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Distoken Acquisition (DIST) - 2024 Q4 - Annual Report
DISTDistoken Acquisition (DIST)2025-03-07 22:09

IPO and Trust Account - The company completed its initial public offering on February 17, 2023, raising gross proceeds of 69millionfromthesaleof6,900,000unitsat69 million from the sale of 6,900,000 units at 10.00 per unit[27]. - A total of 70.38millionfromtheIPOandprivateplacementproceedswasplacedinatrustaccount[28].−FollowingtheIPO,atotalof70.38 million from the IPO and private placement proceeds was placed in a trust account[28]. - Following the IPO, a total of 70,380,000 was placed in the trust account after accounting for transaction costs of 4,366,343[190].−AsofDecember31,2024,thecompanyhadinvestmentsheldinthetrustaccountamountingto4,366,343[190]. - As of December 31, 2024, the company had investments held in the trust account amounting to 7,456,639, including 684,021ofinterestincome[201].−Thecompanyhasapproximately684,021 of interest income[201]. - The company has approximately 7.46 million in its trust account as of December 31, 2024, available for business combinations, assuming no shareholder redemptions[77]. - Shareholders redeemed 3,018,308 ordinary shares for a total of approximately 31.9millionduringtheFirstExtensionAmendment[32].−Shareholdersredeemed3,229,522publicsharesforatotalof31.9 million during the First Extension Amendment[32]. - Shareholders redeemed 3,229,522 public shares for a total of 36.3 million, approximately 11.24pershare,duringtheSecondExtensionAmendment[169].−Thecompanyhasremoved11.24 per share, during the Second Extension Amendment[169]. - The company has removed 31.9 million from the trust account to pay redeeming shareholders during the First Extension Amendment[167]. - Public shareholders may redeem their shares for their pro rata share of the trust account, which is subject to taxes, regardless of their vote on the proposed business combination[99]. - If the initial business combination is not completed within the Combination Period, the company will redeem public shares at a per-share price based on the trust account balance, estimated at approximately 11.43[111].−Thecompany’sinitialshareholdershavewaivedtheirrightstoliquidatingdistributionsfromthetrustaccountconcerningtheirfoundersharesifthebusinesscombinationisnotcompleted[108].−Thecompanycannotassureshareholdersthattheactualper−shareredemptionamountwillnotbesubstantiallylessthantheestimatedvaluesduetopotentialcreditorclaims[111].−Ifthetrustaccountproceedsfallbelow11.43[111]. - The company’s initial shareholders have waived their rights to liquidating distributions from the trust account concerning their founder shares if the business combination is not completed[108]. - The company cannot assure shareholders that the actual per-share redemption amount will not be substantially less than the estimated values due to potential creditor claims[111]. - If the trust account proceeds fall below 10.20 per public share, the company cannot assure shareholders of the redemption price[114]. - Shareholders are entitled to receive funds from the trust account only upon the completion of the initial business combination or specific redemption events[117]. Business Combination Agreement - The company entered into a business combination agreement with Youlife on May 17, 2024, with a merger consideration of 700milliontobepaidinnewlyissuedPubcoshares[39][44].−ThemergerwillconvertYoulife′soutstandingsharesintoPubcoClassAandClassBOrdinaryShares,witheachsharevaluedat700 million to be paid in newly issued Pubco shares[39][44]. - The merger will convert Youlife's outstanding shares into Pubco Class A and Class B Ordinary Shares, with each share valued at 10.00[44]. - The Business Combination Agreement includes customary representations and warranties related to corporate matters, governmental approvals, and compliance with laws[50]. - The agreement stipulates that the parties must have at least 5,000,001innettangibleassetsasoftheClosing[58].−AShareholderSupportAgreementhasbeenexecuted,withshareholdersholdingapproximately69.15,000,001 in net tangible assets as of the Closing[58]. - A Shareholder Support Agreement has been executed, with shareholders holding approximately 69.1% of outstanding Youlife Ordinary Shares agreeing to vote in favor of the Business Combination[69]. - The Business Combination Agreement may be terminated if the Closing does not occur by March 31, 2025, with potential extensions available[61]. - The parties agreed to a lock-up period for Founder Shares commencing on the Closing Date and ending one year later, with early release conditions based on share price performance[66]. - The agreement includes non-competition and non-solicitation provisions for certain Youlife shareholders for a period of three years following the Closing[70]. - The obligations to consummate the Business Combination are subject to various conditions, including the absence of any Material Adverse Effect[59]. - The Sponsor agreed to pay all unpaid expenses exceeding 10,000,000 related to the Business Combination[57]. - The parties will jointly prepare and file a registration statement with the SEC for the issuance of securities related to the Business Combination[56]. - The Business Combination Agreement contains covenants regarding the operation of businesses in the ordinary course and the provision of financial statements[54]. Financial Performance and Projections - For the year ended December 31, 2024, the company reported a net income of 37,131,whichincludesinterestearnedoninvestmentsof37,131, which includes interest earned on investments of 1,956,597, offset by operating and formation costs of 1,775,606[185].−FortheyearendedDecember31,2023,thecompanyhadanetincomeof1,775,606[185]. - For the year ended December 31, 2023, the company had a net income of 1,304,731, consisting of interest earned on investments of 2,908,568,withoperatingandformationcostsof2,908,568, with operating and formation costs of 973,470[186]. - The company expects to incur significant costs in pursuing its acquisition plans, with no assurance of success in completing a business combination[165]. - The company has no long-term debt or off-balance sheet arrangements as of December 31, 2024[207][208]. Acquisition Strategy - The company aims to acquire growth businesses with a total enterprise value between 100millionand100 million and 200 million, targeting sectors significant to Asian markets such as e-commerce and online agricultural trading[14]. - The company seeks to acquire businesses with strong revenue and earnings growth potential, focusing on existing and new product development, increased production capacity, and expense reduction[14]. - The target businesses must have a fair market value equal to at least 80% of the trust account balance at the time of the business combination agreement[87]. - The company intends to structure business combinations to acquire 100% of the equity interests or assets of target businesses, ensuring a controlling interest[88]. - The management team believes their extensive relationships in Asia will facilitate the identification of target businesses with significant upside potential[75]. - The company may utilize cash, debt, or equity securities for business combinations, providing flexibility in structuring transactions[77]. - The company has engaged I-Bankers to assist in identifying potential business combinations, with a fee structure based on the gross proceeds of the initial public offering[79]. - The company will conduct extensive due diligence on potential target businesses, including meetings with management and financial reviews[85]. - The company recognizes that its status as a public entity may provide target businesses with a more certain and cost-effective route to becoming publicly traded compared to traditional IPOs[76]. - The company will not require an opinion from an investment banking firm regarding fair market value if the board determines compliance with the 80% threshold[92]. - The company expects to complete its business combination with a single target business, which may limit diversification and increase dependency on that business's performance[93]. - The company has set a net tangible asset threshold of 5,000,001toavoidbeingsubjecttoRule419,whichmaynecessitateseekingthird−partyfinancingforbusinesscombinations[97].ComplianceandRegulatoryMatters−ThecompanymustcomplywithNasdaq′s36MonthRequirementtoavoidsuspensionoftradinganddelisting[38].−ThecompanyhasreceivedadeficiencynoticefromNasdaqregardingnon−compliancewiththeminimumrequirementforthemarketvalueoflistedsecurities,whichwasbelowthe5,000,001 to avoid being subject to Rule 419, which may necessitate seeking third-party financing for business combinations[97]. Compliance and Regulatory Matters - The company must comply with Nasdaq's 36 Month Requirement to avoid suspension of trading and delisting[38]. - The company has received a deficiency notice from Nasdaq regarding non-compliance with the minimum requirement for the market value of listed securities, which was below the 50 million threshold for 32 consecutive business days[141]. - The company has a compliance period of 180 calendar days to regain compliance with the MVLS Requirement, which ends on July 7, 2025[142]. - If the company fails to regain compliance, its securities may be subject to delisting from Nasdaq, leading to reduced liquidity and trading price[143]. - The company has identified a material weakness in its internal control over financial reporting as of December 31, 2024, which could adversely affect investor confidence[139]. - The company is required to evaluate its internal control procedures under the Sarbanes-Oxley Act for the fiscal year ended December 31, 2024[130]. - The company is subject to risks related to cybersecurity incidents, which could have material adverse consequences on its business and lead to financial loss[148]. - The company has not independently verified the sponsor's ability to satisfy indemnity obligations, which may affect the trust account[115]. - The company has filed its amended and restated memorandum and articles of association, with the latest amendment on November 14, 2024[118]. - The company may seek to extend the Combination Period, requiring public shareholder approval, which could adversely affect the trust account[122]. Operational Matters - The company pays up to 10,000permonthforofficespaceandadministrativesupportservices,whichisconsideredadequateforitscurrentoperations[149].−Thecompanyhasenteredintoanewagreementwithavendorforlegalandconsultingservices,totaling10,000 per month for office space and administrative support services, which is considered adequate for its current operations[149]. - The company has entered into a new agreement with a vendor for legal and consulting services, totaling 500,000, with $950,000 additional payment contingent on the Business Combination closing[210]. - Management does not anticipate that the adoption of ASU 2023-09 will have a material impact on financial statements and disclosures[216]. - The company adopted ASU 2023-07, which requires enhanced disclosures regarding reportable segment expenses, effective for fiscal years beginning after December 15, 2023[217]. - The company evaluates financial instruments to determine if they qualify as derivatives, with changes in fair value reported in the statements of operations[213]. - Management reviews accounting estimates and judgments regularly to ensure compliance with U.S. GAAP, acknowledging inherent uncertainties[211]. - The company does not believe that any recently issued accounting standards will materially affect financial statements if adopted[218]. - Disclosure controls and procedures are in place to ensure timely reporting of required information under the Exchange Act[222]. - The company has not reported any changes or disagreements with accountants on accounting and financial disclosure[221].