UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For
the quarterly period ended
For the transition period from to
Commission
File No.
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of Principal Executive Offices, including zip code)
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| The Stock Market LLC | ||||
| The Stock Market LLC | ||||
| The Stock Market LLC | ||||
| The Stock Market LLC |
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| ☐ Large accelerated filer | ☐ Accelerated filer | |
| ☒
|
||
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes
As of May 20, 2024, there were shares of the Class A Common Stock, par value $0.0001 per share, which number includes 297,205 unseparated units, and -- shares of the Class B Common Stock, par value $0.0001 per share, of the Company issued and outstanding.
CETUS CAPITAL ACQUISITION CORP.
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2024
TABLE OF CONTENTS
| i |
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
CETUS CAPITAL ACQUISITION CORP.
BALANCE SHEETS
(UNAUDITED)
March 31, 2024 | December 31, 2023 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Non-current assets: | ||||||||
| Cash held in the trust | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES | ||||||||
| Current liabilities: | ||||||||
| Other payable | $ | $ | ||||||
| Accrued offering costs | ||||||||
| Franchise tax payable | ||||||||
| Excise Tax Payable | ||||||||
| Income tax payable | ||||||||
| Amount due to related parties | ||||||||
| Total current liabilities | ||||||||
| Deferred underwriting commission | ||||||||
| Total liabilities | $ | $ | ||||||
| Commitments and Contingencies | ||||||||
| Class A Common stock subject to possible redemption, $par value; shares and shares issued and outstanding at redemption value (with $and $per share subject to redemption value), respectively, as of March 31, 2024 and December 31, 2023 | ||||||||
| SHAREHOLDERS’ DEFICIT | ||||||||
| Preferred share, $ par value; shares authorized; issued and outstanding | ||||||||
| Class A common stock, $ par value; shares authorized; issued and outstanding (excluding shares subject to possible redemption), shares issued and outstanding (excluding share subject to possible redemption) as of March 31, 2024 and December 31, 2023, respectively | ||||||||
| Class B common stock, $ par value; shares authorized; issued and outstanding | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total shareholders’ deficit | ( | ) | ( | ) | ||||
| Total liabilities, Class A Common stock subject to redemption and shareholders’ deficit | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited financial statements.
| 1 |
CETUS CAPITAL ACQUISITION CORP.
STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three Months Ended March 31, 2024 | For the Three Months Ended March 31, 2023 | |||||||
| Formation and operating costs | $ | $ | ||||||
| Franchise tax | ||||||||
| Loss from operation | ( | ) | ( | ) | ||||
| Unrealized gain on marketable securities held in the trust account | ||||||||
| Other income | ||||||||
| Income before income taxes | ||||||||
| Income tax expenses | ( | ) | ( | ) | ||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Weighted average shares outstanding, basic and diluted | ||||||||
| Basic and diluted net income (loss) per common share | $ | $ | ) | |||||
The accompanying notes are an integral part of these unaudited financial statements.
| 2 |
CETUS CAPITAL ACQUISITION CORP.
STATEMENTS OF CHANGES IN SHAREHOLDERS’ (DEFICIT) EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
(UNAUDITED)
| Class A | Class B | Additional | Total Shareholders’ | |||||||||||||||||||||||||
| Common Stock | Common Stock | Paid in | Accumulated | (Deficit) | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
| Balance – December 31, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Accretion of subsequent measurement of common stock subject to redemption value | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Extension funds attributable to common stock subject to redemption | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Excise tax | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||
| Balance –March 31, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Balance – December 31, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Issuance of Class A Common Stock | - | |||||||||||||||||||||||||||
| Issuance of Private Placement Units | - | |||||||||||||||||||||||||||
| Conversion from Promissory Note to Private Placement Units | - | |||||||||||||||||||||||||||
| Issuance of representative shares | - | |||||||||||||||||||||||||||
| Underwriting Commissions | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Offering Costs | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Reclassification of Common Stock Subject to Redemption | ( | ) | ( | ) | - | ( | ) | ( | ) | |||||||||||||||||||
| Accretion of initial measurement of subject to redemption | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Accretion of subsequent measurement of common stock subject to redemption value | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance –March 31, 2023 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
The accompanying notes are an integral part of these unaudited financial statements.
| 3 |
CETUS CAPITAL ACQUISITION CORP.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Three months ended March 31, 2024 | For the Three months ended March 31, 2023 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | $ | ( | ) | ||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Unrealized gain in the trust account | ( | ) | ( | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses | ( | ) | ||||||
| Accrued expense and other payable | ||||||||
| Income tax payable | ( | ) | ||||||
| Franchise tax payable | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Investment of cash in Trust Account | ( | ) | ||||||
| Cash withdrawn from Trust Account for redemptions | ||||||||
| Cash withdrawn from Trust Account for estimated corporation income tax | ||||||||
| Net cash provided by (used in) investing activities | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Loan proceeds from a related party | ||||||||
| Payment of offering costs | ( | ) | ||||||
| Redemption of Common Stock | ( | ) | ||||||
| Proceeds from sale of Public Units | ||||||||
| Proceeds from sale of Private Placement units | ||||||||
| Payment of Underwriting discount | ( | ) | ||||||
| Payment of accounts payable and Rockport | ( | ) | ||||||
| Net cash (used in) provided by financing activities | ( | ) | ||||||
| Net change in cash | ( | ) | ||||||
| Cash at the beginning of the period | ||||||||
| Cash at the end of the period | $ | $ | ||||||
| Supplemental disclosure of non-cash financing activities: | ||||||||
| Extension funds attributable to common stock subject to redemption | $ | $ | ||||||
| Remeasurement of common stock subject to redemption value | $ | $ | ||||||
| Accrual of excise tax | $ | $ | ||||||
| Deferred underwriting fee payable | $ | $ | ||||||
| Allocation of offering costs | $ | $ | ||||||
| Value of Class A ordinary shares subject to redemption | $ | $ | ||||||
| Issuance of Representative Shares | $ | $ | ||||||
| Deferred offering costs in accrued offering costs | $ | $ | ||||||
| Accretion of initial measurement of subject to redemption | $ | $ | ||||||
| Conversion from Promissory Notes to Private Placement Units | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited financial statements.
| 4 |
CETUS CAPITAL ACQUISITION CORP.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 1 - Description of Organization and Business Operations
Cetus Capital Acquisition Corp. (the “Company”) is a blank check company incorporated in Delaware on June 7, 2022. The Company was formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). The Company is an emerging growth company and, as such, the Company is subject to all of the risks associated with emerging growth companies.
As of March 31, 2024, the Company had not commenced any operations. All activities through March 31, 2024, are related to the Company’s formation and the initial public offering (“IPO” as defined below in Note 3 and “Subsequent Event” in Note 9). The Company will not generate any operating revenues until after the completion of a Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income from the proceeds derived from the IPO. The Company is identifying a target company for a Business Combination and the proposed acquisition of MKDWELL Limited, a British Virgin Islands company (“MKD BVI”) (see Note 6).
The Company has selected December 31 as its fiscal year end. The Company’s sponsor is Cetus Sponsor LLC, a Delaware limited liability company (the “Sponsor”).
The
registration statement for the Company’s IPO was declared effective on January 31, 2023. On February 3, 2023, the Company consummated
the IPO of units (the “Public Units’), including the full exercise of the over-allotment option of Units
granted to the underwriters. The Public Units were sold at an offering price of $ per unit generating gross proceeds of $
Transaction
costs amounted to $
In addition, in conjunction with the IPO, the Company issued to the underwriter shares of Class A common stock for nominal consideration (the “Representative Shares”). The fair value of the Representative Shares accounted for as compensation under ASC 718, Stock compensation, is included in the offering costs. The estimated fair value of the Representative Shares as of the IPO date totaled $.
Upon
the closing of the IPO and the private placement on February 3, 2023, a total of $
| 5 |
CETUS CAPITAL ACQUISITION CORP.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 1 - Description of Organization and Business Operations (Continued)
Pursuant
to Nasdaq listing rules, the Company’s initial Business Combination must occur with one or more target businesses having an aggregate
fair market value equal to at least
The Company will provide its holders of the outstanding Public Shares (the “Public Stockholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The Public Stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially $ per Public Share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its franchise and income tax obligations). The Public Shares subject to redemption will be recorded at a redemption value and classified as temporary equity upon the completion of the IPO in accordance with the Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.”
The
Company will proceed with a Business Combination if the Company has net tangible assets of at least $
The Initial Stockholders have agreed (a) to waive their redemption rights with respect to the Founder Shares, Private Shares, and Public Shares held by them in connection with the completion of a Business Combination and (b) not to propose, or vote in favor of, an amendment to the Amended and Restated Certificate of Incorporation that would affect the substance or timing of the Company’s obligation to redeem 100% of its Public Shares if the Company does not complete a Business Combination, unless the Company provides the Public Stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment.
On November 3, 2023, the Board of Directors of the Company approved an extension of an additional three (3) months from November 2, 2023 to February 2, 2024 for the completion of a business combination.
On
January 31, 2024, the Company held a special meeting of stockholders (the “Special Meeting”).
| 6 |
CETUS CAPITAL ACQUISITION CORP.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 1 - Description of Organization and Business Operations (Continued)
If the Company is unable to complete a Business Combination within the Combination Period, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest (which interest shall be net of taxes payable, and less certain amount of interest to pay dissolution expenses) divided by the number of then outstanding Public Shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
The Initial Stockholders have agreed to waive their liquidation rights with respect to the Founder Shares and Private Shares if the Company fails to complete a Business Combination within the Combination Period. However, if the Initial Stockholders acquire Public Shares in or after the IPO, such Public Shares will be entitled to liquidating distributions from the Trust Account if the Company fails to complete a Business Combination within the Combination Period. The underwriters have agreed to waive their rights to their deferred underwriting commission (see Note 7) held in the Trust Account in the event the Company does not complete a Business Combination within in the Combination Period and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than $.
In order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a third party (excluding the Company’s independent registered public accounting firm) for services rendered or products sold to the Company, or a prospective target business with which the Company has entered into a written letter of intent, confidentiality or similar agreement or business combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $ per Public Share and (ii) the actual amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $ per share due to reductions in the value of the trust assets, in each case less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the Trust Account (whether or not such waiver is enforceable), nor will it apply to any claims under the Company’s indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims.
| (a) | Liquidity and Capital Resources and Going Concern Consideration |
As
of March 31, 2024, the Company had $
| 7 |
CETUS CAPITAL ACQUISITION CORP.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 1 - Description of Organization and Business Operations (Continued)
| (b) | Risks and Uncertainties |
Management continues to evaluate the impact of the COVID-19 pandemic, including any variants thereof, on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations, and/or search for a target company, the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Additionally, as a result of the military action commenced in February 2022 by the Russian Federation and Belarus in the country of Ukraine and related economic sanctions, the Company’s ability to consummate a Business Combination, or the operations of a target business with which the Company ultimately consummates a Business Combination, may be materially and adversely affected. In addition, the Company’s ability to consummate a transaction may be dependent on the ability to raise equity and debt financing which may be impacted by these events, including as a result of increased market volatility, or decreased market liquidity in third-party financing being unavailable on terms acceptable to the Company or at all. The impact of this action and related sanctions on the world economy and the specific impact on the Company’s financial position, results of operations and/or ability to consummate a Business Combination are not yet determinable. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
| (c) | Inflation Reduction Act of 2022 |
On August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things, a new U.S. federal 1% excise tax on certain repurchases (including redemptions) of stock by publicly traded domestic (i.e., U.S.) corporations and certain domestic subsidiaries of publicly traded foreign corporations. The excise tax is imposed on the repurchasing corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is generally 1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. The U.S. Department of the Treasury (the “Treasury”) has been given authority to provide regulations and other guidance to carry out and prevent the abuse or avoidance of the excise tax. The IR Act applies only to repurchases that occur after December 31, 2022.
Any redemption or other repurchase that occurs after December 31, 2022, in connection with a Business Combination, extension vote or otherwise, may be subject to the excise tax. Whether and to what extent the Company would be subject to the excise tax in connection with a Business Combination, extension vote or otherwise would depend on a number of factors, including (i) the fair market value of the redemptions and repurchases in connection with the Business Combination, extension or otherwise, (ii) the structure of a Business Combination, (iii) the nature and amount of any “PIPE” or other equity issuances in connection with a Business Combination (or otherwise issued not in connection with a Business Combination but issued within the same taxable year of a Business Combination) and (iv) the content of regulations and other guidance from the Treasury. In addition, because the excise tax would be payable by the Company and not by the redeeming holder, the mechanics of any required payment of the excise tax have not been determined. The foregoing could cause a reduction in the cash available on hand to complete a Business Combination and in the Company’s ability to complete a Business Combination.
For the three months ended March 31, 2024, the excise
tax of $
Note 2 - Summary of Significant Accounting Policies
(a) Basis of Presentation
The accompanying unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information, as set forth by the Financial Accounting Standards Board (“FASB”), and pursuant to the rules and regulations of the SEC. The unaudited interim financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2023 included in the 10-K as filed with the SEC on March 28, 2024. In the opinion of management, the unaudited financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented. The interim results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected through December 31, 2024 or for any future periods.
| 8 |
CETUS CAPITAL ACQUISITION CORP.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Note 2 - Summary of Significant Accounting Policies (Continued)
(b) Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
(c) Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
(d) 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 had cash of $
(e) Cash Held in Trust Account
As
of March 31, 2024 and December 31, 2023, $
(f) Offering Costs Associated with the IPO
Offering
costs consist of underwriting, legal, accounting and other expenses incurred through the balance sheet date that are directly related
to the IPO. As of February 3, 2023, offering costs totaled $
| 9 |
CETUS CAPITAL ACQUISITION CORP.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Note 2 - Summary of Significant Accounting Policies (Continued)
(g) Income Taxes
The Company complies with the accounting and reporting requirements of ASC Topic 740, “Income Taxes,” which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC
Topic 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax
positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not
to be sustained upon examination by taxing authorities. The Company’s management determined the United States is the Company’s
only major tax jurisdiction. The Company recognizes accrued interest and penalties related to unrecognized tax benefits, if any, as income
tax expense. There were
The
provision for income taxes for the three months ended of March 31, 2024 and March 31, 2023 were $
(h) Dividends
The Board may from time to time declare, and the Company may pay, dividends (payable in cash, property or shares of the Company’s capital stock) on the Company’s outstanding shares of capital stock, subject to applicable law and the Amended and Restated Certificate of Incorporation.
The Company complies with accounting and disclosure requirements of ASC Topic 260, “Earnings Per Share.” Net income per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period, excluding common stock subject to forfeiture. For the three months ended March 31, 2024, the net income per share was $and the net loss per share was $for the three months ended March 31, 2023.
(j) Concentration of credit risk
Financial
instruments that potentially subject the Company to concentration of credit risk consist of a cash account in a financial institution
which, at times may exceed the Federal depository insurance coverage of $
(k) Fair value of financial instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 825, “Financial Instruments,” approximates the carrying amounts represented in the accompanying balance sheet, primarily due to their short-term nature.
(l) Derivative Financial Instruments
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in 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 are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
The Public Warrants and Rights (see Note 3) and Placement Warrants (see Note 4) were accounted for as equity instruments as they meet all of the requirements for equity classification under ASC 815.
| 10 |
CETUS CAPITAL ACQUISITION CORP.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Note 2 - Summary of Significant Accounting Policies (Continued)
(m) Fair Value Measurements
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. |
In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.
The Representative Shares were valued using the fair value of the Class A common stock, adjusted for the probability of consummation of the Business Combination. As such, these are considered to be non-recurring Level 3 fair value measurements.
The Company accounts for its common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that feature redemption rights that is either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheet.
The
Company has made a policy election in accordance with ASC 480-10-S99-3A and recognizes changes in redemption value in additional paid-in
capital (or accumulated deficit in the absence of additional paid-in capital) over an expected 9-month period leading up to a Business
Combination. As of March 31, 2024, the Company had recorded accretion of $
For issued warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations.
As of March 31, 2024, the amount of common stock subject to possible redemption reflected in the balance sheet are reconciled in the following table:
| Gross proceeds | $ | |||
| Less: | ||||
| Proceeds allocated to public warrants | ( | ) | ||
| Proceeds allocated to public rights | ( | ) | ||
| Allocation of offering costs related to redeemable shares | ( | ) | ||
| Redemption of Public Shares | ( | ) | ||
| Plus: | ||||
| Accretion of initial carrying value to redemption value | ||||
| Subsequent measurement of common stock subject to redemption value | ||||
| Extension funds attributable to common stock subject to redemption | ||||
| Common stock subject to possible redemption | $ |
| 11 |
CETUS CAPITAL ACQUISITION CORP.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Note 3 - Initial Public Offering
On
February 3, 2023, the Company sold Units at a price of $ per Units (including the full exercise of the over-allotment
option of Units granted to the underwriters), generating gross proceeds of $
Note 4 - Private Placement
Simultaneously
with the closing of the IPO, the Sponsor purchased an aggregate of Private Units at a price of $ per Private Unit for an
aggregate purchase price of $
Note 5 - Related Party Transactions
| (a) | Founder Shares |
On June 10, 2022, the Company approved the acquisition by transfer of an aggregate of shares of Class B common stock (the “Founder Shares”) to the Sponsor for an aggregate purchase price of $ in cash, or approximately $per share. Such Class B common stock included an aggregate of up to shares subject to forfeiture by the Sponsor to the extent that the underwriters’ over-allotment option was not exercised in full or in part, so that the Sponsor will own approximately % of the Company’s issued and outstanding shares after the Initial Public Offering (assuming the initial stockholders do not purchase any Public Shares in the Initial Public Offering and excluding the Placement Units and underlying securities and issuance of representative shares). On August 31, 2022, the Sponsor converted all of its shares of Class B common stock into shares of Class A common stock on a one-for-one basis (up to shares of which were subject to forfeiture to the extent that the underwriters’ over-allotment option was not exercised in full or in part). On December 30, 2022, the Sponsor surrendered to the Company for cancellation shares of Class A common stock for no consideration, resulting in the Sponsor owning shares of Class A common stock (up to shares of which were subject to forfeiture to the extent that the underwriters’ over-allotment option is not exercised in full or in part). The surrender was effective retroactively.
The initial stockholders have agreed not to transfer, assign or sell any of the Class A common stock (except to certain permitted transferees as disclosed herein) until, with respect to any of the Class A common stock, the earlier of (i) six months after the date of the consummation of a Business Combination, or (ii) the date on which the closing price of the Company’s common stock equals or exceeds $ per share (as adjusted for share subdivisions, share dividends, reorganizations and recapitalizations) for any 20 trading days within any 30-trading day period commencing after a Business Combination, or earlier, if, subsequent to a Business Combination, the Company consummates a subsequent liquidation, merger, share exchange or other similar transaction which results in all of the Company’s stockholders having the right to exchange their common stock for cash, securities or other property.
As of March 31, 2024, Founder Shares were issued and outstanding and none of the Founder Shares are subject to forfeiture as a result of the underwriters’ full exercise of the over-allotment option on February 1, 2023.
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CETUS CAPITAL ACQUISITION CORP.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Note 5 - Related Party Transactions (Continued)
| (b) | Promissory Note — Related Party |
On
June 10, 2022, the Sponsor issued an unsecured promissory note to the Company, pursuant to which the Company may borrow up to an aggregate
principal amount of $
On March 31, 2023, the $
| (c) | Working Capital Loans |
In
order to finance transaction costs in connection with a Business Combination, the Sponsor, initial stockholders, officers, directors
or their affiliates may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”).
As
of March 31, 2024, working capital loans from related parties were $
| (d) | Extension Loan |
Following
the approval by the Board of Directors of an extension of an additional three (3) months from November 2, 2023 to February 2, 2024 for
the completion of a business combination (the “Extension”), on October 31, 2023, the Sponsor deposited an aggregate of $
On December 14, 2023, the Company, the Sponsor, the members of the Company’s Board of Directors (the “Insiders”) and EF Hutton LLC executed and delivered a Letter of Consent and Waiver (the “Consent and Waiver”), agreeing that notwithstanding anything to the contrary in the Insider Letter among the Insiders, the Company, the Sponsor and EF Hutton LLC, the Sponsor may pledge as security and/or transfer any shares of the common stock of the Company held by the Sponsor in connection with the obtaining of loans towards payment of the fees for the extension of the business combination deadline of the Company, including but not limited to those shares of the common stock of the Company pledged in connection with the MKD Loan.
On
January 31, 2024, the Company held the Extension Meeting, at which the stockholders of the Company approved an amendment (the “Extension
Amendment”) to the Company’s amended and restated certificate of incorporation to extend the date by which the Company
must consummate its initial business combination from February 3, 2024 up to six (6) one-month extensions to August 3, 2024, provided
that an additional amount equal to the lesser of $ per outstanding public share and $
In
connection with the Extension Amendment, the Sponsor has caused four additional deposits, each in the amount of $
On February 1, 2024, the parties to the Business Combination Agreement entered into a Fourth Addendum to the Business Combination Agreement to extend the Termination Date from February 1, 2023 to April 30, 2024.
As
of March 31, 2024, Extension Loan provided by the Sponsor amounted to $
| 13 |
CETUS CAPITAL ACQUISITION CORP.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Note 6 - Business Combination Agreement
On June 20, 2023, the Company entered into a Business Combination Agreement (as it may be amended, supplemented or otherwise modified from time to time, the “Business Combination Agreement”) by and among the Company, MKD Technology Inc., a Taiwan corporation (the “MKD Taiwan”), MKD BVI, and Ming-Chia Huang, in his capacity as the representative of the shareholders of MKD Taiwan (the “Shareholders’ Representative”).
The Business Combination Agreement contemplates, among other things, that: (A) the Shareholders’ Representative will incorporate, on or prior to August 20, 2023, a British Virgin Islands business company (“Pubco”) for the purpose of serving as the public listed company whose shares shall be traded on The Nasdaq Stock Market, which company shall initially be owned by the Shareholders’ Representative; (B) Pubco will incorporate, on or prior to August 20, 2023, a British Virgin Islands business company and wholly-owned subsidiary of Pubco (“Merger Sub 1”) for the sole purpose of merging with and into MKD BVI (the “Acquisition Merger”), with MKD BVI being the surviving entity and a wholly-owned subsidiary of Pubco; (C) Pubco will incorporate, on or prior to August 20, 2023, a British Virgin Islands business company and wholly-owned subsidiary of Pubco (“Merger Sub 2”) for the sole purpose of the merger of the Company with and into Merger Sub 2 (the “SPAC Merger”), in which the Company will be the surviving entity and a wholly-owned subsidiary of Pubco; (D) MKD BVI and Merger Sub 1 will effect the Acquisition Merger; and (E) the Company and Merger Sub 2 will effect the SPAC Merger.
The Acquisition Merger, the SPAC Merger and the other transactions contemplated by the Business Combination Agreement are hereinafter collectively referred to as the “Business Combination”.
The
aggregate consideration to be paid to the shareholders of MKD BVI for the Acquisition Merger is US$
On the Closing Date, the Company and Merger Sub 2 will effect the SPAC Merger, as a result of which the Company will continue as a wholly-owned subsidiary of Pubco. In connection with the SPAC Merger, every issued and outstanding unit of the Company shall separate into each unit’s individual components, consisting of one share of Class A common stock, one warrant and one right, and all units shall cease to be outstanding and shall automatically be canceled and retired and shall cease to exist. In addition, each of the issued and outstanding securities of the Company will be converted into an equivalent amount of Pubco’s securities, as follows:
| ● | Each share of the Class A common stock of the Company will be converted automatically into one ordinary share of Pubco; | |
| ● | Each right to acquire one-sixth of one share of Class A common stock of the Company will be converted automatically into one right to acquire one-sixth of one ordinary share of Pubco, except that any fractional share that would otherwise be issued will be rounded down to the nearest whole share; and | |
| ● | Each
warrant entitled to purchase one ( |
The Business Combination Agreement contemplates that Pubco will, immediately after the Closing, have a board of directors composed of seven (7) persons, with MKD Taiwan having the right to designate five (5) directors and with Cetus Sponsor LLC having the right to designate two (2) directors.
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CETUS CAPITAL ACQUISITION CORP.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Note 6 - Business Combination Agreement (Continued)
On July 31, 2023, the parties to the Business Combination Agreement entered into a First Addendum to the Business Combination Agreement, pursuant to which (A) MKDWELL Tech Inc. agreed to become a party to the Business Combination Agreement and to comply with the terms applicable to Pubco thereunder and (B) the parties agreed to extend the date by which Pubco, Merger Sub 1 and Merger Sub 2 must execute an addendum to become parties to the Business Combination Agreement from July 31, 2023 to August 20, 2023.
On August 10, 2023, MKDMerger1 Inc. and MKDMerger2 Inc. each executed and delivered a Second Addendum to the Business Combination Agreement, pursuant to which (A) MKDMerger1 Inc. agreed to become a party to the Business Combination Agreement and to comply with the terms applicable to Merger Sub 1 thereunder and (B) MKDMerger2 Inc. agreed to become a party to the Business Combination Agreement and to comply with the terms applicable to Merger Sub 2 thereunder.
On
October 31, 2023, the Sponsor deposited $
On November 19, 2023, the parties to the Business Combination Agreement entered into a Third Addendum to the Business Combination Agreement to extend the Termination Date from November 3, 2023 to February 1, 2024.
On December 14, 2023, the Company, the Sponsor, the members of the the Company’s Board (the “Insiders”) and EF Hutton executed and delivered a Letter of Consent and Waiver (the “Consent and Waiver”), agreeing that notwithstanding anything to the contrary in the Insider Letter among the Insiders, the Company, the Sponsor and EF Hutton, the Sponsor may pledge as security and/or transfer any shares of the Company’s Common Stock held by the Sponsor in connection with the obtaining of loans towards payment of the fees for the extension of the Business Combination Period, including but not limited to those shares of the Company’s Common Stock pledged in connection with the MKD Loan.
On
January 31, 2024, the Company held the Extension Meeting, at which the stockholders of the Company approved an amendment (the “Extension
Amendment”) to the Company’s amended and restated certificate of incorporation to extend the date by which the Company
must consummate its initial business combination from February 3, 2024 up to six (6) one-month extensions to August 3, 2024, provided
that an additional amount equal to the lesser of $ per outstanding public share and $
In
connection with the Extension Amendment, the Sponsor has caused four additional deposits, each in the amount of $
On February 1, 2024, the parties to the Business Combination Agreement entered into a Fourth Addendum to the Business Combination Agreement to extend the Termination Date from February 1, 2023 to April 30, 2024.
| 15 |
CETUS CAPITAL ACQUISITION CORP.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Note 7 - Commitments and Contingency
| (a) | Registration Rights |
The holders of the Founder Shares issued and outstanding, as well as the holders of the Placement Units and any units our sponsor, officers, directors, initial stockholders or their affiliates may be issued in payment of working capital loans or extension loans made to the Company (and all underlying securities), are entitled to registration rights pursuant to a registration rights agreement that was signed at the time of our Initial Public offering requiring the Company to register such securities for resale (in the case of the Founder Shares, only after conversion to our Class A common stock). The holders of these securities are entitled to make up to two demands that the Company register such securities. The holders of the majority of the Founder Shares can elect to exercise these registration rights at any time commencing three months prior to the date on which the Founder Shares are to be released from escrow. The holders of a majority of the Placement Units and units issued to our sponsor, officers, directors, initial stockholders or their affiliates in payment of working capital loans and extension loans made to the Company (or underlying securities) can elect to exercise these registration rights at any time after the company consummates a Business Combination. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of a Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. However, the registration rights agreement provides that the Company will not be required to effect or permit any registration or cause any registration statement to become effective until termination of the applicable lock-up period. The registration rights agreement does not contain liquidated damages or other cash settlement provisions resulting from delays in registering the Company’s securities. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
| (b) | Underwriting Agreement |
At
the IPO date, the Company granted EF Hutton, division of Benchmark Investments, LLC, the representative of the underwriters a 45-day
option from the date of the offering to purchase up to additional Units to cover over-allotments, if any, at the IPO price less
the underwriting discounts and commissions. On February 1, 2023, the underwriters fully exercised the over-allotment option to purchase
units, generating gross proceeds to the Company of $
In addition, in conjunction with the Initial Public Offering, the Company issued to the underwriter shares of Class A common stock (the “Representative Shares”) upon the closing of the IPO on February 3, 2023. The Company estimates the fair value of Representative Shares to be $ in total, or $ per Representative Share. The Company accounted for the estimated fair value of the Representative Shares as an offering cost of the IPO and allocated such cost against temporary equity for the amount allocated to the redeemable shares and to equity for the allocable portion relating to the warrants and rights.
The holders of the Representative Shares agreed (a) that they will not transfer, assign or sell any such shares without the Company’s prior consent until the completion of the initial Business Combination, (ii) to waive their redemption rights (or right to participate in any tender offer) with respect to such shares in connection with the completion of the initial Business Combination and (iii) to waive their rights to liquidating distributions from the Trust Account with respect to such shares if the Company fails to complete the initial Business Combination within the Combination Period.
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CETUS CAPITAL ACQUISITION CORP.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Note 7 - Commitments and Contingency (Continued)
| (c) | Right of First Refusal |
For a period beginning on the closing of the IPO and ending 24 months from the closing of a business combination, we have granted EF Hutton a right of first refusal to act as lead-left book running manager and lead left manager for any and all future private or public equity, convertible and debt offerings during such period. In accordance with FINRA Rule 5110(g)(3)(A)(i), such right of first refusal shall not have a duration of more than three years from the effective date of the IPO registration statement.
| 17 |
CETUS CAPITAL ACQUISITION CORP.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Note 8 - Stockholders’ Equity
Class
A Common Stock — Our amended and restated certificate of incorporation authorizes the Company to issue shares
of Class A common stock with a par value of $ per share.
As of March 31, 2024 there were shares of Class A Common Stock issued and outstanding, including Representative Shares issued to the underwriter, and excluding shares subject to possible redemption.
Class
B Common Stock — Our amended and restated certificate of incorporation authorizes the Company to issue shares
of Class B common stock with a par value of $ per share.
Preferred Stock — Our amended and restated certificate of incorporation authorizes the Company to issue shares of preferred stock with a par value of $ per share with such designations, rights and preferences as may be determined from time to time by the Company’s Board of Directors. As of March 31, 2024 and December 31, 2023, there were shares of preferred stock issued or outstanding.
Warrants — The Public Warrants will become exercisable commencing on the later of 12 months from the effective date of the Company’s registration statement for the IPO or the date of the consummation of a Business Combination. The Public Warrants will expire five years from the consummation of a Business Combination or earlier upon redemption or liquidation.
The Company will not be obligated to deliver any Class A common stock pursuant to the exercise of a Public Warrant and will have no obligation to settle such Public Warrant exercise unless a registration statement under the Securities Act covering the issuance of the Class A common stock issuable upon exercise of the Public Warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect to registration. No warrant will be exercisable and the Company will not be obligated to issue Class A common stock upon exercise of a warrant unless the Class A common stock issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants.
| 18 |
CETUS CAPITAL ACQUISITION CORP.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Note 8 - Stockholders’ Equity (Continued)
Once the warrants become exercisable, the Company may redeem the Public Warrants:
| ● | in whole and not in part; | |
| ● | at
a price of $ | |
| ● | at any time after the warrants become exercisable, | |
| ● | upon not less than 30 days’ prior written notice of redemption to each warrant holder; | |
| ● | if,
and only if, the reported last sale price of the Class A common stock equals or exceeds $ | |
| ● | if, and only if, there is a current registration statement in effect with respect to the Class A common stock underlying such warrants. |
If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of Class A common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a share dividend, or recapitalization, reorganization, merger or consolidation. However, except as described below, the warrants will not be adjusted for issuance of Class A common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.
In
addition, if (x) the Company issues additional Class A common stock or equity-linked securities, for capital raising purposes in connection
with the closing of a Business Combination at an issue price or effective issue price of less than $ per share of Class A common
stock (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors, and,
in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor
or its affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from
such issuances represent more than
The Placement Warrants, as well as any warrants underlying additional units the Company issues to the Sponsor, officers, directors, initial stockholders or their affiliates in payment of Working Capital Loans made to the Company, will be identical to the Public Warrants, except that the Placement Warrants will be entitled to registration rights, and the Placement Warrants (including the common shares issuable upon the exercise of the Placement Warrants) will not be transferable, assignable or saleable until after the completion of a Business Combination, except to permitted transferees
Rights -Each holder of a Right will automatically receive one-sixth (1/6) of one share of Class A common stock upon consummation of the initial Business Combination. No additional consideration will be required to be paid by a holder of Rights in order to receive his, her, or its additional Class A common stock upon consummation of an initial business combination. The Class A common stock issuable upon exchange of the Rights will be freely tradable (except to the extent held by affiliates of the Company).
If the Company is unable to complete the initial Business Combination within the Combination Period, and the Company liquidates the funds held in the trust account, holders of Rights will not receive any of such funds for their rights, nor will they receive any distribution from our assets held outside of the trust account with respect to such rights, and the rights will expire worthless.
Note 9 - Subsequent events
On April 24, 2024, the Company,
EF Hutton (“EFH”), MKD Taiwan, MKD BVI and MKDWELL Tech Inc., entered into a Satisfaction and Discharge of Indebtedness Pursuant
to Underwriting Agreement Dated January 31, 2023 (the “Satisfaction and Discharge Agreement”), pursuant to which, among other
things, EFH waived $
The Satisfaction and Discharge Agreement also provides that, within sixty (60) days of the closing of the Business Combination, the Company, the MKD Parties or their successors-in-interest shall cause the Ordinary Shares issued to EFH pursuant to the Satisfaction and Discharge Agreement to be registered under the Securities Act of 1933, as amended (the “Securities Act”).
On April 30, 2024, the parties to the Business Combination Agreement executed and delivered a Fifth Addendum to the Business Combination Agreement to extend the “Outside Date”, as set forth in the Business Combination Agreement, from April 30, 2024 to June 30, 2024.
In
connection with the Extension Amendment, since March 31, 2024, the Sponsor has caused two additional deposits, each in the amount
of $
Management evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the unaudited financial statements were issued and determined that except for the events above, there have been no events that have occurred that would require adjustments to the disclosures in the unaudited financial statements.
| 19 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
References to the “Company,” “Cetus Capital Acquisition Corp.,” “our,” “us” or “we” refer to Cetus Capital Acquisition Corp. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited interim financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other SEC filings. Except as required by law, we assume no duty to update or revise any forward-looking statements.
Overview
We are a blank check company incorporated in Delaware on June 7, 2022. The Company was formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses.
On February 3, 2023, we consummated the IPO of 5,750,000 units (the “Public Units’), including the full exercise of the over-allotment option of 750,000 Units granted to the underwriters. The Public Units were sold at an offering price of $10.00 per unit generating gross proceeds of $57,500,000. Simultaneously with the closing of the IPO, the Company consummated the private placement (“Private Placement”) with the Sponsor of 286,875 units (the “Private Units” as described in Note 4), generating total proceeds of $2,868,750, including the conversion of the outstanding promissory note to the Private Units at $10.00 per Unit in the total principal amount of $216,837. Each Unit consists of one share of common stock of the Company, par value $0.0001 per share (the “Shares”), one redeemable warrant entitling its holder to purchase one Share at a price of $11.50 per Share, and one right to receive one-sixth (1/6) of one share upon the consummation of the business combination.
Upon the closing of the IPO and the private placement on February 3, 2023, a total of $58,506,250 was placed in a trust account (the “Trust Account”) maintained by Continental Stock Transfer & Trust Company as a trustee (the “Trustee”) and will be invested only in U.S. government treasury bills with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act of 1940, as amended (the “Investment Company Act”), and that invest only in direct U.S. government treasury obligations. In February 2024, we redeemed an aggregate of 3,691,066 public shares in connection with a special meeting of our stockholders held on January 31, 2024 (the “Extension Meeting”), as a result of which redemptions $38,792,466 was removed from the Trust Account.
If we unable to complete a Business Combination within the Combination Period, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest (which interest shall be net of taxes payable, and less certain amount of interest to pay dissolution expenses) divided by the number of then outstanding Public Shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
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We cannot assure you that our plans to complete our initial business combination will be successful.
Proposed Business Combination
On June 20, 2023, we entered into a Business Combination Agreement (as it may be amended, supplemented or otherwise modified from time to time, the “Business Combination Agreement”) by and among our company, MKD Technology Inc., a Taiwan corporation (the “MKD Taiwan”), MKDWELL Limited, a British Virgin Islands company (“MKD BVI”), Ming-Chia Huang, in his capacity as the representative of the shareholders of MKD Taiwan (the “Shareholders’ Representative”), and the other parties thereto.
The Business Combination Agreement contemplates, among other things, that: (A) the Shareholders’ Representative will incorporate a British Virgin Islands business company (“Pubco”) for the purpose of serving as the public listed company whose shares shall be traded on The Nasdaq Stock Market, which company shall initially be owned by the Shareholders’ Representative; (B) Pubco will incorporate a British Virgin Islands business company and wholly-owned subsidiary of Pubco (“Merger Sub 1”) for the sole purpose of merging with and into MKD BVI (the “Acquisition Merger”), with MKD BVI being the surviving entity and a wholly-owned subsidiary of Pubco; (C) Pubco will incorporate a British Virgin Islands business company and wholly-owned subsidiary of Pubco (“Merger Sub 2”) for the sole purpose of the merger of our company with and into Merger Sub 2 (the “SPAC Merger”), in which our company will be the surviving entity and a wholly-owned subsidiary of Pubco; (D) MKD BVI and Merger Sub 1 will effect the Acquisition Merger; and (E) our company and Merger Sub 2 will effect the SPAC Merger.
The Acquisition Merger, the SPAC Merger and the other transactions contemplated by the Business Combination Agreement are hereinafter collectively referred to as the “Business Combination”. Capitalized terms used, but not defined, herein, shall have the respective meanings given to such terms in the Business Combination Agreement.
Pubco was incorporated in the BVI on July 25, 2023 under the name MKDWELL Tech Inc. and became a party to the Business Combination Agreement on July 31, 2023. Merger Sub 1 was incorporated in the BVI on August 1, 2023 under the name MKDMerger1 Inc. and became a party to the Business Combination Agreement on August 10, 2023. Merger Sub 2 was incorporated in the BVI on August 1, 2023 under the name MKDMerger2 Inc. and became a party to the Business Combination Agreement on August 10, 2023.
The aggregate consideration to be paid to the shareholders of MKD BVI for the Acquisition Merger is US$230 million (less the amount of Closing Company Debt plus the amount of Closing Company Cash), payable on the Closing Date in the form of a number of newly issued ordinary shares of Pubco valued at $10.00 per share. In the event that MKD BVI holds less than 100% of the issued and outstanding shares of the capital stock of MKD Taiwan at the Closing Date, the number of ordinary shares of Pubco to be issued to the shareholders of MKD BVI shall be proportionately reduced.
On the Closing Date, our company and Merger Sub 2 will effect the SPAC Merger, as a result of which we will continue as a wholly-owned subsidiary of Pubco. In connection with the SPAC Merger, every issued and outstanding unit of our company shall separate into each unit’s individual components, consisting of one share of Class A common stock, one warrant and one right, and all units shall cease to be outstanding and shall automatically be canceled and retired and shall cease to exist. In addition, each of the issued and outstanding securities of our company will be converted into an equivalent amount of Pubco’s securities, as follows:
| ● | Each share of the Class A common stock of our company will be converted automatically into one ordinary share of Pubco; | |
| ● | Each right to acquire one-sixth of one share of our Class A common stock will be converted automatically into one right to acquire one-sixth of one ordinary share of Pubco, except that any fractional share that would otherwise be issued will be rounded down to the nearest whole share; and | |
| ● | Each warrant entitled to purchase one (1) share of our Class A Common stock at a price of $11.50 per whole share will be converted automatically into one warrant to purchase one (1) ordinary share of Pubco at a price of $11.50 per whole share. |
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The Business Combination Agreement contemplates that Pubco will, immediately after the Closing, have a board of directors composed of seven (7) persons, with MKD Taiwan having the right to designate five (5) directors and with Cetus Sponsor LLC having the right to designate two (2) directors.
On July 31, 2023, the parties to the Business Combination Agreement entered into a First Addendum to the Business Combination Agreement, pursuant to which (A) MKDWELL Tech Inc. agreed to become a party to the Business Combination Agreement and to comply with the terms applicable to PubCo thereunder and (B) the parties agreed to extend the date by which PubCo, Merger Sub 1 and Merger Sub 2 must execute an addendum to become parties to the Business Combination Agreement from July 31, 2023 to August 20, 2023.
On August 10, 2023, MKDMerger1 Inc. and MKDMerger2 Inc. each executed and delivered a Second Addendum to the Business Combination Agreement, pursuant to which (A) MKDMerger1 Inc. agreed to become a party to the Business Combination Agreement and to comply with the terms applicable to Merger Sub 1 thereunder and (B) MKDMerger2 Inc. agreed to become a party to the Business Combination Agreement and to comply with the terms applicable to Merger Sub 2 thereunder.
On October 31, 2023, our sponsor deposited $575,000 into the Trust Account in connection with the extension of the Business Combination Period from November 3, 2023 to February 3, 2024. This deposit was made in respect of a loan to our company (the “Extension Loan”), which Extension Loan is evidenced by an unsecured promissory note issued by our company to our sponsor (the “Extension Note”). The funds that were used by our sponsor to make the Extension Loan were provided by MKD BVI (the loan made by MKD BVI to our sponsor being referred to herein as the “First MKD Loan”). The First MKD Loan is evidenced by a promissory note issued by our sponsor to MKD BVI containing substantially the same terms as the Extension Note. As a condition for MKD BVI to make the First MKD Loan to our sponsor, our sponsor granted to MKD BVI a security interest in 575,000 of the shares of our common stock held by our sponsor.
On November 19, 2023, the parties to the Business Combination Agreement entered into a Third Addendum to the Business Combination Agreement to extend the Termination Date from November 3, 2023 to February 1, 2024.
On December 14, 2023, our company, our sponsor, the members of our Board of Directors (the “Insiders”) and EF Hutton executed and delivered a Letter of Consent and Waiver (the “Consent and Waiver”), agreeing that notwithstanding anything to the contrary in the Insider Letter among the Insiders, our company, our sponsor and EF Hutton, our sponsor may pledge as security and/or transfer any shares of our common stock held by our sponsor in connection with the obtaining of loans towards payment of the fees for the extension of the Business Combination Period, including but not limited to those shares of our common stock pledged in connection with the MKD Loan.
On January 31, 2024, we held the Extension Meeting, at which our stockholders approved an amendment (the “Extension Amendment”) to our amended and restated certificate of incorporation to extend the date by which we must consummate our initial business combination from February 3, 2024 up to six (6) one-month extensions to August 3, 2024, provided that an additional amount equal to the lesser of $0.03 per outstanding public share and $50,000 for each month extended is deposited into the trust account, or such earlier date as determined by our Board of Directors (the “2024 Extension”). We implemented the 2024 Extension by (A) filing the Extension Amendment with the Secretary of State of the State of Delaware on February 2, 2024 and (B) entering into an Amendment No. 1 of that certain Investment Management Trust Agreement by and between our company and the Trustee that reflects the 2024 Extension. In connection with the Extension Meeting, an aggregate of 3,691,066 public shares were redeemed, as a result of which redemptions $38,792,466 was removed from the Trust Account.
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In connection with the Extension Amendment, our sponsor has caused four additional deposits, each in the amount of $50,000, for an aggregate of $200,000, to be deposited into the Trust Account to extend the Business Combination Period for four additional one month periods, until June 3, 2024. These deposits were made in respect of a loan to our company in the aggregate principal amount of up to $300,000 (the “Sponsor Loan”), which Sponsor Loan is evidenced by an unsecured promissory note issued by our company to our sponsor (the “Sponsor Note”). The funds that were used by our sponsor to make the Sponsor Loan were provided by MKD BVI (the loan made by MKD BVI to our sponsor being referred to herein as the “Second MKD Loan”). The Second MKD Loan is evidenced by a note issued by our sponsor to MKD BVI in the aggregate principal amount of up to $300,000 containing substantially the same terms as the Sponsor Note. As a condition for MKD BVI to make the Second MKD Loan to our sponsor, our sponsor granted to MKD BVI a security interest in 300,000 of the shares of our common stock held by our sponsor (the “Pledged Shares”). In addition, we and our sponsor entered into a Stock Pledge Agreement with respect to the pledge of the Pledged Shares.
On February 1, 2024, the parties to the Business Combination Agreement entered into a Fourth Addendum to the Business Combination Agreement to extend the Termination Date from February 1, 2023 to April 30, 2024.
On April 30, 2024, the parties to the Business Combination Agreement entered into a Fifth Addendum to the Business Combination Agreement to extend the Termination Date from April 30, 2024 to June 30, 2024.
The Business Combination is expected to close in the second calendar quarter of 2024, following the receipt of the required approval by our stockholders and, to the extent necessary, the other parties to the Business Combination Agreement, approval by the Nasdaq Stock Market (“Nasdaq”) of the initial listing application of Pubco filed in connection with the Business Combination, and the fulfillment of other customary closing conditions.
The Business Combination Agreement (and the addenda thereto) and related agreements are further described in our Current Reports on Form 8-K filed with the SEC on June 26, 2023, August 4, 2023, August 11, 2023, November 22, 2023 and February 2, 2024, as well as in the PubCo Form F-4 described below.
PubCo filed a Registration Statement on Form F-4 with the SEC on March 8, 2024 to register the issuance of the Pubco securities that will be issued at the consummation of the Business Combination. We use the term “PubCo Form F-4” to refer to the original registration statement as it may be subsequently amended.
For further information regarding the Business Combination Agreement and the business combination contemplated thereby, please refer to Note 1 of the financial statements contained in this report and in the PubCo Form F-4.
Representations and Warranties; Covenants
The parties to the Business Combination Agreement have agreed to customary representations and warranties for transactions of this type. In addition, the parties to the Business Combination Agreement agreed to be bound by certain customary covenants for transactions of this type, including, among others, covenants with respect to the conduct of MKD Taiwan and its subsidiaries during the period between execution of the Business Combination Agreement and the Closing. Each of the parties to the Business Combination Agreement has agreed to use commercially reasonable efforts to cause all actions and things necessary to consummate and make effective as promptly as practicable the Business Combination.
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Conditions to Each Party’s Obligations
Under the Business Combination Agreement, the obligations of the parties to consummate the transactions contemplated thereby are subject to the satisfaction or waiver of certain customary closing conditions of the respective parties, including, without limitation: (i) no Governmental Authority of competent jurisdiction shall have enacted, enforced or entered any Law or issued a Governmental Order or legal injunction that is in effect on the Closing Date and that has the effect of making the transactions contemplated by the Business Combination Agreement illegal, otherwise restraining or prohibiting consummation of such transactions or causing any of the transactions contemplated thereunder to be rescinded following completion thereof; (ii) the matters that are submitted to the vote of our shareholders as specified in the Business Combination Agreement shall have been approved by the requisite vote of our shareholders; (iii) the registration statement on Form F-4 to be prepared by our company in connection with the registration under the Securities Act of 1933, as amended (the “Securities Act”), of the ordinary shares of Pubco to be issued under the Business Combination Agreement shall have been declared effective by the Securities and Exchange Commission; (iv) receipt of any necessary regulatory or governmental approvals; (v) if required under applicable law, MKD BVI shall have delivered to us written consents of the shareholders of MKD BVI representing such percentage of the outstanding voting power of the ordinary shares of MKD BVI necessary to approve the Acquisition Merger and the transactions contemplated by the Business Combination Agreement, and the board of directors of MKD Taiwan shall have passed a resolution to ratify and approve the Business Combination Agreement and the transactions contemplated therein; (vi) Pubco’s initial listing application with Nasdaq shall have been approved and, immediately following the Closing, Pubco shall satisfy any applicable initial and continuing listing requirements of Nasdaq and Pubco shall not have any notice of non-compliance that is not cured by the Closing, and Pubco’s ordinary shares and other securities shall have been approved and continue to be approved for listing on Nasdaq; (vii) the fundamental representations of each of MKD Taiwan and our company shall be true and correct in all respects (except for de minimis inaccuracies) and the representations and warranties of MKD Taiwan and our company (other than the fundamental representations) shall be true and correct in all respects; (viii) the covenants and agreements of our company and of the Company Parties, as applicable, set forth in the Business Combination Agreement, shall have been duly performed or complied with in all material respects; (ix) from the date of the Business Combination Agreement, no MKD Taiwan Material Adverse Effect shall have occurred, and there shall be no event, change, circumstance, effect, development, condition or occurrence that, individually or in the aggregate, with or without the lapse of time, could reasonably be expected to have an MKD Taiwan Material Adverse Effect; (x) we shall have received copies of all Governmental Approvals, if any, in form and substance reasonably satisfactory to our company, and no such Governmental Approval shall have been revoked; (xi) we and MKD Taiwan each shall have received a copy of each of the Ancillary Agreements duly executed by the parties thereto and each such Ancillary Agreement shall be in full force and effect; (xii) we shall have received copies of any necessary third party consents in form and substance reasonably satisfactory to us; (xiii) the restructuring and reorganization of the Company Parties as described in the Business Combination Agreement shall have been completed to our reasonable satisfaction; and (xiv) Pubco, Merger Sub 1 and Merger Sub 2 shall have executed an addendum to become parties to the Business Combination Agreement.
Termination
The Business Combination Agreement may be terminated under certain customary and limited circumstances at any time prior to the Closing, including, without limitation: (i) by mutual written consent of our company, MKD Taiwan and MKD BVI; (ii) by us or MKD Taiwan, if the Closing has not occurred on or before November 1, 2023 (as extended to June 30, 2024 pursuant to the Fifth Addendum to the Business Combination Agreement, the “Outside Date”), unless the absence of such occurrence shall be due to the failure of our company, on the one hand, or any Company Party, on the other hand, to materially perform its obligations under the Business Combination Agreement required to be performed by it on or prior to the Outside Date; (iii) by our company or MKD Taiwan if (x) there shall be any Law that makes consummation of the transactions contemplated by the Business Combination Agreement illegal or otherwise prohibited or (y) any Governmental Authority shall have issued a Governmental Order restraining or enjoining the transactions contemplated by the Business Combination Agreement, and such Governmental Order shall have become final and non-appealable; (iv) by us if (x) we are not in material breach of any of its obligations under the Business Combination Agreement and (y) any Company Party is in material breach of any of its representations, warranties or obligations under the Business Combination Agreement that renders or could reasonably be expected to render the conditions set forth in Section 9.02(a) or Section 9.02(b) of the Business Combination Agreement incapable of being satisfied on the Outside Date, and such breach is either (A) not capable of being cured prior to the Outside Date or (B) if curable, is not cured within the earlier of (I) thirty (30) days after the giving of written notice by us to MKD Taiwan and (II) two (2) Business Days prior to the Outside Date; (v) by MKD Taiwan if (x) no Company Party is in material breach of any of its obligations under the Business Combination Agreement and (y) we are in material breach of any of our representations, warranties or obligations under the Business Combination Agreement that renders or could reasonably be expected to render the conditions set forth in 9.03(a) or 9.03(b) of the Business Combination Agreement incapable of being satisfied on the Outside Date, and such breach is either (A) not capable of being cured prior to the Outside Date or (B) if curable, is not cured within the earlier of (I) thirty (30) days after the giving of written notice by MKD Taiwan to us and (II) two (2) Business Days prior to the Outside Date; (vi) by either us or MKD Taiwan if the restructuring and Taiwan Reorganization described in Section 7.15 of the Business Combination Agreement is not completed on or prior to September 30, 2023; and (vii) by us if each of Pubco, Merger Sub 1 and Merger Sub 2 do not execute an addendum to become parties to the Business Combination Agreement on or prior to August 20, 2023.
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If the Business Combination Agreement is validly terminated, it shall thereafter become void and have no effect, and no party thereto shall have any Liability to any other party thereto, its Affiliates or any of their respective directors, officers, employees, equityholders, partners, members, agents or representatives in connection with the Business Combination Agreement, except that if we terminate the Business Combination Agreement pursuant to items (vi) or (vii) of the immediately preceding paragraph, then, promptly (and in any event within twenty (20) Business Days) after such termination, MKD Taiwan shall reimburse us for any and all reasonable costs and expenses with proof of invoice (including legal and accounting fees and expenses) incurred by us in connection with the negotiation, execution and delivery of the Business Combination Agreement and the transactions contemplated thereby.
The Business Combination Agreement contains representations, warranties and covenants that the respective parties made to each other as of the date of the Business Combination Agreement or other specific dates. The assertions embodied in those representations, warranties and covenants were made for purposes of the contract among the respective parties and are subject to important qualifications and limitations agreed to by the parties in connection with negotiating such agreement. The representations, warranties and covenants in the Business Combination Agreement are also modified in important part by the underlying disclosure schedules which are not filed publicly and which are subject to a contractual standard of materiality different from that generally applicable to stockholders and were used for the purpose of allocating risk among the parties rather than establishing matters as facts. We do not believe that these schedules contain information that is material to an investment decision.
Satisfaction and Discharge Agreement
On April 24, 2024, Cetus Capital, EF Hutton LLC (f/k/a EF Hutton, division of Benchmark Investments, LLC) (“EF Hutton”), MKD Taiwan, MKD BVI and PubCo (MKD Taiwan, MKD BVI and PubCo being collectively referred to as the “MKD Parties”) entered into the Satisfaction and Discharge Agreement, pursuant to which, among other things, EF Hutton waived $862,500 of the $1,725,000 cash deferred underwriting commission (the “Deferred Underwriting Commission”) that would otherwise be immediately due and payable to it pursuant to the Underwriting Agreement dated January 31, 2023 by and between our company and EF Hutton upon the closing of the Business Combination, accepting in lieu thereof (i) a one-time cash payment of $862,500 on or before the closing of the Business Combination and (ii) the issuance of 115,000 ordinary shares of Pubco at $10.00 per share on or before the closing of the Business Combination.
The Satisfaction and Discharge Agreement also provides that, within sixty (60) days of the closing of the Business Combination, our company, the MKD Parties or their successors-in-interest shall cause the PubCo ordinary shares issued to EF Hutton pursuant to the Satisfaction and Discharge Agreement to be registered under the Securities Act.
If the aggregate volume weighted average price (“VWAP”) of the 115,000 ordinary shares of Pubco that EF Hutton holds as a result of the Satisfaction and Discharge Agreement, as of the effectiveness date of the registration statement for such ordinary shares, is lower than $1,150,000 (the “Original Aggregate Share Value”) (the difference between the VWAP value on such date and the Original Aggregate Share Value, the “Difference in Amount”), then our company, the MKD Parties or their successors-in-interest shall compensate EF Hutton either in cash or by issuing additional ordinary shares of Pubco, at a new per-share value (the “New Share Price”), in an amount equal to the Difference in Amount on the effectiveness date of the registration statement. If our company, the MKD Parties and/or their successors in interest decide to compensate EF Hutton the Difference in Amount by issuing additional ordinary shares of Pubco, then the New Share Price shall equal an amount that is the lowest of the VWAP for a period of five (5) trading days immediately prior to the effectiveness date of the registration statement, subject to a maximum of 200,000 additional Pubco ordinary shares being issued.
If the date that is five (5) trading days prior to the day the ordinary shares issued to EF Hutton pursuant to the Satisfaction & Discharge Agreement are eligible for release pursuant to Rule 144 promulgated under the Securities Act, the aggregate VWAP value of such ordinary shares is lower than the Original Aggregate Share Value, then our company, the MKD Parties or their successor in interest shall compensate EF Hutton either in cash or by issuing additional ordinary shares at the New Share Price in an amount equal to the Difference in Amount on such date. If our company, the MKD Parties, or their successor in interest decide to compensate EF Hutton for the Difference in Amount in issuing additional ordinary shares, then the New Share Price of such additional ordinary shares shall equal an amount that is the lowest of the VWAP for a period of five (5) trading days immediately prior to the end of the twelve-month month period immediately following the closing of the Business Combination, subject to a maximum of 200,000 additional ordinary shares of Pubco being issued.
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Results of Operations
Our entire activity since inception up to March 31, 2024 was in connection with our initial public offering and our search for a target for our initial business combination, including the proposed business combination with MKD Taiwan. We will not generate any operating revenues until the closing and completion of our initial business combination, at the earliest.
For the three months ended March 31, 2024, we had net income of $268,671, which consisted of interest income on the Trust Account in the amount of $585,807, partially offset by formation and operating costs of $181,466, franchise tax expense of $16,013 and income tax expense of $119,657. For the three months ended March 31, 2023, we had net loss of $52,531, which consisted of interest income on the Trust Account in the amount of $414,342, partially offset by formation and operating costs of $338,333, franchise tax expense of $52,567 and income tax expense of $75,973.
Liquidity and Capital Resources
At March 31, 2024, we had $19,545 in cash and working capital deficit of $1,836,304.
We have has incurred and expect to continue to incur significant professional costs to remain as a publicly traded company and to incur significant transaction costs in pursuit of the consummation of an initial business combination. 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,” management has determined that these conditions raise substantial doubt about our ability to continue as a going concern. In addition, if we are unable to complete an initial business combination within the Business Combination Period, we would proceed to commence a voluntary liquidation and thereby a formal dissolution of our company. There is no assurance that our plans to consummate an initial business combination will be successful within the business Combination Period. As a result, management has determined that such additional condition also raises substantial doubt about our ability to continue as a going concern. The financial statement does not include any adjustments that might result from the outcome of this uncertainty.
Critical Accounting Policies and Estimates
This management’s discussion and analysis of our financial condition and results of operations is based on our unaudited financial statements included in this report, which have been prepared in accordance with United States generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to fair value of financial instruments and accrued expenses. We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Common Stock Subject to Redemption
We account for our common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that feature redemption rights that is either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. Our common stock features certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of our balance sheet.
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We have made a policy election in accordance with ASC 480-10-S99-3A and recognizes changes in redemption value in additional paid-in capital (or accumulated deficit in the absence of additional paid-in capital) over an expected 9-month period leading up to an initial business combination.
Off-Balance Sheet Arrangements
We do not have any obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of March 31, 2024. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.
Item 4. Controls and Procedures.
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended March 31, 2024, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial officer concluded that during the period covered by this report, our disclosure controls and procedures were not effective.
Specifically, management’s determination was based on the following material weaknesses, which existed as of March 31, 2024. Since inception in June 2022 to the present, we did not effectively segregate certain accounting duties due to the small size of our accounting staff. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis. Notwithstanding the determination that our internal control over financial reporting was not effective, as of March 31, 2024, we believe that our financial statements contained in this Quarterly Report fairly present our financial position, results of operations and cash flows for the periods covered hereby in all material respects.
To respond to this material weakness, we plan to devote additional efforts and resources to the remediation and improvement of our internal control over financial reporting. Our plans at this time include providing enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third-party service providers. 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.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended March 31, 2024, covered by this Quarterly Report on Form 10-Q 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.
We are not currently a party to material litigation proceedings, nor, to our knowledge, is any material legal proceeding threatened against us or any of our officers or directors in their corporate capacity.
Item 1A. Risk Factors.
Factors that could cause our actual results to differ materially from those in this Quarterly Report include the risk factors described under the heading “Risk Factors” in our Registration Statement on Form S-1 (No. 333-266363) that was declared effective by the Securities and Exchange Commission (the “Commission”) on January 31, 2023 and that was used in connection with our initial public offering (the “IPO Registration Statement”), and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the “2023 Annual Report”). There have been no material changes to the risk factors disclosed in the IPO Registration Statement or in the 2023 Annual Report.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On February 3, 2023, we consummated the initial public offering (the “IPO”) of 5,750,000 units, which included the full exercise of the underwriter’s option to purchase up to an additional 750,000 units at the initial public offering price to cover over-allotments. The units sold in the IPO and the full exercise of the over-allotment option sold at an offering price of $10.00 per unit, generating total gross proceeds of $57,500,000. EF Hutton, division of Benchmark Investments, LLC, acted as sole book-running manager of the IPO. The securities in the IPO were registered under the Securities Act of 1933, as amended (the “Securities Act”), on the IPO Registration Statement.
Simultaneously with the closing of the IPO, we consummated the private placement (the “Private Placement”) of 286,875 units (the “Private Units”) to our sponsor at a price of $10.00 per unit, generating total gross proceeds of $2,868,750, including the conversion of the outstanding promissory note to units at $10.00 per unit in the total principal amount of $216,837. The Private Units are identical to the units sold in the IPO except that the holder has agreed not to transfer, assign, or sell any of the Private Units or underlying securities (except in limited circumstances, as described in the IPO Registration Statement) until thirty (30) days after the completion of our initial business combination except to certain permitted transferees. In addition, the warrants included in the Private Units are not redeemable if held by our sponsor or a permitted transferee. Our sponsor was granted certain demand and piggy-back registration rights in connection with the purchase of the Private Units. The Private Units were issued pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
Simultaneous with the closing of the IPO, we issued 57,500 shares of Class A Common Stock to the underwriter as compensation under the Underwriting Agreement (the “Representative’s Shares”). The issuance of such shares was registered under the Securities Act on the IPO Registration Statement.
On February 3, 2023, a total of $58,506,250 of the net proceeds from the IPO and the Private Placement were deposited in a trust account maintained by Continental Stock Transfer & Trust Company acting as the trustee (the “Trustee”) and established for the benefit of our public shareholders (the “Trust Account”). This includes $55,854,336 of the net proceeds from the IPO (which amount includes $1,725,000 of the underwriters’ deferred discount) and $2,651,914 from the Private Placement.
Transaction costs for the IPO amounted to $3,346,850, consisting of $862,500 of underwriting fees, $1,725,000 of deferred underwriting fees that will be payable only upon completion of our initial business combination, $137,448 representing the fair value of the Representative Shares, and $621,902 of other offering costs.
On October 31, 2023, our sponsor deposited $575,000 into the Trust Account in connection with the extension of the date by which we must complete our initial business combination from November 3, 2023 to February 3, 2024.
On January 31, 2024, we held a special meeting of our stockholders, at which our stockholders approved an amendment (the “Extension Amendment”) to our amended and restated certificate of incorporation to extend the date by which we must consummate an initial business combination from February 3, 2024 up to six (6) one-month extensions to August 3, 2024, provided that an additional amount equal to the lesser of $0.03 per outstanding public share and $50,000 for each month extended is deposited into the Trust Account, or such earlier date as determined by our Board of Directors (the “2024 Extension”). We implemented the 2024 Extension by (A) filing the Extension Amendment with the Secretary of State of the State of Delaware on February 2, 2024 and (B) entering into an Amendment No. 1 of the Investment Management Trust Agreement dated January 31, 2023 between our company and the Trustee that reflects the 2024 Extension. In connection with the Extension Meeting, an aggregate of 3,691,066 shares of our Class A common stock issued in the IPO were redeemed, as a result of which redemptions $38,792,466 was removed from the Trust Account. To date, our sponsor has deposited an aggregate amount equal to $200,000 to extend the date by which we must complete our initial business combination from February 3, 2024 to June 3, 2024.
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As of March 31, 2024, we had cash in the amount of $19,545 on our balance sheet available to us and working capital deficit of $1,836,304.
There has been no material change in the planned use of the proceeds from the IPO and the private placement as is described in the final prospectus included in the IPO Registration Statement and as described in our other periodic reports previously filed with the Commission pursuant to the Securities Exchange Act of 1934, as amended.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not Applicable.
Item 5. Other Information.
None.
Item 6. Exhibits.
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
| * | Filed herewith. |
| ** | Furnished herewith. |
| ## | Certain schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. We will furnish supplementally copies of omitted schedules and exhibits to the Securities and Exchange Commission or its staff upon its request. |
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| CETUS CAPITAL ACQUISITION CORP. | ||
| Date: May 20, 2024 | By: | /s/ Chung-Yi Sun |
| Name: | Chung-Yi Sun | |
| Title: | Chief Executive Officer | |
| (Principal Executive Officer) | ||
| Date: May 20, 20424 | By: | /s/ Cheng-Nan Wu |
| Name: | Cheng-Nan Wu | |
| Title: | Chief Financial Officer | |
| (Principal Accounting and Financial Officer) | ||
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