Company: FSHPU
Filing Date: 2025-05-13
Form Type: 10-Q
Source: 0001829126-25-003624
Chunk: 16

Company: Flag Ship Acquisition Corp
Filing Date: 2025-05-13
Form: 10-Q
Item: Part I, Item 1
Chunk 16
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, holders of rights will not receive any of such funds with respect to their rights, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such rights, and the rights will expire worthless. Further, there are no contractual penalties for failure to deliver securities to the holders of the rights upon consummation of a Business Combination. Additionally, in no event will the Company be required to net cash settle the rights. Accordingly, the rights may expire worthless.

The Company accounts for rights as either equity-classified or liability-classified instruments based on an assessment of the right’s specific terms and applicable authoritative guidance in ASC 480 and ASC 815. The assessment considers whether the rights are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the rights meet all of the requirements for equity classification under ASC 815, including whether the rights are indexed to the Company’s own ordinary shares and whether the right holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of right issuance and as of each subsequent quarterly period end date while the rights are outstanding.

For issued or modified rights that meet all of
the criteria for equity classification, the rights are required to be recorded as a component of equity at the time of issuance. For
issued or modified rights that do not meet all the criteria for equity classification, the rights are required to be recorded as
liabilities at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated
fair value of the rights are recognized as a non-cash gain or loss on the unaudited statements of operations.

As the rights issued upon the IPO and private placements meet the criteria for equity classification under ASC 480, therefore, the rights are classified as equity.

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    Income taxes 

Income taxes are determined in accordance with
the provisions of ASC Topic 740, “Income Taxes” (“ASC 740”). Under this method, deferred tax assets
and liabilities are recognized for the future tax consequences attributable to differences between the unaudited financial
statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities
are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences
are expected to be recovered or settled. Any effect on