Thunder Power Holdings, Inc 10-Q for FY2023 Q3
Thunder Power Holdings, Inc. (AIEV)
About this 10-Q
Thunder Power Holdings, Inc filed this 10-Q on November 8, 2023, covering the quarter ended September 30, 2023 (FY2023 Q3).
Headline figures
Quarter ended September 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net income
- $36.24K
- down 87.0% from net income of $279.4K a year earlier
- Diluted EPS
- $0.07
- up 133.3% from $0.03 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly
period ended:
Or
For the transition period from to
Commission File
Number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class: | Trading Symbol(s) | Name of Each Exchange on Which Registered: | ||
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check
mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Indicate by check
mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405
of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging
growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check
mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.
As of September 30, 2023,
TABLE OF CONTENTS
| Part I – FINANCIAL INFORMATION | 1 | ||
| Item 1. | Financial Statements | 1 | |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 24 | |
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 31 | |
| Item 4. | Controls and Procedures | 31 | |
| Part II – OTHER INFORMATION | 32 | ||
| Item 1. | Legal Proceedings | 32 | |
| Item 1A. | Risk Factors | 32 | |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 33 | |
| Item 3. | Defaults Upon Senior Securities | 34 | |
| Item 4. | Mine Safety Disclosures | 34 | |
| Item 5. | Other Information | 34 | |
| Item 6. | Exhibits | 34 | |
| SIGNATURES | 35 | ||
i
CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Quarterly Report including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s final prospectus for its initial public offering filed with the U.S. Securities and Exchange Commission (the “SEC”). The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
ii
PART I – FINANCIAL INFORMATION
Item 1. Unaudited Financial Statements
FEUTUNE LIGHT ACQUISITION CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
| September 30, 2023 | December 31, 2022 | |||||||
| Assets | ||||||||
| Other Assets | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Investments held in Trust Account | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities, Temporary Equity, and Stockholders’ Deficit | ||||||||
| Current liabilities: | ||||||||
| Accrued expenses | $ | $ | ||||||
| Franchise tax payable | ||||||||
| Income taxes payable | ||||||||
| Loan from shareholders | ||||||||
| Total Current Liabilities | ||||||||
| Deferred underwriters' discount | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Class A common stock subject to possible redemption, | ||||||||
| Stockholders' Deficit: | ||||||||
Preferred stock, $ | ||||||||
| Class A common stock, $ | ||||||||
| Class B common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders' Deficit | ( | ) | ( | ) | ||||
| Total Liabilities, Temporary Equity and Stockholders' Deficit | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
1
FEUTUNE LIGHT ACQUISITION CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| For the Period from | ||||||||||||||||
| For the Three Months Ended | For the Three Months Ended | For the Nine Months Ended | January 19, 2022 (inception) through | |||||||||||||
| September 30, 2023 | September 30, 2022 | September 30, 2023 | September 30, 2022 | |||||||||||||
| Formation and operating costs | $ | $ | $ | $ | ||||||||||||
| Franchise tax expenses | ||||||||||||||||
| Loss from Operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Other income | ||||||||||||||||
| Interest earned on investment held in Trust Account | ||||||||||||||||
| Income before income taxes | ||||||||||||||||
| Income taxes provision | ||||||||||||||||
| Net Income (Loss) | $ | $ | $ | $ | ||||||||||||
| $ | $ | $ | $ | |||||||||||||
| $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
2
FEUTUNE LIGHT ACQUISITION CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(Unaudited)
| Common Stock | Additional | Total | ||||||||||||||||||||||||||
| Class A | Class B | Paid-in | Accumulated | Stockholders' | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance as of December 31, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Accretion of carrying value to redemption value | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Net Income | - | - | ||||||||||||||||||||||||||
| Balance as of March 31, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Accretion of carrying value to redemption value | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Net Income | - | - | ||||||||||||||||||||||||||
| Balance as of June 30, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Accretion of carrying value to redemption value | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||
| Net Income | - | - | - | - | - | |||||||||||||||||||||||
| Balance as of September 30, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Common Stock | Additional | Total | ||||||||||||||||||||||||||
| Class A | Class B | Paid-in | Accumulated | Stockholders' | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance as of January 19, 2022 (inception) | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Founder shares issued to initial stockholder | ||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance as of March 31, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Sale of public units through public offering | ||||||||||||||||||||||||||||
| Sale of private placement shares | ||||||||||||||||||||||||||||
| Issuance of representative shares | - | |||||||||||||||||||||||||||
| Underwriters' discount | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Reclassification of common stock subject to redemption | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Allocation of offering costs to common stock subject to redemption | - | - | ||||||||||||||||||||||||||
| Accretion of carrying value to redemption value | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Net Loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance as of June 30, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Accretion of carrying value to redemption value | ( | ) | ( | ) | ||||||||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||
| Balance as of September 30, 2022 | $ | $ | $ | - | $ | ( | ) | $ | ( | ) | ||||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
3
FEUTUNE LIGHT ACQUISITION CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
| For the Nine Months Ended September 30, 2023 | For the Period from January 19, 2022 (inception) through September 30, 2022 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net Income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
| Interest earned on investment held in Trust Account | ( | ) | ( | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses | ( | ) | ||||||
| Accrued expenses | ||||||||
| Franchise tax payable | ( | ) | ||||||
| Income taxes payable | ( | ) | ||||||
| Net Cash Used in Operating Activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Purchase of investment held in trust account | ( | ) | ( | ) | ||||
| Cash withdrawn from trust to pay taxes | ||||||||
| Cash withdrawn from Trust Account in connection with redemption | ||||||||
| Net Cash Provided by (Used in) Investing Activities | ( | ) | ||||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from issuance of founder shares | ||||||||
| Proceeds from issuance of promissory note to related party | ||||||||
| Payment of promissory note to related party | ( | ) | ||||||
| Proceeds from public offering | ||||||||
| Proceeds from private placement | ||||||||
| Payment of underwriter discount | ( | ) | ||||||
| Payment of deferred offering costs | ( | ) | ||||||
| Redemption of Class A Common Stock | ( | ) | ||||||
| Net Cash Provided by (Used in) Financing Activities | ( | ) | ||||||
| Net Change in Cash | ( | ) | ||||||
| Cash at Beginning of Period | ||||||||
| Cash at End of Period | $ | $ | ||||||
| Supplemental Disclosure of Cash Flow Information: | ||||||||
| Cash paid for income taxes | $ | $ | ||||||
| Cash paid for interest | $ | $ | ||||||
| Non-cash Financing Activities: | ||||||||
| Deferred underwriters’ marketing fees | $ | $ | ||||||
| Issuance of representative shares | $ | $ | ||||||
| Change in value of common stock subject to redemption | $ | $ | ||||||
| Allocation of offering costs to common stock subject to redemption | $ | $ | ||||||
| Accretion of carrying value to redemption value | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
4
FEUTUNE LIGHT ACQUISITION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(Unaudited)
Note 1 — Organization and Business Operation
Feutune Light Acquisition Corporation (the “Company”) is a newly organized blank check company incorporated as a Delaware company on January 19, 2022. The Company was formed for the purpose of entering into a merger, stock exchange, asset acquisition, share purchase, recapitalization, reorganization or similar business combination with one or more businesses (the “Business Combination”). The Company is actively searching for and identifying a suitable Business Combination target. The Company is not limited to a particular industry or geographic region for purposes of consummating an initial business combination. The Company will not undertake its initial Business Combination with any company being based in or having the majority of the company’s operations in China (including Hong Kong and Macau). The Company has selected December 31 as its fiscal year end.
On July 3, 2023, the Company incorporated Feutune Light Merger Sub, Inc, (“Merger Sub”), a Delaware corporation and wholly owned subsidiary of the Company. As of September 30, 2023, there has been no activity in Merger Sub.
As of September 30, 2023, the Company had not commenced any operations. For the period from January 19, 2022 (inception) through September 30, 2023, the Company’s efforts have been limited to organizational activities ,as activities related to the initial public offering (“IPO”) and Business Combination. The Company will not generate any operating revenues until after the completion of a Business Combination, at the earliest. The Company generates non-operating income in the form of interest income from the proceeds derived from the IPO.
The registration statement for the Company’s
IPO became effective on June 15, 2022. On June 21, 2022, the Company consummated the IPO of
Substantially concurrently with the closing of
the IPO, the Company completed the sale in a private placement (the “Private Placement”) of
The Company also issued
Transaction costs amounted to $
5
The Company’s initial Business Combination
must occur with one or more target businesses that together have an aggregate fair market value of at least
Following the closing of the IPO, $
On March 21, 2023, an aggregate of $
6
In connection with the Extension Payment, the
Company issued an unsecured promissory note (the “Note”) to the Sponsor. The Note is non-interest bearing and payable (subject
to the waiver against trust provisions) upon the date on which the Company consummates its initial Business Combination. The principal
balance may be prepaid at any time, at the election of the Company. The holder of the Note has the right, but not the obligation, to convert
the Note, in whole or in part, into Private Units of the Company, as described in the final prospectus dated June 17, 2022 filed by the
Company with the SEC (the “Prospectus”), by providing the Company with written notice of its intention to convert the Note
at least two business days prior to the closing of the Company’s initial Business Combination.
On June 16, 2023, the Company held a special meeting
of the stockholders (the “Special Meeting”), where the stockholders of the Company approved the Company to amend the Company’s
Amended and Restated Certificate of Incorporation (the “Charter”) to allow the Company until June 21, 2023 to consummate an
initial Business Combination and may elect to extend the period to consummate an initial Business Combination up to nine times, each by
an additional one-month period (each, a “Monthly Extension”), for a total of up to nine months to March 21, 2024, by depositing
to the Company’s Trust Account, the lesser of (i) $
As of September 30, 2023, four $
In connection with the four Monthly Extension Payments, the Company
issued four unsecured promissory notes of $
The notes bear no interest and are payable in full upon the earlier to occur of (i) the consummation of the Company’s Business Combination or (ii) the date of expiry of the term of the Company (the “Maturity Date”). The following shall constitute an event of default: (i) a failure to pay the principal within five business days of the Maturity Date; (ii) the commencement of a voluntary or involuntary bankruptcy action, (iii) the breach of the Company’s obligations thereunder; (iv) any cross defaults; (v) any enforcement proceedings against the Company; and (vi) any unlawfulness and invalidity in connection with the performance of the obligations thereunder, in which case the notes may be accelerated.
The payee of the notes, the Sponsor, has the right,
but not the obligation, to convert the notes, in whole or in part, respectively, into Private Units of the Company, that are identical
to Public Units of the Company, subject to certain exceptions, as described in the Prospectus, by providing the Company with written notice
of the intention to convert at least two business days prior to the closing of the Business Combination. The number of Private Units to
be received by the Sponsor in connection with such conversion shall be an amount determined by dividing (x) the sum of the outstanding
principal amount payable to the Sponsor by (y) $
7
The Company currently has until November 21, 2023 to consummate its initial Business Combination. However, if the Company anticipates that it may not be able to consummate its initial Business Combination by November 21, 2023, the Company may, but is not obligated to, extend the period of time to consummate its initial Business Combination for up to four more times by an additional one-month each time and may have until March 21, 2024 to consummate its initial Business Combination.
The shares of Class A Common Stock subject to redemption will be recorded
at a redemption value and classified as temporary equity upon the completion of the IPO, in accordance with Accounting Standards Codification
(“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” In such case, the Company will consummate a Business
Combination and, solely if the Company has net tangible assets of at least $
If the Company is unable to complete the initial
Business Combination within the Combination Period, the Company will: (i) cease all operations except for the purpose of winding
up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share
price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held
in the Trust Account and not previously released to the Company to pay the Company’s taxes (less up to $
There will be no redemption rights or liquidating
distributions with respect to the Company’s Warrants and Rights, which will expire worthless if the Company fails to complete the
Business Combination within the Combination Period. The Sponsor, directors and officers (the “founders”) have entered into
a letter agreement with the Company, pursuant to which they have agreed (i) to waive their redemption rights with respect to any Founder
Shares (as defined in Note 5), Private Shares, and any Public Shares held by them in connection with the completion of the initial Business
Combination, (ii) waive their redemption rights with respect to their Founder Shares, Private Shares and Public Shares in connection with
a stockholder vote to approve an amendment to the Company’s amended and restated certificate of incorporation (A) to modify the
substance or timing of the Company’s obligation to allow redemption in connection with the initial Business Combination or to redeem
8
The Sponsor has agreed that it will be liable
to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or by a prospective
target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account
to below (i) $
However, the Company has not asked the Sponsor to reserve for such indemnification obligations, nor has the Company independently verified whether the Sponsor has sufficient funds to satisfy their indemnity obligations and believe that the Sponsor’s only assets are securities of the Company. Therefore, the Company cannot assure that its Sponsor would be able to satisfy those obligations. None of the officers or directors will indemnify the Company for claims by third parties including, without limitation, claims by vendors and prospective target businesses.
Liquidity and Capital Resources and Going Concern
As
of September 30, 2023, the Company had cash of $
The Company intends to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account, excluding deferred underwriting commissions, to complete its Business Combination. The Company may withdraw interest from the Trust Account to pay taxes, if any. To the extent that the Company’s share capital or debt is used, in whole or in part, as consideration to complete a Business Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
The Company intends to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, structure, negotiate and complete a Business Combination.
In order to fund working capital deficiencies
or finance transaction costs in connection with a Business Combination, the Company’s Sponsor or an affiliate of the Company Sponsor
or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required. If
the Company completes the initial Business Combination, it would repay such loaned amounts. In the event that the initial Business Combination
does not close, the Company may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no
proceeds from the Trust Account would be used for such repayment. Up to $
9
If the estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating a Business Combination are less than the actual amount necessary to do so, the Company may have insufficient funds available to operate our business prior to our initial Business Combination. Moreover, the Company may need to obtain additional financing either to complete our Business Combination or because the Company become obligated to redeem a significant number of our public shares upon completion of our Business Combination, in which case the Company may issue additional securities or incur debt in connection with such Business Combination, all of which raise substantial doubt about our ability to continue as a going concern.
In addition, under the Company’s currently effective amended
and restated certificate of incorporation, the Company currently has until November 21, 2023, or March 21, 2024 upon maximum extension,
to complete the initial Business Combination. The Company may seek approval from its stockholders holding no less than
There is no assurance that the Company’s plans to consummate a Business Combination will be successful within the Combination Period and that the Company will obtain enough votes to extend the Combination Period. In connection with the Company’s assessment of going concern considerations in accordance with the Accounting Standards Update (“ASU”) 2014-15 of the Financial Accounting Standard Board (FASB), “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that the liquidity concern and mandatary liquidation mentioned above raised substantial doubt about the Company’s ability to continue as a going concern. The unaudited consolidated financial statement does not include any adjustments that might result from the outcome of this uncertainty.
Merger Agreement
On October 26, 2023, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Thunder Power Holdings Limited, a British Virgin Islands company (“TPH”), and Feutune Light Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Merger Sub”).
TPH is a technology innovator and manufacturer of premium electric vehicles (“EVs”). TPH is dedicated to creating electric vehicles that deliver a premium driving experience combined with a high degree of personalization and has developed and is planning to manufacture a family of EVs suited to various stages of life and driving environments.
Pursuant to the Merger Agreement, TPH will be merged with and into Merger Sub (the “Merger”), with the Merger Sub surviving the Merger as a direct wholly owned subsidiary of the Company.
Note 2 — Significant accounting policies
Basis of Presentation
The accompanying unaudited consolidated financial statements are presented in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) and pursuant to the rules and regulations of the SEC, and include all normal and recurring adjustments that management of the Company considers necessary for a fair presentation of its financial position and operation results. Interim results are not necessarily indicative of results to be expected for any other interim period or for the full year.
Principles of consolidation
The unaudited consolidated financial statements include the financial statements of the Company and its wholly owned subsidiary Merger Sub, over which the Company exercises control. All transactions and balances among the Company and its subsidiary have been eliminated upon consolidation.
10
Emerging Growth Company Status
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 auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s consolidated 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 consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
Cash
The Company considers all short-term investments
with an original maturity of three months or less when purchased to be cash equivalents. The Company had $
Investments held in Trust Account
At September 30, 2023 and December 31, 2022,
$
All of the Company’s investments held in
the Trust Account are classified as trading securities. Trading securities are presented on the unaudited balance sheet at fair value
at the end of each reporting period. Gains and losses resulting from the change in fair value of investments held in Trust Account are
accounted as interest income in the accompanying statement of operations. Interest income for the three months ended September 30, 2023
and 2022 amounted to $
11
Fair Value of Financial Instruments
ASC Topic 820 “Fair Value Measurements and Disclosures” defines fair value, the methods used to measure fair value and the expanded disclosures about fair value measurements. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between the buyer and the seller at the measurement date. In determining fair value, the valuation techniques consistent with the market approach, income approach and cost approach shall be used to measure fair value. ASC Topic 820 establishes a fair value hierarchy for inputs, which represent the assumptions used by the buyer and seller in pricing the asset or liability. These inputs are further defined as observable and unobservable inputs. Observable inputs are those that buyer and seller would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs reflect the Company’s assumptions about the inputs that the buyer and seller would use in pricing the asset or liability developed based on the best information available in the circumstances.
The fair value hierarchy is categorized into three levels based on the inputs as follows:
| ☐ | Level 1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments and block discounts are not being applied. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these securities does not entail a significant degree of judgment. |
| ☐ | Level 2 - Valuations based on (i) quoted prices in active markets for similar assets and liabilities, (ii) quoted prices in markets that are not active for identical or similar assets, (iii) inputs other than quoted prices for the assets or liabilities, or (iv) inputs that are derived principally from or corroborated by market through correlation or other means. |
| ☐ | Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement. |
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the accompanying balance sheet, primarily due to their short-term nature.
Warrants
The Company accounts for Warrants as either equity-classified or liability-classified instruments based on an assessment of the Warrant’s specific terms and applicable authoritative guidance in FASB ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the Warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the Warrants meet all of the requirements for equity classification under ASC 815, including whether the Warrants are indexed to the Company’s own shares of Class A Common Stock and whether the Warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the Warrants are outstanding.
For issued or modified Warrants that meet all of the criteria for equity classification, the Warrants are required to be recorded as a component of equity at the time of issuance. For issued or modified Warrants that do not meet all the criteria for equity classification, the Warrants are required to be recorded as liabilities at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the Warrants are recognized as a non-cash gain or loss on the statements of operations.
12
Common Stock Subject to Possible Redemption
The Company accounts for its common stock subject
to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Common stock
subject to mandatory redemption (if any) are classified as a liability instrument and are measured at fair value. Conditionally redeemable common
stock (including common stock that feature redemption rights that are either within the control of the holder or subject
to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity.
At all other times, common stock is classified as stockholders’ equity. The Company’s Public Shares feature certain
redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events.
Accordingly, as of September 30, 2023, common stock subject to possible redemption are presented at redemption value of
$
As discussed in Note 1, in connection with the
votes to approve the Charter Amendment,
Offering Costs
The Company complies with the requirements of
FASB ASC Topic 340-10-S99-1, “Other Assets and Deferred Costs – SEC Materials” (“ASC 340-10-S99”)
and SEC Staff Accounting Bulletin Topic 5A, “Expenses of Offering”. Offering costs were $
Net Income (Loss) Per Common Share
The Company complies with accounting and disclosure requirements of FASB ASC 260, Earnings Per Share. In order to determine the net income (loss) attributable to both the redeemable shares and non-redeemable shares, the Company first considered the undistributed income (loss) allocable to both the redeemable common stock and non-redeemable common stock and the undistributed income (loss) is calculated using the total net loss less any dividends paid. The Company then allocated the undistributed income (loss) ratably based on the weighted average number of shares outstanding between the redeemable and non-redeemable common stock. Any remeasurement of the accretion to redemption value of the common stock subject to possible redemption was considered to be dividends paid to the public stockholders. As of September 30, 2023, the Company has not considered the effect of the Warrants sold in the IPO and the Private Placement in the calculation of diluted net income (loss) per share, since the exercise of the Warrants is contingent upon the occurrence of future events and the inclusion of such Warrants would be anti-dilutive and the Company did not have any other dilutive securities and other contracts that could, potentially, be exercised or converted into common stock and then share in the earnings of the Company. As a result, diluted income (loss) per share is the same as basic (income) loss per share for the periods presented.
| For the Three Months Ended September 30, 2023 | For the Three Months Ended September 30, 2022 | |||||||
| Net income | $ | $ | ||||||
| Accretion of carrying value to redemption value | ( | ) | ( | ) | ||||
| Net loss including accretion of carrying value to redemption value | $ | ( | ) | $ | ( | ) | ||
13
| For the Three Months Ended September 30, 2023 | For the Three Months Ended September 30, 2022 | |||||||||||||||
| Redeemable Common Stock | Non- Redeemable Common Stock | Redeemable Common Stock | Non- Redeemable Common Stock | |||||||||||||
| Basic and diluted net income/(loss) per share: | ||||||||||||||||
| Numerators: | ||||||||||||||||
| Allocation of net loss including carrying value to redemption value | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Accretion of carrying value to redemption value | ||||||||||||||||
| Allocation of net income (loss) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Denominators: | ||||||||||||||||
| Weighted-average shares outstanding | ||||||||||||||||
| $ | $ | ( | ) | $ | $ | ( | ) | |||||||||
| For the Nine Months Ended September 30, 2023 | For the Period from January 7, 2022 (inception) through September 30, 2022 | |||||||
| Net income (loss) | $ | $ | ||||||
| Accretion of carrying value to redemption value | ( | ) | ( | ) | ||||
| Net loss including accretion of carrying value to redemption value | $ | ( | ) | $ | ( | ) | ||
| For the Nine Months Ended September 30, 2023 | For the Period From January 7, 2022 (inception) through September 30, 2022 | |||||||||||||||
| Redeemable Common Stock | Non- Redeemable Common Stock | Redeemable Common Stock | Non- Redeemable Common Stock | |||||||||||||
| Basic and diluted net income/(loss) per share: | ||||||||||||||||
| Numerators: | ||||||||||||||||
| Allocation of net loss including carrying value to redemption value | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Accretion of carrying value to redemption value | ||||||||||||||||
| Allocation of net income (loss) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Denominators: | ||||||||||||||||
| Weighted-average shares outstanding | ||||||||||||||||
| $ | $ | ( | ) | $ | $ | ( | ) | |||||||||
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentration of credit risk consist of a cash account in a financial institution. The Company has not experienced losses on this account and management believes the Company is not exposed to significant risks on such account. As of September 30, 2023, the balance in this account was fully covered by the Federal Deposit Insurance Corporation (FDIC) limit.
14
Income Taxes
The Company accounts for income taxes under ASC 740 Income Taxes (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s consolidated financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of September 30, 2023. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
The Company has identified the United States as its only major tax jurisdiction.
The Company may be subject to potential examination by federal and state taxing authorities in the areas of income taxes. These potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
The Company is incorporated in the State of Delaware and is required to pay franchise taxes to the State of Delaware on an annual basis. The Company is also registered as a foreign corporation with the State of New Jersey Department of the Treasury and is subject to New Jersey state tax laws.
On August 16, 2022, the Inflation Reduction
Act of 2022 (the “IRA”) was signed into federal law. The IRA provides for, among other things, a new U.S. federal
Any redemption or other repurchase that occurs after December 31, 2022, in connection with a Business Combination, extension vote or otherwise, may be subject to the excise tax. Whether and to what extent the Company would be subject to the excise tax in connection with a Business Combination, extension vote or otherwise would depend on a number of factors, including (i) the fair market value of the redemptions and repurchases in connection with the Company’s initial Business Combination, extension or otherwise, (ii) the structure of the Company’s initial Business Combination, (iii) the nature and amount of any “PIPE” or other equity issuances in connection with the Company’s initial Business Combination (or otherwise issued not in connection with the Company’s initial Business Combination but issued within the same taxable year of the Company’s initial Business Combination) and (iv) the content of regulations and other guidance from the Treasury. In addition, because the excise tax would be payable by the Company and not by the redeeming holder, the mechanics of any required payment of the excise tax have not been determined. The foregoing could cause a reduction in the cash available on hand to complete the Company’s initial Business Combination and in the Company’s ability to complete its initial Business Combination.
Related parties
Parties, which can be a corporation or individual, are considered to be related if the Company has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operational decisions. Companies are also considered to be related if they are subject to common control or common significant influence.
15
Reclassification
Certain prior period amounts on the Company’s statements of changes in stockholders’ deficit have been reclassified to conform to current year presentation. These reclassifications have no effect on the statement.
Recent Accounting Pronouncements
Management does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s unaudited consolidated financial statements.
Note 3 — Investments Held in Trust Account
As of September 30, 2023 and December 31, 2022, assets held in
the Trust Account were comprised of $
| Description | Level | September 30, 2023 | ||||||
| Assets: | ||||||||
| Trust Account - U.S. Treasury Securities Money Market Fund | 1 | $ | ||||||
| Description | Level | December 31, 2022 | ||||||
| Assets: | ||||||||
| Trust Account - U.S. Treasury Securities Money Market Fund | 1 | $ | ||||||
Note 4 — Initial Public Offering
Pursuant to the IPO, the Company sold
All of the
16
The Company’s redeemable common stock is subject to SEC and its staff’s guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99. If it is probable that the equity instrument will become redeemable, the Company has the option to either accrete changes in the redemption value over the period from the date of issuance (or from the date that it becomes probable that the instrument will become redeemable, if later) to the earliest redemption date of the instrument or to recognize changes in the redemption value immediately as they occur and adjust the carrying amount of the instrument to equal the redemption value at the end of each reporting period. The Company has elected to recognize the changes immediately. The accretion or remeasurement is treated as a deemed dividend (i.e., a reduction to retained earnings, or in absence of retained earnings, additional paid-in capital).
| As of September 30, 2023 | As of December 31, 2022 | |||||||
| Gross proceeds | $ | $ | ||||||
| Less: | ||||||||
| Proceeds allocated to Warrants issued in IPO | ( | ) | ( | ) | ||||
| Proceeds allocated to Rights issued in IPO | ( | ) | ( | ) | ||||
| Offering costs of Public Units | ( | ) | ( | ) | ||||
| Redemption | ( | ) | ||||||
| Plus: | ||||||||
| Accretion of carrying value to redemption value | ||||||||
| Common stock subject to possible redemption | $ | $ | ||||||
Note 5 — Private Placement
Substantially concurrently with the closing of
the IPO, the Company completed the sale of
The Founder Shares and Private Shares are identical to the Public Shares. However, the Company’s founders have agreed (A) to vote their Founder Shares and Private Shares in favor of any proposed Business Combination, (B) not to propose, or vote in favor of, prior to and unrelated to an initial Business Combination, an amendment to the Company’s certificate of incorporation that would affect the substance or timing of the Company’s redemption obligation to redeem all Public Shares if the Company cannot complete an initial Business Combination within the Combination Period, unless the Company provides public stockholders an opportunity to redeem their Public Shares in conjunction with any such amendment, (C) not to redeem any shares, including Founder Shares, Private Shares and Public Shares into the right to receive cash from the Trust Account in connection with a stockholder vote to approve a proposed initial Business Combination or sell any shares to the Company in any tender offer in connection with the Company’s proposed initial Business Combination, and (D) that the Founder Shares and Private Shares shall not participate in any liquidating distribution upon winding up if a Business Combination is not consummated.
The Private Placement Units sold in the Private Placement including the underlying securities and the Working Capital Units (defined below) that may be issued upon conversion of working capital loans (including extension notes) may not, subject to certain limited exceptions, be transferred, assigned or sold by the holder until 30 days following the closing of the Business Combination, subject to certain exceptions.
17
Note 6 — Related Party Transactions
Founder Shares
On February 2, 2022, the Sponsor acquired
The number of Founder Shares issued was determined
based on the expectation that such Founder Shares would represent
The founders have agreed not to transfer, assign
or sell
Substantially concurrently with the closing of
the IPO, the Company completed the sale of
The sale of the Founder Shares to the Company’s
management and directors is within the scope of FASB ASC Topic 718, “Compensation-Stock Compensation” (“ASC 718”).
Under ASC 718, stock-based compensation associated with equity-classified awards is measured at fair value upon the grant date. The fair
value of the
Representative Shares
The Company also issued
18
Promissory Note — Related Party
On February 2, 2022, the Sponsor agreed to loan
the Company up to $
On March 21, 2023, the Extension Payment was deposited
by the Sponsor into the Trust Account for the public stockholders, representing $
In connection with the Extension Payment, the
Company issued the Note to the Sponsor. The Note is non-interest bearing and payable (subject to the waiver against trust provisions)
upon the date on which the Company consummates its initial Business Combination. The principal balance may be prepaid at any time, at
the election of the Company. The holder of the Note has the right, but not the obligation, to convert the Note, in whole or in part, into
Private Units of the Company, as described in the Prospectus, by providing the Company with written notice of its intention to convert
the Note at least two business days prior to the closing of the Company’s initial Business Combination.
Following the Special Meeting, as of September 30, 2023, four Monthly Extension Payments were deposited into the Trust Account for the public stockholders as of September 30, 2023, which enabled the Company to extend the period of time it has to consummate its initial Business Combination by four months from June 21, 2023 to October 21, 2023. In connection with the four Monthly Extension Payments, the Company issued notes to the Sponsor.
The notes bear no interest and are payable in full upon the earlier to occur of (i) the consummation of the Company’s Business Combination or (ii) the date of expiry of the term of the Company (the “Maturity Date”). The following shall constitute an event of default: (i) a failure to pay the principal within five business days of the Maturity Date; (ii) the commencement of a voluntary or involuntary bankruptcy action, (iii) the breach of the Company’s obligations thereunder; (iv) any cross defaults; (v) any enforcement proceedings against the Company; and (vi) any unlawfulness and invalidity in connection with the performance of the obligations thereunder, in which case the notes may be accelerated.
The payee of the notes, the Sponsor, has the right,
but not the obligation, to convert the notes, in whole or in part, respectively, into Private Units of the Company, that are identical
to Public Units of the Company, subject to certain exceptions, as described in the Prospectus, by providing the Company with written notice
of the intention to convert at least two business days prior to the closing of the Business Combination. The number of Private Units to
be received by the Sponsor in connection with such conversion shall be an amount determined by dividing (x) the sum of the outstanding
principal amount payable to the Sponsor by (y) $
As of September 30, 2023 and December 31, 2022, the Company had total
of $
Related Party Loans
In addition, in order to finance transaction costs
in connection with an intended initial Business Combination, the Sponsor, or an affiliate of the Sponsor or certain of the Company’s
officers and directors may, but are not obligated to, loan the Company funds as may be required. If the Company completes the initial
Business Combination, it would repay such loaned amounts. In the event that the initial Business Combination does not close, the Company
may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from the Trust Account
would be used for such repayment. Up to $
In
addition to the promissory notes in relation to the Monthly Extension Payments, the Company also borrowed $
As of September 30, 2023 and December 31, 2022, the Company had total
loan from related party amounted to $
19
Note 7 — Commitments & Contingencies
Risks and Uncertainties
Management is currently evaluating the impact of the COVID-19 pandemic on the industry 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 these unaudited consolidated financial statements. The unaudited consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Registration Rights
The holders of the Founder Shares and Private Placement Units, Working Capital Units issuable upon the conversion of certain working capital loans and any underlying securities will be entitled to registration rights pursuant to a registration rights agreement signed on June 15, 2022, requiring the Company to register such securities for resale. The holders of these securities are entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of the Company’s initial Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The underwriters of the IPO (the “underwriters”)
exercised the option to purchase an additional
The Company paid an underwriting discount of
Note 8 — Stockholders’ Equity
Preferred Stock — Pursuant
to the Company’s amended and restated certificate of incorporation, the Company is authorized to issue
Class A Common Stock — Pursuant
to the Company’s amended and restated certificate of incorporation, the Company is authorized to issue
20
Class B Common Stock — Pursuant
to the Company’s amended and restated certificate of incorporation, the Company is authorized to issue
Common stockholders of record are entitled to
The Class B Common Stock will automatically convert into shares of the Class A Common Stock at the time of the initial Business Combination, or at any time prior thereto at the option of the holder, on a one-for-one basis, subject to adjustment pursuant to certain anti-dilution right.
Rights — On June 21, 2022, the
Company issued
As of September 30, 2023 and December 31, 2022,
Warrants — On June 21,
2022, the Company issued
The Company has agreed that as soon as practicable, but in no event later than 30 business days, after the closing of the initial Business Combination, it will use its reasonable best efforts to file, and within 60 business days following its initial Business Combination to have declared effective, a registration statement for the registration, under the Securities Act, of the shares of Class A Common Stock issuable upon exercise of the Warrants. The Company will use its reasonable best efforts to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the Warrants in accordance with the provisions of the warrant agreement signed on June 15, 2022 (the “warrant agreement”). No Warrants will be exercisable for cash unless the Company has an effective and current registration statement covering the Class A Common Stock issuable upon exercise of the Warrants and a current prospectus relating to such shares of Class A Common Stock. Notwithstanding the above, if the Company’s Class A Common Stock is at the time of any exercise of a Warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Warrants who exercise their Warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event it so elect, it will not be required to file or maintain in effect a registration statement, but it will be required to use its reasonable best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
21
The Company may call the Warrants for redemption, in whole and not in part, at a price of $0.01 per Warrant:
| ● | in whole and not in part; |
| ● | upon not less than 30 days’ prior written notice of redemption (the “30-day redemption period”) to each warrant holder; and |
| ● | if, and only if, the reported last sale price of the Class A Common Stock equals or exceeds $16.50 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending three business days before the Company sends the notice of redemption to the warrant holders. |
The Company accounted for the
The Company accounted for the
As of September 30, 2023 and December 31, 2022,
Note 9 — Income Taxes
The Company’s taxable income primarily consists of interest earned on investments held in the Trust Account. There was income tax expense for the three months ended September 30, 2022.
| For the Three Months Ended | For the Three Months Ended | |||||||
| September 30, 2023 | September 30, 2022 | |||||||
| Current | ||||||||
| Federal | $ | $ | ||||||
| State | ||||||||
| Deferred | ||||||||
| Federal | ( | ) | ||||||
| State | ( | ) | ||||||
| Change in valuation allowance | ( | ) | ||||||
| Income tax provision | $ | $ | ||||||
There was no income tax expense for the period from January 19, 2022 (inception) through September 30, 2022.
22
The income tax provision (benefit) for the nine months ended September 30, 2023 was as follows:
| For the Nine Months Ended | For the Period from January 19, 2022 (inception) through | |||||||
| September 30, 2023 | September 30, 2022 | |||||||
| Current | ||||||||
| Federal | $ | $ | ||||||
| State | ||||||||
| Deferred | ||||||||
| Federal | ( | ) | ||||||
| State | ( | ) | ||||||
| Change in valuation allowance | ( | ) | ||||||
| Income tax provision | $ | $ | ||||||
| September 30, 2023 | December 31, 2022 | |||||||
| Deferred tax assets(liability): | ||||||||
| Start up cost | $ | $ | ||||||
| Valuation allowance | ( | ) | ( | ) | ||||
| Deferred tax assets, net | $ | $ | ||||||
In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences representing net future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax assets, projected future taxable income and tax planning strategies in making this assessment. After consideration of all of the information available, management believes that significant uncertainty exists with respect to future realization of the deferred tax assets and has therefore established a full valuation allowance.
Note 10 — Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date through the date the financial statement is issued. Other than the events below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statement.
On
October 2, 2023, Mr. Michael Davidov resigned from his position as an independent director, and a member of the Audit Committee and Compensation
Committee of the of Board of Directors of the Company, effective immediately after the appointment of his successor. On October 2, 2023,
the Board of Directors of the Company appointed Mr. Wenbing Chris Wang as an independent director of the Company effective
immediately. The Sponsor will repurchase
On October 20, 2023, another Monthly Extension Payment of $
Merger Agreement
On October 26, 2023, the Company entered into an Agreement and Plan of Merger with Thunder Power Holdings Limited, a British Virgin Islands company Merger Sub. TPH is a technology innovator and manufacturer of premium electric vehicles (“EVs”). TPH is dedicated to creating electric vehicles that deliver a premium driving experience combined with a high degree of personalization and has developed and is planning to manufacture a family of EVs suited to various stages of life and driving environments. Pursuant to the Merger Agreement, TPH will be merged with and into Merger Sub (the “Merger”), with the Merger Sub surviving the Merger as a direct wholly owned subsidiary of the Company.
23
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References in this Quarterly Report to “we,” “us” or the “Company” refer to Feutune Light Acquisition Corporation. References to our “management” or our “management team” refer to our officers and directors, references to the “sponsor” refer to Feutune Light Sponsor LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties. Our actual results may differ significantly from the results, expectations and plans discussed in these forward-looking statements. See “Cautionary Note Concerning Forward-Looking Statements.”
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form 10-Q including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and variations thereof and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s final prospectus for its initial public offering filed with the SEC on June 17, 2022 (the “Prospectus”). The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Overview
We are a blank check company incorporated as a Delaware corporation on January 19, 2022 formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). We are actively searching for and identifying a suitable Business Combination target but have not yet selected any Business Combination target. We will not undertake our initial Business Combination with an entity based in or having the majority of its operations in China (including Hong Kong and Macau). We intend to effectuate our Business Combination using cash derived from the proceeds of our initial public offering (the “IPO”) of the Company’s units (the “Public Units”, each consisting of one share of Class A common stock, or the “Public Shares”, one warrant, or the “Public Warrants”, and one right, or the “Public Rights”), and the sale of units (the “Private Placement Units”) in a private placement (the “Private Placement”) to the Company’s sponsor Feutune Light Sponsor LLC (the “Sponsor”), potential additional shares, debt or a combination of cash, shares and debt.
We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a Business Combination will be successful.
24
Permission Required from the PRC Authorities for our Business Combination and Relevance of PRC Regulations.
We are a Delaware corporation with no operations in China and all of our officers and directors are U.S. citizens, thus we or any of our officers and directors are not required to obtain permission from any Chinese authorities to operate or conduct a Business Combination. Since we will not undertake our initial Business Combination with any company being based in or having the majority of the company’s operations in China (including Hong Kong and Macau), we do not expect that any permission or approval that our officers and directors or us would be required from the Chinese authorities to search for a target company or to consummate our initial Business Combination.
We are a blank check company with no operations of our own except searching for a non-China-based target for our initial Business Combination. We do not have any subsidiaries and all of our officers and directors are located in the United States. Therefore, we do not consider ourselves a China-based issuer, in particular, as specified in the Trial Administrative Measures of the Overseas Securities Offering and Listing by Domestic Companies, or the Trial Measures, and five supporting guidelines promulgated by the China Securities Regulatory Commission (the “CSRC”) on February 17, 2023, which became effective on March 31, 2023. According to the Trial Administration Measures, an issuer is a “domestic [Chinese] company” if the issuer meets both of the following conditions and thus, subject to the requirements for domestic [Chinese] companies seeking to offer or list securities overseas, both directly and indirectly, thereunder: (i) any of the total assets, net assets, revenues or profits of the domestic operating entities of the issuer in the most recent accounting year accounts for more than 50% of the corresponding figure in the issuer’s audited consolidated financial statements for the same period; and (ii) its major operational activities are carried out in China or its main places of business are located in China, or the senior managers in charge of operation and management of the issuer are mostly Chinese citizens or are domiciled in China.
Additionally, as of the date of this report, no transfers, dividends, or distributions have been made by us. We have not adopted or maintained any other cash management policies and procedures and need to comply with applicable law or regulations with respect to transfer of funds, dividends and distributions, if any. Given that we are not a China-based issuer or expect to be a China-based issuer upon the consummation of our initial Business Combination, we are not subject to or will become subject to the foreign exchange control rules of the PRC.
Certain Potential Restrictions or Negative Impacts
We believe that none of our officers, directors, Sponsor and members of our Sponsor have significant ties to China except that some of our management members and Sponsor members lived in China or Hong Kong more than ten or twenty years ago before they came to the United States for advanced education and commenced their professional careers in the United States and certain members of our Sponsor including [Ms. Sau Fong Yeung (holding approximately 41.3% of equity interest in the Sponsor), the manager of the Sponsor and Mr. Xianhong Wu (indirectly holding approximately 17.4% of equity interest in the Sponsor) are Hong Kong citizens and U.S. permanent residents.] As our Certificate of Incorporation prohibits us from undertaking our initial Business Combination with any company being based in or having the majority of the company’s operations in China (including Hong Kong and Macau), we do not believe the historical path of some of our management and Sponsor members will result in a material change in our search for a target company and the value of the securities that we are registering for sale. However, as we cannot predict the perception from potential target companies or the market, it is uncertain whether that would make us a less attractive partner to a non-China or non-Hong Kong-based target company and such perception may potentially limit or negatively impact our search for our initial Business Combination. Furthermore, if any officers and directors of the post-combination entity will be located outside the United States, it may be difficult, or in some cases, impossible for investors in the United States to enforce their legal rights against, effect service of process upon, or enforce judgments of United States courts predicated upon civil liabilities and criminal penalties under United States securities laws against such officers and directors after our Business Combination. See the sections titled “Risk Factors— All of our management as well as members of our sponsor are either U.S. citizens or permanent residents in the United States and our sponsor is a Delaware LLC; and they do not have significant ties to China and Hong Kong except that certain members of our management and sponsor members lived in China and Hong Kong in the past, it is uncertain whether that would make us a less attractive partner to a non-China or non-Hong Kong-based target company and such perception may potentially limit or negatively impact our search for an initial Business Combination.” in the Prospectus and “Risk Factors— The manager of our sponsor is a resident of Hong Kong. Further, there is uncertainty if any officers and directors of the post-combination entity will be located outside the Unites States. Therefore, it may be difficult, or in some cases not possible, for investors in the United States to enforce their legal rights, to effect service of process upon the said person or those officers and directors after the business combination located outside the United States, to enforce judgments of United States courts predicated upon civil liabilities and criminal penalties on them under United States securities laws” in our annual report on Form 10-K for the fiscal year ended on December 31, 2022 filed with the SEC on March 31, 2023.
25
Controlling or non-controlling investments in U.S. businesses that produce, design, test, manufacture, fabricate or develop one or more critical technologies in one of 27 identified industries – including aviation, defense, semiconductors, telecommunications and biotechnology – are subject to a mandatory filing with the Committee on Foreign Investment in the U.S. (“CFIUS”). In addition, CFIUS is an interagency committee authorized to review certain transactions involving foreign investment in the United States by foreign persons in order to determine the effect of such transactions on the national security of the United States. Two members of our Sponsor (including the manager of the Sponsor) are Hong Kong citizens and U.S. permanent residents, therefore any proposed Business Combination between us and a U.S. business engaged in a regulated industry or which may affect national security could be subject to such foreign ownership restrictions and/or CFIUS review. The scope of CFIUS was expanded by the Foreign Investment Risk Review Modernization Act of 2018 (“FIRRMA”) to include certain non-passive, non-controlling investments in sensitive U.S. businesses and certain acquisitions of real estate even with no underlying U.S. business. FIRRMA, and subsequent implementing regulations that are now in force, also subject certain categories of investments to mandatory filings. If our potential initial Business Combination with a U.S. business falls within the scope of foreign ownership restrictions, we may be unable to consummate a Business Combination with such business. In addition, if our potential Business Combination falls within CFIUS’s jurisdiction, we may be required to make a mandatory filing or determine to submit a voluntary notice to CFIUS, or to proceed with our initial Business Combination without notifying CFIUS and risk CFIUS intervention, before or after closing our initial Business Combination. CFIUS may decide to block or delay our initial Business Combination, impose conditions to mitigate national security concerns with respect to our initial Business Combination or order us to divest all or a portion of a U.S. business of the combined company if we proceed without first obtaining CFIUS clearance. The foreign ownership limitations, and the potential impact of CFIUS, may limit the attractiveness of a transaction with us or prevent us from pursuing certain initial Business Combination opportunities that we believe would otherwise be beneficial to us and our stockholders. As a result, the pool of potential targets with which we could complete our initial Business Combination may be limited and we may be adversely affected in terms of competing with other special purpose acquisition companies which do not have similar foreign ownership restrictions. Moreover, the process of government review, whether by CFIUS or otherwise, could be lengthy. Because we have only a limited time to complete our initial Business Combination our failure to obtain any required approvals within the requisite time period may require us to liquidate. If we liquidate, our public stockholders may only receive $10.00 per share initially, and our warrants and rights will expire worthless. This will also cause you to lose any potential investment opportunity in a target company and the chance of realizing future gains on your investment through any price appreciation in the combined company. See the section titled “Risk Factors—We may not be able to complete an initial business combination with a U.S. target company if such initial business combination is subject to U.S. foreign investment regulations and review by a U.S. government entity such as the Committee on Foreign Investment in the United States (CFIUS), or ultimately prohibited.” in our annual report on Form 10-K for the fiscal year ended on December 31, 2022 filed with the SEC on March 31, 2023.
Recent Developments
Extensions
As of the date of this report, there were five Monthly Extension Payments, each in the amount of $100,000 to the Trust Account for the Monthly Extensions, as a result of which, the Company currently has until November 21, 2023 to complete its business combination. The Company issued four unsecured promissory notes (the “Monthly Extension Notes”), each in the amount of $100,000 to the Sponsor, to evidence the deposits provided by the Sponsor for the four Monthly Extension Payments, respectively. The Monthly Extension Notes bear no interest and is payable in full upon the earlier to occur of (i) the consummation of the Company’s Business Combination or (ii) the Maturity Date. The following shall constitute an event of default: (i) a failure to pay the principal within five business days of the Maturity Date; (ii) the commencement of a voluntary or involuntary bankruptcy action, (iii) the breach of the Company’s obligations thereunder; (iv) any cross defaults; (v) any enforcement proceedings against the Company; and (vi) any unlawfulness and invalidity in connection with the performance of the obligations thereunder, in which case the Monthly Extension Notes may be accelerated. The payee of the Monthly Extension Notes, the Sponsor, has the right, but not the obligation, to convert the Monthly Extension Notes, in whole or in part, respectively, into Private Units of the Company, that are identical to Public Units of the Company, subject to certain exceptions, as described in the Prospectus, by providing the Company with written notice of the intention to convert at least two business days prior to the closing of the Business Combination. The number of Private Units to be received by the Sponsor in connection with such conversion shall be an amount determined by dividing (x) the sum of the outstanding principal amount payable to the Sponsor by (y) $10.00.
In connection with the October Monthly Extension Payment, and pursuant to the Merger Agreement, on October 26, 2023, the Company issued an unsecured promissory note of $100,000 to TPH) to evidence the payment made for the October Monthly Extension Payment (the “TPH Promissory Note”).
The TPH Promissory Note bears no interest and is payable in full upon the earlier to occur of (i) the consummation of Company’s business combination, or (ii) the date of expiry of the term of the Company (the “Maturity Date”). Any of the following will constitute an event of default under the TPH Promissory Note: (i) a failure to pay the principal within five (5) business days of the Maturity Date; (ii) the commencement of a voluntary or involuntary bankruptcy action, (iii) the breach of any of the Company’s obligations under the TPH Promissory Note; (iv) any cross defaults; (v) an enforcement proceeding against the Company; or (vi) it is or becomes unlawful for the Company to perform any of its obligations under the TPH Promissory Note, or any obligations of the Company under the TPH Promissory Note are not or cease to be legal, valid, binding or enforceable. Upon the occurrence of an event of default specified in (i) or (iv) above, TPH may, by written notice to the Company, declare the TPH Promissory Note to be due immediately and payable, whereupon the outstanding principal balance of the TPH Promissory Note, and all other amounts payable under the TPH Promissory Note, will become immediately due and payable without presentment, demand, protest or other notice of any kind. Upon the occurrence of an event of default specified in (ii), (iii), (v), (vi) or (vii) above, the outstanding principal balance of the TPH Promissory Note, and all other sums payable under the TPH Promissory Note, will automatically and immediately become due and payable, in all cases without any action on the part of TPH. TPH has the right, but not the obligation, to convert the TPH Promissory Note, in whole or in part, respectively, into private units of the Company, that are identical to the public units the Company, subject to certain exceptions, as described in the Company’s final prospectus dated June 17, 2022 filed with the SEC and related to FLFV’s initial public offering, by providing the Company with written notice of the intention to convert at least two (2) business days prior to the closing of the business combination. The number of private units to be received by TPH in connection with such conversion will be an amount determined by dividing (x) the sum of the outstanding principal amount payable to TPH by (y) $10.00.
26
In the event that the Merger and related transactions are being negotiated in good faith and show a reasonable chance of being consummated, TPH, in its sole discretion, may agree on the same or different terms and conditions to further extend the monthly extension payments to the Company, thereby incurring additional promissory notes from the Company to TPH. So long as there is an outstanding principal balance on the TPH Promissory Note or any additional promissory note from the Company to TPH, the Company and TPH must mutually agree to extend the period of time that the Company has to consummate its initial business combination past March 21, 2024.
We currently have until November 21, 2023 to consummate our initial Business Combination. However, if we anticipate that we may not be able to consummate our initial Business Combination by November 21, 2023, we may, but are not obligated to, extend the period of time to consummate our initial Business Combination for up to four more times by an additional one-month each time and may have until March 21, 2024 to consummate our initial Business Combination.
Change of Director
On October 2, 2023, Mr. Michael Davidov resigned from his position as an independent director and a member of the Audit Committee and Compensation Committee of the Board of Directors of the Company, effective immediately after the appointment of his successor. On October 2, 2023, the Board of Directors of the Company appointed Mr. Wenbing Chris Wang as an independent director of the Company effectively immediately. The Sponsor will repurchase 10,000 Founder Shares of the Company from Mr. Davidov and will transfer the shares to Mr. Wang as compensation.
Business Combination with Thunder Power Holdings Limited
Merger Agreement
On October 26, 2023, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Thunder Power Holdings Limited, a British Virgin Islands company (“TPH”), and Feutune Light Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Merger Sub”).
TPH is a technology innovator and manufacturer of premium electric vehicles (“EVs”). TPH is dedicated to creating electric vehicles that deliver a premium driving experience combined with a high degree of personalization and has developed and is planning to manufacture a family of EVs suited to various stages of life and driving environments.
Pursuant to the Merger Agreement, TPH will be merged with and into Merger Sub (the “Merger”), with the Merger Sub surviving the Merger as a direct wholly owned subsidiary of the Company.
Merger Consideration
At the effective time of the Merger (the “Effective Time”), by virtue of the Merger and without any action on the part of the Company, Merger Sub, TPH or the shareholders of TPH immediately prior to the Effective Time (collectively, the “TPH Shareholders”), each TPH Shareholder’s ordinary shares of TPH (“TPH Ordinary Shares”) issued and outstanding immediately prior to the Effective Time (excluding dissenting shares and shares held by TPH or any of its direct or indirect subsidiaries as of immediately prior to the Effective Time) will be canceled and automatically converted into (i) the right to receive, without interest, the applicable portion of the Closing Merger Consideration Shares (as defined below) as set forth in the Closing Consideration Spreadsheet (as defined in the Merger Agreement) and (ii) the contingent right to receive the applicable portion of the Earnout Shares (as defined in the Merger Agreement), if, as and when payable in accordance with the earnout provisions described in the Merger Agreement. For avoidance of any doubt, each TPH Shareholder will cease to have any rights with respect to such TPH Shareholder’s TPH Ordinary Shares, except the right to receive the Closing Per Share Merger Consideration and the Earnout Shares. “Closing Merger Consideration Shares” means 40,000,000 shares of common stock of the Company upon and following the Merger (the "PubCo”), which are equal or equivalent in value to the sum of $400,000,000 divided by $10.00 per share.
27
Earnout Escrow
Pursuant to the Merger Agreement, at the Effective Time, an aggregate of 20,000,000 shares of common stock of PubCo issued to the TPH Shareholders (the “Earnout Shares”) will be deposited with an escrow agent in a segregated escrow account (the “Earnout Escrow Account”) pursuant to an escrow agreement effective as of the Effective Time and will be released from the Earnout Escrow Account and delivered to the TPH Shareholders after the closing of the Merger as follows:
| (a) | an aggregate of 5,000,000 Earnout Shares will be vested, if and only if, on the occurrence that the amount of sales/revenues of PubCo for any of the fiscal years (such fiscal year is referred as “Tranche 1 Fiscal Year”) ending from December 31, 2023 to December 31, 2025 is no less than $42,200,000 as evidenced by the audited financial statements of PubCo prepared in accordance with U.S. GAAP for the Tranche 1 Fiscal Year that is contained in an annual report on Form 10-K filed by PubCo with the SEC. |
| (b) | an aggregate of 15,000,000 Earnout Shares will be vested, if and only if, on the occurrence that the amount of sales/revenues of PubCo for any of the fiscal years (such fiscal year is referred as “Tranche 2 Fiscal Year”) ending from December 31, 2023 to December 31, 2026 is no less than $415,000,000 as evidenced by the audited financial statements of PubCo prepared in accordance with U.S. GAAP for the Tranche 2 Fiscal Year that is contained in an annual report on Form 10-K filed by PubCo with the SEC. |
Results of Operations
We have neither engaged in any operations nor generated any operating revenues to date except the preparation and completion of the IPO and search for target candidate following the consummation of the IPO. Our only activities from inception through September 30, 2023 were organizational activities and those necessary to prepare for the IPO, described below. We do not expect to generate any operating revenues until after the completion of our initial Business Combination. We expect to generate non-operating income in the form of interest income on marketable securities held after the IPO. We expect that we will incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses in connection with searching for, and completing, our initial Business Combination.
For the three months ended September 30, 2023 and 2022, we had a net income of $36,244 and $279,403, respectively, from interest income less formation and operating costs. For the nine months ended September 30, 2023 and the period from January 19, 2022 (inception) through September 30, 2023, we had a net income of $1,249,338 and $205,781, respectively, from interest income less formation and operating costs.
Liquidity and Capital Resources and Going Concern
The Company’s liquidity needs up to September 30, 2023 had been satisfied through the initial payment from the Sponsor of $25,000 for the insider shares and proceeds from the Private Placement.
On June 21, 2022, we consummated the IPO of 9,775,000 Public Units at a price of $10.00 per unit (including 1,275,000 units issued upon the full exercise of the over-allotment option), generating gross proceeds of $97,750,000. Simultaneously with the closing of the IPO and full exercise of the over-allotment option by the underwriters, we consummated the sale of 498,875 units as Private Placement Units to the Sponsor (for 478,875 units) and US Tiger (for 20,000 units), one of the representative of the underwriters, with each unit consisting of one share of Class A common stock, one warrant and one right, at a price of $10.00 per unit, generating gross proceeds of $4,988,750. Following the closings of the IPO and the sales of the Private Placement Units on June 21, 2022, a total of $99,216,250 (or $10.15 per share) was placed in the Trust Account.
As of September 30, 2023, the Company had cash of $110,855 and a working capital deficit of $1,526,274.
We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account, excluding deferred underwriting commissions, to complete our Business Combination. We may withdraw interest from the Trust Account to pay taxes, if any. To the extent that our share capital or debt is used, in whole or in part, as consideration to complete a Business Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, structure, negotiate and complete a Business Combination.
In order to fund working capital deficiencies or finance transaction costs in connection with our initial Business Combination, our Sponsor or an affiliate of our Sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete our initial Business Combination, we would repay such loaned amounts. In the event that our initial Business Combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from the Trust Account would be used for such repayment. Up to $3,000,000 of such loans may be convertible into units, at a price of $10.00 per unit at the option of the lender.
28
If our estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating our initial Business Combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our initial Business Combination. Moreover, we may need to obtain additional financing either to complete our initial Business Combination or because we become obligated to redeem a significant number of our public shares upon completion of our initial Business Combination, in which case we may issue additional securities or incur debt in connection with our initial Business Combination, all of which raise substantial doubt about our ability to continue as a going concern.
In addition, our Charter and Charter Amendment allow the Company until June 21, 2023 to consummate an initial Business Combination and to elect to extend the period to consummate an initial Business Combination up to nine times, each by an additional one-month period, for a total of up to nine months to March 21, 2024. If we are unable to complete our initial Business Combination by March 21, 2024 upon maximum extension, we may seek approval from our stockholders holding no less than 65% or more of the votes to approve to extend the completion period if we fail to obtain approval from our stockholders for such extension or we do not seek such extension, the Company will cease all operations.
As a result, management has determined that such additional condition also raise substantial doubt about the Company’s ability to continue as a going concern. The unaudited financial statement does not include any adjustments that might result from the outcome of this uncertainty.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities that would be considered off-balance sheet arrangements as of September 30, 2023. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
Contractual Obligations
As of September 30, 2023 and December 31, 2022, we do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities.
The holders of the Founder Shares, the Private Placement Units, and any units that may be issued upon conversion of working capital loans (and any underlying securities) will be entitled to registration rights pursuant to a registration rights agreement entered into in connection with the IPO. The holders of these securities are entitled to make up to three demands, excluding short form demands, that we register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to our completion of our initial Business Combination. We will bear the expenses incurred in connection with the filing of any such registration statements.
29
Critical Accounting Policies and Estimates
Warrants
We account for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) ASC 480 “Distinguishing Liabilities from Equity” (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, whether they meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common stock and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of equity at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded as liabilities at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations. We determined that upon further review of the proposed form of warrant agreement, management concluded that the warrants included in the units issued in the IPO pursuant to the warrant agreement qualify for equity accounting treatment.
Common Stock Subject to Possible Redemption
The Company accounts for its common stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption (if any) are classified as a liability instrument and are measured at fair value. Conditionally redeemable common stock (including common stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s Public Shares feature certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, as of September 30, 2023, common stock subject to possible redemption is presented at redemption value of $10.68 per share as temporary equity, outside of the shareholders’ equity section of the Company’s balance sheet. The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable common stock are affected by charges against additional paid in capital or accumulated deficit if additional paid in capital equals to zero.
Fair Value of Financial Instruments
The fair value of our assets and liabilities approximates the carrying amounts represented in the accompanying balance sheet, primarily due to their short-term nature.
The fair value of our financial assets and liabilities reflects management’s estimate of amounts that we would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, we seek to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
| ● | Level 1 - inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active market. |
| ● | Level 2 - inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments. |
| ● | Level 3 - inputs to the valuation methodology are unobservable and significant to the fair value. |
Recent Accounting Pronouncements
Management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial statement.
30
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES.
(a) Evaluation of Disclosure Controls and Procedures
Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this Report, is recorded, processed, summarized, and reported within the time period specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. Our management evaluated, with the participation of our current chief executive officer and our chief financial officer (our “Certifying Officers”), the effectiveness of our disclosure controls and procedures as of September 30, 2023, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our chief executive officer and chief financial officer concluded that, have concluded that during the period covered by this report, our disclosure controls and procedures were not effective.
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
This Quarterly Report on Form 10-Q does not include an attestation report of internal controls from our independent registered public accounting firm due to our status as an emerging growth company under the JOBS Act.
(b) Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter covered by this report that has materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
31
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are not a party to any material legal proceedings and no material legal proceedings have been threatened by us or, to the best of our knowledge, against us.
ITEM 1A. RISK FACTORS
Factors that could cause our actual results to differ materially from those in this Quarterly Report are any of the risks described the Prospectus and our Annual Report on Form 10-K for the fiscal year ended on December 31, 2022 filed with the SEC on March 31, 2023. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. As of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in the Prospectus and our Annual Report on Form 10-K for the fiscal year ended on December 31, 2022 filed with the SEC on March 31, 2023, except the following:
A new 1% U.S. federal excise tax could be imposed on the Company in connection with redemptions by the Company of its shares in connection with a Business Combination or other stockholder vote pursuant to which stockholders would have a right to submit their shares for redemption (a “Redemption Event”).
On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into federal law. The IRA provides for, among other things, a new U.S. federal 1% excise tax on certain repurchases (including redemptions) of stock by publicly traded domestic (i.e., U.S.) corporations and certain domestic subsidiaries of publicly traded foreign corporations.
The excise tax is imposed on the repurchasing corporation itself, not its stockholders from which shares are repurchased. The amount of the excise tax is generally 1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. The Treasury has been given authority to provide regulations and other guidance to carry out, and prevent the abuse or avoidance of the excise tax. In this regard, on December 27, 2022, the Treasury and the Internal Revenue Service issued a notice announcing their intent to issue proposed regulations addressing the application of the excise tax, and describing certain rules on which taxpayers may rely prior to the issuance of such proposed regulations (the “Notice”).
Any redemption or other repurchase that occurs after December 31, 2022 in connection with a Redemption Event may be subject to the excise tax. Pursuant to the rules set forth in the Notice, however, redemptions in connection with a liquidation of the Company are generally not subject to the excise tax. Whether and to what extent we would be subject to the excise tax in connection with a Redemption Event would depend on a number of factors, including (i) the fair market value of the redemptions and repurchases in connection with the Redemption Event, (ii) the structure of our initial Business Combination, (iii) the nature and amount of any “PIPE” or other equity issuances in connection with our initial Business Combination (or otherwise issued not in connection with the Redemption Event but issued within the same taxable year of our initial Business Combination) and (iv) the content of regulations and other future guidance from the Treasury. In addition, because the excise tax would be payable by us, and not by the redeeming holder, the mechanics of any required payment of the excise tax have not been determined; however, we will not use the funds held in the Trust Account or any additional amounts deposited into the Trust Account, as well as any interest earned thereon, to pay the excise tax, if any. The foregoing could cause a reduction in the cash available on hand to complete our initial Business Combination and in our ability to complete our initial Business Combination.
32
If the Company is deemed to be an unregistered investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”), the Company may be required to institute burdensome compliance requirements or liquidate or restrict its activities, which may make it difficult to complete its initial Business Combination or cause its securities to be adversely impacted or become valueless.
On March 30, 2022, the SEC issued proposed rules (the “SPAC Rule Proposals”), which include proposals relating to the circumstances in which special purpose acquisition companies (“SPACs”) such as the Company could be subject to the Investment Company, and the regulations thereunder. The SPAC Rule Proposals would provide a safe harbor from one prong of the definition of “investment company” under Section 3(a)(1)(A) of the Investment Company Act for a SPAC satisfying certain conditions that limit a SPAC’s duration, asset composition, business purpose and activities. To comply with the duration limitation of the proposed safe harbor, a SPAC would have a limited time period to announce and complete a de-SPAC transaction. Specifically, the SPAC Rule Proposals would require a company to file a report on Form 8-K announcing that it has entered into an agreement with a target company for an initial business combination no later than 18 months after the effective date of the SPAC’s registration statement for its IPO (an “IPO Registration Statement”). The SPAC also would need to complete its initial Business Combination no later than 24 months after the effective date of the IPO Registration Statement.
The Company’s registration statement on Form S-1 in connection with its IPO was declared effective by the SEC on June 15, 2022 and the Company completed its IPO on June 21, 2022. Since the Company is a blank check company, the efforts of its management since the consummation of its IPO have been focused on searching for a target business with which to consummate a Business Combination. The Company currently has until March 21, 2024, with maximum extension, to consummate its initial Business Combination.
Since the consummation of its IPO, the Company has deposited the proceeds of its IPO and the Private Placement into the Trust Account to be held in money market funds, which are invested in U.S. Treasury securities. The longer that the funds in the Trust Account are held in short-term U.S. government treasury obligations or in money market funds invested exclusively in such securities, the greater the risk that the Company may be considered an unregistered investment company. If the Company were to be deemed an investment company for purposes of the Investment Company Act, it might be forced to abandon its efforts to complete an initial Business Combination and instead be required to liquidate. Should the Company be required to liquidate, its investors would not be able to realize the benefits of owning stock in a successor operating business, such as any appreciation in the value of the Company’s stock and warrants following such a transaction, the Company’s warrants would expire worthless and shares of its common stock would have no value apart from their pro rata entitlement to the funds then-remaining in the Trust Account.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Unregistered Sales of Equity Securities
On June 21, 2022, simultaneously with the closing of the IPO, the Company completed the Private Placement of 478,875 Private Placement Units to the Company’s Sponsor, and the Private Placement of 20,000 Private Placement Units to US Tiger, at a purchase price of $10.00 per Private Placement Unit, generating gross proceeds to the Company of $4,988,750.
The above sales were issued pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act. No commissions were paid in connection with such sales.
Use of Proceeds
On June 21, 2022, we consummated the IPO of 9,775,000 Public Units (including 1,275,000 Public Units issued upon the partial exercise of the over-allotment option), at a price of $10.00 per unit, generating gross proceeds of $97,750,000. Simultaneously with the closing of the IPO, we consummated the sale of 498,875 Private Placement Units, to our Sponsor and US Tiger in Private Placement generating gross proceeds of $4,988,750.
The net proceeds of $99,216,250 from the IPO and the Private Placement, were placed in the Trust Account established for the benefit of the Company’s public stockholders and the underwriters of the IPO with Continental Stock Transfer & Trust Company, LLC acting as trustee.
33
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
| * | Filed herewith. |
34
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| FEUTUNE LIGHT ACQUISITION CORPORATION | ||
| Dated: November 8, 2023 | By: | /s/ Yuanmei Ma |
| Name: | Yuanmei Ma | |
| Title: | CFO | |
35
Exhibit 31.1
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Xuedong (Tony) Tian, certify that:
| 1. | I have reviewed this report on Form 10-Q of Feutune Light Acquisition Corporation; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function): |
| a) | all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financialh information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: November 8, 2023
| /s/ Xuedong (Tony) Tian | |
| Xuedong (Tony) Tian | |
| CEO | |
| (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Yuanmei Ma, certify that:
| 1. | I have reviewed this report on Form 10-Q of Feutune Light Acquisition Corporation: |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function): |
| a) | all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: November 8, 2023
| /s/ Yuanmei Ma | |
| Yuanmei Ma | |
| CFO (Principal Financial Officer and Principal Accounting Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The undersigned hereby certifies, in her capacity as an officer of Feutune Light Acquisition Corporation (the “Company”), for the purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:
| (1) | The Quarterly Report of the Company on Form 10-Q for the quarter ended on September 30, 2023 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: November 8, 2023
| /s/ Xuedong (Tony) Tian | |
| Xuedong (Tony) Tian | |
| CEO | |
| (Principal Executive Officer) |
The foregoing certification is being furnished solely pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code) and is not being filed as part of a separate disclosure document.
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The undersigned hereby certifies, in her capacity as an officer of Feutune Light Acquisition Corporation (the “Company”), for the purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:
| (1) | The Quarterly Report of the Company on Form 10-Q for the quarter ended on September 30, 2023 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: November 8, 2023
| /s/ Yuanmei Ma | |
| Yuanmei Ma | |
| CFO | |
| (Principal Financial Officer and Principal Accounting Officer) |
The foregoing certification is being furnished solely pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code) and is not being filed as part of a separate disclosure document.