UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Amendment No. 1)
(Mark One)
For the fiscal year ended
or
For the transition period from to
Commission file number:
(Exact name of registrant as specified in its charter)
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Registrant’s telephone number, including area code:
Securities registered pursuant to Section 12(b) of the Act:
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Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐
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 |
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Emerging growth company |
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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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
The aggregate market value of the outstanding shares of the registrant’s ordinary shares, other than shares held by persons who may be deemed affiliates of the registrant, computed by reference to the closing price for the ordinary shares on June 30, 2023, the last business day of the registrant’s most recently completed second fiscal quarter, as reported on the Nasdaq Global Market was $
As of April 16, 2024 there were
EXPLANATORY NOTE
Distoken Acquisition Corporation (the “Company,” “we,” or “our”) filed its Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the “Original Form 10-K”) with the Securities and Exchange Commission (the “SEC”) on April 17, 2024. The Company is now filing this Amendment No. 1 to the Original Form 10-K (the “Amendment”) solely to correct an error in the report titled “Report of Independent Registered Public Accounting Firm” contained in Part II, Item 8 “Consolidated Financial Statements and Supplementary Data” of the Original Form 10-K to properly identify the balance sheets in the first sentence of the report.
Pursuant to Rule 12b-15 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we have included the entire text of Item 8 of the Form 10-K in this Amendment. However, there have been no changes made to the text of such item other than the changes stated in the immediately preceding paragraph. As required by Rule 12b-15 under the Exchange Act, new certifications by our principal executive officer and principal financial officer are being filed as Exhibits 31.1, 31.2, 32.1 and 32.2 to this Amendment. Accordingly, Item 15 of Part III has been amended to reflect the new certifications.
Except as expressly set forth above, this Amendment does not, and does not purport to, amend, update, or restate the information in the remainder of the Original Form 10-K or reflect any events that have occurred after the date of the Original Form 10-K. Accordingly, this Amendment should be read in conjunction with the Original Form 10-K.
i
PART II
Item 8.Financial Statements and Supplementary Data.
DISTOKEN ACQUISITION CORPORATION
INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm (PCAOB ID# |
| F-2 |
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Financial Statements: | |||
F-3 | |||
Statements of Operations for the years ended December 31, 2023 and 2022 | F-4 | ||
F-5 | |||
Statements of Cash Flows for the years ended December 31, 2023 and 2022 | F-6 | ||
F-7 to F-22 |
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
Distoken Acquisition Corporation
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Distoken Acquisition Corporation (the “Company”) as of December 31, 2023 and 2022, the related statements of operations, statements of changes in shareholders’ (deficit) equity and cash flows for each of the two years ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph – Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 1 to the financial statements, the Company is a Special Purpose Acquisition Corporation that was formed for the purpose of completing a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses or entities on or before April 18, 2024. There is no assurance that the Company will obtain the necessary shareholder approvals to extend the business combination deadline on a monthly basis to November 18, 2024 or raise the additional capital it needs to fund its business operations and complete any business combination, if at all. These matters raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans with regard to these matters are also described in Note 1. The financial statements do not include any adjustments that may be necessary should the Company be unable to continue as a going concern.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Marcum LLP
We have served as the Company’s auditor since 2020.
April 16, 2024
PCAOB ID# 688
F-2
DISTOKEN ACQUISITION CORPORATION
BALANCE SHEETS
| December 31, | |||||
| 2023 |
| 2022 | |||
ASSETS | ||||||
Current assets | ||||||
Cash | $ | | $ | — | ||
Other receivable | — | | ||||
Due from Sponsor |
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| — | ||
Prepaid expenses | | | ||||
Total current assets |
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Deferred offering costs |
| — |
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Investments held in Trust Account | | — | ||||
TOTAL ASSETS | $ | | $ | | ||
LIABILITIES AND SHAREHOLDERS’ (DEFICIT) EQUITY |
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Current liabilities |
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Accounts payable and accrued expenses | $ | | $ | | ||
Accrued offering costs |
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Chinese taxes payable | | — | ||||
Advances from Sponsor |
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Promissory note – Sponsor |
| — |
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Extension Note – Sponsor | | — | ||||
TOTAL LIABILITIES |
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Commitments and contingencies |
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Ordinary shares subject to possible redemption | | — | ||||
SHAREHOLDERS’(DEFICIT) EQUITY |
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Preference shares, $ |
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Ordinary shares, $ |
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Additional paid-in capital |
| — |
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Accumulated Deficit |
| ( |
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TOTAL SHAREHOLDERS’ (DEFICIT) EQUITY |
| ( |
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TOTAL LIABILITIES AND SHAREHOLDERS’ (DEFICIT) EQUITY | $ | | $ | | ||
| (1) |
| (2) |
| (3) |
The accompanying notes are an integral part of the financial statements.
F-3
DISTOKEN ACQUISITION CORPORATION
STATEMENTS OF OPERATIONS
| For the Year Ended December 31, | |||||
| 2023 |
| 2022 | |||
Operating and formation costs | $ | | $ | | ||
Loss from operations | ( | ( | ||||
Other income: | ||||||
Interest earned on Investments held in Trust Account | | — | ||||
Total other income | | — | ||||
Income (loss) before provision for income taxes | | ( | ||||
Provision for income taxes | ( | — | ||||
Net income (loss) | $ | | $ | ( | ||
Basic and diluted weighted average shares outstanding, ordinary shares subject to possible redemption value | | — | ||||
Basic and diluted net income (loss) per share, ordinary shares subject to possible redemption value | | $ | — | |||
Basic and diluted weighted average shares outstanding, Non-redeemable ordinary shares(1)(2)(3) |
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Basic and diluted net income (loss) per share, Non-redeemable ordinary shares | | ( | ||||
| (1) | At December 31, 2022, excludes an aggregate of up to |
| (2) | On January 26, 2023, the shareholders of the Company approved, through an ordinary resolution, the redesignation of authorized share capital from |
| (3) | On January 30, 2023, the Company effected a share dividend of |
The accompanying notes are an integral part of the financial statements.
F-4
DISTOKEN ACQUISITION CORPORATION
STATEMENTS OF CHANGES IN SHAREHOLDERS’ (DEFICIT) EQUITY
FOR THE YEAR ENDED DECEMBER 31, 2023 AND 2022
| Additional |
| Total | |||||||||||
| Ordinary Shares |
| Paid-in |
| Accumulated |
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| Shares |
| Amount |
| Capital |
| Deficit |
| Equity (Deficit) | |||||
Balance – January 1, 2022 |
| | $ | | $ | | $ | ( | $ | | ||||
Net loss | — | — | — | ( | ( | |||||||||
Balance – December 31, 2022(1)(2)(3) | | | ( | | ||||||||||
Sale of | | | | — | | |||||||||
Fair value of public warrants at issuance | — | — | | — | | |||||||||
Fair value of representative shares | — | — | | — | | |||||||||
Fair value of rights included in public units | — | — | | — | | |||||||||
Fair value of representative warrants | — | — | | — | | |||||||||
Allocated value of transaction costs | — | — | ( | — | ( | |||||||||
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Accretion for ordinary shares to redemption amount |
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Net income | — | — | — | | | |||||||||
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Balance – December 31, 2023 |
| | $ | | $ | — | $ | ( | $ | ( | ||||
| (1) | At December 31, 2022, includes an aggregate of up to |
| (2) | On January 26, 2023, the shareholders of the Company approved, through an ordinary resolution, the redesignation of authorized share capital from |
| (3) |
The accompanying notes are an integral part of the financial statements.
F-5
DISTOKEN ACQUISITION CORPORATION
STATEMENTS OF CASH FLOWS
| For the Year Ended December 31, | |||||
| 2023 |
| 2022 | |||
Cash Flows from Operating Activities: | ||||||
Net income (loss) | $ | | $ | ( | ||
Adjustments to reconcile net income (loss) to net cash used in operating activities: |
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Interest earned on Investments held in Trust Account | ( | | ||||
Changes in operating assets and liabilities: |
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Other receivable | | | ||||
Prepaid expenses |
| ( |
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Accounts payable and accrued expenses |
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Chinese taxes payable | | | ||||
Net cash used in operating activities |
| ( |
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Cash Flows from Investing Activities: | ||||||
Investment of cash in Trust Account | ( | | ||||
Cash deposited in Trust Account for extension payments | ( | | ||||
Cash withdrawn from Trust Account in connection with redemption | | | ||||
Net cash used in investing activities | ( | | ||||
Cash Flows from Financing Activities: | ||||||
Proceeds from sale of Units, net of underwriting discounts paid | | | ||||
Proceeds from sale of Private Units | | | ||||
Proceeds from sale of Representative warrants | | | ||||
Advances from the Sponsor |
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Repayment of advances from the Sponsor |
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Repayment of promissory note – the Sponsor |
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Payment of offering costs |
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Redemption of ordinary shares | ( | | ||||
Net cash provided by financing activities | |
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Net Change in Cash | | | ||||
Cash – Beginning of period |
| — |
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Cash – End of period | $ | | $ | | ||
Non-Cash investing and financing activities: | ||||||
Offering costs included in accrued offering costs | $ | | $ | | ||
Accretion of ordinary shares to redemption value | $ | | $ | | ||
The accompanying notes are an integral part of the financial statements.
F-6
NOTE 1 — DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Distoken Acquisition Corporation (the “Company”) is a blank check company incorporated as a Cayman Islands exempted company on July 1, 2020. The Company was 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 (“Business Combination”).
As of December 31, 2023, the Company had not commenced any operations. All activity for the period from July 1, 2020 (inception) through December 31, 2023 relates to the Company’s formation, the preparation of the initial public offering (“Initial Public Offering”), which closed on February 17, 2023, as described below, and subsequent to the Initial Public Offering, identifying a target company for a Business Combination. The Company will not generate any operating revenues until after the completion of a Business Combination, at the earliest. The Company generates non-operating income in the form of interest income and unrealized gains from the proceeds derived from the Initial Public Offering. The Company has selected December 31 as its fiscal year end.
The registration statement for the Company’s Initial Public Offering was declared effective on February 13, 2023. On February 17, 2023, the Company consummated the Initial Public Offering of
Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of
Transaction costs amounted to $
Following the closing of the Initial Public Offering on February 17, 2023, an amount of $
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of the Private 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 an aggregate fair market value of 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. The decision as to whether the Company will seek shareholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The shareholders will be entitled to redeem their shares for a pro rata portion of the amount held in the Trust Account (initially $
F-7
The Company will proceed with a Business Combination only if 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 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 redeeming its shares with respect to
The Sponsor has agreed (a) to waive its redemption rights with respect to any Founder Shares, Private Shares and Public Shares held by it in connection with the completion of a Business Combination (and not seek to sell its shares to the Company in any tender offer the Company undertakes in connection with a Business Combination) and (b) not to propose an amendment to the Memorandum and Articles of Association (i) that would affect the ability of holders of Public Shares to redeem or sell their shares to the Company in connection with a Business Combination or to modify the substance or timing of the Company’s obligation to redeem
The Company initially had 9 months from the closing of the Initial Public Offering, or until November 17, 2023, to consummate a Business Combination. However, if the Company anticipated that it would not be able to consummate a Business Combination within 9 months, it was originally permitted, by resolution of the Company’s board of directors (the “Board”) if requested by the Sponsor, extend the period of time to consummate a Business Combination up to three times, each by an additional three months (for a total of up to 18 months), subject to the Sponsor depositing additional funds into the Trust Account (the “Original Extension”). Pursuant to the terms of the Memorandum and Articles of Association and the Trust Agreement entered into between the Company and Continental Stock Transfer & Trust Company on the date of the prospectus, in order for the time available to consummate the Initial Business Combination to be extended, the Sponsor or its affiliates or designees, upon advance notice prior to the applicable deadline, was originally required to deposit into the Trust Account $
On November 10, 2023, the Company held an extraordinary general meeting (the “Extension Meeting”), at which the Company’s shareholders approved, as a special resolution, an amendment to the Company’s Memorandum and Articles of Association to amend the terms of the Original Extension and to give the Board the right to extend the date by which the Company has to consummate a Business Combination (such date, the “Termination Date”) from November 17, 2023 on a monthly basis up to twelve (12) times until November 18, 2024, or such earlier date as determined by the Board (the “New Extension”). In connection with the New Extension, shareholders holding
F-8
On November 10, 2023, the Company issued a promissory note (the “Extension Note”) in the aggregate principal amount of up to $
As of December 31, 2023, the Company advanced an aggregate amount of $
From January 2024 through April 2024, the Company advanced an aggregate amount of $
As a result of the New Extension, the Company has the ability to extend liquidation until November 18, 2024, or such earlier date as determined by the Board (the “Combination Period”) to consummate a Business Combination. 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 10 business days thereafter, redeem
The Sponsor has agreed that it will be liable to the Company, if and to the extent any claims by a third party (other than the Company’s independent auditors) for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below (1) $
Going Concern Consideration
The Company’s liquidity needs prior to the consummation of the Initial Public Offering were satisfied through the payment of $
F-9
In order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, it would repay such loaned amounts at that time. Up to $
In connection with the Company’s assessment of going concern considerations in accordance with the authoritative guidance in Financial Accounting Standard Board (“FASB”) Accounting Standards Update (“ASU”) Topic 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that the Company currently lacks the liquidity it needs to sustain operations for a reasonable period of time, which is considered to be at least one year from the date that the financial statements are issued as it expects to continue to incur significant costs in pursuit of its acquisition plans. In addition, the Company may extend the amount of time to consummate a Business Combination from April 18, 2024, on a monthly basis up to twelve times, until November 18, 2024, or such earlier date as determined by the board. It is uncertain that the Company will be able to consummate a Business Combination by this time. The Company plans on extending the time to complete an initial business combination by one month from April 18, 2024 to May 18, 2024 by depositing the $
Management has determined that mandatory liquidation, should a Business Combination not occur, and potential subsequent dissolution and the liquidity condition raise substantial doubt about the Company’s ability to continue as a going concern for one year from the date these financial statements are issued. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after November 18, 2024. The Company intends to continue to search for and seek to complete a Business Combination before the mandatory liquidation date.
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements are presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the SEC.
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 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-10
Use of Estimates
The preparation of the financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company has $
Investments in Trust Account
At December 31, 2023, assets held in the Trust Account were held in money market funds which are invested primarily in U.S. government securities. The Company accounts for its investments as trading securities under ASC 320 (Investments—Debt and Equity Securities), where securities are presented at fair value on the balance sheets. Gains and losses resulting from the change in fair value of investments held in the Trust Account are included in interest earned on investments held in Trust Account in the statements of operations. As of December 31, 2022 there were
Redeemable Share Classification
The Public Shares contain a redemption feature which allows for the redemption of such Public Shares in connection with the Company’s liquidation, or if there is a shareholder vote or tender offer in connection with the Company’s initial business combination. In accordance with ASC 480-10-S99, the Company classifies Public Shares subject to redemption outside of permanent equity as the redemption provisions are not solely within the control of the Company. The Public Shares sold as part of the Units in the Initial Public Offering were issued with other freestanding instruments (i.e., Public Warrants and Public Rights) and as such, the initial carrying value of Public Shares classified as temporary equity are the allocated proceeds determined in accordance with ASC 470-20. The Company recognizes changes in redemption value immediately as it occurs and will adjust the carrying value of redeemable shares to equal the redemption value at the end of each reporting period. Immediately upon the closing of the Initial Public Offering, the Company recognized the accretion from initial book value to redemption amount value. The change in the carrying value of redeemable shares will result in charges against additional paid-in capital and accumulated deficit. Accordingly, at December 31, 2023, shares subject to possible redemption are presented at redemption value as temporary equity, outside of the shareholders’ equity section of the Company’s balance sheet.
At December 31, 2023, the ordinary shares reflected in the balance sheet are reconciled in the following table:
Gross proceeds |
| $ | |
Less: |
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Proceeds allocated to Public Warrants |
| ( | |
Proceeds allocated to Public Rights |
| ( | |
Ordinary share issuance costs |
| ( | |
Redemption of ordinary shares |
| ( | |
Plus: |
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Remeasurement of carrying value to redemption value |
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Ordinary shares subject to possible redemption, December 31, 2023 | $ | |
F-11
Offering Costs
The Company complies with the requirements of the ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A — “Expenses of Offering”. Offering costs consist principally of professional and registration fees, cash underwriting discount, fair value of representative shares, and fair value of representative warrants incurred through the balance sheet date that are related to the Initial Public Offering. Offering costs were allocated to the separable financial instruments issued in the Initial Public Offering based on relative fair value basis, compared to total proceeds received. Offering costs allocated to the Public Shares were charged to temporary equity and offering costs allocated to Public Warrants (as defined in Note 3) were charged to shareholders’ equity upon the completion of the Initial Public Offering.
Income Taxes
The Company accounts for income taxes under ASC 740, “Income Taxes” (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statement and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. The Company has determined there is a possibility it will be considered a Chinese Income Tax Resident for which it will owe taxes to the Chinese government. As such, the Company has accrued $
The Company is considered an exempted Cayman Islands Company and is presently not subject to income taxes or income tax filing requirements in the Cayman Islands or the United States.
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with FASB ASC Topic 815, “Derivatives and Hedging”. Derivative instruments are initially recorded at fair value on the grant date and re-valued at each reporting date, with changes in the fair value reported in the statement of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative assets and liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instruments could be required within 12 months of the balance sheet date.
Warrant Instruments
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the instruments’ specific terms and applicable authoritative guidance in ASC 480 and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the instruments are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the instruments meet all of the requirements for equity classification under ASC 815, including whether the instruments are indexed to the Company’s own ordinary shares and whether the instrument holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of the warrant issuance and as of each subsequent quarterly period end date while the instruments are outstanding. Upon further review of the warrant agreement, management concluded that the warrants issued pursuant to the warrant agreement qualify for equity accounting treatment.
F-12
Net Income (Loss) Per Share
The Company complies with accounting and disclosure requirements of Financial Accounting Standards Board (“FASB”) ASC Topic 260, “Earnings Per Share”. Net income (loss) per ordinary share is computed by dividing net income (loss) by the weighted average number of ordinary shares outstanding for the period. Accretion associated with the redeemable Class A ordinary shares is excluded from earnings per share as the redemption value approximates fair value.
The calculation of diluted income (loss) per share does not consider the effect of the warrants issued in connection with the (i) Initial Public Offering, and (ii) the private placement since the exercise of the warrants to purchase
The following table reflects the calculation of basic and diluted net income (loss) per ordinary share (in dollars, except per share amounts):
For the Year Ended December 31, | ||||||||||||
2023 | 2022 | |||||||||||
| Redeemable |
| Non-redeemable |
| Redeemable |
| Non-redeemable | |||||
Basic and diluted net income (loss) per ordinary share | ||||||||||||
Numerator: | ||||||||||||
Allocation of net income (loss) | $ | | $ | | $ | — | $ | ( | ||||
Denominator: | ||||||||||||
Basic and diluted weighted average ordinary shares outstanding |
| |
| |
| — |
| | ||||
Basic and diluted net income (loss) per ordinary share | $ | | $ | | $ | — | $ | ( | ||||
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentration of credit risk consist of a cash account in a financial institution which, at times may exceed the Federal Deposit Insurance Corporation coverage limit of $250,000. The Company has not experienced losses on this account.
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 Measurement,” approximates the carrying amounts represented in the accompanying balance sheet, primarily due to their short-term nature.
Recently Issued Accounting Standards
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which requires disclosure of incremental income tax information within the rate reconciliation and expanded disclosures of income taxes paid, among other disclosure requirements. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company’s management does not believe the adoption of ASU 2023-09 will have a material impact on its financial statements and disclosures.
Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s financial statements.
F-13
NOTE 3 —PUBLIC OFFERING
Pursuant to the Initial Public Offering, the Company sold
NOTE 4 — PRIVATE PLACEMENT
Simultaneously with the closing of the Initial Public Offering, the Sponsor purchased an aggregate of
NOTE 5 — RELATED PARTY TRANSACTIONS
Founder Shares
On July 8, 2020, the Sponsor paid $
On January 26, 2023, the shareholders of the Company approved, through an ordinary resolution, the redesignation of authorized share capital from two classes of ordinary shares (Class A and Class B) to one class of ordinary shares and related amendments to the memorandum and articles of association. All share and per-share amounts and descriptions have been retrospectively presented.
The Sponsor has agreed, subject to limited exceptions, not to transfer, assign or sell any of its Founder Shares until the earlier of (A)
F-14
Administrative Services Agreement
The Company entered into an agreement, commencing on February 15, 2023, to pay the Sponsor or its affiliate up to $
Due from Sponsor
At the closing of the Initial Public Offering on February 17, 2023, $
As of December 31, 2023, the Company advanced an aggregate amount of $
From January 2024 through April 2024, the Company advanced an aggregate amount of $
As of December 31, 2022, there was
Advances from Sponsor
The advances from Sponsor represents the amounts paid by the Sponsor on behalf of the Company in excess of the limit that can be drawn against the promissory note. As of December 31, 2023 and 2022, there were $
Promissory Note — Sponsor
On July 8, 2020, the Company issued an unsecured promissory note to the Sponsor, pursuant to which the Company may borrow up to an aggregate principal amount of $
Related Party 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 officers and directors may, but are not obligated to, loan the Company funds as may be required. Such Working Capital Loans would be evidenced by promissory notes. The notes may be repaid upon completion of a Business Combination, without interest, or, at the lender’s discretion, up to $
F-15
Extension Note - Sponsor
As discussed in Note 1, on November 10, 2023, the Company issued the Extension Note in the aggregate principal amount of up to $
NOTE 6 — COMMITMENTS
Registration Rights
Pursuant to a registration rights agreement entered into on February 15, 2023, the holders of the Founder Shares, Representative Shares, Private Units and any units that may be issued on conversion of the Working Capital Loans (and any securities underlying the Private Units or units issued upon conversion of Working Capital Loans) will be entitled to registration rights pursuant to a registration rights agreement. The holders of these securities will be entitled to make up to
Underwriting Agreement
The Company granted the underwriters a 45-day option to purchase up to
The underwriters were also entitled to a cash underwriting discount of $
Business Combination Marketing Agreement
The Company has engaged I-Bankers Securities, Inc. (“I-Bankers”), the representative of the underwriters in the Initial Public Offering, as an advisor in connection with its Business Combination to assist in holding meetings with the Company shareholders to discuss the potential Business Combination and the target business’ attributes, introduce the Company to potential investors that are interested in purchasing its securities in connection with its initial Business Combination and assist with press releases and public filings in connection with the Business Combination. The Company will pay I-Bankers a cash fee for such services upon the consummation of its initial business combination in an amount equal to
F-16
Vendor Agreement
On April 30, 2023, the Company entered into an agreement with a vendor for legal and consulting services, pursuant to which the Company agreed to pay the vendor $
NOTE 7 — SHAREHOLDERS’ (DEFICIT) EQUITY
Preference Shares — The Company is authorized to issue
Ordinary Shares — On January 26, 2023, the shareholders of the Company approved, through an ordinary resolution, the redesignation of authorized share capital from
The Company is authorized to issue
Rights — Each holder of a right will receive (1/10) of one ordinary share upon consummation of a Business Combination, even if the holder of such right redeemed all shares held by it in connection with a Business Combination. No fractional shares will be issued upon exchange of the rights.
If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of rights will not receive any of such funds with respect to their rights, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such rights, and the rights will expire worthless. Further, there are
Warrants — The Public Warrants will become exercisable
F-17
No warrants will be exercisable for cash unless the Company has an effective and current registration statement covering the ordinary shares issuable upon exercise of the warrants and a current prospectus relating to such ordinary shares. Notwithstanding the foregoing, if a registration statement covering the ordinary shares issuable upon exercise of the Public Warrants is not effective within
Once the Public Warrants become exercisable, the Company may redeem the Public Warrants for redemption:
| ● | in whole and not in part; |
| ● | at a price of $ |
| ● | upon not less than |
| ● | if, and only if, the reported last sale price of the ordinary shares equals or exceeds $ |
| ● | if, and only if, there is a current registration statement in effect with respect to the ordinary shares underlying such warrants. |
If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of ordinary shares issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a share dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. However, except as described below, the Public Warrants will not be adjusted for issuances of ordinary shares at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the Public Rights or Public Warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of Public Warrants will not receive any of such funds with respect to their Public Warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such Public Warrants. Accordingly, the Public Rights and Public Warrants may expire worthless.
In addition, if (x) the Company issues additional ordinary shares or equity-linked securities for capital raising purposes in connection with the closing of a Business Combination at an issue price or effective issue price of less than $
The Private Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Warrants and the ordinary shares issuable upon the exercise of the Private Warrants will not be transferable, assignable or salable until
F-18
Representative Shares
On July 28, 2020 the Company issued to EarlyBirdCapital and its designees an aggregate of
The following tables present the quantitative information regarding market assumptions used in the representative shares valuation:
| August 23, |
| October 28, |
| |||
2021 | 2021 | ||||||
Market price(1) | $ | | $ | | |||
Risk-free rate(2) |
| | % |
| | % | |
Dividend yield(3) |
| | % |
| | % | |
Volatility(4) |
| | % |
| | % | |
| (1) | As reported by Bloomberg on the Valuation Date |
| (2) | Based on the U.S. Treasury rate with a term matching the time to expiration |
| (3) | Based on an analysis of the guideline companies and discussions with management |
| (4) | Implied volatility calculated using the Black-Scholes formula using the fair value of the warrant. This value is presented for comparison purposes only as it excludes the impact of redemption features. |
August 23, | October 28, | |||||
| 2021 |
| 2021 | |||
1.00 share per Unit | $ | | $ | | ||
0.50 warrant per Unit |
| |
| | ||
0.10 right per Unit |
| |
| | ||
Total price per Unit | $ | | $ | | ||
Offering price per Unit | $ | | $ | | ||
The holders of the representative shares have agreed not to transfer, assign or sell any such shares until the completion of a Business Combination. In addition, the holders have agreed (i) to waive conversion rights (or right to participate in any tender offer) with respect to such shares in connection with the completion of a Business Combination and (ii) to waive their rights to liquidating distributions from the Trust Account with respect to such shares if the Company fails to complete a Business Combination within the Combination Period.
The representative shares have been deemed compensation by FINRA and are therefore subject to a lock-up for a period of 180 days immediately following the effective date of the registration statement related to the Initial Public Offering pursuant to Rule 5110(g)(1) of the FINRA Manual. Pursuant to FINRA Rule 5110(g)(1), these securities will not be sold during the Initial Public Offering, or sold, transferred, assigned, pledged, or hypothecated, or be the subject of any hedging, short sale, derivative, put or call transaction that would result in the economic disposition of the securities by any person for a period of 180 days immediately following the effective date of the registration statement related to the Initial Public Offering or commencement of sales of the Initial Public Offering, except to any underwriter and selected dealer participating in the Initial Public Offering and their bona fide officers or partners.
F-19
Representative Warrants
In addition, the Company entered into a separate warrant agreement with I-Banker Securities, Inc. (referred as “I-Bankers”, the “Representative” of the Underwriters) to issue Representative Warrants exercisable to purchase
NOTE 8 — INCOME TAXES
If the Company is deemed a Chinese tax resident enterprise, its worldwide income, including the interest income from U.S. Treasury bills and mutual funds, will be taxable at a standard rate of
The Chinese income tax provisions for the years ended December 31, 2023 and 2022 consist of the following:
| December 31, |
| December 31, | |||
2023 | 2022 | |||||
Income (loss) before provision for income taxes |
| |
| ( | ||
China’s corporate income tax standard rate (on income) |
| | % | | ||
Income tax provision | $ | | $ | | ||
As of December 31, 2023 and 2022, the Company did not have any deferred tax assets and liabilities.
A reconciliation of the Chinese income tax rate to the Company’s effective tax rate is as follows:
| December 31, |
| December 31, | |
2023 | 2022 | |||
China’s corporate income tax standard rate |
| | % | |
Income tax provision |
| | % | |
NOTE 9 — FAIR VALUE MEASUREMENTS
The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.
F-20
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. |
At December 31, 2023, assets held in the Trust Account were comprised of $
The following table presents information about the Company’s assets that are measured at fair value on a recurring basis at December 31, 2023 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
| December 31, | ||||
Description |
| Level |
| 2023 | |
Assets: |
|
| |||
Investments held in Trust Account |
| 1 | $ | | |
The following table presents information about the Company’s equity instruments that are measured at fair value at February 17, 2023, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.
| Level |
| February 17, 2023 | ||
Equity: | |||||
Representative Warrants |
| 3 | $ | | |
Fair Value of Public Rights for ordinary shares subject to redemption allocation |
| 3 | $ | | |
Fair Value of Public Warrants for ordinary shares subject to redemption allocation |
| 3 | $ | | |
The Public Warrants were valued using the binomial lattice model incorporating the Cox-Ross-Rubenstein methodology. The private and representative warrants were valued using the Black-Scholes model. The following table presents the quantitative information regarding market assumptions used in the valuation of warrants:
February 17, | ||||
| 2023 |
| ||
Market price of public share | $ | |
| |
Risk-free rate |
| | % | |
Dividend yield |
| | % | |
Volatility |
| | % | |
F-21
The rights were valued using a scenario analysis. The following table presents the quantitative information regarding market assumptions used in the valuation of the rights. The appraiser determined the value of the rights based on the value of underlying security:
February 17, |
| |||
| 2023 |
| ||
Value in De-SPAC(1) | $ | |
| |
Value without De-SPAC(2) | $ | — | ||
Probability(3) |
| | % | |
Fair value of Right to buy one Share(4) | $ | | ||
| (1) | As the Founder Share will be converted to an ordinary share at the consummation of a transaction, it is assumed that the value of the Founder Share in the de-SPAC transaction scenario would simply equal the value of the ordinary share in a de-SPAC transaction. |
| (2) | The probability is as used in warrant analysis |
| (3) | Probability of the consummation of an initial business combination |
| (4) | Calculated as the weighted average price |
NOTE 10 — SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued. Based upon this review, except as set forth below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.
On February 26, 2024, the Company issued an unsecured promissory note (the “2024 Note”) in the aggregate principal amount of up to $
From January 2024 through April 2024, the Company advanced an aggregate amount of $
F-22
PART IV
Item 15. Exhibit and Financial Statement Schedules.
(a)The following documents are filed as part of this Amendment:
(1)Financial Statements
(2)Financial Statement Schedules
All financial statement schedules are omitted because they are not applicable or the amounts are immaterial and not required, or the required information is presented in the financial statements and notes thereto beginning on page F-1 of this Amendment.
(3)Exhibits
The exhibits listed in the Exhibit Index of the Original Form 10-K and the additional exhibits listed in the Exhibit Index of this Amendment are filed with, or incorporated by reference, in this report.
23
EXHIBIT INDEX
24
*Filed herewith.
**Furnished herewith
(1)Incorporated by reference to the Company’s Registration Statement on Form S-1 (File No. 333-248822), filed with the SEC on September 15, 2020.
(2) | Incorporated by reference to Amendment No. 1 to the Company’s Registration Statement on Form S-1/A (File No. 333-248822), filed with the SEC on October 9, 2020. |
(3) | Incorporated by reference to Amendment No. 5 to the Company’s Registration Statement on Form S-1/A (File No. 333-248822), filed with the SEC on August 30, 2021. |
(4) | Incorporated by reference to Amendment No. 7 to the Company’s Registration Statement on Form S-1/A (File No. 333-248822), filed with the SEC on December 12, 2022. |
(5)Incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on February 17, 2023.
25
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report on Form 10-K/A to be signed on its behalf by the undersigned, thereunto duly authorized.
September 23, 2024 | DISTOKEN ACQUISITION CORPORATION | |
By: | /s/ Jian Zhang | |
Name: | Jian Zhang | |
Title: | Chief Executive Officer (Principal Executive Officer) | |
26