08/14/2024 | Press release | Distributed by Public on 08/14/2024 12:31
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ______ to ______
Commission file number: 001-41289
FUTURETECH II ACQUISITION CORP.
(Exact name of registrant as specified in its charter)
Delaware | 87-2551539 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
128 Gail Drive New Rochelle, NY |
10805 | |
(Address of principal executive offices) | (Zip Code) |
(914)316-4805
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Units, each consisting of one share of Class A Common Stock and one Redeemable Warrant | FTIIU | The NasdaqStock Market LLC | ||
Class A Common stock, $0.0001 par value per share | FTII | The NasdaqStock Market LLC | ||
Redeemable Warrants, each warrant exercisable for one share of Class A Common Stock at an exercise price of $11.50 per share | FTIIW | The NasdaqStock Market LLC |
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. Yes☒ No ☐
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). Yes☒ No ☐
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 | ☐ |
Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
Emerging growth company | ☒ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☒No ☐
As of August 14, 2024 there were 2,954,510shares of the Company's Class A Common Stock, $0.0001par value per share, and 2,875,000shares of the Company's Class B Common Stock, $0.0001par value per share, issued and outstanding.
FUTURETECH II ACQUISITION CORP.
INDEX TO FINANCIAL STATEMENTS
Page | |||
PART I - FINANCIAL INFORMATION | F-1 | ||
Item 1. | Financial Statements: | F-1 | |
Condensed Balance Sheets as of June 30, 2024 (Unaudited) and December 31, 2023 (Audited) | F-1 | ||
Condensed Statements of Operations for the Three and Six Months Ended June 30, 2024 and 2023 (Unaudited) | F-2 | ||
Condensed Statements of Changes in Stockholders' Deficit for the Six Months Ended June 30, 2024 and 2023 (Unaudited) | F-3 | ||
Condensed Statements of Cash Flows for the Six Months Ended June 30, 2024 and 2023 (Unaudited) | F-4 | ||
Notes to Condensed Financial Statements (Unaudited) | F-5 | ||
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 3 | |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 9 | |
Item 4. | Controls and Procedures | 9 | |
PART II - OTHER INFORMATION: | 9 | ||
Item 1. | Legal Proceedings | 9 | |
Item 1A. | Risk Factors | 9 | |
Item 2. | Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities | 9 | |
Item 3. | Defaults Upon Senior Securities | 9 | |
Item 4. | Mine Safety Disclosures | 9 | |
Item 5. | Other Information | 9 | |
Item 6. | Exhibits | 10 |
2 |
FUTURETECH II ACQUISITION CORP.
CONDENSED BALANCE SHEETs
June 30, | December 31, | |||||||
2024 | 2023 | |||||||
(unaudited) | ||||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash | $ | 476 | $ | 17,578 | ||||
Prepaid expenses | 63,000 | 64,043 | ||||||
Extension fee receivable | - | 125,000 | ||||||
Due from Sponsor | 731,912 | 731,912 | ||||||
Total Current Assets | 795,388 | 938,533 | ||||||
Marketable Securities held in Trust Account | 26,660,351 | 61,839,164 | ||||||
Total Assets | $ | 27,455,739 | $ | 62,777,697 | ||||
LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
Current Liabilities: | ||||||||
Accounts payable and accrued expenses | $ | 414,761 | $ | 295,138 | ||||
Excise tax payable | 1,005,209 | 642,389 | ||||||
Franchise tax payable | 194,364 | 94,364 | ||||||
Income tax payable | 1,009,833 | 1,087,603 | ||||||
Accrued offering costs | 2,708 | 2,708 | ||||||
Total Current Liabilities | 2,626,875 | 2,122,202 | ||||||
Deferred underwriting commission | 3,450,000 | 3,450,000 | ||||||
Total Liabilities | 6,076,875 | 5,572,202 | ||||||
COMMITMENTS AND CONTINGENCIES (Note 6) | ||||||||
Class A common stock, $0.0001par value; 100,000,000shares authorized; 2,319,435and 5,556,350shares subject to possible redemption issued and outstanding shares at redemption value of $10.87and $10.90per share as of June 30, 2024 and December 31, 2023 , respectively | 25,206,155 | 60,532,197 | ||||||
Stockholders' deficit: | ||||||||
Preferred shares, $0.0001par value; 1,000,000shares authorized; noneissued and outstanding | - | - | ||||||
Class A common stock, $0.0001par value, 100,000,000shares authorized, 635,075issued and outstanding (excluding 2,319,435and 5,556,350shares subject to possible redemption and including 115,000representative shares as of June 30, 2024 and December 31, 2023, respectively) | 64 | 64 | ||||||
Class B common stock, $0.0001par value, 10,000,000shares authorized, 2,875,000shares issued and outstanding | 288 | 288 | ||||||
Additional paid-in capital | - | - | ||||||
Accumulated deficit | (3,827,643 | ) | (3,327,054 | ) | ||||
Total Stockholders' Deficit | (3,827,291 | ) | (3,326,702 | ) | ||||
Total Liabilities and Stockholders' Deficit | $ | 27,455,739 | $ | 62,777,697 |
The accompanying notes are an integral part of these unaudited condensed financial statements.
F-1 |
FUTURETECH II ACQUISITION CORP.
CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
For the Three Months Ended | For the Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2024 | 2023 | 2024 | 2023 | |||||||||||||
EXPENSES | ||||||||||||||||
Administrative fee - related party | $ | 30,000 | $ | 30,000 | $ | 60,000 | $ | 60,000 | ||||||||
Franchise tax | 50,000 | 50,000 | 100,000 | 100,000 | ||||||||||||
General and administrative | 204,894 | 260,441 | 435,828 | 401,566 | ||||||||||||
TOTAL EXPENSES | 284,894 | 340,441 | 595,828 | 561,566 | ||||||||||||
OTHER INCOME | ||||||||||||||||
Interest earned on marketable securities held in Trust Account | 283,084 | 1,468,385 | 819,427 | 2,756,883 | ||||||||||||
TOTAL OTHER INCOME | 283,084 | 1,468,385 | 819,427 | 2,756,883 | ||||||||||||
Pre-tax income (loss) | (1,810 | ) | 1,127,944 | 223,599 | 2,195,317 | |||||||||||
Income tax | (42,647 | ) | (291,561 | ) | (138,480 | ) | (551,645 | ) | ||||||||
Net income (loss) | $ | (44,457 | ) | $ | 836,383 | $ | 85,119 | $ | 1,643,672 | |||||||
Weighted average number of redeemable common stock outstanding, basic and diluted | 2,319,435 | 11,500,000 | 3,119,771 | 11,500,000 | ||||||||||||
Basic and diluted net income (loss) per share of redeemable common stock | $ | 0.07 | $ | 0.08 | $ | 0.15 | $ | 0.17 | ||||||||
Weighted average number of shares of non-redeemable common stock outstanding, basic and diluted | 3,510,075 | 3,510,075 | 3,510,075 | 3,510,075 | ||||||||||||
Basic and diluted net income (loss) per share of non-redeemable common stock | $ | (0.06 | ) | $ | (0.04 | ) | $ | (0.11 | ) | $ | (0.07 | ) |
The accompanying notes are an integral part of these unaudited condensed financial statements.
F-2 |
FUTURETECH II ACQUISITION CORP.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR SIX MONTHS ENDED JUNE 30, 2024 AND 2023
(unaudited)
Class A | Class B | Additional | Total | |||||||||||||||||||||||||
Common Stock | Common Stock | Paid in | Accumulated | Stockholders' | ||||||||||||||||||||||||
Shares | Amounts | Shares | Amounts | Capital | Deficit | Deficit | ||||||||||||||||||||||
Balance - December 31, 2022 | 635,075 | $ | 64 | 2,875,000 | $ | 288 | $ | - | $ | (3,229,704 | ) | $ | (3,229,352 | ) | ||||||||||||||
Remeasurement adjustment | - | - | - | - | - | (2,128,414 | ) | (2,128,414 | ||||||||||||||||||||
Net income | - | - | - | - | - | 807,289 | 807,289 | |||||||||||||||||||||
Balance March 31, 2023 | 635,075 | 64 | 2,875,000 | 288 | - | (4,550,829 | ) | (4,550,477 | ) | |||||||||||||||||||
Remeasurement adjustment | - | - | - | - | - | (1,126,824 | ) | (1,126,824 | ) | |||||||||||||||||||
Net income | - | - | - | - | - | 836,383 | 836,383 | |||||||||||||||||||||
Balance June 30, 2023 | 635,075 | $ | 64 | 2,875,000 | $ | 288 | $ | - | $ | (4,841,270 | ) | $ | (4,840,918 | ) |
Class A | Class B | Additional | Total | |||||||||||||||||||||||||
Common Stock | Common Stock | Paid in | Accumulated | Stockholders' | ||||||||||||||||||||||||
Shares | Amounts | Shares | Amounts | Capital | Deficit | Deficit | ||||||||||||||||||||||
Balance December 31, 2023 | 635,075 | $ | 64 | 2,875,000 | $ | 288 | $ | - | $ | (3,327,054 | ) | $ | (3,326,702 | ) | ||||||||||||||
Excise tax payable | - | - | - | - | - | (362,820 | ) | (362,820 | ) | |||||||||||||||||||
Accretion to redemption value | - | - | - | - | - | (615,511 | ) | (615,511 | ) | |||||||||||||||||||
Capital contribution | - | - | - | - | - | 273,667 | 273,667 | |||||||||||||||||||||
Net income | - | - | - | - | - | 129,577 | 129,577 | |||||||||||||||||||||
Balance March 31, 2024 | 635,075 | 64 | 2,875,000 | 288 | - | (3,902,141 | ) | (3,901,789 | ) | |||||||||||||||||||
Accretion to redemption value | - | - | - | - | - | (340,436 | ) | (340,436 | ) | |||||||||||||||||||
Capital contribution | - | - | - | - | - | 459,391 | 459,391 | |||||||||||||||||||||
Net income | - | - | - | - | - | (44,457 | ) | (44,457 | ) | |||||||||||||||||||
Balance June 30, 2024 | 635,075 | $ | 64 | 2,875,000 | $ | 288 | $ | - | $ | (3,827,643 | ) | $ | (3,827,291 | ) |
The accompanying notes are an integral part of these unaudited financial statements.
F-3 |
FUTURETECH II ACQUISITION CORP.
CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
For the Six Months Ended |
||||||||
June 30, 2024 | June 30, 2023 | |||||||
Cash flows from Operating Activities: | ||||||||
Net income | $ | 85,119 | $ | 1,643,672 | ||||
Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
Income earned on marketable securities held in the Trust Account | (819,427 | ) | (2,756,883 | ) | ||||
Changes in operating assets and liabilities: | ||||||||
Prepaid expenses | 1,043 | (41,153 | ) | |||||
Franchise tax payable | 100,000 | (200,000 | ) | |||||
Income tax payable | (77,770 | ) | 349,645 | |||||
Other assets | - | 77,654 | ||||||
Accounts payable and accrued expenses | 119,625 | 174,066 | ||||||
Net cash used in operating activities | (591,410 | ) | (752,999 | ) | ||||
Cash flows from Investing Activities: | ||||||||
Investment of cash in Trust Account | (500,000 | ) | (2,300,000 | ) | ||||
Cash in transit to the trust | 125,000 | - | ||||||
Cash withdrawn from Trust | 36,498,240 | 507,636 | ||||||
Net cash provided by (used in) investing activities | 36,123,240 | (1,792,364 | ) | |||||
Cash flows from Financing Activities: | ||||||||
Capital contribution from Sponsor | 733,058 | - | ||||||
Cash paid for redemptions | (36,281,990 | ) | - | |||||
Advance to Sponsor | - | (440,100 | ) | |||||
Proceeds from issuance of debt - related party | - | 2,771,485 | ||||||
Net cash (used in) provided by financing activities | (35,548,932 | ) | 2,331,385 | |||||
Net change in cash | (17,102 | ) | (213,978 | ) | ||||
Cash - Beginning of the period | 17,578 | 262,756 | ||||||
Cash - End of the period | $ | 476 | $ | 48,778 | ||||
Supplemental disclosure of non-cash financing activities: | ||||||||
Accretion to redemption value | $ | 955,947 | $ | 3,255,238 | ||||
Excise tax on Class A common stock redemptions | $ | 362,820 | $ | - |
The accompanying notes are an integral part of these unaudited condensed financial statements.
F-4 |
FUTURETECH II ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1 - Description of Organization and Business Operations, Going Concern and Basis of Presentation
FutureTech II Acquisition Corp. (the "Company") is a blank check company incorporated in Delaware on August 19, 2021. The Company was formed for the purpose of effectuating a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more businesses (the "Business Combination"). The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of June 30, 2024, the Company had not commenced any operations. All activity for the period from April 13, 2021 (inception) through June 30, 2024 relates to organizational activities and identifying a target company for a business combination. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the Company's initial public offering (the "Initial Public Offering"). The Company has selected December 31 as its fiscal year end.
The registration statement for the Initial Public Offering was declared effective on February 14, 2022. On February 18, 2022, the Company consummated the Initial Public Offering of 11,500,000units ("Units" and, with respect to the shares of Class A common stock included in the Units offered, the "Public Shares"), generating gross proceeds of $115,000,000, which is described in Note 3.
Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 520,075private placement units (the "Private Placement Units") at a price of $10.00per unit in a private placement to the FutureTech Partners II LLC (the "Sponsor"), generating gross proceeds of $5,200,750, which is described in Note 4.
Following the closing of the Initial Public Offering on February 18, 2022, an amount of $117,300,000($10.00per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering and the Private Placement Units was placed in a trust account ("Trust Account") which may be invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the "Investment Company Act"), with a maturity of 185 days or less or in any open-ended investment company that holds itself out as a money market fund meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the consummation of a Business Combination or (ii) the distribution of the Trust Account to the Company's stockholders, as described below.
Transaction costs of the Initial Public Offering with the exercise of the overallotment amounted to $5,688,352consisting of $1,725,000of cash underwriting fees, $3,450,000of deferred underwriting fees and $513,352of other costs.
Following the closing of the Initial Public Offering, $700,000of cash was held outside of the Trust Account available for working capital purposes. As of June 30, 2024, the Company has available to it $476of cash on its unaudited condensed balance sheet and a working capital deficit of $1,831,487. As of December 31, 2023, the Company has available to it $17,578of cash on its condensed balance sheet and a working capital deficit of $1,183,669.
F-5 |
Note 1 - Description of Organization and Business Operations (Continued)
The Company's management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of the Private Placement Units, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. NASDAQ rules provide that the Business Combination must be with one or more target businesses that together have a fair market value equal to at least 80% of the balance in the Trust Account (as defined below) (less any deferred underwriting commissions and taxes payable on interest earned on the Trust Account) at the time of the signing of a definitive agreement to enter a Business Combination. The Company will only complete a Business Combination if the post-Business Combination company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act. There is no assurance that the Company will be able to successfully effect a Business Combination.
The Company has until August 18, 2024 (or up to November 18, 2024, if extended) to consummate a Business Combination (the "Combination Period"). If the Company is unable to complete a Business Combination by the end of 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 its taxes (less up to $100,000of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish public stockholders' rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company's remaining stockholders and its board of directors, dissolve and liquidate, subject in the case of clauses (ii) and (iii) above to the Company's obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. Accordingly, unless a Business Combination has been completed, it is the Company's intention to redeem its Public Shares as soon as reasonably possible following the end of the Combination Period.
The Sponsor has agreed that it will be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has entered into a written letter of intent, confidentiality or similar agreement or Business Combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10.20per Public Share and (ii) the actual amount per Public Share held in the Trust Account as of the day of liquidation of the Trust Account, if less than $10.20per share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to monies held in the Trust Account (whether or not such waiver is enforceable) nor will it apply to any claims under the Company's indemnity of the underwriter of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the "Securities Act"). 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 its indemnity obligations and believe that the Sponsor's only assets are securities of the Company. Therefore, the Company cannot assure its stockholders that the Sponsor would be able to satisfy those obligations. None of the Company's officers or directors will indemnify the Company for claims by third parties including, without limitation, claims by vendors and prospective target businesses. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers, prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
F-6 |
Note 1 - Description of Organization and Business Operations (Continued)
Liquidity and Management's Plans
At June 30, 2024, the Company had cash of $476and working capital deficit of $1,831,487.
At December 31, 2023, the Company had cash of $17,578and working capital deficit of $1,183,669.
In connection with the Company's assessment of going concern considerations in accordance with Financial Accounting Standard Board's Accounting Standards Update ("ASU") 2014-15, "Disclosures of Uncertainties about an Entity's Ability to Continue as a Going Concern," the Company has until August 18, 2024 (or up to November 18, 2024, if extended) to complete a Business Combination. It is uncertain that the Company will be able to consummate an initial Business Combination by this time. If an initial Business Combination is not consummated by this date and the Company has not exercised its option to extend the deadline, there will be a mandatory liquidation and subsequent dissolution of the Company. These factors, among others, raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the Company's inability to continue as a going concern.
Risks and Uncertainties
Management is currently evaluating the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company's financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of the unaudited condensed financial statements. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Additionally, as a result of the military action commenced in February 2022 by the Russian Federation and Belarus in the country of Ukraine and related economic sanctions, 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. Further, 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 and/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.
Note 2 - Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the Securities and Exchange Commission (the "SEC"). Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows.
In the opinion of the Company's management, the unaudited condensed financial statements as of June 30, 2024 and for the three and six months ended June 30, 2024 and 2023 include all adjustments, which are only of a normal and recurring nature, necessary for a fair statement of the financial position of the Company as of June 30, 2024 and its results of operations and cash flows for the six months ended June 30, 2024 and 2023. 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 fiscal year ending December 31, 2024 or any future interim period.
F-7 |
Note 2 - Summary of Significant Accounting Policies (Continued)
Emerging Growth Company
The Company is an "emerging growth company," as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company's financial statements with another public company, which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of unaudited condensed financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements and the reported amounts of revenues and expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the unaudited condensed financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentration of credit risk consist of a cash account in a financial institution which, at times may exceed the Federal depository insurance coverage of $250,000. At June 30, 2024 and December 31, 2023, the Company had not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.
Derivative
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 815. "Derivatives and Hedging". Derivative instruments are initially recorded at fair value on the grant date and re-valued at each reporting date, with changes in the fair value reported in the unaudited condensed statements of operations. Derivative assets and liabilities are classified in the unaudited condensed balance sheets as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date. The Company accounts for the warrants in accordance with the guidance contained in ASC 815-40. The Company has determined that the warrants qualify for equity treatment in the Company's unaudited condensed financial statements.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash equivalents are carried at cost, which approximates fair value. As of June 30, 2024 and December 31, 2023, the Company had cash of $476and $17,578, respectively. The Company had nocash equivalents as of June 30, 2024 and December 31, 2023.
Trust Account
Upon the closing of the Initial Public Offering and the Private Placement, $117,300,000($10.00per Unit) of the net proceeds of the Initial Public Offering and certain of the proceeds of the Private Placement Units was held in the Trust Account located in the United States with Continental Stock Transfer & Trust Company acting as trustee, and invested only in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act, which will be invested only in direct U.S. government treasury obligations, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account as described above.
F-8 |
Note 2 - Summary of Significant Accounting Policies (Continued)
As of June 30, 2024 and December 31, 2023, the Company had $26,660,351and $61,839,164, respectively, in marketable securities held in the Trust Account.
Offering Costs Associated with the Initial Public Offering
The Company complies with the requirements of the Financial Accounting Standards Board ASC 340-10-S99-1 and SEC Staff Accounting Bulletin ("SAB") Topic 5A, "Expenses of Offering." Offering costs of $513,352consist principally of costs incurred in connection with formation of the Company and preparation for the Initial Public Offering. These costs, together with the underwriter discount of $1,725,000were charged to additional paid-in capital upon completion of the Initial Public Offering.
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 "Distinguishing Liabilities from Equity." Common stock subject to mandatory redemption is classified as a liability instrument and is 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, at June 30, 2024 and December 31, 2023, the Class A common stock subject to possible redemption in the amount of $25,206,155and $60,532,197, respectively, is presented as temporary equity, outside of the stockholders' equity section of the Company's unaudited condensed balance sheets. The decrease of $35,326,042during the six months ended June 30, 2024 in the Class A common stock subject to possible redemption is due to a redemption of $36,281,990offset by accretion to the redemption value of $955,947during the six months ended June 30, 2024.
As of June 30, 2024 and December 31, 2023, the shares of common stock reflected on the unaudited condensed balance sheets are reconciled in the following table.
Ending Balance as of December 31, 2022 | $ | 118,466,326 | ||
Redemption of Class A common stock | (64,238,888 | ) | ||
Remeasurement of carrying value to redemption value | 6,304,759 | |||
Ending Balance as of December 31, 2023 | 60,532,197 | |||
Redemption of Class A common stock | (36,281,990 | ) | ||
Remeasurement of carrying value to redemption value | 615,511 | |||
Ending Balance as of March 31, 2024 | 24,865,718 | |||
Remeasurement of carrying value to redemption value | 340,437 | |||
Ending Balance as of June 30, 2024 | $ | 25,206,155 |
Warrant Instruments
The Company accounts for the Public Warrants and the Private Placement Warrants issued in connection with the Initial Public Offering and the Private Placement in accordance with the guidance contained in FASB ASC 815, "Derivatives and Hedging". Under ASC 815-40 the Public Warrants and the Private Placement Warrants meet the criteria for equity treatment and as such will be recorded in shareholders' deficit. If the warrants no longer meet the criteria for equity treatment, they will record as a liability and remeasured each period with changes recorded in the statement of operations.
Net Income (Loss) Per Share
Net income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. The Company applies the two-class method in calculating earnings per share. Earnings and losses are shared pro rata between the two classes of shares. The calculation of diluted loss per share of common stock does not consider the effect of the warrants issued in connection with the (i) Initial Public Offering and (ii) sale of the Private Placement Units, because the warrants are contingently exercisable, and the contingencies have not yet been met. As a result, diluted earnings per share is the same as basic earnings per share for the periods presented.
F-9 |
Note 2 - Summary of Significant Accounting Policies (Continued)
The following table reflects the calculation of basic and diluted net income (loss) per share (in dollars, except per share amounts):
Three Months Ended | Three Months Ended | |||||||||||||||
June 30, 2024 | June 30, 2023 | |||||||||||||||
Redeemable | Non-redeemable | Redeemable | Non-redeemable | |||||||||||||
Basic and diluted net income (loss) per share of common stock Numerator | $ | 283,084 | $ | - | $ | 1,456,385 | $ | - | ||||||||
Less: Allocation of net income (loss), as adjusted | (130,322 | ) | (197,219 | ) | (484,210 | ) | (147,792 | ) | ||||||||
Total | $ | 152,762 | $ | (197,219 | ) | $ | 972,175 | $ | (147,792 | ) | ||||||
Basic and diluted net income (loss) per share of common stock | $ | 0.07 | $ | (0.06 | ) | $ | 0.08 | $ | (0.04 | ) |
Six Months Ended | Six Months Ended | |||||||||||||||
June 30, 2024 | June 30, 2023 | |||||||||||||||
Redeemable | Non-redeemable | Redeemable | Non-redeemable | |||||||||||||
Basic and diluted net income (loss) per share of common stock Numerator | $ | 819,427 | $ | - | $ | 2,756,883 | $ | - | ||||||||
Less: Allocation of net income (loss), as adjusted | (345,539 | ) | (388,769 | ) | (852,889 | ) | (260,322 | ) | ||||||||
Total | $ | 473,888 | $ | (388,769 | ) | $ | 1,903,994 | $ | (260,322 | ) | ||||||
Basic and diluted net income (loss) per share of common stock | $ | 0.15 | $ | (0.11 | ) | $ | 0.17 | $ | (0.07 | ) |
Fair Value of Financial Instruments
The fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
● Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets. This is the level that the Marketable Securities Held in Trust Account are considered (being $26,660,351and $61,839,164as of June 30, 2024 and December 31, 2023, respectively);
● Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and
● Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.
F-10 |
Note 2 - Summary of Significant Accounting Policies (Continued)
Income Taxes
The Company complies with the accounting and reporting requirements of ASC Topic 740, "Income Taxes," which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC Topic 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The Company's management determined the United States is the Company's only major tax jurisdiction. The Company recognizes accrued interest and penalties related to unrecognized tax benefits, if any, as income tax expense. There were nounrecognized tax benefits as of June 30, 2024 and December 31, 2023 and noamounts accrued for interest and penalties. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires disaggregated information about a reporting entity's effective tax rate reconciliation, as well as information related to income taxes paid to enhance the transparency and decision usefulness of income tax disclosures. This ASU will be effective for the annual period ending December 31, 2025. The Company is currently assessing what impact, if any, that ASU 2023-09 would have on its financial position, results of operations or cash flows.
New Law and Changes
On August 16, 2022, the Inflation Reduction Act (the "IR Act") was signed into law, which, beginning in 2023, will impose a 1% excise tax on public company stock buybacks.
The IR Act imposes a 1% excise tax on the fair market value of stock repurchases made by covered corporations after December 31, 2022. The total taxable value of shares repurchased is reduced by the fair market value of any newly issued shares during the taxable year. Redemption rights are ubiquitous to nearly all SPACs. The Company has recorded a liability on the accompanying unaudited condensed balance sheets to be in compliance with the IR Act.
Recently Issued Accounting Standards
Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company's unaudited condensed financial statements.
Note 3 - Public Offering
Pursuant to the Initial Public Offering and full exercise of the underwriters' overallotment option, the Company sold 11,500,000Units at a purchase price of $10.00per Unit. Each Unit consists of one share of Class A common stock and one redeemable warrant ("Public Warrant"). Each Public Warrant will entitle the holder to purchase one share of Class A common stock at an exercise price of $11.50per share (see Note 7).
Note 4 - Private Placement
Simultaneously with the closing of the Initial Public Offering, the Sponsor purchased an aggregate of 520,075Private Placement Units at a price of $10.00per Private Placement Unit (or $5,200,750in the aggregate), from the Company. The Sponsor transferred $5,200,750to the Trust Account on February 16, 2022.
The proceeds from the sale of the Private Placement Units were added to the net proceeds from the Initial Public Offering held in the Trust Account. The warrants included in the Private Placement Units (the "Private Placement Warrants") are identical to the warrants sold in the Initial Public Offering, except as described in Note 7. If the Company does not complete a Business Combination within the required period, the Private Placement Warrants will expire worthless.
F-11 |
Note 5 - Related Party Transactions
Class B Common Stock
On October 8, 2021, the Company issued an aggregate of 2,875,000shares of Class B common stock to the Sponsor for an aggregate purchase price of $25,000in cash, or approximately $0.009per share. Such Class B common stock includes an aggregate of up to 375,000shares that were subject to forfeiture by the Sponsor to the extent that the underwriters' over-allotment was not exercised in full or in part, so that the Sponsor would collectively own 20% of the Company's issued and outstanding shares after the Initial Public Offering (assuming the initial stockholders did not purchase any Public Shares in the Initial Public Offering and excluding the Private Placement Units and underlying securities).
The initial stockholders have agreed not to transfer, assign or sell any of the Class B common stock (except to certain permitted transferees) until the earlier of (i) one year after the date of the consummation of a Business Combination, or (ii) the date on which the closing price of the Company's common stock equals or exceeds $12.00per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations) for any 20 trading days within any 30-trading day period commencing six months after a Business Combination, or earlier, in each case, if, subsequent to a Business Combination, the Company consummates a subsequent liquidation, merger, stock exchange or other similar transaction which results in all of the Company's stockholders having the right to exchange their common stock for cash, securities or other property.
Promissory Note - Related Party
On August 19, 2021, the Sponsor issued an unsecured promissory note to the Company, pursuant to which the Company may borrow up to an aggregate principal amount of $300,000to be used for payment of costs related to the Initial Public Offering. The note is non-interest bearing and payable on the earlier of (i) March 31, 2022 or (ii) the consummation of the Initial Public Offering. The promissory note was fully drawn as of June 30, 2024 and December 31, 2023, respectively. The Company is not required to repay the promissory note and as such is treated as a capital contribution and included in accumulated deficit on the Company's unaudited condensed balance sheets.Related Party Loans
In order to finance transaction costs in connection with a Business Combination, the Sponsor, an affiliate of the Sponsor, or the Company's officers and directors may, but are not obligated to, loan the Company funds as may be required (the "Working Capital Loans"). Such Working Capital Loans would be evidenced by promissory notes. The notes would either be repaid upon consummation of a Business Combination, without interest, or, at the lender's discretion, up to $1,500,000of such loans may be converted upon consummation of a Business Combination into units at a price of $10.00per unit. The Units will be identical to the Private Placement Units. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. As of June 30, 2024 and December 31, 2023, the Company has no working capital loans outstanding.
F-12 |
Extension Loan - Related Party
If the Company anticipates that it may not be able to consummate a Business Combination by the end of the Combination Period, the Company may, by resolution of the Company's board if requested by the Sponsor, extend the period of time to consummate a Business Combination up to six times, each by an additional one month (for a total of up to 24 months to complete a Business Combination), subject to the Sponsor depositing additional funds into the Trust Account as set out below. Pursuant to the terms of the Company's amended and restated certificate of incorporation, as amended, and the trust agreement entered into between the Company and Continental Stock Transfer & Trust Company, in order for the time available for the Company to consummate the initial Business Combination to be extended, the Sponsor or its affiliates or designees, upon five business days' advance notice prior to the applicable deadline, must deposit into the Trust Account the lesser of: (i) $125,000and (ii) an aggregate amount equal to $0.04multiplied by the number of public shares of the Company that are not redeemed for each such one-month extension unless the closing of the Company's initial business combination shall have occurred, in exchange for a non-interest bearing, unsecured promissory note payable upon consummation of a business combination (the "Extension Loans"). If the Company completes its initial Business Combination, the Company will, at the option of the Sponsor, repay the Extension Loans out of the proceeds of the Trust Account released to the Company or convert a portion or all of the total loan amount into units at a price of $10.00per unit, which units will be identical to the Private Placement Units. If the Company does not complete a Business Combination, the Company will repay such loans only from funds held outside of the Trust Account. Furthermore, the letter agreement among the Company and the Company's officers, directors, and the Sponsor contains a provision pursuant to which the Sponsor will agree to waive its right to be repaid for such loans to the extent there is insufficient funds held outside of the Trust Account in the event that the Company does not complete a Business Combination. The Sponsor and its affiliates or designees are not obligated to fund the Trust Account to extend the time for the Company to complete the initial Business Combination. The public stockholders will not be afforded an opportunity to vote on the extension of time to consummate an initial Business Combination from 18 months to 24 months described above or redeem their shares in connection with such extensions. On August 18, 2023, the Company caused to be deposited $125,000into the Company's Trust Account, allowing the Company to extend the period of time it has to consummate its initial Business Combination from August 18, 2023 to September 18, 2023. On September 26, 2023, the Company caused to be deposited $125,000into the Company's Trust Account, allowing the Company to extend the period of time it has to consummate its initial Business Combination from September 18, 2023 to October 18, 2023. On, October 18, 2023, the Company caused to be deposited $125,000into the Company's Trust Account, allowing the Company to extend the period of time it has to consummate its initial Business Combination from October 18, 2023 to November 18, 2023. On December 18, 2023, the Company caused to be deposited $125,000into the Company's Trust Account, allowing the Company to extend the period of time it has to consummate its initial Business Combination from December 18, 2023 to January 18, 2024. On January 18, 2024, the Company caused to be deposited $125,000into the Company's Trust Account, allowing the Company to extend the period of time it has to consummate its initial Business Combination from January 18, 2024 to February 18, 2024. On February 18, 2024, the Company caused to be deposited $50,000into the Company's Trust Account, allowing the Company to extend the period of time it has to consummate its initial Business Combination from February 18, 2024 to March 18, 2024. On March 18, 2024, the Company caused to be deposited $50,000into the Company's Trust Account, allowing the Company to extend the period of time it has to consummate its initial Business Combination from March 18, 2024 to April 18, 2024. On April 18, 2024, the Company caused to be deposited $50,000into the Company's Trust Account, allowing the Company to extend the period of time it has to consummate its initial Business Combination from April 18, 2024 to May 18, 2024. On May 18, 2024, the Company caused to be deposited $50,000into the Company's Trust Account, allowing the Company to extend the period of time it has to consummate its initial Business Combination from May 18, 2024 to June 18, 2024. On June 18, 2024, the Company caused to be deposited $50,000into the Company's Trust Account, allowing the Company to extend the period of time it has to consummate its initial Business Combination from June 18, 2024 to July 18, 2024. On July 18, 2024, the Company caused to be deposited $50,000into the Company's Trust Account, allowing the Company to extend the period of time it has to consummate its initial Business Combination from July 18, 2024 to August 18, 2024. As of June 30, 2024 and December 31, 2023, there was $3,425,028and $3,050,028outstanding under the Extension Loans, respectively. The Company is not required to repay the extension loans and as such is treated as a capital contribution and is included in accumulated deficit on the Company's unaudited condensed balance sheets.
Due from Sponsor
On August 16, 2023, the Company and the Sponsor entered into an agreement to have the Sponsor reimburse all of the Company's expenses after August 16, 2023 in exchange for 380,000founder's shares and 164,000founder shares at the signing of the agreement and at the closing of a merger, respectively. As of June 30, 2024 and December 31, 2023, the Company had paid a total of $731,912and $731,912, respectively, in expenses that will be reimbursed by the Sponsor.
Administrative Support Agreement
Commencing on the date the Units are first listed on Nasdaq, the Company has agreed to pay the Sponsor a total of $10,000per month for office space, utilities and secretarial and administrative support for up to 18 months. Upon completion of the initial Business Combination or the Company's liquidation, the Company will cease paying these monthly fees. During the three and six months ended June 30, 2024 the Company recorded $30,000and $60,000, respectively of administrative expenses. As of June 30, 2024 and December 31, 2023, the Company had $280,000and $220,000in administrative expenses included in accounts payable and accrued expenses on the Company's unaudited condensed balance sheets.
Representative Shares
The Company issued to EF Hutton and/or its designees, 115,000shares of Class A common stock upon the Initial Public Offering. EF Hutton has agreed not to transfer, assign or sell any such common stock until the completion of the Company's initial Business Combination. In addition, EF Hutton has agreed (i) to waive its redemption rights with respect to such common stock in connection with the completion of the Company's initial Business Combination and (ii) to waive its rights to liquidating distributions from the Trust Account with respect to such common stock if the Company fails to complete its initial Business Combination within the Combination Period.
F-13 |
The representative shares have been deemed compensation by FINRA and are therefore subject to a lock-up for a period of 180 days immediately following the commencement of sales in the Initial Public Offering pursuant to Rule 5110(e)(1) of FINRA's NASD Conduct Rules. Pursuant to FINRA Rule 5110(e)(1), these securities may not be sold, transferred, assigned, pledged or hypothecated or the subject of any hedging, short sale, derivative, put or call transaction that would result in the economic disposition of the securities by any person for a period of 180 days immediately following the effective date of the registration statement for the Initial Public Offering, nor may they be sold, transferred, assigned, pledged or hypothecated for a period of 180 days immediately following the commencement of sales in the Initial Public Offering except to any underwriter and selected dealer participating in the offering and their bona fide officers or partners, registered persons or affiliates or as otherwise permitted under Rule 5110(e)(2), and only if any such transferee agrees to the foregoing lock-up restrictions.
Note 6 - Commitments and Contingencies
Registration Rights
The holders of the insider shares, as well as the holders of the Private Placement Units (and underlying securities) and any securities issued in payment of working capital loans made to the Company, are entitled to registration rights pursuant to an agreement signed on the effective date of Initial Public Offering. The holders of a majority of these securities are entitled to make up to three demands that the Company register such securities. Notwithstanding anything to the contrary, the underwriters (and/or their designees) may only make a demand registration (i) on one occasion and (ii) during the five-year period beginning on the effective date of the Initial Public Offering. The holders of the majority of these securities can elect to exercise these registration rights at any time after the Company consummates a Business Combination. In addition, the holders have certain "piggy-back" registration rights with respect to registration statements filed subsequent to the consummation of a Business Combination. Notwithstanding anything to the contrary, the underwriters (and/or their designees) may participate in a "piggy-back" registration only during the seven-year period beginning on the effective date of the Initial Public Offering. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The underwriter was paid a cash underwriting discount of one and a half percent (1.50%) of the gross proceeds of the Initial Public Offering, or $1,725,000. In addition, the underwriter is entitled to a deferred fee of three and a half percent (3.50%) of the gross proceeds of the Initial Public Offering, or $3,450,000. The deferred fee was placed in the Trust Account and will be paid in cash upon the closing of a Business Combination, subject to the terms of the underwriting agreement. In addition, the Company issued EF Hutton and/or its designees, 115,000shares of Class A common stock upon the consummation of the Initial Public Offering.
Right of First Refusal
For a period beginning on the closing of the Initial Public Offering and ending twenty-four (24) months from the closing of a Business Combination, the Company granted EF Hutton, division of Benchmark Investments, LLC a right of first refusal to act as lead-left book running manager and lead left manager for any and all future private or public equity, convertible and debt offerings during such period.
Note 7 - Stockholders' Deficit
Preferred Shares - The Company is authorized to issue 1,000,000preferred shares with a par value of $0.0001per share with such designation, rights and preferences as may be determined from time to time by the Company's Board of Directors. At June 30, 2024 and December 31, 2023, there were nopreferred shares issued or outstanding.
Class A Common Stock - The Company is authorized to issue 100,000,000shares of Class A common stock with a par value of $0.0001per share. Holders of the Company's Class A common stock are entitled to one vote for each share.At June 30, 2024 and December 31, 2023, there were 635,075shares of Class A common stock issued and outstanding, which included 115,000representative shares and excludes shares subject to possible redemption. As of June 30, 2024 and December 31, 2023, there were 2,319,435shares and 5,556,350shares subject to possible redemption, respectively, of Class A common stock that were classified as temporary equity in the accompanying unaudited condensed balance sheets.
F-14 |
Note 7 - Stockholders' Deficit (Continued)
Class B Common Stock - The Company is authorized to issue 10,000,000shares of Class B common stock with a par value of $0.0001per share. Holders of the Company's Class B common stock are entitled to one vote for each share.At June 30, 2024 and December 31, 2023, there were 2,875,000shares of Class B common stock issued and outstanding.
Only holders of the Class B common stock will have the right to vote on the election of directors prior to the Business Combination. Holders of Class A common stock and holders of Class B common stock will vote together as a single class on all matters submitted to a vote of the Company's stockholders except as otherwise required by law. In connection with the Company's initial Business Combination, the Company may enter into a shareholders agreement or other arrangements with the shareholders of the target or other investors to provide for voting or other corporate governance arrangements that differ from those in effect upon completion of the Initial Public Offering.
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 one-for-one basis, subject to adjustment. In the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in excess of the amounts issued in the Initial Public Offering and related to the closing of a Business Combination, the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the then-outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as-converted basis, 20% of the sum of the total number of all shares of common stock outstanding upon the completion of Initial Public Offering plus all shares of Class A common stock and equity-linked securities issued or deemed issued in connection with a Business Combination (net of the number of shares of Class A common stock redeemed in connection with a Business Combination), excluding any shares or equity-linked securities issued or issuable to any seller of an interest in the target to the Company in a Business Combination.
Warrants - The Public Warrants will become exercisable 30 days after the completion of a Business Combination. The Public Warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.
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 20 business days after the closing of a Business Combination, the Company will use its commercially reasonable efforts to file, and within 60 business days following a Business Combination to have declared effective, a registration statement covering the issuance of the shares of Class A common stock issuable upon exercise of the warrants and to maintain a current prospectus relating to those shares of Class A common stock until the warrants expire or are redeemed. Notwithstanding the above, if the 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 Public 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 the Company so elects, the Company will not be required to file or maintain in effect a registration statement, but will use its commercially reasonable efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
F-15 |
Note 7 - Stockholders' Deficit (Continued)
Redemption of Warrants When the Price per Share of Class A Common Stock Equals or Exceeds $18.00 - Once the warrants become exercisable, the Company may redeem the outstanding Public Warrants:
● | in whole and not in part; |
● | at a price of $0.01per Public Warrant; |
● | upon a minimum of 30 days' prior written notice of redemption, or the 30-day redemption period to each warrant holder; and |
● | if, and only if, the last reported sale price of the Class A common stock equals or exceeds $18.00per share (as adjusted for stock splits, stock dividends, reorganization, recapitalizations and the like) for any 20 trading days within a 30-trading day period commencing once the warrants become exercisable and ending on the third trading day prior to the date on which the Company sends the notice of redemption to warrant holders. |
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 required 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.
The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering.
NOTE 8. FAIR VALUE MEASUREMENTS
The Company follows the guidance in ASC 820 for its financial assets that are re-measured and reported at fair value at each reporting period.
The following table presents information about the Company's assets that are measured at fair value at June 30, 2024 and December 31, 2023, and indicates the Fair Value Hierarchy of the valuation inputs the Company utilized to determine such fair value:
Description: | Level | June 30, 2024 | December 31, 2023 | ||||||||
Assets: | |||||||||||
Marketable securities held in trust account | 1 | $ | 26,660,351 | $ | 61,839,164 |
Note 9 - Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date. Based upon this review the Company did not identify any subsequent events, that would have required adjustment or disclosure in the financial statements.
F-16 |
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
References to the "Company," "us," "our" or "we" refer FutureTech II Acquisition Corp. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited interim financial statements and related notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report contains statements that constitute forward-looking statements which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Statements that are not historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Some of the statements in this Quarterly Report constitute forward-looking statements because they relate to future events or our future performance or future financial condition. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about our company, our industry, our beliefs and our assumptions. Our forward-looking statements include, but are not limited to, statements regarding our or our management team's expectations, hopes, beliefs, intentions, or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "might," "plan," "possible," "potential," "predict," "project," "should," "would" and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this Quarterly Report may include, for example, statements about:
● | our ability to select an appropriate target business or businesses; | |
● | our ability to complete our initial business combination; | |
● | our expectations around the performance of the prospective target business or businesses; | |
● | our success in retaining or recruiting, or changes required in, our officers, key employees or directors following our initial business combination; | |
● | our officers and directors allocating their time to other businesses and potentially having conflicts of interest with our business or in approving our initial business combination; | |
● | our potential ability to obtain additional financing to complete our initial business combination; | |
● | our pool of prospective target businesses; | |
● | the ability of our officers and directors to generate a number of potential acquisition opportunities; | |
● | our disclosure controls and procedures and internal control over financial reporting and any material weaknesses of the foregoing; | |
● | the use of proceeds not held in the trust account or available to us from interest income on the trust account balance; | |
● | the trust account not being subject to claims of third parties; or | |
● | our financial performance. |
The forward-looking statements contained in this Quarterly Report are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under the section of this Quarterly Report entitled "Risk Factors." Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
We use words such as "anticipates," "believes," "expects," "intends," "seeks," "plans," "estimates," "targets" and similar expressions to identify forward-looking statements. The forward-looking statements contained in this Quarterly Report involve risks and uncertainties. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason.
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Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be inaccurate. In light of these and other uncertainties, the inclusion of a projection or forward-looking statements in this Quarterly Report should not be regarded as a representation by us that our plans and objectives will be achieved.
Overview
We are a blank check company incorporated in Delaware on August 19, 2021. We were 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 (the "Business Combination"). We are an emerging growth company and, as such, we are subject to all of the risks associated with emerging growth companies. We intend to effectuate our Business Combination using cash from the proceeds of the Initial Public Offering and the sale of the Private Warrants, our capital stock, debt or a combination of cash, stock and debt.
We expect to continue to incur significant costs in the pursuit of our initial Business Combination. We cannot assure you that our plans to raise capital or to complete our initial Business Combination will be successful.
Extension of Combination Period
As approved by our stockholders at the special meeting of stockholders held on August 17, 2023 (the "2023 Special Meeting"), we entered into an amendment to the Investment Management Trust Agreement, dated as of February 18, 2022 (the "Trust Agreement"), with Continental Stock Transfer & Trust Company ("Continental"), on August 17, 2023 (the "Trust Amendment"). The Trust Amendment extended the initial date on which Continental must commence liquidation of the Trust Account to up to February 18, 2024, or such earlier date as determined by our board of directors (the "Board"), unless the closing of our initial business combination shall have occurred, provided that FutureTech II Partners LLC (the "Sponsor") (or its affiliates or permitted designees) will deposit into a trust account established for the benefit of our public stockholders (the "Trust Account") the lesser of: (i) $125,000 and (ii) an aggregate amount equal to $0.04 multiplied by the number of our public shares that are not redeemed for each such one-month extension unless the closing of our initial business combination shall have occurred, in exchange for a non-interest bearing, unsecured promissory note payable upon consummation of a business combination.
As approved by its stockholders at the 2023 Special Meeting, we filed an amendment to our amended and restated certificate of incorporation (the "Charter") with the Delaware Secretary of State on August 17, 2023 (the "First Charter Amendment"), to extend the date by which we have to consummate a business combination for an additional six months, from August 18, 2023 (the "Termination Date") to up to February 18, 2024, by electing to extend the date to consummate an initial business combination on a monthly basis for up to six times by an additional one month each time after the Termination Date, until February 18, 2024 or a total of up to six months after the Termination Date, or such earlier date as determined by the Board, unless the closing of our initial business combination shall have occurred (the "Extension," and such later date, the "Extended Termination Date"), provided that the Sponsor (or its affiliates or permitted designees) will deposit into the Trust Account the lesser of: (i) $125,000 and (ii) an aggregate amount equal to $0.04 multiplied by the number of our public shares that are not redeemed for each such one-month extension unless the closing of our initial business combination shall have occurred, in exchange for a non-interest bearing, unsecured promissory note payable upon consummation of a business combination.
In connection with the votes to approve the Extension, the holders of 5,943,650 public shares of our Class A common stock properly exercised their right to redeem their shares for cash at a redemption price of approximately $10.81 per share, for an aggregate redemption amount of approximately $64.2 million.
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On August 18, 2023, the Company caused to be deposited $125,000 into the Company's Trust Account, allowing the Company to extend the period of time it has to consummate its initial Business Combination from August 18, 2023 to September 18, 2023. On September 26, 2023, the Company caused to be deposited $125,000 into the Company's Trust Account, allowing the Company to extend the period of time it has to consummate its initial Business Combination from September 18, 2023 to October 18, 2023. On October 18, 2023, the Company caused to be deposited $125,000 into the Company's Trust Account, allowing the Company to extend the period of time it has to consummate its initial Business Combination from October 18, 2023 to November 18, 2023. On November 17, 2023, the Company caused to be deposited $125,000 into the Company's Trust Account, allowing the Company to extend the period of time it has to consummate its initial Business Combination from November 18, 2023 to December 18, 2023. On December 18, 2023, the Company caused to be deposited $125,000 into the Company's Trust Account, allowing the Company to extend the period of time it has to consummate its initial Business Combination from December 18, 2023 to January 18, 2023. On January 18, 2024, the Company caused to be deposited $50,000 into the Company's Trust Account, allowing the Company to extend the period of time it has to consummate its initial Business Combination from January 18, 2024 to February 18, 2024.
As approved by its stockholders at the special meeting of stockholders held on February 14, 2024, (the "Second Special Meeting"), we filed an amendment to the Charter with the Delaware Secretary of State on February 14, 2024 (the "Second Charter Amendment"), to extend the date (the "Second Extension") by which we have to consummate a business combination for an additional nine months up to November 18, 2024 by electing to extend the date to consummate an initial business combination on a monthly basis for up to nine times by an additional one month each time after the Extended Termination Date, until November 18, 2024 or a total of up to nine months after the Extended Termination Date, or such earlier date as determined by the Board, unless the closing of our initial business combination shall have occurred, provided that the Sponsor (or its affiliates or permitted designees) will deposit into the Trust Account the lesser of: (i) $50,000 and (ii) an aggregate amount equal to $0.03 multiplied by the number of our public shares that are not redeemed for each such one-month extension unless the closing of our initial business combination shall have occurred, in exchange for a non-interest bearing, unsecured promissory note payable upon consummation of a business combination. The Second Charter Amendment was filed as Exhibit 3.1 to the Form 8-K filed by the Company on February 14 , 2024
In connection with the votes to approve the Second Extension, the holders of 3,236,915 public shares of our Class A common stock properly exercised their right to redeem their shares for cash at a redemption price of approximately $11.13 per share, for an aggregate redemption amount of approximately $36 million.
On February 18, 2024, the Company caused to be deposited $50,000 into the Company's Trust Account, allowing the Company to extend the period of time it has to consummate its initial Business Combination from February 18, 2024 to March 18, 2024. On March 18, 2024, the Company caused to be deposited $50,000 into the Company's Trust Account, allowing the Company to extend the period of time it has to consummate its initial Business Combination from March 18, 2024 to April 18, 2024. On April 18, 2024, the Company caused to be deposited $50,000 into the Company's Trust Account, allowing the Company to extend the period of time it has to consummate its initial Business Combination from April 18, 2024 to May 18, 2024. On May 18, 2024, the Company caused to be deposited $50,000 into the Company's Trust Account, allowing the Company to extend the period of time it has to consummate its initial Business Combination from May 18, 2024 to June 18, 2024. On June 18, 2024, the Company caused to be deposited $50,000 into the Company's Trust Account, allowing the Company to extend the period of time it has to consummate its initial Business Combination from June 18, 2024 to July 18, 2024.On July 18, 2024, the Company caused to be deposited $50,000 into the Company's Trust Account, allowing the Company to extend the period of time it has to consummate its initial Business Combination from July 18, 2024 until August 18, 2024.
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Recent Developments
Nasdaq Notice
As previously disclosed, on October 16, 2023, the Company received a written notice from the Listing Qualifications Department (the "Staff") of The Nasdaq Stock Market LLC ("Nasdaq") indicating that we were not in compliance with Nasdaq Listing Rule 5450(a)(2) (the "Minimum Total Holders Rule"), which requires the Company to have at least 400 total holders for continued listing on The Nasdaq Global Market. In accordance with Nasdaq Listing Rule 5810(c)(2)(G), the Company submitted a plan to regain compliance with the Minimum Total Holders Rule (the "Plan").
On February 27, 2024, the Company received a written notice (the "Notice") indicating that the Staff determined to delist the Company's securities from Nasdaq, unless the Company timely requests a hearing before a Hearings Panel (the "Panel"), based on the Staff's determination that the Staff only has discretion to grant an extension until April 15, 2024, and in the context of a reasonably long timeline to consummate a de-SPAC merger, given that the Company plans to enter into a definitive agreement no sooner than March 2024, therefore the Staff does not believe that the Company can feasibly consummate a business combination and regain compliance by April 15, 2024.
Accordingly, the Company timely requested a hearing before the Panel. The hearing request will stay the suspension of the Company's securities and the termination of registration of the securities with Nasdaq as required by the rules of the Securities and Exchange Commission pending the Panel's decision and, therefore, Nasdaq's notice has no immediate effect on the listing of the Company's common stock, units or warrants on Nasdaq. The time and place of any hearing before the Panel will be determined by the Panel. There can be no assurance that the Panel will grant the Company's request for continued listing.
On April 23, 2024, the Company received a written notice (the "Second Notice") from the Staff of Nasdaq notifying the Company that, for the last 30 consecutive business days, the Company's Market Value of Listed Securities ("MVLS") was below the minimum of $50 million required for continued listing on The Nasdaq Global Market pursuant to Nasdaq Listing Rule 5450(b)(2)(A) (the "Market Value Standard"). The Staff also noted that the Company does not meet the requirements under Nasdaq Listing Rule 5450(b)(3)(A) (the "Total Assets/Total Revenue Standard"). An indicator will be displayed with quotation information related to the Company's securities on NASDAQ.com and NASDAQTrader.com and may be displayed by other third-party providers of market data information, however, the Second Notice does not impact the listing of the Company's securities on The Nasdaq Global Market at this time.
The Second Notice provided that, in accordance with Nasdaq Listing Rule 5810(c)(3)(C) (the "Compliance Period Rule"), the Company has a period of 180 calendar days from the date of the Notice, or until October 21, 2024 (the "Compliance Date"), to regain compliance with the Market Value Standard. During this period, the Company's securities will continue to trade on The Nasdaq Global Market. If at any time before the Compliance Date the Company's MVLS closes at or above $50 million for a minimum of 10 consecutive business days as required under the Compliance Period Rule, the Staff will provide written notification to the Company that it has regained compliance with the Market Value Standard and will close the matter.
If the Company does not regain compliance with the Market Value Standard by the Compliance Date, the Staff will provide a written notification to the Company that its securities are subject to delisting. At that time, the Company may appeal the Staff's delisting determination to a Panel. However, there can be no assurance that, if the Company receives a delisting notice and appeals the delisting determination by the Staff to the Panel, such appeal would be successful.
The Company intends to monitor its MVLS between now and the Compliance Date, and may, if appropriate, evaluate available options to resolve the deficiency under the Market Value Standard and regain compliance with the Market Value Standard. Additionally, the Company may consider applying to transfer the listing of its securities to The Nasdaq Capital Market (provided that it then satisfies the requirements for continued listing on that market). However, there can be no assurance that the Company will be able to regain or maintain compliance with Nasdaq listing criteria.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities from inception to June 30, 2024 were organizational activities, those necessary to prepare for the Initial Public Offering ("Initial Public Offering"), conducting the Initial Public Offering and identifying a target company for a business combination. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the Initial Public Offering We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.
For the three and six months ended June 30, 2024, we had net loss of $44,457 and net income of $85,119, which consisted of investment income of $283,084 and $819,427, respectively, partially offset by expenses of $284,894 and $595,828 and tax expense of $42,647 and $138,480, respectively. Investment income was higher in 2023 compared to 2024 due to higher trust assets in 2023. Expenses were higher in 2024 compared to 2023 due to due diligence costs related to a potential business combination transaction.
For the three and six months ended June 30, 2023, we had net income of $836,383 and $1,643,672, which consisted of investment income of $1,468,385 and $2,756,883, partially offset by expenses of $340,441 and $561,566 and tax expense of $291,561 and $551,645, respectively.
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Liquidity and Capital Resources
In connection with the Company's assessment of going concern considerations in accordance with Financial Accounting Standard Board's Accounting Standards Update ("ASU") 2014-15, "Disclosures of Uncertainties about an Entity's Ability to Continue as a Going Concern," the Company has until August 18, 2024 to complete a Business Combination. It is uncertain that the Company will be able to consummate an initial Business Combination by this time. If an initial Business Combination is not consummated by this date and the Company has not exercised its option to extend the deadline, there will be a mandatory liquidation and subsequent dissolution of the Company. These factors, among others, raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the Company's inability to continue as a going concern.
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash equivalents are carried at cost, which approximates fair value. The Company had $476 in cash and no cash equivalents as of June 30, 2024.
For the six months ended June 30, 2024, cash used in operating activities was $591,410. The net income of $85,119 was affected by interest earned on investments held in the trust account of $819,427, and changes in operating assets and liabilities provided $142,898 of cash for operating activities.
For the six months ended June 30, 2023, cash used in operating activities was $752,999. The net income of $1,643,672 was affected by interest earned on investments held in the trust account of $2,756,883, and changes in operating assets and liabilities provided $360,212 of cash for operating activities.
For the six months ended June 30, 2024, cash provided by investing activities was $36,123,240 due to cash withdrawn from the Trust Account of $36,498,240 and cash that was in transit to the Trust Account as of December 31, 2023, partially offset by cash deposited into the Trust Account of $500,000 and $125,000 cash in transit to the trust.
For the six months ended June 30, 2023, cash used in investing activities was $1,792,364 due to cash deposited into the Trust Account of $2,300,000 and cash withdrawn from the Trust Account of $507,636.
For the six months ended June 30, 2024, cash provided by financing activities was $35,548,932 due to $36,281,990 in cash paid for redemptions, partially offset by $733,058 in capital contributions from the Sponsor.
For the six months ended June 30, 2023, cash provided by financing activities was $2,331,385 due to proceeds from issuance of debt of $2,771,485 and $440,100 cash advanced to the Sponsor.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of June 30, 2024. 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.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities. The underwriter is entitled to a deferred fee of three percent (3.00%) of the gross proceeds of the Offering upon closing of the Business Combination, or $3,450,000. The deferred fee will be paid in cash upon the closing of a Business Combination from the amounts held in the Trust Account, subject to the terms of the underwriting agreement.
Critical Accounting Policies
The preparation of audited financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America 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 audited financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. As of June 30, 2024, the below were the Company's critical accounting policies.
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Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
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 "Distinguishing Liabilities from Equity." Common stock subject to mandatory redemption is classified as a liability instrument and is 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, at June 30, 2024 and December 31, 2023, the Class A common stock subject to possible redemption in the amount of $25,206,155 and $60,532,197, respectively, is presented as temporary equity, outside of the stockholders' equity section of the Company's unaudited condensed balance sheets. The decrease of $35,326,042 during the six months ended June 30, 2024 in the Class A common stock subject to possible redemption is due to a redemption of $36,281,990 offset by accretion to the redemption value of $955,947 during the three months ended March 31, 2024.
As of June 30, 2024 and December 31, 2023, the shares of common stock reflected on the unaudited condensed balance sheets are reconciled in the following table.
Ending Balance as of December 31, 2022 | $ | 118,466,326 | ||
Redemption of Class A common stock | (64,238,888 | ) | ||
Remeasurement of carrying value to redemption value | 6,304,759 | |||
Ending Balance as of December 31, 2023 | 60,532,197 | |||
Redemption of Class A common stock | (36,281,990 | ) | ||
Remeasurement of carrying value to redemption value | 615,511 | |||
Ending Balance as of March 31, 2024 | 24,865,718 | |||
Remeasurement of carrying value to redemption value | 340,437 | |||
Ending Balance as of June 30, 2024 | $ | 25,206,155 |
Net Income (Loss) Per Share
The Company complies with accounting and disclosure requirements of ASC Topic 260, "Earnings Per Share." Net loss per share is computed by dividing net income (loss) by the weighted average number of ordinary shares outstanding during the period, excluding ordinary shares subject to forfeiture. As of June 30, 2024 and 2023, the calculation of diluted income (loss) per share does not consider the effect of the warrants issued in connection with the Initial Public Offering and warrants issued as components of the Private Placement Units (the "Placement Warrants") since the exercise of the warrants are contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive. As a result, diluted income (loss) per share is the same as basic loss per share for the periods presented. Accretion associated with the redeemable shares of Class A Ordinary Shares is excluded for earnings per share as the redemption value approximates fair value at June 30, 2024 and 2023.
The following table reflects the calculation of basic and diluted net income (loss) per share (in dollars, except per share amounts):
Three Months Ended | Three Months Ended | |||||||||||||||
June 30, 2024 | June 30, 2023 | |||||||||||||||
Redeemable | Non-redeemable | Redeemable | Non-redeemable | |||||||||||||
Basic and diluted net income (loss) per share of common stock Numerator | $ | 283,084 | $ | - | $ | 1,456,385 | $ | - | ||||||||
Less: Allocation of net income (loss), as adjusted | (130,322 | ) | (197,220 | ) | (484,210 | ) | (147,792 | ) | ||||||||
Total | $ | 152,762 | $ | (197,220 | ) | $ | 972,175 | $ | (147,792 | ) | ||||||
Basic and diluted net income (loss) per share of common stock | $ | 0.07 | $ | (0.06 | ) | $ | 0.08 | $ | (0.04 | ) |
Six Months Ended | Six Months Ended | |||||||||||||||
June 30, 2024 | June 30, 2023 | |||||||||||||||
Redeemable | Non-redeemable | Redeemable | Non-redeemable | |||||||||||||
Basic and diluted net income (loss) per share of common stock Numerator | $ | 819,427 | $ | - | $ | 2,756,883 | $ | - | ||||||||
Less: Allocation of net income (loss), as adjusted | (345,539 | ) | (388,769 | ) | (852,889 | ) | (260,322 | ) | ||||||||
Total | $ | 473,888 | $ | (388,769 | ) | $ | 1,903,994 | $ | (260,322 | ) | ||||||
Basic and diluted net income (loss) per share of common stock | $ | 0.15 | $ | (0.11 | ) | $ | 0.17 | $ | (0.07 | ) |
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Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on our audited financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not required for smaller reporting companies.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Exchange Act, 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 management, including our Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), as appropriate, to allow timely decisions regarding required disclosure.
In connection with the preparation of this Quarterly Report, as of June 30, 2024, an evaluation was performed under the supervision and with the participation of management, including the CEO and CFO, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15€ under the Exchange Act.) Based on such evaluation, our CEO and CFO concluded that, as of June 30, 2024, our disclosure controls and procedures were not effective, due solely to the material weakness in our internal control over financial reporting related to financial reporting system and accounting for accruals.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the quarter of the fiscal year covered by this Quarterly Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
As a smaller reporting company, as defined in Rule 12b-2 of the Exchange Act, we are not required to provide the information required by this Item. Factors that could cause our actual results to differ materially from those in this Quarterly Report are any of the risks described in our final prospectus for our Initial Public Offering 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 on Form 10-Q, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.
Item 2. Unregistered Sale of Equity Securities and Use of Proceeds.
None. There has been no material change in the planned use of proceeds from our offering as described in our final prospectus filed with the SEC pursuant to Rule 424(b) related to the Initial Public Offering.
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.
No. | Description of Exhibit | |
31.1* | Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
32.1** | Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
101.INS* | Inline XBRL Instance Document | |
101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.SCH* | Inline XBRL Taxonomy Extension Schema 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 | Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit) |
* | Filed herewith. |
** | Furnished. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
FUTURETECH II ACQUISITION CORP. | ||
Date: August 14, 2024 | By: | /s/ Ray Chen |
Name: | Ray Chen | |
Title: | Chief Executive Officer and Chief Financial Officer | |
(Principal Executive, Financial and Accounting Officer) |
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