TKB Critical Technologies 1(USCT) - 2024 Q4 - Annual Report

Business Combination - The Company entered into a Business Combination Agreement with SharonAI Inc. on January 28, 2025, which includes a merger process [19]. - The Aggregate Merger Consideration is 560,835,633 shares of Common Stock to be issued at the closing of the Business Combination [22]. - The Company plans to change its name to "SharonAI Holdings, Inc." following the Domestication Merger [21]. - The Company intends to seek shareholder approval for the Business Combination, but may not hold a vote if not required by law [46]. - The Business Combination Agreement requires the issuance of 560,835,633 additional shares of Common Stock, which will significantly dilute the equity interest of existing investors [114][115]. - The company may issue Class A Shares upon conversion of Class B Shares at a ratio greater than one-to-one due to anti-dilution provisions, potentially affecting shareholder interests [112]. - The company has agreed to file a registration statement for Class A Shares issuable upon exercise of warrants within 20 business days after the initial business combination [105]. - If Class A Shares are not registered under the Securities Act, warrant holders may only exercise their warrants on a cashless basis, resulting in fewer shares received [109]. - The company may amend the terms of the warrants with the approval of at least 50% of the outstanding public warrants, potentially increasing the exercise price or shortening the exercise period [116][117]. - The company may face adverse tax consequences if it re-domiciles or reincorporates in another jurisdiction as part of its business combination [104]. - The existence of registration rights may lead to increased equity stakes demanded by shareholders of the target business, complicating the business combination process [111]. Financial Position - The Company raised gross proceeds of $230,000,000 from its initial public offering of 23,000,000 units at$10.00 per unit [23]. - A total of $234,600,000 from the initial public offering and the sale of Private Warrants was placed in a U.S.-based trust account [24]. - The company had cash of$6,738 as of December 31, 2024, which is insufficient to operate until the completion of the Business Combination [49]. - As of December 31, 2024, the company had cash of $6,738, primarily intended for evaluating target businesses and completing business combinations [180]. - The company entered into a promissory note for up to$2,000,000, with $1,109,412 drawn as of December 31, 2024, leaving$890,588 available [181]. - The company expects to incur significant costs related to identifying a target business and conducting due diligence, raising doubts about its ability to continue as a going concern within one year [183]. - As of December 31, 2024, the company had a working capital deficit of $2,021,686, raising substantial doubt about its ability to continue as a going concern [130]. - The company has no long-term debt obligations or capital lease obligations [187]. - The company has no off-balance sheet financing arrangements as of December 31, 2024 [186]. Internal Controls and Compliance - The Company has identified a material weakness in its internal control over financial reporting, which may affect investor confidence [40]. - A material weakness in internal controls over financial reporting was identified, affecting the effectiveness of controls as of December 31, 2021, and subsequent quarters [41]. - There is no assurance that additional material weaknesses or restatements will not arise in the future due to inadequate internal controls [43]. - Compliance with laws and regulations is necessary and any failure could adversely affect the company's business and results of operations [52]. - Management assessed the effectiveness of internal control over financial reporting and determined that it was not effective as of December 31, 2024, due to material weaknesses [208]. - Remediation steps have been implemented to improve internal control, including enhancing the review process for complex securities and increasing access to accounting literature [209]. - The company has identified material weaknesses in internal controls over financial reporting, particularly regarding complex financial instruments [204]. - The company has not included an attestation report from its independent registered public accounting firm due to its status as an emerging growth company under the JOBS Act [210]. Shareholder Dynamics - Initial shareholders own approximately 81$25,000 for 5,750,000 founder shares, which will be worthless if the initial business combination is not completed [94]. Management and Operations - The company has no full-time employees prior to the completion of its initial business combination, with seven executive officers currently [32]. - The ability to successfully effect the Business Combination depends on key personnel, and their loss could negatively impact post-combination operations and profitability [73]. - The company is dependent on a small group of executive officers and directors, and their loss could negatively impact operations [87]. - The management team includes experienced professionals with extensive backgrounds in investment banking and corporate governance, such as Byron Roth and John Lipman [213][214]. - Byron Roth has helped raise over 100 billion for small-cap companies and has been involved in numerous merger and acquisition transactions [213]. - Aaron Gurewitz has managed over 1,000 public offerings since joining Roth in 1999, focusing on growth companies [215]. - Rick Hartfiel has managed over 300 equity offerings and M&A transactions since joining Craig-Hallum in 2005, emphasizing emerging growth companies [216]. Market and Regulatory Risks - The company may incur substantial debt to complete a business combination, which could negatively impact financial condition and shareholder value [54]. - If the company completes a business combination with a target outside the United States, it may face additional risks, including regulatory approvals and foreign exchange fluctuations [79]. - The company may face significant risks associated with managing cross-border business operations, including currency fluctuations and complex corporate taxes [80]. - The market for directors' and officers' liability insurance has become less favorable, potentially complicating the negotiation of the initial business combination [65]. - Cyber incidents could lead to financial loss, as the company lacks significant investments in data security protection [139]. Performance and Financial Results - For the year ended December 31, 2024, the company reported a net income of 119,065, primarily from interest earned on marketable securities held in the Trust Account [170]. - For the year ended December 31, 2023, the company had a net income of $2,586,752, which included forgiveness of debt of$4,692,176 [171]. - The total transaction costs of the initial public offering amounted to $21,140,059, including$3,850,000 of underwriting discount and $8,800,000 of deferred underwriting discount [176]. - The company generated gross proceeds of$230 million from its initial public offering of 23 million units at $10.00 per unit on October 29, 2021 [164]. - The company has incurred significant costs in pursuit of acquisition plans, which may not be successful [130].