Four Leaf Acquisition Corporation (NASDAQ: FORLU) 10-K Review: Charting a Course to IoT Potential

In this blog post, we examine Four Leaf Acquisition Corporation’s 2024 Form 10-K, the annual report that underpins its SPAC structure designed to target companies in the Internet of Things (IoT) or adjacent industries. Below, we:

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• Describe Four Leaf’s SPAC mechanics and timeline,
• Summarize its key strategic event—a definitive merger agreement with Xiaoyu Dida Interconnect International Limited,
• Analyze the financials (trust-account cash, working capital, net losses, and going-concern risks),
• Highlight critical governance, auditor and regulatory considerations (U.S. and PRC),
• Explore the most important risk factors that investors must weigh, and
• Conclude with a balanced take on its investment potential and prospective hurdles.

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1. Business Model: A Blank-Check Company with IoT Focus

• Inception and IPO
  Four Leaf was incorporated in Delaware on March 3, 2022, as a special purpose acquisition company (SPAC). On March 16–17, 2023, it issued:
• 5.2 million units (5.421 million with over-allotment) at $10.00 each,
• Each “Unit” = 1 share of Class A common stock (symbol FORL) + 1 warrant (FORLW) exercisable at $11.50, and
• 3.5769 million private-placement warrants to ALWA Sponsor, LLC at $1.00 each, raising $3.577 million.
• Trust Account
  $55.8363 million of the IPO and private placement net proceeds (less up to $100,000 of interest to pay dissolution expenses) were deposited into a U.S. Treasury-only trust. Earnings may be released to cover taxes on interest, but not for any other purpose.
• Sponsor Shares & Private Warrants
  ALWA Sponsor, LLC received 1.35525 million Founder Shares (20% of the post-IPO capital, on an as-converted basis) for $25,000, and holds 3.5769 million private warrants. These are worthless if no business combination is completed by the deadline.
• Target Criteria
  Four Leaf’s board will search globally for IoT or adjacent-market companies, aiming at $200–$300M enterprise value. They can extend the deal deadline monthly (each $75,000 deposit into trust) up to May 22, 2025 (or June 22, 2025 if fully extended).

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2. Key Event: Merger Agreement with Xiaoyu Dida

• Parties
  On December 17, 2024, Four Leaf signed a definitive merger agreement with:
• Xiaoyu Dida Interconnect International Limited (Cayman Islands holding company),
• Xiaoyu Dida Merger Sub 1, Inc. (Delaware),
• Xiaoyu Dida (USA) Company, Inc. (Delaware).
• Structure

1. Merger 1: Merger Sub 1 merges into Four Leaf, making Four Leaf a wholly-owned subsidiary of Xiaoyu Dida, and
2. Merger 2: Four Leaf (now a subsidiary) merges into Merger Sub 2, leaving Xiaoyu Dida (USA) as the direct subsidiary.

• Merger Consideration
• Holders of public Class A shares can be redeemed for cash (pro rata trust amount) or remain shareholders
• Each public Class A share not redeemed converts to 1 Xiaoyu Dida Class A ordinary share (par $0.00005)
• Each Four Leaf warrant becomes a warrant on Xiaoyu Dida Class A shares at the same $11.50 strike
• Founder Shares convert 1:1 to Class A shares and remain subject to lockups.
• Approvals & Conditions
• Requires Four Leaf and Xiaoyu Dida stockholder approvals, antitrust clearance, U.S. regulatory filings, Nasdaq listing permit
• No minimum cash condition (the $5M Four Leaf net tangible-assets threshold is waived by Nasdaq’s SPAC rule change)
• Termination Rights
• Mutual consent, failure to close by December 31, 2025, uncured breaches, government blocking orders, or failed votes.

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3. Financial Overview (Year Ended December 31, 2024)

3.1 Balance Sheet Highlights

• Cash & Trust Account
• $28,407 in operating cash (non-trust)
• $30.1 million in trust: Treasury bills/money markets (net of distributions for redemptions and working capital loans)
• Working Capital Loans
• $2,195,100 borrowed from Sponsor to fund admin before business combination—no interest, repayable only at closing
• Up to $2 million convertible to private warrants at $1.00 each upon closing
• Stockholders’ Equity
• Public shares: 2,722,903 Class A
• Sponsor (Founder) shares: 1,355,250 Class B

3.2 Income Statement & Cash Flows

• Operating Revenue: $— (no operations pre-combination)
• Interest & Dividend Income: approximated interest earned on trust for taxes (approx. $1.03M distributed for taxes)
• Operating Expenses: legal, accounting, filing, listing, due diligence, G&A
• Net Loss: $(2.45) million for year ended December 31, 2024; $(4.12) million since inception
• Net Cash Used in Operations: largely due to general and administrative expenses

3.3 Going Concern & Liquidity Risk

• At December 31, 2024:
• Non-trust cash: $28,407
• Working capital deficit (excluding trust-account tax accruals): $(3.33) million
• Non-trust funds insufficient to operate through Q2 2025; reliance on Sponsor loans for admin and deadline extensions
• Deadline: May 22, 2025 (or June 22, 2025, if fully extended). Failure to close triggers mandatory redemption/liquidation
• Sponsor Indemnity: Sponsor to top up trust if third-party claims reduce trust to below $10.30/share (net of taxes)

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4. Risk Profile: 12 Categories of Concern

Four Leaf’s 10-K lists 80+ risk factors; the most salient include:

1. Blank-Check & SPAC-Specific Risks

• No operating history, no revenues, reliance on trust account and sponsor loans
• Must close business combination by deadline or liquidate (warrants worthless)

1. Target & Merger Risks

• No guarantee we’ll find or close with a qualified IoT target
• Possible soft valuations, limited diligence, misidentified management
• Merger approvals, antitrust and cross-border hurdles (China M&A Rules)

1. Financial & Liquidity Risks

• Non-trust cash insufficient for runway; working capital loan reliance
• Negative or low interest on trust could erode per-share value

1. Governance & Sponsor Conflicts

• Sponsor and insiders own 33.2%, can control votes, no redemption rights
• Founders paid $0.011/share but drive a $10.00 deal

1. Regulatory & Exchange Risks

• Nasdaq delisting threats over market cap, late filings, Chinese audit rules
• Potential U.S. HCFA/AHFCAA delisting if PCAOB can’t inspect PRC audits

1. Accounting & Audit Uncertainties

• We exclude any #10-K with PCAOB-uninspectable PRC auditor
• Complex SPAC M&A accounting, pro forma disclosures

1. Chinese Market Complexity

• Cross-border SPAC-to-China M&A: uncertain M&A Rules, SAFE, CSRC, CAC, national security reviews
• Cybersecurity Law, Personal Info Law, data-export restrictions

1. Legal & Liability Risks

• Third-party claims could deplete trust; sponsor indemnity limited
• Delaware dissolution rules could trigger post-redemption creditor claims

1. Capital Structure & Dilution

• Sponsor and private warrants dilute existing stock unavoidably
• Additional financing for closing or post-deal operations may dilute further

1. Macro & Market Risks

• Rising rates, war (Ukraine/Russia), global trade tensions, SPAC market appetite
• Lower public SPAC valuations, investor lockups and redemption contests

1. Human Capital

• Key management split among multiple ventures; loss of experience or misaligned incentives

1. Post-Deal Execution

• Converting to a public IoT operator requires new systems, compliance, audit, controls, D&O insurance

This hefty risk profile underscores the speculative nature of a SPAC pre-deal and the complexity of China-facing targets.

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5. How to Analyze Four Leaf’s Next Moves

1. Progress on Merger Approval

• Monitor proxy/tender documents, vote count on special meeting, CSRC filing

1. Cash & Extension Updates

• Examine upcoming extension deposits or loan advances; expiry on May 22 (or June 22), 2025

1. Regulatory Filings & Exchange Notices

• Watch for Nasdaq deficiency letters, SEC comment letters, 8-K disclosures on listing status

1. Valuation & Financing

• Assess implied equity value per share, PIPE pricing, warrants exercise terms, anti-dilution triggers

1. Deal Due Diligence

• Scrutinize IoT target’s financials (cash flow, capex, customer concentration), China-specific legal opinion, and cybersecurity reviews

1. Post-Close Roadmap

• Seek clarity on management incentives, board continuity, integration plan, pro forma credit and debt structure

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6. Investment Score: 4/10

• Four Leaf Acquisition has secured an attractive target in the burgeoning IoT segment: Xiaoyu Dida, with a deal signed and proxy prepared.
• Positives: targets a high-growth sector, global footprint in Consumer/Industrial IoT, experienced SPAC team, $30M+ in trust.
• Concerns: no operations/revenue yet, net losses, short runway, repeated deadline extensions, complex China-deal approvals, Nasdaq delisting possibilities, PCAOB audit access, heavy dilution, sponsor conflicts, regulatory unknowns.

Score: 4/10
Four Leaf merits watching closely due to its IoT deal pipeline but remains a high-risk SPAC play until deal closing, a successful IPO to Sycamore, financial discipline post-close and regulatory hurdles in China are conclusively cleared.

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Disclaimers

This blog post is for educational purposes and is not investment advice. Always consult your financial advisor and perform your own due diligence.

Read more in: Four Leaf Acquisition’s 2024 Form 10-K

Download the complete 10-K PDF
(EDGAR Filing)

Stay tuned for further deal updates, extended deadlines, and analysis on IoT SPAC M&A.