’s ability to continue as a going concern. The unaudited condensed financial statement does not include any adjustments that might result from the outcome of this uncertainty.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities that would be considered off-balance sheet arrangements as of September 30, 2023. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
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Contractual Obligations
As of September 30, 2023 and December 31, 2022, we do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities.
The holders of the founder shares, the Private Placement Warrants, and any warrants that may be issued upon conversion of working capital loans (and any underlying securities) will be entitled to registration rights pursuant to a registration rights agreement entered into in connection with the IPO. The holders of these securities are entitled to make up to three demands, excluding short form demands, that we register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to our completion of our Business Combination. We will bear the expenses incurred in connection with the filing of any such registration statements.
Critical Accounting Policies and Estimates
In preparing the unaudited condensed financial statements in conformity with U.S. GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported 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 financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, actual results may differ from these estimates. We have identified the following critical accounting policies and estimates:
Investments held in Trust Account
At September 30, 2023 and December 31, 2022, $35,968,942 and $89,140,977 of the assets held in the Trust Account were held in money market funds, which are invested in short term U.S. Treasury securities.
The Company classifies its U.S. Treasury and equivalent securities as held-to-maturity in accordance with ASC Topic 320 “Investments — Debt and Equity Securities.” Held-to-maturity securities are those securities which the Company has the ability and intent to hold until maturity. Held-to-maturity treasury securities are recorded at amortized cost on the accompanying balance sheet and adjusted for the amortization or accretion of premiums or discounts.
Offering Costs
The Company complies with the requirements of FASB ASC Topic 340-10-S99-1, “Other Assets and Deferred Costs – SEC Materials” (“ASC 340-10-S99”) and SEC Staff Accounting Bulletin Topic 5A, “Expenses of Offering”. Offering costs consisting principally of underwriting, legal, accounting and other expenses that are directly related to the IPO and charged to shareholders’ equity upon the completion of the IPO.
Warrants
We account for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) ASC 480 “Distinguishing Liabilities from Equity” (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, whether they 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 stock and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
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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 equity at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded as liabilities at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations. We determined that upon further review of the proposed form of warrant agreement, management concluded that the warrants included in the Units issued in the IPO pursuant to the warrant agreement qualify for equity accounting treatment.
Common Stock Subject to Possible Redemption
The Company accounts for its common stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption (if any) 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 is classified as stockholders’ equity. The Company’s Public Shares feature certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, as of September 30, 2023, common stock subject to possible redemption are presented at redemption value of $10.94 per share as temporary equity, outside of the shareholders’ equity section of the Company’s balance sheet. The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable common stock are affected by charges against additional paid in capital or accumulated deficit if additional paid in capital equals to zero.
Income Taxes
The Company accounts for income taxes under ASC 740 Income Taxes (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position 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. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of September 30, 2023. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
The Company has identified the United States as its only major tax jurisdiction.
The Company may be subject to potential examination by federal and state taxing authorities in the areas of income taxes. These potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
Net Income (Loss) per Share
The Company complies with accounting and disclosure requirements of FASB ASC 260, Earnings Per Share. In order to determine the net income (loss) attributable to both the redeemable shares and non-redeemable shares, the Company first considered the undistributed income (loss) allocable to both the redeemable common stock and non-redeemable common stock and the undistributed income (loss) is calculated using the total net loss less any dividends paid. The Company then allocated the undistributed income (loss) ratably based on the weighted average number of shares outstanding between the redeemable and non-redeemable common stock. Any remeasurement of the accretion to redemption value of the common stock subject to possible redemption was considered to be dividends paid to the public stockholders.
Recent Accounting Pronouncements
Management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s unaudited condensed financial statement.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES.
(a) Evaluation of Disclosure Controls and Procedures
Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this Report, is recorded, processed, summarized, and reported within the time period specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. Our management evaluated, with the participation of our current chief executive officer (who also serves as our chief financial officer) (our “Certifying Officer”), the effectiveness of our disclosure controls and procedures as of September 30, 2023, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our chief executive officer and chief financial officer concluded that during the period covered by this report, our disclosure controls and procedures were not effective due to presence of material weaknesses in internal control over financial reporting.
Previously, management identified a material weakness in the Company’s internal controls over financial reporting which existed as of March 31, 2023 due to ineffective control over period end process to properly accrue exercise tax as a result of new tax legislation. A material weakness is a deficiency, or a 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 financial statements will not be prevented or detected on a timely basis. Since then, management has taken mediation measures including without limitation, consulting tax expert in connection with the new tax legislation, performing additional research and analyses as deemed necessary to book accrued exercise tax and adding proper accounting and review of exercise tax, as a result of which, management reasonably concluded that such material weakness has been remediated as of September 30, 2023.
This Quarterly Report on Form 10-Q does not include an attestation report of internal controls from our independent registered public accounting firm due to our status as an emerging growth company under the JOBS Act.
(b) Changes in Internal Control over Financial Reporting
Except as set forth in Item 4(a) above, there were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter covered by this report that has materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are not a party to any material legal proceedings and no material legal proceedings have been threatened by us or, to the best of our knowledge, against us.
ITEM 1A. RISK FACTORS
Not required.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Unregistered Sales of Equity Securities
On June 14, 2022, simultaneously with the closing of the IPO, the Company completed the Private Placement of 5,240,000 Private Placement Warrants to the Company’s sponsor, at a purchase price of $1.00 per Private Placement Warrant, generating gross proceeds to the Company of $5,240,000.
The above sales were issued pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act. No commissions were paid in connection with such sales.
Use of Proceeds
On June 14, 2022, we consummated the IPO of 8,625,000 Public Units (including 1,125,000 Units issued upon the partial exercise of the over-allotment option), at a price of $10.00 per unit, generating gross proceeds of $86,250,000. Simultaneously with the closing of the IPO, we consummated the sale of 5,240,000 Private Placement Warrants, to our sponsor in Private Placement generating gross proceeds of $5,240,000.
The net proceeds of $87,975,000 from the IPO and the Private Placement, were placed in the Trust Account established for the benefit of the Company’s public stockholders and the underwriters of the IPO with Wilmington Trust, National Association acting as trustee.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
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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.
* | Filed herewith. |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Acri Capital Acquisition Corporation | ||
Date: November 9, 2023 | By: | /s/ “Joy” Yi Hua |
“Joy” Yi Hua | ||
Chief Executive Officer & Chief Financial Officer | ||
(Principal Executive Officer and Principal Financial and Accounting Officer) |
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