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Basis of Presentation and Summary of Significant Accounting Policies | 6 Months Ended
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Jun. 30, 2024
Basis of Presentation and Summary of Significant Accounting Policies [Abstract] |
Basis of Presentation and Summary of Significant Accounting Policies | Note 2 - Basis of Presentation and Summary of Significant Accounting Policies Basis of Presentation The accompanying unaudited condensed 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 with the instructions to Form 10-Q and Article 8 of Regulation S-X and pursuant to the rules and regulations of the SEC. Accordingly, certain disclosures included in the annual financial statements have been condensed or omitted from these financial statements as they are not required for interim financial statements. In the opinion of management, the unaudited condensed 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 and six months ended June 30, 2024 are not necessarily indicative of the results that may be expected through December 31, 2024 or any future period. The accompanying unaudited condensed 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 14, 2024. Principles of Consolidation The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All significant intercompany balances and transactions have been eliminated in consolidation. 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. The Company had no cash equivalents as of June 30, 2024 and December 31, 2023. Restricted Cash The Company has $0 and $314,482 of restricted cash to be used to pay for taxes as of June 30, 2024 and December 31, 2023, respectively. Concentration of Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed the Federal Deposit Insurance Corporation coverage limit of $250,000. Any loss incurred or a lack of access to such funds could have a significant adverse impact on the Company’s financial condition, results of operations, and cash flows. Use of Estimates The preparation of unaudited 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 unaudited condensed consolidated financial statements and the reported amounts of income and expenses during the reporting period. Making estimates requires management to exercise significant judgment. One of the more significant accounting estimates included in these unaudited condensed consolidated financial statements is the determination of the fair value of the warrant liabilities. 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 unaudited 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. Accordingly, the actual results could differ significantly from those estimates. Investments Held in the Trust Account The Company’s portfolio of investments is comprised of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or investments in money market funds that invest in U.S. government securities and generally have a readily determinable fair value, or a combination thereof. When the Company’s investments held in the Trust Account are comprised of U.S. government securities, the investments are classified as trading securities. Trading securities and investments in money market funds are presented on the unaudited condensed consolidated balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these securities are included in income from investments held in Trust Account in the accompanying consolidated statements of operations. The estimated fair values of investments held in the Trust Account are determined using available market information. Financial Instruments The fair value of the Company’s assets and liabilities, which qualify as financial instruments under the FASB ASC 820, “Fair Value Measurements and Disclosures,” equals or approximates the carrying amounts represented in the unaudited condensed consolidated balance sheets, except for the derivative liabilities (see Note 9). 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 consist of:
| ● | Level 1, defined as observable inputs such as quoted prices (unadjusted) 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 Liabilities The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including issued stock purchase warrants and the forward purchase agreement, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and FASB ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. The warrants issued in the Initial Public Offering (the “Public Warrants”) and the Private Placement Warrants are recognized as derivative liabilities in accordance with ASC 815. Accordingly, the Company recognizes the warrant instruments as liabilities at fair value and adjusts the carrying value of the instruments to fair value at each reporting period for so long as they are outstanding. The initial fair value of the Public Warrants issued in connection with the Public Offering and the fair value of the Private Placement Warrants have been estimated using a Monte Carlo simulation model and subsequently, the fair value of the Private Placement Warrants have been estimated using the public market quoted prices at each measurement date starting at September 30, 2022. The fair value of Public Warrants has subsequently been measured based on the listed market price of such warrants. Derivative warrant liabilities 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. The Company granted the underwriters a 45-day option to purchase up to 3,600,000 additional Units solely to cover over-allotments, if any. The Company estimated the fair value of the over-allotment option using a Black-Scholes model. On October 16, 2021, the over-allotment option expired unexercised. The Forward Purchase Agreement entered into on March 29, 2023 included elements that require liability classification under ASC 480. Accordingly, the Company recognizes the Forward Purchase Agreement as a liability at fair value and adjusts the carrying value of the instruments to fair value at each reporting period for so long as it is outstanding. The initial fair value of the Forward Purchase Agreement liability issued was estimated using a Put Option Pricing model, which analyzed and incorporated into the model the put price, the risk-free rate, the variable term, the settlement features, the likelihood of completing a business combination and the early termination provisions. The model estimates the underlying economic factors that influenced which of these events would occur, when they were likely to occur, and the specific terms that would be in effect at the time (i.e., stock price, exercise price, etc.). Probabilities were assigned to each variable such as the timing and pricing of events over the term of the instruments based on management projections. The fair value was adjusted for the market implied likelihood of completing a business combination. The Forward Share Purchase Agreement was terminated as a result of the termination of the Avila BCA on August 10, 2023. As a result, there was no value assigned to the Forward Share Purchase Agreement. The Company has written off the liability and recognized the change in value of the Forward Share Purchase Agreement in the consolidated statement of operations during the nine months ended September 30, 2023. Capital Call Loan The Company previously analyzed the Subscription Agreement under ASC 470 “Debt”, ASC 480 “Distinguishing Liabilities from Equity” and ASC 815, “Derivatives and Hedging”, and previously concluded that, (i) the Subscription Shares (as defined in Note 5) issuable under the Subscription Agreement are not required to be accounted for as a liability under ASC 480, (ii) bifurcation of a single derivative that comprises all of the fair value of the Subscription Share feature(s) (i.e., derivative instrument(s)) is not necessary under ASC 815-15-25-7 through 25-10 and (iii) under ASC 470-20-25-2 the Subscription Shares are deemed to be representative of a freestanding financial instrument issued in a bundled transaction with the Capital Call Loan. The Subscription Shares to be issued as part of the bundled transaction were previously classified and accounted for as equity. As a result, proceeds from the sale of a debt instrument with stock purchase Subscription Shares were allocated to the two elements based on the relative fair values of the debt instrument without the Subscription Shares and of the Subscription Shares themselves at time of issuance. The portion of the proceeds allocated to the Subscription Shares were accounted for as paid-in capital. The remainder of the proceeds was allocated to the debt instrument portion of the transaction. This resulted in a debt discount, which shall be accounted for as interest and amortized as interest expense over the life of the loan. Based on the previous accounting for Subscription Agreement, the Company recognized at draw dates an aggregate of $800,000 as capital call loan recorded as a due to investor under unaudited condensed consolidated balance sheets, $568,503 was recorded as additional paid-in capital and $568,503 was recognized as debt discount – due to investor which was amortized as interest expense in the profit and loss over the life of the loan. On May 15, 2024, the Company, Sponsor and Polar entered into the Amendment pursuant to which Polar’s aggregate advance under the Subscription Agreement was reduced from $1,000,000 to $975,000 and in the event the Company consummates the business combination with Alpha Modus Corp., then the Company will not be obligated to issue to Polar one (1) share of the Company’s Class A Common Stock for each dollar Polar advances to the Company under at Subscription Agreement at the closing of the business combination. However, if the Company consummates a business combination with an entity other than Alpha Modus, Corp., then the Company is obligated to issue to Polar one (1) share of the Company’s Class A Common Stock for each dollar Polar advances to the Company under at Subscription Agreement at the closing of the business combination with an entity other than Alpha Modus, Corp. After the amendment The Company analyzed the amended Subscription Agreement under ASC 470 “Debt”, ASC 480 “Distinguishing Liabilities from Equity”, ASC 815, “Derivatives and Hedging” and ASC 825 “Financial Instrument” and concluded that, (i) the Subscription Shares issuable under the Subscription Agreement are now required to be accounted for as a liability under ASC 480, (ii) bifurcation of a single derivative that comprises all of the fair value of the Subscription Share feature(s) (i.e., derivative instrument(s)) is not necessary under ASC 815-15-25-7 through 25-10 and (iii) under ASC 470-20-25-2 the Subscription Shares are deemed to be representative of a freestanding financial instrument issued in a bundled transaction with the Capital Call Loan. The Subscription Shares to be issued as part of the bundled transaction shall be classified and accounted for as liability. The Subscription Shares are required to be classified and accounted for at fair value under ASC 480-10. The Company has not elected to classify and account for the Capital Call(s) at fair value under the fair value option under ASC 825.As a result, proceeds from the sale of a debt instrument with stock purchase Subscription Shares were allocated to the two elements based on the relative fair values of the debt instrument without the Subscription Shares and of the Subscription Shares themselves at time of issuance. The portion of the proceeds so allocated to the Subscription Shares were accounted for as subscription share liability. The remainder of the proceeds was allocated to the debt instrument portion of the transaction. This resulted in a debt discount, which shall be accounted for as interest on capital call date. In accordance with ASC 480-10, the Subscription Shares were initially required to be classified as liability classified instruments; therefore, the Subscription Shares are required to be measured at fair value at each reporting period with changes in fair value recorded within earnings. As a result of the amendment, the Company recognized the fair value of the subscription share liability on the amendment date amounting to $0. As of June 30, 2024, the Company drawn additional $175,000 as capital call loan and recorded as a due to investor under unaudited condensed consolidated balance sheets, where $0 was allocated as fair value of the bundled subscription share. As of June 30, 2024, the Company received $975,000 under the Subscription Agreement and recorded the amounts as a due to investors, net of debt discount of $0 and $0 of subscription share liability, on the accompanying condensed consolidated balance sheets. As of December 31, 2023, the Company received $600,000 under the Subscription Agreement and recorded the amounts as a due to investors, net of debt discount of $279,245, on the accompanying condensed consolidated balance sheets. Offering Costs Associated with the Initial Public Offering 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 associated with derivative warrant liabilities were expensed as incurred and presented as non-operating expenses in the consolidated statements of operations. Offering costs associated with issuance of the Class A common stock were charged against the carrying value of the Class A common stock subject to possible redemption upon the completion of the Initial Public Offering. The Company classifies deferred underwriting commissions 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. Income Taxes The Company follows the asset and liability method of accounting for income taxes under FASB ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. Deferred tax assets were offset by a full valuation allowance as of June 30, 2024 and December 31, 2023. Deferred tax liabilities were $7,589 and $9,935 as of June 30, 2024 and December 31, 2023, respectively. FASB ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions 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. Tax expense of approximately $26,000 and $169,000 was recognized for the three months ended June 30, 2024 and 2023, respectively, and amounts of approximately $47,000 and $585,000 was recognized for the six months ended June 30, 2024 and 2023, respectively. There were no unrecognized tax benefits as of June 30, 2024 and December 31, 2023. Tax expense of approximately $169,000 and $585,000 was recognized for the three and six months ended June 30, 2023, respectively. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued for the payment of interest and penalties as of June 30, 2024 and December 31, 2023. 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 has been subject to income tax examinations by major taxing authorities since inception. 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 Topic 480, “Distinguishing Liabilities from Equity.” 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’ equity. The Company’s Class A common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, 519,080 and 1,000,945 shares of Class A common stock subject to possible redemption as of June 30, 2024 and December 31, 2023, respectively, are presented at redemption value as temporary equity, outside of the stockholders’ deficit section of the Company’s unaudited condensed consolidated balance sheets. The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of the Class A common stock subject to possible redemption to equal the redemption value at the end of each reporting period. This method would view the end of the reporting period as if it were also the redemption date for the security. Immediately upon the closing of the Initial Public Offering, the Company recognized the accretion from initial book value to redemption amount, which resulted in charges against additional paid-in capital (to the extent available) and accumulated deficit. 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 Class B common stock. Income and losses are shared pro rata between the two classes of shares. The presentation assumes a business combination as the most likely outcome. 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 and the private placement warrants to purchase an aggregate of 20,700,000 shares of Class A common stock in the calculation of diluted (loss) income per share, because their exercise is contingent upon future events and their inclusion would be anti-dilutive under the treasury stock method. As a result, diluted net (loss) income per share is the same as basic net (loss) income per share for the three and six months ended June 30, 2024 and 2023. Accretion associated with the redeemable Class A common stock is excluded from earnings per share as the redemption value approximates fair value. The following tables present a reconciliation of the numerator and denominator used to compute basic and diluted net (loss) income per share for each class of common stock:
|  | For the Three Months Ended June 30, |
|  | 2024 |  |  | 2023 |
|  | Class A redeemable |  |  | Class A non- redeemable |  |  | Class B |  |  | Class A redeemable |  |  | Class A non- redeemable |  |  | Class B |
Basic and diluted net (loss) income per common share: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Numerator: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allocation of net (loss) income |  | $ | (226,132 | ) |  | $ | (1,327,793 | ) |  | $ | (234,316 | ) |  | $ | (129,446 | ) |  | $ | (221,011 | ) |  | $ | (39,002 | )
Denominator: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic and diluted weighted average common shares outstanding |  |  | 868,565 |  |  |  | 5,100,000 |  |  |  | 900,000 |  |  |  | 2,848,607 |  |  |  | 5,100,000 |  |  |  | 900,000 |
Basic and diluted net (loss) income per common share |  | $ | (0.26 | ) |  | $ | (0.26 | ) |  | $ | (0.26 | ) |  | $ | (0.04 | ) |  | $ | (0.04 | ) |  | $ | (0.04 | )
|  | For the Six Months Ended June 30, |
|  | 2024 |  |  | 2023 |
|  | Class A redeemable |  |  | Class A non- redeemable |  |  | Class B |  |  | Class A redeemable |  |  | Class A non- redeemable |  |  | Class B |
Basic and diluted net (loss) income per common share: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Numerator: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allocation of net (loss) income |  | $ | (326,480 | ) |  | $ | (1,781,266 | ) |  | $ | (314,341 | ) |  | $ | 323,775 |  |  | $ | 89,356 |  |  | $ | 98,879 |
Denominator: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic and diluted weighted average common shares outstanding |  |  | 934,755 |  |  |  | 5,100,000 |  |  |  | 900,000 |  |  |  | 10,327,553 |  |  |  | 2,861,667 |  |  |  | 3,166,667 |
Basic and diluted net (loss) income per common share |  | $ | (0.35 | ) |  | $ | (0.35 | ) |  | $ | (0.35 | ) |  | $ | 0.03 |  |  | $ | 0.03 |  |  | $ | 0.03 |
Recent Accounting Pronouncements Management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying unaudited condensed consolidated financial statements.

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- Definition The entire disclosure for the basis of presentation and significant accounting policies concepts. Basis of presentation describes the underlying basis used to prepare the financial statements (for example, US Generally Accepted Accounting Principles, Other Comprehensive Basis of Accounting, IFRS). Accounting policies describe all significant accounting policies of the reporting entity. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 235 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/235/tableOfContent + Details
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