UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the quarterly period ended
For the transition period from _______to_______
Commission
File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s
telephone number, including area code:
Not applicable
(Former name or former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| The Global Market LLC | ||||
| The Global Market LLC | ||||
| The Global 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, if any, every Interactive Date File required to be submitted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of May 16, 2024, there were shares of the Company’s Class A Common Stock, $0.0001 par value per share (the “Class A Common Stock”), and shares of the Company’s Class B Common Stock, $0.0001 par value per share, issued and outstanding (the “Class B Common Stock”).
EXPLANATORY NOTE
Except as described above, this Amendment does not amend, modify, or otherwise update any other information in the Original Form 10-Q and does not reflect events occurring after the date of the filing of the Original Form 10-Q. This Amendment continues to describe the conditions as of the date of the Original Form 10-Q, and accordingly, this Amendment should be read in conjunction with the Original Form 10-Q.
DUET ACQUISITION CORP.
TABLE OF CONTENTS
| i |
PART I – FINANCIAL INFORMATION
Item 1. Unaudited Condensed Financial Statements
DUET ACQUISITION CORP.
CONDENSED BALANCE SHEETS
March 31, 2024 (unaudited) | December 31, 2023 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Total Current Assets | $ | $ | ||||||
| Cash and Marketable Securities held in trust account | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities | ||||||||
| Accrued expenses | $ | $ | ||||||
| Accounts payable | ||||||||
| Amount due to related party | ||||||||
| Franchise tax payable | ||||||||
| Income tax payable | ||||||||
| Excise tax liability | ||||||||
| Extension loan | ||||||||
| Working capital loan | ||||||||
| Total Current Liabilities | ||||||||
| Deferred underwriter commission | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies (Note 6) | ||||||||
| Class A common stock $ par value; shares authorized; shares subject to possible redemption issued and outstanding, at $ and $ per share, as of March 31, 2024 and December 31, 2023 | ||||||||
| Stockholders’ Deficit | ||||||||
| Preference Shares, $ par value; shares authorized; issued and outstanding | ||||||||
| Class A common stock, $ par value; shares authorized; shares issued and outstanding (excluding shares subject to possible redemption, as of March 31, 2024 and December 31, 2023) | ||||||||
| Class B common stock, $ par value; shares authorized; shares issued and outstanding | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Deficit | ( | ) | ( | ) | ||||
| Total Liabilities and Stockholders’ Deficit | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
| 1 |
DUET ACQUISITION CORP.
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
(UNAUDITED)
For the Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Formation and operating costs | $ | ( | ) | $ | ( | ) | ||
| Franchise tax | ( | ) | ( | ) | ||||
| Loss from Operations | ( | ) | ( | ) | ||||
| Other Income | ||||||||
| Interest earned on marketable securities held in trust account | ||||||||
| Net Income before income tax provision | ||||||||
| Income tax provision | ( | ) | ( | ) | ||||
| Net Income | $ | $ | ||||||
| Weighted average shares outstanding of Redeemable Common Stock | ||||||||
| Basic and diluted net income per common stock | $ | $ | ||||||
| Weighted average shares outstanding of Non-redeemable Common Stock | ||||||||
| Basic and diluted net income (loss) per common stock | $ | ) | $ |
| ) | |||
The accompanying notes are an integral part of these unaudited condensed financial statements.
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DUET ACQUISITION CORP.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
(UNAUDITED)
Class A Common Stock | Class B Common Stock | Additional Paid in | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance – December 31, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||
| Remeasurement of Class A common stock subject to possible redemption | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance – March 31, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Class A | Class B | Additional | Total | |||||||||||||||||||||||||
| Common Stock | Common Stock | Paid in | Accumulated | Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance – December 31, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||
| Balance – March 31, 2023 | ( | ) | ( | ) | ||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
| 3 |
DUET ACQUISITION CORP.
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
(UNAUDITED)
For the Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
| Interest earned on marketable securities held in Trust Account | ( | ) | ( | ) | ||||
| Interest withdrawn from the Trust Account | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts payable | ( | ) | ( | ) | ||||
| Accrued expenses | ||||||||
| Prepaid expenses | ( | ) | ||||||
| Amount due to related party | ( | ) | ||||||
| Franchise tax payable | ( | ) | ||||||
| Income tax payable | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Cash withdrawn from Trust Account in connection with redemption | ||||||||
| Payments to Trust Account | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Proceeds from working capital loan | ||||||||
| Net cash 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 investing and financing activities: | ||||||||
| Remeasurement of Class A Common Stock subject to redemption | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
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DUET ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. DESCRIPTION OF ORGANIZATION, BUSINESS OPERATIONS
DUET Acquisition Corp. (the “Company”) is a blank check company incorporated in the State of Delaware on September 20, 2021. The Company was formed for the purpose of acquiring, engaging in a share exchange, share reconstruction and amalgamation with, purchasing all or substantially all of the assets of, entering into contractual arrangements with, or engaging in any other similar business combination with one or more businesses or entities (“Business Combination”). The Company is not limited to a particular industry or sector for purposes of consummating a Business Combination.
As of March 31, 2024, the Company had not commenced any operations. All activity for the period from September 20, 2021 (inception) through March 31, 2024, relates to the Company’s formation, the initial public offering described below and activities necessary to identify a potential target and prepare for a Business Combination. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the Initial Public Offering (as defined below). The Company has selected December 31 as its fiscal year end.
The Company’s sponsor is DUET Partners LLC (the “Sponsor”). The registration statement for the Company’s Initial Public Offering was declared effective on January 19, 2022.
On
January 24, 2022, the Company consummated its Initial Public Offering of units (the “Units” and, with respect to
the Class A common stock included in the Units being offered, the “Public Shares”), at $ per Unit, generating gross
proceeds of $
Simultaneously
with the consummation of the closing of the Initial Public Offering, the Company consummated the private placement of an aggregate of
units (the “Private Placement Units”) to the Sponsor, at a price of $ per Private Placement Unit, generating
total gross proceeds of $
Subsequently,
on January 24, 2022, the Company consummated the closing of the sale of additional units at a price of $ per unit (the “Units”)
upon receiving notice of the underwriters’ election to fully exercise their overallotment option (“Overallotment Units”),
generating additional gross proceeds of $
Simultaneously
with the exercise of the overallotment, the Company consummated the Private Placement of an additional Private Placement Units
to DUET Partners LLC, a Delaware limited liability company (the “Sponsor”), generating gross proceeds of $
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A
total of $
Transaction
costs of the Initial Public Offering with the exercise of the overallotment amounted to $
Following
the closing of the Initial Public Offering $
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. NASDAQ rules provide that the Business Combination must be with one or more target businesses that
together have a fair market value equal to at least
The
Company will provide its 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. In connection with a Business Combination, the Company
may seek stockholder approval of a Business Combination at a meeting called for such purpose at which stockholders may seek to redeem
their shares, regardless of whether they vote for or against a Business Combination. The Company will proceed with a Business Combination
only if the Company has net tangible assets of at least $
The
Company will have until 24 months (subject to a three month extension of time, as set forth in the Company’s registration statement)
from the closing of the Initial Public Offering to consummate a Business Combination (the “Combination Period”). If the Company
is unable to complete a Business Combination within the Combination Period, the Company will (i) cease all operations except for the
purpose of winding up, (ii) as promptly as reasonably possible but no more than five business days thereafter, redeem
| 6 |
On
April 19, 2023, the Company held a virtual special meeting of its stockholders (the “Special Meeting”). At
the Special Meeting, the stockholders of the Company approved the proposal (the “Extension Amendment Proposal”)
to amend the Company’s Amended and Restated Certificate of Incorporation to extend the date by which the Company must (i) consummate
a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination involving the Company
and one or more businesses, which we refer to as a “business combination,” (ii) cease its operations if it fails to complete
such business combination, and (iii) redeem or repurchase
On
December 18, 2023, the Company held a virtual special meeting of its stockholders (the “Special Meeting”).
At the Special Meeting, the stockholders of the Company approved the proposal (the “Extension Amendment Proposal”)
to amend the Company’s Amended and Restated Certificate of Incorporation to extend the date by which the Company must (i)
consummate a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination involving
the Company and one or more businesses, which we refer to as a “business combination,” (ii) cease its operations if it fails
to complete such business combination, and (iii) redeem or repurchase
In
connection with the approval of the Extension Amendment Proposal and the Trust Amendment Proposal at the Special Meeting, holders of
shares of the Company’s Class A Common Stock exercised their right to redeem those shares for cash at an approximate
price of $ per share, for an aggregate of approximately $
On
December 19, 2023, the Company deposited two payments in an aggregate of $
| 7 |
The Sponsor has agreed that it will be liable to the Company, if and to the extent any claims by a vendor for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amounts in the Trust Account to below $ per share (whether or not the underwriters’ over-allotment option is exercised in full), except as to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims under the Company’s indemnity of the underwriters of the Initial 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 endeavoring to have all vendors, service providers (except for the Company’s independent registered 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.
Termination of the Merger Agreement
On July 25, 2022, the Company entered into a definitive Business Combination Agreement and Plan of Merger (the “Merger Agreement”) with Millymont Limited, a private limited company incorporated in Ireland (“Holdco”), Duet Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of Holdco, J. Streicher Technical Services, LLC, a Delaware limited liability company, Anteco Systems, S.L., trading as AnyTech365, a company incorporated in Spain and registered at the Commercial Registry of Malaga under reference MA-122108, Miguel Ángel Casales Ruiz and Thomas Marco Balsloev, as the sellers’ representatives, and Lee Keat Hin, as the Company’s representative.
On April 6, 2023, the Company provided the other parties with written notice of the termination of the Merger Agreement pursuant to Section 11.1 thereof (the “Termination”). No party will be required to pay another party a termination fee as a result of the Termination.
The termination of the Merger Agreement also terminates and makes void the Support Agreement, the Non-Competition and Non-Solicitation Agreement, and the Lock-up Agreement (each as defined in the Merger Agreement), each of which were executed concurrently with the Merger Agreement.
Business Combination Agreement
As previously disclosed, the Company entered into a binding letter of intent with Fenix 360 Pte. Ltd., a Singapore private company limited by shares (the “Target”), on July 6, 2023, pursuant to which DUET agreed to acquire all of the outstanding equity interests of the Target. On November 28, 2023, DUET and the Target entered into a definitive Business Combination Agreement and Plan of Merger (the “Business Combination Agreement”). DUET and the Target are sometimes referred to this Quarterly Report on Form 10-Q, individually, as a “Party” and, collectively, as the “Parties.”
Our Chairman of the Board of Directors, Larry Gan Nyap Liou, serves as a financial advisor to the Target pursuant to a pre-existing relationship with the Target. Accordingly, Mr. Gan has recused himself, and will continue to recuse himself, from all Board decisions related to the Business Combination.
| 8 |
Domestication
Pursuant to and upon the closing (the “Closing”) of the transactions contemplated in the Business Combination Agreement (collectively, the “Business Combination”), the Company will transfer by way of continuation from the State of Delaware to the Cayman Islands and domesticate (the “Domestication”) as a Cayman Islands exempted company limited by shares in accordance with Section 390 of the Delaware General Corporation Law, as amended, and Part XII of the Cayman Islands Companies Act, as amended (the “Cayman Companies Act”).
In
connection with the Domestication,
Business Combination
Pursuant
to the Business Combination Agreement, as consideration for the Business Combination, the shareholders of the Target (each, a “Target
Shareholder” and, together, the “Target Shareholders”) are entitled to receive an aggregate of DUET Ordinary
Shares, valued at $ per share for an aggregate value equal to $
Upon the terms and subject to the conditions of the Business Combination Agreement, at or prior to the Closing, each Target Shareholder will deliver to Continental Stock Transfer & Trust Company (the “Exchange Agent”) a share exchange agreement in the form mutually agreed to between the Parties (a “Share Exchange Agreement”) that has been duly executed by that Target Shareholder, surrender any original certificates for the Target Ordinary Shares held by such Target Shareholder, and deliver such other documents reasonably requested by DUET. In exchange, DUET will issue and cause the Exchange Agent to deliver to each Target Shareholder the amount of DUET Ordinary Shares due to such Target Shareholder pursuant to the Business Combination Agreement.
Representations and Warranties; Covenants
Pursuant to the Business Combination Agreement, the Parties made customary representations and warranties for transactions of this type. The Business Combination Agreement includes certain covenants that are customary for transactions of this type, including obligations of the Parties to use reasonable best efforts to operate their respective businesses in the ordinary course and to refrain from taking certain specified actions without the prior written consent of the applicable party, in each case, subject to certain exceptions and qualifications. The Parties have agreed not to solicit, negotiate, or enter into a competing transaction. Additionally, the Target has agreed to certain other covenants, including to (a) deliver the PCAOB Financials (as defined in the Business Combination Agreement) to DUET no later than December 11, 2023, (b) conclude investigations, examinations and diligence with respect to certain agreed-upon items by December 12, 2023 (the “Due Diligence Period”), and (c) onboard certain employees of one of the Target’s primary software developers. The covenants in the Business Combination Agreement generally will not survive the Closing, subject to certain exceptions, including certain covenants and agreements that by their terms are to be performed in whole or in part after the Closing.
| 9 |
Reserve Against Certain Liabilities
Certain of the Target Shareholders (the “Legacy Shareholders”) are to deposit with the Escrow Agent at Closing their pro rata portion of an aggregate of DUET Ordinary Shares otherwise issuable to the Legacy Shareholders as Exchange Consideration (the “Escrow Shares”). The Escrow Shares are subject to a quarterly release following the Closing and are reserved to cover losses arising out of or in connection with the Target’s rescission plan for tokens that were issued by management of the Target, any pending or threatened legal proceedings required to be disclosed by the Target, and any other matters mutually agreed upon by the Parties (collectively, the “Covered Matters”). To the extent the Target incurs losses based on an action against the Target or its affiliates by any third party with respect to the Covered Matters, the Legacy Shareholders consent to and agree to reasonably and promptly allow the post-Closing company to redeem an aggregate number of Escrow Shares with a value equal to the amount of such loss incurred by the post-Closing company therefrom, with the value of the Escrow Shares to be determined using the 5-Day VWAP of the DUET Ordinary Shares.
Conditions to Obligations of Both Parties at Closing
The obligations of the Parties to consummate the Business Combination are subject to the satisfaction of the following conditions, any one or more of which may be waived by in writing by either or both of the Parties: (a) DUET stockholder approval of the Business Combination has been obtained; (b) all of the Target Shareholders have submitted a Share Exchange Agreement and have exchanged all of the Target Ordinary Shares for the DUET Ordinary Shares in accordance with the terms of the Business Combination Agreement no later than the date of the DUET Stockholders’ Meeting (defined below); (c) the Proxy/Registration Statement (as defined below) shall have become effective under the Securities Act of 1933, as amended (the “Securities Act”), and no stop order suspending the effectiveness of the Proxy/Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the U.S. Securities and Exchange Commission (the “SEC”) and not withdrawn; (d) the Nasdaq Stock Market LLC (“Nasdaq”) shall have completed its review of the “Listing of Additional Shares Notification Form” filed by DUET with Nasdaq with respect to the DUET Ordinary Shares to be issued in connection with the Business Combination; (e) no Exchange Objection (as defined in the Business Combination Agreement) shall have been raised, or any such Exchange Objection which has been raised shall have been addressed; (f) no federal, state, provincial, municipal, local or foreign government, governmental authority, taxing, regulatory or administrative agency, governmental commission, department, board, bureau, agency or instrumentality, court or tribunal (“Governmental Authority”) shall have enacted, issued, promulgated, enforced or entered any statute, law, ordinance, rule, order, or regulation (“Law”) that is then in effect and which has the effect of making the Business Combination illegal or which otherwise prevents or prohibits consummation of the Business Combination, other than any such restraint that is immaterial, or for which the relevant Governmental Authority does not have jurisdiction over either of the parties hereto with respect to the Business Combination; and (g) all Closing deliverables required under the Business Combination Agreement have been provided.
Conditions to Obligations of DUET at Closing
Pursuant to the Business Combination Agreement, the obligations of DUET to consummate, or cause to be consummated, the Business Combination are subject to the satisfaction of the following additional conditions, any one or more of which may be waived in writing by DUET: (a)(i) the representations and warranties of the Target regarding the capitalization of the Target are true and correct in all respects of the date of the Closing except with respect to such representations and warranties speaking to an earlier date, which shall be true and correct at and as of such date, subject to changes made to the Business Combination Agreement, (ii) the Target’s Fundamental Representations (as defined in the Business Combination Agreement) other than those regarding the capitalization of the Target shall be true and correct as of the date of the Closing, subject to certain qualifications and exceptions, and (iii) each of the representations and warranties of the Target other than the Target’s Fundamental Representations shall be true and correct as of the date of the Closing, subject to certain qualifications and exceptions; (b) each of the covenants of the Target to be performed as of or prior to the Closing shall have been performed in all material respects; (c) there shall not have occurred a Company Material Adverse Effect (as defined in the Business Combination Agreement); (d) each of the Restrictive Covenant Agreements (as defined in the Business Combination Agreement) with each of the Key Executives (as defined in the Business Combination Agreement) shall be in full force and effect at Closing; (e) the Target’s unaudited consolidated statement of financial positions and consolidated statements of comprehensive income, changes in equity and cash flows of the Target and its Subsidiaries as of and for the nine-month period ended September 30, 2023, which comply with the applicable accounting requirements and with the rules and regulations of the SEC, the Exchange Act and the Securities Act applicable to a registrant shall have been provided; and (f) all closing deliveries required by the Business Combination Agreement shall have been delivered.
| 10 |
Conditions to Obligations of the Target at Closing
The obligation of the Target to consummate is subject to the satisfaction of the following additional conditions, any one or more of which may be waived in writing by the Target: (a) subject to certain qualifications and exceptions in each: (i) the representations and warranties of DUET regarding the capitalization of DUET shall be true and correct as of the Closing, (ii) DUET’s Fundamental Representations (as defined in the Business Combination Agreement) other than those regarding the capitalization of DUET shall be materially true and correct as of date of the Closing, subject to certain exceptions, and (iii) each of the representations and warranties of DUET contained in the Business Combination Agreement other than those regarding organization, due authorization, absence of changes, capitalization, and brokers’ fees shall be true and correct as of Closing; (b) the Class A Common Stock shall remain listed on the Nasdaq Global Market; and (c) each of the covenants of DUET to be performed as of or prior to the Closing shall have materially been performed.
Termination
The
Business Combination Agreement may be terminated and the transactions therein may be abandoned: (a) by DUET pursuant to a failure of
the Target to deliver timely the PCAOB Financials, or comply with the requests of DUET during the Due Diligence Period; (b) by DUET if
the Proxy/Registration Statement is not declared effective or such effectiveness is materially delayed due to any action or omission
by the Target; (c) by the Target if DUET is delisted from the Nasdaq Global Market for any reason other than a breach by the Target or
Legacy Shareholders of obligations to the Business Combination Agreement; (d) by mutual written consent of all Parties; (e) by DUET or
the Target if any Governmental Authority shall have enacted, issued, promulgated, enforced or entered any Law or order that is then in
effect and which has the effect of making the Business Combination illegal or which otherwise prevents or prohibits their consummation;
(f) by DUET if (i) there is a breach of any representation, warranty, covenant or agreement on the part of the Target, such that the
conditions obligating DUET to close would not be satisfied, subject to a 30 day cure period for the Target, or (ii) the Closing has not
occurred on or before the date on which the DUET charter expires and the Parties agree it shall not be extended (the “Agreement
End Date”), unless DUET is in material breach of the Business Combination Agreement; (g) by DUET if the original certificates for
the Target duly endorsed for transfer to DUET have not been submitted for exchange along with duly executed Share Exchange Agreements
from the Target Shareholders by the date of the DUET Stockholders’ Meeting; (h) by the Target by written notice to DUET if (i)
there is any breach of any representation, warranty, covenant or agreement on the part DUET set forth in the Business Combination Agreement,
such that the conditions obligating the Target to close would not be satisfied at Closing, subject to a 30 day cure period for DUET upon
notice, or (ii) the Closing has not occurred on or before the Agreement End Date, unless the Target is in material breach of the Business
Combination Agreement; or (i) if the resolution of outstanding accrued underwriting fees payable to EF Hutton, division of Benchmark
Investments LLC, are not resolved, in a manner satisfactory to both DUET and the Target before the Closing. In the event the Business
Combination Agreement is terminated pursuant to (a), (b) or (f) above, the Target shall pay DUET $
The foregoing description of the Business Combination Agreement does not purport to be complete and is qualified in its entirety by the full text of the Business Combination Agreement, which is filed as Exhibit 2.1 hereto and incorporated herein by reference.
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.
| 11 |
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.
Going Concern, Liquidity and Capital Resources
As
of March 31, 2024, the Company had $
The
Company’s liquidity needs prior to the consummation of the Initial Public Offering were satisfied through the payment of $
We currently believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating our initial business combination are less than the actual amount necessary to do so, 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 consummation of our initial business combination, in which case we may issue additional securities or incur debt in connection with such 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. The accompanying financial statements have been prepared in conformity with U.S. GAAP, which contemplates the continuation of the Company as a going concern and the realization of assets and the satisfaction of liabilities in the normal course of business. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Further, we have incurred and expect to continue to incur significant costs in pursuit of our financing and acquisition plans. Management plans to address this uncertainty during the period leading up to the business combination, however this cannot be guaranteed.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed financial statements are presented in U.S. Dollars and conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.
The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 as filed with the SEC on April 1, 2024 (the “Annual Report”), which contains the audited financial statements and notes thereto. The financial information as of December 31, 2023 is derived from the audited financial statements presented in the Company’s Annual Report. The interim results for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or for any future interim periods.
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Use of Estimates
The preparation of unaudited condensed financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed 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 unaudited condensed 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
Marketable Securities Held in Trust Account
At
March 31, 2024 and December 31, 2023, substantially all of the assets held in the Trust Account were held in mutual funds. At March 31,
2024 and December 31, 2023, the balance in the Trust Account was $
Deferred offering costs
Deferred offering costs consist of underwriting, legal, accounting and other expenses incurred through the balance sheet date that are directly related to the Initial Public Offering and that were charged to stockholders’ deficit upon the completion of the Offering. Should the Offering have proved to be unsuccessful, these deferred costs, as well as additional expenses incurred, would have been charged to operations.
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 no unrecognized tax benefits as of March 31, 2024 and December 31, 2023 and no amounts accrued for interest and penalties. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.
Our
effective tax rate was
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The Company accounts for its shares subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Shares subject to mandatory redemption (if any) are classified as a liability instrument and are measured at fair value. Conditionally redeemable shares of common stock (including shares of 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 Company’s control) are classified as temporary equity. At all other times, shares are classified as stockholders’ equity. The Company’s Class A 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, and is therefore classified as temporary equity on the unaudited condensed balance sheets.
If it is probable that the equity instrument will become redeemable, the Company has the option to either accrete changes in the redemption value over the period from the date of issuance (or from the date that it becomes probable that the instrument will become redeemable, if later) to the earliest redemption date of the instrument or to recognize changes in the redemption value immediately as they occur and adjust the carrying amount of the instrument to equal the redemption value at the end of each reporting period. The Company has elected to recognize the changes immediately. The accretion or remeasurement is treated as a deemed dividend (i.e., a reduction to retained earnings, or in absence of retained earnings, additional paid-in capital).
As of March 31, 2024 and December 31, 2023, the Class A Common Stock subject to possible redemption reflected on the unaudited condensed balance sheets is reconciled in the following table:
| March 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Redeemable Class A Common Stock – Opening Balance | $ | $ | ||||||
| Less: | ||||||||
| Redemption of Class A common stock, including interest | ( | ) | ||||||
| Plus: | ||||||||
| Re-measurement of carrying value to redemption value | ||||||||
| Redeemable Class A Common Stock - Ending Balance | $ | $ | ||||||
The Company complies with accounting and disclosure requirements of ASC Topic 260, “Earnings Per Share.” Net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common stock outstanding during the period, excluding common stock subject to forfeiture. Weighted average shares were reduced for the effect of an aggregate of shares of Class B Common Stock that are subject to forfeiture if the over-allotment option is not exercised by the underwriters (see Note 6). At March 31, 2024 and 2023, the Company did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into common stock and then share in the earnings of the Company. As a result, diluted income (loss) per share is the same as basic income (loss) per share for the periods presented.
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| For
the three months ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Net income | $ | $ | ||||||
| Accretion of carrying value to redemption value | ( | ) | ||||||
| Net income including accretion of carrying value to redemption value | $ | ( | ) | $ | ||||
| Redeemable Common Stock | Non- Redeemable Common Stock | Redeemable Common Stock | Non-Redeemable Common Stock | |||||||||||||
| Basic and diluted net income(loss) per share: | ||||||||||||||||
| Numerators: | ||||||||||||||||
| Allocation of net income(loss) including carrying value to redemption value | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Accretion of carrying value to redemption value | ( | ) | ||||||||||||||
| Allocation of net income | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Denominators: | ||||||||||||||||
| Weighted-average shares outstanding | ||||||||||||||||
| Basic and diluted net income(loss) per share | $ | $ | ) | $ | $ | ) | ||||||||||
Concentration of Credit Risk
Financial
instruments that potentially subject to concentration of credit risk consist of cash and cash held in trust. Cash is comprised of cash
balances with banks and bank deposits, which are insured by the Federal Deposit Insurance Company (“FDIC”), up to $
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the accompanying unaudited condensed balance sheets, primarily due to their short-term nature.
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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. |
The following table presents information about the Company’s financial assets that are measured at fair value on a recurring basis as of March 31, 2024 and December 31, 2023:
| Level | March 31, 2024 | December 31, 2023 | ||||||||||
| Assets: | ||||||||||||
| Cash and marketable securities held in trust account | 1 | $ | $ | |||||||||
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.” Derivative instruments are initially recorded at fair value on the grant date and re-valued at each reporting date, with changes in the fair value reported in the unaudited condensed statements of operations. Derivative assets and liabilities are classified in the unaudited condensed balance sheets 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 unaudited condensed balance sheets date. The Company accounts for the Warrants in accordance with the guidance contained in ASC 815-40. The Company has determined that the Warrants qualify for equity treatment in the Company’s unaudited condensed financial statements.
Recent Accounting Standards
The Company’s management does not believe that any recently issued, but not yet effective, accounting standards updates, if currently adopted, would have a material effect on the accompanying unaudited condensed financial statements.
Risks and Uncertainties
Management has evaluated the impact of the COVID-19 pandemic 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 unaudited condensed financial statements. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Furthermore, sustained uncertainty about, or worsening of, geopolitical tensions, including further escalation of the war between Russia and Ukraine, further escalation of the conflict between the State of Israel and Hamas, as well as further escalation of tensions between the State of Israel and various countries in the Middle East and North Africa, could result in a global economic slowdown and long-term changes to global trade. As a result, 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. Further, 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 these events 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 unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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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 holders, 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.
At
this time, it has been determined that the IR Act tax provisions would have an impact to the Company’s fiscal 2023 tax
provision as there were redemptions by the public stockholders in April 2023 and December 2023; as a result, the Company recorded
$
NOTE 3. INITIAL PUBLIC OFFERING
Pursuant
to the Initial Public Offering, the Company offered for sale up to Units at a purchase price of $ per Unit. Each Unit
consists of one share of Class A common stock and one redeemable warrant (“Public Warrant”). Each Public Warrant will entitle
the holder to purchase one share of Class A common stock at an exercise price of $
NOTE 4. PRIVATE PLACEMENT
The
Sponsor purchased an aggregate of placement units at a price of $ per unit, for an aggregate purchase price of $
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NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
On
October 17, 2021, the Sponsor purchased Founder Shares for an aggregate purchase price of $
The initial stockholders have agreed not to transfer, assign or sell any of the Class B common stock (except to certain permitted transferees as disclosed herein) until, with respect to any of the Class B 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.
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 6, 2023, the Company issued a promissory note (the “Promissory Note”) in the principal amount of $
As
described in Note 1, on December 18, 2023, the Company approved the Extension Amendment and the Trust Amendment to allow the Company
to extend the deadline from January 24, 2024 to January 24, 2025, or such earlier date as
determined by the board of directors, pursuant to twelve one-month extensions, which we refer to as the “Extension,” and
such later date, the “Extended Date,” provided that (i) the Sponsor, or its affiliates or permitted designees will
deposit into the Trust Account the lesser of (x) $
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Convertible Note Purchase Agreement
On
July 6, 2023, DUET Partners LLC (the “Sponsor”) and Fenix entered into a convertible note purchase agreement (the “Note
Purchase Agreement”), pursuant to which Fenix agreed to loan $
The Note Purchase Agreement contains customary representations, warranties, conditions and indemnification obligations by each party thereto. The representations and warranties contained therein were made only for the purposes of the Note Purchase Agreement, and as of specific dates, were solely for the benefit of the parties to such agreement and are subject to certain limitations set forth therein.
The Fenix Notes are due and payable by the Sponsor upon the closing of the Proposed Business Combination between the Company and Fenix (the “Maturity Date”). The Fenix Notes are convertible into common stocks of the Company pursuant to terms that will be set forth in the Definitive Agreement. The Fenix Notes will be cancelled and the principal amount of the loans disbursed by the Sponsor to the Company (as described below in the section titled “Promissory Note”) shall be forgiven, and the balance of the principal amount of the Fenix Notes not disbursed by the Sponsor to the Company will be returned to Fenix (i) in the event that a Definitive Agreement is not signed by July 31, 2023 or such later date that may be mutually agreed between the parties), (ii) if a Definitive Agreement is entered into and then subsequently terminated by the Company, or (iii) if the PCAOB audited financial statements of Fenix have not been delivered by the date mutually agreed between the parties and stipulated in the Business Combination Agreement.
The issuance of the Fenix Notes will be made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended.
Administrative Services Arrangement
The
Company’s Sponsor has agreed, commencing from the date that the Company’s securities are first listed on Nasdaq through the
earlier of the Company’s consummation of a Business Combination and its liquidation, to make available to the Company certain general
and administrative services, including office space, utilities and administrative services, as the Company may require from time to time.
The Company has agreed to pay to the Sponsor $
NOTE 6. COMMITMENTS AND CONTINGENCIES
Registration Rights
The holders of the Founder Shares, Private Placement Units and warrants that may be issued upon conversion of Working Capital Loans (and any shares of common stocks issuable upon the exercise of the Private Placement Warrants or warrants issued upon conversion of the Working Capital Loans and upon conversion of the Founder Shares) 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 (in the case of the Founder Shares, only after conversion to shares of Class A common stocks). 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.
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Underwriting Agreement
The
Company granted the underwriters a 45-day option to purchase up to an additional
The
underwriters were entitled to a cash underwriting discount of one and one-half percent (
Additionally, shares of our Class A common stock were issued to the underwriter upon the closing of Initial Public Offering.
NOTE 7. STOCKHOLDERS’ DEFICIT
Class A Common Stock — Our amended and restated memorandum and articles of association authorize the Company to issue shares of Class A common stock with a par value of $ per share. Holders of the Company’s Class A common stock is entitled to one vote for each share. On March 31, 2024 and December 31, 2023, there were shares of Class A Common Stock issued and outstanding, excluding shares of Class A Common Stock subject to possible redemption.
Class B Common Stock — The Company is authorized to issue shares of Class B common stock with a par value of $ per share. Holders of the Company’s Class B common stock are entitled to one vote for each share. As of March 31, 2024 and December 31, 2023, there were shares of Class B common stock issued and outstanding, such that the Initial Stockholders will maintain ownership of at least 20% of the issued and outstanding shares after the Initial Public Offering.
Preferred Shares — The Company is authorized to issue preferred shares with a par value of $ per share with such designation, rights and preferences as may be determined from time to time by the Company’s Board of Directors. At March 31, 2024 and December 31, 2023, there were preferred shares issued or outstanding.
Warrants — Public Warrants may only be exercised for a whole number of shares. No fractional warrants will be issued upon separation of the Units and only whole warrants will trade. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination and (b) 12 months from the closing of the Initial Public Offering. The Public Warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.
The Company will not be obligated to deliver any shares of Class A common stocks pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act covering the issuance of the shares of Class A common stocks issuable upon exercise of the warrants is then effective and a current prospectus relating to those shares of Class A common stocks is available, subject to the Company satisfying its obligations with respect to registration, or a valid exemption from registration is available. No warrant will be exercisable for cash or on a cashless basis, and the Company will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of residence of the exercising holder, or an exemption from registration is available.
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The Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of a Business Combination, the Company will use its commercially reasonable efforts to file, and within 60 business days following a Business Combination to have declared effective, a registration statement covering the issuance of the shares of Class A common stocks issuable upon exercise of the warrants and to maintain a current prospectus relating to those shares of Class A common stocks until the warrants expire or are redeemed. Notwithstanding the above, if the Class A common stocks is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement, but will use its commercially reasonable efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
Redemption
of Warrants When the Price per Share of Class A Common Stock Equals or Exceeds $
| ● | in whole and not in part; | |
| ● | at a price of $ per Public Warrant; | |
| ● | upon a minimum of 30 days’ prior written notice of redemption, or the 30-day redemption period to each warrant holder; and | |
| ● | if,
and only if, the last reported sale price of the Class A Common Stock equals or exceeds $ |
If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
If the Company calls the Public Warrants for redemption, as described above, its management will have the option to require any holder that wishes to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of common stocks issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. However, except as described below, the Public Warrants will not be adjusted for issuances of common stocks at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the Public Warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of Public Warrants will not receive any of such funds with respect to their Public Warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such Public Warrants. Accordingly, the Public Warrants may expire worthless.
The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering.
NOTE 8. SUBSEQUENT EVENTS
In accordance with ASC Topic 855, “Subsequent Events”, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued, the Company has evaluated all events or transactions that occurred after the balance sheet date. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements other than what is listed below:
On
April 24, 2024, the Company caused to be deposited $
On May
6, 2024, as previously disclosed, the Company received a written notice (the “Notice”) from the Listing Qualifications Department
(the “Staff”) of Nasdaq notifying the Company that, for the last 30 consecutive business days, the Company’s Market
Value of Listed Securities (“MVLS”) was below the minimum of $
The Notice
provided that, in accordance with Nasdaq Listing Rule 5810(c)(3)(C) (the “Compliance Period Rule”), the Company has a period
of 180 calendar days from the date of the Notice, or until November 5, 2024 (the “Compliance Date”), to regain compliance
with the Market Value Standard. During this period, the Company’s securities will continue to trade on The Nasdaq Global Market.
If at any time before the Compliance Date the Company’s MVLS closes at or above $
If the Company does not regain compliance with the Market Value Standard by the Compliance Date, the Staff will provide a written notification to the Company that its securities are subject to delisting. At that time, the Company may appeal the Staff’s delisting determination to a Hearings Panel (the “Panel”). However, there can be no assurance that, if the Company receives a delisting notice and appeals the delisting determination by the Staff to the Panel, such appeal would be successful.
The Company intends to monitor its MVLS between now and the Compliance Date, and may, if appropriate, evaluate available options to resolve the deficiency under the Market Value Standard and regain compliance with the Market Value Standard. Additionally, the Company may consider applying to transfer the listing of its securities to The Nasdaq Capital Market (provided that it then satisfies the requirements for continued listing on that market). However, there can be no assurance that the Company will be able to regain or maintain compliance with Nasdaq listing criteria.
On
May 7, 2024, DUET Acquisition Corp., a Delaware corporation (the “Company”) caused to be deposited $
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
References to the “Company,” “us,” “our” or “we” refer to DUET Acquisition Corp. 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 Form 10-Q including, without limitation, statements under “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 Form 10-Q, 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, including, but not limited to:
| ● | our ability to complete our initial business combination; | |
| ● | our success in retaining or recruiting, or changes required in, our officers, key employees or directors following our initial business combination; | |
| ● | our officers and directors allocating their time to other businesses and potentially having conflicts of interest with our business or in approving our initial business combination, as a result of which they would then receive expense reimbursements; | |
| ● | our ability to implement business plans, forecasts, and other expectations regarding the target business after the completion of our initial business combination; | |
| ● | the ability of our officers and directors to generate a number of potential acquisition opportunities; | |
| ● | our pool of prospective target businesses; | |
| ● | our public securities’ potential liquidity and trading; | |
| ● | the lack of a market for our securities; | |
| ● | our continued liquidity and our ability to continue as a going concern; | |
| ● | the use of proceeds not held in the trust account or available to us from interest income on the trust account balance; or | |
| ● | our financial performance. |
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 Form 10-K. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
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Overview
The Company is a blank check company formed under the laws of the State of Delaware on September 20, 2021 for the purpose of effecting a merger, share exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. The Company intends to effectuate its initial business combination using cash from the proceeds of its initial public offering (the “Initial Public Offering”) and the private placement consummated in connection therewith (the “Private Placement”), the proceeds of the sale of our securities in connection with our initial business combination, our shares, debt or a combination of cash, stock and debt.
The issuance of additional shares in connection with an initial business combination to the owners of the target or other investors:
| ● | may significantly dilute the equity interest of investors, which dilution would increase if the anti-dilution provisions in the Class B Common Stock resulted in the issuance of Class A Common Stock on a greater than one-to-one basis upon conversion of the Class B Common Stock; | |
| ● | may subordinate the rights of holders of our common stock if preferred stock is issued with rights senior to those afforded our common stock; | |
| ● | could cause a change in control if a substantial number of shares of our common stock is issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors; | |
| ● | may have the effect of delaying or preventing a change of control of us by diluting the stock ownership or voting rights of a person seeking to obtain control of us; and | |
| ● | may adversely affect prevailing market prices for our Class A Common Stock and/or warrants. |
Similarly, if we issue debt securities or otherwise incur significant debt to bank or other lenders or the owners of a target, it could result in:
| ● | default and foreclosure on our assets if our operating revenues after an initial business combination are insufficient to repay our debt obligations; | |
| ● | acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant; | |
| ● | our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand; | |
| ● | our inability to obtain necessary additional financing if the debt security contains covenants restricting our ability to obtain such financing while the debt security is outstanding; | |
| ● | our inability to pay dividends on our common stock; | |
| ● | using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our common stock if declared, our ability to pay expenses, make capital expenditures and acquisitions, and fund other general corporate purposes; | |
| ● | limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate; | |
| ● | increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; | |
| ● | limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, and execution of our strategy; and | |
| ● | other purposes and other disadvantages compared to our competitors who have less debt. |
We expect to continue to incur significant costs in the pursuit of our initial business combination plans. We cannot assure you that our plans to raise capital or to complete our initial business combination will be successful.
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Termination of the Merger Agreement
As previously disclosed, on July 25, 2022, the Company entered into a definitive Business Combination Agreement and Plan of Merger (the “Merger Agreement”) with Millymont Limited, a private limited company incorporated in Ireland (“Holdco”), Duet Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of Holdco, J. Streicher Technical Services, LLC, a Delaware limited liability company, Anteco Systems, S.L., trading as AnyTech365, a company incorporated in Spain and registered at the Commercial Registry of Malaga under reference MA-122108, Miguel Ángel Casales Ruiz and Thomas Marco Balsloev, as the sellers’ representatives, and Lee Keat Hin, as the Company’s representative.
On April 6, 2023, the Company provided the other parties with written notice of the termination of the Merger Agreement pursuant to Section 11.1 thereof (the “Termination”). No party will be required to pay another party a termination fee as a result of the Termination.
The termination of the Merger Agreement also terminates and makes void the Support Agreement, the Non-Competition and Non-Solicitation Agreement, and the Lock-up Agreement (each as defined in the Merger Agreement), each of which were executed concurrently with the Merger Agreement.
Business Combination Period
At a special meeting of the Company’s stockholders held on April 19, 2023, the stockholders of the Company approved the First Amendment to the Amended and Restated Certificate of Incorporation of the Company, giving the Company the right to extend the date by which the Company must (i) consummate a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination involving the Company and one or more businesses, (ii) cease its operations if it fails to complete such business combination, and (iii) redeem or repurchase 100% of the Company’s Class A Common Stock included as part of the units sold in the Initial Public Offering (the “Business Combination Period”) from April 24, 2023 up to nine (9) one-month extensions to January 24, 2024. In connection with approval of the First Amendment to the Amended and Restated Certificate of Incorporation of the Company, DUET Partners LLC (the “Sponsor”) caused $175,000 to be deposited in the Trust Account. On October 13, 2023, DUET Acquisition Corp., a Delaware corporation (the “Company”), caused to be deposited $175,000 into the Company’s trust account, representing approximately $0.03 per public share, allowing the Company to extend the period of time it has to consummate its initial business combination by one month from October 24, 2023 to November 24, 2023 (the “Monthly Extension”). The Monthly Extension is the seventh of up to nine monthly extensions permitted under the Company’s Amended and Restated Certificate of Incorporation, as amended.
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On December 18, 2023, the Company held a virtual special meeting of its stockholders (the “Special Meeting”). At the Special Meeting, The Stockholders approved the Charter Amendment at the Special Meeting, changing (A) the structure and cost of the Company’s right to extend the Deadline Date (the “Extension Amendment Proposal”), and (B) the right of the holders of the Company’s Class B common stock, par value $0.0001 per share (the “Class B Common Stock” or “Founder Shares”) to convert such shares of Class B Common Stock into shares of Class A Common Stock, par value $0.0001 per share (“Class A Common Stock”) on a one-to-one basis at the election of such holders (the “Founder Share Amendment Proposal”); and (C) the right of the directors of the Company to take any action required to be taken at a meeting of the board of directors (the “Board”) or at a meeting of a committee thereof without holding such a meeting if a consent in writing, setting forth the actions to be taken, is signed by a majority of the Board or a majority of the members of any committee, as the case may be (the “Action by Written Consent Amendment Proposal” and, together with the Founder Share Amendment Proposal, the “Additional Charter Amendment Proposals”).
In connection with the approval of the Extension Amendment Proposal and the Trust Amendment Proposal at the Special Meeting, holders of 3,760,678 shares of the Company’s Class A Common Stock exercised their right to redeem those shares for cash at an approximate price of $10.95 per share, for an aggregate of approximately $41.2 million. Following the payment of the redemptions, the Trust Account will have a balance of approximately $14.1 million before the Extension Payment.
The Charter Amendment allows the Company to extend through January 24, 2025 (or until the business combination is consummated, if earlier) the Deadline Date, provided that (i) by the 24th calendar day of each of such thirteen months unless the Company’s initial business combination has been consummated earlier and in exchange for a non-interest bearing, unsecured promissory note payable upon consummation of the business combination, DUET Partners, LLC, the Company’s sponsor, or its affiliates or permitted designees deposits into the Trust Account the lesser of (x) $40,000 or (y) $0.04 per share for each public share that was not redeemed in connection with the Special Meeting, and (ii) the procedures relating to any such Extension, as set forth in the Trust Agreement, as amended by the Trust Amendment, shall have been complied with.
On December 19, 2023, the Company deposited two payments in an aggregate of $80,000 (the “Extension Payment”) into the Trust Account, which enables the Company to extend the period of time it has to consummate its initial business combination by two months from December 24, 2023 to February 24, 2024. On February 16, 2024, the Company caused to be deposited $40,000 into the Company’s trust account, allowing the Company to extend the period of time it has to consummate its initial business combination by one month from February 24, 2024 to March 24, 2024. On March 19, 2024, the Company caused to be deposited $40,000 into the Company’s trust account, allowing the Company to extend the period of time it has to consummate its initial business combination by one month from March 24, 2024 to April 24, 2024. On April 24, 2024, the Company caused to be deposited $40,000 into the Company’s trust account, allowing the Company to extend the period of time it has to consummate its initial business combination by one month from April 24, 2024 to May 24, 2024. The foregoing extensions are permitted under the Company’s governing documents. On May 7, 2024, DUET Acquisition Corp., a Delaware corporation (the “Company”) caused to be deposited $40,000 into the Company’s trust account, allowing the Company to extend the period of time it has to consummate its initial business combination by one month from May 24, 2024 to June 24, 2024 (the “May Extension”). The May Extension is permitted under the Company’s governing documents.
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Business Combination Agreement
As previously disclosed, the Company entered into a binding letter of intent with Fenix 360 Pte. Ltd., a Singapore private company limited by shares (the “Target”), on July 6, 2023, pursuant to which DUET agreed to acquire all of the outstanding equity interests of the Target. On November 28, 2023, DUET and the Target entered into a definitive Business Combination Agreement and Plan of Merger (the “Business Combination Agreement”). DUET and the Target are sometimes referred to this Quarterly Report on Form 10-Q, individually, as a “Party” and, collectively, as the “Parties.”
Domestication
Pursuant to and upon the closing (the “Closing”) of the transactions contemplated in the Business Combination Agreement (collectively, the “Business Combination”), the Company will transfer by way of continuation from the State of Delaware to the Cayman Islands and domesticate (the “Domestication”) as a Cayman Islands exempted company limited by shares in accordance with Section 390 of the Delaware General Corporation Law, as amended, and Part XII of the Cayman Islands Companies Act, as amended (the “Cayman Companies Act”).
In connection with the Domestication, (a) each share of DUET’s Class A common stock, par value $0.0001 per share (the “Class A Common Stock”), that is issued and outstanding immediately prior to the Domestication shall become one ordinary share of DUET (the “DUET Ordinary Shares”), (b) each share of DUET’s Class B common stock, par value $0.0001 per share (the “Class B Common Stock”), that is issued and outstanding immediately prior to the Domestication shall become one DUET Ordinary Share, (c) each warrant of DUET that is outstanding immediately prior to the Domestication shall, from and after the Domestication, represent the right to purchase one DUET Ordinary Share at an exercise price of $11.50 per share on the terms and subject to the conditions set forth in the Warrant Agreement, dated January 19, 2022 by and between DUET and Continental Stock Transfer & Trust Company, and (d) the governing documents of DUET shall be amended and restated in the form of the amended and restated memorandum and articles of association of DUET in a form to be mutually agreed between the Parties (the “DUET A&R Charter”), and, as so amended and restated, the DUET A&R Charter will be the memorandum and articles of association of DUET until thereafter amended in accordance with the terms thereof and the Cayman Companies Act.
Business Combination
Pursuant to the Business Combination Agreement, as consideration for the Business Combination, the shareholders of the Target (each, a “Target Shareholder” and, together, the “Target Shareholders”) are entitled to receive an aggregate of 61,000,000 DUET Ordinary Shares, valued at $10.00 per share for an aggregate value equal to $610,000,000. Each Target Shareholder will be entitled to receive, in accordance with terms of the Business Combination Agreement, one DUET Ordinary Share for each share of the Target (the “Target Ordinary Shares”) held by such Target Shareholder (the “Exchange Consideration”). As of the Effective Time (as defined in the Business Combination Agreement), each Target Shareholder, upon receiving the Exchange Consideration, shall cease to have any other rights in and to the Target.
Upon the terms and subject to the conditions of the Business Combination Agreement, at or prior to the Closing, each Target Shareholder will deliver to Continental Stock Transfer & Trust Company (the “Exchange Agent”) a share exchange agreement in the form mutually agreed to between the Parties (a “Share Exchange Agreement”) that has been duly executed by that Target Shareholder, surrender any original certificates for the Target Ordinary Shares held by such Target Shareholder, and deliver such other documents reasonably requested by DUET. In exchange, DUET will issue and cause the Exchange Agent to deliver to each Target Shareholder the amount of DUET Ordinary Shares due to such Target Shareholder pursuant to the Business Combination Agreement.
Representations and Warranties; Covenants
Pursuant to the Business Combination Agreement, the Parties made customary representations and warranties for transactions of this type. The Business Combination Agreement includes certain covenants that are customary for transactions of this type, including obligations of the Parties to use reasonable best efforts to operate their respective businesses in the ordinary course and to refrain from taking certain specified actions without the prior written consent of the applicable party, in each case, subject to certain exceptions and qualifications. The Parties have agreed not to solicit, negotiate, or enter into a competing transaction. Additionally, the Target has agreed to certain other covenants, including to (a) deliver the PCAOB Financials (as defined in the Business Combination Agreement) to DUET no later than December 11, 2023, or such other date as may be agreed upon by the parties, (b) conclude investigations, examinations and diligence with respect to certain agreed-upon items by December 12, 2023 (the “Due Diligence Period”), and (c) onboard certain employees of one of the Target’s primary software developers. The covenants in the Business Combination Agreement generally will not survive the Closing, subject to certain exceptions, including certain covenants and agreements that by their terms are to be performed in whole or in part after the Closing.
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Reserve Against Certain Liabilities
Certain of the Target Shareholders (the “Legacy Shareholders”) are to deposit with the Escrow Agent at Closing their pro rata portion of an aggregate of 4,500,000 DUET Ordinary Shares otherwise issuable to the Legacy Shareholders as Exchange Consideration (the “Escrow Shares”). The Escrow Shares are subject to a quarterly release following the Closing and are reserved to cover losses arising out of or in connection with the Target’s rescission plan for tokens that were issued by management of the Target, any pending or threatened legal proceedings required to be disclosed by the Target, and any other matters mutually agreed upon by the Parties (collectively, the “Covered Matters”). To the extent the Target incurs losses based on an action against the Target or its affiliates by any third party with respect to the Covered Matters, the Legacy Shareholders consent to and agree to reasonably and promptly allow the post-Closing company to redeem an aggregate number of Escrow Shares with a value equal to the amount of such loss incurred by the post-Closing company therefrom, with the value of the Escrow Shares to be determined using the 5-Day VWAP of the DUET Ordinary Shares.
Conditions to Obligations of Both Parties at Closing
The obligations of the Parties to consummate the Business Combination are subject to the satisfaction of the following conditions, any one or more of which may be waived by in writing by either or both of the Parties: (a) DUET stockholder approval of the Business Combination has been obtained; (b) all of the Target Shareholders have submitted a Share Exchange Agreement and have exchanged all of the Target Ordinary Shares for the DUET Ordinary Shares in accordance with the terms of the Business Combination Agreement no later than the date of the DUET Stockholders’ Meeting (defined below); (c) the Proxy/Registration Statement (as defined below) shall have become effective under the Securities Act of 1933, as amended (the “Securities Act”), and no stop order suspending the effectiveness of the Proxy/Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the U.S. Securities and Exchange Commission (the “SEC”) and not withdrawn; (d) the Nasdaq Stock Market LLC (“Nasdaq”) shall have completed its review of the “Listing of Additional Shares Notification Form” filed by DUET with Nasdaq with respect to the DUET Ordinary Shares to be issued in connection with the Business Combination; (e) no Exchange Objection (as defined in the Business Combination Agreement) shall have been raised, or any such Exchange Objection which has been raised shall have been addressed; (f) no federal, state, provincial, municipal, local or foreign government, governmental authority, taxing, regulatory or administrative agency, governmental commission, department, board, bureau, agency or instrumentality, court or tribunal (“Governmental Authority”) shall have enacted, issued, promulgated, enforced or entered any statute, law, ordinance, rule, order, or regulation (“Law”) that is then in effect and which has the effect of making the Business Combination illegal or which otherwise prevents or prohibits consummation of the Business Combination, other than any such restraint that is immaterial, or for which the relevant Governmental Authority does not have jurisdiction over either of the parties hereto with respect to the Business Combination; and (g) all Closing deliverables required under the Business Combination Agreement have been provided.
Conditions to Obligations of DUET at Closing
Pursuant to the Business Combination Agreement, the obligations of DUET to consummate, or cause to be consummated, the Business Combination are subject to the satisfaction of the following additional conditions, any one or more of which may be waived in writing by DUET: (a)(i) the representations and warranties of the Target regarding the capitalization of the Target are true and correct in all respects of the date of the Closing except with respect to such representations and warranties speaking to an earlier date, which shall be true and correct at and as of such date, subject to changes made to the Business Combination Agreement, (ii) the Target’s Fundamental Representations (as defined in the Business Combination Agreement) other than those regarding the capitalization of the Target shall be true and correct as of the date of the Closing, subject to certain qualifications and exceptions, and (iii) each of the representations and warranties of the Target other than the Target’s Fundamental Representations shall be true and correct as of the date of the Closing, subject to certain qualifications and exceptions; (b) each of the covenants of the Target to be performed as of or prior to the Closing shall have been performed in all material respects; (c) there shall not have occurred a Company Material Adverse Effect (as defined in the Business Combination Agreement); (d) each of the Restrictive Covenant Agreements (as defined in the Business Combination Agreement) with each of the Key Executives (as defined in the Business Combination Agreement) shall be in full force and effect at Closing; (e) the Target’s unaudited consolidated statement of financial positions and consolidated statements of comprehensive income, changes in equity and cash flows of the Target and its Subsidiaries as of and for the nine-month period ended September 30, 2023, which comply with the applicable accounting requirements and with the rules and regulations of the SEC, the Exchange Act and the Securities Act applicable to a registrant shall have been provided; and (f) all closing deliveries required by the Business Combination Agreement shall have been delivered.
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Conditions to Obligations of the Target at Closing
The obligation of the Target to consummate is subject to the satisfaction of the following additional conditions, any one or more of which may be waived in writing by the Target: (a) subject to certain qualifications and exceptions in each: (i) the representations and warranties of DUET regarding the capitalization of DUET shall be true and correct as of the Closing, (ii) DUET’s Fundamental Representations (as defined in the Business Combination Agreement) other than those regarding the capitalization of DUET shall be materially true and correct as of date of the Closing, subject to certain exceptions, and (iii) each of the representations and warranties of DUET contained in the Business Combination Agreement other than those regarding organization, due authorization, absence of changes, capitalization, and brokers’ fees shall be true and correct as of Closing; (b) the Class A Common Stock shall remain listed on the Nasdaq Global Market; and (c) each of the covenants of DUET to be performed as of or prior to the Closing shall have materially been performed.
Termination
The Business Combination Agreement may be terminated and the transactions therein may be abandoned: (a) by DUET pursuant to a failure of the Target to deliver timely the PCAOB Financials, or comply with the requests of DUET during the Due Diligence Period; (b) by DUET if the Proxy/Registration Statement is not declared effective or such effectiveness is materially delayed due to any action or omission by the Target; (c) by the Target if DUET is de-listed from the Nasdaq Global Market for any reason other than a breach by the Target or Legacy Shareholders of obligations to the Business Combination Agreement; (d) by mutual written consent of all Parties; (e) by DUET or the Target if any Governmental Authority shall have enacted, issued, promulgated, enforced or entered any Law or order that is then in effect and which has the effect of making the Business Combination illegal or which otherwise prevents or prohibits their consummation; (f) by DUET if (i) there is a breach of any representation, warranty, covenant or agreement on the part of the Target, such that the conditions obligating DUET to close would not be satisfied, subject to a 30 day cure period for the Target, or (ii) the Closing has not occurred on or before the date on which the DUET charter expires and the Parties agree it shall not be extended (the “Agreement End Date”), unless DUET is in material breach of the Business Combination Agreement; (g) by DUET if the original certificates for the Target duly endorsed for transfer to DUET have not been submitted for exchange along with duly executed Share Exchange Agreements from the Target Shareholders by the date of the DUET Stockholders’ Meeting; (h) by the Target by written notice to DUET if (i) there is any breach of any representation, warranty, covenant or agreement on the part DUET set forth in the Business Combination Agreement, such that the conditions obligating the Target to close would not be satisfied at Closing, subject to a 30 day cure period for DUET upon notice, or (ii) the Closing has not occurred on or before the Agreement End Date, unless the Target is in material breach of the Business Combination Agreement; or (i) if the resolution of outstanding accrued underwriting fees payable to EF Hutton, division of Benchmark Investments LLC, are not resolved, in a manner satisfactory to both DUET and the Target before the Closing. In the event the Business Combination Agreement is terminated pursuant to (a), (b) or (f) above, the Target shall pay DUET $3,500,000 within 10 days of such termination.
The foregoing description of the Business Combination Agreement does not purport to be complete and is qualified in its entirety by the full text of the Business Combination Agreement, which is filed as Exhibit 2.1 hereto and incorporated herein by reference.
Convertible Note Purchase Agreement
On July 6, 2023, DUET Partners LLC (the “Sponsor”) and Fenix entered into a convertible note purchase agreement (the “Note Purchase Agreement”), pursuant to which Fenix agreed to loan $200,000 to the Sponsor at the signing of the Letter of Intent and an additional $800,000 at the signing of the Definitive Agreement. In addition, in order to finance any further extensions in connection with the Proposed Business Combination, Fenix shall at its discretion, loan funds as may be required up to another $500,000. The Sponsor will sell and issue to Fenix one or more unsecured, non-interest-bearing notes in connection with the aforementioned loans, with an aggregate principal amount of up to $1,500,000 (the “Fenix Notes”).
The Note Purchase Agreement contains customary representations, warranties, conditions and indemnification obligations by each party thereto. The representations and warranties contained therein were made only for the purposes of the Note Purchase Agreement, and as of specific dates, were solely for the benefit of the parties to such agreement and are subject to certain limitations set forth therein.
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The Fenix Notes are due and payable by the Sponsor upon the closing of the Proposed Business Combination between the Company and Fenix (the “Maturity Date”). The Fenix Notes are convertible into common stocks of the Company pursuant to terms that will be set forth in the Definitive Agreement. The Fenix Notes will be cancelled and the principal amount of the loans disbursed by the Sponsor to the Company (as described below in the section titled “Promissory Note”) shall be forgiven, and the balance of the principal amount of the Fenix Notes not disbursed by the Sponsor to the Company will be returned to Fenix (i) in the event that a Definitive Agreement is not signed by July 31, 2023 (or such later date that may be mutually agreed between the parties), (ii) if a Definitive Agreement is entered into and then subsequently terminated by the Company, or (iii) if the PCAOB audited financial statements of Fenix have not been delivered by the date mutually agreed between the parties and stipulated in the Business Combination Agreement.
The issuance of the Fenix Notes will be made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended.
The foregoing descriptions of the Note Purchase Agreement and the Fenix Notes are summaries only and are qualified in their entirety by the full text of the Note Purchase Agreement and the form of the Fenix Notes which is attached to the Note Purchase Agreement, a copy of which is attached as Exhibit 10.2 hereto and is incorporated herein by reference.
Promissory Note
On July 6, 2023, the Company issued a promissory note (the “Promissory Note”) in the principal amount of $1,500,000 to the Sponsor. The Promissory Note was issued to provide the Company with additional working capital, and the funds provided in accordance therewith will not be deposited into the Company’s trust account. The Company issued the Promissory Note in consideration for a loan from the Sponsor to fund the Company’s extension costs and working capital requirements. The Promissory Note bears no interest and is due and payable upon the earlier to occur of (i) the date on which the Company’s initial business combination is consummated and (ii) the liquidation of the Company on or before July 23, 2023 (subject to the extension of the period in which the Company must complete its initial business combination pursuant to the Company’s governing documents, or such later liquidation date as may be approved by the Company’s stockholders). At the election of the Sponsor, the unpaid principal amount of the Promissory Note may be converted into units of the Company (the “Conversion Units”) and the total Conversion Units so issued shall be equal to: (x) the portion of the principal amount of the Promissory Note being converted divided by (y) the conversion price of ten dollars ($10.00), rounded up to the nearest whole number of Conversion Units.
The issuance of the Promissory Note was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended.
The foregoing description is a summary only and is qualified in its entirety by the full text of the Promissory Note, a copy of which is attached as Exhibit 10.3 hereto and is incorporated herein by reference.
NASDAQ Notice
On May 6, 2024, as previously disclosed, the Company received a written notice (the “Notice”) from the Listing Qualifications Department (the “Staff”) of Nasdaq notifying the Company that, for the last 30 consecutive business days, the Company’s Market Value of Listed Securities (“MVLS”) was below the minimum of $50 million required for continued listing on The Nasdaq Global Market pursuant to Nasdaq Listing Rule 5450(b)(2)(A) (the “Market Value Standard”). The Staff also noted that the Company does not meet the requirements under Nasdaq Listing Rule 5450(b)(3)(A) (the “Total Assets/Total Revenue Standard”). An indicator will be displayed with quotation information related to the Company’s securities on NASDAQ.com and NASDAQTrader.com and may be displayed by other third-party providers of market data information, however, the Notice does not impact the listing of the Company’s securities on The Nasdaq Global Market at this time.
The Notice provided that, in accordance with Nasdaq Listing Rule 5810(c)(3)(C) (the “Compliance Period Rule”), the Company has a period of 180 calendar days from the date of the Notice, or until November 5, 2024 (the “Compliance Date”), to regain compliance with the Market Value Standard. During this period, the Company’s securities will continue to trade on The Nasdaq Global Market. If at any time before the Compliance Date the Company’s MVLS closes at or above $50 million for a minimum of 10 consecutive business days as required under the Compliance Period Rule, the Staff will provide written notification to the Company that it has regained compliance with the Market Value Standard and will close the matter.
If the Company does not regain compliance with the Market Value Standard by the Compliance Date, the Staff will provide a written notification to the Company that its securities are subject to delisting. At that time, the Company may appeal the Staff’s delisting determination to a Hearings Panel (the “Panel”). However, there can be no assurance that, if the Company receives a delisting notice and appeals the delisting determination by the Staff to the Panel, such appeal would be successful.
The Company intends to monitor its MVLS between now and the Compliance Date, and may, if appropriate, evaluate available options to resolve the deficiency under the Market Value Standard and regain compliance with the Market Value Standard. Additionally, the Company may consider applying to transfer the listing of its securities to The Nasdaq Capital Market (provided that it then satisfies the requirements for continued listing on that market). However, there can be no assurance that the Company will be able to regain or maintain compliance with Nasdaq listing criteria.
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Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities from inception to March 31, 2024, were organizational activities, those necessary to prepare for the Initial Public Offering, identifying a target company for a business combination, and activities related to the Merger Agreement and the Termination. We do not expect to generate any operating revenues until after the completion of our business combination. We expect to generate non-operating income in the form of interest income on cash and marketable securities held after the Initial Public Offering. We expect that we will incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses in connection with completing a business combination.
For the three months ended March 31, 2024, we had a net income of $132,838, which consisted of formation and operating costs of $283,337, franchise tax cost of $32,640, income tax provision of $43,988 and interest earned on investments held of $492,803.
For the three-month period ended March 31, 2023, we had a net income of $225,923, which consisted of formation and operating costs of $434,519, franchise tax cost of $50,000, income tax provision of $175,561 and interest earned on investments held of $886,003.
Going Concern, Liquidity and Capital Resources
On February 18, 2022, we consummated our Initial Public Offering of 8,625,000 Units at a price of $10.00 per Unit, generating gross proceeds of $86,250,000. Simultaneously with the consummation of the Initial Public Offering, we completed the private placement of an aggregate of 390,000 units to our sponsor at a purchase price of $10.00 per private placement unit, generating total gross proceeds of $3,900,000.
For the three months ended March 31, 2024, cash used in operating activities was $190,375. For the three months ended March 31, 2023, cash used in operating activities was $219,186.
As of March 31, 2024 and December 31, 2023, we had investments of $14,448,590 and $13,979,449 held in the Trust Account, respectively. We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (less taxes paid and deferred underwriting commissions) to complete our initial business combination. We may withdraw interest to pay taxes. For the three months ended March 31, 2024 and 2023, we withdrew nil, respectively, from interest earned on the Trust Account to pay income tax and franchise tax. 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 March 31, 2024 and December 31, 2023, we had cash of $16,661 and $87,134 held outside of the Trust Account, respectively. We intend to use the funds held outside the Trust Account primarily 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 our initial business combination.
In order to fund working capital deficiencies or finance transaction costs in connection with our 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 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. Up to $1,500,000 of such loans may be convertible into units identical to the units issued in the Private Placement, at a price of $10.00 per unit at the option of the lender.
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We currently believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating our initial business combination are less than the actual amount necessary to do so, 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 consummation of our initial business combination, in which case we may issue additional securities or incur debt in connection with such 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. The accompanying unaudited condensed financial statements have been prepared in conformity with U.S. GAAP, which contemplates the continuation of the Company as a going concern and the realization of assets and the satisfaction of liabilities in the normal course of business. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty. Further, we have incurred and expect to continue to incur significant costs in pursuit of our financing and acquisition plans. Management plans to address this uncertainty during the period leading up to the business combination, however this cannot be guaranteed.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities which would be considered off-balance sheet arrangements. 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 any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or entered any non-financial assets.
Critical Accounting Policies
We have established accounting policies which conform to generally accepted accounting principles (“GAAP”) in the U.S. Preparing financial statements in conformity with GAAP requires management to use judgment in the application of accounting policies, including making estimates and assumptions. Following is a discussion of the estimates and assumptions used in setting accounting policies that we consider critical in the presentation of our financial statements. Many estimates and assumptions involved in the application of GAAP may have a material impact on our financial condition or operating performance, or on the comparability of such information to amounts reported for other periods, because of the subjectivity and judgment required to account for highly uncertain items or the susceptibility of such items to change. These estimates and assumptions affect the reported amounts covered by this report. If management’s judgment or interpretation of the facts and circumstances relating to various transactions had been different, it is possible that different accounting policies would have been applied or different amounts would have been recorded, thus resulting in a materially different presentation of the financial statements or materially different amounts being reported in the financial statements. Additionally, other companies may use different estimates and assumptions that may impact the comparability of our financial condition and results of operations to those companies.
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.
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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.
Class A Common Stock Subject to Possible Redemption
The Company accounts for its shares subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Shares subject to mandatory redemption (if any) are classified as a liability instrument and are measured at fair value. Conditionally redeemable shares of common stock (including shares of 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 Company’s control) are classified as temporary equity. At all other times, shares are classified as stockholders’ equity. The Company’s Class A 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, and is therefore classified as temporary equity on the unaudited condensed balance sheets.
If it is probable that the equity instrument will become redeemable, the Company has the option to either accrete changes in the redemption value over the period from the date of issuance (or from the date that it becomes probable that the instrument will become redeemable, if later) to the earliest redemption date of the instrument or to recognize changes in the redemption value immediately as they occur and adjust the carrying amount of the instrument to equal the redemption value at the end of each reporting period. The Company has elected to recognize the changes immediately. The accretion or remeasurement is treated as a deemed dividend (i.e., a reduction to retained earnings, or in absence of retained earnings, additional paid-in capital).
Net income (loss) per share
The Company complies with accounting and disclosure requirements of ASC Topic 260, “Earnings Per Share.” Net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common stock outstanding during the period, excluding common stock subject to forfeiture. Weighted average shares are reduced for the effect of the Class B Common Stock that are subject to forfeiture if the over-allotment option is not exercised by the underwriters. Diluted income (loss) per share is calculated by taking into account any dilutive securities and other contracts that could, potentially, be exercised or converted into common stock and then share in the earnings of the Company. If none, diluted income (loss) per share is the same as basic income (loss) per share for the periods presented. Accretion associated with the redeemable shares of Class A common stock is excluded from earnings per share as the redemption value approximates fair value as of the period presented.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay the Sponsor a monthly fee up to $10,000 for office space, utilities and secretarial and administrative support services. We began incurring these fees on January 25, 2022, and will continue to incur these fees monthly until the earlier of the completion of our initial business combination and our liquidation.
The underwriters are entitled to a deferred fee of $2,587,500 in the aggregate. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that we complete a business combination, subject to the terms of the underwriting agreement.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Following the consummation of the Initial Public Offering, the net proceeds of the Initial Public Offering, 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 do not believe that there will be an associated material exposure to interest rate risk.
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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 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 Co-Chief Executive Officers and our Chief Financial Officer, to allow timely decisions regarding required disclosure.
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our principal executive officers and principal financial and accounting 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 officers and principal financial and accounting officer have concluded that during the period covered by this report, our disclosure controls and procedures were effective at a reasonable assurance level and, accordingly, provided reasonable assurance that the information required to be disclosed by us in reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
Changes in Internal Controls over Financial Reporting
During the most recently completed fiscal quarter ended March 31, 2024, there were no changes in our internal controls over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
Factors that could cause our actual results to differ materially from those in this Quarterly Report include the risk factors described in our final prospectus for the Initial Public Offering filed with the SEC on January 24, 2022 and our Annual Report on Form 10-K for the year ended December 31, 2023. There have been no material changes to the risk factors disclosed in our final prospectus for the Initial Public Offering or our Annual Report on Form 10-K for the year ended December 31, 2023.
Item 2. Unregistered Sale of Equity Securities and Use of Proceeds.
(a) Unregistered Sales of Equity Securities
None.
(b) Use of Proceeds from the Public Offering
The securities sold in our initial public offering were registered under the Securities Act on a registration statement on Form S-1 (No. 333-261494), as amended. The SEC declared the registration statement effective on January 19, 2022. There have been no material changes to the planned use of proceeds from our initial public offering as described in our final prospectus dated January 19, 2022, filed with the SEC on January 21, 2022, and our other periodic reports previously filed with the SEC.
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(c) Purchase of Equity Securities by the Issuer and Affiliated Purchasers
None.
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.
EXHIBIT INDEX
| * | Filed herewith. |
| ** | Furnished herewith. |
| *** | Certain of the exhibits and schedules to this exhibit have been omitted in accordance with Regulation S-K Item 601(b)(2). The Company agrees to furnish supplementally a copy of all omitted exhibits and schedules to the SEC upon its request. |
| (1) | Incorporated by reference to the Company’s Form S-1, filed with the SEC on December 3, 2021. |
| (2) | Incorporated by reference to the Company’s Form 8-K, filed with the SEC on January 24, 2022. |
| (3) | Incorporated by reference to the Company’s Form 8-K, filed with the SEC on November 30, 2023. |
| (4) | Incorporated by reference to the Company’s Form 8-K, filed with the SEC on April 24, 2023. |
| (5) | Incorporated by reference to the Company’s Form 8-K, filed with the SEC on December 20, 2023. |
| (6) | Incorporated by reference to the Company’s Form 8-K, filed with the SEC on July 6, 2023. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| DUET ACQUISITION CORP. | ||
| Date: June 4, 2024 | By: | /s/ Dharmendra Magasvaran |
| Dharmendra Magasvaran | ||
| Co-Chief Executive Officer | ||
| Date: June 4, 2024 | By: | /s/ Lee Keat Hin |
| Lee Keat Hin | ||
| Chief Financial Officer | ||
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