8-K: Four Leaf Acquisition Terminates XYDD Deal, Pursues Data443 Merger

Four Leaf Acquisition Corporation has mutually agreed to terminate its business combination agreement with Guangzhou Xiaoyu DiDa Technology Co., Ltd. to pursue a merger with Data443 Risk Mitigation, Inc.

Summary

• Four Leaf Acquisition Corporation (the Company) has terminated its Business Combination Agreement with Guangzhou Xiaoyu DiDa Technology Co., Ltd. (XYDD).
• This termination is to allow the Company to pursue an alternative business combination with Data443 Risk Mitigation, Inc. (Data443).
• The termination was effective on July 15, 2026.
• As part of the termination, Data443 has agreed to compensate XYDD.
• Data443 will issue a promissory note to XYDD for US$2,000,000.
• This compensation is to facilitate the termination of the XYDD transaction and the pursuit of the Data443 merger.
• The Company is not obligated to pay any termination fee to XYDD.

Sentiment

Score: 5

Explanation: StockSavvy.ai views this as a neutral event; while the termination of one deal and pursuit of another introduces uncertainty, the company is proactively addressing the situation and has secured a new potential combination.

Positives

• Termination of the XYDD agreement allows the company to pursue a new business combination with Data443.
• The company is not obligated to pay any termination fee to XYDD.
• Data443 is providing compensation to XYDD, mitigating direct financial burden on Four Leaf Acquisition.
• The compensation to XYDD includes a US$2,000,000 promissory note from Data443, with potential conversion into PubCo shares.

Negatives

• The original business combination with XYDD has stalled due to regulatory review under PRC law.
• The compensation to XYDD by Data443 involves a significant promissory note that could convert into equity, potentially diluting existing shareholders.
• The promissory note accrues 15% interest if not paid on time, increasing the cost of termination.

Risks

• The proposed business combination with Data443 may not be completed.
• Regulatory hurdles encountered with the XYDD deal could potentially impact the Data443 transaction.
• The conversion of the US$2,000,000 promissory note into shares of the combined public company (PubCo) could lead to significant dilution for existing shareholders.
• The terms of the promissory note's conversion include a floor and a cap, creating uncertainty regarding the final equity structure.
• Disputes related to the Compensation Agreement are subject to arbitration administered by the Singapore International Arbitration Centre, which can be complex and costly.

Future Outlook

The company is actively pursuing a business combination with Data443 Risk Mitigation, Inc. The terms of the compensation to XYDD involve a promissory note that can be converted into shares of the combined public company, subject to certain conditions and potential dilution.

Management Comments

• The termination was effected to permit the Company to pursue the proposed business combination with Data443.
• Data443 has agreed to compensate XYDD on the terms described under Item 8.01 below.

Industry Context

StockSavvy.ai notes that the termination of a SPAC's initial business combination and the pursuit of an alternative target is a common, albeit often challenging, scenario in the SPAC market, particularly when regulatory reviews or deal complexities arise. The compensation structure involving a promissory note convertible into equity highlights the intricate negotiations required to unwind prior agreements and facilitate new ones.

Comparison to Industry Standards

• The US$2,000,000 compensation to XYDD is a significant amount for a termination, but within the range seen in SPAC deal terminations where multiple parties are involved.
• The conversion terms of the promissory note, including the 80% VWAP conversion price, 50% VWAP floor, and 19.99% equity cap, are complex and reflect efforts to balance compensation with potential dilution, a common consideration in such transactions.
• The use of arbitration in Singapore for dispute resolution is a global standard for international business agreements, though it can be more costly and time-consuming than domestic litigation.

Legal Proceedings

• Any disputes related to the Compensation Agreement are to be resolved by arbitration administered by the Singapore International Arbitration Centre.

Stakeholder Impact

• Shareholders may experience dilution if the US$2,000,000 promissory note is converted into equity.
• Creditors of Data443 may be impacted by the issuance of the promissory note and potential future equity dilution.
• XYDD, as a counterparty to the termination, is receiving compensation in the form of a promissory note.

Next Steps

• Pursue the proposed business combination with Data443 Risk Mitigation, Inc.
• XYDD may convert the US$2,000,000 promissory note into shares of the combined public company if not repaid.
• Data443 may repay the loan in full at any time prior to twelve (12) months after the Date of Deal Close.

Key Dates

Recommendation

The filing indicates a shift in strategy with the termination of one business combination and the pursuit of another. While this demonstrates proactive management, the success of the new Data443 merger is uncertain, and the compensation terms for the terminated deal introduce potential dilution. Therefore, a 'hold' recommendation is appropriate pending further clarity on the Data443 transaction.

Keywords

Four Leaf Acquisition Corporation, Form 8-K, Business Combination Agreement, XYDD, Data443 Risk Mitigation, Termination Agreement, Promissory Note, Merger