UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _______ to ______
Commission
File Number
(Exact name of registrant as specified in its charter)
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(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
N/A
(Former name or former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| The
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| The Stock Market LLC | ||||
| The
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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
As of November 5, 2024, there were ordinary shares, par value $per shares, issued and outstanding.
DT Cloud Acquisition Corporation
TABLE OF CONTENTS
| 2 |
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DT CLOUD ACQUISITION CORPORATION
UNAUDITED BALANCE SHEETS
| September 30, 2024 | December 31, 2023 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash | $ | $ | ||||||
| Cash in escrow | ||||||||
| Prepaid expenses | ||||||||
| Total Current Assets | ||||||||
| Deferred offering costs | ||||||||
| Investments held in trust account | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||||
| Current Liabilities: | ||||||||
| Accrued liabilities | $ | $ | ||||||
| Amount due to related party | ||||||||
| Promissory note – related party | ||||||||
| Total Current Liabilities | ||||||||
| Deferred Underwriting Compensation | ||||||||
| TOTAL LIABILITIES | ||||||||
| Commitments and contingencies | ||||||||
| Ordinary shares subject to possible redemption, and shares issued and outstanding at redemption value of $ and $ as of September 30, 2024 and December 31, 2023, respectively | ||||||||
| Shareholders’ Deficit: | ||||||||
| Ordinary shares, $ par value; shares authorized; and shares issued and outstanding (excluding and shares, subject to possible redemption as of September 30, 2024 and December 31, 2023, respectively) | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Shareholders’ Deficit | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT | $ | $ | ||||||
See accompanying notes to the unaudited financial statements.
| F-1 |
DT CLOUD ACQUISITION CORPORATION
UNAUDITED STATEMENTS OF OPERATIONS
| Three
months ended September 30, | Nine
months ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Formation and operating costs | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Other income: | ||||||||||||||||
| Dividend income earned in investments held in Trust Account | ||||||||||||||||
| Interest income | ||||||||||||||||
| Total Other income | ||||||||||||||||
| NET INCOME (LOSS) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Basic and diluted weighted average shares outstanding, ordinary shares subject to possible redemption | ||||||||||||||||
| Basic and diluted net income per ordinary shares subject to possible redemption | $ | $ | $ | $ | ||||||||||||
| Basic and diluted weighted average shares outstanding, ordinary shares attributable to DT Cloud Acquisition Corporation | ||||||||||||||||
| Basic and diluted net income (loss), ordinary shares attributable to DT Cloud Acquisition Corporation | $ | $ | ) | $ | $ | ) | ||||||||||
See accompanying notes to unaudited financial statements.
| F-2 |
DT CLOUD ACQUISITION CORPORATION
UNAUDITED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
| For the nine months ended September 30, 2024 | ||||||||||||||||||||
| Ordinary shares | Additional | Total | ||||||||||||||||||
| No.
of shares | Amount | paid-in capital | Accumulated deficit | Shareholders’ deficit | ||||||||||||||||
| Balance as of December 31, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Sale of units in initial public offering, net of offering costs | ||||||||||||||||||||
| Sale of units to the founder in private placement | ||||||||||||||||||||
| Issuance of representative shares | ( | ) | ||||||||||||||||||
| Initial classification of ordinary shares subject to possible redemption | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Allocation of offering costs to ordinary shares subject to possible redemption | - | |||||||||||||||||||
| Accretion of carrying value to redemption value | - | ( | ) | ( | ) | ( | ) | |||||||||||||
| Subsequent remeasurement of ordinary shares subject to possible redemption | - | ( | ) | ( | ) | |||||||||||||||
| Net income for the period | - | |||||||||||||||||||
| Balance as of March 31, 2024 | ( | ) | ( | ) | ||||||||||||||||
| Subsequent remeasurement of ordinary shares subject to redemption | - | ( | ) | ( | ) | |||||||||||||||
| Net income for the period | - | |||||||||||||||||||
| Balance as of June 30, 2024 | $ | ( | ) | $ | ( | ) | ||||||||||||||
| Subsequent remeasurement of ordinary shares subject to redemption | - | ( | ) | ( | ) | |||||||||||||||
| Net income for the period | - | |||||||||||||||||||
| Balance as of September 30, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| For the nine months ended September 30, 2023 | ||||||||||||||||||||
| Ordinary shares | Additional | Total | ||||||||||||||||||
| No.
of shares | Amount | paid-in capital | Accumulated deficit |
Shareholders’ deficit | ||||||||||||||||
| Balance as of December 31, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Net loss for the period | - | |||||||||||||||||||
| Balance as of March 31, 2023 | $ | ( | ) | ( | ) | |||||||||||||||
| Net loss for the period | - | ( | ) | ( | ) | |||||||||||||||
| Balance as of June 30, 2023 | ( | ) | ( | ) | ||||||||||||||||
| Net loss for the period | - | ( | ) | ( | ) | |||||||||||||||
| Balance as of September 30, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
See accompanying notes to unaudited financial statements.
| F-3 |
DT CLOUD ACQUISITION CORPORATION
UNAUDITED STATEMENTS OF CASH FLOWS
| For
the nine months ended September 30, 2024 | For the nine months ended September 30, 2023 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Dividend income earned in cash and investments held in trust account | ( | ) | ||||||
| Change in operating assets and liabilities: | ||||||||
| Prepaid expenses | ( | ) | ||||||
| Due to Sponsor – related party | ( | ) | ||||||
| Accrued liabilities | ||||||||
| Net cash used in operating activities | ( | ) | ||||||
| Cash flows from investing activities: | ||||||||
| Proceeds deposited in Trust Account | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Advance from related party | ( | ) | ||||||
| Proceed from public offering, net of offering costs | ||||||||
| Proceed from private placement | ||||||||
| Net cash provided by financing activities | ||||||||
| NET CHANGE IN CASH | ||||||||
| CASH, BEGINNING OF PERIOD | ||||||||
| CASH, END OF PERIOD | $ | $ | ||||||
| Reconciliation to amounts on balance sheets: | ||||||||
| Cash | $ | $ | ||||||
| Cash in escrow | ||||||||
| $ | $ | |||||||
| NON-CASH INVESTING AND FINANCIAL ACTIVITIES: | ||||||||
| Issuance of representative shares | $ | $ | ||||||
| Initial classification of ordinary shares subject to possible redemption | $ | $ | ||||||
| Allocation of offering costs to ordinary shares subject to possible redemption | $ | $ | ||||||
| Accretion of carrying value to redemption value | $ | $ | ||||||
| Subsequent remeasurement of ordinary shares subject to possible redemption | $ | $ | ||||||
| Accrued underwriting compensation | $ | $ | ||||||
See accompanying notes to unaudited financial statements.
| F-4 |
DT CLOUD ACQUISITION CORPORATION
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND BUSINESS BACKGROUND
DT Cloud Acquisition Corporation (the “Company”) is a newly incorporated blank check company incorporated as a Cayman Islands exempted company on July 7, 2022, formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). The Company is not limited to a particular industry or geographic region for purposes of consummating a Business Combination.
As of September 30, 2024, the Company has not commenced any operations. All activities through September 30, 2024 relate to the Company’s formation and the initial public offering (the “Initial Public Offering”). Since the Initial Public Offering, the Company’s activity has been limited to the evaluation of business combination candidates. The Company will not generate any operating revenues until after the completion of a Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income and changes in unrealized appreciation of Trust Account assets from the proceeds derived from the Initial Public Offering. The Company has selected December 31 as its fiscal year end.
Financing
The
registration statement for the Company’s Initial Public Offering was declared effective on February 14, 2024. On February 23, 2024,
the Company consummated the Initial Public Offering of units (the “Public Units”), which includes Public
Units upon the full exercise by the underwriter of its over-allotment option, at $ per Public Unit, generating gross proceeds of
$
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the sale of units (the “Private Placement Units”)
at a price of $ per Private Placement Unit in a private placement to DT Cloud Capital Corp. (the “Sponsor”), generating
gross proceeds of $
Transaction
costs amounted to $
Trust Account
The
aggregate amount of $
| F-5 |
Business Combination
The
Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering
and sale of the Private Placement Units, although substantially all of the net proceeds are intended to be applied generally toward consummating
a Business Combination. Nasdaq rules provide that the Business Combination must be with one or more target businesses that together have
a fair market value equal to at least
The
Company will provide its shareholders with the opportunity to redeem all or a portion of their public shares upon the completion of a
Business Combination either (i) in connection with a shareholder meeting called to approve the Business Combination or (ii) by means
of a tender offer. In connection with an initial Business Combination, the Company may seek shareholder approval of a Business Combination
at a meeting called for such purpose at which shareholders may seek to redeem their shares, regardless of whether they vote for or against
a Business Combination. The Company shall not consummate such Business Combination unless the Company has net tangible assets of at least
$
Notwithstanding
the foregoing, if the Company seeks shareholder approval of a Business Combination and it does not conduct redemptions pursuant to the
tender offer rules, the Company’s Amended and Restated Memorandum and Articles of Association provides that a public shareholder,
together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a “group”
(as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted
from seeking redemption rights with respect to
If a shareholder vote is not required and the Company does not decide to hold a shareholder vote for business or other legal reasons, the Company will, pursuant to its Amended and Restated Memorandum and Articles of Association, offer such redemption pursuant to the tender offer rules of the Securities and Exchange Commission (“SEC”), and file tender offer documents containing substantially the same information as would be included in a proxy statement with the SEC prior to completing a Business Combination.
The shareholders will be entitled to redeem their public shares for a pro rata portion of the amount then in the Trust Account (initially $ per public share, subject to increase of up to an additional $ per public share per month in the event that the Sponsor elects to extend the period of time to consummate a Business Combination (see below), plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations). The per-share amount to be distributed to shareholders who redeem their public shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriter (as discussed in Note 7). There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s rights. The ordinary shares will be recorded at redemption value and classified as temporary equity upon the completion of the Initial Public Offering, in accordance with ASC Topic 480 “Distinguishing Liabilities from Equity” (“ASC 480”).
| F-6 |
The Company will proceed with a Business Combination if the Company has net tangible assets of at least $ upon such consummation of a Business Combination and, if the Company seeks shareholder approval, a majority of the outstanding shares voted are voted in favor of the Business Combination. If a shareholder vote is not required and the Company does not decide to hold a shareholder vote for business or other legal reasons, the Company will, pursuant to its Amended and Restated Memorandum and Articles of Association, offer such redemption pursuant to the tender offer rules of the SEC, and file tender offer documents containing substantially the same information as would be included in a proxy statement with the SEC prior to completing a Business Combination.
The Sponsor and any of the Company’s officers or directors that may hold Founder Shares (as described in Note 5) (as defined the “initial shareholders”) are identical to the ordinary shares included in the units being sold in this offering except that the founder shares are subject to certain transfer restrictions, as described in more detail below: the sponsor, officers and directors have entered into a letter agreement with us, pursuant to which they have agreed (i) to waive their redemption rights with respect to their founder shares, private placement shares and public shares in connection with the completion of the initial business combination, (ii) to waive their redemption rights with respect to any founder shares, private placement shares and public shares held by them in connection with a shareholder vote to approve an amendment to the amended and restated memorandum and articles of association (A) to modify the substance or timing of obligation to provide for the redemption of public shares in connection with an initial business combination or to redeem % of public shares if the Company have not consummated the initial business combination within the timeframe set forth therein or (B) with respect to any other provision relating to shareholders’ rights or pre-initial business combination activity and (iii) to waive their rights to liquidating distributions from the Trust Account with respect to their founder shares and private placement shares if the Company fail to complete the initial business combination within nine months from the closing of this offering (or up to 21 months from the closing of this offering if the Company extend the period of time to consummate a business combination, as described in more detail in this prospectus) (although they will be entitled to liquidating distributions from the Trust Account with respect to any public shares they hold if the Company fail to complete the initial business combination within the prescribed time frame).
On September 3, 2024, the Company entered into a non-binding letter of intent (the “LOI”) with Shanghai Maius Pharmaceutical Technology Co., LTD (“Shanghai Maius”). Shanghai Maius is a biopharmaceutical R&D company focusing on innovative formulations and targeted small-molecule chemical drugs. Its core products include small-molecule chemical drugs and peptide drugs. Under the terms of the LOI, the Company would acquire % of Shanghai Maius’s outstanding equity and equity equivalents or all of its business, with the deal structure to be determined later by the parties based on further due diligence findings and other considerations.
On October 22, 2024, the Company, Maius Pharmaceutical Co., Ltd., an exempted company limited by shares incorporated under the laws of the Cayman Islands (“Maius”)” as said below under “Proposed Business Combination” section, Maius Pharmaceutical Group Co., Ltd., an exempted company limited by shares incorporated under the laws of the Cayman Islands (“Pubco”) incorporated for the purpose of serving as the public listed company whose shares shall be traded on The Nasdaq Stock Market LLC (“Nasdaq”), Chelsea Merger Sub 1 Limited, a Cayman Islands exempted company (“Merger Sub 1”), Chelsea Merger Sub 2 Limited, a Cayman Islands exempted company (“Merger Sub 2”), and XXW Investment Limited, a limited liability company incorporated under the laws of British Virgin Islands as Maius’ representative (the “Shareholders’ Representative”), entered into a business combination agreement (the “Business Combination Agreement”).
Subject to, and in accordance with the terms and conditions of the Business Combination Agreement, (i) on the date on which the closing actually occurs (the “Closing Date”), Merger Sub 1 shall be merged with and into the Company (the “SPAC Merger”), with the Company continuing as the surviving company of the merger as a wholly-owned subsidiary of the Pubco (the “SPAC Merger Surviving Corporation”) and the separate existence of the Merger Sub 1 shall cease, and (ii) on the Closing Date and immediately following the SPAC Merger, Merger Sub 2 shall be merged with and into Maius (the “Acquisition Merger”, together with the SPAC Merger, the “Mergers”), with Maius continuing as the surviving company of the Acquisition Merger as a wholly-owned subsidiary of the Pubco (the “Surviving Corporation”) and the separate existence of the Merger Sub 2 shall cease. The Mergers and each of the other transactions contemplated by the Business Combination Agreement and other Ancillary Documents (as defined below) are collectively referred to as the “Transactions.”
The
Company will have until February 23, 2025 initially to consummate a Business Combination. However, if the Company anticipates that it
may not be able to consummate a Business Combination within nine months, the Company may extend the period of time to consummate a Business
Combination up to twelve times, each by an additional one month each time (for a total of 24 months to complete a Business Combination
(the “Combination Period”), including automatic extension period). In order to extend the time available for the Company
to consummate a Business Combination, the Sponsor or its affiliate or designees must deposit into the Trust Account $
| F-7 |
Liquidation
If the Company is unable to complete a 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 no more than ten business days thereafter, redeem 100% of the outstanding 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 (net of taxes payable), which redemption will completely extinguish public shareholders’ rights as shareholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining shareholders and the Company’s board of directors, proceed to commence a voluntary liquidation and thereby a formal dissolution of the Company, subject in each case to its obligations to provide for claims of creditors and the requirements of applicable law. The underwriters have agreed to waive its rights to the deferred underwriting commission held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such event, such amounts will be included with the funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than $.
The Sponsor has agreed that it will be liable to the Company, if and to the extent any claims by a vendor for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amounts in the Trust Account to below $ per share (whether or not the underwriters’ over-allotment option is exercised in full), except as to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims under the Company’s indemnity of the underwriters of the “Proposed Public Offering” against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). In the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavouring to have all vendors, service providers, prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
Going Concern Consideration
The Company initially had 9 months from the consummation of the Initial Public Offering to consummate the initial Business Combination. If the Company does not complete a Business Combination within nine months from the consummation of the Initial Public Offering, the Company will trigger an automatic winding up, dissolution and liquidation pursuant to the terms of the Amended and Restated Memorandum and Articles of Association. As a result, this has the same effect as if the Company had formally gone through a voluntary liquidation procedure under the Companies Act (As Revised) of the Cayman Islands. Accordingly, no vote would be required from our shareholders to commence such a voluntary winding up, dissolution and liquidation. However, the Company may extend the period of time to consummate a Business Combination nine times (for a total of up to 21 months from the consummation of the Initial Public Offering to complete a Business Combination). If the Company is unable to consummate the Company’s initial Business Combination by May 22, 2025 (unless further extended), the Company will, as promptly as possible but not more than ten business days thereafter, redeem % of the Company’s outstanding public shares for a pro rata portion of the funds held in the Trust Account, including a pro rata portion of any interest earned on the funds held in the Trust Account and not necessary to pay taxes, and then seek to liquidate and dissolve. However, the Company may not be able to distribute such amounts as a result of claims of creditors which may take priority over the claims of the Company’s public shareholders. In the event of dissolution and liquidation, the Company’s rights will expire and will be worthless.
In connection with the Company’s assessment of going concern considerations in accordance with Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that if the Company is unsuccessful in consummating an initial business combination within the prescribed period of time from the closing of the IPO, the requirement that the Company cease all operations, redeem the public shares and thereafter liquidate and dissolve raises substantial doubt about the ability to continue as a going concern. The unaudited financial statements do not include any adjustments that might result from the outcome of this uncertainty. The accompanying unaudited financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”), which contemplate continuation of the Company as a going concern.
| F-8 |
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
● Basis of presentation
These accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial statements and Article 8 of Regulation S-X. They do not include all of the information and notes required by U.S. GAAP for complete financial statements. The unaudited financial statements should be read in conjunction with the Company’s financial statements and notes thereto for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K. In the opinion of management, all adjustments (consisting of normal recurring adjustments) have been made that are necessary to present fairly the financial position, and the results of its operations and its cash flows. Operating results as presented are not necessarily indicative of the results to be expected for a full year.
● Emerging growth company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s unaudited 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.
| F-9 |
● Use of estimates
The preparation of unaudited financial statement in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statement.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statement, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
● Cash and cash equivalents
The
Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.
As of September 30, 2024 and December 31, 2023, the cash balance was $
● Cash and investment held in trust account
As
of September 30, 2024 and December 31, 2023, substantially all of the assets held in the Trust Account were held in U.S. Treasury Securities
Money Market Funds. 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 included in investment income earned on investments held in Trust in the accompanying
unaudited statement of operations. The estimated fair values of investments held in Trust Account are determined using available market
information. As of September 30, 2024 and December 31, 2023, the estimated fair values of investments held in Trust Account were $
The Company accounts for its ordinary shares subject to possible redemption in accordance with the guidance in ASC 480. Ordinary share subject to mandatory redemption (if any) is classified as a liability instrument and is measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares 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, ordinary shares are classified as shareholders’ equity. The Company’s ordinary 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, 2024 and December 31, 2023, and ordinary shares subject to possible redemption are presented at redemption value as temporary equity, outside of the shareholders’ equity section of the Company’s unaudited balance sheet, respectively.
| F-10 |
● Deferred offering costs
Deferred offering costs consist of underwriting, legal, accounting and other expenses incurred through the balance sheet dates that are directly related to the Initial Public Offering and that were charged to shareholders’ equity upon the completion of the Initial Public Offering.
● Income taxes
Income taxes are determined in accordance with the provisions of ASC Topic 740, “Income Taxes” (“ASC 740”). Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Any effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
ASC 740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their unaudited financial statements uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the unaudited financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. The Company’s management determined that the Cayman Islands is the Company’s major tax jurisdiction. The Company recognizes accrued interest and penalties related to unrecognized tax benefits, if any, as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of September 30, 2024 and December 31, 2023. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
The Company may be subject to potential examination by foreign taxing authorities in the area 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 foreign 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 considered to be an exempted Cayman Islands company with no connection to any other taxable jurisdiction and is presently not subject to income taxes or income tax filing requirements in the Cayman Islands or the United States. As such, the Company’s tax provision was zero for the periods presented.
The Company calculates net loss per share in accordance with ASC Topic 260, “Earnings per Share.” In order to determine the net income attributable to both the redeemable shares and non-redeemable shares, the Company first considered the undistributed income allocable to both the redeemable ordinary shares and non-redeemable ordinary shares and the undistributed income is calculated using the total net loss less any dividends paid. The Company then allocated the undistributed income ratably based on the weighted average number of shares outstanding between the redeemable and non-redeemable ordinary shares. Any remeasurement of the accretion to the redemption value of the ordinary shares subject to possible redemption was considered to be dividends paid to the public stockholders.
| F-11 |
| For
the nine months ended September 30, 2024 | For
the nine September 30, 2023 | |||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| For
the three months ended September 30, 2024 | For
the three months ended September 30, 2023 | |||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| For the Nine Months Ended | For the Nine Months Ended | |||||||||||||||
| September 30, 2024 | September 30, 2023 | |||||||||||||||
Redeemable
| Non-Redeemable Ordinary Share | Redeemable. | Non-Redeemable Ordinary Share | |||||||||||||
| Basic and diluted net income (loss) per share: | ||||||||||||||||
| Numerators: | ||||||||||||||||
| Allocation of net income (loss) including carrying value to redemption value | $ | $ | $ | $ | ( | ) | ||||||||||
| Allocation of net income (loss) | $ | $ | $ | $ | ( | ) | ||||||||||
| Denominators: | ||||||||||||||||
| Weighted-average shares outstanding | ||||||||||||||||
| Basic and diluted net income (loss) per share | $ | $ | $ | $ | ) | |||||||||||
| For the Three Months Ended | For the Three Months Ended | |||||||||||||||
| September 30, 2024 | September 30, 2023 | |||||||||||||||
Redeemable Ordinary Share | Non-Redeemable Ordinary Share | Redeemable Ordinary Share | Non-Redeemable Ordinary Share | |||||||||||||
| Basic and diluted net income (loss) per share: | ||||||||||||||||
| Numerators: | ||||||||||||||||
| Allocation of net income (loss) including carrying value to redemption value | $ | $ | $ | $ | ( | ) | ||||||||||
| Allocation of net income (loss) | $ | $ | $ | $ | ( | ) | ||||||||||
| Denominators: | ||||||||||||||||
| Weighted-average shares outstanding | ||||||||||||||||
| Basic and diluted net income (loss) per share | $ | $ | $ | $ | ) | |||||||||||
| F-12 |
● 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.
● Fair value of financial instruments
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.
“Fair value” is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
| ● | Level 1 - Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. | |
| ● | Level 2 - Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active. | |
| ● | Level 3 - Unobservable inputs based on the Company’s assessment of the assumptions that market participants would use in pricing the asset or liability. |
● 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.
● Recent accounting pronouncements
Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s unaudited financial statements.
| F-13 |
NOTE 3 –INITIAL PUBLIC OFFERING
Pursuant
to the Initial Public Offering, the Company sold Public Units, which includes Public Units upon the full exercise by
the underwriter of its over-allotment option, at a purchase price of $ per Public Unit.
All of the public shares sold as part of the Public Units in the Initial Public Offering contain a redemption feature which allows for the redemption of such public shares if there is a shareholder vote or tender offer in connection with the Business Combination and in connection with certain amendments to the Company’s Amended and Restated Memorandum and Articles of Association, or in connection with the Company’s liquidation. In accordance with the SEC and its staff’s guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99, redemption provisions not solely within the control of the Company require ordinary shares subject to redemption to be classified outside of permanent equity.
The Company’s redeemable ordinary share 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).
NOTE 4 – PRIVATE PLACEMENT
Simultaneously
with the closing of the Initial Public Offering, the Company consummated a private placement of Private Placement Units, at a
price of $ per Private Placement Unit.
The Private Placement Units are identical to the Public Units sold in the Initial Public Offering except for certain registration rights and transfer restrictions.
NOTE 5 – RELATED PARTY TRANSACTIONS
Founder Shares
In
July 2022, the Company issued an aggregate of founder shares (“Founder Shares”) to the initial shareholders, so
that the Sponsor collectively owned % of the Company’s issued and outstanding shares after the Initial Public Offering for an
aggregate purchase price of $
| F-14 |
Private Placement
The
Company consummated the sale of Private Placement Units at a price of $ per Private Placement Unit in a private placement
to the Sponsor, generating gross proceeds of $
Promissory Note — Related Party
On
August 5, 2022, the Company issued an unsecured promissory note to the Sponsor, pursuant to which the Company may borrow up to an aggregate
principal amount of $
As
of September 30, 2024 and December 31, 2023, the principal amount due and owing under the Promissory Note was $
Due to Related Party
As
of September 30, 2024 and December 31, 2023, the Company had a temporary advance of $
Administrative Services Arrangement
An
affiliate of the Sponsor will agree that, commencing from the date that the Company’s securities are first listed on NASDAQ through
the earlier of the Company’s consummation of a Business Combination and its liquidation, to make available to the Company certain
general and administrative services, including office space, administrative and support services, as the Company may require from time
to time. The Company has agreed to pay the affiliate of the Sponsor $
Working Capital Loans
In
order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor or certain of
the Company’s directors and officers may, but are not obligated to, loan the Company funds as may be required (“Working Capital
Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds
of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the
Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust
Account to repay the Working Capital Loans, but no proceeds held in the Trust Account would be used to repay the Working Capital Loans.
Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with
respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest,
or, at the lender’s discretion, up to $
| F-15 |
NOTE 6 – SHAREHOLDERS’ DEFICIT
Ordinary shares
The
Company is authorized to issue ordinary shares at par value of $.
As of September 30, 2024 and December 31, 2023, and Ordinary Shares were issued and outstanding excluding and shares subject to possible redemption, respectively, so that the initial shareholders will own 20% of the issued and outstanding shares after the Initial Public Offering (excluding the sale of the Private Units and assuming the initial shareholders do not purchase any Units in the Initial Public Offering). As a result of the underwriters’ full exercise of their over-allotment option on February 23, 2024, no Founder Shares are currently subject to forfeiture.
Rights
—
NOTE 7 – FAIR VALUE MEASUREMENTS
The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
| Level 1: | Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. |
| Level 2: | Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active. |
| Level 3: | Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability. |
The following table presents information about the Company’s assets that are measured at fair value on a recurring basis as of September 30, 2024 and December 31, 2023 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.
| September 30, 2024 | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | |||||||||||||
| Assets | ||||||||||||||||
| Cash held in trust account | $ | $ | $ | $ | ||||||||||||
| December 31, 2023 | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | |||||||||||||
| Assets | ||||||||||||||||
| Cash held in trust account | $ | $ | $ | $ | ||||||||||||
| F-16 |
NOTE 8 – COMMITMENTS AND CONTINGENCIES
Risks and Uncertainties
Management is currently assessing to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of these unaudited financial statements. The unaudited financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Registration Rights
Pursuant to a registration rights agreement entered into on February 23, 2024, the holders of the Founder Shares, Private Placement Units (including securities contained therein), and units (including securities contained therein) that may be issued on conversion of working capital loans or extension loans (and) are entitled to registration rights pursuant to a registration rights agreement signed on the effective date of this offering 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’s register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the Company completion of 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.
Underwriter Agreement
On February 23, 2024, the Company issued ordinary shares of $ par value each to Brookline Capital Markets, a division of Arcadia Securities (hereafter – the Representative Shares), at the closing of the IPO as part of representative compensation.
NOTE 9 – SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the unaudited financial statements were available to be issued. Other than as described in these unaudited financial statements, the Company did not identify any subsequent events that would have required adjustment or disclosure in the unaudited financial statements.
On October 22, 2024, the Company, Maius Pharmaceutical Co., Ltd., an exempted company limited by shares incorporated under the laws of the Cayman Islands (“Maius”)” as said below under “Proposed Business Combination” section, Maius Pharmaceutical Group Co., Ltd., an exempted company limited by shares incorporated under the laws of the Cayman Islands (“Pubco”) incorporated for the purpose of serving as the public listed company whose shares shall be traded on The Nasdaq Stock Market LLC (“Nasdaq”), Chelsea Merger Sub 1 Limited, a Cayman Islands exempted company (“Merger Sub 1”), Chelsea Merger Sub 2 Limited, a Cayman Islands exempted company (“Merger Sub 2”), and XXW Investment Limited, a limited liability company incorporated under the laws of British Virgin Islands as Maius’ representative (the “Shareholders’ Representative”), entered into a business combination agreement (the “Business Combination Agreement”).
| F-17 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to DT Cloud Acquisition Corporation. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to DT Cloud Capital Corp. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited 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.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” 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 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.
Overview
We are a blank check company incorporated in the Cayman Islands on July 7, 2022 as an exempted company with limited liability. We were formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, recapitalization, reorganization or similar business combination with one or more businesses or entities, which we refer to as a “target business.” We are an emerging growth company and, as such, we are subject to all of the risks associated with emerging growth companies.
On February 23, 2024, we consummated the initial public offering of 6,900,000 units, which includes the exercise in full by the underwriters of their over-allotment option to purchase up to an additional 900,000 units on February 21, 2024. Each unit consists of one ordinary share and one right. Each seven rights entitle the holder thereof to receive one ordinary share at the closing of a business combination. The units were sold at an offering price of $10.00 per unit, generating gross proceeds of $69,000,000. Simultaneously with the closing of our initial public offering on February 23, 2024, we consummated the private placement with DT Cloud Capital Corp., our sponsor, of 234,500 units at a price of $10.00 per private unit, generating total gross proceeds of $2,345,000. As of February 23, 2024, a total of $69,345,000 of the net proceeds from our initial public offering and the private placement were deposited in a trust account established for the benefit of our public stockholders at Morgan Stanley, with Continental Stock Transfer & Trust Company, acting as trustee.
Our units started to be listed on The Nasdaq Global Market (the “Nasdaq”) and began trading under the ticker symbol “DYCQU” on February 21, 2024. On April 10, 2024, we announced that the holders of the units may elect to separately trade the underlying component securities of the units commencing on April 12, 2024. Those units not separated will continue to trade on Nasdaq under the symbol “DYCQU,” and each of the ordinary shares and rights that are separated will trade on Nasdaq under the symbols “DYCQ” and “DYCQR,” respectively.
| 3 |
We will provide our public shareholders with the opportunity to redeem all or a portion of their public shares upon the completion of our initial business combination either (i) in connection with a shareholder meeting called to approve the business combination or (ii) by means of a tender offer. The decision as to whether we will seek shareholder approval of a proposed business combination or conduct a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would require us to seek shareholder approval under the law or stock exchange listing requirement. The amount in the Trust Account is initially anticipated to be $10.05 per public share (subject to increase of up to an additional $0.03 per public share for each monthly extension in the event that the Sponsor elects to extend the period of time to consummate a business combination). The per-share amount we will distribute to investors who properly redeem their shares will not be reduced by the deferred underwriting commissions we will pay to the underwriters. There will be no redemption rights upon the completion of our initial business combination with respect to our rights. The Sponsor, officers and directors have entered into a letter agreement with us, pursuant to which they have agreed to waive their redemption rights with respect to their founder shares, private placement shares and any public shares they may acquire during or after our initial public offering in connection with the completion of our initial business combination.
As we have entered into a definitive business combination agreement on October 22, 2024 (the “Business Combination Agreement”), which is within nine months after the closing of our initial public offering, we have been entitled to an automatic three-month extension to the original nine months from the closing of our initial public offering to consummate our initial business combination. As a result, we now have 12 months from the closing of our initial public offering to consummate our initial business combination, or up to 24 months if we extend the period of time to consummate a business combination, which may be accomplished only if our insiders or their affiliates or designees deposit additional funds into the Trust Account. If it is reasonably determined by us and Maius (as defined below) that we may not be able to consummate the initial business combination by February 23, 2025, we will use our reasonable best efforts to cause the our board of directors to approve that the date by which we must consummate a business combination is extended from February 23, 2025 to February 23, 2026 (such period by which we must consummate a business combination, as amended, and as may be extended in accordance with the provisions of the Business Combination Agreement, the “Combination Period”), provided that our insiders or their affiliates or designees deposit additional funds into the Trust Account.
If we are unable to consummate an initial business combination within the Combination Period, we will, (1) cease all operations except for the purpose of winding up; (2) 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 us to pay our income taxes, divided by the number of the then-outstanding public shares, which redemption will completely extinguish public shareholders’ rights as shareholders (including the right to receive further liquidation distributions, if any); and (3) as promptly as reasonably possible following such redemption, subject to the approval of our remaining shareholders and our board of directors, liquidate and dissolve, subject in the case of clauses (2) and (3), to our obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law.
| 4 |
Proposed Business Combination
On October 22, 2024, we entered into the Business Combination Agreement with Maius Pharmaceutical Co., Ltd., an exempted company limited by shares incorporated under the laws of the Cayman Islands (“Maius”), Maius Pharmaceutical Group Co., Ltd., an exempted company limited by shares incorporated under the laws of the Cayman Islands (“Pubco”) incorporated for the purpose of serving as the public listed company whose shares shall be traded on Nasdaq, Chelsea Merger Sub 1 Limited, a Cayman Islands exempted company (“Merger Sub 1”), Chelsea Merger Sub 2 Limited, a Cayman Islands exempted company (“Merger Sub 2”), and XXW Investment Limited, a limited liability company incorporated under the laws of British Virgin Islands as the Company shareholders’ representative (the “Shareholders’ Representative”). The mergers and each of the other transactions contemplated by the Business Combination Agreement or other ancillary documents are collectively referred to as the “Business Combination.”
Termination
The Business Combination Agreement may be terminated under certain customary and limited circumstances prior to the Closing (as defined in the Business Combination Agreement), including, among others: (i) by mutual written consent of us and Maius; (ii) by us or Maius if the Closing has not occurred on or before June 30, 2025 (the “Outside Date”); (iii) by us or Maius if any law or governmental order is in effect that has become final and non-appealable and has the effect of making the consummation of the Transactions illegal or otherwise preventing or prohibiting consummation of the Transactions (as defined in the Business Combination Agreement); (iv) by either us or Maius if it is not in material breach of any of its obligations hereunder while the other party is in material breach of any of its representations, warranties or obligations hereunder that renders or could reasonably be expected to render the conditions set forth in the Business Combination Agreement incapable of being satisfied on the Outside Date, and such breach cannot or has not been cured; (v) by us if we are not in material breach of any of our obligations hereunder and Maius fails to perform certain covenants set forth in the Business Combination Agreement within the time period promulgated therein; and (vi) by either us or Maius, if we fail to obtain the required shareholder approval upon vote taken thereon at a duly convened special meeting of shareholders.
The Business Combination Agreement and related agreements are further described in our Current Report on Form 8-K filed with the SEC on October 23, 2024. Other than as specifically discussed, this Quarterly Report does not assume the closing of the Business Combination or the transactions contemplated by the Business Combination Agreement.
Form of Sponsor Support and Lock-up Agreement
Simultaneously with the execution and delivery of the Business Combination Agreement, the Sponsor has executed and delivered to Maius a support and lock-up agreement (the “Sponsor Support and Lock-up Agreement”), pursuant to which, the Sponsor has agreed to, among other things, (i) vote to adopt and approve the Business Combination Agreement, the Ancillary Agreements and the Transactions contemplated hereunder, and (ii) become subject to certain lock-up provisions with respect to certain Restricted Securities (as defined in the Sponsor Support and Lock-up Agreement) held by it.
The foregoing description of the Sponsor Support and Lock-up Agreement does not purport to be complete and is qualified in its entirety by the terms and conditions of the Sponsor Support and Lock-up Agreement, a copy of which is filed with our Current Report on Form 8-K filed with the SEC on October 23, 2024, 2024 which is incorporated by reference herein.
Going Concern Consideration
The Company initially had 9 months from the consummation of the Initial Public Offering to consummate the initial Business Combination. If the Company does not complete a Business Combination within nine months from the consummation of the Initial Public Offering, the Company will trigger an automatic winding up, dissolution and liquidation pursuant to the terms of the Amended and Restated Memorandum and Articles of Association. As a result, this has the same effect as if the Company had formally gone through a voluntary liquidation procedure under the Companies Act (As Revised) of the Cayman Islands. Accordingly, no vote would be required from our shareholders to commence such a voluntary winding up, dissolution and liquidation. However, the Company may extend the period of time to consummate a Business Combination nine times (for a total of up to 21 months from the consummation of the Initial Public Offering to complete a Business Combination). If the Company is unable to consummate the Company’s initial Business Combination by May 22, 2025 (unless further extended), the Company will, as promptly as possible but not more than ten business days thereafter, redeem 100% of the Company’s outstanding public shares for a pro rata portion of the funds held in the Trust Account, including a pro rata portion of any interest earned on the funds held in the Trust Account and not necessary to pay taxes, and then seek to liquidate and dissolve. However, the Company may not be able to distribute such amounts as a result of claims of creditors which may take priority over the claims of the Company’s public shareholders. In the event of dissolution and liquidation, the Company’s rights will expire and will be worthless.
| 5 |
Our management plans to address this uncertainty through the initial business combination as discussed above. There is no assurance that our plans to consummate the initial business combination will be successful or successful by the deadline of completing an initial business combination as described above. The unaudited financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Risks and Uncertainties
We are currently experiencing a period of economic uncertainty and capital markets disruption, which has been significantly impacted by geopolitical instability and economic uncertainties. For example, United States and global markets are experiencing volatility and disruption following the geopolitical instability resulting from the ongoing Russia-Ukraine conflict and the recent escalation of the Israel-Hamas conflict. In response to the ongoing Russia-Ukraine conflict, the North Atlantic Treaty Organization (“NATO”) deployed additional military forces to eastern Europe, and the United States, the United Kingdom, the European Union and other countries have announced various sanctions and restrictive actions against Russia, Belarus and related individuals and entities, including the removal of certain financial institutions from the Society for Worldwide Interbank Financial Telecommunication (SWIFT) payment system. Certain countries, including the United States, have also provided and may continue to provide military aid or other assistance to Ukraine and to Israel, increasing geopolitical tensions among a number of nations. The Russia-Ukraine conflict and the escalation of the Israel Hamas conflict and the resulting measures that have been taken, and could be taken in the future, by NATO, the United States, the United Kingdom, the European Union, Israel and its neighboring states and other countries have created global security concerns that could have a lasting impact on regional and global economies. Although the length and impact of the ongoing conflicts are highly unpredictable, they could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions and increased cyber-attacks against U.S. companies. Additionally, any resulting sanctions could adversely affect the global economy and financial markets and lead to instability and lack of liquidity in capital markets. The political and economic intense between the United States and China may also affect the business of the target of our Business Combination.
Our search for a business combination, and any target business with which we ultimately consummate a business combination, may be materially adversely affected by any negative impact on the global economy and capital markets resulting from the conflict in geopolitical tensions and economic uncertainties.
Liquidity and Capital Resources
On February 23, 2024, we consummated the initial public offering of 6,900,000 units, which includes the exercise in full by the underwriters of their over-allotment option to purchase up to an additional 900,000 units on February 21, 2024. The units were sold at an offering price of $10.00 per unit, generating gross proceeds of $69,000,000. Simultaneously with the closing of our initial public offering on February 23, 2024, we consummated the private placement with DT Cloud Capital Corp., our sponsor, of 234,500 units at a price of $10.00 per private unit, generating total gross proceeds of $2,345,000.
Following our initial public offering and the private placement, a total of $69,345,000 of the net proceeds from our initial public offering and the private placement were deposited in the trust account. 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 and less taxes payable) to complete our initial business combination. We may withdraw interest from the trust account to pay our taxes. To the extent that our equity or debt is used, in whole or in part, as consideration to complete our initial business combination, the remaining proceeds held in the trust account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies. We intend to use the funds held outside the trust account primarily for identifying and evaluating prospective acquisition candidates, performing business due diligence on prospective target businesses, traveling to and from the offices, plants or similar locations of prospective target businesses, reviewing corporate documents and material agreements of prospective target businesses, selecting the target business to acquire and structuring, negotiating and consummating the business combination.
| 6 |
For the nine months ended September 30, 2024, cash used in operating activities was $671,186, primarily due to dividend income earned in cash and investments held in trust account of $2,171,443, prepaid expenses of $29,495 and due to Sponsor – related party of $147,614, partially set-off by net income of $1,633,003 and change in accrued liabilities of $44,363.
As of September 30, 2024, we had cash at bank of $167,526.
On August 5, 2022, we issued an unsecured promissory note to the sponsor, pursuant to which we may borrow up to an aggregate principal amount of $300,000 (the “Promissory Note”). The Promissory Note is non-interest-bearing and payable on the consummation of the initial business combination or converted upon consummation of the business combination into additional private units at a price of $10.00 per unit. As of September 30, 2024 and December 31, 2023, the principal amount due and owing under the Promissory Note was $0 and $217,614, respectively.
As of September 30, 2024 and December 31, 2023, we had a temporary advance of $70,000 and $490,000 from the sponsor, respectively. The balance is unsecured, interest-free and has no fixed terms of repayment.
In order to fund working capital deficiencies or finance transaction costs in connection with an initial business combination, our sponsor, officers, directors, or their affiliates may, but are not obligated to, loan us funds as may be required (“Working Capital Loan”). If we complete our initial business combination, we will repay such loaned amounts. In the event that the initial business combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts, but no proceeds from our trust account would be used for such repayment. Up to $300,000 of such loans may be convertible upon consummation of our business combination into private units at a price of $10.00 per unit. As of September 30, 2024 and December 31, 2023, there was no outstanding balance of the principal amount due under the Working Capital Loan.
Results of Operations
Our entire activity since inception up to September 30, 2024 related to our formation, the preparation for the initial public offering, and since the closing of the initial public offering, the search for a prospective initial business combination. We will not be generating any operating revenues until the closing and completion of our initial business combination, at the earliest. We will generate non-operating income in the form of interest income from the amount held in the Trust Account.
For the three months ended September 30, 2024, we had a net income of $760,262, which consisted of dividend income earned in investments held in Trust Account of $917,865 and interest income of $7, partially set-off by formation and operating costs of $157,610.
For the three months ended September 30, 2023, we had a net loss of $5,000, which consisted of formation and operating costs of $5,000.
For the nine months ended September 30, 2024, we had a net income of $1,633,003, which consisted of dividend income earned in investments held in Trust Account of $2,171,443 and interest income of $22, partially set-off by formation and operating costs of $538,462.
For the nine months ended September 30, 2023, we had a net income of $5,257, which consisted of formation and operating costs of $5,257.
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Contractual Obligations
Registration Rights
Pursuant to a registration rights agreement entered into on February 23, 2024, the holders of the insider shares, private placement units (including securities contained therein), and units (including securities contained therein) that may be issued on conversion of working capital loans or extension loans (and) are entitled to registration rights pursuant to a registration rights agreement signed on the effective date of our initial public offering requiring us to register such securities for resale. 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 initial business combination and rights to require us to register for resale such securities pursuant to Rule 415 under the Securities Act. We will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The underwriters are to a cash underwriting discount of 2.5% of the gross proceeds of the initial public offering, or $1,725,000, upon the closing of the initial business combination. On February 23, 2024 we issued 103,500 ordinary shares of $0.0001 par value each to Brookline Capital Markets, a division of Arcadia Securities, at the closing of our initial public offering as part of representative compensation, which have been received by Brookline.
Administrative Services Agreement
On February 20, 2024, we entered into an agreement with our sponsor, pursuant to which we agreed to pay our sponsor a total of $10,000 per month for secretarial and administrative support services provided to us through the earlier of consummation of the initial business combination and our liquidation.
In addition, our sponsor, officers and directors, or any of their respective affiliates, will be reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. There is no cap or ceiling on the reimbursement of out-of-pocket expenses incurred by such persons in connection with activities on our behalf.
Business Combination Agreement
On October 22, 2024, we entered into the Business Combination Agreement with Maius, Pubco, Merger Sub 1, Merger Sub 2 and XXW Investment Limited. The merger involves multiple steps and will result in the cancellation and conversion of various shares into Pubco’s ordinary shares. After the Closing of the transactions contemplated by the Business Combination Agreement, we will become a wholly owned subsidiary of Pubco. The Closing is subject to various conditions, such as shareholder approvals and regulatory clearances (including the necessary approval from the China Securities Regulatory Commission). Additionally, related agreements such as the Key Company Shareholder Lock-Up agreement, Key Company Shareholder Support agreement, and Sponsor Support and Lock-up Agreement (as defined in the Business Combination Agreement) have been executed. See our Current Report on Form 8-K filed with the SEC on October 23, 2024 for details.
Critical Accounting Estimates
The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income and expenses during the periods reported. Actual results could materially differ from those estimates. A critical accounting estimate to our unaudited financial statements includes the valuation of ordinary shares subject to possible redemption. We have not identified any critical accounting estimates.
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Recent Accounting Pronouncements
Our management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s unaudited financial statements.
Off-Balance Sheet Arrangements
As of September 30, 2024, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
JOBS Act
We qualify as an “emerging growth company” under the JOBS Act and are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We elected to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
As an “emerging growth company”, we are not required to, among other things, (1) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404, (2) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (3) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis), and (4) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our initial public offering or until we are no longer an “emerging growth company,” whichever is earlier.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
This item is not applicable as we are a smaller reporting company.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial and accounting officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of September 30, 2024, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial officer have concluded that during the period covered by this Report, our disclosure controls and procedures were not effective as of September 30, 2024, because of the identification of the material weaknesses in our internal control over financial reporting relating to (1) inadequate segregation of duties within account processes due to limited personnel, and (2) insufficient written policies and procedure for accounting, IT, financial reporting and record keeping. In light of these material weaknesses, we performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with U.S. GAAP. Accordingly, management believes that the financial statements included in this Report present fairly in all material respects our financial position, results of operations and cash flows for the periods presented.
Changes in Internal Control Over Financial Reporting
During the most recently completed fiscal quarter, there has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 1A. RISK FACTORS
Except as set forth below, as of the date of this Quarterly Report on Form 10-Q, there have been no material changes to the risk factors disclosed in our annual report on Form 10-K filed with the SEC on March 28, 2024. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.
The Sponsor and our directors and officers have interests that are different from, or in addition to (and which may conflict with), the interests of its shareholders, and therefore potential conflicts of interest exist in recommending that shareholders vote in favor of the Business Combination. Such conflicts of interests include that the Sponsor as well as our directors and officers are expected to lose their entire investment in the Company if the Business Combination is not completed.
When considering our board’s recommendation to vote in favor of approving any proposals in connection with the Business Combination, our shareholders should keep in mind that the Sponsor and our directors and officers have interests in such proposals that are different from, or in addition to (and which may conflict with), those of our shareholders generally.
These interests include, among other things:
| ● | The fact that immediately following the consummation of the Business Combination, the initial shareholders are expected to hold an aggregate of 1,993,000 Pubco ordinary shares on an as-converted basis, consisting of (i) 1,725,000 Pubco ordinary shares to be converted from our ordinary shares held by the initial shareholders, (ii) 234,500 Pubco ordinary shares to be converted from our ordinary shares underlying the private units held by the initial shareholders; and (iii) 33,500 Pubco ordinary shares to be converted from our ordinary shares underlying the private rights held by the initial shareholders, which in the aggregate, would represent approximately 5.7% ownership interest in the Pubco following the consummation of the Business Combination under the no redemption scenario, on an as-converted basis. | |
| ● | The fact that the Sponsor acquired 234,500 units at a price of $10.00 per private unit through private placement simultaneously with the closing of our initial public offering on February 23, 2024. | |
| ● | The fact that the initial shareholders paid an aggregate purchase price of $25,000, or approximately $0.01 per share, for 1,725,000 insider shares prior to our initial public offering, which shall be surrendered to us to exchange for a share certificate representing the same number of Pubco ordinary shares at the SPAC Merger Effective Time pursuant to the Business Combination Agreement. All of the insider shares are subject to certain transfer restrictions and could have a significantly higher value at the time of the Business Combination, which, if unrestricted and freely tradable, would be valued at approximately $17.9 million, based on the most recent closing price of our ordinary shares of $10.39 per share on November 5, 2024 | |
| ● | The fact that if the Business Combination or another business combination is not consummated by February 23, 2025 (or February 23, 2026 if we extend the Combination Period which may be accomplished only if the Sponsor deposits additional funds into the Trust Account), we will cease all operations except for the purpose of winding up, redeeming 100% of our outstanding public shares for cash and, subject to the approval of its remaining shareholders and our board, liquidating and dissolving. In such event, the private units held by our initial shareholders would expire worthless. If the Business Combination is consummated, each of our outstanding ordinary share will be converted into one Pubco ordinary share. Given (i) the differential in the purchase price that the Sponsor paid for the insider shares, as compared to the price of the our ordinary shares, (ii) the differential in the purchase price that the Sponsor paid for the our private placement units as compared to the price of the public units, and (iii) the substantial number of Pubco ordinary shares that the Sponsor will receive upon conversion of the initial shares and/or our private placement units, the Sponsor may earn a positive return on their investment, even if public shareholders have a negative return on their investment. |
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| ● | The fact that the Sponsor has agreed that if we liquidate the Trust Account prior to the consummation of a business combination, it will be liable to pay debts and obligations to target businesses or vendors or other entities that are owed money by us for services rendered or contracted for or products sold to us in excess of the net proceeds of our initial public offering not held in the Trust Account, but only to the extent necessary to ensure that such debts or obligations do not reduce the amounts in the trust account and only if such parties have not executed a waiver agreement. | |
| ● | The fact that our Sponsor, officers, directors, or their affiliates may, but are not obligated to, loan us funds as may be required (“Working Capital Loan”) to fund working capital deficiencies or finance transaction costs in connection with an initial business combination. Up to $300,000 of such Working Capital Loan may be convertible upon consummation of our business combination into private units at a price of $10.00 per unit. | |
| ● | The fact that the Business Combination Agreement provides for the continued indemnification of our current directors and officers and the continuation of directors and officers liability insurance covering our current directors and officers. | |
| ● | The fact that Maius, the Sponsor and Pubco will enter into an amendment to the Registration Rights Agreement of our company on or prior to the Closing which provides for registration rights following consummation of the Business Combination. | |
| ● | The fact that pursuant to the Business Combination Agreement, the Sponsor shall promptly provide non-interest bearing loans to us (the “Extension Loans”) for the sole purpose of extending the deadline for the consummation of our initial business combination, which shall immediately be repaid by us to the Sponsor and/or Maius (as the case may be) upon the earlier of the Closing or the expiry of the deadline for the consummation of our initial business combination. | |
| ● | The fact that in addition to these interests of the Sponsor and our officers, directors and advisors, to the fullest extent permitted by applicable laws and our memorandum and articles of association, waive certain applications of the doctrine of corporate opportunity in some circumstances where the application of any such doctrine would conflict with any fiduciary duties or contractual obligations they may have, and we will renounce any expectancy that any of our directors or officers will offer any such corporate opportunity of which he or she may become aware to us. We do not believe that the pre-existing fiduciary duties or contractual obligations of its officers and directors materially impacted its search for an acquisition target. Further, we do not believe that the waiver of the application of the corporate opportunity doctrine had any impact on its search for a potential business combination target. |
The personal and financial interests of our directors and officers may have influenced their motivation in identifying and selecting Maius as a business combination target, completing the Business Combination with Maius and influencing the operation of the business following the Business Combination.
There is no assurance when or if the Business Combination will be completed.
The completion of the Business Combination is subject to the satisfaction or waiver of a number of conditions as set forth in the Business Combination Agreement, including, among others, (i) receipt of the required approval by our shareholders; (ii) receipt of the required approval by the shareholders of Maius; (iii) effectiveness of the registration statement (which is to be prepared in connection with the Business Combination and to call a special meeting of our shareholders requiring us to prepare and file with the SEC) declared by the SEC; (iv) the approval for Pubco’s initial listing application with Nasdaq; and (v) the absence of any law or governmental order or legal injunction making illegal the consummation of the Business Combination,
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No assurance can be given that the required consents, orders and approvals will be obtained or that the required conditions to the completion of the Business Combination will be satisfied. Even if all such consents, orders and approvals are obtained and such conditions are satisfied, no assurance can be given as to the terms, conditions and timing of such consents, orders and approvals. We cannot provide assurance that the Business Combination will be completed on the terms or timeline currently contemplated, or at all.
Our extraordinary shareholder meeting may take place before all of the required regulatory approvals have been obtained and before all conditions to such approvals, if any, are known. Notwithstanding the foregoing, if the proposal to conduct the Business Combination and the Transactions are approved by our shareholders, we would not be required to seek further approval of our shareholders, even if the conditions imposed in obtaining required regulatory approvals could have an adverse effect on us or Maius.
The approval of, or submission of filings with, the China Securities Regulatory Commission (the “CSRC”), may be required in connection with the Business Combination.
The PRC government has expanded oversight over offerings that are conducted overseas by China-based issuers and foreign investment in China-based issuers in recent years. On February 17, 2023, the CSRC released the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies (the “Trial Measures”), and five supporting guidelines, which came into effect on March 31, 2023. According to the Trial Measures, domestic companies that seek to offer or list securities overseas, both directly and indirectly, should fulfill certain filing procedures and report relevant information to the CSRC. If the issuer meets both of the following conditions, an overseas offering and listing will be determined as an indirect overseas offering and listing by a domestic company: (i) any of the total assets, net assets, revenue or profits of the PRC-incorporated 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) the issuer’s major operational activities are carried out in the PRC or its main places of business are located in the PRC, or the senior managers in charge of operation and management of the issuer are mostly PRC citizens or are domiciled in the PRC. The determination as to whether or not an overseas offering and listing by domestic companies is indirect, shall be made on a substance over form basis.
Pursuant to covenants of Maius under the Business Combination Agreement, Maius shall use its commercially reasonable efforts to fulfill the filing procedure with the CSRC and report relevant information in a timely manner per the requirements of the Trial Measures and the supporting guidelines. Maius expects to submit the filing application documents according to the Trial Measures and relevant supporting guidelines within three business days after filing the registration statement in connection with the Transactions with the SEC. It is uncertain whether Maius will be able to, or how long it will take it to, obtain such approval or complete the filing procedures. Further, the CSRC could rescind its approval after giving it. Any failure to obtain or delay in obtaining clearance of such approval or completing such filing procedures for this Business Combination or the Pubco’s proposed listing on Nasdaq, or a rescission of any such approval obtained by Maius, would subject Maius to regulatory actions or other sanctions by the CSRC or other PRC regulatory authorities for failure to obtain required governmental authorization. These governmental authorities may impose fines, restrictions and penalties on Maius, which might make it advisable for Maius to suspend the Business Combination or the Pubco’s proposed listing on Nasdaq. All of these could have a material adverse effect on our and Maius’ ability to consummate the Business Combination, and could significantly limit or completely hinder the Pubco’s ability and the ability of any holder of the Pubco’s securities to offer or continue to offer such securities.
There is no assurance if any PIPE financing as contemplated in the Business Combination can be completed.
Pursuant to covenants under the Business Combination Agreement, we and Maius have agreed to use commercially reasonable efforts to obtain executed subscription agreements for an aggregate investment amount of no less than $10,000,000 from third party investors (such investors, collectively, with any permitted assignees or transferees, the “PIPE Investors”), pursuant to which the PIPE Investors make or commit to make private equity investments in us, Maius or Pubco to purchase shares of us, Maius or Pubco in connection with a private placement, and/or enter into backstop or other alternative financing arrangements with potential investors (a “PIPE Investment”). We may terminate the Business Combination Agreement at any time prior to the Closing if we are not in material breach of any of our obligations in the Business Combination Agreement while Maius fails to perform such covenants in connection with the PIPE Investment within the time period specified in the Business Combination Agreement.
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Although we will continue to work toward obtaining the PIPE Investment on market terms, no subscription agreements have been entered into as of the date of this Quarterly Report on Form 10-Q. Accordingly, there are substantial uncertainties with respect to the financing amount, terms and timing of PIPE Investment, as well as the dilutive effect of such PIPE Investment to our non-redeeming shareholders. Furthermore, there can be no assurances that such PIPE Investment can be secured at all. Lack of PIPE Investment may cause the Business Combination to become less attractive to some investors, which may make it more difficult for us to complete the Business Combination.
If the Business Combination does not constitute an “Exchange” within the meaning of Section 351 of the Code, then the Business Combination generally will be taxable to U.S. holders.
Each of us, Maius, Pubco, Merger Sub 1 and Merger Sub 2 intend to take the position that, for U.S. federal income tax purposes, the Transactions constitute a single exchange transaction under Section 351 of the Internal Revenue Code of 1986, as amended (the “Exchange”). However, there is a lack of authority supporting the treatment of the Transactions as an Exchange, and accordingly there is significant uncertainty that the Business Combination would so qualify. Neither us nor Maius intends to request a ruling from the IRS regarding the U.S. federal income tax treatment of the Business Combination as part of an Exchange, and no assurance can be given that Business Combination will qualify as part of an Exchange, that the IRS will not challenge this position or that a court will not sustain such a challenge by the IRS. Further, the Closing is not conditioned upon the receipt of an opinion of counsel that the Transactions will constitute an Exchange.
If the Transactions do not constitute an Exchange, then a U.S. holder generally will recognize gain or loss in an amount equal to the difference between the fair market value (as of the Closing Date of the Business Combination) of Pubco ordinary shares received in the Business Combination, over such holder’s aggregate adjusted tax basis in the corresponding public shares surrendered by such holder in the Business Combination. Even if the Transactions otherwise constitutes an Exchange, U.S. Holders may be required to recognize gain (but not loss) in the Business Combination under the PFIC rules. The tax consequences of the Business Combination are complex and will depend on each U.S. holder’s particular circumstances.
We may not have sufficient funds to consummate the Business Combination.
As of September 30, 2024, we had US$167,526 of cash held outside the Trust Account. If we are required to seek additional capital, we may need to borrow funds from the Sponsor, directors, officers, their affiliates or other third parties to operate or may be forced to liquidate. We believe that the funds available to us outside of the Trust Account, together with funds available from loans from Sponsor, its affiliates or members of our management team will be sufficient to allow us to operate for at least the period ending on February 23, 2025 (or February 23, 2026 if we extend the Combination Period which may be accomplished only if the Sponsor deposits additional funds into the Trust Account). However, we cannot assure you that its estimate is accurate, and the Sponsor, directors, officers and their affiliates are under no obligation to advance funds to us in such circumstances.
Our management concluded that there is substantial doubt about its ability to continue as a “going concern.”
As of September 30, 2024, we had US$71,516,443 of cash and investments held in the Trust Account to be used for a business combination or to repurchase or redeem our ordinary shares in connection therewith. If we are unable to raise additional funds to alleviate liquidity needs and complete a business combination by February 23, 2025 (or February 23, 2026 if we extend the Combination Period which may be accomplished only if the Sponsor deposits additional funds into the Trust Account), we will cease all operations except for the purpose of liquidating. The liquidity condition and date for mandatory liquidation and subsequent dissolution raise substantial doubt about our ability to continue as a going concern.
We depend on a variety of U.S. and multi-national financial institutions to provide us with banking services. The default or failure of one or more of the financial institutions that we rely on may adversely affect our business and financial condition.
We maintain the majority of our cash and cash equivalents in accounts with major U.S. and multi-national financial institutions, and our deposits at certain of these institutions exceed insured limits. Market conditions can impact the viability of these institutions. In the event of the failure of any of the financial institutions where we maintain our cash and cash equivalents, there can be no assurance that we would be able to access uninsured funds in a timely manner or at all. Any inability to access or delay in accessing these funds could adversely affect our liquidity, business and financial condition.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Unregistered Sales of Equity Securities
In August 2022, an aggregate of 1,725,000 insider shares were issued to our initial shareholders, for an aggregate purchase price of $25,000, or approximately $0.01 per share. The insider shares held by our initial shareholders included an aggregate of up to 225,000 shares subject to forfeiture by our sponsor to the extent that the underwriters’ over-allotment option was not exercised in full or in part, so that our initial shareholders would collectively own 20.0% of our issued and outstanding shares after our initial public offering (excluding the sale of the private units and the representative shares and assuming our initial shareholders did not purchase units in our initial public offering). On February 21, 2024, the underwriters exercised their over-allotment option in full.
Simultaneously with the closing of our initial public offering on February 23, 2024, we consummated the private placement with DT Cloud Capital Corp., our sponsor, of 234,500 units at a price of $10.00 per private unit. This issuance was made pursuant to Section 4(a)(2) of the Securities Act, as the transaction did not involve a public offering. No underwriting discounts or commissions were paid with respect to the private placement.
Use of Proceeds
On February 23, 2024, we consummated the initial public offering of 6,900,000 units, which includes the exercise in full by the underwriters of their over-allotment option to purchase up to an additional 900,000 units on February 21, 2024. The units were sold at an offering price of $10.00 per unit, generating gross proceeds of $69,000,000. Simultaneously with the closing of our initial public offering on February 23, 2024, we consummated the private placement with DT Cloud Capital Corp., our sponsor, of 234,500 units at a price of $10.00 per private unit, generating total gross proceeds of $2,345,000.
As of February 23, 2024, a total of $69,345,000 of the net proceeds from our initial public offering and the private placement were deposited in a trust account established for the benefit of our public stockholders at Morgan Stanley, with Continental Stock Transfer & Trust Company, acting as trustee.
Brookline Capital Markets, a division of Arcadia Securities, LLC served as the representative of the underwriters of our initial public offering.
The securities sold in our initial public offering were registered under the Securities Act pursuant to a registration statement on Form S-1 (File No. 333-267184) (the “Registration Statement”). The SEC declared the Registration Statement effective on February 14, 2024.
There has been no material change in the planned use of proceeds from our initial public offering and the private placement as described in our final prospectus dated February 20, 2024 .
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
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ITEM 6. EXHIBITS
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
| * | Filed herewith |
| ** | Furnished herewith |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Date: November 7, 2024 | DT Cloud Acquisition Corporation | |
| By: | /s/ Shaoke Li | |
| Name: | Shaoke Li | |
| Title: | Chief Executive Officer and Director (Principal Executive Officer) | |
| By: | /s/ Guojian Chen | |
| Name: | Guojian Chen | |
| Title: | Chief Financial Officer and Director (Principal Financial and Accounting Officer) | |
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