Financial Condition and Risks - As of December 31, 2024, the company had cash of 3,334,790, raising substantial doubt about its ability to continue as a going concern[83]. - The company has incurred significant costs in pursuit of acquisition plans and cannot assure successful capital raising or initial business combination[83]. - The company had 28,407, necessitating borrowing of 10.40 per share or less[96]. - The company may incur substantial debt to complete an initial business combination, which could negatively impact financial condition and stockholder value[146]. - The company may face challenges in completing advantageous business combinations due to federal proxy rules requiring detailed financial disclosures[165]. - The company has no operating history or revenues until it completes its initial business combination, posing a risk to achieving its business objectives[203]. Shareholder and Redemption Rights - If stockholder approval is sought for the initial business combination, only 683,827 shares (25.1% of 2,722,903 Class A Common Stock) need to be voted in favor for approval[85]. - An aggregate of 2,752,307 shares of Class A common stock were tendered for redemption during the special meeting of stockholders[93]. - The redemption rights of public stockholders may limit the company's ability to complete desirable business combinations[88]. - If stockholders fail to comply with redemption procedures, their shares may not be redeemed, impacting their investment[100]. - Stockholders holding more than 15% of Class A common stock may lose the ability to redeem shares in excess of that percentage if redemptions are not conducted according to tender offer rules[103]. - Public stockholders may only receive funds from the trust account upon completion of an initial business combination or under specific conditions, with a potential redemption amount of less than 11.25 per share due to negative interest rates[191][195]. Business Combination Challenges - The company has not yet identified a target business for its initial business combination, which may classify it as a "blank check" company under U.S. securities laws[101]. - The company may purchase public shares to increase the likelihood of obtaining stockholder approval for the business combination, but such purchases could reduce the public float of Class A common stock[99]. - 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 may enter into initial business combinations with financially unstable businesses, which could lead to volatile revenues and difficulties in retaining key personnel[134]. - The company may only complete one business combination with the proceeds from its Initial Public Offering, leading to a lack of diversification and increased risk[168]. - 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 absence of a specified maximum redemption threshold may allow for initial business combinations that a majority of stockholders do not support[149]. - Amendments to the Certificate of Incorporation may facilitate initial business combinations that some stockholders may oppose[151]. Regulatory and Compliance Risks - Changes in laws or regulations may adversely affect the company's ability to complete its initial business combination and overall operations[120]. - The Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) expanded CFIUS's jurisdiction, potentially affecting the company's ability to complete business combinations with U.S. companies[128]. - CFIUS could block or delay business combinations involving U.S. businesses, impacting the attractiveness of transactions and limiting potential targets[131]. - The PRC government has significant oversight over business operations, which may impact the ability to conduct profitable operations and pursue business combinations[220]. - The PRC's regulatory environment remains uncertain, and new interpretations of existing rules could require additional approvals for business activities[224]. - Compliance with new regulations may increase transaction costs and time, potentially hindering the ability to negotiate favorable terms for acquisitions[216]. - The M&A Rules in China establish complex procedures for foreign acquisitions, potentially complicating the company's ability to complete business combinations with PRC-based businesses[212]. Market and Competitive Environment - 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]. - Increased competition for attractive acquisition targets may lead to higher financial terms demanded by target companies[140]. - 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]. Financial Instruments and Securities - The company’s sponsor purchased 3,576,900 Private Placement warrants at 1.00 each, generating approximately 11.50 per share[190]. - The company may amend the terms of the Public Warrants, potentially increasing the exercise price, shortening the exercise period, or decreasing the number of shares purchasable upon exercise, with approval from a majority of outstanding Public Warrants[201]. - The company can redeem outstanding warrants at a price of 18.00 for 20 trading days within a 30-day period, which could disadvantage warrant holders[202]. International Operations and Risks - If the company acquires a business outside the U.S., it will face additional risks, including higher costs and complexities in managing cross-border operations[172]. - The combined company may face restrictions on dividend payments, as PRC subsidiaries can only pay dividends from accumulated distributable profits[232]. - The PRC government imposes controls on the convertibility of the Renminbi into foreign currencies, affecting the ability of future operating companies in the PRC to utilize their revenues effectively[234]. - PRC residents making offshore investments must register with SAFE, and failure to comply may restrict the ability of the combined company to distribute profits or inject capital[261]. Governance and Management Risks - The management's ability to assess a prospective target's management may be limited, potentially leading to a negative impact on the value of stockholders' investments[171]. - The management team may negotiate employment agreements with a target business, which could create conflicts of interest in selecting the most advantageous business combination[180]. - The company has not adopted a policy to prevent conflicts of interest among its directors and officers, which may affect the terms of business combinations[185]. - The initial stockholders will lose their entire investment if the initial business combination is not completed, potentially influencing the selection of target businesses[188].
Four Leaf Acquisition Corporation(FORLU) - 2024 Q4 - Annual Report