美國
證券交易委員會
華盛頓特區20549
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(成立州或其他管轄區) | 編號) |
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(總部辦公地址) | (郵遞區號) |
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( (註冊人電話號碼，包括區號) 拉丁美洲增長特殊目的收購公司（SPAC） （如果自上次報告以來更改了前名或前地址） 根據法案第12(b)條註冊的證券： | |
每種類別的名稱 |
| 交易標的（s） |
| 每個註冊交易所的名稱 |
The | ||||
The |
請勾選表示是否以下事項：(1)在過去12個月內（或者登記者需要提交這些報告的較短期間），已依據1934年證券交易所法第13或15(d)條的規定提交所有需要提交的報告；以及(2)在過去90天內已經受到這些報告要求的影響。
☒ 不☐
請勾選表示是否以下事項：在過去12個月內（或者登記者需要提交這些文件的較短期間），已根據S-t法規第405條（本章節第232.405條）要求提交每個互動數據文件。 ☒ NO ☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definition of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 120億2 of the Exchange Act.:
大型快速申報者☐ | 加速披露人☐ |
小型報告公司 | |
| 新興成長型公司 |
如果一家新興成長公司，當公司選擇不使用根據《交易所法》第13(a)條提供的任何新的或修訂後的財務會計準則的延長過渡期時，請勾選。
勾選是否登記人為外殼公司（根據《交易所法》120億2條定義）。是
截至2024年11月12日，存在
第一部分. 財務資料
項目 1。 | 基本報表 |
誠合併公司I股份
縮表
九月三十日， | 十二月三十一日， | |||||
| 2024 |
| 2023 | |||
(未經審計) | ||||||
資產 |
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流動資產 |
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現金 | $ | — | $ | — | ||
預付費用 |
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所有流動資产總額 |
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$ |
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總資產 | $ | | $ | | ||
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負債、可贖優先股和股東資本赤字 | ||||||
流動負債 |
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應付帳款及應計費用 | $ | | $ | | ||
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應付交易成本 | | — | ||||
全部流动负债 |
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認股權證負債 |
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總負債 |
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承諾與可能負擔（附註6） | ||||||
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可能被贖回的A類普通股， |
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股東赤字 |
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優先股，$ |
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A類普通股，每股 $ |
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B類普通股，$ |
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資本公積額額外增資 |
| — |
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累積虧損 |
| ( |
| ( | ||
股東權益總缺口 | ( | ( | ||||
負債總額、可贖回普通股和股東資本赤字 | $ | | $ | | ||
附註是這份未經審計的簡明財務報表的一部分。
1
誠合併公司I股份
未審計的簡明損益表
截至9月30日止三個月 | 截至9月30日止九個月的情況為 | |||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 | |||||
在信託賬戶中持有的投資所獲得的投資收入 | $ | | $ | | $ | | $ | | ||||
營運虧損 |
| ( |
| ( | ( |
| ( | |||||
其他收入： |
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其他收入歸因於將分配給發行成本的遞延承銷費用減少 | — | | — | | ||||||||
認股權的公允價值變動溢利（損失） |
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| | ( |
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信托利息收入 |
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其他收入合計，淨額 |
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凈利潤（損失） | $ | | $ | | $ | ( | $ | | ||||
普通A類股份的基本和稀釋加權平均未來支付部分可能贖回 |
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普通股每股基本及稀釋凈利潤（損失），A類普通股可能面臨贖回 | $ | | $ | | $ | ( | $ | | ||||
非可贖回A類和B類普通股的稀釋和基本加權平均股份 |
| |
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每股基本與稀釋凈利潤（虧損），不可贖回的A類和B類普通股 | $ | | $ | | $ | ( | $ | | ||||
附註是這份未經審計的簡明財務報表的一部分。
2
誠合併公司I股份
未經審核的股東權益赤字變動簡明報表
截至2024年9月30日和2023年9月30日的三個和九個月。
總計 | |||||||||||||||||||
A類普通股 | b類普通股 | 追加 | 累積的 | 股東的 | |||||||||||||||
| 股份 |
| 金額 |
| 股份 |
| 金額 |
| 實收資本 |
| 赤字 |
| 赤字 | ||||||
2023年12月31日結餘 |
| | $ | | | $ | | $ | | $ | ( | $ | ( | ||||||
對A類普通股重新計量至贖回金額 |
| — |
| — | — | — |
| ( |
| — |
| ( | |||||||
淨虧損 |
| — |
| — | — | — |
| — |
| ( |
| ( | |||||||
2024年3月31日餘額（未經審計） | | $ | | | $ | | $ | | $ | ( | $ | ( | |||||||
對A類普通股重新計量至贖回金額 | — | — | — | — | ( | — | ( | ||||||||||||
凈利潤 |
| — |
| — | — | — |
| — |
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截至2024年6月30日的資產負債表（未經審核） |
| | $ | | | $ | | $ | | $ | ( | $ | ( | ||||||
對A類普通股重新計量至贖回金額 | — | — | — | — | ( | ( | ( | ||||||||||||
凈利潤 | — | — | — | — | — | | | ||||||||||||
2024年9月30日結餘（未經審核） | | $ | | | $ | | $ | — | $ | ( | $ | ( | |||||||
截至2023年9月30日的三個月和九個月
總計 | ||||||||||||||
B類 | 追加 | 累積的 | Shareholders’ | |||||||||||
| 股份 |
| 金額 |
| 已繳資本 |
| 赤字 |
| 赤字 | |||||
截至2022年12月31日的资产负债表 | | $ | | $ | — | $ | ( | $ | ( | |||||
對A類普通股重新計量至贖回金額 |
| — |
| — |
| — |
| ( |
| ( | ||||
凈利潤 |
| — |
| — |
| — |
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2023年3月31日餘額（未經審核） | | | — | ( | ( | |||||||||
對A類普通股重新計量至贖回金額 | — | — | — | ( | ( | |||||||||
凈利潤 | — | — | — | | | |||||||||
2023年6月30日資產負債表（未經審核） | | | — | ( | ( | |||||||||
對A類普通股重新計量至贖回金額 |
| — | — | — | ( | ( | ||||||||
減少遞延承銷費用 | — | — | — | | | |||||||||
凈利潤 | — | — | — | | | |||||||||
至2023年9月30日止餘額（未經審核） | | $ | | $ | — | $ | ( | $ | ( | |||||
附註是這份未經審計的簡明財務報表的一部分。
3
誠合併公司I股份
未經核數的現金流量表
截至9月30日止九個月的情況為 | ||||||
| 2024 |
| 2023 | |||
經營活動現金流量： | ||||||
淨（損失）收入 | $ | ( | $ | | ||
調整以調和淨（虧損）收益為經營活動所用現金： |
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其他收入歸因於將分配給發行成本的遞延承銷費用減少 | — | ( | ||||
信託賬戶中持有的可轉讓證券所賺取的利息 | ( | ( | ||||
認股權變動公平值未實現盈利（虧損） |
| |
| ( | ||
營運資產和負債的變化： |
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預付費用 |
| ( |
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應付帳款及應計費用 |
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應付給關聯方 | — | ( | ||||
經營活動所用的淨現金 |
| ( |
| ( | ||
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投資活動現金流量： |
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融資活動中使用的淨現金 | — | | ||||
主要存入trust賬戶 | ( | ( | ||||
投資活動提供的淨現金流量（使用） |
| ( |
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融資活動現金流量： | ||||||
贖回普通股 | — | ( | ||||
發行人保證票款的收益 |
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由目標支付的展延存款 |
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| — | ||
融資活動提供的（使用的）淨現金 | | ( | ||||
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現金的淨變化 |
| — |
| ( | ||
期初現金 | — | | ||||
期末現金 | $ | — | $ | | ||
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現金流量資訊的補充披露： | ||||||
對A類普通股重新計量至贖回金額 | $ | | $ | | ||
免除推廣中的承銷佣金應付款項計入累積虧損 | $ | — | $ | ( | ||
附註是這份未經審計的簡明財務報表的一部分。
4
成合收購I公司。
基本報表附註
備註1—組織和業務業務控件
成和收購I公司（前稱LatAmGrowth SPAC）（以下簡稱「公司」）於2021年5月20日註冊成爲開曼群島豁免公司。2023年10月25日，該公司股東批准將公司名稱從LatAmGrowth SPAC更改爲成和收購I公司，這是由於贊助銷售（請參閱下文中有關該贊助銷售的詳細信息）。公司的成立目的是實現與一個或多個企業或實體進行合併、股份交換、資產收購、股份購買、重組或類似業務組合（「業務組合」）。
首次公開募股
截至2024年9月30日，該公司尚未開始任何業務。從2021年5月20日（成立）至2024年9月30日的所有活動均涉及公司的成立、首次公開發行（「IPO」）、尋找業務組合目標和談判業務組合。在初步業務組合完成之前，該公司將不會產生任何營業收入。該公司將以來自IPO收益的現金及現金等價物利息收入形式生成非營業收入。該公司已將12月31日確定爲其財政年度結束日期。
公司IPO的註冊聲明於2022年1月24日生效。於2022年1月27日，公司完成了IPO
與IPO結束同時，公司完成了對
交易成本爲
公司必須完成一個或多個業務組合，其總公允市值至少爲信託帳戶中資產價值的
2022年1月27日發行IPO後，從公開發行單位和定向增發warrants的淨收益中，每單位共籌集了$
5
根據修訂和重新制定的公司備忘錄和章程（隨時修訂，稱爲「MAA」）中規定，或在公司爲了完成業務組合而必須延長時間期間內，由股東投票修訂其MAA導致的任何延長時間（iii）適當提交的公衆股份的贖回與股東投票修訂該公司MAA有關的情況下（A）修改公司允許在初始業務組合中贖回的義務的實質或時間安排或贖回
公司將向其公衆股東提供在完成初始業務組合後贖回其全部或部分公衆股份的機會，方式包括（i）在召開以批准初始業務組合爲目的的股東大會時，或（ii）通過要約收購無需股東投票。關於公司是否將尋求股東批准擬議的初始業務組合或進行要約收購的決定將由公司獨自酌情作出，並將基於多種因素，例如交易的時間安排以及交易條款是否需要公司根據適用法律或股票交易所上市要求尋求股東批准。
股東有權以每股價格以現金支付等於在初始業務組合完成之前兩個工作日按委託帳戶中當時存入的總金額計算，包括委託帳戶中持有的未曾用於支付公司稅款的資金所產生的利息，除以當時未發行的公衆股份數量，取決於公司IPO招股說明書中描述的限制和條件。委託帳戶中的金額爲$
待贖回的普通股按贖回價值計入，並在IPO完成後按照《財務會計準則委員會（FASB）》《會計準則規範（ASC）》第480號主題「區分負債和權益」（「ASC 480」）分類爲臨時權益。
2023年6月15日，公司收到了納斯達克證券交易所（「NASDAQ」）上市資格部（「Staff」）發來的書面通知，指出自公司尚未行使的認股證的總市值低於1,000,000美元，公司不再符合納斯達克全球市場繼續上市標準中規定的納斯達克上市規則5452(b)(C)（「規則」）要求公司至少維持未行使的認股證總市值1,000,000美元以上的資格（「通知」）。公司獲得從通知發出之日起45個日曆日的期限提交恢復遵守規則的計劃。公司未提出此類計劃。2023年8月16日，Staff通知公司，納斯達克決定啓動對公司公共認股證的除牌程序，每個整認股證可行使購買。
如果公司在交易組合期內未完成業務組合，則公司將：(i) 停止所有業務，僅用於清算目的，(ii) 儘快但不超過 業務日後，按照每股價格贖回公共股份，以現金支付，等於信託帳戶中當時存款總額，包括信託帳戶中的利息所得（扣除應繳稅款和最高$
贊助方和管理團隊的每位成員同意放棄他們在完成首次業務組合時針對其創始股和公共股份的贖回權；(ii) 放棄其權利與股東表決批准修改公司MAA的修正案有關時的初始期業務組合時允許贖回或贖回
6
合併期或（B）與股東權利或初始業務合併前活動有關的任何其他重要條款；（iii）如果公司未能在合併期內完成初始業務合併，則放棄從信託帳戶中清算其創始股票分配的權利，但如果公司未能在合併期內完成初始業務合併，他們將有權清算信託帳戶中其持有的任何公開股票的分配規定的時限；以及（iv）投票支持初始業務合併，以及在首次公開募股（包括公開市場和私下談判的交易）期間或之後購買的任何公開股票。
贊助商已同意，如果第三方就向公司提供的服務或出售的產品提出的索賠，或公司已與之簽訂書面意向書、保密或其他類似協議或業務合併協議的潛在目標企業提出的任何索賠，將信託帳戶中的資金金額減少到 (i) 美元以下，則贊助商將對公司承擔責任
贊助商銷售
該公司目前的保薦人是Chenghe Investment I Limited，這是一家根據開曼群島法律註冊成立的豁免公司（「新贊助商」 和 「贊助商」 是指每位老贊助商和新保薦人，除非文中另有說明）。2023年9月29日，公司、舊保薦人和新保薦人簽訂了證券購買協議（「SPA」），2023年10月6日，舊保薦人和新保薦人完成了SPA考慮的交易（「贊助商出售」），根據該協議，新保薦人共收購了 (i)
公司分析了2023年9月在SaB主題5 「雜項會計」 第t節 「主要股東支付的費用或負債會計」 下籤訂的SPA，得出的結論是，SPA以有權從新保薦人那裏獲得額外延期繳款的形式向公司提供福利。獲得額外補助的權利
7
extension contributions required the New Sponsor, who is a principal shareholder, to provide or cause to provide consideration in the form of a transfer of Class B ordinary shares of the Company. The estimated fair value of the earnout provision at the closing of the Sponsor Sale on October 6, 2023 is nominal to zero. As a result, the Company determined that an expense in the full amount of the fair value of the Class B ordinary shares transferred should be recorded. During October 2023, the Company recorded an expense under SAB Topic 5T of $
In connection with the Sponsor Sale, previous management of the Company, Gerard Cremoux, former chief executive officer, chief financial officer and director, and Gerardo Mendoza, former chief investment officer, and former directors of the Company Michael McGuiness, Eduardo Cortina, Carole Philippe, Miguel Olea, Zain Manekia and Hector Martinez resigned from their respective position as a director (and/or officer, as the case may be), effective upon the closing of the Sponsor Sale. On October 6, 2023, Shibin Wang, Ning Ma, Kwan Sun and James Zhang were appointed as directors of the Company, and Zhiyang Zhou was appointed as chief executive officer and chief financial officer of the Company.
On October 2, 2023, the Old Sponsor entered into the EBC Letter Agreement, under which, the Old Sponsor agreed to (i) transfer, at
The
On October 2, 2023, in connection with the Sponsor Sale, EBC issued the EBC Waiver Letter to the Company, pursuant to which, the EBC BCMA is terminated. Under the EBC Waiver Letter, the Company agreed that such Class B ordinary shares to be transferred by the Old Sponsor to EBC under the EBC Letter Agreement will have the same registration rights as the other Class B ordinary shares held by the Old Sponsor.
Extraordinary General Meetings, Extension and Redemption
On April 13, 2023, the Company convened an extraordinary general meeting (the “First Extraordinary General Meeting”) virtually. At the First Extraordinary General Meeting, the shareholders approved (1) the proposal to amend the Company’s MAA to extend the date (the “Termination Date”) by which the Company must (i) consummate its Business Combination, (ii) cease its operations except for the purpose of winding up if it fails to consummate a Business Combination, and (iii) redeem all of the Company’s Public Shares from April 27, 2023 to November 27, 2023 (the “First Extension Amendment” and such proposal, the “First Extension Amendment Proposal”); (2) the proposal to amend the Investment Management Trust Agreement, dated January 24, 2022 (the “Trust Agreement”), by and between the Company and Continental Stock Transfer & Trust Company, to allow the Company to extend, on a month to month basis, the date on which the Trustee must liquidate the Trust Account established by the Company in connection with the IPO if the Company has not completed its initial Business Combination, from April 27, 2023 to up to November 27, 2023 by depositing into the Trust Account the lesser of $
Additionally, at the First Extraordinary General Meeting, holders of Public Shares were afforded the opportunity to require the Company to redeem their Public Shares for their pro rata share of the Trust Account.
8
a redemption price of approximately $
On April 13, 2023, the Company issued a non-interest bearing non-convertible unsecured promissory note to the Old Sponsor for a principal amount of up to $
On October 25, 2023, the Company held an extraordinary general meeting (the “Second Extraordinary General Meeting”) at which the shareholders approved (1) the proposal to amend the MAA to extend (the “Second Extension”) the Termination Date from October 27, 2023 to January 27, 2024 for a deposit of the lesser of (a) $
In connection with the vote to approve the Second Extension Amendment Proposal, the holders of
On October 25, 2023, the Company issued a non-interest bearing non-convertible unsecured promissory note (the “October 2023 Note”) to the New Sponsor, for a principal amount of up to $
On July 11, 2024, the Company issued a non-interest bearing non-convertible unsecured promissory note (the “July 2024 Note”) to the New Sponsor, for a principal amount of up to $
On each of October 30, 2023 and November 29, 2023, the Company deposited $
From February 2024 to September 2024,
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Company’s material breach of its obligations as described in the Business Combination Agreement, the Company shall pay and reimburse FST the Extension Contribution(s) FST has deposited in the Trust Account with funds held outside of the Trust Account.
On October 25, 2024, the Company held an extraordinary general meeting (the “Third Extraordinary General Meeting”) at which the shareholders approved (1) the proposal to amend the MAA to extend (the “Third Extension”) the Termination Date from October 27, 2024 to November 27, 2024 for a deposit of $
In connection with the vote to approve the Third Extension Amendment Proposal, the holders of
In connection with the approval of the Extension Amendment Proposal, in addition to the Extension Contributions, the Company commits to deposit extra incentive in the Trust Account for the Third Extension. As a result, in the aggregate, the Company commits to pay (a) $
On November 4, 2024, $
Business Combination Agreement and Ancillary Agreements
Business Combination Agreement
On December 22, 2023, the Company entered into a business combination agreement (the “Business Combination Agreement”) with FST Corp., a Cayman Islands exempted company limited by shares (“CayCo”), FST Merger Ltd., a Cayman Islands exempted company limited by shares and a direct wholly owned subsidiary of CayCo, (“Merger Sub”) and Femco Steel Technology Co., Ltd., a company limited by shares incorporated and in existence under the laws of Taiwan with uniform commercial number of 04465819 (“FST” and together with CayCo and Merger Sub, the “FST Parties”), pursuant to which, among other transactions, on the terms and subject to the conditions set forth therein, Merger Sub will merge with and into the Company with the Company being the surviving company and as a direct, wholly owned subsidiary of CayCo (the “Merger”), and the Company will change its name to “FST Ltd.” (the “FST Business Combination”). Under the Business Combination Agreement, FST agreed to bear all of the fees and costs relating to the extension of the Company’s Termination Date not exceeding $
On September 10, 2024, the Company and FST Parties entered into the First Amendment to Business Combination Agreement (the “First BCA Amendment”), pursuant to which, the date, by which if the closing of the Business Combination has not occurred the Business Combination Agreement will be terminated, is extended from 5:00 p.m. (Hong Kong time) on October 26, 2024 to 5:00 p.m. (Hong Kong time) on January 26, 2025 (or such later time mutually agreed upon by the Company and Chenghe) (the “Agreement End Date”). All other terms of the Business Combination Agreement, which was previously filed by Chenghe as Exhibit 2.1 to Chenghe’s Current Report on Form 8-K on December 22, 2023, remain unchanged.
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Pursuant to the Business Combination Agreement, at the time when the Merger becomes effective, (i) each outstanding Unit of the Company will be automatically separated (“Unit Separation”) and the holder thereof will be deemed to hold
Under the Business Combination Agreement, the obligations of the parties (or, in some cases, some of the parties) to consummate the FST Business Combination are subject to the satisfaction or waiver of certain customary closing conditions of the respective parties, including, among others, (i) the accuracy of representations and warranties to various standards, from no material qualifier to a material adverse effect qualifier, (ii) material compliance with pre-closing covenants, (iii) no material adverse effect for FST, (iv) FST’s Company Acquisition Percentage (as defined in the Business Combination Agreement) reaching at least
The Business Combination Agreement contemplates the execution of various additional agreements and instruments, on or before the closing of the FST Business Combination, including, among others, the following:
Sponsor Support Agreement
Concurrently with the extension of the Business Combination Agreement, the Company, the New Sponsor, the Old Sponsor and FST entered into a sponsor support agreement (the “Sponsor Support Agreement”), pursuant to which each Sponsor has agreed to, among other things, vote in favor of the transaction contemplated under the Business Combination Agreement, from the date when FST received the Taiwan DIR Approval (as defined therein) until the closing of the FST Business Combination or, if earlier, until termination of the Business Combination Agreement.
Company Shareholder Support Agreement
Concurrently with the execution of the Business Combination Agreement, the Company, FST, CayCo, certain shareholders of FST listed thereto and certain shareholders of CayCo listed thereto entered into a company shareholder support agreement (the “Company Support Agreement”), pursuant to which each signatory shareholders of FST and CayCo has agreed to, among other things, vote to the transactions contemplated under the Business Combination Agreement, and to not transfer any Subject Shares (as defined therein) until termination of the Company Support Agreement.
Lock-up Agreement
At the closing of the FST Business Combination, CayCo, the New Sponsor, certain shareholder of FST (the “Company Holders”) listed thereto and certain person listed thereto (the “Sponsor Key Holders”, and together with the Company Holders, the “Holders”) will enter into a lock-up agreement (the “Lock-up Agreement”), pursuant to which, each Holder agrees to not to transfer any Lock-Up Shares (as defined therein) for a period of six (6) months after the closing date of the FST Business Combination, with certain exceptions and carveouts.
Investor Rights Agreement
At the closing of the FST Business Combination, CayCo, the Company, FST and other parties listed thereto will enter into an investor rights agreement (the “Investor Rights Agreement”). Pursuant to the Investor Rights Agreement, (i) CayCo will agree to undertake certain resale shelf registration obligations in accordance with the Securities Act and certain holders have been granted customary demand and piggyback registration rights, and (ii) each party to the Investor Rights Agreement agrees to cause (x) the board of CayCo to be comprised of five (5) directors (subject to increase by unanimous resolutions of the board from time to time), (y) one (1) of such directors should be nominated by the New Sponsor and (z) as long as the Sponsor Parties (as defined therein) beneficially own any
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ordinary shares of CayCo, CayCo shall take all necessary actions to cause the individuals nominated by the New Sponsor for election as directors to be elected as directors.
Other Developments
On November 6, 2023, pursuant to the Trust Agreement, the Company instructed Continental Stock Transfer & Trust Company to hold all funds in the Trust Account uninvested in an interest-bearing bank deposit account.
On November 8, 2023, the New Sponsor notified the Company that it elected to convert
On November 8, 2023, the Company and Continental Stock Transfer & Trust Company entered into the Amendment No.3 to the Investment Management Trust Agreement, pursuant to which, all references to “LatAmGrowth SPAC” in the Trust Agreement, including the exhibits thereto, are amended to “Chenghe Acquisition I Co.”.
On January 31, 2024, the Company signed an engagement letter with Revere Securities, LLC, pursuant to which, the Company has engaged Revere Securities, LLC to act as its financial advisor (a) in connection with the FST Business Combination and (b) on any private investment in the Company consisting of equity, debt, and/or equity-linked securities in connection with the FST Business Combination.
On June 21, 2024, the Company received a notice from Zhiyang Zhou of her decision to resign as the chief executive officer and chief financial officer of the Company due to personal reason, effectively immediately. On June 27, 2024, the board of directors of the Company appointed Yixuan Yuan as the chief executive officer of the Company, Zhaohai Wang as chief financial officer of the Company, and Zhiyang Zhou as president of the Company.
Liquidity, Capital Resources and Going Concern
As of September 30, 2024, the Company had
The Company’s liquidity needs prior to the IPO had been satisfied through a payment from the Old Sponsor of $
The Company did
The Company can raise additional capital through Working Capital Loans (as defined below) from the Sponsor, an affiliate of the Sponsor, certain of the Company’s officers and directors, or through loans from third parties. If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of its business plan, and reducing overhead expenses. The Company cannot provide assurance that new financing will be available to it on commercially acceptable terms, if at all.
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On April 13, 2023, the Company issued the April 2023 Note as described above. The April 2023 Note was terminated on October 4, 2023 and the withdrawal of $
On October 25, 2023, the Company issued the October 2023 Note. As of September 30, 2024, the total outstanding under the October 2023 Note was $
On July 11, 2024, the Company issued the July 2024 Note to the New Sponsor, for a principal amount of up to $
If a Business Combination is not consummated by the required date and the Company is unable to obtain the funding to further extend the Termination Date, there will be a mandatory liquidation and subsequent dissolution.
In connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standard Board’s Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” the Company has until November 27, 2024 (or April 27, 2025 subject to additional extension deposits as approved on the Third Extraordinary General Meeting) to consummate the initial Business Combination. The Company intends to complete the initial Business Combination before the mandatory liquidation date. However, there can be no assurance that the Company will be able to consummate any business combination by November 27, 2024 (or April 27, 2025 subject to additional extension deposits as approved on the Third Extraordinary General Meeting). Management has determined that the mandatory liquidation, should a business combination not occur, and potential subsequent dissolution, raises substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. The accompanying financial statements have been prepared in conformity with GAAP, which contemplate continuation of the Company as a going concern.
Risks and Uncertainties
The Company is currently evaluating the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or consummating a business combination, the specific impact is not readily determinable as of the date of these financial statements.
Management is currently evaluating the impact of the Israel-Hamas conflict and the Russia-Ukraine war and has concluded that while it is reasonably possible that the war 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 condensed financial statements. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 2—SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in unaudited condensed financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.
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The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 as filed by the Company with the SEC on April 12, 2024. The interim results for the three and nine months ended September 30, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or for any future interim periods.
Emerging Growth Company Status
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012, (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, 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.
Use of Estimates
The preparation of condensed financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed financial statements and the reported amounts of expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the condensed financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. One of the more significant accounting estimates included in these condensed financial statements is the determination of the fair value of the warrant liabilities. Such estimates may be subject to change as more current information becomes available and accordingly, the actual results could differ significantly from those estimates.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times, may exceed the Federal Depository Insurance Coverage of $250,000. The Company has not experienced losses on this account.
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 did
Cash Held in Trust Account
At September 30, 2024 and December 31, 2023, the Company held $
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all funds in the Trust Account uninvested in an interest - bearing bank deposit account. As of September 30, 2024 and December 31, 2023, all funds in the Trust Account are held in cash.
Warrant Liabilities
The Company assessed its warrants under ASC 480-25, “Distinguishing liabilities from equity” and ASC 815-40 “Derivatives and Hedging—Contracts in Entity’s Own Equity”. The Company accounts for the Public Warrants and Private Placement Warrants (collectively, the “Warrants”) as derivative liabilities. A provision in the Warrant Agreement related to certain tender or exchange offers precludes the Warrants from being accounted for as components of equity. As the Warrants meet the definition of a derivative as contemplated in ASC 815 “Derivatives and Hedging” (“ASC 815”), the Company accounts for Warrants for the Company’s ordinary shares that are not indexed to its own stock as derivative liabilities at fair value on the balance sheets and measured at fair value at inception (on the date of the IPO) and at each reporting date in accordance with ASC 820, with changes in fair value recognized in the statements of operations in the period of change.
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under FASB ASC 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the balance sheets, primarily due to its 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). The Company’s financial instruments are classified as either Level 1, Level 2 or Level 3. These tiers include:
| ● | Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; |
| ● | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
| ● | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
In some cases, the inputs used to measure fair value might fall within different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the investment is categorized in its entirety is determined based on the lowest level input that is significant to the investment. Assessing the significance of a particular input to the valuation of an investment in its entirety requires judgement and considers factors specific to the investment. The categorization of an investment within the hierarchy is based on the pricing transparency of the investment and does not necessarily correspond to the perceived risk of that investment.
See Note 8 for additional information on assets and liabilities measured at fair value.
Derivative Financial Instruments and Warrant and Over-allotment Liability
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 815-15. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity and measurement of fair value is re-assessed at the end of each reporting period. In accordance with ASC 825-10 “Financial Instruments”, offering costs attributable to the issuance of the derivative warrant liabilities and overallotment option have been allocated based on their relative fair value of total proceeds and are recognized in the statements of operations as incurred. Derivative warrant liabilities are classified as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or the creation of current liabilities.
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The Company accounts for warrants and over-allotment as either equity-classified or liability-classified instruments based on an assessment of the warrant and over-allotment option’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board Accounting Standards Codification 480, Distinguishing Liabilities from Equity and ASC 815, Derivatives and Hedging. The assessment considers whether the warrants and over-allotment option are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants and over-allotment option meet all of the requirements for equity classification under ASC 815, including whether the warrants and over-allotment option are indexed to the Company’s own ordinary shares, among other conditions for equity classification. This assessment is conducted at the time of warrant and over-allotment option issuance and as of each subsequent quarterly period end date while the warrants and over-allotment option are outstanding.
For warrants and over-allotment option that meet all of the criteria for equity classification, they are recorded as a component of additional paid-in capital at the time of issuance. For warrants and over-allotment that do not meet all the criteria for equity classification, they are required to be recorded as a liability at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants and over-allotment option are recognized as a non-cash gain or loss on the statements of operations.
The Company accounted for the Public Warrants (see Note 3), Private Placement Warrants (see Note 4) and over-allotment option (Note 6) in accordance with the guidance contained in ASC 815-40. The Warrants and over-allotment are not considered indexed to the Company’s own ordinary shares, and as such, they do not meet the criteria for equity treatment and are recorded as liabilities.
Income Taxes
The Company accounts for income taxes under FASB 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.
FASB ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. There were
There is currently no taxation imposed on income by the Government of the Cayman Islands. In accordance with Cayman income tax regulations, income taxes are not levied on the Company. Consequently, income taxes are not reflected in the Company’s financial statements.
Net Income (Loss) Per Share
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” The Company has two classes of ordinary shares, which are referred to as Class A and Class B. Income and losses are shared pro rata between the two classes of shares. Net income (loss) per ordinary share is calculated by dividing the net income (loss) by the weighted average number of ordinary shares outstanding for the respective period. The Company did not consider the effect of the warrants issued in connection with the IPO and the private placement in the calculation of diluted income (loss) per ordinary share because their exercise is contingent upon future events. As a result, diluted net income (loss) per ordinary share is the same as basic net income (loss) per ordinary share. Remeasurement associated with the redeemable Class A ordinary shares is excluded from income (loss) per ordinary share as the redemption value approximates fair value.
At September 30, 2024 and 2023, we did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into ordinary shares and then share in our earnings. As a result, diluted income per share is the same as basic income per share for the period presented.
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The table below presents a reconciliation of the numerator and denominator used to compute basic and diluted net income per share for each class of ordinary shares:
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||||||||||
2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||
Non-Redeemable | Non-Redeemable | Non-Redeemable | Non-Redeemable | |||||||||||||||||||||
Redeemable | Class A | Redeemable | Class A | Redeemable | Class A | Redeemable | Class A | |||||||||||||||||
| Class A |
| And Class B |
| Class A |
| And Class B |
| Class A |
| And Class B |
| Class A |
| And Class B | |||||||||
Basic and diluted net income (loss) per share: | ||||||||||||||||||||||||
Numerator: | ||||||||||||||||||||||||
Allocation of net income (loss) | $ | | $ | | $ | | $ | | $ | ( | $ | ( | $ | | $ | | ||||||||
Denominator: | ||||||||||||||||||||||||
Weighted average shares outstanding | | | | | | | | | ||||||||||||||||
Basic and diluted net income (loss) per share | $ | | $ | | $ | | $ | |
| $ | ( | $ | ( | $ | | $ | | |||||||
Offering Costs associated with the IPO
The Company complies with the requirements of ASC 340-10-S99-1, SEC Staff Accounting bulletin Topic 5A – “Expenses of Offering”, and SEC Staff Accounting bulletin Topic 5T – “Accounting for Expenses or Liabilities Paid by Principal Stockholder(s)”. Offering costs consist principally of professional and registration fees incurred through the balance sheet date that are related to the IPO. Offering costs directly attributable to the issuance of an equity contract to be classified in temporary equity are recorded as a reduction of equity. Offering costs for equity contracts that are classified as assets and liabilities are expensed immediately. The Company incurred offering costs amounting to $
Class A Shares Subject to Possible Redemption
The Company accounts for its Class A ordinary shares subject to possible redemption in accordance with the guidance in ASC 480. Ordinary shares subject to mandatory redemption are classified as a liability instrument and are 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’ deficit. The Company’s Class A 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, Class A ordinary shares subject to possible redemption is presented as temporary equity, outside of the shareholders’ deficit section of the Company’s balance sheets.
At September 30, 2024 and December 31, 2023, Class A ordinary shares subject to possible redemption are presented at redemption value as temporary equity, outside of the shareholders’ deficit section of the Company’s balance sheets. On April 13, 2023, in connection with First Extension Amendment Proposal, holders of
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As of September 30, 2024 and December 31, 2023, the amount of Class A ordinary shares reflected on the balance sheets are reconciled in the following table:
Class A ordinary shares subject to possible redemption as of December 31, 2022 |
| | |
Less: | |||
Partial Redemption |
| ( | |
Plus: |
| ||
Remeasurement of Class A ordinary shares subject to possible redemption |
| | |
Class A ordinary shares subject to possible redemption as of December 31, 2023 | $ | | |
Plus: |
|
| |
Remeasurement of Class A ordinary shares subject to possible redemption |
| | |
Class A ordinary shares subject to possible redemption as of September 30, 2024 | $ | |
Recent Accounting Pronouncements
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 condensed financial statements and disclosures.
The Company’s management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the accompanying unaudited condensed financial statements.
NOTE 3—INITIAL PUBLIC OFFERING
On January 27, 2022, the Company consummated its IPO of
NOTE 4—PRIVATE PLACEMENT
Simultaneously with the closing of the IPO, the Sponsor purchased an aggregate of
The Private Placement Warrants are identical to the warrants sold in the IPO except that the Private Placement Warrants, so long as they are held by the Sponsor or its permitted transferees, (i) will not be redeemable by the Company, (ii) may not (including the Class A ordinary shares issuable upon exercise of these Private Placement Warrants), subject to certain limited exceptions, be transferred, assigned or sold by the holders until
If the Private Placement Warrants are held by holders other than the Sponsor or its permitted transferees, the Private Placement Warrants will be redeemable by the Company in all redemption scenarios and exercisable by the holders on the same basis as the warrants included in the units being sold in the IPO.
NOTE 5—RELATED PARTY TRANSACTIONS
Founder Shares
On June 2, 2021, the Old Sponsor paid $
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the Sponsor Sale as described above, the New Sponsor acquired
The holders of the Company’s founder shares have agreed not to transfer, assign or sell any of their founder shares and any Class A ordinary shares issuable upon conversion thereof until the earlier to occur of: (i)
The sale or allocation of the founders shares to the Company’s director nominees and affiliates of its Sponsor group, as described above, is within the scope of FASB ASC Topic 718, “Compensation-Stock Compensation” (“ASC 718”). Under ASC 718, stock-based compensation associated with equity-classified awards is measured at fair value upon the grant date. The fair value of the
Promissory Note—Related Party
On April 13, 2023, the Company issued a non-interest bearing non-convertible unsecured promissory note to the Old Sponsor for a principal amount of up to $
On October 25, 2023, the Company issued the October 2023 Note to the New Sponsor for a principal amount of up to $
On July 11, 2024, the Company issued a non-interest bearing non-convertible unsecured promissory note (the “July 2024 Note”) to the New Sponsor, for a principal amount of up to $
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Working Capital Loans
In order to finance transaction costs in connection with an intended initial Business Combination, the Sponsor or an affiliate of the Sponsor or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes its initial Business Combination, the Company would repay the Working Capital Loans. In the event that the initial Business Combination does not close, the Company may use a portion of the working capital held outside the Trust Account to repay the Working Capital Loans but no proceeds from the Trust Account would be used to repay the Working Capital Loans. Up to $
NOTE 6—COMMITMENTS & CONTINGENCIES
Registration and Shareholder Rights
The holders of the (i) founder shares, (ii) Private Placement Warrants, which were issued in a private placement simultaneously with the closing of the IPO and the Class A ordinary shares underlying such Private Placement Warrants and (iii) warrants that may be issued upon conversion of Working Capital Loans have registration rights to require the Company to use its best efforts to register a sale of any of its securities held by them pursuant to a registration rights agreement dated January 24, 2022. The holders of these securities are entitled to make up to
Legal Fee Arrangement
Pursuant to the SPA, in respect of the legal expenses of Shearman & Sterling LLP (“Shearman”), the Company’s legal counsel prior to the Sponsor Sale, owed by the Company, the Company will pay Shearman in connection with the closing of the initial Business Combination of the Company together with the payment of other transaction expenses and fees pursuant to the funds flow for such Business Combination, an amount equal to $
Underwriting Agreement
The Company granted the underwriters of the IPO a
The underwriters received a cash underwriting discount of two percent (
On September 8, 2023, BofA delivered a letter to the Company to waive its entitlement to the payment of $
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Forward Purchase Agreement
An affiliate of the Old Sponsor (the “Sponsor Affiliate”) entered into a forward purchase agreement with the Company in connection with the IPO that provides for the purchase by the Sponsor Affiliate of an aggregate of up to
The forward purchase shares are identical to the Class A ordinary shares included in the Units sold in the IPO, except that pursuant to the forward purchase agreement, they are not transferable, assignable or salable until 30 days after the completion of our initial Business Combination, subject to limited exceptions. The forward purchase warrants have the same terms as the private placement warrants.
Business Combination Marketing Agreement
On February 9, 2023, the Company entered into a business combination marketing agreement (the “EBC BCMA”) with EarlyBirdCapital, Inc. (“EBC”) for EBC’s assistance in connection with a potential Business Combination with a cash fee equal to $
On October 2, 2023, the Old Sponsor entered into a letter agreement with EBC (the “EBC Letter Agreement”), under which, the Old Sponsor agreed to (i) transfer, at no consideration, to EBC
The
On October 2, 2023, in connection with the Sponsor Sale (see Note 1), EBC issued a waiver letter (“EBC Waiver Letter”) to the Company, pursuant to which, the EBC BCMA is terminated. Under the EBC Waiver Letter, the Company agreed that such Class B ordinary shares to be transferred by the Old Sponsor to EBC under the EBC Letter Agreement will have the same registration rights as the other Class B ordinary shares held by the Old Sponsor.
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NOTE 7—SHAREHOLDERS’ DEFICIT
Preference shares—The Company is authorized to issue
Class A ordinary shares—The Company is authorized to issue
Class B ordinary shares—The Company is authorized to issue
Holders of Class A ordinary shares and holders of Class B ordinary shares will vote together as a single class on all matters submitted to a vote of the shareholders except as required by law or the MAA. Unless specified in the Company’s MAA, or as required by applicable provisions of the Companies Act or applicable stock exchange rules, the affirmative vote of a majority of the Company’s ordinary shares that are voted is required to approve any such matter voted on by its shareholders.
The Class B ordinary shares will automatically convert into Class A ordinary shares concurrently with or immediately following the consummation of the initial Business Combination on a
On April 13, 2023, at the First Extraordinary General Meeting, the shareholders approved, among others, the proposal to amend the Company’s MAA to provide for the right of a holder of the Company’s Class B ordinary shares to convert into Class A ordinary shares on a one-for-one basis prior to the closing of a Business Combination at the election of the holder.
On November 8, 2023, the New Sponsor notified the Company that it elected to convert
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NOTE 8—FAIR VALUE MEASUREMENTS
The following table presents information about the Company’s liabilities that are measured at fair value on September 30, 2024 and December 31, 2023 and indicates the Level 3 fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.
|
| Quoted |
| Significant |
| Significant | ||||||
Prices in | Other | Other | ||||||||||
Active | Observable | Unobservable | ||||||||||
September 30, | Markets | Inputs | Inputs | |||||||||
2024 | (Level 1) | (Level 2) | (Level 3) | |||||||||
Liabilities: |
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|
|
|
|
| ||||
Warrant liabilities – Public Warrants | $ | | $ | | $ | — | $ | — | ||||
Warrant liabilities – Private Placement Warrants |
| |
| — |
| — |
| | ||||
$ | | $ | | $ | — | $ | | |||||
|
| Quoted |
| Significant |
| Significant | ||||||
Prices in | Other | Other | ||||||||||
Active | Observable | Unobservable | ||||||||||
December 31, | Markets | Inputs | Inputs | |||||||||
2023 | (Level 1) | (Level 2) | (Level 3) | |||||||||
Liabilities: |
|
|
|
|
|
|
|
| ||||
Warrant liabilities – Public Warrants | $ | | $ | | $ | — | $ | — | ||||
Warrant liabilities – Private Placement Warrants |
| |
| — |
| — |
| | ||||
$ | | $ | | $ | — | $ | | |||||
The Public Warrants and the Private Placement Warrants are accounted for as liabilities in accordance with ASC 815-40 and are presented within liabilities on the balance sheets. The warrant liabilities were measured at fair value at inception and remeasured on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the statements of operations.
The overallotment option was accounted for as a liability in accordance with ASC 815-40 and was presented within liabilities on the balance sheets from January 27, 2022 up to its expiration on March 10, 2022. The overallotment liability was measured at fair value at inception. The expiration of the overallotment resulted in a gain of $
The Company used a Binomial Option Pricing Model to value the Private Placement Warrants and a Black-Scholes model to value the overallotment option at the initial measurement date. The Company allocated the proceeds received from (i) the sale of Units (which is inclusive of
At September 30, 2024 and December 31, 2023, the Company used the quoted price on Over-the-Counter Market (the “OTC”) to establish the fair value of the Public Warrants.
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The Private Placement Warrants were transferred to a Level 2 from a Level 3 during the year ended December 31, 2022, due to the use of an observable market quote for a similar asset in an active market. The Private Placement Warrants changed from Level 2 at September 30, 2023 to Level 3 at December 31, 2023 as a result of the lack of an observable market quote of the Public Warrants on that day. At September 30, 2024 and December 31, 2023 a Monte Carlo simulation methodology was used in estimating the fair value of the Private Placement Warrants. The key inputs for Monte Carlo simulation for the Private Placement Warrants as of September 30, 2024 and December 31, 2023 were as follows:
Input |
| September 30, 2024 |
| December 31, 2023 |
| ||
Public Warrant Price | $ | | $ | |
| ||
Risk-free interest rate |
| | % | | % | ||
Expected term (years) |
| |
| | |||
Expected volatility |
| de minimis |
| de minimis | |||
Stock price | $ | | $ | | |||
Exercise price | $ | | $ | | |||
NOTE 9—SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the condensed balance sheet date up to the date that the unaudited condensed financial statements were issued. Based on this review, other than described below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the unaudited condensed financial statements.
Subsequent to the September 30, 2024, the Company withdrew $
On October 25, 2024, the Company held the Third Extraordinary General Meeting as disclosed in Note 1. In connection with the vote to approve the Third Extension Amendment Proposal, the holders of
On November 4, 2024, $
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
References in this quarterly report to “we,” “us,” “Company” or “our company” are to Chenghe Acquisition I Co. (formerly LatAmGrowth SPAC), a Cayman Islands exempted company. References to “management” or our “management team” are to our officers and directors. Capitalized but not otherwise defined terms have the meaning as ascribed to such terms in the notes to the accompanying financial statements.
Cautionary Note Regarding Forward-Looking Statements
This quarterly report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements other than statements of historical fact included in this quarterly report, including, without limitation, statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding our financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. When used in this quarterly report, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “seek” and similar expressions, are intended to, identify forward-looking statements. Such forward-looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, our management. Actual results could differ materially from those contemplated by the forward- looking statements as a result of certain factors detailed in our filings with the SEC. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety by this paragraph.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed 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.
Overview
We, Chenghe Acquisition I Co. (f/k/a LatAmGrowth SPAC) are a blank check company incorporated on May 20, 2021 as a Cayman Islands exempted company and incorporated for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses. On October 25, 2023, our shareholders approved to change our name to Chenghe Acquisition I Co., as a result of the Sponsor Sale. We intend to effectuate our initial business combination using cash from the proceeds of our IPO and the private placement of the private placement warrants and forward purchase units, the proceeds of the sale of our shares in connection with our initial business combination (pursuant to forward purchase agreements or backstop agreements we may enter into), shares issued to the owners of the target, debt issued to bank or other lenders or the owners of the target, or a combination of the foregoing.
The issuance of additional shares in connection with a business combination to the owners of the target or other investors:
| ● | may significantly dilute the equity interest of investors in our IPO, which dilution would increase if the anti-dilution provisions in the Class B ordinary shares resulted in the issuance of Class A ordinary shares on a greater than one-to-one basis upon conversion of the Class B ordinary shares; |
| ● | may subordinate the rights of holders of Class A ordinary shares if preference shares are issued with rights senior to those afforded our Class A ordinary shares; |
| ● | could cause a change in control if a substantial number of our Class A ordinary shares are issued, which could result in the resignation or removal of our present officers and directors; |
| ● | may have the effect of delaying or preventing a change of control of us by diluting the share ownership or voting rights of a person seeking to obtain control of us; and |
| ● | may adversely affect prevailing market prices for our Class A ordinary shares. |
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Similarly, if we issue debt securities or otherwise incur significant debt to bank or other lenders or the owners of a target, it could result in:
| ● | default and foreclosure on our assets if our operating revenues after an initial business combination are insufficient to repay our debt obligations; |
| ● | acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant; |
| ● | our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand; |
| ● | our inability to obtain necessary additional financing if the debt security contains covenants restricting our ability to obtain such financing while the debt security is outstanding; |
| ● | our inability to pay dividends on our Class A ordinary shares; |
| ● | using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our Class A ordinary shares, expenses, capital expenditures, acquisitions and other general corporate purposes; |
| ● | limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate; |
| ● | increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; and |
| ● | limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, execution of our strategy and other purposes and other disadvantages compared to our competitors who have less debt. |
As indicated in the accompanying unaudited condensed financial statements, at September 30, 2024, we had no cash and had working capital deficit of $4,471,356. Transaction costs related to our IPO amounted to $7,647,620 consisting of $2,600,000 of underwriting discount, $4,550,000 of deferred underwriting discount, and $497,620 of other offering costs. In addition, $2,494,203 of cash was held outside of the trust account and was available for working capital purposes at the consummation of the IPO. Further, we expect to incur significant costs in the pursuit of our initial business combination. We cannot assure you that our plans to raise capital or to complete our initial business combination will be successful.
Proposed Business Combination with Femco Steel Technology Co., Ltd.
As discussed in more details in “Note 1 – Organization and Business Operation” to the unaudited condensed financial statements contained elsewhere in this report, on December 22, 2023, the Company entered into the Business Combination Agreement with the FST Parties, pursuant to which, among other transactions, on the terms and subject to the conditions set forth therein, Merger Sub will merge with and into the Company with the Company being the surviving company and as a direct, wholly owned subsidiary of CayCo, and the Company will change its name to “FST Ltd.”. Under the Business Combination Agreement, FST agreed to bear all of the fees and costs relating to the extension of the Company’s Termination Date not exceeding $80,000 per month. The Extension Contributions loaned to the Company will be forgiven if the Company is unable to consummate a business combination except to the extent of any funds held outside of the trust account. If the Business Combination Agreement is terminated by FST due to the Company’s shareholders’ failure to approve the FST Business Combination or the Company’s material breach of its obligations as described in the Business Combination Agreement, the Company shall pay and reimburse FST the Extension Contribution(s) FST has deposited in the trust account with funds held outside of the trust account.
Under the Business Combination Agreement, the obligations of the parties (or, in some cases, some of the parties) to consummate the FST Business Combination are subject to the satisfaction or waiver of certain customary closing conditions of the respective parties, including, among others, (i) the accuracy of representations and warranties to various standards, from no material qualifier to a material adverse effect qualifier, (ii) material compliance with pre-closing covenants, (iii) no material adverse effect for FST, (iv) FST’s Company
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Acquisition Percentage (as defined in the Business Combination Agreement) reaching at least 90%, (v) the consummation of the FST Restructuring (as defined in the Business Combination Agreement), (vi) the delivery of customary closing certificates, (vii) the receipt of Taiwan DIR Approval and such approval being effective, (viii) the absence of a legal prohibition on consummating the transactions, (ix) approval by the shareholders of the Company and FST, (x) approval of a listing application on the applicable stock exchange for newly issued shares, and (xi) the Company having at least US$5,000,001 of net tangible assets remaining after redemption.
The Business Combination Agreement contemplates the execution of various additional agreements and instruments, on or before the closing of the FST Business Combination, including, among others, Sponsor Support Agreement, Company Shareholder Support Agreement, Lock-up Agreement and Investor Rights Agreement.
On September 10, 2024, the Company and FST Parties entered into the First Amendment to Business Combination Agreement (the “First BCA Amendment”), pursuant to which, the date, by which if the closing of the Business Combination has not occurred the Business Combination Agreement will be terminated, is extended from 5:00 p.m. (Hong Kong time) on October 26, 2024 to 5:00 p.m. (Hong Kong time) on January 26, 2025 (or such later time mutually agreed upon by the Company and Chenghe) (the “Agreement End Date”). All other terms of the Business Combination Agreement, which was previously filed by Chenghe as Exhibit 2.1 to Chenghe’s Current Report on Form 8-K on December 22, 2023, remain unchanged.
Results of Operations
As of September 30, 2024, we have not commenced any operations. All activity for the period from May 20, 2021 (inception) through September 30, 2024, relates to our formation and IPO, and, since the completion of our IPO, the Sponsor Sale, searching for a target to consummate an initial business combination and activities in connection with the proposed FST Business Combination. We will not generate any operating revenues until after the completion of our initial business combination, at the earliest. We generate non-operating income in the form of interest income from the proceeds derived from our IPO and placed in the trust account.
For the three months ended September 30, 2024, we had a net income of $224,112, which consisted of trust interest income of $486,747 and an unrealized gain on change in fair value of warrants of $288,000, offset by formation and operating costs of $550,635.
For the nine months ended September 30, 2024, we had a net loss of $408,688, which consisted of formation and operating costs of $1,565,985 and an unrealized loss on change in fair value of warrants of $288,000, offset by trust interest income of $1,445,297.
For the three months ended September 30, 2023, we had a net income of $1,014,277, which consisted of other income attributable to the reduction of deferred underwriting fee allocated to offering costs of $186,550, unrealized gain on change in fair value of warrants of $416,950 and trust interest income of $778,829, partially offset by formation and operating costs of $368,052.
For the nine months ended September 30, 2023, we had a net income of $3,961,115, which consisted of other income attributable to the reduction of deferred underwriting fee allocated to offering costs of $186,550, unrealized gain on change in fair value of warrants of $1,726,560 and trust interest income of $3,069,235, partially offset by formation and operating costs of $1,021,230.
For the nine months ended September 30, 2024, cash used in operating activities was $1,094,434. Net loss of $408,688 was affected by interest earned on marketable investments held in the Trust Account of $1,445,297 and an unrealized loss on change in fair value of warrants of $288,000. Changes in operating assets and liabilities provided $471,551 of cash for operating activities.
For the nine months ended September 30, 2023, cash used in operating activities was $438,469. Net income of $3,961,115 was affected by unrealized gain on change in fair value of warrant liabilities of $1,726,560, other income attributable to the reduction of deferred underwriting fee allocated to offering costs of $186,550, and interest earned on marketable investments held in the Trust Account of $3,069,235. Changes in operating assets and liabilities provided $582,761 of cash for operating activities.
For the nine months ended September 30, 2024, cash used in investing activities was $788,375 which includes principal deposited into the Trust Account.
For the nine months ended September 30, 2023, cash provided by investing activities was $77,021,024. This included principal deposited into the Trust Account from extension payments totaling $450,000 and cash withdrawn from the Trust Account in connection with a partial redemption of $77,471,024.
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For the nine months ended September 30, 2024, cash provided by financing activities was $1,882,809 which includes proceeds from the issuance of promissory note to related party of $1,094,434 and extension deposits paid by target of $788,375.
For the nine months ended September 30, 2023, cash used in financing activities was $77,171,024. This included proceeds from the Sponsor promissory note of $300,000 and cash withdrawn from the Trust Account for the partial redemption of ordinary shares of $77,471,024.
Liquidity, Capital Resources and Going Concern
As of September 30, 2024, we had no cash on hand and working capital deficit of $4,471,356. On October 6, 2023, we transferred cash balance of $428,000 from our bank account controlled by the Old Sponsor to an account controlled by the New Sponsor, due to our new bank account under the control of the New Sponsor has not been set up yet. We and the New Sponsor agreed to offset the balance of $428,000 due from the New Sponsor with the outstanding promissory note balance due to the New Sponsor of $1,925,479 as of September 30, 2024, as a result of which, the total outstanding balance of the promissory note was $1,497,479 as of September 30, 2024 (see Note 5 to the unaudited condensed financial statements contained elsewhere in this report).
On January 27, 2022, we consummated our IPO of 13,000,000 units, at $10.00 per unit, generating gross proceeds of $130.0 million. Simultaneously with the closing of our IPO, we consummated the sale of 7,900,000 private placement warrants at a price of $1.00 per private placement warrant in a private placement to our sponsor, generating gross proceeds of $7.9 million. Prior to the completion of the IPO, we lacked the liquidity we needed to sustain operations for a reasonable period of time, which is considered to be one year from the issuance date of the financial statements. At the IPO date, cash of $2,494,203 in excess of the funds deposited in the trust account and/or used to fund offering expenses was released to us for general working capital purposes.
We did not have any cash on hand as of September 30, 2024. Until consummation of our initial business combination, we will use the funds raised from the New Sponsor, as mentioned below, for paying existing accounts payable, identifying and evaluating prospective initial business combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the business combination.
We can raise additional capital through working capital loans from the sponsor, an affiliate of the sponsor, certain of our officers and directors, or through loans from third parties. If we are unable to raise additional capital, we may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of our business plan, and reducing overhead expenses. We cannot provide assurance that new financing will be available to us on commercially acceptable terms, if at all.
On April 13, 2023, at the First Extraordinary General Meeting, in connection with the approval of the First Extension Amendment Proposal, we have agreed to contribute into the trust account the lesser of an aggregate of $150,000 and $0.0375 per share for each public share that was not redeemed at the First Extraordinary General Meeting for each monthly period commencing April 27, 2023, until the earlier of the completion of the initial business combination and November 27, 2023. We issued the April 2023 Note, a non-interest bearing non-convertible unsecured promissory note, to the Old Sponsor for a principal amount of up to $1,050,000 to fund the contributions to the trust account in connection with the First Extension Amendment and First Trust Amendment. The April 2023 Note was terminated on October 4, 2023 and the withdrawal of $300,000 under the April 2023 Note was forgiven without any further liability of us or the Old Sponsor. The amounts forgiven were booked as a capital transaction at October 4, 2023.
On October 25, 2023, at the Second Extraordinary General Meeting, in connection with the approval of the Second Extension Amendment Proposal, we have agreed to contribute into the trust account the lesser of 80,000 and $0.02 for each public share that was not redeemed at the Second Extraordinary General Meeting for each monthly period commencing October 27, 2023 until the earlier of the completion of the initial business combination and October 27, 2024. On October 25, 2023, we issued the October 2023 Note, a non-interest bearing non-convertible unsecured promissory note, to the New Sponsor for a principal amount of up to $1,960,000. As of September 30, 2024, the total outstanding under the October 2023 Note was $1,497,479. Including the $428,000 cash transferred from our bank account controlled by the Old Sponsor to the account controlled by the New Sponsor (as mentioned above), the New Sponsor paid $1,925,479 in total under the October 2023 Note, on behalf of us, for extension and working capital purposes, of which $610,000 was used for extension deposits and $1,315,479 was used for working capital purposes.
On July 11, 2024, the Company issued the July 2024 Note, a non-interest bearing non-convertible unsecured promissory note, to the New Sponsor, for a principal amount of up to $500,000. The Company may apply the amount advanced by the New Sponsor under the
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July 2024 Note to fund the Extension Contribution or, as the Company deems appropriate, towards general corporate purposes. The unpaid principal amount under the July 2024 Note will be repayable by the Company to the New Sponsor on the effective date of an initial merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination involving the Company and one or more businesses. The maturity date of the July 2024 Note may be accelerated upon the occurrence of an Event of Default (as defined in the July 2024 Note). As of September 30, 2024, the total outstanding under the July 2024 Note was $nil.
On January 3, 2024, $76,512.38 was deposited as Extension Contribution into the trust account by FST pursuant to the Business Combination Agreement, extending the Termination Date to January 27, 2024. From February 2024 to September 2024, nine tranches of $78,837, for an aggregated of $709,537, were deposited as Extension Contribution into the Trust Account by FST pursuant to the Business Combination Agreement, extending the Termination Date to October 27, 2024.
On October 25, 2024, at the Third Extraordinary General Meeting, in connection with the approval of the Third Extension Amendment Proposal, in addition to the Extension Contributions, the Company commits to deposit extra incentive in the Trust Account for the Third Extension. As a result, in the aggregate, the Company commits to pay (a) $0.03 for each of the Company’s Class A ordinary shares not elected to be redeemed immediately after the Third Extraordinary General Meeting for each one-month extension period from October 27, 2024 (exclusive) to January 27, 2025; and (b) $0.05 for each of the Company’s Class A ordinary shares not elected to be redeemed immediately after the Third Extraordinary General Meeting for each one-month extension period from January 25, 2025 to April 27, 2025. On November 4, 2024, $80,000 was deposited as Extension Contribution into the Trust Amount by FST pursuant to the Business Combination Agreement, and on November 5, 2024, $26,032.93 was deposited as Extension Contribution into the Trust Account by the Company, extending the Termination Date to November 27, 2024. If a business combination is not consummated by the required date and we are unable to obtain the funding to further extend the Termination Date, there will be a mandatory liquidation and subsequent dissolution.
In connection with our assessment of going concern considerations in accordance with Financial Accounting Standard Board’s Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” we have until November 27, 2024 (or April 27, 2025 subject to additional extension deposits as approved in the Third Extraordinary General Meeting) to consummate the initial Business Combination. We intend to complete the initial Business Combination before the mandatory liquidation date. However, there can be no assurance that we will be able to consummate any business combination by November 27, 2024 (or April 27, 2025 subject to additional extension deposits as approved in the Third Extraordinary General Meeting). Management has determined that the mandatory liquidation, should a business combination not occur, and potential subsequent dissolution, raises substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. The accompanying financial statements have been prepared in conformity with GAAP, which contemplate continuation of the Company as a going concern.
Risks and Uncertainties
Management is currently evaluating the impact of the Israel-Hamas conflict and the Russia-Ukraine war and has concluded that while it is reasonably possible that the war 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 condensed financial statements. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of September 30, 2024 and December 31, 2023. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
Contractual Obligations
As of September 30, 2024 and December 31, 2023, we did not have any long-term debt, capital or operating lease obligations.
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Critical Accounting Estimates
The preparation of condensed 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 condensed financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. A critical accounting estimate to our condensed financial statements is the estimated fair value of our warrant liabilities and over-allotment liability, and Class B ordinary shares. Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
| ● | Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; |
| ● | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
| ● | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
Warrant Liabilities and Over-allotment Liability
We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. We evaluate all of our financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 815-15. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity and measurement of fair value is re-assessed at the end of each reporting period. In accordance with ASC 825-10 “Financial Instruments”, offering costs attributable to the issuance of the derivative warrant liabilities and overallotment option have been allocated based on their relative fair value of total proceeds and are recognized in the statements of operations as incurred. Derivative warrant liabilities are classified as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or the creation of current liabilities.
We account for warrants and over-allotment as either equity-classified or liability-classified instruments based on an assessment of the warrant and over-allotment option’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants and over-allotment option are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants and over-allotment option meet all of the requirements for equity classification under ASC 815, including whether the warrants and over-allotment option are indexed to our own ordinary shares, among other conditions for equity classification. This assessment is conducted at the time of warrant and over-allotment option issuance and as of each subsequent quarterly period end date while the warrants and over-allotment option are outstanding.
For issued or modified warrants and over-allotment option that meet all of the criteria for equity classification, the warrants and over-allotment option are recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants and over-allotment option that do not meet all the criteria for equity classification, the warrants and over-allotment option are required to be recorded as a liability at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants and over-allotment option are recognized as a non-cash gain or loss on the statements of operations.
We accounted for the warrants and over-allotment option in accordance with the guidance contained in ASC 815-40. The warrants and over-allotment are not considered indexed to our own ordinary shares, and as such, they do not meet the criteria for equity treatment and are recorded as liabilities.
At September 30, 2024 and December 31, 2023, the Company used the quoted price on Over - the - Counter Market (the “OTC”) to establish the fair value of the Public Warrants.
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The Private Placement Warrants changed from Level 2 at September 30, 2023 to Level 3 at December 31, 2023 as a result of the lack of an observable market quote of the Public Warrants on that day. At September 30, 2024 and December 31, 2023 a Monte Carlo simulation methodology was used in estimating the fair value of the Private Placement Warrants.
Class B Ordinary Shares (or “Founder Shares”)
The Company analyzed the SPA entered into during September 2023 under SAB Topic 5, Miscellaneous Accounting, section T, Accounting for Expenses or Liabilities Paid by Principal Stockholder(s) and concluded that the SPA provides the Company with a benefit in the form of the right to receive additional extension contributions from the New Sponsor. The right to receive the additional extension contributions required the New Sponsor, who is a principal shareholder, to provide or cause to provide consideration in the form of a transfer of Class B ordinary shares of the Company. The estimated fair value of the earnout provision at the closing of the Sponsor Sale on October 6, 2023 is nominal to zero. As a result, the Company determined that an expense in the full amount of the fair value of the Class B ordinary shares transferred should be recorded. During October 2023, the Company recorded an expense under SAB Topic 5T of $2,851,750 with a corresponding increase to additional paid-in capital, based on a Monte Carlo Model simulation valuation of the Class B ordinary shares.
Recent Accounting Pronouncements
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 unaudited condensed financial statements and disclosures.
Management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s unaudited condensed financial statements.
JOBS Act
The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an “emerging growth company” and under the JOBS Act are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing 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.
Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be required to, among other things, (i) provide an independent registered public accounting firm’s attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) 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, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the report of the independent registered public accounting firm providing additional information about the audit and the financial statements (auditor discussion and analysis), and (iv) 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 IPO or until we are no longer an “emerging growth company,” whichever is earlier.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Following the consummation of our IPO, the net proceeds of our IPO, including amounts in the trust account, have been invested in U.S. government treasury bills, notes or bonds with a maturity of 185 days or less or in certain money market funds that invest solely in US treasuries. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.
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Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our chief executive officer and chief financial officer (together, the “Certifying Officers”), 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 Certifying Officers, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on the foregoing, our Certifying Officers concluded that our disclosure controls and procedures were not effective as of September 30, 2024, due to material weaknesses in our internal control over financial reporting, as defined in the SEC guidelines for public companies. The material weaknesses identified relate to ineffective controls over recording of accounting transactions in the proper period, controls over accounting for and disclosure of complex financial instruments in the proper period, including those requiring them to apply complex accounting principles as a means of differentiating between liability, temporary equity and permanent equity classification, controls over fair value estimation of complex financial instruments such as Class B ordinary shares, earnout provision, and forfeiture provision, and controls over timely reconciliation of accrued legal expenses and NASDAQ filing fees.
In light of these material weaknesses, we have enhanced our processes to identify and appropriately apply applicable accounting requirements to better evaluate and understand the nuances of the complex accounting standards that apply to our financial statements including making greater use of third-party professionals with whom we consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects. We believe our efforts will enhance our controls relating to accounting for and disclosure of complex financial instruments in the proper period, but we can offer no assurance that our controls will not require additional review and modification in the future as industry accounting practice may evolve over time.
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Management’s Report on Internal Control Over Financial Reporting
This quarterly report does not include a management’s assessment regarding internal control over financial reporting or an attestation report of our registered public accounting firm due to a transition period established by rules of the SEC for newly public companies and for an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, or the Securities Act, as modified by the JOBS Act.
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 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.
Factors that could cause our actual results to differ materially from those in this Quarterly Report are any of the risks described in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on April 12, 2024 (the “Annual Report”). Any of these factors could result in a significant or material adverse effect on our business, financial condition and results of operations. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business, financial condition or results of operations. As of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in the Annual Report. We may disclose future changes to the risk factors or disclose additional factors from time to time in our future filings with the SEC.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
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Item 6. Exhibits.
Exhibit |
| Description |
31.1 |
| |
31.2 |
| |
32.1* |
| |
32.2* |
| |
101.INS | XBRL Instance Document | |
101.SCH | XBRL Taxonomy Extension Schema Document | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | XBRL Taxonomy Extension Definitions Linkbase Document | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | |
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* | These certifications are furnished to the SEC pursuant to Section 906 of the Sarbanes Oxley Act of 2002 and are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this quarterly report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Chenghe Acquisition I Co. | |
|
| |
Date: November 12, 2024 | By: | /s/ Yixuan Yuan |
|
| Name: Yixuan Yuan |
|
| Title: Chief Executive Officer (Principal Executive Officer) |
| Chenghe Acquisition I Co. | |
|
| |
Date: November 12, 2024 | By: | /s/ Zhaohai Wang |
|
| Name: Zhaohai Wang |
|
| Title: Chief Financial Officer (Principal Financial and Accounting Officer) |
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