UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
OR
For the transition period from to
Commission file number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation) | (I.R.S. Employer Identification Number) |
| ||
(Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class: | Trading Symbol(s) | Name of Each Exchange on Which Registered: | ||
(1) | ||||
(1) | ||||
(1) |
(1) | The Company’s Class A Common Stock, Warrants and Units are currently traded on the over-the-counter market (the “ ”) under the symbols SUAC, SUACW and SUACU, respectively. |
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting company | ||
Emerging growth company |
If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of June 10, 2025, there were
SHOULDERUP TECHNOLOGY ACQUISITION CORP.
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2025
TABLE OF CONTENTS
i
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
SHOULDERUP TECHNOLOGY ACQUISITION CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, | December 31, 2024 | |||||||
(unaudited) | ||||||||
Assets: | ||||||||
Current assets: | ||||||||
Cash | $ | $ | ||||||
Prepaid expenses and other current assets | ||||||||
Total current assets | ||||||||
Cash held in Trust Account | ||||||||
Total Assets | $ | $ | ||||||
Liabilities, Class A Common Stock Subject to Possible Redemption, and Stockholders’ Deficit: | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | $ | ||||||
Redemptions payable | ||||||||
Franchise tax payable | ||||||||
Income tax payable | ||||||||
Excise tax payable | ||||||||
Promissory note - related party | ||||||||
Due to related party | ||||||||
Total current liabilities | ||||||||
Non-redemption agreements derivative liability | ||||||||
Total liabilities | ||||||||
Commitments and Contingencies | ||||||||
Class A common stock subject to possible redemption, $ | ||||||||
Stockholders’ Deficit: | ||||||||
Preferred stock, $ | ||||||||
Class A common stock, $ | ||||||||
Convertible Class B common stock, $ | ||||||||
Subscription receivable | ( | ) | ( | ) | ||||
Accumulated deficit | ( | ) | ( | ) | ||||
Total stockholders’ deficit | ( | ) | ( | ) | ||||
Total Liabilities, Class A Common Stock Subject to Possible Redemption, and Stockholders’ Deficit | $ | $ |
The accompanying notes are an integral part of these unaudited Condensed Consolidated financial statements.
1
SHOULDERUP TECHNOLOGY ACQUISITION CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three Months Ended March 31, | ||||||||
2025 | 2024 | |||||||
General and administrative expenses | $ | $ | ||||||
Franchise tax expense | ||||||||
Loss from operations | ( | ) | ( | ) | ||||
Other (expense) income: | ||||||||
Change in fair value of derivative liability | ( | ) | ( | ) | ||||
Interest and penalties | ( | ) | ||||||
Interest income - bank | ||||||||
Income from cash and investments held in Trust Account | ||||||||
Total other (expense) income, net | ( | ) | ||||||
Net loss before income taxes | ( | ) | ( | ) | ||||
Income tax expense | ( | ) | ( | ) | ||||
Net loss | $ | ( | ) | $ | ( | ) | ||
Weighted average shares outstanding of redeemable Class A common stock, basic and diluted | ||||||||
Basic and diluted net loss per share, redeemable Class A common stock | $ | ( | ) | $ | ( | ) | ||
Weighted average shares outstanding of non-redeemable Class A and Class B common stock, basic and diluted | ||||||||
Basic and diluted net loss per share, non-redeemable Class A and Class B common stock | $ | ( | ) | $ | ( | ) |
The accompanying notes are an integral part of these unaudited Condensed Consolidated financial statements.
2
SHOULDERUP TECHNOLOGY ACQUISITION CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2025
Common Stock | Additional | Total | ||||||||||||||||||||||||||||||
Class A | Convertible Class B | Paid-in | Subscription | Accumulated | Stockholders’ | |||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Receivable | Deficit | Deficit | |||||||||||||||||||||||||
Balance - December 31, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
Increase in redemption value of Class A common stock subject to possible redemption | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
Excise tax liability on share redemptions | ( | ) | ( | ) | ||||||||||||||||||||||||||||
Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
Balance - March 31, 2025 (unaudited) | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) |
FOR THE THREE MONTHS ENDED MARCH 31, 2024
Common Stock | Additional | Total | ||||||||||||||||||||||||||||||
Class A | Convertible Class B | Paid-in | Subscription | Accumulated | Stockholders’ | |||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Receivable | Deficit | Deficit | |||||||||||||||||||||||||
Balance - December 31, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
Increase in redemption value of Class A common stock subject to possible redemption | ― | ― | ( | ) | ( | ) | ||||||||||||||||||||||||||
Net loss | ― | ― | ( | ) | ( | ) | ||||||||||||||||||||||||||
Balance - March 31, 2024 (unaudited) | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) |
The accompanying notes are an integral part of these unaudited Condensed Consolidated financial statements.
3
SHOULDERUP TECHNOLOGY ACQUISITION CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Three Months Ended March 31, | ||||||||
2025 | 2024 | |||||||
Cash Flows from Operating Activities: | ||||||||
Net loss | $ | ( | ) | $ | ( | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Interest and penalties | ||||||||
Interest earned on marketable securities held in Trust Account | ( | ) | ( | ) | ||||
Change in fair value of derivative liability | ||||||||
Changes in operating assets and liabilities: | ||||||||
Prepaid expenses | ( | ) | ||||||
Accounts payable | ( | ) | ||||||
Franchise tax payable | ||||||||
Income tax payable | ||||||||
Due to related party | ||||||||
Net cash used in operating activities | ( | ) | ( | ) | ||||
Cash Flows from Investing Activities: | ||||||||
Cash withdrawn from Trust Account in connection with redemption | ||||||||
Net cash provided by investing activities | ||||||||
Cash Flows from Financing Activities: | ||||||||
Proceeds from convertible promissory note – related party | ||||||||
Redemptions of Class A common stock | ( | ) | ||||||
Net cash provided by financing activities | ||||||||
Net change in cash | ( | ) | ( | ) | ||||
Cash - beginning of the period | ||||||||
Cash - end of the period | $ | $ |
The accompanying notes are an integral part of these unaudited Condensed Consolidated financial statements.
4
SHOULDERUP TECHNOLOGY ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Organization and Business Operation
ShoulderUp Technology Acquisition Corp. (the “Company”) is a blank check company formed as a Delaware corporation on May 20, 2021 for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). As further described below on February 6, 2025, the Company’s stockholders voted and approved a proposal to adopt the Business Combination Agreement, dated as of March 18, 2024, entered into by and among SUAC, CID HoldCo, Inc., a Delaware corporation and wholly-owned subsidiary of SUAC (“Holdings”), ShoulderUp Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of Holdings, SEI Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Holdings, and SEE ID, Inc., a Nevada corporation and the transactions contemplated by the Business Combination Agreement (collectively, the “Business Combination”).
As of March 31, 2025, the Company has neither engaged in any operations nor generated any revenues. All activity for the period from May 20, 2021 (inception) through March 31, 2025 relates to the Company’s formation and its initial public offering (the “Initial Public Offering” or “IPO”) described below, and, subsequent to the Initial Public Offering, identifying a target company for a Business Combination. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company generates non-operating income in the form of interest income on the proceeds derived from the Initial Public Offering.
The Company’s Sponsor is ShoulderUp Technology Sponsor LLC, a Delaware limited liability company (the “Sponsor”).
The registration statements for the Company’s
IPO were declared effective on November 17, 2021. On November 19, 2021, the Company consummated the IPO of
Simultaneously with the consummation of the IPO,
the Company consummated the private placement of
Transaction costs amounted to $
The Company must complete one or more initial
Business Combinations having an aggregate fair market value of at least
Following the closing of the IPO on November
19, 2021, $
5
SHOULDERUP TECHNOLOGY ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Company will provide its public stockholders
with the opportunity to redeem all or a portion of their Public Shares upon the completion of the initial Business Combination either
(i) in connection with a stockholder meeting called to approve the Business Combination or (ii) without a stockholder vote by means of
a tender offer. The decision as to whether the Company will seek stockholder approval of a proposed Business Combination or conduct a
tender offer will be made by the Company, solely in its discretion. The public stockholders are entitled to redeem all or a portion of
their Public Shares upon the completion of the initial Business Combination at a per-share price, payable in cash, equal to the aggregate
amount then on deposit in the Trust Account calculated as of two business days prior to the consummation of the initial Business Combination,
including interest earned on the funds held in the Trust Account (which interest shall be net of taxes payable), divided by the number
of then outstanding Public Shares, subject to the limitations and on the conditions described herein. The amount in the Trust Account
initially deposited into the Trust following the closing of the IPO was $
All of the Public Shares contain a redemption feature which allows for the redemption of such Public Shares in connection with the Company’s liquidation, if there is a stockholder vote or tender offer in connection with the initial Business Combination and in connection with certain amendments to the Company’s amended and restated certificate of incorporation.
In accordance with SEC and its guidance on redeemable equity instruments, which has been codified in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 480-10-S99, redemption provisions not solely within the control of a company require common stock subject to redemption to be classified outside of permanent deficit. Given that the Public Shares were issued with Public Warrants, the initial carrying value of common stock classified as temporary equity was then allocated proceeds determined in accordance with FASB ASC 470-20. The Public Shares are subject to FASB ASC 480-10-S99. If it is probable that the equity instrument will become redeemable, the Company has the option to either (i) accrete changes in the redemption value over the period from the date of issuance (or from the date that it becomes probable that the instrument will become redeemable, if later) to the earliest redemption date of the instrument or (ii) recognize changes in the redemption value immediately as they occur and adjust the carrying amount of the instrument to equal the redemption value at the end of each reporting period. The Company has elected to recognize the changes immediately as they occur, measured at the end of each reporting period.
The initial stockholders, sponsor, officers and
directors have entered into a letter agreement with the Company, pursuant to which they have agreed to (i) waive their redemption rights
with respect to any shares of Class B common stock, par value $
The Sponsor has agreed that it will be liable
to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective
target business with which the Company has entered into a written letter of intent, confidentiality or other similar agreement or Business
Combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $
On April 20, 2023, the Company held a special
meeting of its stockholders (the “Special Meeting”). At the Special Meeting, the Company’s stockholders approved an
amendment to the Company’s Amended and Restated Certificate of Incorporation that extends the date by which the Company must consummate
a business combination transaction from May 19, 2023, to November 19, 2023 (the date which is 24 months from the closing date
of the Company’s initial public offering of units). The certificate of amendment was filed with the Delaware Secretary of State
and has an effective date of April 21, 2023. In connection with Special Meeting, holders of
On October 16, 2023, the Company announced that it has entered into a non-binding letter of intent for a potential business combination with Airspace Experience Technologies, Inc., a pioneer in the urban mobility market. The non-binding letter of intent was terminated on December 1, 2023.
On November 17, 2023, the Company, held a special
meeting of its stockholders (the “Special Meeting”). At the Special Meeting, the Company’s stockholders approved an
amendment to the Company’s Amended and Restated Certificate of Incorporation that extends the date (the “Termination Date”)
by which the Company must consummate a business combination (the “Charter Extension”) from November 19, 2023 (the “Original
Termination Date”) to May 19, 2024 or such earlier date as may be determined by the Company’s board of directors in its sole
discretion (the “Charter Extension Date”). The certificate of amendment was filed with the Delaware Secretary of State and
has an effective date of November 15, 2023. In connection with the Extension Amendment Proposal, holders of
6
SHOULDERUP TECHNOLOGY ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On December 28, 2023, the Company held an annual meeting of its stockholders (the “Annual Meeting”). At the Annual Meeting, the Company’s stockholders approved an amendment to the Company’s Amended and Restated Certificate of Incorporation to allow for the right of a holder of Class B common stock of the Company to convert its shares of Class B common stock into shares of Class A common stock on a one-to-one basis at any time and from time to time at the election of the holder. The newly issued Class A common stock would not have any redemption rights and would continue to be subject to a lock-up period upon consummation of the business combination.
On December 19, 2023, the NYSE filed a Form 25 to delist the Company securities. The delisting was effective on December 29, 2023. On March 6, 2024, pursuant to Rule 15c-211 of the U.S. Securities Exchange Act, as amended (the “Exchange Act”), as amended, a market maker filed a Form 211 with the Financial Industry Regulatory Authority, Inc. (“FINRA”) to initiate proprietary trading of the Class A common stock, the units, and the warrants of the Company. Pursuant to Rule 15c2-11 (the “Exchange Act”), the submission of Form 211 to the FINRA OTC Compliance Unit enables broker-dealers to initiate or resume trading quotes on the “pink sheets” by OTC Markets Group Inc. for securities not listed on the New York Stock Exchange or The Nasdaq Stock Market LLC. The securities are expected to be quoted on the Pink Sheets, but there can be no assurance if or when this will occur.
On May 17, 2024, the Company held a special meeting
of its stockholders (the “Special Meeting”). At the Special Meeting, the Company’s stockholders approved an amendment
to the Company’s Amended and Restated Certificate of Incorporation that extends the date by which the Company must consummate a
business combination from May 19, 2024 to November 19, 2024 or such earlier date as may be determined by the Company’s board of
directors in its sole discretion. The certificate of amendment was filed with the Delaware Secretary of State and has an effective date
of May 17, 2024. In connection with the Extension Amendment Proposal, holders of
On June 27, 2024, the Company issued a press release announcing that on June 26, 2024, the Company was assigned the trading symbols SUAC, SUACU and SUACW for its common stock, units and warrants, respectively, by FINRA. As a result, the Company’s common stock, units and warrants begin to be quoted and traded in the over-the-counter market.
On November 7, 2024, the Company has filed a definite proxy announcing a special meeting of stockholders to be held on November 18, 2024, seeking shareholders’ approval of the proposal to extend the date by which it has to consummate a business combination from November 19, 2024 to December 31, 2024, or such earlier date as may be determined by the Company’s board of directors in its sole discretion.
On November 19, 2024, the Sponsor elected to convert
all of the
On November 19, 2024, the Company held a special
meeting of its stockholders (the “Special Meeting”). At the Special Meeting, the Company’s stockholders approved an
amendment to the Company’s Amended and Restated Certificate of Incorporation that extends the date by which the Company must consummate
a business combination from November 19, 2024 to December 31, 2024 or such earlier date as may be determined by the Company’s board
of directors in its sole discretion. The certificate of amendment was filed with the Delaware Secretary of State and has an effective
date of November 19, 2024. In connection with the Extension Amendment Proposal, holders of
On December 30, 2024, the Company held a special
meeting of its stockholders (the “Special Meeting”). At the Special Meeting, the Company’s stockholders approved an
amendment to the Company’s Amended and Restated Certificate of Incorporation that extends the date by which the Company must consummate
a business combination from December 31, 2024 to January 25, 2025 or such earlier date as may be determined by the Company’s board
of directors in its sole discretion. The certificate of amendment was filed with the Delaware Secretary of State and has an effective
date of November 30, 2024. In connection with the Extension Amendment Proposal, holders of
On January 24, 2025, the Company held a special
meeting of its stockholders (the “January 24 Special Meeting”). At the January 24 Special Meeting, the Company’s stockholders
approved an amendment to the Company’s Amended and Restated Certificate of Incorporation that extends the Termination Date by which
the Company must consummate a business combination from January 24, 2025, to February 24, 2025, or such earlier date as may be determined
by the Company’s board of directors in its sole discretion. The certificate of amendment was filed with the Delaware Secretary of
State and has an effective date of January 24, 2025. In connection with the extension amendment proposal at the January 24 Special Meeting,
holders of 240 shares of the Company’s common stock properly exercised their right to redeem their shares (and did not withdraw
their redemption) for a cash redemption price of approximately $
7
SHOULDERUP TECHNOLOGY ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On February 6, 2025, the Company called a special
meeting of stockholders (the “Business Combination Meeting”) where, among other things, the stockholders voted and approved
a proposal to adopt the Business Combination Agreement, dated as of March 18, 2024, entered into by and among SUAC, CID HoldCo, Inc.,
a Delaware corporation and wholly-owned subsidiary of SUAC (“Holdings”), ShoulderUp Merger Sub, Inc., a Delaware corporation
and wholly-owned subsidiary of Holdings, SEI Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Holdings, and SEE
ID, Inc., a Nevada corporation and the transactions contemplated by the Business Combination Agreement (collectively, the “Business
Combination”). In connection with the Business Combination Meeting, holders of
After the Business Combination meeting, the Company and certain holders of the Company’s common stock who elected to redeem in connection with the Business Combination Meeting entered into discussions to reverse their redemptions. The discussions continued after February 24, 2025, the Company’s termination date.
On April 17, 2025, the Company entered into a
non-redemption agreement (the “Non-Redemption Agreement”) with a certain holder of the Company’s common stock (the “Investor”)
pursuant to which the Investor agreed to rescind its redemptions of an aggregate of
Also on April 17, 2025, in connection with the
Non-Redemption Agreement, the Company and Investor entered into a forfeiture agreement (the “Forfeiture Agreement”), pursuant
to which Investor agreed to forfeit its right, immediately upon consummation of the Business Combination and receipt of the Non-Redemption
Payment, to an aggregate of
Franchise and Income Tax Withdrawals from Trust Account
Since completion of its IPO on November 19, 2021,
and through March 31, 2025, the Company withdrew $
Liquidity and Capital Resources
As of March 31, 2025, the Company had $
In addition, the Company has $
In addition, in order to finance transaction costs
in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and
directors may, but are not obligated to, provide the Company Working Capital Loans, as defined below (see Note 5). As of March 31, 2025,
the Sponsor and its affiliates advanced $
In connection with the Company’s assessment of going concern considerations in accordance with FASB Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that the liquidity condition and the fact that the mandatory liquidation date has passed, raises substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate. The financial statements do not include any adjustment that might be necessary if the Company is unable to continue as a going concern.
8
SHOULDERUP TECHNOLOGY ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Risks and Uncertainties
Inflation Reduction Act of 2022
On August 16, 2022, the Inflation Reduction Act
of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things, a new U.S. federal
On April 20, 2023, the Company’s stockholders
redeemed
The Company evaluated the classification and accounting
of the share/ stock redemption under ASC 450, “Contingencies”. ASC 450 states that when a loss contingency exists the likelihood
that the future event(s) will confirm the loss or impairment of an asset or the incurrence of a liability can range from probable to remote.
A contingent liability must be reviewed at each reporting period to determine appropriate treatment. Management has evaluated the requirements
of the IR Act and the Company’s operations at the end of the reporting period and has determined that a liability of $
Note 2 - Significant Accounting Policies and Basis of Consolidation
Basis of Presentation
The accompanying unaudited Condensed Consolidated financial statements are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP. In the opinion of management, the unaudited Condensed Consolidated financial statements reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the balances and results for the periods presented. Operating results for the three months ended March 31, 2025 are not necessarily indicative of the results that may be expected through December 31, 2025, or any future periods.
The accompanying unaudited Condensed Consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries.
The year-end condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America.
The accompanying unaudited Condensed Consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Annual Report on Form 10-K filed by the Company with the SEC on May 7, 2025.
Emerging Growth Company Status
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, (the “Securities Act”), as modified by the Jumpstart our Business Startups Act of 2012, (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
9
SHOULDERUP TECHNOLOGY ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s condensed consolidated financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements. Making estimates requires management to exercise significant judgement. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the condensed consolidated financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Actual results could differ from those estimates. Management has identified assumptions involved in the valuation of Class B shares transferred under the terms of non-redemption agreements as a critical accounting estimate.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. As of March 31, 2025 and December 31, 2024, the Company had
cash equivalents.
Cash Held in the Trust Account
The Company’s portfolio of investments was comprised of cash held in demand deposit account of March 31, 2025, and December 31, 2024.
Concentration of Credit Risk
The Company has significant cash balances at financial
institutions which throughout the year regularly exceed the federally insured limit of $
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, excluding the non-redemption agreements derivative liability, which qualify as financial instruments under the FASB ASC Topic 820, “Fair Value Measurements” equal or approximate the carrying amounts represented in the condensed consolidated balance sheets, primarily due to their short-term nature (see Note 9).
10
SHOULDERUP TECHNOLOGY ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Fair Value Measurements
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.
The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
● | Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets; | |
● | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and | |
● | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.
Derivative Financial Instruments
The Company evaluates its equity-linked financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). For derivative financial instruments that are classified as liabilities, the derivative instrument is initially recognized at fair value with subsequent changes in fair value recognized in the Consolidated statements of operations each reporting period.
The Company accounts for the
The Company accounts for the Non-Redemption Agreements (as defined in Note 6) in accordance with the guidance contained in ASC 815. Such guidance provides that the Non-Redemption Agreements are classified as liabilities. As such, the non-redemption agreements derivative liability was recorded at its initial fair value on the date of issuance, and is adjusted at each balance sheet date thereafter. Changes in the estimated fair value of the non-redemption agreements derivative liability are recognized as a non-cash gain or loss on the Consolidated statements of operations. The fair value of the derivative liability is discussed in Note 9.
Class A Common Stock Subject to Possible Redemption
The Company accounts for its Class A common stock
subject to possible redemption in accordance with the guidance in ASC 480. Class A common stock subject to mandatory redemption (if any)
is classified as liability instruments and is measured at fair value. Conditionally redeemable Class A common stock (including Class A
common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence
of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, Class A common
stock is classified as stockholders’ deficit. The Public Shares feature certain redemption rights that are considered to be outside
of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, as of March 31, 2025 and December
31, 2024,
11
SHOULDERUP TECHNOLOGY ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Company has elected to recognize changes in redemption value immediately as they occur and adjust the carrying value of redeemable common stock to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable common stock are affected by charges against additional paid-in capital (if available) and accumulated deficit.
Offering Costs Associated with the Initial Public Offering
The Company complies with the requirements of Financial Accounting Standards Board (FASB) Accounting Standard Codification (ASC) 340-10-S99-1. Offering costs consisted of legal, accounting, underwriting fees and other costs incurred through the Initial Public Offering that were directly related to the Initial Public Offering. Offering costs were allocated to the separable financial instruments issued in the Initial Public Offering based on a relative fair value basis, compared to total proceeds received. Offering costs were allocated between the Public Shares, Public Warrants, Private Placement Shares, and Private Placement Warrants, based on a relative fair value basis, compared to total proceeds received. Additionally, at the Initial Public Offering, offering costs allocated to the Public Shares were charged against temporary equity and offering costs allocated to the Public Warrants, Private Placement Shares, and Private Placement Warrants were charged against stockholders’ deficit. Deferred underwriting commissions are classified as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.
Net (Loss) Income Per Common Share
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” The Company has two classes of shares, which are referred to as Class A common stock and Convertible Class B common stock. Income and losses are shared pro rata between the two classes of shares. Net (loss) income per common share is calculated by dividing the net (loss) income by the weighted average shares of common stock outstanding for the respective period.
The calculation of diluted net (loss) income does
not consider the effect of the warrants underlying the Units sold in the Initial Public Offering (including the consummation of the Over-allotment)
and the private placement warrants to purchase an aggregate of
The tables below present a reconciliation of the numerator and denominator used to compute basic and diluted net (loss) income per share of common stock:
For the Three Months Ended March 31, | ||||||||||||||||
2025 | 2024 | |||||||||||||||
Class A redeemable | Class A and Class B non- redeemable | Class A redeemable | Class A and Class B non- redeemable | |||||||||||||
Basic and diluted net loss per common stock: | ||||||||||||||||
Numerator: | ||||||||||||||||
Allocation of net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
Denominator: | ||||||||||||||||
Basic and diluted weighted average common stock outstanding | ||||||||||||||||
Basic and diluted net loss per common stock | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) |
Income Taxes
The Company accounts for income taxes under ASC 740 Income Taxes (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized. As of March 31, 2025 and December 31, 2024, the Company had a full valuation allowance against the deferred tax assets.
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition.
12
SHOULDERUP TECHNOLOGY ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were
unrecognized tax benefits and no amounts accrued for interest and penalties as of March 31, 2025 and December 31, 2024. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
The Company’s effective tax rate was (
The Company has identified the United States as its only “major” tax jurisdiction. The Company may be subject to potential examination by federal and state taxing authorities in the areas of income taxes. These potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
Recent Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s condensed consolidated financial statements.
Note 3 - Initial Public Offering
On November 19, 2021, the Company sold
Following the closing of the IPO on November 19,
2021, $
13
SHOULDERUP TECHNOLOGY ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 4 - Private Placement
Simultaneously with the closing of the IPO, the
Sponsor purchased an aggregate of
Note 5 - Related Party Transactions
Founder Shares
On August 30, 2021, the Sponsor paid $
The Sponsor has agreed not to transfer, assign
or sell any of its Founder Shares until the earlier to occur of: (i)
Convertible Promissory Note - Related Party
On August 30, 2021, the Sponsor agreed to loan
the Company up to $
On April 2, 2024, Company issued a promissory
note to the Sponsor in the amount of $
On August 14, 2024, Company issued a promissory
note to the Sponsor in the amount of $
On September 30, 2024, Company issued a promissory
note to the Sponsor in the amount of $
On November 27, 2024, Company issued a promissory
note to the Sponsor in the amount of $
14
SHOULDERUP TECHNOLOGY ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On January 17, 2025, Company issued a promissory
note to the Sponsor in the amount of $
Working Capital Loans
In order to finance transaction costs in connection
with an intended Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors
may, but are not obligated to, loan the Company funds as may be required (the “Working Capital Loans”). If the Company completes
the initial Business Combination, the Company may repay the Working Capital Loans out of the proceeds of the Trust Account released to
the Company. Otherwise, the Working Capital Loans may be repaid only out of funds held outside the Trust Account. In the event that the
initial Business Combination does not close, the Company may use a portion of the working capital held outside the Trust Account to repay
the Working Capital Loans but no proceeds from the Trust Account would be used to repay the Working Capital Loans. Up to $
Due to Related Party
In connection with the IPO, the Sponsor had advanced
to the Company an aggregate of approximately $
Administrative Service Fee
On November 16, 2021, the Company entered into
an agreement with the Sponsor, pursuant to which the Company agreed to pay the Sponsor a total of $
Note 6 - Commitments and Contingencies
Registration and Stockholder Rights
The holders of the (i) Founder Shares, which were issued in a private placement prior to the closing of the IPO, (ii) Private Units (including securities contained therein), which were issued in a private placement simultaneously with the closing of the IPO and (iii) private placement-equivalent units (including securities contained therein) that may be issued upon conversion of Working Capital Loans will have registration rights to require the Company to register a sale of any of the Company’s securities held by them pursuant to a registration rights agreement signed on November 16, 2021. The holders of these securities are entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the Company’s completion of the initial Business Combination. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
15
SHOULDERUP TECHNOLOGY ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Underwriting Agreement
The Company granted the underwriters a
On November 19, 2021, the Company paid cash underwriting
commissions of $
The underwriters were entitled to a deferred underwriting
commission of $
Non-Redemption Agreements
During April 2023, the Company and the Sponsor
entered into agreements (the “April Non-Redemption Agreements”) with third parties in exchange for them agreeing not to redeem
shares of Class A common stock at the Special Meeting at which a proposal to amend to the Company’s Certificate of Incorporation
to effect an extension of time for the Company to consummate an initial business combination (the “April Charter Amendment Proposal”)
from May 19, 2023 to November 19, 2023 (the “April Extension”). The Non-Redemption Agreements provide for the allocation
of
During November 2023, the Company and the Sponsor
entered into agreements (the “November Non-Redemption Agreements”, and together with the April Non-Redemption Agreements,
collectively, the “Non-Redemption Agreements”) with third parties in exchange for them agreeing not to redeem shares of Class
A common stock at the Special Meeting at which a proposal to amend to the Company’s Certificate of Incorporation to effect an extension
of time for the Company to consummate an initial business combination (the “November Charter Amendment Proposal”) from November 19,
2023 to May 19, 2024 (the “November Extension”). The November Non-Redemption Agreements provide for the allocation of
On May 17, 2024, the Company and the Sponsor entered
into Non-Redemption Agreements on substantially the same terms with certain stockholders of the Company, pursuant to which such stockholders
agreed not to redeem (or to validly rescind any redemption requests on) an aggregate of
The Non-Redemption Agreements shall terminate on the earlier of (a) the failure of the Company’s stockholders to approve the Extensions at the Meeting, or the determination of the Company not to proceed to effect the Extensions, (b) the fulfillment of all obligations of parties to the Non-Redemption Agreements, (c) the liquidation or dissolution of the Company, or (d) the mutual written agreement of the parties.
Additionally, pursuant to the Non-Redemption Agreements, the Company has agreed that until the earlier of (a) the consummation of the Company’s initial business combination; (b) the liquidation of the trust account; and (c) 24 months from consummation of the Company’s initial public offering, the Company will maintain the investment of funds held in the trust account in interest-bearing United States government securities within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended, having a maturity of 185 days or less, or in money market funds meeting the conditions of paragraphs (d)(1), (d)(2), (d)(3) and (d)(4) of Rule 2a-7 promulgated under the Investment Company Act of 1940, as amended, which invest only in direct U.S. government treasury obligations. The Company has also agreed that it will not use any amounts in the trust account, or the interest earned thereon, to pay any excise tax that may be imposed on the Company pursuant to the Inflation Reduction Act (IRA) of 2022 (H.R. 5376) due to any redemptions of public shares at the Special Meeting, in connection with a liquidation of the Company if it does not effect a business combination prior to its termination date by the Company.
The Company accounts for non-redemption agreements
on a derivative liability basis and records any changes in their fair value in the condensed consolidated statements of operations. The
amount of such liability was $
16
SHOULDERUP TECHNOLOGY ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Service Provider Agreements
From time to time the Company has entered into and may enter into agreements with various service providers and advisors, including investment banks, that helped us identify targets, negotiate terms of potential Business Combinations, and that will help us consummate a Business Combination and/or provide other services. In connection with these agreements, the Company may be required to pay such service providers and advisors fees in connection with their services to the extent that certain conditions, including the closing of a potential Business Combination, are met. If a Business Combination does not occur, the Company would not expect to be required to pay these contingent fees. There can be no assurance that the Company will complete a Business Combination.
The Company has recorded an accrual of $
SEE ID Business Combination Agreement
On March 18, 2024, the Company entered into a Business Combination Agreement (such agreement, the “Business Combination Agreement” and such business combination, the “Business Combination”) by and among CID HoldCo, Inc., a Delaware corporation and a direct, wholly-owned subsidiary of ShoulderUp (“Holdings”), ShoulderUp Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of Holdings (“ShoulderUp Merger Sub”), SEI Merger Sub, Inc., a Delaware corporation and a direct, wholly owned subsidiary of Holdings (“SEI Merger Sub” and together with ShoulderUp Merger Sub, the “Merger Subs”) and SEE ID, Inc., a Nevada corporation (“SEE ID”).
Pursuant to the Business Combination Agreement and subject to the terms and conditions set forth therein, (i) ShoulderUp Merger Sub will merge with and into ShoulderUp (the “ShoulderUp Merger”), whereby the separate existence of ShoulderUp Merger Sub will cease and ShoulderUp will be the surviving entity of the ShoulderUp Merger and become a wholly owned subsidiary of Holdings, and (ii) following confirmation of the effective filing of the documents required to implement the ShoulderUp Merger, SEI Merger Sub will merge with and into the Company (the “SEE ID Merger” and together with the ShoulderUp Merger, the “Mergers”), the separate existence of SEI Merger Sub will cease and SEE ID will be the surviving entity of the SEE ID Merger and a direct wholly owned subsidiary of Holdings (the “Surviving Company”).
Upon the closing of the transactions, it is expected that Holdings will be listed on the Nasdaq Stock Market, LLC.
There are no assurances that the Business Combination will close, the consummation of which remains subject to the satisfaction or waiver of certain customary closing conditions of the respective parties, including, among others, a registration statement of Holdings becoming effective and approval of the Business Combination by the stockholders of ShoulderUp and SEE ID.
Note 7 - Class A Common Stock Subject to Possible Redemption
The Company’s Public Shares feature certain
redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of future events. The
Company is authorized to issue
In connection with the Special Meeting held on
April 20, 2023, holders of
In connection with the Special Meeting held on
November 17, 2023, holders of
In connection with the Special Meeting held on
May 17, 2024, holders of
In connection with the Special Meeting held on
November 19, 2024, holders of
In connection with the Special Meeting held on
December 30, 2024, holders of
In connection with the Special Meeting held on
January 26, 2025, holders of
In connection with the Special Meeting held on
February 6, 2025, holders of
As of March 31, 2025 and December 31, 2024,
there were respectively
17
SHOULDERUP TECHNOLOGY ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Company recognizes changes in redemption value of the Class A common stock subject to possible redemption immediately as changes occur and adjusts the carrying value of the Class A common stock subject to possible redemption to equal the redemption value as if liquidation were to occur at the end of the reporting period.
The Class A common stock subject to possible redemption reflected on the accompanying Consolidated balance sheets is reconciled on the following table:
Class A common stock subject to possible redemption as of December 31, 2024 | $ | |||
Increase in redemption value of Class A common stock subject to possible redemption | ||||
Redemptions | ( | ) | ||
Class A common stock subject to possible redemption as of March 31, 2025 | $ |
Note 8 - Stockholders’ Deficit
Preferred Stock - The Company is
authorized to issue
Class A Common stock - The Company
is authorized to issue
Convertible Class B Common stock
- The Company is authorized to issue
Effective December 29, 2023, the Company amended its certificate of incorporation to allow for the right of a holder of Class B common stock of the Company to convert its shares of Class B common stock into shares of Class A common stock on a one-to-one basis at any time and from time to time at the election of the holder. The newly issued Class A common stock would not have any redemption rights and would continue to be subject to a lock-up period upon consummation of the business combination. The amendment was approved by the Company’s stockholders at a meeting held on December 28, 2023.
The shares of Class B common stock (to the extent not already converted) will automatically convert into shares of Class A common stock at the time of the initial Business Combination on a one-for-one basis (subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like), and subject to further adjustment.
Warrants - As of March 31, 2025
and December 31, 2024, there were
The warrants will become exercisable on the later
of
18
SHOULDERUP TECHNOLOGY ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Company is not registering the shares of Class
A common stock issuable upon exercise of the warrants at this time. However, the Company has agreed that as soon as practicable, but in
no event later than
Once the warrants become exercisable, the Company may redeem the outstanding warrants:
● | in whole and not in part; | |
● | at a price of $ | |
● | upon a minimum of | |
● | if, and only if, the last reported sale price of the Class A common stock equals or exceeds $ |
If the Company calls the warrants for redemption
as described above, the management will have the option to require all holders that wish to exercise warrants to do so on a “cashless
basis.” In determining whether to require all holders to exercise their warrants on a “cashless basis,” the management
will consider, among other factors, the Company’s cash position, the number of warrants that are outstanding and the dilutive effect
on the stockholders of issuing the maximum number of shares of Class A common stock issuable upon the exercise of the warrants. In such
event, each holder would pay the exercise price by surrendering the warrants for that number of shares of Class A common stock equal to
the quotient obtained by dividing (x) the product of the number of shares of Class A common stock underlying the warrants, multiplied
by the excess of the “fair market value” (as defined below) over the exercise price of the warrants by (y) the fair market
value. The “fair market value” shall mean the average last reported sale price of shares of the Class A common stock for the
The Company accounts for the
19
SHOULDERUP TECHNOLOGY ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 9 - Fair Value Measurements
The following tables present information about the Company’s assets that are measured at fair value on a recurring basis as of March 31, 2025 and December 31, 2024, and indicate the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value:
March 31, 2025
Description | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | |||||||||
Liabilities: | ||||||||||||
Non-redemption agreements derivative liability | $ | $ | $ |
December 31, 2024
Description | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | |||||||||
Liabilities: | ||||||||||||
Non-redemption agreements derivative liability | $ | $ | $ |
The Non-Redemption Agreements derivative liability were accounted for as liabilities in accordance with ASC 815 and are presented on the condensed consolidated balance sheets. The non-redemption agreements derivative liability are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of derivative liability in the condensed consolidated statements of operations.
As of March 31, 2025 and December 31, 2024, the
value of Non-Redemption Agreements derivative liability was determined by applying the estimated probability of the successful business
combination to the market price of the Class A common stock.
Input | March 31, 2025 | December 31, 2024 | ||||||
Market price of Class A common stock | $ | $ | ||||||
Probability of successful business combination | % | % |
The following table presents the changes in the fair value of the Non-Redemption Agreements derivative liability:
Fair value as of December 31, 2024 | $ | |||
Change in valuation inputs or other assumptions | ||||
Fair value as of March 31, 2025 | $ |
Fair value as of December 31, 2023 | $ | |||
Change in valuation inputs or other assumptions | ||||
Fair value as of March 31, 2024 | $ |
Transfers to/from Levels 1, 2, and 3 are recognized at the beginning of the reporting period. There were no transfers to/from Levels 1, 2, and 3 during the three months ended March 31, 2025 and 2024.
20
SHOULDERUP TECHNOLOGY ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 10 – Segment Information
ASC Topic 280, “Segment Reporting,” establishes standards for companies to report in their financial statement information about operating segments, products, services, geographic areas, and major customers. Operating segments are defined as components of an enterprise that engage in business activities from which it may recognize revenues and incur expenses, and for which separate financial information is available that is regularly evaluated by the Company’s chief operating decision maker, or group, in deciding how to allocate resources and assess performance.
The Company’s chief operating decision maker
(“CODM”) has been identified as the Chief Financial Officer who reviews the assets, operating results, and financial metrics
for the Company as a whole to make decisions about allocating resources and assessing financial performance. Accordingly, management has
determined that there is only
The CODM assesses performance for the single segment
and decides how to allocate resources based on net loss that also is reported on the consolidated statements of operations as net loss.
The measure of segment assets is reported on the balance sheets as total assets.
March 31, | December 31, | |||||||
2025 | 2024 | |||||||
Trust Account | $ | $ | ||||||
Cash | $ | $ |
For the Three Months Ended March 31, 2025 | For the Three Months Ended March 31, 2024 | |||||||
General and administrative expenses | $ | $ | ||||||
Income from cash and investments held in Trust Account | $ | $ |
The CODM reviews interest earned on the Trust Account to measure and monitor stockholder value and determine the most effective strategy of investment with the Trust Account funds while maintaining compliance with the Trust Agreement.
General and administrative expenses are reviewed and monitored by the CODM to manage and forecast cash to ensure enough capital is available to complete a business combination or similar transaction within the business combination period. The CODM also reviews general and administrative costs to manage, maintain and enforce all contractual agreements to ensure costs are aligned with all agreements and budget. General and administrative costs, as reported on the consolidated statements of operations, are the significant segment expenses provided to the CODM on a regular basis.
All other segment items included in net (loss) income are reported on the consolidated statement of operations and described within their respective disclosures.
Note 11 – Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the unaudited Condensed Consolidated balance sheets and up to the date the unaudited Condensed Consolidated financial statements were issued. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the unaudited Condensed Consolidated financial statements, except as hereinafter described.
On April 17, 2025, the Company entered into a
non-redemption agreement (the “Non-Redemption Agreement”) with a certain holder of the Company’s common stock (the “Investor”)
pursuant to which the Investor agreed to rescind its redemptions of an aggregate of
Also on April 17, 2025, in connection with the
Non-Redemption Agreement, the Company and Investor entered into a forfeiture agreement (the “Forfeiture Agreement”), pursuant
to which Investor agreed to forfeit its right, immediately upon consummation of the Business Combination and receipt of the Non-Redemption
Payment, to an aggregate of
On May 30, 2025, the Company and its holder party to the Non-Redemption Agreement agreed to extend the termination date of the Non-Redemption Agreement to June 15, 2025.
21
Item 2. Managements’ Discussion and Analysis of Financial Conditions and Results of Operations
References to “we”, “us”, “our” or the “Company” are to ShoulderUp Technology Acquisition Corp., except where the context requires otherwise. The following discussion should be read in conjunction with our interim Condensed Consolidated financial statements and related notes thereto included elsewhere in this report.
Special Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Such statements include, but are not limited to, possible business combinations and the financing thereof, and related matters, as well as all other statements other than statements of historical fact included in this Form 10-Q. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other Securities and Exchange Commission (“SEC”) filings.
Overview
We are a blank check company incorporated in Delaware on May 20, 2021, for the purpose of effecting a merger, stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more businesses.
On November 19, 2021, we consummated our IPO of 30,000,000 units, at $10.00 per unit, generating gross proceeds of $300 million.
Simultaneously with the closing of the IPO, we consummated the private placement of 1,350,000 private units for an aggregate purchase price of $13,500,000.
Upon the closing of our IPO on November 19, 2021, $306,000,000 ($10.00 per unit) from the net proceeds of the sale of the units in the initial public offering and the sale of private shares were placed in the Trust Account.
If we are unable to complete the initial business combination on or before the current termination date or and extended date, we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the outstanding public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to us but net of taxes payable (and less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, liquidate and dissolve, subject (in the case of (ii) and (iii) above) to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
We cannot assure you that our plans to complete our initial business combination will be successful.
Recent Developments
On April 20, 2023, the Company held a special meeting of its stockholders (the “Special Meeting”). At the Special Meeting, the Company’s stockholders approved an amendment to the Company’s Amended and Restated Certificate of Incorporation that extends the date by which the Company must consummate a business combination transaction from May 19, 2023, to November 19, 2023 (the date which is 24 months from the closing date of the Company’s initial public offering of units). The certificate of amendment was filed with the Delaware Secretary of State and has an effective date of April 21, 2023. In connection with Special Meeting, holders of 25,845,428 shares of the Company’s Class A common stock exercised their right to redeem their shares for a cash redemption price of approximately $10.43 per share, or an aggregate redemption amount of $269,597,445. Following such redemptions, approximately 4,154,572 shares of Class A common stock remain issued and outstanding.
On October 16, 2023, the Company announced that it has entered into a non-binding letter of intent for a potential business combination with Airspace Experience Technologies, Inc., a pioneer in the urban mobility market. The non-binding letter of intent was terminated on December 1, 2024.
22
On November 17, 2023, the Company, held a special meeting of its stockholders (the “Special Meeting”). At the Special Meeting, the Company’s stockholders approved an amendment to the Company’s Amended and Restated Certificate of Incorporation that extends the date (the “Termination Date”) by which the Company must consummate a business combination (the “Charter Extension”) from November 19, 2023 (the “Original Termination Date”) to May 19, 2024 or such earlier date as may be determined by the Company’s board of directors in its sole discretion (the “Charter Extension Date”). The certificate of amendment was filed with the Delaware Secretary of State and has an effective date of November 15, 2023. In connection with the Extension Amendment Proposal, holders of 2,170,004 shares of the Company’s common stock properly exercised their right to redeem their shares. $22,904,010 or $10.55 per share was withdrawn from the Trust Account, leaving $20,946,765 in the Trust Account after the redemptions.
On December 19, 2023, the NYSE filed a Form 25 to delist the Company securities. The delisting was effective on December 29, 2023. On March 6, 2024, pursuant to Rule 15c-211 of the U.S. Securities Exchange Act, as amended (the “Exchange Act”), as amended, a market maker filed a Form 211 with the Financial Industry Regulatory Authority, Inc. (“FINRA”) to initiate proprietary trading of the Class A common stock, the units, and the warrants of the Company. Pursuant to Rule 15c2-11 (the “Exchange Act”), the submission of Form 211 to the FINRA OTC Compliance Unit enables broker-dealers to initiate or resume trading quotes on the “pink sheets” by OTC Markets Group Inc. for securities not listed on the New York Stock Exchange or The Nasdaq Stock Market LLC. The securities are expected to be quoted on the Pink Sheets, but there can be no assurance if or when this will occur.
On December 28, 2023, the Company held an annual meeting of its stockholders (the “Annual Meeting”). At the Annual Meeting, the Company’s stockholders approved an amendment to the Company’s Amended and Restated Certificate of Incorporation to allow for the right of a holder of Class B common stock of the Company to convert its shares of Class B common stock into shares of Class A common stock on a one-to-one basis at any time and from time to time at the election of the holder. The newly issued Class A common stock would not have any redemption rights and would continue to be subject to a lock-up period upon consummation of the business combination.
On May 17, 2024, the Company held a special meeting of its stockholders (the “May 17 Special Meeting”). At the May 17 Special Meeting, the Company’s stockholders approved an amendment to the Company’s Amended and Restated Certificate of Incorporation that extends the Termination Date by which the Company must consummate a business combination from May 19, 2024, to November 19, 2024 or such earlier date as may be determined by the Company’s board of directors in its sole discretion. The certificate of amendment was filed with the Delaware Secretary of State and has an effective date of May 17, 2024. In connection with the extension amendment proposal at the May 17 Special Meeting, holders of 1,125,154 shares of the Company’s common stock properly exercised their right to redeem their shares (and did not withdraw their redemption) for a cash redemption price of approximately $10.78 per share, or an aggregate redemption amount of $12,136,736. Following such redemptions, approximately $9,270,270 will remain in the trust account and 859,414 shares of common stock will remain issued and outstanding.
On September 19, 2024, one of the underwriters, Citigroup, waived all of their portion of the deferred underwriting fees totaling $11,200,000.
On November 7, 2024, the Company has filed a definite proxy announcing a special meeting of stockholders to be held on November 18, 2024, seeking shareholders’ approval of the proposal to extend the date by which it has to consummate a business combination from November 19, 2024, to December 31, 2024, or such earlier date as may be determined by the Company’s board of directors in its sole discretion.
On November 19, 2024, the Company held a special meeting of its stockholders (the “November 19 Special Meeting”). At the November 19 Special Meeting, the Company’s stockholders approved an amendment to the Company’s Amended and Restated Certificate of Incorporation that extends the Termination Date by which the Company must consummate a business combination from November 19, 2024 to December 31, 2024 or such earlier date as may be determined by the Company’s board of directors in its sole discretion. The certificate of amendment was filed with the Delaware Secretary of State and has an effective date of November 19, 2024. In connection with the extension amendment proposal at the November 19 Special Meeting, holders of 349,505 shares of the Company’s common stock properly exercised their right to redeem their shares (and did not withdraw their redemption) for a cash redemption price of approximately $10.99 per share, or an aggregate redemption amount of $3,841,059. Following such redemptions, approximately $5,604,904 will remain in the trust account and 509,909 shares of common stock will remain issued and outstanding.
On December 30, 2024, the Company held a special meeting of its stockholders (the “December 30 Special Meeting”). At the December 30 Special Meeting, the Company’s stockholders approved an amendment to the Company’s Amended and Restated Certificate of Incorporation that extends the Termination Date by which the Company must consummate a business combination from December 31, 2024 to January 24, 2025 or such earlier date as may be determined by the Company’s board of directors in its sole discretion. The certificate of amendment was filed with the Delaware Secretary of State and has an effective date of December 30, 2024. In connection with the extension amendment proposal at the December 30 Special Meeting, holders of 1,080 shares of the Company’s common stock properly exercised their right to redeem their shares (and did not withdraw their redemption) for a cash redemption price of approximately $10.95 per share, or an aggregate redemption amount of approximately $11,824. Following such redemptions, approximately $5,570,730 will remain in the trust account and 508,829 shares of common stock will remain issued and outstanding.
On January 24, 2025, the Company held a special meeting of its stockholders (the “January 24 Special Meeting. At the January 24 Special Meeting, the Company’s stockholders approved an amendment to the Company’s Amended and Restated Certificate of Incorporation that extends the Termination Date by which the Company must consummate a business combination from January 24, 2025, to February 24, 2025, or such earlier date as may be determined by the Company’s board of directors in its sole discretion. The certificate of amendment was filed with the Delaware Secretary of State and has an effective date of January 24, 2025. In connection with the extension amendment proposal at the January 24 Special Meeting, holders of 240 shares of the Company’s common stock properly exercised their right to redeem their shares (and did not withdraw their redemption) for a cash redemption price of approximately $10.98 per share, or an aggregate redemption amount of approximately $ 2,634.91. Following such redemptions, approximately $5,583,697 will remain in the trust account and 508,589 shares of common stock will remain issued and outstanding.
On February 6, 2025, the Company held a special meeting of its stockholders (the “Business Combination Meeting”). At the Business Combination Meeting, the Company’s stockholders approved, among other things, the Business Combination. In connection with the Business Combination Meeting, holders of 502,000 shares of common stock elected to redeem.
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After the Business Combination meeting, the Company and certain holders of the Company’s common stock who elected to redeem in connection with the Business Combination Meeting entered into discussions to reverse their redemptions. The discussions continued after February 24, 2025, the Company’s termination date.
On April 17, 2025, the Company entered into a non-redemption agreement (the “Non-Redemption Agreement”) with a certain holder of the Company’s common stock (the “Investor”) pursuant to which the Investor agreed to rescind its redemptions of an aggregate of 500,000 shares of common stock redeemed in connection with the Business Combination Meeting (the “Investor Shares”). The Non-Redemption Agreement shall terminate on the earlier of (a) May 31, 2025, unless the parties mutually agree to extend such date; (b) the fulfillment of all obligations of the parties to the Non-Redemption Agreement; (c) the liquidation or dissolution of the Company; (d) the mutual written agreement of the parties to the Non-Redemption Agreement; or (e) if any the Investor Shares are actually redeemed in connection with a meeting of the Company prior to consummation of the Business Combination. The Company processed the redemptions of the remaining holders of the 2,000 shares of common stock who elected to redeem. On May 30, 2025, the Company and its holder party to the Non-Redemption Agreement agreed to extend the termination date of the Non-Redemption Agreement to June 15, 2025.
Non-Redemption Agreements
During April 2023, the Company and the Sponsor entered into agreements (the “April Non-Redemption Agreements”) with third parties in exchange for them agreeing not to redeem shares of Class A common stock at the Special Meeting at which a proposal to amend to the Company’s Certificate of Incorporation to effect an extension of time for the Company to consummate an initial business combination (the “April Charter Amendment Proposal”) from May 19, 2023 to November 19, 2023 (the “April Extension”). The April Non-Redemption Agreements provide for the allocation of 1,000,000 Founder Shares held by the Sponsor in exchange for such investors agreeing to hold and not redeem certain public shares at the Special Meeting. Certain of the parties to the Non-Redemption Agreements are also members of the Sponsor.
During November 2023, the Company and the Sponsor entered into agreements (the “November Non-Redemption Agreements” and together with the April Non-Redemption Agreements, collectively, the “Non-Redemption Agreements”) with third parties in exchange for them agreeing not to redeem shares of Class A common stock at the Special Meeting at which a proposal to amend to the Company’s Certificate of Incorporation to effect an extension of time for the Company to consummate an initial business combination (the “November Charter Amendment Proposal”) from November 19, 2023 to May 19, 2024 (the “November Extension”). The November Non-Redemption Agreements provide for the allocation of 376,000 Founder Shares held by the Sponsor in exchange for such investors agreeing to hold and not redeem certain public shares at the Special Meeting. Certain of the parties to the Non-Redemption Agreements are also members of the Sponsor.
On May 17, 2024, the Company and the Sponsor entered into Non-Redemption Agreements on substantially the same terms with certain stockholders of the Company, pursuant to which such stockholders agreed not to redeem (or to validly rescind any redemption requests on) an aggregate of 800,000 non-Redeemed shares in connection with the Special Meeting. In exchange for the foregoing commitments not to redeem such shares of Class A Common Stock, the Sponsor agreed to transfer an aggregate of 266,666 shares of Class B Common Stock held by the Sponsor to such stockholders immediately following consummation of the initial business combination if they continued to hold such Non-Redeemed shares through the Special Meeting.
On April 17, 2025, the Company entered into a non-redemption agreement (the “Non-Redemption Agreement”) with a certain holder of the Company’s common stock (the “Investor”) pursuant to which the Investor agreed to rescind its redemptions of an aggregate of 500,000 shares of common stock redeemed in connection with the Business Combination Meeting (the “Investor Shares”). Pursuant to the Non-Redemption Agreement, the Company agreed that immediately upon the consummation of the Business Combination and the Share Forfeiture (as defined below), the Company and Holdings shall pay to the Investor a payment in respect of its Investor Shares in cash released from the Trust Account equal to (x) the number of Investor Shares multiplied by (y) the redemption price for the common stock redeemed in connection with the Business Combination (the “Non-Redemption Payment”). The Non-Redemption Agreement shall terminate on the earlier of (a) May 31, 2025, unless the parties mutually agree to extend such date; (b) the fulfillment of all obligations of the parties to the Non-Redemption Agreement; (c) the liquidation or dissolution of the Company; (d) the mutual written agreement of the parties to the Non-Redemption Agreement; or (e) if any the Investor Shares are actually redeemed in connection with a meeting of the Company prior to consummation of the Business Combination. The Company processed the redemptions of the remaining holders of the 2,000 shares of common stock who elected to redeem. On May 30, 2025, the Company and its holder party to the Non-Redemption Agreement agreed to extend the termination date of the Non-Redemption Agreement to June 15, 2025.
Also on April 17, 2025, in connection with the Non-Redemption Agreement, the Company and Investor entered into a forfeiture agreement (the “Forfeiture Agreement”), pursuant to which Investor agreed to forfeit its right, immediately upon consummation of the Business Combination and receipt of the Non-Redemption Payment, to an aggregate of 413,333 founder shares held the Sponsor, which the Sponsor agreed to transfer to Investor in connection with certain non-redemption agreements entered into on April 19, 2023, November 10, 2023, and May 16, 2024 (the “Share Forfeiture”).
The Non-Redemption Agreements shall terminate on the earlier of (a) the failure of the Company’s stockholders to approve the Extension at the Meeting, or the determination of the Company not to proceed to effect the Extension, (b) the fulfillment of all obligations of parties to the Non-Redemption Agreements, (c) the liquidation or dissolution of the Company, or (d) the mutual written agreement of the parties.
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Additionally, pursuant to the Non-Redemption Agreements, the Company has agreed that until the earlier of (a) the consummation of the Company’s initial business combination; (b) the liquidation of the trust account; and (c) 24 months from consummation of the Company’s initial public offering, the Company will maintain the investment of funds held in the trust account in interest-bearing United States government securities within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended, having a maturity of 185 days or less, or in money market funds meeting the conditions of paragraphs (d)(1), (d)(2), (d)(3) and (d)(4) of Rule 2a-7 promulgated under the Investment Company Act of 1940, as amended, which invest only in direct U.S. government treasury obligations. The Company has also agreed that it will not use any amounts in the trust account, or the interest earned thereon, to pay any excise tax that may be imposed on the Company pursuant to the Inflation Reduction Act (IRA) of 2022 (H.R. 5376) due to any redemptions of public shares at the Special Meeting, in connection with a liquidation of the Company if it does not effect a business combination prior to its termination date by the Company.
The Company accounts for non-redemption agreements on a derivative liability basis and records any changes in their fair value in the statements of operations. The amount of such liability was $12,599,255 and $8,886,828 as of March 31, 2025 and December 31, 2024, respectively.
SEE ID Business Combination Agreement
On March 18, 2024, we entered into a Business Combination Agreement (such agreement, the “Business Combination Agreement” and such business combination, the “Business Combination”) by and among CID HoldCo, Inc., a Delaware corporation and a direct, wholly-owned subsidiary of ShoulderUp (“Holdings”), ShoulderUp Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of Holdings (“ShoulderUp Merger Sub”), SEI Merger Sub, Inc., a Delaware corporation and a direct, wholly owned subsidiary of Holdings (“SEI Merger Sub” and together with ShoulderUp Merger Sub, the “Merger Subs”) and SEE ID, Inc., a Nevada corporation (“SEE ID”).
Pursuant to the Business Combination Agreement and subject to the terms and conditions set forth therein, (i) ShoulderUp Merger Sub will merge with and into ShoulderUp (the “ShoulderUp Merger”), whereby the separate existence of ShoulderUp Merger Sub will cease and ShoulderUp will be the surviving entity of the ShoulderUp Merger and become a wholly owned subsidiary of Holdings, and (ii) following confirmation of the effective filing of the documents required to implement the ShoulderUp Merger, SEI Merger Sub will merge with and into the Company (the “SEE ID Merger” and together with the ShoulderUp Merger, the “Mergers”), the separate existence of SEI Merger Sub will cease and SEE ID will be the surviving entity of the SEE ID Merger and a direct wholly owned subsidiary of Holdings (the “Surviving Company”).
Upon the closing of the transactions, it is expected that Holdings will be listed on the Nasdaq Stock Market, LLC.
There are no assurances that the Business Combination will close, the consummation of which remains subject to the satisfaction or waiver of certain customary closing conditions of the respective parties, including, among others, a registration statement of Holdings becoming effective and approval of the Business Combination by the stockholders of ShoulderUp and SEE ID.
Results of Operations
Our entire activity from inception up to March 31, 2025, was for our formation and preparation for our IPO, and subsequent to the IPO, identifying a target company for a business combination. We will not generate any operating revenues until the closing and completion of our initial business combination, at the earliest.
For the three months ended March 31, 2025, we had net loss of approximately $4.5 million, which consisted of the change in fair value of derivative liability of approximately $3.7 million, interest and penalties of $0.5 million, general and administrative expenses of approximately $0.3 million, franchise tax expense of approximately $15,800 and income tax expense of approximately $3,200, offset by income from investments held in the Trust Account of approximately $28,000 and interest income – bank of approximately of $2,800.
For the three months ended March 31, 2024, we had net loss of approximately $0.4 million, which consisted of the general and administrative expenses of approximately $410,000, change in fair value of derivative liability of approximately $248,000, franchise tax expense of approximately $53,000 and income tax expense of approximately $44,000, offset by income from investments held in the Trust Account and operating account of approximately $262,147.
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Liquidity and Going Concern Consideration
As of March 31, 2025, the Company had $400,093 in its operating bank account and working capital deficit of approximately $6.3 million. The amounts of cash on hand as of March 31, 2025 relate to the amounts that were withdrawn from the Trust for payment of income and Delaware Franchise Taxes and can not be used for any other purpose.
In addition, we have $600,000 in subscription receivable, which will be used to satisfy our liquidity needs. Our liquidity needs prior to the consummation of the Initial Public Offering were satisfied through the cash contribution of $25,000 from the Sponsor to purchase Founder Shares, and an advance from the Sponsor of approximately $29,000. We repaid $24,000 on November 19, 2021 and the remaining $5,000 remains outstanding and is due on demand. Subsequent to the consummation of the Initial Public Offering, our liquidity has been satisfied through the net proceeds from the consummation of the Initial Public Offering, over-allotment and the Private Placement held outside of the Trust Account. Over this time period, the Company will be using the funds outside of the Trust Account for paying existing accounts payable, identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination.
Of the net proceeds from the IPO and associated Private Placements, $306,000,000 of cash was placed in the Trust Account and $1,656,890 of cash was held outside of the Trust Account and was available for the Company’s working capital purposes.
In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of our officers and directors may, but are not obligated to, provide the Company Working Capital Loans, as defined below. As of March 31, 2025, there were no amounts outstanding under any Working Capital Loans. On April 2, 2024, the Company issued a promissory note to the Sponsor for working capital needs in the amount of $275,000, of which $175,000 was funded on April 2, 2024, and $100,000 was funded on April 10, 2024. On August 14, 2024, the Company issued a promissory note to the Sponsor for working capital needs in the amount of $100,000, which was fully drawn on the same date. On September 30, 2024, Company issued a promissory note to the Sponsor in the amount of $50,000 for working capital needs, which was funded on October 1, 2024, for working capital requirements and payment of certain expenses in connection the Company’s Business Combination. On November 27, 2024, Company issued a promissory note to the Sponsor in the amount of $175,000 for working capital needs, which was funded on same date for working capital requirements and payment of certain expenses in connection the Company’s Business Combination.
Assessment of Going Concern Considerations
In connection with the Company’s assessment of going concern considerations in accordance with FASB Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that the liquidity condition and the fact that the mandatory liquidation date has passed, raises substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate. The financial statements do not include any adjustment that might be necessary if the Company is unable to continue as a going concern.
Franchise and Income Tax Withdrawals from Trust Account
Since completion of its IPO on November 19, 2021, and through March 31, 2025, the Company withdrew $2,886,354 from the Trust Account to pay its liabilities related to the income and Delaware franchise taxes. Through March 31, 2025, the Company remitted $2,526,664 to the respective tax authorities, which resulted in remaining excess of funds withdrawn from the Trust Account, but not remitted to the government authorities of $359,690. Additionally, as of March 31, 2025, the Company had accrued but unpaid income tax liability of $176,789 and unpaid liability for the Delaware franchise tax of $79,400. In 2024 the Company has established a dedicated bank account which is solely used for keeping amounts withdrawn from the Trust Account for taxes until such taxes are due and payable. As of March 31, 2025, the amount maintained in this account was $365,175.
Critical Accounting Estimates
The preparation of these condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. The only item that involves critical accounting estimates is non-redemption agreements derivative liability.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not required for smaller reporting companies.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of March 31, 2025, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial and accounting officer have concluded that as of March 31, 2025, our disclosure controls and procedures were not effective, due to the following material weakness identified in our internal controls over financial reporting identified as of March 31, 2025:
● | a material weakness in internal controls related to failures in reporting period closing that could lead to understatement of the Company’s liabilities arising from complex financial instruments; |
Changes in Internal Control over Financial Reporting
There were no changes to our internal control over financial reporting that occurred during our fiscal quarter ended March 31, 2025, that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors.
Except as set forth below, as of the date of this Quarterly Report, there have been no material changes with respect to those risk factors previously disclosed in described in our Annual Report on Form 10-K for the year ended December 31, 2024. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations.
The New York Stock Exchange delisted our securities from trading on its exchange, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.
Since the New York Stock Exchange (“NYSE”) delisted our securities from trading on its exchange and we are not able to list our securities on another national securities exchange, our securities are quoted on the OTC. Since our securities trade on the OTC, we could face significant material adverse consequences, including:
● | a limited availability of market quotations for our securities; |
● | reduced liquidity for our securities; |
● | a determination that our common stock is a “penny stock” which will require brokers trading in our Class A common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities; |
● | a limited amount of news and analyst coverage; |
● | a decreased ability to issue additional securities or obtain additional financing in the future; and |
● | a requirement to trade on the OTC for a year before reapplying for listing on a national securities exchange. |
The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” Because our common stock and warrants were delisted from the NYSE and trade on the OTC, our units, Class A common stock and warrants are not covered securities and we would be subject regulation in each state in which we offer our securities, including in connection with our initial business combination, which may make more difficult and costly to complete a business combination. In addition, our securityholders could be prohibited from trading in our securities absent our registration in the state where such securityholder lives. To date we have not registered our securities in any State, and do not currently plan to do so. This may make it difficult or impossible for our securityholders to trade in our securities.
In addition, because our securities were delisted from the NYSE and are no longer listed on a national securities exchange, we may be less attractive to potential business combination targets and thereby adversely affect our ability to complete an initial business combination.
Our securities are quoted on the OTC and may become subject to the “penny stock” rules, which may make it more difficult to trade in our securities.
The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in “penny stocks.” “Penny stocks” are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or authorized for quotation on certain automated quotation systems, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. Since our securities were delisted from the NYSE, and if the price of our common stock is less than $5.00 per share, our securities could be determined to be “penny stock” under Rule 3a-51 of the Exchange Act and we would be required to comply with the requirements of Rule 419 of the Securities Act. The “penny stock” rules require a broker-dealer, before a transaction in a “penny stock” not otherwise exempt from those rules, to deliver a standardized risk disclosure document containing specified information. In addition, the “penny stock” rules require that before effecting any transaction in a “penny stock” not otherwise exempt from those rules, a broker-dealer must make a special written determination that the “penny stock” is a suitable investment for the purchaser and receive (i) the purchaser’s written acknowledgment of the receipt of a risk disclosure statement; (ii) a written agreement to transactions involving “penny stocks”; and (iii) a signed and dated copy of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our common stock, and therefore stockholders may have difficulty selling their shares. In addition, being subject to the requirements of the penny stock rules would make us less attractive to potential business combination targets and thereby adversely affect our ability to complete an initial business combination.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On November 19, 2021, we sold 30,000,000 units, including 3,500,000 units pursuant to the exercise of the underwriters’ over-allotment option in full, at a purchase price of $10.00 per unit in our initial public offering (the “IPO”). Simultaneously with the closing of the initial public offering, we consummated the private placement of 1,350,000 private shares for an aggregate purchase price of $13,500,000 (the “Private Placement”). Following the closing of the IPO and the Private Placement on November 19, 2021, $306,000,000 ($10.20 per unit) from the net proceeds of the sale of the units in the IPO and the sale of the private placement units was deposited into our trust account (the “Trust Account”), and $1,656,890 of cash was held outside of the Trust Account and is available for the Company’s working capital purposes. Transaction costs (other than deferred underwriting commissions) amounted to $6,620,368 consisting of $5,300,000 of underwriting commissions, and $1,320,368 of other offering costs (including $795,000 of offering costs reimbursed by the underwriters).
The net proceeds deposited into the Trust Account are invested in United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government treasury obligations.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
Item 6. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
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PART III
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SHOULDERUP TECHNOLOGY ACQUISITION CORP. | ||
Date: June 10, 2025 | By: | /s/ Phyllis W. Newhouse |
Name: | Phyllis W. Newhouse | |
Title: | Chief Executive Officer | |
(Principal Executive Officer) |
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