BOWN Bowen Acquisition Corp - 10-K

ITEM 1A. RISK FACTORS

The Business Combination and each of Qianzhi and Bowen are subject to numerous risks and uncertainties. Accordingly, an investment in our securities involves a high degree of risk. You should consider carefully all of the risks described below, together with the other information contained in this Annual Report on Form 10-K and the Definitive Proxy Statement/Prospectus before making a decision to invest in our securities. If any of the following events occur, our business, financial condition and operating results may be materially adversely affected. In that event, the trading price of our securities could decline, and you could lose all or part of your investment. The risk factors described below are not necessarily exhaustive and you are encouraged to perform your own investigation with respect to us and our business.

Risks Relating to Qianzhi’s Business and Industry

If Qianzhi’s products fail to meet the demands of its customers or to reflect the latest developments in the personal hygiene and disinfection products market, it may be unable to retain existing customers or attract new customers, and its business, financial condition and results of operations may be materially and adversely affected.

A significant portion of Qianzhi’s revenue is concentrated with a small number of customers and it could be seriously harmed if these customers significantly reduced the volume of business they conduct, or cease doing business, with Qianzhi.

Qianzhi may be unable to maintain its relationships with its customers and Qianzhi may fail to engage new customers.

Qianzhi may be compelled to undertake product recalls or other actions, which could adversely affect its brand image, financial condition, results of operations, and growth prospects.

Qianzhi’s revenues and financial results may be adversely affected by an economic slowdown on a global scale or in any jurisdictions in which it operates.

Heightened tensions in international relations may adversely impact Qianzhi’s business, financial condition, and results of operations.

Qianzhi faces intense competition in the personal hygiene and disinfection products industry from numerous competitors.

Qianzhi is subject to cost overruns and delays, regulatory requirements, and miscalculations in capacity needs with respect to its expansion projects and its manufacturing facilities, as well as disruptions to its manufacturing facilities and those of its contract manufacturers and other suppliers.

Qianzhi’s facilities and operations may require continuous and substantial investment and upgrading.

Qianzhi has a limited operating history and its ability to successfully commercialize products of high quality and appeal to customers at scale is unproven and still evolving.

Qianzhi may experience net losses and may not sustain profitability in the future.

Qianzhi relies on third-party suppliers and distributors for many of the materials utilized in its products and they may not continue to produce products or provide services that are consistent with its standards or applicable regulatory requirements, which could harm Qianzhi’s brand, cause consumer dissatisfaction, and require it to find alternative suppliers of its products.

Qianzhi’s success depends on the continuing efforts of its senior management team and other key employees.

If Qianzhi fails to maintain an effective system of internal control over financial reporting, it may be unable to accurately report financial results or prevent fraud, and investor confidence in Qianzhi and the market price of its securities may be adversely affected.

Failure or security breach of Qianzhi’s information technology systems may disrupt its operations.

Certain regulatory actions call for additional and more stringent criteria to be applied to emerging market companies upon assessing the qualification of their auditors, especially the non-U.S. auditors who are not inspected by the Public Company Accounting Oversight Board. These developments could add uncertainties to Qianzhi’s operations.

Forecasts and projections of Qianzhi’s operating and financial results relies in large part upon assumptions and analyses developed by its management. If these assumptions or analyses prove to be incorrect, Qianzhi’s actual operating results may be materially different from those forecasted or projected.

Qianzhi’s business plans require a significant amount of capital. In addition, Qianzhi’s future capital needs may require it to obtain additional equity or debt financing that may dilute shareholders or introduce covenants that may restrict its operations or its ability to pay dividends.

Qianzhi’s future growth is dependent on the demand for, and upon consumers’ willingness to adopt personal hygiene products and disinfectants, which is associated with consumers’ demand for personal hygiene products and disinfectants, and adoption of new personal hygiene products and disinfectants.

Risks Relating to Doing Business in the People’s Republic of China (“PRC”)

Failure to meet the PRC government’s complex regulatory requirements on and significant oversight over Qianzhi’s business operation could result in a material adverse change in its operations and the value of securities.

The approval of and filing with the China Securities Regulatory Commission (“CSRC”) or other PRC government authorities is required in connection with the business combination. However, Qianzhi cannot predict whether or when it will be able to obtain such approval or complete such filing, and even if it obtains such approval, it could be rescinded. Any failure to or delay in obtaining such approval or complying with such filing requirements in relation to offering, or a rescission of such approval, could subject Qianzhi to sanctions imposed by the CSRC or other PRC government authorities.

Additional regulations under the PRC Law Relating to Data Security and Confidentiality and Archives Management may subject Qianzhi to additional compliance requirements in the future.

PRC regulations of loans and direct investment by offshore holding companies to PRC entities may delay or prevent Qianzhi from using the proceeds of its offshore financing to make loans or additional capital contributions to its PRC subsidiary, which could materially and adversely affect Qianzhi’s liquidity and its ability to fund and expand its business.

Chinese regulatory authorities could disallow Qianzhi’s holding company structure, which may result in a material change in its operations and/or a material change in the value of the combined company’s securities, including that it could cause the value of such securities to significantly decline.

Qianzhi may be materially adversely affected if its shareholders and beneficial owners who are PRC entities fail to comply with the PRC overseas investment regulations.

Qianzhi relies on dividends and other distributions on equity paid by its PRC subsidiaries to fund any cash and financing requirements it may have, and any limitation on the ability of Qianzhi’s PRC subsidiaries to make payments to Qianzhi could have a material and adverse effect on its ability to conduct business.

Risks Relating to Intellectual Property, Information Technology and Legal Proceedings

Qianzhi may be subject to intellectual property infringement claims, which may be expensive to defend and may disrupt its business and operations.

As Qianzhi’s patents may expire and may not be extended, its patent applications may not be granted, and its patent rights may be contested, circumvented, invalidated, or limited in scope, its patent rights may not protect it effectively. In particular, Qianzhi may not be able to prevent others from developing or exploiting competing technologies, which could materially and adversely affect its business, financial condition, and results of operations.

If Qianzhi’s trademarks and trade names are not adequately protected, then it may not be able to build name recognition in its markets of interest and its business may be adversely affected.

Qianzhi depends on information technology to conduct its business. Any significant disruptions to information technology systems or facilities, or those of third parties with which Qianzhi does business, such as disruptions caused by cyber-attacks, could adversely impact its business.

You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing actions in China against Qianzhi or its management based on foreign laws. It may also be difficult for you or overseas regulators to conduct investigations or collect evidence within China.

Risks Relating to Being a Public Company Following the Business Combination

A market for the combined company’s shares may not develop, which would adversely affect the liquidity and price of the combined company’s shares.

The issuance of additional shares in connection with financings, acquisitions, investments, equity incentive plans

or otherwise will dilute all other shareholders.

The combined company may be unable to maintain the listing of its securities on the Nasdaq Global Market in the future.

You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be

limited, because the Company is incorporated under the laws of the Cayman Islands, and will conduct its operations, and

its directors and executive officers reside, outside of the United States.

Risks Related to Bowen Before the Business Combination

Bowen’s officers and directors have interests in the business combination that are different from those of Public Shareholders.

Bowen may become involved in litigation, including securities class action litigation relating to the proposed business combination that may materially adversely affect it.

For additional detail on these and other risks, see the section entitled “ Risk Factors ” in the Definitive Proxy Statement/Prospectus , incorporated by reference herein.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with our audited financial statements and the notes related thereto which are included in “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. Certain information contained in the discussion and analysis set forth below includes forward-looking statements. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under “ Cautionary Note Regarding Forward-Looking Statements ,” “ Item 1A. Risk Factors ” and elsewhere in this Annual Report.

Overview

We are a blank check company incorporated on February 17, 2023 as a Cayman Islands exempted company and incorporated for the purpose of effecting a merger, share exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. While we intend to focus our search on businesses in Asia, we are not limited to a particular industry or geographic region for purposes of consummating an initial business combination. We intend to effectuate our initial business combination using cash from the proceeds of this offering and the private placement of the private units, promissory loans with target or related parties, the proceeds of the sale of our securities in connection with our initial business combination, our shares, debt or a combination of cash, stock and debt.

We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a Business Combination will be successful.

Results of Operations

We have neither engaged in any operations nor generated any revenues to date. Our only activities since inception through December 31, 2024 were organizational activities, those necessary to prepare for the IPO described below, and since the closing of the IPO, identifying a target company for our initial Business Combination, and professional costs related with the initial Business Combination. We do not expect to generate any operating revenues until after the completion of our initial Business Combination. We generated non-operating income in the form of interest income on marketable securities held after the IPO. We expect that we will incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses in connection with searching for, and completing, a Business Combination.

For the year ended December 31, 2024, we had a net income of $2,963,852, which consists of a loss of $633,764 derived from operating costs, and interest expense of $87,267, offset by income earned on the Trust Account of $3,684,883.

For the period from February 17, 2023 (inception) through the year ended December 31, 2023, we had a net income of $1,484,790, which consists of a loss of $244,568 derived from formation and operating costs offset by income earned on the Trust Account of $1,729,358.

Liquidity, Capital Resources and Going Concern

On July 14, 2023, we consummated our IPO of 6,000,000 Units, at $10.00 per Unit, generating gross proceeds of $60,000,000. Simultaneously with the closing of our IPO, we consummated the sale of 330,000 Private Placement Units at a price of $10.00 per Private Placement Unit in a private placement to the Sponsors, generating total gross proceeds of $3,300,000.

On July 17, 2023, the underwriters exercised the over-allotment option in full to purchase 900,000 Units. As a result, on July 18, 2023, we sold an additional 900,000 Units at $10.00 per Unit, generating gross proceeds of $9,000,000. Simultaneously with the closing of the full exercise of the over-allotment option, we completed the private sale of an aggregate of 31,500 Private Placement Units, at a purchase price of $10.00 per Private Placement Unit, generating gross proceeds of $315,000. Transaction costs amounted to $3,318,898 consisting of $1,725,000 of cash underwriting fees and $1,593,898 of other offering costs.

Following the closing of the IPO and the sale of over-allotment units, an amount of $69,690,000 ($10.10 per Unit) from the net proceeds of the sale of the Units in the IPO and the Private Placement was placed in a trust account. The funds held in the Trust Account may be invested in U.S. government securities with a maturity of 185 days or less or in any open-ended investment company that holds itself out as a money market fund selected by us. We intend to use substantially all of the funds held in the trust account, including any amounts representing interest earned on the trust account, to complete our initial business combination. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our initial business combination, the remaining proceeds held in the trust account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.

As of December 31, 2024, we had cash and cash equivalent of $103,774. We will use these funds primarily to complete the business combination. This includes conducting ongoing due diligence, obtaining necessary regulatory and shareholder approvals, preparing required filings and disclosures, structuring and negotiating transaction terms, and covering costs related to legal, financial, and other advisory services. Additionally, funds may be used to pay taxes to the extent the interest earned on the trust account is not sufficient to pay our taxes.

We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimates of the costs of identifying a target business, undertaking in-depth due diligence and negotiating an initial business combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our initial business combination. Moreover, we may need to obtain additional financing either to complete our initial business combination or because we become obligated to redeem a significant number of our public shares upon completion of our initial business combination, in which case we may issue additional securities or incur debt in connection with such business combination.

As of December 31, 2024, we had cash and cash equivalent of $103,774 and a working capital deficit of $799,056. We have incurred and expect to continue to incur significant professional costs to remain as a public traded company and to incur transaction costs in pursuit of a Business Combination. In connection with our assessment of going concern considerations in accordance with Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” we believe that these conditions raise substantial doubt about our ability to continue as a going concern. In addition, if we are unable to complete a Business Combination within the Combination Period and such period is not extended, there will be a liquidation and subsequent dissolution. As a result, we have determined that such additional condition also raises substantial doubt about our ability to continue as a going concern. Management expects to obtain additional funds from related parties to provide the additional working capital necessary to carry out its objective to consummate a business combination.  The consolidated financial statements do not include any adjustments that might result from the outcome of the uncertainty.

Off-Balance Sheet Financing Arrangements

We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of December 31, 2024. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.

Related Party Transactions

Please refer to Financial Statement Note 5 - Related Parties.

Other Contractual Obligations

We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities reflected on our balance sheet.

Registration Rights

The holders of the Founder Shares, EBC founder shares, Private Placement Units will be entitled to registration rights pursuant to a registration rights agreement dated July 11, 2023 requiring the Company to register such securities for resale. Subject to certain limitations set forth in such agreement, the holders of these securities will be entitled to make up to three demands, excluding short form registration 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 completion of a Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. However, the registration rights agreement provides that the Company will not be required to effect or permit any registration or cause any registration statement to become effective until the securities covered thereby are released from their lock-up restrictions. The Company will bear the expenses incurred in connection with the filing of any such registration statements.

Business Combination Marketing Agreement

We have engaged EBC as an advisor in connection with its Business Combination to assist in holding meetings with the Company stockholders to discuss the potential Business Combination and the target business’ attributes, introduce the Company to potential investors that are interested in purchasing its securities in connection with its initial Business Combination and assist with press releases and public filings in connection with the Business Combination. The Company will pay EBC a service fee for such services upon the consummation of its initial Business Combination in an amount equal to 3.5% of the gross proceeds of the IPO. In addition, the Company will pay EBC a service fee in an amount equal to 1.0% of the total consideration payable in the initial Business Combination if it introduces the Company to the target business with whom it completes an initial Business Combination and the amount will be payable in cash and is due at the closing date of the initial Business Combination.

Critical Accounting Policies and Estimates

The preparation of consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation, or set of circumstances that existed as of the date of the financial statements, and that management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, actual results may differ from these estimates. Management does not believe that we have any critical accounting estimates; however, we have identified the following critical accounting policy:

Net Income (Loss) per Share

The Company complies with accounting and disclosure requirements of FASB ASC 260, Earnings Per Share. In order to determine the net income (loss) attributable to both the redeemable shares and non-redeemable shares, the Company first considered the undistributed income (loss) allocable to both the redeemable shares and non-redeemable shares and the undistributed income (loss) is calculated using the total net loss less interest income and unrealized gain or loss on investments in trust account less any dividends paid. We then allocated the undistributed income (loss) ratably based on the weighted average number of shares outstanding between the redeemable and non-redeemable shares. Any remeasurement of the accretion to redemption value of the ordinary shares subject to possible redemption was considered to be dividends paid to the public shareholders.

Recent Accounting Standards

Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our consolidated financial statements.