UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(MARK ONE)
For
the quarter ended
For the transition period from to
Commission
file number:
(formerly known as TenX Keane Acquisition)
(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)
Tel:
(Issuer’s telephone number)
Check
whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging Growth Company |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
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 |
As of August 9, 2024, ordinary shares, par value $ per share, were issued and outstanding.
Citius Oncology, Inc.
(formerly known as TenX Keane Acquisition)
FORM 10-Q FOR QUARTER ENDED JUNE 30, 2024
TABLE OF CONTENTS
| 2 |
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CITIUS ONCOLOGY, INC.
(formerly known as TenX Keane Acquisition)
CONSOLIDATED BALANCE SHEETS
June 30, 2024 (unaudited) | December 31, 2023 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total Current Assets | ||||||||
| Investments held in trust account | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||||
| Current Liabilities: | ||||||||
| Accrued offering costs | $ | $ | ||||||
| Accrued expenses | ||||||||
| Notes payable | ||||||||
| Due to related party | ||||||||
| Total Current Liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Ordinary shares subject to possible redemption ( and shares at $ and $ per share as of June 30, 2024, and December 31, 2023, respectively) | ||||||||
| Shareholders’ Deficit: | ||||||||
| Preferred shares, $ par value; shares authorized; issued and outstanding | ||||||||
| Ordinary shares, $ par value; shares authorized; shares issued and outstanding (excluding shares and shares subject to possible redemption) as of June 30, 2024 and December 31, 2023, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Shareholders’ Deficit | ( | ) | ( | ) | ||||
| Total Liabilities and Shareholders’ Deficit | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| F-1 |
CITIUS ONCOLOGY, INC.
(formerly known as TenX Keane Acquisition)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| General and administrative costs | $ | $ | $ | $ | ||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other Income: | ||||||||||||||||
| Interest earned on investments held in trust account | ||||||||||||||||
| Total other income | ||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||
| Weighted average ordinary shares outstanding, basic and diluted for ordinary shares subject to redemption | ||||||||||||||||
| Basic and diluted net income per ordinary share for ordinary shares subject to redemption | $ | $ | $ | $ | ||||||||||||
| Weighted average ordinary shares outstanding, basic and diluted for ordinary shares not subject to redemption | ||||||||||||||||
| Basic and diluted net income per ordinary share for ordinary shares not subject to redemption | $ | $ | $ | $ | ||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| F-2 |
CITIUS ONCOLOGY, INC.
(formerly known as TenX Keane Acquisition)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT)
For the THREE AND SIX MONTHS ended JUNE 30, 2024 and 2023
(UNAUDITED)
| Ordinary Shares | Additional Paid-in | Accumulated | Total Shareholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||
| Balance, January 1, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Remeasurement of ordinary shares subject to redemption | - | ( | ) | ( | ) | |||||||||||||||
| Net income | - | |||||||||||||||||||
| Balance, March 31, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Remeasurement of ordinary shares subject to redemption | - | ( | ) | ( | ) | |||||||||||||||
| Net income | - | |||||||||||||||||||
| Balance, June 30, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Ordinary Shares | Additional Paid-in | (Accumulated Deficit) Retained | Total Shareholders’ Equity | |||||||||||||||||
| Shares | Amount | Capital | Earnings | (Deficit) | ||||||||||||||||
| Balance, January 1, 2023 | $ | $ | $ | $ | ||||||||||||||||
| Remeasurement of ordinary shares subject to redemption | — | ( | ) | ( | ||||||||||||||||
| Net income | — | |||||||||||||||||||
| Balance, March 31, 2023 | $ | $ | $ | $ | ||||||||||||||||
| Remeasurement of ordinary shares subject to redemption | - | ( | ) | ( | ) | |||||||||||||||
| Net income | - | |||||||||||||||||||
| Balance, June 30, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| F-3 |
CITIUS ONCOLOGY, INC.
(formerly known as TenX Keane Acquisition)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, | ||||||||
| 2024 | 2023 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
| Interest income on investments held in trust account | ( | ) | ( | ) | ||||
| Change in operating assets and liabilities: | ||||||||
| Prepaid expenses | ( | ) | ( | ) | ||||
| Accrued expenses | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Cash withdrawn from trust account | ||||||||
| Cash deposited into trust account | ( | ) | ||||||
| Net cash provided by investing activities | ||||||||
| Cash flows from financing activities: | ||||||||
| Payments made in relation to redemptions of ordinary shares | ( | ) | ||||||
| Proceeds from Sponsor Note | ||||||||
| Advance from related party | ||||||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| Net change in cash | ( | ) | ||||||
| Cash at beginning of period | ||||||||
| Cash at end of period | $ | $ | ||||||
| Supplemental disclosure of non-cash financing activities: | ||||||||
| Remeasurement of ordinary shares subject to possible redemption | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| F-4 |
CITIUS ONCOLOGY, INC.
(formerly known as TenX Keane Acquisition)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS AND GOING CONCERN
Citius Oncology, Inc. (formerly known as TenX Keane Acquisition, the “Company”) was incorporated in the Cayman Islands on March 1, 2021, and migrated to and domesticated as a Delaware corporation on August 5, 2024. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”).
The Company is not limited to a particular industry or sector for purposes of consummating an Initial Business Combination. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of June 30, 2024, the Company had not commenced any operations. All activity for the period from March 1, 2021 (inception) through June 30, 2024 relates to the Company’s formation and the initial public offering (“Initial Public Offering”), which is described below. The Company will not generate any operating revenues until after the completion an initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income from the proceeds derived from the Proposed Public Offering. The Company has selected December 31 as its fiscal year end.
The
registration statement for the Company’s Initial Public Offering (the “Registration Statement”) was declared effective
on October 13, 2022. On October 18, 2022, the Company consummated the Initial Public Offering of units, including additional
units issued pursuant to the partial exercise by the underwriter of its over-allotment option, (“Units” and, with respect
to the ordinary share included in the Units being offered, the “Public Shares”), generating gross proceeds of $
Simultaneously
with the consummation of the Initial Public Offering and the sale of the Units, the Company consummated the private placement (the “Private
Placement”) of Units (the “Placement Units”), to the 10XYZ Holdings LP (the “Sponsor”) at a price
of $ per Placement Unit, generating total proceeds of $
As
of October 18, 2022, transaction costs amounted to $
Following
the closing of the Initial Public Offering on October 18, 2022, an amount of $
The
Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering
and the sale of the Private Placement Units, although substantially all of the net proceeds are intended to be applied generally toward
consummating a Business Combination. The stock exchange listing rules require that the Business Combination must be with one or more
operating businesses or assets with a fair market value equal to at least
| F-5 |
There is no assurance that the Company will be able to successfully effect a Business Combination. Upon the closing of the Proposed Public Offering, management has agreed that $ per Unit sold in the Proposed Public Offering, including proceeds of the sale of the Private Placement Units, will be held in a trust account (the “Trust Account”) and invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or in any open-ended investment company that holds itself out as a money market fund investing solely in U.S. Treasuries and meeting certain conditions under Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of (i) the completion of a Business Combination and (ii) the distribution of the funds in the Trust Account to the Company’s shareholders, as described below.
The Company will provide the holders of the outstanding Public Shares (the “Public Shareholders”) with the opportunity to redeem all or a portion of their Public Shares either (i) in connection with a shareholder meeting called to approve the Business Combination or (ii) by means of a tender offer in connection with the Business Combination. The decision as to whether the Company will seek shareholder approval of a Business Combination or conduct a tender offer will be made by the Company. The Public Shareholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially anticipated to be $ per Public Share, plus any pro rata interest then in the Trust Account, net of taxes payable).
All
of the Public Shares contain a redemption feature which allows for the redemption of such Public Shares in connection with the Company’s
liquidation, if there is a shareholder vote or tender offer in connection with the Company’s Business Combination and in connection
with certain amendments to the Company’s amended and restated certificate of incorporation (the “Certificate of Incorporation”).
In accordance with the rules of the U.S. Securities and Exchange Commission (the “SEC”) and its guidance on redeemable equity
instruments, which has been codified in ASC 480-10-S99, redemption provisions not solely within the control of a company require ordinary
share subject to redemption to be classified outside of permanent equity. Given that the Public Shares will be issued with other freestanding
instruments (i.e., rights), the initial carrying value of ordinary shares classified as temporary equity will be the allocated proceeds
determined in accordance with ASC 470-20. The ordinary shares are subject to ASC 480-10-S99. If it is probable that the equity instrument
will become redeemable, the Company has the option to either (i) accrete changes in the redemption value over the period from the date
of issuance (or from the date that it becomes probable that the instrument will become redeemable, if later) to the earliest redemption
date of the instrument or (ii) recognize changes in the redemption value immediately as they occur and adjust the carrying amount of
the instrument to equal the redemption value at the end of each reporting period. The Company has elected to immediate fair value recognition.
The accretion will be treated as a deemed dividend (i.e., a reduction to retained earnings, or in absence of retained earnings, additional
paid-in capital). While redemptions cannot cause the Company’s net tangible assets to fall below $
The
Company will not redeem Public Shares in an amount that would cause its net tangible assets to be less than $
| F-6 |
Notwithstanding
the foregoing, if the Company seeks shareholder approval of the Business Combination and the Company does not conduct redemptions pursuant
to the tender offer rules, a Public Shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder
is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of
The Sponsor has agreed (a) to waive its redemption rights with respect to any Founder Shares and Public Shares held by it in connection with the completion of a Business Combination and (b) not to propose an amendment to the Amended and Restated Memorandum and Articles of Association (i) to modify the substance or timing of the Company’s obligation to allow redemption in connection with the Company’s initial Business Combination or to redeem % of the Public Shares if the Company does not complete a Business Combination within the Combination Period (as defined below) or (ii) with respect to any other provision relating to shareholders’ rights or pre-initial business combination activity, unless the Company provides the Public Shareholders with the opportunity to redeem their Public Shares upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the Trust account and not previously released to pay taxes, divided by the number of then issued and outstanding Public Shares.
The
Company will have until 12 months (or 19 months if the Company extends the period) to consummate a Business Combination (the “Combination
Period”). However, if the Company has not completed 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 % of the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in
the Trust Account, including interest earned and not previously released to us to pay our taxes, if any (less up to $
The Sponsor has agreed to waive its rights to liquidating distributions from the Trust Account with respect to the Founder Shares it will receive if the Company fails to complete a Business Combination within the Combination Period. However, if the Sponsor or any of its respective affiliates acquire Public Shares, 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. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than the Public Offering price per Unit ($).
In order to protect the amounts held in the Trust Account, the Sponsor has agreed that it will be liable to the Company if and to the extent any claims by a third party (other than the Company’s independent registered public accounting firm) for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below the lesser of (1) $ per Public Share and (2) 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 Public Share, due to reductions in the value of trust assets, in each case net of the interest that may be withdrawn to pay taxes. This liability will not apply to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and as to any claims under the Company’s indemnity of the underwriters of the Proposed Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). In the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavouring to have all vendors, service providers (other than the Company’s independent registered public accounting firm), prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
| F-7 |
Going Concern Consideration
The Company has incurred and expects to continue to incur significant costs in pursuit of its acquisition plans. In addition, the Company currently has less than 12 months from the date these financial statements were issued to complete a Business Combination transaction. If the Company is unsuccessful in consummating an initial Business Combination by August 18, 2024, per the mandatory liquidation requirement, the Company must cease all operations, redeem the Public Shares and thereafter liquidate and dissolve. In connection with the Company’s assessment of going concern considerations in accordance with Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” the Company does not have adequate liquidity to sustain operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of time within one year after the date that the financial statements are issued. There is no assurance that the Company’s plans to raise capital or to consummate a Business Combination will be successful or successful within the Combination Period. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Risks and Uncertainties
Management continues to monitor the Russian invasion of Ukraine and its global impact. We have no operations, employees or assets in Russia, Belarus or Ukraine. While the conflict continues to evolve and the outcome remains highly uncertain, we do not currently believe the Russia-Ukraine conflict will have a material impact on our business and results of operations. However, if the Russia-Ukraine conflict continues or worsens, leading to greater global economic or political disruptions and uncertainty, our business and results of operations could be materially impacted as a result.
Management continues to monitor the Israel and the Gaza Strip conflict and its global impact. We have no operations, employees or assets in Israel or the Gaza Strip. While the conflict continues to evolve and the outcome remains uncertain, we do not currently believe the Gaza Strip conflict will have a material impact on our business and results of operations.
As
of June 30, 2024 and December 31, 2023, the Company had $
Initial Business Combination
On October 24, 2023, the Company announced that it had entered into an agreement and plan of merger and reorganization (the “Merger Agreement”), dated October 23, 2023, by and among TenX Merger Sub, Inc., a Delaware corporation and the Company’s wholly owned subsidiary (“Merger Sub”), Citius Pharmaceuticals, Inc., a Nevada corporation (“Citius Pharma”), and Citius Oncology, Inc., a Delaware corporation and wholly owned subsidiary of Citius Pharma (“Citius Oncology”), to acquire Citius Oncology. The Merger Agreement provides, among other things, on the terms and subject to the conditions set forth therein, (i) that Merger Sub will merge with and into Citius Oncology, with Citius Oncology to be renamed and to survive as a wholly owned subsidiary of TenX Keane Acquisition (“TenX”) (the “Merger”), and (ii) that prior to the effective time of the Merger (the “Effective Time”), TenX will migrate to and domesticate as a Delaware corporation in accordance with Section 388 of the General Corporation Law of the State of Delaware and the Cayman Islands Companies Act (As Revised) (the “Domestication”). The newly combined publicly traded company is to be named “Citius Oncology, Inc.” (the “Combined Company”). The Domestication, Merger and the other transactions contemplated by the Merger Agreement are referred to in this section as the “Business Combination”.
In
the Merger, all shares of Citius Oncology would be converted into the right to receive ordinary share of the Combined Company. As a result,
upon closing, Citius Pharma would receive million shares of ordinary share of the Combined Company which, at an implied value of
$ per share, would be $
| F-8 |
The Merger Agreement, Business Combination and the transactions contemplated thereby were unanimously approved by the boards of directors of each of the Company, Citius Pharma and Citius Oncology. The transaction is expected to be completed in the first half of 2024, subject to approval by shareholders of the Company and other customary closing conditions, including final regulatory approvals and SEC filings. There can be no assurance regarding the ultimate timing of the proposed transaction or that the transaction will be completed at all.
We
will have until 12 months to consummate an initial business combination (the “Combination Period”). However, if we anticipate
that we may not be able to consummate our initial business combination within 12 months, we may extend the Combination Period up to seven
(7) times, each time for an additional month (for a total of up to 19 months to complete a business combination) without submitting such
proposed extensions to our shareholders for approval or offering our public shareholders redemption rights in connection therewith. Pursuant
to the terms of our third amended and restated memorandum and articles of association and the trust agreement entered into between us
and American Stock Transfer & Trust Company on October 13, 2022, in order to extend the time available for us to consummate our initial
business combination, our Sponsor or its affiliates or designees, upon two days advance notice prior to the applicable deadline, must
deposit into the trust account the lesser of $
If we are unable to consummate an initial business combination within such time period, we will, as promptly as reasonably possible but not more than ten business days thereafter, redeem % of the outstanding Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including any interest earned on the funds held in the trust account (net of interest that may be used by us to pay our taxes payable and for dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish public shareholders’ rights as shareholders (including the right to receive further liquidation distributions, if any), subject to applicable law and as further described herein, and then seek to dissolve and liquidate. We expect the pro rata redemption price to be approximately $ per public share (subject to increase of up to an additional approximately $ per share for each month in the event that our Sponsor elects to extend the period of time to consummate a business combination by the full seven months), without taking into account any interest earned on such funds. However, we cannot assure you that we will in fact be able to distribute such amounts as a result of claims of creditors which may take priority over the claims of our public shareholders.
| F-9 |
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying audited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”).
In the opinion of the Company’s management, the unaudited condensed financial statements as of June 30, 2024 include all adjustments, which are only of a normal and recurring nature, necessary for a fair statement of the financial position of the Company as of June 30, 2024. This financial information should be read with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission on April 16, 2024. The results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of the results to be expected for the full fiscal year ending December 31, 2024 or any future interim period. The December 31, 2023 balance sheet information has been derived from the 2023 audited financial statements.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All significant intercompany balances and transactions have been eliminated in consolidation.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012, as amended (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 independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of financial statements in conformity with US GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
Cash and cash equivalents
The
Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.
The Company had
Trust Account
Upon
the closing of the Initial Public Offering and the Private Placement, $
As
of June 30, 2024 and December 31, 2023, the Company had $
| F-10 |
Deferred Offering Costs
Deferred
offering costs consist of costs incurred in connection with preparation for the Initial Public Offering. These costs, together with the
underwriting discounts and commissions, were charged to additional paid in capital upon completion of the Initial Public Offering. As
of June 30, 2024 and December 31, 2023 the Company had
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC
740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions
taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be
sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits
as income tax expense. There were
There is currently no taxation imposed on income by the Government of the Cayman Islands. In accordance with Cayman income tax regulations, income taxes are not levied on the Company. Consequently, income taxes are not reflected in the Company’s financial statements.
The Company accounts for the ordinary shares subject to possible redemption in accordance with the guidance enumerated in ASC 480, “Distinguishing Liabilities from Equity.” Shares of the common stock subject to mandatory redemption are classified as a liability instrument and are measured at fair value. Conditionally redeemable shares of the common stock (including shares of the common stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the issuer’s control) are classified as temporary equity. At all other times, shares of the common stock are classified as shareholders’ equity. The ordinary features certain redemption rights that are considered by the Company to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, as of June 30, 2024 and December 31, 2023, the ordinary shares subject to possible redemption in the amount of $ and $, respectively, are presented as temporary equity, outside of the shareholders’ deficit section of the Company’s balance sheet.
| Ordinary shares subject to possible redemption – December 31, 2023 | $ | |||
| Redemption of ordinary shares | ( | ) | ||
| Remeasurement of ordinary shares subject to redemption | ||||
| Ordinary shares subject to possible redemption – June 30, 2024 | $ |
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. Net income per share of ordinary shares is computed by dividing net income by the weighted average number of ordinary shares outstanding for the period. The Company applies the two-class method in calculating income per ordinary share.
The calculation of diluted income per ordinary share does not consider the effect of the warrants issued in connection with the (i) Initial Public Offering, and (ii) the Private Placement since the exercise of the warrants is contingent upon the occurrence of future events. As of June 30, 2024 and 2023, the Company did not have any dilutive securities or other contracts that could, potentially, be exercised or converted into ordinary shares and then share in the earnings of the Company. As a result, diluted net income per ordinary share is the same as basic net income per ordinary share for the period presented.
| F-11 |
| Three Months Ended | Three Months Ended | |||||||
| June 30, 2024 | June 30, 2023 | |||||||
| Ordinary shares subject to redemption | ||||||||
| Numerator: Allocation of net income | $ | |||||||
| Denominator: Basic and diluted weighted average shares outstanding | ||||||||
| Basic and diluted net income per share | $ | $ | ||||||
| Ordinary shares not subject to redemption | ||||||||
| Numerator: Allocation of net income | $ | $ | ||||||
| Denominator: Basic and diluted weighted average shares outstanding | ||||||||
| Basic and diluted net income per share | $ | $ | ||||||
| Six Months Ended | Six Months Ended | |||||||
| June 30, 2024 | June 30, 2023 | |||||||
| Ordinary shares subject to redemption | ||||||||
| Numerator: Allocation of net income | $ | |||||||
| Denominator: Basic and diluted weighted average shares outstanding | ||||||||
| Basic and diluted net income per share | $ | $ | ||||||
| Ordinary shares not subject to redemption | ||||||||
| Numerator: Allocation of net income | $ | $ | ||||||
| Denominator: Basic and diluted weighted average shares outstanding | ||||||||
| Basic and diluted net income per share | $ | $ | ||||||
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging.” For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value on the grant date and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date. The over-allotment option is deemed to be a freestanding financial instrument indexed on the contingently redeemable shares and will be accounted for as a liability pursuant to ASC 480.
Concentration of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution,
which, at times, may exceed the Federal Depository Insurance Coverage of $
Financial Instruments
The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:
Level 1 Inputs: Unadjusted quoted prices for identical assets or instruments in active markets.
Level 2 Inputs: Quoted prices for similar instruments in active markets and quoted prices for identical or similar instruments in markets that are not active and model derived valuations whose inputs are observable or whose significant value drivers are observable.
Level 3 Inputs: Significant inputs into the valuation model are unobservable.
The Company does not have any recurring Level 2 assets or liabilities, see Note 8 for Level 3 assets and liabilities. The carrying value of the Company’s financial instruments including its cash and accrued liabilities approximate their fair values principally because of their short-term nature.
Convertible Promissory Notes
The Company accounts for their convertible promissory notes under ASC 815, “Derivatives and Hedging” (“ASC 815”). Management has determined that other than the conversion feature, the Promissory Note is a “plain vanilla” liability. Further, the Promissory Note contains no equity host characteristics. As such there is no embedded derivative that needs bifurcation or other features that require further accounting consideration.
| F-12 |
Recent Accounting Standards
In August 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-06, “Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”),” which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain areas. ASU 2020-06 is effective for the Company on January 1, 2022. Adoption of the ASU did not impact the Company’s financial position, results of operations or cash flows.
In June 2022, the FASB issued ASU 2022-03, ASC Subtopic 820 “Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions”. The ASU amends ASC 820 to clarify that a contractual sales restriction is not considered in measuring an equity security at fair value and to introduce new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value. The ASU applies to both holders and issuers of equity and equity-linked securities measured at fair value. The amendments in this ASU are effective for the Company in fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance. The Company is currently assessing what impact, if any, that ASU 2022-03 would have on its financial position, results of operations or cash flows.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which requires disclosure of incremental income tax information within the rate reconciliation and expanded disclosures of income taxes paid, among other disclosure requirements. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company’s management does not believe the adoption of ASU 2023-09 will have a material impact on its condensed consolidated financial statements and disclosures.
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s financial statements.
NOTE 3 — INITIAL PUBLIC OFFERING
Pursuant
to the Initial Public Offering, the Company sold Units, including additional units issued pursuant to the partial exercise
by the underwriter of its over-allotment option at a price of $ per Unit.
NOTE 4 — PRIVATE PLACEMENTS
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the private sale of Private Placement Units.
| F-13 |
NOTE 5 — RELATED PARTIES
Founder Shares
On
March 24, 2021, the Sponsor received of the Company’s ordinary shares (the “Founder Shares”) in exchange
for $
| (a) | Each of the authorized but unissued Class A ordinary shares were cancelled and re-designated as ordinary shares of $ par value each; | |
| (b) | Each of the Class B ordinary shares in issue were exchanged in consideration for the issuance of ordinary shares of $ par value each; and | |
| (c) | Upon completion of the above steps, the authorized but unissued Class B ordinary shares were cancelled. |
On December 20, 2021, subsequent to the above share exchange the Company issued an additional ordinary shares to our Sponsor for no additional consideration, resulting in our Sponsor holding an aggregate of ordinary shares (the founder shares). The issuance was considered as a bonus share issuance, in substance a recapitalization transaction, which was recorded and presented retroactively. The founder shares include an aggregate of up to ordinary shares subject to forfeiture to the extent that the underwriters’ over-allotment is not exercised in full or in part. On October 18, 2022, the underwriter partially exercised the over-allotment and as such, as of November 28, 2022, ordinary shares are not subject to forfeiture.
The Sponsor has agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier to occur of: (A) one year after the completion of a Business Combination and (B) subsequent to a Business Combination, (x) if the last reported sale price of the ordinary shares equals or exceeds $ per share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after a Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange or other similar transaction that results in all of the Public Shareholders having the right to exchange their shares of ordinary shares for cash, securities or other property.
Promissory Note — Related Party
On
March 17, 2021, the Sponsor issued an unsecured promissory note (the “Pre-IPO Note”) to the Company (the “Promissory
Note”), pursuant to which the Company may borrow up to an aggregate principal amount of $
After
expiration of the Promissory Note, the Sponsor issued a new unsecured promissory note to the Company (the “Post-IPO Promissory
Note”) on April 14, 2023. The Post-IPO Promissory Note is non-interest bearing and payable on the earlier of (i) October 14, 2024
or (ii) the date of consummation of the Company’s initial business combination or liquidation (such earlier date, the “Maturity
Date”). As of June 30, 2024 and December 31, 2023, there were $
Advances from Related Party
The
Sponsor paid certain formation and operating costs on behalf of the Company. These advances are due on demand and non-interest bearing.
As of June 30, 2024 and December 31, 2023, there were $
Administrative Services Agreement
Commencing
on the date the Units are first listed on the Nasdaq, the Company has agreed to pay the Sponsor a total of $
| F-14 |
Related Party Loans
In
order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain
of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working
Capital Loans”). Such Working Capital Loans would be evidenced by promissory notes. The notes may be repaid upon completion of
a Business Combination, without interest, or, at the lender’s discretion, up to $
On
July 18, 2023 and October 18, 2023, the Company deposited $
The
Company’s shareholders approved the Extension Amendment Proposal on January 17, 2024. On January 18, 2024 the Sponsor deposited
$
As
of June 30, 2024 and December 31, 2023, there was $
NOTE 6 — COMMITMENTS AND CONTINGENCIES
Registration Rights
The holders of the Founder Shares, Private Placement Units and Units that may be issued upon conversion of Working Capital Loans (and any shares of ordinary shares issuable upon the exercise of the Private Placement Right) will be entitled to registration rights pursuant to a registration rights agreement to be signed prior to or on the effective date of Initial Public Offering requiring the Company to register such securities for resale. The holders of these securities will be entitled to make up to three demands, excluding short form registration demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to 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 the securities covered thereby are released from their lock-up restrictions. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The Company granted the underwriters a 45-day option from the date of Initial Public Offering to purchase up to additional Units to cover over-allotments, if any, at the Initial Public Offering price less the underwriting discounts and commissions. The underwriter partially exercised the over-allotment in the amount of Units during the option period.
The underwriters are entitled to a cash underwriting discount of $ per Unit payable upon the closing of the Initial Public Offering.
| F-15 |
The underwriters are also entitled to ordinary shares ( if the over-allotment option is exercised in full) as part of its underwriting fee. Due to the partial exercise, the shares granted at October 18, 2022 were .
Equity Payment Letter
On
February 23, 2024, The Crone Law Group, P.C. entered into an Equity Payment Letter Agreement with the Sponsor in connection with the
payment of its legal fees. As such, The Crone Law Group has a present expectation of receipt of shares of TenX Ordinary Shares
and a potential future expectation of the Sponsor transferring additional equity interests in TenX, if certain fee caps are exceeded,
and such equity interests may exceed $
Investment Banking Engagement Agreement
The
Company entered into an agreement with Newbridge Securities Corporation (“Newbridge”) for Newbridge to act as the Company’s
non-exclusive financial advisor with respect to Merger & Acquisitions (“M&A”) services. At the closing of a M&A
transaction, the Company shall pay Newbridge a fee of $
NOTE 7 — SHAREHOLDERS’ DEFICIT
Preferred Shares — The Company is authorized to issue preferred shares with a par value of $ per share with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. As of June 30, 2024 and December 31, 2023, there were shares of preferred shares issued or outstanding.
Ordinary
Shares — The Company is authorized to issue ordinary shares with a par value of $ per share.
As
of June 30, 2024 and December 31, 2023, there were ordinary shares issued and outstanding, respectively, of which an aggregate
of up to ordinary shares are subject to forfeiture to the extent that the underwriters’ over-allotment option is not exercised
in full or in part so that the number of Founder Shares will equal
Only holders of the founder shares will have the right to vote on the election of directors prior to the Business Combination. Holders of ordinary shares and holders of founder shares will vote together as a single class on all matters submitted to a vote of our shareholders except as otherwise required by law. In connection with our initial business combination, we may enter into a shareholders’ agreement or other arrangements with the shareholders of the target or other investors to provide for voting or other corporate governance arrangements that differ from those in effect upon completion of this offering.
In
the case that additional shares of ordinary shares, or equity-linked securities, are issued or deemed issued in excess of the amounts
issued in the Proposed Public Offering and relate to the closing of a Business Combination, the ratio at which founder shares will be
adjusted (unless the holders of a majority of the then-outstanding shares of founder shares agree to waive such adjustment with respect
to any such issuance or deemed issuance) so that the number of founder shares will equal, in the aggregate,
| F-16 |
Rights - Except in cases where the Company is not the surviving company in a business combination, each holder of a right will automatically receive two-tenths (2/10) of one ordinary share upon consummation of the initial business combination. The Company will not issue fractional shares in connection with an exchange of rights. Fractional shares will either be rounded down to the nearest whole share or otherwise addressed in accordance with the applicable provisions of Cayman law.
NOTE 8. FAIR VALUE MEASUREMENTS
The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.
The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
| Level 1: | Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. | |
| Level 2: | Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active. | |
| Level 3: | Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability. |
The following table presents information about the Company’s assets and liabilities that are measured at fair value at June 30, 2024 and December 31, 2023 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
| Description | Level | June 30, 2024 | December 31, 2023 | |||||||||
| Assets: | ||||||||||||
| Marketable securities held in the Trust Account | 1 | $ | $ | |||||||||
NOTE 9 — SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued. Based upon this review the Company did not identify any subsequent events, other than below, that would have required adjustment or disclosure in the financial statements.
| (1) | On
July 17, 2024, Citius Pharma deposited $ |
| (2) | On
August 2, 2024, the Company held an extraordinary general meeting of shareholders (the “EGM”),
at which the Company’s shareholders approved, among all proposals, in connection with
its previously announced business combination (the “Business Combination”) with
Citius Pharma. Holders of public redeemable shares exercised their redemption rights
for a pro rata portion of the trust amount. The estimated redemption price is approximately $ per share, which is calculated based on the trust balance as of August 8, 2024. The Company will distribute a total of approximately $ | |
| (3) | On August 5, 2024, the Company de-registered in Cayman Islands and migrated to and domesticated as a Delaware corporation. |
| F-17 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References to the “Company,” “us,” “our” or “we” refer to Citius Oncology, Inc. (formerly known as TenX Keane Acquisition). The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and related notes included herein.
Cautionary Note Regarding Forward-Looking Statements
All statements other than statements of historical fact included in this Report including, without limitation, statements under this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. When used in this Report, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions, as they relate to us or the Company’s management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, the Company’s management. Actual results could differ materially from those contemplated by the forward- looking statements as a result of certain factors detailed in our filings with the SEC. All subsequent written or oral forward-looking statements attributable to us or persons acting on the Company’s behalf are qualified in their entirety by this paragraph.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the 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.
Overview
We were incorporated in the Cayman Islands on March 1, 2021, for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.
Results of Operations and Known Trends or Future Events
We have not generated any revenues to date, and we will not be generating any operating revenues until the closing and completion of our initial business combination. Our entire activity up to June 30, 2024 has been related to our formation, the Initial Public Offering and, since the closing of the Initial Public Offering, and a search for a business combination target. We have, and expect to continue to generate, non-operating income in the form of interest income and unrealized gains on investments held in the trust account. We expect to continue to incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for the expenses in connection with the business combination.
We have neither engaged in any operations nor generated any revenues to date. Our only activities since inception have been organizational activities and those necessary to prepare for the IPO. Following the IPO, we will not generate any operating revenues until after completion of our initial business combination. We will generate non-operating income in the form of interest income on cash and cash equivalents after the IPO. After the IPO, we expect to incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for the expenses in connection with the business combination.
For the three months ended June 30, 2024, we had net income of $252,462, which primarily consisted of investment income on the trust assets of $636,419, partially offset by operating expenses of $383,957.
For the six months ended June 30, 2024, we had net income of $742,291, which primarily consisted of investment income on the trust assets of $1,394,677, partially offset by operating expenses of $652,386.
For the three months ended June 30, 2023, we had net income of $616,296, which primarily consisted of investment income on the trust assets of $815,850, partially offset by operating expenses of $199,554.
For the six months ended June 30, 2023, we had net income of $1,228,021, which primarily consisted of investment income on the trust assets of $1,575,497, partially offset by operating expenses of $347,476.
Liquidity, Capital Resources Going Concern
As of June 30, 2024 our cash was $261.
Our registration statement for the IPO (the “Registration Statement”) was declared effective on October 13, 2022. On October 18, 2022, we consummated the IPO of 6,600,000 Units, including 600,000 additional Units issued pursuant to the partial exercise by the underwriter of its over-allotment option (with respect to the ordinary share included in the Units being offered, the “Public Shares”), generating gross proceeds of $66,000,000.
Simultaneously with the consummation of the IPO and the sale of the Units, we consummated the Private Placement of 394,000 Placement Units to the Sponsor at a price of $10.00 per Placement Unit, generating total proceeds of $3,940,000.
Following the closing of the IPO on October 18, 2022, an amount of $67,320,000 ($10.20 per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering and the Private Placement was placed in the trust account. The funds held in the trust account may be invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 185 days or less or in any open-ended investment company that holds itself out as a money market fund selected by us meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined by the us, until the earlier of: (i) the completion of a business combination or (ii) the distribution of the trust account.
| 3 |
We intend to use substantially all of the funds held in the trust account, including any amounts representing interest earned on the trust account, to complete our initial business combination. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our initial business combination, the remaining proceeds held in the trust account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
As of June 30, 2024, we had available to us approximately $261 of proceeds held outside the trust account. We will use these funds to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete an initial business combination.
In order to fund working capital deficiencies or finance transaction costs in connection with an intended initial business combination, our Sponsor or an affiliate of our Sponsor or certain of our officers and directors may, but are not obligated to, loan us funds on a non-interest bearing basis as may be required. If we complete our initial business combination, we would repay such loaned amounts. In the event that our initial business combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts but no proceeds from our trust account would be used for such repayment. Other than as described above, the terms of such loans by our officers and directors, if any, have not been determined and no written agreements exist with respect to such loans. We do not expect to seek loans from parties other than our Sponsor or an affiliate of our Sponsor as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our trust account.
We expect our primary liquidity requirements from June 30, 2024 through the consummation of the business combination include $300,000 for legal, accounting, due diligence, travel and other expenses associated with structuring, negotiating and documenting successful business combinations as well as legal and accounting fees related to regulatory reporting requirements, and $216,800 for working capital that will be used for miscellaneous expenses and reserves. In addition, the Sponsor issued an unsecured promissory note to the Company (the “Promissory Note”), pursuant to which the Company may borrow up to an aggregate principal amount of $300,000 if we need additional capital.
These amounts are estimates and may differ materially from our actual expenses. In addition, we could use a portion of the funds not being placed in trust to pay commitment fees for financing, fees to consultants to assist us with our search for a target business or as a down payment or to fund a “no-shop” provision (a provision designed to keep target businesses from “shopping” around for transactions with other companies or investors on terms more favorable to such target businesses) with respect to a particular proposed initial business combination, although we do not have any current intention to do so. If we entered into an agreement where we paid for the right to receive exclusivity from a target business, the amount that would be used as a down payment or to fund a “no-shop” provision would be determined based on the terms of the specific business combination and the amount of our available funds at the time. Our forfeiture of such funds (whether as a result of our breach or otherwise) could result in our not having sufficient funds to continue searching for, or conducting due diligence with respect to, prospective target businesses.
We may have insufficient funds available to operate our business prior to our initial business combination. Moreover, we may need to obtain additional financing either to complete our initial business combination or because we become obligated to redeem a significant number of our Public Shares upon completion of our initial business combination, in which case we may issue additional securities or incur debt in connection with such business combination. In addition, we are targeting businesses larger than we could acquire with the net proceeds of the IPO and the sale of the Private Units, and may as a result be required to seek additional financing to complete such proposed initial business combination. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of our initial business combination. If we are unable to complete our initial business combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the trust account. In addition, following our initial business combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.
| 4 |
There is no assurance that our plans to consummate a business combination will be successful within the combination period. As a result, there is substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued or are available to be issued.
The Company has incurred and expects to continue to incur significant costs in pursuit of its acquisition plans. In addition, the Company currently has less than 12 months from the date these financial statements were issued to complete a business combination transaction. If the Company is unsuccessful in consummating an initial business combination by August 18, 2024, per the mandatory liquidation requirement, the Company must cease all operations, redeem the Public Shares and thereafter liquidate and dissolve. In connection with the Company’s assessment of going concern considerations in accordance with Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” the Company does not have adequate liquidity to sustain operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of time within one year after the date that the financial statements are issued. There is no assurance that the Company’s plans to raise capital or to consummate a business combination will be successful or successful within the Combination Period. The financial statements do not include any adjustments that might result from the outcome of the uncertainty.
The change in cash for six months ended June 30, 2024 was an decrease of $32,485 and was comprised of cash used in operating activities of $557,796, cash provided by investing activities of $24,807,433 and cash used in financing activities of $24,282,122.
The change in cash for the six months ended June 30, 2023 was an increase of $80,920 and was comprised of cash used in operating activities of $269,055 and cash provided by financing activities of $349,975.
Critical Accounting Estimates
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates.
We consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition. We have not identified any critical accounting estimates other than below.
Derivative Financial Instruments
We evaluate our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging.” For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value on the grant date and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date. The over-allotment option is deemed to be a freestanding financial instrument indexed on the contingently redeemable shares and will be accounted for as a liability pursuant to ASC 480.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As of June 30, 2024, we were not subject to any market or interest rate risk. Following the consummation of our IPO, the net proceeds of our IPO, including amounts in the trust account, have been invested in U.S. government treasury bills, notes or bonds with a maturity of 185 days or less or in certain money market funds that invest solely in U.S. treasuries. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.
ITEM 4. CONTROLS AND PROCEDURES.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Evaluation of Disclosure Controls and Procedures
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2024. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15 (e) and 15d-15 (e) under the Exchange Act) were not effective as of the end of period covered by this Report, due to material weaknesses in internal control over financial reporting that existed relating to accounting for accruals and advances from related parties and accounting for complex financial instruments.
Changes in Internal Control Over Financial Reporting
During the most recently completed fiscal quarter, there has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
| 5 |
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
We are not currently a party to any material litigation or other legal proceedings brought against us. We are also not aware of any legal proceeding, investigation or claim, or other legal exposure that has a more than remote possibility of having a material adverse effect on our business, financial condition or results of operations.
Item 1A. Risk Factors.
As a smaller reporting company, we are not required to make disclosures under this Item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not Applicable.
Item 5. Other Information.
On August 5, 2024, as contemplated by the Merger Agreement and described in the section titled “The Domestication Proposal” beginning on page 154 of the Proxy Statement, the Company filed a notice of deregistration with the Cayman Islands Registrar of Companies, together with the necessary accompanying documents, and filed a certificate of incorporation and a certificate of corporate domestication with the Secretary of State of the State of Delaware, under which the Company was domesticated and continues as a Delaware corporation, under the name Citius Oncology, Inc.
If we are a PFIC for any taxable year (or portion thereof) that is included in the holding period of a U.S. Holder (as defined in the section of the Registration Statement captioned “Taxation—United States Federal Income Tax Considerations—General”) of our securities, the U.S. Holder may be subject to adverse U.S. federal income tax consequences and may be subject to additional reporting requirements. Our PFIC status for our current and subsequent taxable years may depend on whether we qualify for the PFIC start-up exception (see the section of the Registration Statement captioned “Taxation—United States Federal Income Tax Considerations—U.S. Holders—Passive Foreign Investment Company Rules”). Depending on the particular circumstances, the application of the start-up exception may be subject to uncertainty, and there cannot be any assurance that we will qualify for the start-up exception. Accordingly, there can be no assurances with respect to our status as a PFIC for our current taxable year or any subsequent taxable year (and if the start-up exception may be applicable, potentially not until after the two taxable years following). Our actual PFIC status for any taxable year, however, will not be determinable until after the end of such taxable year. Moreover, if we determine we are a PFIC for any taxable year, upon written request, we will endeavor to provide to a U.S. Holder such information as the Internal Revenue Service (“IRS”) may require, including a PFIC annual information statement, to enable the U.S. Holder to make and maintain a “qualified electing fund” election, but there can be no assurance that we will timely provide such required information. We urge U.S. investors to consult their tax advisors regarding the possible application of the PFIC rules. For a more detailed discussion of the tax consequences of PFIC classification to U.S. Holders, see the section of the Registration Statement captioned “Taxation—United States Federal Income Tax Considerations—U.S. Holders—Passive Foreign Investment Company Rules.”
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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.
Date: August 9, 2024
| Citius Oncology, Inc. | ||
| By: | /s/ Xiaofeng Yuan | |
| Xiaofeng Yuan | ||
| Chief Executive Officer and Chairman | ||
| (Principal Executive Officer) | ||
| By: | /s/ Taylor Zhang | |
| Taylor Zhang | ||
| Chief Financial Officer and Director | ||
| (Principal Financial Officer and Accounting Officer) | ||
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