Oak Woods Acquisition (OAKU) - 2024 Q1 - Quarterly Report

PART I – FINANCIAL INFORMATION Item 1. Financial Statements Presents unaudited condensed consolidated financial statements and detailed notes for Q1 2024 and FY 2023, covering financial position, operations, equity, and cash flows Unaudited Condensed Consolidated Balance Sheets Summarizes the company's financial position, showing assets, liabilities, and shareholders' deficit as of March 31, 2024, and December 31, 2023 Unaudited Condensed Consolidated Balance Sheets | Metric | March 31, 2024 | December 31, 2023 | | :----------------------------------- | :------------- | :---------------- | | Cash | $38,232 | $367,321 | | Total Current Assets | $106,880 | $434,271 | | Investments held in Trust Account | $61,551,082 | $60,765,154 | | Total Assets | $61,657,962 | $61,199,425 | | Total Current Liabilities | $1,133,548 | $816,475 | | Total Liabilities | $3,152,908 | $2,837,875 | | Class A ordinary shares subject to possible redemption | $61,551,082 | $58,997,725 | | Total Shareholders' Deficit | $(3,046,028) | $(636,175) | - The company's cash significantly decreased from $367,321 at December 31, 2023, to $38,232 at March 31, 2024. Total current assets also saw a substantial decline, while total liabilities increased, leading to a larger shareholders' deficit[10] Unaudited Condensed Consolidated Statements of Operations Details the company's revenues, expenses, and net income (loss) for the three months ended March 31, 2024, and 2023 Unaudited Condensed Consolidated Statements of Operations | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :-------------------------------------------------------------------------------- | :-------------------------------- | :-------------------------------- | | Formation and operating costs | $648,672 | $43,943 | | Interest income earned on investments held in Trust Account | $785,928 | $21,058 | | Changes in fair value of warrant liabilities | $2,040 | — | | Net income (loss) | $143,504 | $(17,984) | | Basic and diluted net income per ordinary share, redeemable Class A ordinary shares | $0.12 | $0.40 | | Basic and diluted net loss per ordinary share, non-redeemable Class A ordinary shares and Class B ordinary shares | $(0.32) | $(0.07) | - The company reported a net income of $143,504 for Q1 2024, a significant improvement from a net loss of $17,984 in Q1 2023, primarily driven by a substantial increase in interest income from investments held in the Trust Account[11] Unaudited Condensed Consolidated Statements of Changes in Shareholders' Equity (Deficit) Outlines changes in shareholders' equity (deficit) from December 31, 2023, to March 31, 2024, including net income and share accretion Unaudited Condensed Consolidated Statements of Changes in Shareholders' Equity (Deficit) | Metric | December 31, 2023 | March 31, 2024 | | :------------------------------------------ | :---------------- | :------------- | | Accumulated Deficit | $(636,353) | $(3,046,206) | | Total Shareholders' Deficit | $(636,175) | $(3,046,028) | | Accretion of redeemable ordinary shares to redemption value | — | $(2,553,357) | | Net income | — | $143,504 | - The total shareholders' deficit significantly increased from $(636,175) at December 31, 2023, to $(3,046,028) at March 31, 2024, primarily due to the accretion of redeemable ordinary shares to redemption value, despite reporting a net income for the quarter[12] Unaudited Condensed Consolidated Statements of Cash Flows Presents cash inflows and outflows from operating, investing, and financing activities for the three months ended March 31, 2024, and 2023 Unaudited Condensed Consolidated Statements of Cash Flows | Cash Flow Activity | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(329,089) | $(100,107) | | Net cash used in investing activities | — | $(58,506,250) | | Net cash provided by financing activities | — | $59,540,235 | | Net change in cash | $(329,089) | $933,878 | | Cash at end of period | $38,232 | $967,356 | - Net cash used in operating activities increased significantly in Q1 2024 compared to Q1 2023. There were no investing or financing activities in Q1 2024, contrasting with substantial activities in Q1 2023 related to the IPO and trust account investments[13] Notes to Unaudited Condensed Consolidated Financial Statements Provides detailed explanations and disclosures supporting the unaudited condensed consolidated financial statements Note 1 — Organization, Business Operation and Going Concern Consideration Details the company's formation, business combination efforts, and management's assessment of going concern due to liquidity challenges - Oak Woods Acquisition Corporation is a blank check company formed to effect a business combination. As of March 31, 2024, it had not commenced operations beyond activities related to its formation, IPO, and searching for a target, with non-operating income from interest on IPO proceeds[14][16][109] - The company entered into a Merger Agreement with Huajin (China) Holdings Limited on August 11, 2023, which was amended on March 23, 2024, to extend the termination date to June 28, 2024[15][31][32] - Management has identified substantial doubt about the company's ability to continue as a going concern due to a working capital deficit of $1,026,668 as of March 31, 2024, and the uncertainty of completing a Business Combination within the extended period ending June 28, 2024[33][35][36] Note 2 — Significant accounting policies Outlines the key accounting principles and policies applied in preparing the financial statements, including for warrants and investments - The financial statements are prepared in accordance with GAAP for interim financial information, with certain disclosures condensed or omitted per SEC rules for interim reporting[38] - The company is an 'emerging growth company' and has elected to use the extended transition period for complying with new or revised financial accounting standards, which may affect comparability with other public companies[40][41] - Investments held in the Trust Account are classified as trading securities or money market funds and are recognized at fair value, with changes in fair value included in the statement of operations[44] - Warrants are classified as liability-classified instruments and measured at fair value, with changes recognized as non-cash gain or loss in the consolidated statements of operations[46][47] - Class A ordinary shares subject to possible redemption are presented at redemption value as temporary equity, outside of shareholders' equity, with accretion of redemption value recognized in accumulated deficit[48][49] Note 3 — Initial Public Offering Describes the details and proceeds of the company's Initial Public Offering completed on March 28, 2023 - On March 28, 2023, the Company completed its IPO, selling 5,750,000 units at $10.00 per unit, generating gross proceeds of $57,500,000. Each unit consists of one Class A ordinary share, one right, and one redeemable warrant[61] Note 4 — Private Placement Details the private placement of units to the Sponsor and the use of its proceeds - Simultaneously with the IPO, the Sponsor purchased 343,125 Private Units at $10.00 per unit, generating $3,431,250. These proceeds were added to the Trust Account[62] - Private Units are identical to Public Units but have certain registration rights and transfer restrictions, and will expire worthless if a Business Combination is not completed within the specified timeframe[62] Note 5 — Related Party Transactions Discloses transactions and balances with related parties, including the Sponsor, for shares and administrative services - The Sponsor initially acquired 2,156,250 Class B ordinary shares for $25,000, later surrendering 718,750 shares. As of March 31, 2024, 1,437,500 Class B ordinary shares were outstanding[63][64] - The Company accrues a monthly fee of $10,000 to the Sponsor for administrative services. As of March 31, 2024, $120,000 was payable to the Sponsor for these services, up from $90,000 at December 31, 2023[72][73] - The Sponsor's $500,000 promissory note to the Company was repaid in June 2023, with no outstanding balance as of March 31, 2024, or December 31, 2023[70][71] Note 6 — Commitments & Contingencies Outlines the company's contractual obligations, including registration rights, underwriting fees, and advisory agreements - The Company has registration rights agreements with holders of founder shares, private placement units, and other securities, entitling them to demand and 'piggy-back' registration rights[74] - Underwriting fees include a cash discount of $1,150,000 and a deferred underwriting fee of $2,012,500, payable upon the closing of a Business Combination[77] - The Company engaged Asian Legend International Investment Holding Limited as an advisor for the Business Combination, incurring a cash fee of $100,000 per month and Class A Ordinary Shares equivalent to 5% of shares issued to Huajin shareholders. Accrued consulting expenses were $600,000 as of March 31, 2024[78] Note 7 — Shareholder's Equity Details the authorized and outstanding share capital, including preferred, Class A, and Class B ordinary shares, rights, and warrants - The Company is authorized to issue 5,000,000 preferred shares, but none were issued or outstanding as of March 31, 2024, and December 31, 2023[79] - As of March 31, 2024, and December 31, 2023, there were 343,125 Class A ordinary shares issued or outstanding (excluding 5,750,000 shares subject to possible redemption) and 1,437,500 Class B ordinary shares issued and outstanding[80][81] - Each right converts into one-sixth of a Class A ordinary share upon consummation of the initial Business Combination. Warrants entitle holders to purchase one Class A ordinary share at $11.50, exercisable 30 days after Business Combination completion or 12 months from IPO, expiring five years post-Business Combination[82][84] Note 8 — Derivative Warrant Liabilities Explains the classification and fair value measurement of private warrants as derivative liabilities - As of March 31, 2024, and December 31, 2023, the Company had 343,125 Private Warrants outstanding, recognized as warrant liabilities and measured at fair value[90] - Private Warrants are identical to Public Warrants but are subject to transfer restrictions, registration rights, and are exercisable on a cashless basis by initial purchasers or their affiliates, and are not redeemable by the Company[91] Note 9 — Fair Value Measurements Describes the fair value hierarchy used for assets and liabilities, particularly investments and warrant liabilities - The Company uses a fair value hierarchy (Level 1, 2, 3) to classify assets and liabilities. Investments held in the Trust Account are Level 1, while Derivative Warrant Liability – Private Warrant is Level 2[92][97] Fair Value Measurements | Description | Level | March 31, 2024 | December 31, 2023 | | :-------------------------------- | :---- | :------------- | :---------------- | | Investments held in Trust Account | 1 | $61,551,082 | $60,765,154 | | Derivative Warrant Liability – Private Warrant | 2 | $6,860 | $8,900 | - The fair value of Private Warrants was initially estimated using a Binomial Model (Level 3 inputs) on March 28, 2023, but was reclassified to Level 2 after Public Warrants began trading separately on May 19, 2023, using their publicly listed trading price[98][99][101] Note 10 — Subsequent Event Confirms the evaluation of events subsequent to the balance sheet date, with no material adjustments or disclosures identified - The Company evaluated subsequent events up to the financial statement issuance date and did not identify any requiring adjustment or disclosure, beyond what is already presented[103] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition, operational results, recent developments, liquidity, and critical accounting estimates for Q1 2024 and Q1 2023 Overview Provides a general introduction to Oak Woods Acquisition Corporation as a blank check company and its purpose - Oak Woods Acquisition Corporation is a blank check company formed on March 11, 2022, for the purpose of executing a business combination[107] - The company has not commenced any operations as of March 31, 2024, other than those related to its formation, IPO, and the prospective merger with Huajin (China) Holdings Limited[108][109] Recent Development Highlights the merger agreement with Huajin (China) Holdings Limited and its recent amendment - On August 11, 2023, the Company entered into a Merger Agreement with Huajin (China) Holdings Limited, with Huajin surviving as a wholly-owned subsidiary[111] - The Merger Agreement was amended on March 23, 2024, extending the termination date for the proposed business combination from March 23, 2024, to June 28, 2024[114] - Huajin made a deposit of $330,969 to the Company, intended to fund a portion of the extension deposit and other expenses[113] Results of Operations Compares the company's financial performance, including net income/loss and key drivers, for Q1 2024 and Q1 2023 - For the three months ended March 31, 2024, the Company reported a net income of $143,504, primarily from $785,928 in interest income from the trust account and a $2,040 decrease in warrant liabilities, offset by $648,672 in operating expenses[117] - In contrast, for the three months ended March 31, 2023, the Company had a net loss of $17,984, due to $43,943 in operating expenses, partially offset by $21,058 in trust account interest income[118] Liquidity and Capital Resources Analyzes the company's cash position, working capital, and ability to meet obligations, addressing going concern considerations - The Company consummated its IPO on March 28, 2023, raising $57,500,000 from Public Units and $3,431,250 from Private Units, with $58,506,250 deposited into a Trust Account[119][152] Liquidity and Capital Resources | Metric | March 31, 2024 | December 31, 2023 | | :-------------------- | :------------- | :---------------- | | Cash outside Trust Account | $38,232 | $367,321 | | Working Capital Deficit | $(1,026,668) | $(382,204) | - Net cash used in operating activities was $329,089 for Q1 2024, compared to $100,107 for Q1 2023, reflecting increased operating expenses and adjustments[120][121] - Management has determined that the current financial conditions, including a significant working capital deficit and the uncertainty of completing the Business Combination by June 28, 2024, raise substantial doubt about the Company's ability to continue as a going concern[123][125][126] Off-Balance Sheet Arrangements Confirms the absence of any off-balance sheet arrangements, obligations, assets, or liabilities - The Company had no off-balance sheet arrangements, obligations, assets, or liabilities as of March 31, 2024, and December 31, 2023[128] Contractual Obligations Details the company's various contractual commitments, including registration rights, administrative fees, and deferred underwriting fees - The Company has registration rights agreements for founder shares, Private Placement Units, and other securities, requiring it to register these for resale[129] - The Company is obligated to pay the Sponsor a monthly fee of $10,000 for administrative services, with $120,000 accrued as of March 31, 2024[132][133] - A deferred underwriting fee of $2,012,500 is payable to the underwriter upon the completion of a business combination[135] - The Company has a financial advisory agreement with Asian Legend International Investment Holding Limited, incurring a cash fee of $100,000 per month and a contingent issuance of Class A Ordinary Shares[136] Critical Accounting Estimates Discusses key accounting estimates, particularly the classification and fair value measurement of warrant liabilities - The classification and fair value measurement of private warrants as a liability is a critical accounting estimate, requiring significant management judgment, and deviations could materially impact financial results[138] Recent Accounting Pronouncements Identifies and assesses the potential impact of recently issued accounting standards on the company's financial reporting - The FASB issued ASU 2023-09, 'Improvements to Income Tax Disclosures,' effective for public business entities for annual periods beginning after December 15, 2024. The Company is currently assessing its impact[139] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company, as a smaller reporting entity, is exempt from market risk disclosures - The Company, as a smaller reporting company, is not required to make disclosures under this Item[141] Item 4. Control and Procedures Evaluates the effectiveness of disclosure controls and procedures, confirming no material changes in internal control over financial reporting - The Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of disclosure controls and procedures as of March 31, 2024, concluding they were effective[143] - There were no material changes in the Company's internal control over financial reporting during the most recent fiscal quarter[144] PART II – OTHER INFORMATION Item 1. Legal Proceedings The company reports no legal proceedings as of the filing date - There are no legal proceedings to report[146] Item 1A. Risk Factors Refers to previously disclosed risk factors and highlights new geopolitical risks impacting business combination prospects - No material changes to risk factors were disclosed, other than those described in the report[147] - Global geopolitical events, including the conflicts in Ukraine and between Israel and Hamas, could materially and adversely affect the Company's ability to complete a Business Combination or the operations of a target business[148] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Details unregistered equity sales and the use of IPO and private placement proceeds, primarily for the trust account - On March 28, 2023, the Company completed its IPO, selling 5,750,000 Public Units at $10.00 each, generating $57,500,000[149] - Simultaneously, the Sponsor purchased Private Units for $3,431,250 in a private placement, with terms identical to Public Units except for transfer restrictions and registration rights[150][151] - A total of $58,506,250 from the IPO and Private Placement proceeds was deposited into a trust account for the benefit of public stockholders[152] Item 3. Defaults Upon Senior Securities The company reports no defaults upon senior securities - There are no defaults upon senior securities[153] Item 4. Mine Safety Disclosures This item is not applicable to the company - This item is not applicable[154] Item 5. Other Information The company reports no other information for this period - There is no other information to report[155] Item 6. Exhibits Lists exhibits filed with the Quarterly Report on Form 10-Q, including certifications and XBRL documents - Exhibits include certifications from the Principal Executive Officer and Principal Financial Officer (31.1, 32.1) and Inline XBRL documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[158] SIGNATURES The report is signed by Lixin Zheng, Chairman, CEO, and CFO, on behalf of Oak Woods Acquisition Corporation - The report was signed by Lixin Zheng, Chairman, Chief Executive Officer, and Chief Financial Officer, on May 15, 2024[164]