dMY Squared Technology (DMYY) - 2024 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the unaudited condensed financial statements and management's discussion of financial condition and operations Item 1. Unaudited Condensed Financial Statements This section presents DMY Squared Technology Group's unaudited condensed financial statements and notes, detailing its financial position and accounting policies Condensed Balance Sheets This section provides the unaudited condensed balance sheets, detailing assets, liabilities, and shareholders' deficit as of March 31, 2024, and December 31, 2023 | Metric | March 31, 2024 (unaudited) | December 31, 2023 | | :-------------------------------- | :------------------------- | :------------------ | | Assets: | | | | Cash | $626,136 | $9 | | Total current assets | $729,886 | $155,634 | | Investments held in Trust Account | $25,209,181 | $67,545,266 | | Total Assets | $25,939,067 | $67,700,900 | | Liabilities and Shareholders' Deficit: | | | | Total current liabilities | $2,580,873 | $2,153,820 | | Total Liabilities | $6,647,003 | $6,219,950 | | Total shareholders' deficit | $(4,794,640) | $(5,079,018) | - Cash significantly increased from $9 at December 31, 2023, to $626,136 at March 31, 2024[9] - Investments held in the Trust Account decreased substantially from $67.5 million to $25.2 million, primarily due to redemptions[9] - Total Assets decreased from $67.7 million to $25.9 million[9] - Total current liabilities increased from $2.15 million to $2.58 million[9] - Shareholders' Deficit improved from $(5,079,018) to $(4,794,640)[9] Unaudited Condensed Statements of Operations This section presents the unaudited condensed statements of operations for the three months ended March 31, 2024, and March 31, 2023, detailing revenues, expenses, and net income or loss | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | General and administrative expenses | $377,583 | $530,235 | | Corporate tax expenses | $84,308 | $79,683 | | Loss from operations | $(461,891) | $(609,918) | | Investment income from Trust Account | $346,217 | $684,210 | | Change in fair value of derivative warrant liabilities | $0 | $604,420 | | Net income (loss) | $(168,454) | $526,992 | | Basic and diluted net income (loss) per share, Class A common stock | $(0.04) | $0.07 | - The company reported a net loss of $(168,454) for Q1 2024, a significant decrease from a net income of $526,992 in Q1 2023[12] - General and administrative expenses decreased from $530,235 in Q1 2023 to $377,583 in Q1 2024[12] - Investment income from the Trust Account decreased from $684,210 in Q1 2023 to $346,217 in Q1 2024[12] - The change in fair value of derivative warrant liabilities was $0 in Q1 2024, compared to a gain of $604,420 in Q1 2023[12] Unaudited Condensed Statements of Changes in Shareholders' Deficit This section outlines changes in shareholders' deficit for the three months ended March 31, 2024, and March 31, 2023, including net loss and redemption impacts | Metric | December 31, 2023 | March 31, 2024 (unaudited) | | :---------------------------------------------------------------- | :------------------ | :------------------------- | | Balance—December 31, 2023 | $(5,079,018) | N/A | | Increase in redemption value of Class A common stock due to extension | $(191,667) | N/A | | Remeasurement for Class A common stock subject to possible redemption | $644,499 | N/A | | Net loss | $(168,454) | N/A | | Balance—March 31, 2024 (unaudited) | N/A | $(4,794,640) | - Total shareholders' deficit improved from $(5,079,018) at December 31, 2023, to $(4,794,640) at March 31, 2024[14] - The increase in redemption value of Class A common stock due to extension was $(191,667), while remeasurement for Class A common stock subject to possible redemption resulted in a gain of $644,499[14] Unaudited Condensed Statements of Cash Flows This section details cash flows from operating, investing, and financing activities for the three months ended March 31, 2024, and March 31, 2023 | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(59,968) | $(237,323) | | Net cash provided by investing activities | $42,682,302 | $0 | | Net cash used in financing activities | $(41,996,207) | $0 | | Net change in cash | $626,127 | $(237,323) | | Cash—End of the period | $626,136 | $1,216 | - Net cash used in operating activities decreased from $(237,323) in Q1 2023 to $(59,968) in Q1 2024[17] - Net cash provided by investing activities was $42,682,302 in Q1 2024, primarily due to withdrawals from the Trust Account for redemptions and taxes[17] - Net cash used in financing activities was $(41,996,207) in Q1 2024, mainly due to the redemption of Class A common stock[17] - Cash at the end of the period increased significantly to $626,136 in Q1 2024 from $1,216 in Q1 2023[17] Notes to Unaudited Condensed Financial Statements This section provides detailed notes explaining the company's organization, significant accounting policies, related party transactions, and other financial instruments Note 1—Description of Organization and Business Operations This note describes DMY Squared Technology Group, Inc.'s formation as a blank check company, its IPO, Trust Account, and going concern risks - DMY Squared Technology Group, Inc. is a blank check company formed for a business combination, operating as an emerging growth company[20] - The company has not commenced operations and generates non-operating income from interest on IPO proceeds held in a Trust Account[21] - The Initial Public Offering (IPO) in October 2022 raised $60.0 million from 6,000,000 units at $10.00 per unit, with an additional $3.2 million from a partial over-allotment[22] - Simultaneously, a private placement of 2,840,000 warrants generated $2.8 million, with an additional $45,000 from over-allotment warrants[23] - Approximately $64.1 million from IPO, private placement, and overfunding loans was placed in a Trust Account, invested in U.S. government securities[25] - Shareholders approved an extension of the business combination period up to December 29, 2025, requiring the Sponsor to deposit $41,667 initially and $50,000 for each subsequent monthly extension[35] - In connection with the extension, 3,980,414 Public Shares were redeemed for approximately $42 million on January 4, 2024[35] - A convertible promissory note up to $1.75 million was issued to an affiliate of the Sponsor to fund extensions and working capital, with $241,667 drawn and deposited into the Trust Account as of April 2024[37][38][44] - Management's assessment indicates substantial doubt about the company's ability to continue as a going concern due to liquidity conditions and mandatory liquidation if a business combination is not completed[47] - The company acknowledges risks from geopolitical conflicts (Russia-Ukraine, Israel-Hamas) and the potential impact of the Inflation Reduction Act's 1% excise tax on stock repurchases/redemptions[48][49][50] Note 2—Summary of Significant Accounting Policies This note outlines the significant accounting policies, including fair value measurements, warrant accounting, and revenue recognition, applied in the financial statements - The financial statements are prepared in accordance with GAAP for interim information, with certain disclosures condensed or omitted[54] - 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[56][57] - Investments held in the Trust Account are classified as trading securities or recognized at fair value (money market funds), with gains/losses included in interest income[61] - Warrants are recognized as derivative liabilities at fair value and re-measured each reporting period, with changes recognized in the statements of operations[64] - The fair value of Public Warrants is based on listed market price (Level 2), while Private Placement Warrants use a Monte Carlo simulation with Level 3 inputs[64][124] - Public Shares subject to possible redemption are classified outside of permanent equity in accordance with ASC 480[71] - Net income (loss) per common share is calculated pro rata for Class A and Class B shares, excluding warrants due to anti-dilutive effect or contingency[74] - Deferred tax assets of approximately $584,000 (March 31, 2024) and $505,000 (December 31, 2023) are presented net of a full valuation allowance[76] - The company adopted ASU 2022-03 (Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions) effective January 1, 2024, with no material impact[81] Note 3—Initial Public Offering This note details the Initial Public Offering, including units issued, proceeds generated, and associated offering costs - The IPO on October 4, 2022, involved 6,000,000 units at $10.00 each, generating $60.0 million, with offering costs of $3.7 million[82] - A partial over-allotment exercise on October 11, 2022, added 319,000 units, generating $3.2 million and incurring $156,000 in additional offering costs[82] - Each unit consists of one Public Share and one-half of one Public Warrant, exercisable at $11.50 per share[82] Note 4—Related Party Transactions This note describes transactions with related parties, including Founder Shares, Private Placement Warrants, Overfunding Loans, and administrative service fees - The Sponsor purchased 2,875,000 Founder Shares for $25,000, which were subsequently adjusted to 1,579,750 shares due to forfeitures related to the over-allotment option[83][116] - Private Placement Warrants totaling 2,884,660 were sold to the Sponsor for approximately $2.8 million, with proceeds added to the Trust Account[87] - The Sponsor extended Overfunding Loans totaling $947,850 to be deposited in the Trust Account, repayable or convertible into Class A Shares upon business combination[92][165] - A convertible promissory note up to $1.75 million was issued to an affiliate of the Sponsor, with $191,667 borrowed from January to March 2024 and an additional $50,000 in April 2024, all contributed to the Trust Account for extensions[95][96][167] - The company pays the Sponsor $10,000 per month for administrative services, totaling $30,000 for the three months ended March 31, 2024 and 2023[98][160] - Outstanding advances from related parties were approximately $173,000 as of March 31, 2024, increasing to $178,000 by April 2024[91][128][149] Note 5—Commitments and Contingencies This note outlines the company's commitments and contingencies, including registration rights and deferred underwriting commissions - Holders of Founder Shares, Private Placement Warrants, and warrants from working capital loans/contributions are entitled to registration rights[100][162] - The underwriter received an upfront discount of $0.8 million and is entitled to a deferred underwriting commission of $2.1 million (plus $112,000 from over-allotment) payable only upon completion of a Business Combination[101][103][163][164] Note 6—Derivative Warrant Liabilities This note details the outstanding derivative warrant liabilities, including Public and Private Placement Warrants, their exercise terms, and redemption conditions - As of March 31, 2024, there were 6,044,160 warrants outstanding, comprising 3,159,500 Public Warrants and 2,884,660 Private Placement Warrants[104] - Public Warrants become exercisable 30 days after a business combination or 12 months from IPO closing, subject to an effective registration statement[104] - Warrants have an exercise price of $11.50 per share and expire five years after a business combination or earlier upon redemption/liquidation[105] - The company may redeem Public Warrants for $0.01 per warrant if the Public Share price equals or exceeds $18.00 for 20 trading days within a 30-day period[109] - Alternatively, Public Warrants may be redeemed for $0.10 per warrant if the Public Share price equals or exceeds $10.00, with cashless exercise option[109] - Private Placement Warrants are non-transferable and non-redeemable (unless held by non-Sponsor transferees) as long as held by the Sponsor or permitted transferees[106] Note 7—Shareholders' Deficit This note describes the components of shareholders' deficit, including authorized and outstanding shares, redemptions, and share conversions - The company is authorized to issue 1,000,000 shares of preferred stock, but none were issued or outstanding as of March 31, 2024, and December 31, 2023[111] - As of March 31, 2024, 2,338,586 Class A Shares were issued and outstanding, all subject to possible redemption, down from 6,319,000 shares at December 31, 2023[112][113] - A total of 3,980,414 Public Shares were redeemed for approximately $42 million on January 4, 2024[113] - 1,579,750 Class B Shares were issued and outstanding as of March 31, 2024, and December 31, 2023[116] - The Charter was amended to allow Class B Shares to convert into Class A Shares on a one-for-one basis at the holder's election[117] Note 8—Fair Value Measurements This note provides fair value measurements for investments and derivative warrant liabilities, categorized by valuation input levels Fair Value Measurements as of March 31, 2024 | Description | March 31, 2024 (Level 1) | March 31, 2024 (Level 2) | March 31, 2024 (Level 3) | | :------------------------------------ | :----------------------- | :----------------------- | :----------------------- | | Investments held in Trust Account—U.S. Treasury Securities | $25,209,181 | $— | $— | | Derivative warrant liabilities—Public Warrants | $— | $473,930 | $— | | Derivative warrant liabilities—Private Warrants | $— | $— | $432,700 | Fair Value Measurements as of December 31, 2023 | Description | December 31, 2023 (Level 1) | December 31, 2023 (Level 2) | December 31, 2023 (Level 3) | | :------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | | Investments held in Trust Account—U.S. Treasury Securities | $67,545,266 | $— | $— | | Derivative warrant liabilities—Public Warrants | $— | $473,930 | $— | | Derivative warrant liabilities—Private Warrants | $— | $— | $432,700 | - Public Warrants were transferred from Level 3 to Level 1 in December 2022, then to Level 2 as of March 31, 2024, and December 31, 2023, due to low trading volume[122] - Private Placement Warrants are valued using a Monte Carlo simulation method with Level 3 inputs, with a fair value of $432,700 as of March 31, 2024, and December 31, 2023[124][125] Level 3 Fair Value Measurement Inputs | Level 3 Fair Value Measurement Inputs | March 31, 2024 | December 31, 2023 | | :------------------------------------ | :------------- | :---------------- | | Exercise price | $11.50 | $11.50 | | Stock price | $10.63 | $10.60 | | Volatility | 7.0% | 5.1% | | Risk-free rate | 4.12% | 3.77% | | Dividend yield | 0.00% | 0.0% | Note 9— Subsequent Events This note discloses significant events occurring after the balance sheet date, including additional borrowings and contributions to the Trust Account - Subsequent to March 31, 2024, the company borrowed an additional $5,000 from related parties, increasing total advances to approximately $178,000[128] - An additional $50,000 was borrowed under the Convertible Note in April 2024, increasing the total outstanding to $241,667, and contributed to the Trust Account for extensions[128] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition and operational results, covering liquidity, share redemptions, and geopolitical and regulatory risks - The company is a blank check company with no operations, focused on identifying a business combination, and generates non-operating income from Trust Account investments[132][133][157] - Shareholders approved an extension of the business combination period up to December 29, 2025, requiring monthly contributions from the Sponsor to the Trust Account[141][144] - In connection with the extension, 3,980,414 Public Shares were redeemed on January 4, 2024, resulting in approximately $40.4 million paid out[142] - A convertible promissory note up to $1.75 million was issued to an affiliate of the Sponsor, with $241,667 drawn and deposited into the Trust Account for extensions as of April 2024[144][145][150] - As of March 31, 2024, the company had $626,000 in cash and a working capital deficit of approximately $1.9 million, raising substantial doubt about its ability to continue as a going concern[147][151] - The company reported a net loss of approximately $(168,000) for the three months ended March 31, 2024, compared to a net income of $527,000 for the same period in 2023[158][159] - Geopolitical events (Russia-Ukraine, Israel-Hamas) and the Inflation Reduction Act's excise tax on stock repurchases pose risks, with their specific financial impact not yet determinable[152][153][154] - The company pays $10,000 monthly to its Sponsor for administrative services, totaling $30,000 for Q1 2024 and Q1 2023[160] - The company qualifies as an 'emerging growth company' under the JOBS Act, allowing it to delay adoption of new accounting standards and benefit from reduced reporting requirements[172][173] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, DMY Squared Technology Group, Inc. is not required to provide quantitative and qualitative disclosures about market risk - The company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[174] Item 4. Disclosure Controls and Procedures Management evaluated the effectiveness of disclosure controls and procedures as of March 31, 2024, concluding they were effective with no material changes - The CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2024[176] - No material changes in internal control over financial reporting occurred during the fiscal quarter ended March 31, 2024[177] PART II. OTHER INFORMATION This section provides other required information, including legal proceedings, risk factors, equity sales, and exhibits Item 1. Legal Proceedings This section confirms that there are no legal proceedings to report for the company - The company has no legal proceedings to report[178] Item 1A. Risk Factors This section states that there have been no material changes to the previously disclosed risk factors - No material changes to the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2023, as of the date of this report[179] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities This section details unregistered equity sales, including Founder Shares and private placement warrants, and the use of IPO proceeds in the Trust Account - Founder Shares were initially issued to the Sponsor for $25,000 and subsequently adjusted to 1,725,000 shares, then 1,579,750 shares due to forfeitures[180] - The Initial Public Offering on October 4, 2022, generated net proceeds of $59,135,000 from 6,000,000 units at $10.00 per unit[181] - A private placement of 2,840,000 warrants generated $2,840,000, with an additional 44,660 warrants generating $44,660[182] - Overfunding Loans totaling $947,850 were extended by the Sponsor and deposited into the Trust Account[182] - Approximately $64.1 million from the IPO, private placement, and overfunding loans was placed in the Trust Account[183] Item 3. Defaults Upon Senior Securities This section confirms that there are no defaults upon senior securities to report - The company has no defaults upon senior securities[184] Item 4. Mine Safety Disclosures This section states that mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable[185] Item 5. Other Information This section confirms that there is no other information to report - No other information is reported in this section[186] Item 6. Exhibits This section lists the exhibits filed as part of, or incorporated by reference into, the Quarterly Report on Form 10-Q | Exhibit Number | Description | | :------------- | :---------- | | 3.1 | Amended and Restated Articles of Organization | | 3.2 | Certificate of Amendment to the Amended and Restated Articles of Organization | | 10.1 | Amendment to the Investment Management Trust Agreement | | 10.2 | Promissory Note, dated January 2, 2024, between dMY Squared Technology Group, Inc. and Harry L. You | | 31.1* | Certification of Principal Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) | | 31.2* | Certification of Principal Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) | | 32.1** | Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350 | | 32.2** | Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350 | | 101.INS* | Inline XBRL Instance Document | | 101.SCH* | Inline XBRL Taxonomy Extension Schema Document | | 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | | 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | | 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document | | 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | | 104 | Cover Page Interactive Data File | SIGNATURES This section contains the signatures of the principal executive and financial officers, certifying the report's accuracy - The report is signed by Niccolo de Masi, Chief Executive Officer, and Harry L. You, Chief Financial Officer, on May 15, 2024[193][194]