Four Leaf Acquisition (FORL) - 2024 Q4 - Annual Report

Financial Condition and Capital Structure - As of December 31, 2024, the company had cash of $28,407 and a working capital deficit of$3,334,790, raising substantial doubt about its ability to continue as a going concern[83]. - The company had $974,028 available outside the trust account at the closing of the Initial Public Offering, but as of December 31, 2024, cash decreased to$28,407, necessitating borrowing of $2,195,100 from the Sponsor to fund operations[105]. - If the initial business combination is not completed by the deadline, public stockholders may only receive$10.40 per share or less[96]. - The company must redeem public shares at a price equal to the aggregate amount in the trust account, which may be less than $11.25 per share under certain circumstances[97]. - The per-share redemption amount could be reduced due to claims against the trust account, potentially resulting in stockholders receiving less than$11.25 per share[106]. - The trust account may be reduced below $11.25 per share if independent directors choose not to enforce indemnification obligations[110]. - The company may be required to liquidate if it cannot secure additional capital, which would limit stockholders' returns[105]. - The company generated approximately$3.58 million in gross proceeds from the sale of 3,576,900 Private Placement warrants at $1.00 each[189]. - Each Private Placement Warrant is exercisable to purchase one whole share of common stock at$11.50 per share[190]. Business Combination and Acquisition Strategy - The company intends to focus on identifying IoT companies for initial business combinations but may consider opportunities outside its management's expertise if attractive candidates are presented[126]. - The company may complete its initial business combination without public stockholder approval, depending on various factors[84]. - Initial stockholders have agreed to vote in favor of the initial business combination, requiring only 683,827 shares (25.1% of 2,722,903 Class A Common Stock) to be voted in favor for approval[85]. - The company may enter into business combinations with financially unstable entities, which could lead to volatile revenues and difficulties in retaining key personnel[134]. - The company is not required to obtain a fairness opinion for its business combinations, relying instead on its board's judgment for fair market value[135]. - The company must provide financial statements for target businesses, which may limit the pool of potential acquisition candidates[165]. - The company may structure its initial business combination such that it owns less than 100% of the target business, but must acquire at least 50% of the voting securities to avoid registration as an investment company[170]. - The company may issue shares in connection with the initial business combination at a price less than the prevailing market price, potentially impacting liquidity[89]. - Additional shares of common or preferred stock may be issued to complete business combinations, potentially diluting existing stockholders' interests[136]. - The increasing number of special purpose acquisition companies may lead to a scarcity of attractive targets, raising costs and complicating the search for suitable candidates[139]. - The company may face intense competition from other entities with similar business objectives, which could hinder its ability to complete an initial business combination[104]. Regulatory and Compliance Risks - The company is classified as a "blank check" company under U.S. securities laws, exempt from certain SEC rules due to having net tangible assets exceeding $5,000,000[101]. - Changes in laws or regulations may adversely affect the company's ability to complete its initial business combination[120]. - The Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) may limit the company's ability to complete business combinations with U.S. target companies due to foreign ownership regulations[128]. - CFIUS has jurisdiction to review transactions that could result in control of a U.S. business by a foreign person, which may limit the pool of potential targets[129]. - The PRC government has significant oversight over business operations, which may influence the ability to conduct profitable operations in China[220]. - The PRC's regulatory environment remains uncertain, with potential for new rules that could require additional approvals for business combinations[224]. - The PRC government may impose additional regulations affecting foreign investments, which could limit the pool of potential acquisition targets[222]. - Compliance with new regulations is expected to be more time-consuming and costly, potentially affecting the ability to negotiate favorable transaction terms[216]. - The PRC Cybersecurity Law mandates that personal information collected by critical information infrastructure operators must be stored in the PRC, affecting potential business combinations[243]. - The Measures for Cybersecurity Review require operators of critical information infrastructure to pass a cybersecurity review when purchasing network products that may affect national security[244]. Shareholder and Investment Risks - If stockholders fail to comply with redemption procedures, their shares may not be redeemed, impacting their investment[100]. - Stockholders holding more than 15$0.01 per warrant if the Class A common stock price exceeds $18.00 for 20 trading days within a 30-day period, which could disadvantage warrant holders[202]. Market and Economic Conditions - The company may face uncertainties regarding reporting obligations and potential taxation under Bulletin 7 and SAT Circular 37 if it pursues an initial business combination with a PRC-based company[258]. - Economic conditions in China, including potential downturns, could reduce demand for services and products, impacting revenue generation[229]. - Rising costs and decreased availability of directors' and officers' liability insurance may complicate initial business combination negotiations[143]. - The lack of diversification may expose the company to significant economic, competitive, and regulatory risks post-combination[169]. - The combined company may face restrictions on dividend payments, as PRC subsidiaries can only pay dividends from accumulated distributable profits[232]. Legal and Judicial Risks - Legal processes and enforcement of judgments in the PRC may pose challenges for U.S. investors against the combined company and its officers[281]. - The PRC does not have treaties with the U.S. for reciprocal recognition of foreign judgments, complicating legal enforcement[282]. - The company may reincorporate in another jurisdiction, which could complicate the enforcement of legal rights under new laws[176]. - The management team may have conflicts of interest due to their involvement with other entities engaged in similar business activities[182]. Management and Operational Risks - The management's ability to assess a prospective target's management may be limited, potentially impacting the value of stockholders' investments if the target's management lacks necessary skills[171]. - If the company acquires a business outside the U.S., it will face additional risks, including higher operational costs and compliance with different legal requirements[172]. - The company has no operating history or revenues until the completion of its initial business combination, posing a risk to achieving its business objectives[203]. - The company intends to focus on acquiring target businesses in the IoT space, including both developing and developed markets, while excluding companies audited by non-PCAOB inspected firms[209]. - The company will not pursue business combinations with entities operating through VIEs, which may limit acquisition opportunities in the PRC[210].