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Item 2. Management’s Discussion and Analysis

2025-05-02 compared with 2024-11-12 · 66 added, 35 removed, 96 unchanged (51% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” or refer to Aldel Financial Inc.

References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” or refer to Aldel Financial II Inc.

References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to Aldel Investors II LLC.

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(the “Company”) is a blank check company incorporated as a Cayman Islands exempted company on July 15, 2024 .

The Company was formed for the purpose of merger, share exchange, asset acquisition, share purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities (“Business Combination”).

The Company was formed for the purpose of merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities (“Business Combination”)

Although the Company is not limited to a particular industry or geographic region for purposes of consummating a Business Combination, the Company intends to focus on businesses in the financial services industry.

The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.

As of September 30, 2024, the Company had not yet commenced any operations.

All activity through September 30, 2024 relates to the Company’s formation and the initial public offering (“IPO”), which is described below.

The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest.

As of March 31, 2025, the Company had not yet commenced any operations.

All activity through March 31, 2025 relates to the Company’s formation and the initial public offering (“IPO”), which is described below and target search for Business Combination.

The Company will not generate any operating revenues until after the completion of its Business Combination, at the earliest.

The Company will generate nonoperating income in the form of interest income from the proceeds derived from the IPO.

The Company has selected December 31 as its fiscal year end.

Recent Developments

The registration statement for the Company’s IPO was declared effective on October 21, 2024.The Company closed its IPO on October 23, 2024 and commenced operations after receiving adequate financial resources through i) the IPO of 23,000,000 units at $10.00 per unit (including 3,000,000 units that were issued pursuant to the underwriters’ full exercise of the over-allotment option) (the “Units” and, with respect to the shares of common stock included in the Units being offered, the “Public Shares”) which is discussed in Note 3, ii) the sale of 1,000,000 $15.00 exercise price warrants (the “$15 Private Warrants”) at a price of $0.10 per $15 Private Warrant, iii) the sale of 707,500 units at $10.00 per unit (the “Private Units”) in a private placement ( the Private Placement”) to the Company’s sponsor, Aldel Investors II LLC (the “Sponsor”) and BTIG LLC ( the “Underwriter”).

Each Private Unit consist of one common share and one-half of one non-redeemable warrant (“Private Unit Warrant”).

Each whole Private Unit Warrant will entitle the holder to purchase one share of common stock at an exercise price of $11.50 per share.

Each $15 Private Warrant will entitle the holder to purchase one share of Common Stock at an exercise price of $15.00 per each share, will be exercisable for a period of 10 years from the date of Business Combination, will be non-redeemable, and may be exercised on a cashless basis.

Additionally, $15 Private Warrants and the shares issuable upon the exercise of the $15 Private Warrants will not be transferable, assignable or salable until after the completion of a Business Combination, subject to certain limited exceptions.

The Units are listed on the National Association of Securities Dealers Automated Quotations (“Nasdaq”).

The registration statement for the Company’s IPO was declared effective on October 21, 2024.

On October 23, 2024, the Company consummated its IPO of 23,000,000 units (the “Units”) at $10.00 per unit including the 3,000,000 Units that were issued pursuant to the underwriters’ full exercise of their over-allotment option.

Each Unit consist of one share of Class A ordinary share of the Company, par value $0.0001 per share (the “Public Share”) and one-half of one redeemable warrant ( “Public Warrant”), each whole Public Warrant entitling the holder thereof to purchase one share of Class A ordinary share for $11.50 per share.

The Units were sold at a price of $10.00 per Unit, generating gross proceeds to the Company of $230,000,000.

The Public Warrants will become exercisable on the later of 30 days after the completion of Business Combination and 12 months from the closing of the IPO and will expire five years after the completion of Business Combination or earlier upon Company’s liquidation.

Simultaneously with the closing of the IPO, the Company consummated private placements (the “Private Placements”) in which (i) Aldel Investors II LLC (the “Sponsor”) and BTIG LLC (“ Underwriter”) purchased 477,500 and 230,000 private units (the “Private Units”) respectively, at a price of $10.00 per Private Unit, generating total proceeds of $7,075,000, and (ii) the Sponsor purchased an aggregate of 1,000,000 warrants (“$15 Private Warrant”) and, together with the Private Units, the “Private Placement Securities”) at a price of $0.10 per warrant, each exercisable to purchase one share of Class A ordinary share at $15.00 per share, for an aggregate purchase price of $100,000.

Each Private Unit consists of one ordinary share and one-half of one non-redeemable warrant (“Private Unit Warrant”).

Each whole Private Unit Warrant entitles the holder to purchase one share of ordinary share at an exercise price of $11.50 per share.

Each $15 Private Warrant entitles the holder to purchase one share of ordinary share at an exercise price of $15.00 per each share, is exercisable for a period of 10 years from the date of Business Combination, is non-redeemable, and may be exercised on a cashless basis.

Additionally, $15 Private Warrants and the shares issuable upon the exercise of the $15 Private Warrants are not to be transferable, assignable or salable until after the completion of a Business Combination, subject to certain limited exceptions.

The Company’s Units are listed on the National Association of Securities Dealers Automated Quotations (“Nasdaq”).

The Company’s management has broad discretion with respect to the specific application of the net proceeds of the IPO and sale of the $15 Private Warrants, and Private Units, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination.

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(i) the consummation of a Business Combination or (ii) the distribution of the funds in the Trust Account to the Company’s shareholders, as described below.

The Sponsor, officers, directors and advisors (the “Initial Shareholders”) have agreed (a) to vote their Founder Shares (as defined below) as well as any common shares underlying the Private Units, and any Public Shares purchased during or after the IPO in favor of a Business Combination, (b) not to propose an amendment to the Company’s amended and restated memorandum and articles of association with respect to the Company’s pre-Business Combination activities prior to the consummation of a Business Combination unless the Company provides dissenting public shareholders with the opportunity to redeem their Public Shares in conjunction with any such amendment;

(c) not to redeem any shares (including the Founder Shares as well as any common shares underlying the Private Units) into the right to receive cash from the Trust Account in connection with a shareholder vote to approve a Business Combination (or to sell any shares in a tender offer in connection with a Business Combination if the Company does not seek shareholder approval in connection therewith) or a vote to amend the provisions of the amended and restated memorandum and articles of association relating to shareholders’ rights of pre-Business Combination activity and (d) that the Founder Shares, the Private Units and $15 Private Warrants (including underlying securities) shall not participate in any liquidating distributions upon winding up if a Business Combination is not consummated.

However, the Initial Shareholders will be entitled to liquidating distributions from the Trust Account with respect to any Public Shares purchased after the IPO if the Company fails to complete its Business Combination.

The Company will have until October 23, 2026, to complete a Business Combination.

The Company will provide its shareholders with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a shareholder meeting called to approve the Business Combination or (ii) by means of a tender offer.

In connection with a proposed Business Combination, the Company may seek shareholder approval of a Business Combination at a meeting called for such purpose at which shareholders may seek to redeem their shares, regardless of whether they vote for or against the proposed Business Combination.

If the Company seeks shareholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Company’s amended and restated articles of incorporation will provide that a public shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from seeking redemption rights with respect to 15% or more of the Public Shares without the Company’s prior written consent.

The holders of Public Shares are entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (including any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations).

There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants.

As of March 31, 2025, the redemption value of the trust account was approximately $10.24 per share.

If a shareholder vote is not required and the Company does not decide to hold a shareholder vote for business or other legal reasons, the Company will, pursuant to its amended and restated articles of incorporation, offer such redemption pursuant to the tender offer rules of the Securities and Exchange Commission (“SEC”), and file tender offer documents containing substantially the same information as would be included in a proxy statement with the SEC prior to completing a Business Combination.

The Sponsor, officers, directors and advisors (the “Initial Shareholders”) and Underwriter have agreed (a) to vote their Founder Shares (as defined in Note 5) as well as any common shares underlying the Private Units, and any Public Shares purchased during or after the IPO in favor of a Business Combination, (b) not to propose an amendment to the Company’s amended and restated articles of incorporation with respect to the Company’s pre-Business Combination activities prior to the consummation of a Business Combination unless the Company provides dissenting public shareholders with the opportunity to redeem their Public Shares in conjunction with any such amendment;

(c) not to redeem any shares (including the Founder Shares as well as any common shares underlying the Private Units) into the right to receive cash from the Trust Account in connection with a shareholder vote to approve a Business Combination (or to sell any shares in a tender offer in connection with a Business Combination if the Company does not seek shareholder approval in connection therewith) or a vote to amend the provisions of the amended and restated articles of incorporation relating to shareholders’ rights of pre-Business Combination activity and (d) that the Founder Shares, the Private Units and $15 Private Warrants (including underlying securities) shall not participate in any liquidating distributions upon winding up if a Business Combination is not consummated.

However, the Initial Shareholders will be entitled to liquidating distributions from the Trust Account with respect to any Public Shares purchased during or after the IPO if the Company fails to complete its Business Combination.

The Company has until 24 months from the closing of the IPO to complete a Business Combination.

If the Company is unable to complete a Business Combination within the Combination Period, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but no more than ten business days thereafter, redeem 100% of the outstanding Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned (net of taxes payable), divided by the number of then outstanding public shares, which redemption will completely extinguish public shareholders’ rights as shareholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining shareholders and the Company’s board of directors, proceed to commence a voluntary liquidation and thereby a formal dissolution of the Company, subject in each case to its obligations to provide for claims of creditors and the requirements of applicable law.

There will be no redemption rights or liquidation distribution with respect to the Company’s warrants, which will expire worthless if the Company fails to complete its initial Business Combination within the Combination period.

There will be no redemption rights or liquidation distribution with respect to the Company’s warrants, which will expire worthless if the Company fails to complete its Business Combination within the Combination period.

The Sponsor has agreed that it will be liable to the Company, if and to the extent any claims by a vendor for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amounts in the Trust Account to below $10.05 per share, except as to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims under the Company’s indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”).

In the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims.

The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers, prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.

Results of Operations

Our entire activity since inception up to September 30, 2024, is related to our formation and the IPO, and we will not be generating any operating revenues until the closing and completion of our initial Business Combination, at the earliest.

We will generate nonoperating income in the form of interest income from the proceeds derived from the IPO.

Following the closing of our IPO on October 23, 2024, we expect to incur increased expenses as a result of becoming a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.

For the period July 15, 2024 (inception) to September 30, 2024, the Company reported a net loss of $8,919, which consists solely of formation and general and administrative expenses.

We have neither engaged in any operations nor generated any revenues to date.

Our activities through March 31, 2025 were organizational activities, including those necessary to prepare for the IPO and identifying a target company for a Business Combination.

We do not expect to generate any operating revenues until after the completion of our Business Combination.

We generate non-operating income in the form of interest income on marketable securities.

We incur 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 completing a Business Combination.

For the three months ended March 31, 2025, the Company reported net income of $2,251,489, which consists of $2,416,318, in investment income earned in Trust Account, offset by $164,829 of general and administrative expenses.

Liquidity and Capital Resources

As of September 30, 2024, the Company held a cash balance of $108,632.

As of March 31, 2025, the Company held a cash balance of $879,289.

Prior to the IPO, our liquidity needs were satisfied through the $25,000 proceeds received from the Sponsor for purchase of Founder Shares (as defined below), as well as $180,000 loan from Sponsor under a promissory note (“Promissory Notes”).

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In order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of our officers and directors may, but are not obligated to, loan us funds as may be required (“Working Capital Loans”).

As of September 30, 2024, there were no Working Capital Loans under this arrangement.

We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business.

As of March 31, 2025, there were no Working Capital Loans under this arrangement.

We do not believe we need to raise additional funds in order to meet the expenditures required for operating our business.

However, if our estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating a 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

Off-Balance Sheet Arrangement

We have no obligations, assets, or liabilities, which would be considered off-balance sheet arrangements as of September 30, 2024.

We have no obligations, assets, or liabilities, which would be considered off-balance sheet arrangements as of March 31, 2025.

Contractual Obligations

Registration Rights

Pursuant to the registration right agreement entered into on October 21, 2024, the holders of the Founder Shares, the Private Units, the $15 Private Warrants (and their underlying securities) are entitled to registration rights.

Pursuant to the registration right agreement entered on October 21, 2024, the holders of the Founder Shares, the Private Units, the $15 Private Warrants (and their underlying securities) are entitled to registration rights.

The Company will bear the expenses incurred in connection with the filing of any registration statements pursuant to such registration rights

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The purchase price was satisfied against the promissory note between Company and Sponsor dated July 19, 2024.

As of September 30, 2024, there was 178,334 outstanding under the promissory notes.

The promissory notes are noninterest bearing and payable on the) the consummation of the IPO.

As of March 31, 2025, there was no outstanding balance under the promissory notes.

Administrative Services Agreement

The Company entered into an administrative services agreement (the “Administrative Services Agreement”) with the Sponsor whereby the Sponsor will perform certain services for the Company for a monthly fee of $20,000.

The Company entered into an administrative services agreement (the “Administrative Services Agreement”) with the Sponsor whereby the Sponsor performs certain services for the Company for a monthly fee of $20,000.

Chief Executive Officer of the Company serves as managers of the Sponsor at close of the IPO.

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Accordingly, the actual results could differ significantly from those estimates.

Common stock subject to possible redemption

The Company accounts for its ordinary share subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Ordinary share subject to mandatory redemption is classified as a liability instrument and is measured at fair value.

Conditionally redeemable ordinary share (including ordinary share that features redemption rights that is either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity.

At all other times, ordinary share is classified as stockholders’ equity.

The Company’s ordinary share features certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events.

Accordingly, at March 31, 2025, ordinary share subject to possible redemption is presented as temporary equity at redemption value, outside of the stockholders’ equity section of the Company’s balance sheet.

The Company recognizes changes in redemption value using the “at redemption value” method and accordingly recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable shares to equal the redemption value at the end of each reporting period.

Such changes are reflected in additional paid-in-capital and retained earnings.

Cash and cash equivalents

The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.

The Company did not have any cash equivalents as of September 30, 2024.

The Company did not have any cash equivalents as of March 31, 2025.

Deferred offering costs

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The Company recognizes accrued interest and penalties related to unrecognized tax benefits, if any, as income tax expense.

There were no unrecognized tax benefits as of September 30, 2024 and no amounts accrued for interest and penalties.

There were no unrecognized tax benefits as of March 31, 2025 and no amounts accrued for interest and penalties.

The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.

The Company is subject to income tax examinations by major taxing authorities since inception.

There was no provision for income taxes for the period from July 15, 2024 (inception) to September 30, 2024.

Net loss per share

Net loss per share is computed by dividing net loss by the weighted average number of ordinary shares outstanding during the period, excluding shares of common stock subject to forfeiture by the Initial Shareholders.

The Company had 6,160,714 founder shares outstanding as of September 30, 2024.

The company’s year - end is December 31 and no statutory tax deadline has yet occurred.

There is currently no taxation imposed on income by the Government of the Cayman Islands.

In accordance with Cayman income tax regulations, income taxes are not levied on the Company.

Consequently, income taxes are not reflected in the Company’s financial statements

Net income (loss) per share

The Company complies with the accounting and disclosure requirements of ASC 260, Earnings Per Share.

The Company utilize two class methodology in calculation of earning per share.

The Company has redeemable shares referred to as Class A ordinary shares and and non-redeemable shares referred to as Class B ordinary shares of.

Income and losses are shared pro rata between the redeemable and non-redeemable shares of ordinary share.

Net income (loss) per share of ordinary share is calculated by dividing the net income (loss) by the weighted average shares of ordinary share outstanding for the respective period.

Net income for the three-month period ended March 31, 2025 was allocated to redeemable and non-redeemable shares of ordinary share.

Diluted net income per share attributable to stockholders adjusts the basic net income per share attributable to stockholders and the weighted-average shares of ordinary share outstanding for the potentially dilutive impact of outstanding warrants.

Fair value of financial instruments

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis