DT Cloud Star Acquisition (DTSQ) risk factors, FY2024 10-K

Risks Relating to Our Search for, and Consummation of or Inability to Consummate a Business Combination

1. 01We are a blank check company with no operating history and no revenues, and, accordingly, you will not have any basis on which to evaluate our ability to achieve our business objective
2. 02If we are unable to consummate a business combination, our public shareholders may be forced to wait more than 15 months before receiving liquidation distributions
3. 03Our ability to consummate an attractive business combination may be impacted by the market for initial public offerings
4. 04We may be unable to obtain additional financing, if required, to complete a business combination or to fund the operations and growth of the target business, which could compel us to restructure or abandon a particular business combination
5. 05If third parties bring claims against us, the proceeds held in trust could be reduced and the per-share redemption price received by shareholders may be less than $10.00
6. 06Our shareholders may be held liable for claims by third parties against us to the extent of distributions received by them
7. 07If we deviate from the acquisition criteria or guidelines, our shareholders may have rescission rights or may bring an action for damages against us or we could be subject to civil or criminal actions taken by governmental authorities
8. 08Since we have not yet selected a particular industry or target business with which to complete a business combination, we are unable to currently ascertain the merits or risks of the industry or business in which we may ultimately operate
9. 09Our officers and directors may not have significant experience or knowledge regarding the jurisdiction or industry of the target business we may seek to acquire
10. 10Our officers and directors will allocate their time to other businesses thereby potentially limiting the amount of time they devote to our affairs. This conflict of interest could have a negative impact on our ability to consummate our initial business combination
11. 11Our officers and directors have pre-existing fiduciary and contractual obligations and accordingly, may have conflicts of interest in determining to which entity a particular business opportunity should be presented
12. 12Our officers’ and directors’ personal and financial interests may influence their motivation in determining whether a particular target business is appropriate for a business combination
13. 13We may only be able to complete one business combination with the proceeds of our initial public offering, which will cause us to be solely dependent on a single business which may have a limited number of products or services
14. 14This lack of diversification may subject us to numerous economic, competitive and regulatory developments, any or all of which may have a substantial adverse impact upon the particular industry in which we may operate subsequent to a business combination
15. 15The ability of our public shareholders to exercise their redemption rights or sell their public shares to us in a tender offer may not allow us to effectuate the most desirable business combination or optimize our capital structure
16. 16Our public shareholders may not be afforded an opportunity to vote on our proposed business combination, which means we may consummate our initial business combination even though a majority of our public shareholders do not support such a combination
17. 17In connection with any meeting held to approve an initial business combination, we will offer each public shareholder the option to vote in favor of a proposed business combination and still seek conversion of his, her or its public shares, which may make it more likely that we will consummate a business combination
18. 18Investors may not have sufficient time to comply with the delivery requirements for conversion
19. 19If we require public shareholders who wish to convert their public shares to comply with the delivery requirements for conversion, such converting shareholders may be unable to sell their securities when they wish to in the event that the proposed business combination is not approved
20. 20Because of our limited resources and structure, other companies may have a competitive advantage and we may not be able to consummate an attractive business combination
21. 21Our initial shareholders control a substantial interest in us and thus may influence certain actions requiring a shareholder vote, potentially in a manner that you do not support
22. 22If our management following a business combination is unfamiliar with United States securities laws, they may have to expend time and resources becoming familiar with such laws which could lead to various regulatory issues
23. 23We may reincorporate in another jurisdiction in connection with our initial business combination and such reincorporation may result in taxes imposed on shareholders
24. 24The ability of our public shareholders to redeem their shares for cash may make our financial condition unattractive to potential business combination targets, which may make it difficult for us to enter into our initial business combination with a target
25. 25The ability of a large number of our shareholders to exercise redemption rights may not allow us to consummate the most desirable business combination or optimize our capital structure
26. 26If we seek shareholder approval of our initial business combination, all of our existing shareholders, including all of our officers and directors, have agreed to vote in favor of such initial business combination, regardless of how our public shareholders vote
27. 27You will not have any rights or interests in funds from the trust account, except under certain limited circumstances. To liquidate your investment, therefore, you may be forced to sell your public shares, potentially at a loss
28. 28We may be limited to the funds held outside of the trust account to fund our search for target businesses, to pay our tax obligations and expenses, to operate before our initial business combination, and to complete our initial business combination
29. 29Subsequent to our consummation of our initial business combination, we may be required to take write-downs or write-offs, restructuring and impairment or other charges
30. 30Our directors may decide not to enforce indemnification obligations against our sponsor, resulting in a reduction in the amount of funds in the trust account available for distribution to our public shareholders
31. 31The conversion of the promissory notes upon consummation of our business combination into private units may have an adverse effect on the market price of our ordinary shares and make it more difficult to effect a business combination
32. 32If our shareholders exercise their registration rights with respect to their securities, it may have an adverse effect on the market price of our ordinary shares and the existence of these rights may make it more difficult to effect a business combination
33. 33If we were deemed to be an investment company under the Investment Company Act, we may be required to institute burdensome compliance requirements and our activities may be restricted, which may make it difficult for us to complete a business combination
34. 34We may not seek an opinion from an unaffiliated third party as to the fair market value of the target business we acquire
35. 35We may acquire a target business that is affiliated with our officers, directors, initial shareholders or their affiliates
36. 36A market for our securities may not develop, which would adversely affect the liquidity and price of our securities
37. 37Resources could be wasted in researching acquisitions that are not consummated
38. 38We may attempt to consummate our initial business combination with a private company about which little information is available
39. 39We may not be able to maintain control of a target business after our initial business combination

Risks Relating to Our Securities

1. 40The value of the initial shares following completion of our initial business combination is likely to be substantially higher than the nominal price paid for them, even if the trading price of our ordinary shares at such time is substantially less than $10.00 per share
2. 41The nominal purchase price paid by our initial shareholders for the initial shares may significantly dilute the implied value of your public shares in the event we consummate an initial business combination
3. 42We may issue additional ordinary or preferred shares or debt securities to complete a business combination, which would reduce the equity interest of our shareholders and likely cause a change in control of our ownership
4. 43Holders of rights will not have redemption rights if we are unable to complete an initial business combination within the required time period
5. 44If a public holder fails to receive notice of our offer to redeem our ordinary shares in connection with our initial business combination, or fails to comply with the procedures for tendering its shares, such shares may not be redeemed
6. 45We may amend the terms of the rights in a way that may be adverse to holders with the approval by the holders of a majority of the then outstanding rights
7. 46An investment in our units may involve adverse U.S. federal income tax consequences
8. 47Our initial business combination or transactions relating thereto may result in taxes imposed on us and our shareholders
9. 48Nasdaq may delist 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
10. 49Past performance by our management team and our sponsor may not be indicative of future performance of an investment in us
11. 50We are a newly formed blank check company with no operating history and no revenues, and, accordingly, you will not have any basis on which to evaluate our ability to achieve our business objective
12. 51Because we are incorporated under the laws of the Cayman Islands, and most of our executive officers and directors are located outside the United States, you may face difficulties in protecting your interests, and your ability to protect your rights through the U.S. Federal or state courts may be limited
13. 52Subject to the above limitations, in appropriate circumstances, a Cayman Islands court may give effect in the Cayman Islands to other kinds of final foreign judgments such as declaratory orders, orders for performance of contracts and injunctions
14. 53You will not be entitled to protections normally afforded to investors of blank check companies
15. 54We are an “emerging growth company” and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our securities less attractive to investors
16. 55Compliance with the Sarbanes-Oxley Act of 2002 will require substantial financial and management resources and may increase the time and costs of completing an acquisition
17. 56Cyber incidents or attacks directed at us could result in information theft, data corruption, operational disruption and/or financial loss
18. 57We may effect a business combination with a company located outside of the United States and if we do, we would be subject to a variety of additional risks that may negatively impact our business operations and financial results
19. 58Because of the costs and difficulties inherent in managing cross-border business operations, our results of operations may be negatively impacted
20. 59Political events in another country may significantly affect our business, assets or operations. Social unrest, acts of terrorism, regime changes, changes in laws and regulations, political upheaval, and policy changes or enactments could negatively impact our business in a particular country
21. 60Many countries have difficult and unpredictable legal systems and underdeveloped laws and regulations that are unclear and subject to corruption and inexperience, which may adversely impact our results of operations and financial condition
22. 61If we effect a business combination with a company located outside of the United States, the laws applicable to such company will likely govern all of our material agreements and we may not be able to enforce our legal rights
23. 62If relations between the United States and foreign governments deteriorate, it could cause potential target businesses or their goods and services to become less attractive
24. 63If any dividend is declared in the future and paid in a foreign currency, you may be taxed on a larger amount in U.S. dollars
25. 64Currency policies may cause a target business’ ability to succeed in the international markets to be diminished
26. 65Many of the economies in Asia are experiencing substantial inflationary pressures which may prompt the governments to take action to control the growth of the economy and inflation that could lead to a significant decrease in our profitability following our initial business combination
27. 66Many industries in Asia are subject to government regulations that limit or prohibit foreign investments in such industries, which may limit the potential number of acquisition candidates
28. 67If a country in Asia enacts regulations in industry segments that forbid or restrict foreign investment, our ability to consummate our initial business combination could be severely impaired
29. 68Corporate governance standards in Asia may not be as strict or developed as in the United States and such weakness may hide issues and operational practices that are detrimental to a target business
30. 69Risks Associated with Acquiring and Operating a Target Business with its Primary Operations in China
31. 70U.S. laws and regulations, such as the HFCAA, may restrict or eliminate our ability to complete a business combination with certain companies, particularly those acquisition candidates with substantial operations in mainland China or Hong Kong
32. 71Compliance with the PRC Antitrust law may limit our ability to effect our initial business combination
33. 72Regulations relating to the transfer of state-owned property rights in enterprises may increase the cost of our acquisitions and impose an additional administrative burden on us
34. 73Our initial business combination may be subject to national security review by the PRC government and we may have to spend additional resources and incur additional time to complete any such business combination or be prevented from pursuing certain investment opportunities
35. 74There are uncertainties in the interpretation and enforcement of PRC laws and regulations that could limit the legal protections available to you and us
36. 75If our initial business combination target is a company with operations in China, its business, prospects, financial condition and results of operations may be influenced to a significant degree by political, economic and social conditions in China generally and by continued economic growth in China as a whole
37. 76You may face difficulties in protecting your interests and exercising your rights as a shareholder if we were to conduct substantially all of our operations in China, and almost all of our officers and directors currently and will likely reside outside the U.S
38. 77Governmental control of currency conversion may affect the value of your investment
39. 78As a result, the PRC subsidiaries of the combined company will need to obtain SAFE approval to pay off their debt in a currency other than Renminbi owed to any entities outside China or to make other capital expenditure payments outside China in a currency other than Renminbi
40. 79We may consummate a business combination with a target business based in and primarily operating in China, after which the PRC subsidiaries of the combined company will be subject to restrictions on dividend payments
41. 80The M&A Rules and certain other PRC regulations establish complex procedures for certain acquisitions of Chinese companies by foreign investors, which could make it more difficult for us to pursue a business combination with a China-based business
42. 81Enhanced scrutiny over acquisition transactions by the PRC tax authorities may have a negative impact on potential acquisitions we may pursue in the future