v3.26.3
Business Combination and Reverse Recapitalization
 6 Months Ended
Jun. 30, 2026
Business Combination and Reverse Recapitalization [Abstract]  
Business Combination and Reverse Recapitalization

Note 4 – Business Combination and Reverse Recapitalization

 

Business Combination

 

On March 18, 2024, the Company entered into a Business Combination Agreement with ShoulderUp, ShoulderUp Merger Sub, Inc., SEI Merger Sub, Inc. and the Legacy Company.

 

On June 18, 2025, the Company consummated its Business Combination pursuant to the terms of the Business Combination Agreement. The Business Combination was structured as follows. All share and per-share amounts below have been adjusted to give effect to the Company’s 1-for-25 reverse stock split, effective May 29, 2026:

 

● At the Closing, each ordinary share of ShoulderUp that was not redeemed or converted was exchanged for one share of CID Holdco Inc. Common Stock. Each issued and outstanding unit of ShoulderUp (“Unit”) was automatically separated into (i) one ordinary share and (ii) one-half of one warrant. Each whole warrant is exercisable to purchase one ordinary share at an exercise price of $287.50 per share.

 

● 506,589 shares of Common Stock were issued to the public shareholders of ShoulderUp at Closing, equivalent to approximately 20,264 shares after giving effect to the 1-for-25 reverse stock split. An additional 6,698,333 shares were issued to ShoulderUp’s officers and directors, ShoulderUp Technology Sponsor LLC (the “Sponsor”), and transferees of founder shares, equivalent to approximately 267,933 shares on a post-split basis.

 

● 1,345,001 shares of Common Stock were issued to certain original public shareholders who had previously agreed not to redeem their shares, equivalent to approximately 53,800 shares after giving effect to the reverse stock split.

 

● 482,500 shares of Common Stock were issued to holders of the ShoulderUp bridge loan to partially settle the outstanding loan balance at Closing, equivalent to 19,300 shares after giving effect to the reverse stock split. In addition, 150,000 shares were issued to legal services provider DLA Piper LLP to partially settle outstanding service fees pursuant to the Expense Release and Payment Agreement executed on June 3, 2025, equivalent to 6,000 shares on a post-split basis.

 

● All 108,975,000 shares of SEE ID Common Stock issued and outstanding immediately prior to the Closing were canceled and converted into 12,210,718 shares of the Company’s Common Stock pursuant to the applicable exchange ratio of 0.11205. Following the 1-for-25 reverse stock split, such shares were adjusted to approximately 488,429 shares of Common Stock.

 

● 2,909,057 shares of Common Stock were issued to the SEE ID SAFE note holders, equivalent to approximately 116,362 shares after giving effect to the reverse stock split.

 

● 11,205 shares of Common Stock were issued in exchange for financial advisory services at Closing, equivalent to approximately 448 shares after giving effect to the reverse stock split.

 

● 3,323,536 shares of Common Stock were issued to three major PIPE investors, equivalent to approximately 132,942 shares after giving effect to the reverse stock split.

 

● The Company assumed 15,654,983 public and private warrants of ShoulderUp, net of 20,017 forfeitures. Following the 1-for-25 reverse stock split, the number of shares of Common Stock underlying such warrants was proportionately adjusted to approximately 626,199 shares, and the exercise price was adjusted from $11.50 per (Pre-split) share to $287.50 per post-split share.

 

Redemption

 

Prior to the Closing, certain public shareholders of ShoulderUp exercised their rights to redeem certain ordinary shares for funds previously held in the trust account, resulting in the redemption of 2,000 ordinary shares for an aggregate payment of approximately $22,019. After redemptions, there was a total of 506,589 ordinary shares, which were converted into Common Stock in connection with the Business Combination, and approximately $5.58 million remained in the trust account. After giving effect to the 1-for-25 reverse stock split effective May 29, 2026, such 506,589 shares were adjusted to approximately 20,264 shares of Common Stock.

 

Share Ownership Upon Closing

 

The number of shares of Common Stock issued in connection with the Business Combination and subsequent equity conversion was as follows:

 

    Shares at
Closing		     Shares After
1-for-25
Reverse
Stock Split		  
Ordinary shares, outstanding prior to the Business Combination     508,589       20,344  
Less: Redemption of ordinary shares     (2,000 )     (80 )
Ordinary shares held by ShoulderUp’s officers and directors, the Sponsor and each transferee of founder shares     6,698,333       267,933  
Ordinary shares held by non-redemption share holders     1,345,001       53,800  
Ordinary shares held by ShoulderUp bridge loan holder     482,500       19,300  
Ordinary shares held by DLA Piper, LLP     150,000       6,000  
Common Stock issued to holders of SEE ID Inc.     12,210,718       488,429  
Common Stock issued to SEE ID SAFE note holders     2,909,057       116,362  
Common Stock issued to StartUpNV     11,205       448  
Common Stock issued to PIPE investors     3,323,536       132,942  
Common Stock Upon the Business Combination     27,636,939       1,105,478  

 

The post-reverse stock split amounts presented above give effect to the Company’s 1-for-25 reverse stock split, effective May 29, 2026. Pursuant to the terms of the reverse stock split, no fractional shares were issued. Any fractional shares resulting from the reverse stock split were rounded down to the nearest whole share, and the Company paid a de minimis amount of cash in lieu of such fractional shares.

 

The Legacy Company incurred $2,726,183 in transaction costs in connection with the Business Combination, which was determined not to be a capital-raising transaction for the Legacy Company. The $2,726,183 consists of the following:

 

● $1,003,500 in assumed expenses from ShoulderUp for financial advisory services provided by Cohen Capital Markets;
     
● $156,870 for financial advisory services provided by a financial advisor;
     
● $295,000 in registration fees paid to Nasdaq Corporate Solutions, LLC;
     
● $271,079 paid to Continental Stock Transfer & Trust Co.;
     
● $126,812 paid to Edgar Agents, LLC; and
     
● $872,922 in bonus expenses related to the successful closing of the Business Combination.

 

The following tables reconcile elements of the Business Combination to the Company’s condensed consolidated financial statements, and should be read in conjunction with the footnotes referenced above:

 

    Recapitalization  
Closing proceeds      
Proceeds from Trust account   $ 5,577,304  
Proceeds from PIPE investors     10,837,643  
Proceeds from legacy ShoulderUp bank accounts     74,501  
Closing disbursements        
Less: Payment to purchase founder shares     (5,000,000 )
Net cash proceeds from the Business Combination   $ 11,489,448  
Noncash activities        
Conversion of SAFE notes to equity     40,726,793  
Conversion of short-term debt to equity     8,597,749  
Transaction costs paid in shares     156,870  
Less: Accrued taxes assumed from ShoulderUp     (3,913,668 )
Less: Short-term debt assumed from ShoulderUp     (900,000 )
Net equity impact of the Business Combination   $ 56,157,192  
Par value of common stock issued     (1,543 )
Total Impact of Business Combination on additional paid-in capital   $ 56,155,649  

 

Bridge Loan Agreements

 

In the first two quarters of 2025, the Legacy Company entered into unsecured bridge loan agreements with two major lenders, totaling $2,850,000 in principal. These loans bear interest at an annual rate of 20%, calculated on a 365-day basis, and include a minimum interest provision requiring payment of at least 8% or 10% of the principal amount if repaid prior to their six-month maturity dates. As of the date of Closing, the Company recorded an accrued interest liability of $280,000, which was settled at Closing.

 

Prior to the Closing of the Business Combination, one of the lenders elected to convert a portion of its outstanding principal and accrued interest into 614,125 shares of Common Stock, based on a conversion price of $4.00 per share. The other lender opted to receive full repayment in cash. Following the 1-for-25 reverse stock split effective May 29, 2026, the 614,125 shares were adjusted to 24,565 shares of Common Stock.

 

The table below summarizes the transaction:

 

Bridge Loans   Effective
Date		   Amount     Interest at
closing		     Payback in
Cash		     Payback in
shares at
4/share		     Shares at
Closing		     Shares After
1-for-25
Reverse
Stock Split		  
Bridge loan 1*   1/29/2025   $ 1,500,000     $ 150,000     $ (193,500 )   $ 1,456,500       364,125       14,565  
Bridge loan 2*   4/9/2025     500,000       50,000       (50,000 )     500,000       125,000       5,000  
Bridge loan 3*   5/7/2025     500,000       50,000       (50,000 )     500,000       125,000       5,000  
Bridge loan 4   3/29/2025     100,000       10,000       (110,000 )     -       -       -  
Bridge loan 5   6/5/2025     250,000       20,000       (270,000 )     -       -       -  
Total       $ 2,850,000     $ 280,000     $ (673,500 )   $ 2,456,500       614,125       24,565  

 

* Bridge loans from this investor had an aggregate principal amount of $2,500,000. At the Closing of the Business Combination, the investor received a cash payment of $293,500, consisting of $250,000 in minimum 10% interest and $43,500 in principal repayment. In addition, the investor received 614,125 shares of Common Stock in exchange for $2,456,500 of combined principal and accrued interest, based on a per share price of $4.00.

 

In connection with the bridge loan conversion, the Company derecognized $2,456,500 of the outstanding liability upon the issuance of 614,125 shares of Common Stock, equivalent to 24,565 shares after giving effect to the Company’s 1-for-25 reverse stock split. The Company recognized a loss on debt extinguishment of $6,141,250 during the second quarter of 2025, based on the fair value of the Common Stock of $14.00 per share at the Closing, equivalent to $350.00 per share on a post-reverse stock split basis. 

 

PIPE Investments

 

In connection with the Business Combination, the Company entered into a private investment in public equity (“PIPE”) financing agreement with certain accredited investors. Pursuant to the PIPE subscription agreements, these investors committed to purchase an aggregate of 2,709,411 shares of Common Stock at a price of $4.00 per share, for total gross proceeds of $10,837,643. The PIPE investment provided additional capital to support the Company’s post-closing operations and was consummated concurrently with the Closing of the Business Combination.

 

Following the Company’s 1-for-25 reverse stock split, effective May 29, 2026, the 2,709,411 shares are equivalent to approximately 108,376 shares of Common Stock, and the $4.00 per-share purchase price is equivalent to $100.00 per share on a post-reverse stock split basis. The aggregate gross proceeds were unaffected by the reverse stock split. The following table presents the breakdown of the PIPE investments.

 

PIPE   Effective
Date		   Amount     Shares at
Closing		     Shares After
1-for-25
Reverse
Stock Split		  
PIPE 1   6/16/2025   $ 2,814,500       703,625       28,145  
PIPE 2   6/10/2025     1,000,000       250,000       10,000  
PIPE 3   6/17/2025     7,023,143       1,755,786       70,231  
Total PIPE       $ 10,837,643       2,709,411       108,376  

 

In connection with the Business Combination, the Company assumed an excise tax liability of $3,905,240 and a franchise tax liability of $8,428, both of which were incurred prior to the Closing and were recorded as assumed obligations from the reverse recapitalization transaction. Accordingly, the Company recorded a total accrued tax liability of $3,913,668 related to the Business Combination.

 

The U.S. Treasury issued final regulations under Section 58.4501-2(e) clarifying the application of the 1% stock repurchase excise tax imposed by the Inflation Reduction Act. The regulations provide that redemptions of stock issued prior to August 16, 2022 are exempt from the excise tax if the shares were subject to mandatory redemption or stockholder put rights from issuance through redemption. The Company’s SPAC redemptions qualified for this exemption because the shares were issued before August 16, 2022 and were continuously subject to contractual redemption rights, including mandatory redemption and stockholder put options, which were redeemed in connection with extension votes. As a result, the previously recorded excise tax liability of $3,905,240 was reversed as of December 31, 2025, with a corresponding adjustment to additional paid-in capital.