Item 7. Management’s Discussion and Analysis
Item
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Cautionary Note
Regarding Forward-Looking Statements
All
statements other than statements of historical fact included in this Report including, without limitation, statements under this Item
regarding our financial position, business strategy and the plans and objectives of Management for future operations, are forward-looking
statements. When used in this Report, words such as “anticipate,” “believe,” “estimate,” “expect,”
“intend” and similar expressions, as they relate to us or our Management, identify forward-looking statements. Such forward-looking
statements are based on the beliefs of our Management, as well as assumptions made by, and information currently available to, our Management.
Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors detailed
in our filings with the SEC. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf
are qualified in their entirety by this paragraph.
The
following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial
statements and the notes thereto contained elsewhere in this Report.
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Overview
We are a blank check company
incorporated in the Cayman Islands on September 13, 2024 incorporated for the purpose of effecting a merger, amalgamation, share exchange,
asset acquisition, share purchase, reorganization or other similar business combination with one or more businesses. We intend to effectuate
our Business Combination using cash derived from the proceeds of the Initial Public Offering and the sale of the Private Placement Warrants,
our shares, debt or a combination of cash, shares 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.
In 2024, the SEC adopted additional
rules and regulations relating to SPACs, which became effective on July 1, 2024, referred herein as the 2024 SPAC Rules. The 2024
SPAC Rules require, among other matters, (i) additional disclosures relating to SPAC sponsors and related persons; (ii) additional disclosures
relating to SPAC Business Combination transactions; (iii) additional disclosures relating to dilution and to conflicts of interest involving
sponsors and their affiliates in connection with proposed Business Combination transactions; (iv) additional disclosures regarding projections
included in SEC filings in connection with proposed Business Combination transactions; and (v) the requirement that both the SPAC and
its target company be co-registrants in connection with registration statements relating to proposed Business Combination transactions.
In addition, the SEC’s adopting release provided guidance describing circumstances in which a SPAC could become subject to regulation
under the Investment Company Act, including its duration, asset composition, business purpose, and the activities of the SPAC and its
management team. The 2024 SPAC Rules may materially affect our ability to negotiate and complete our Initial Business Combination and
may increase the costs and time related thereto.
We may seek to extend the
Combination Period consistent with applicable laws, regulations and stock exchange rules by amending our amended and restated memorandum
and articles of association. Such an amendment would require the approval of our public shareholders, who will be provided the opportunity
to redeem all or a portion of their Public Shares in connection with the vote on such approval. Such redemptions will decrease the amount
held in our Trust Account and our capitalization, and may affect our ability to maintain our listing on Nasdaq. In addition, the Nasdaq
rules currently require SPACs (such as us) to complete our initial Business Combination within 36 months following the effective date
of our IPO Registration Statement. If we do not meet such 36-month requirement, our securities will likely be subject to a suspension
of trading and delisting from Nasdaq.
.
Results of Operations
We have neither engaged in
any operations nor generated any revenues to date. Our only activities from September 13, 2024 (inception) through December 31, 2025 were
organizational activities, those necessary to prepare for the Initial Public Offering, described below, 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 held in the Trust Account. 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.
For the year ended December
31, 2025, we had a net income of $3,349,485 which consists of interest earned on marketable securities held in the Trust Account of $3,801,400
offset by formation and general and administrative costs of $451,915.
For the period from September
13, 2024 (inception) through December 31, 2024, we had a net loss of $36,702, which consists of formation and general and administrative
costs.
Liquidity, Capital
Resources and Going Concern
On May 8, 2025, we consummated
the Initial Public Offering of 14,375,000 Units, which included the full exercise by the underwriters of their over-allotment option in
the amount of 1,875,000 Units, at $10.00 per Unit generating gross proceeds of $143,750,000. Simultaneously with the closing of the Initial
Public Offering, we completed the sale of 2,000,000 Private Placement Warrants at a price of $1.00 per Private Placement Warrant in a
private placement to our Dune Acquisition Holdings II LLC (the “Sponsor”), generating gross proceeds of $2,000,000.
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Following the Initial Public
Offering, the full exercise of the over-allotment option, and the sale of the Private Placement Warrants, a total of $144,109,375 ($10.025
per Unit) was placed in the Trust Account. We incurred transaction costs of $6,637,469, consisting of $550,000 of a cash underwriting
fee, $5,750,000 of deferred underwriting fees and $337,469 of other offering costs.
On January 30, 2026, we, the
New Sponsor, the Old Sponsor, the Sponsor Member, the Non-Managing Members, and the Non-Managing Investors entered into the New Sponsor
Purchase Agreement pursuant to which New Sponsor has agreed to purchase from the Sponsor the Transferred Interest, an aggregate of (i)
4,475,000 Class B Ordinary Shares and (ii) 1,000,000 Private Placement Warrants, for an aggregate purchase price of $2,000,000 (the “Sponsor
Transaction”).
Pursuant to the Purchase Agreement,
if a definitive business combination agreement is not entered into by the Option Date, May 7, 2026, the Sponsor Member shall be entitled
to the Repurchase Right, to repurchase the Transferred Interests from the New Sponsor for a purchase price of $2,000,000. The Repurchase
Right may be exercised only during the Option Period, commencing on the Option Date and ending at 5:00 p.m., New York City time, on the
date that is five (5) days after the Option Date, by delivery of written notice of exercise to the New Sponsor in accordance with the
terms set forth in the Purchase Agreement. If the Sponsor Member does not exercise the Repurchase Right within the Option Period, the
Repurchase Right shall automatically terminate and be of no further force or effect.
The closing of the Sponsor
Transaction and such other transactions contemplated by the Purchase Agreement occurred on February 5, 2026 (the “New Sponsor Closing”).
For the year ended December
31, 2025, cash used in operating activities was $429,113. Net income of $3,349,485 was affected by interest earned on marketable securities
held in the Trust Account of $3,801,400 offset by the payment of offering costs through promissory note of $23,500 and the payment of
operating costs through advances from related party of $4,320. Changes in operating assets and liabilities used $5,018 of cash for operating
activities.
For the period from September
13, 2024 (inception) through December 31, 2024, cash used in operating activities was $30,472. Net loss of $36,702 was affected by changes
in operating assets and liabilities which used $6,230 of cash for operating activities.
As of December 31, 2025, we
had marketable securities held in the Trust Account of $147,910,775 (including approximately $3,801,400 of interest income) consisting
of money market funds invested in U.S. treasury securities. We may withdraw interest from the Trust Account to pay taxes, if any. We intend
to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account
(less income taxes payable), to complete our Business Combination. To the extent that our share capital or debt is used, in whole or in
part, as consideration to complete our 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, 2025, we
had cash of $365,751. We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses,
perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective
target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses,
and structure, negotiate and complete a Business Combination.
In order to fund working capital
deficiencies or finance transaction costs in connection with a Business Combination, our New Sponsor, or an affiliate of our New Sponsor
or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete a Business Combination,
we would repay such loaned amounts. In the event that a Business Combination does not close, we may use a portion of the working capital
held outside the Trust Account to repay such loaned amounts but no proceeds from our Trust Account would be used for such repayment. Up
to $1,500,000 of such loans may be convertible into private placement warrants of the post Business Combination entity at a price of $1.00
per warrant at the option of the lender. The warrants would be identical to the Private Placement Warrants.
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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 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 Business Combination. Moreover,
we may need to obtain additional financing either to complete our Business Combination or because we become obligated to redeem a significant
number of our Public Shares upon consummation of our Business Combination, in which case we may issue additional securities or incur debt
in connection with such Business Combination.
As of December 31, 2025, we
had operating cash and cash equivalents of $365,751 and a working capital surplus of $289,539. We intend to use the funds held outside
the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses,
travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review
corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete a Business Combination.
In connection with Management’s
assessment of going concern considerations in accordance with ASC 205-40, “Going Concern,” as of December 31, 2025, the Company
may need to raise additional capital through loans or additional investments from the New Sponsor, stockholders, officers, directors,
or third parties. Our officers, directors and New Sponsor may, but are not obligated to, loan the Company funds, from time to time or
at any time, in whatever amount they deem reasonable in their sole discretion, to meet the Company’s working capital needs. Accordingly,
the Company may not be able to obtain additional financing. If the Company is unable to raise additional capital, it may be required to
take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending
the pursuit of a potential transaction, and reducing overhead expenses. The Company cannot provide any assurance that new financing will
be available to it on commercially acceptable terms, if at all. The Company’s liquidity condition raises substantial doubt about
the Company’s ability to continue as a going concern for a period of time within one year after the date that the accompanying financial
statements are issued. Management plans to address this uncertainty through a Business Combination.
Off-Balance Sheet
Arrangements
We have no obligations, assets
or liabilities, which would be considered off-balance sheet arrangements as of December 31, 2025. 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.
Contractual obligations
We do not have any long-term
debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement with the Old Sponsor and
subsequently New Sponsor an aggregate of $15,000 per month for utilities and secretarial and administrative support. We began incurring
these fees on May 6, 2025 and will continue to incur these fees monthly until the earlier of the completion of the Business Combination
and our liquidation.
The underwriters are entitled
to a deferred underwriting discount of $0.40 per unit, or up to $5,750,000 in the aggregate. The deferred fee will become payable to the
underwriters from the amounts held in the Trust Account solely on amounts remaining in the Trust Account following all properly submitted
shareholder redemptions in connection with the consummation of the initial Business Combination, subject to the terms of the underwriting
agreement.
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Critical Accounting
Policies and Estimates
The preparation of financial
statements in conformity with GAAP 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 judgement. It is at least reasonably possible that the
estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management
considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, actual
results could materially differ from those estimates. We have identified the following critical accounting policies:
Class A Ordinary
Shares Subject to Possible Redemption
The public shares contain
a redemption feature which allows for the redemption of such public shares in connection with the Company’s liquidation, or if there
is a shareholder vote or tender offer in connection with the Company’s initial Business Combination. In accordance with ASC 480-10-S99,
the Company classifies public shares subject to possible redemption outside of permanent equity as the redemption provisions are not solely
within the control of the Company. The Company recognizes changes in redemption value immediately as they occur and will adjust the carrying
value of redeemable shares to equal the redemption value at the end of each reporting period. Immediately upon the closing of the Initial
Public Offering, the Company recognized the accretion from initial book value to redemption amount value. The change in the carrying value
of redeemable shares will result in charges against additional paid-in capital (to the extent available) and accumulated deficit.
Net Income
(Loss) per Ordinary Share
The Company complies with
accounting and disclosure requirements of ASC 260, “Earnings Per Share.” The Company has two classes of shares, which are
referred to as Class A ordinary shares and Class B ordinary shares. Income and losses are shared pro rata between the two classes of shares.
Net income (loss) per ordinary share is calculated by dividing the net income (loss) by the weighted average ordinary shares outstanding
for the respective period. Diluted net income (loss) per share attributable to ordinary shareholders adjusts the basic net income (loss)
per share attributable to ordinary shareholders and the weighted-average ordinary shares outstanding for the potentially dilutive impact
of outstanding warrants. However, because the warrants are anti-dilutive, they have been excluded from the calculation of diluted income
(loss) per ordinary share for the periods presented.
Recent Accounting Standards
In November 2023, the FASB
issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments in this ASU require
disclosures, on an annual and interim basis, of significant segment expenses that are regularly provided to the chief operating officer
decision maker (“CODM”), as well as the aggregate amount of other segment items included in the reported measure of segment
profit or loss. The ASU requires that a public entity disclose the title and position of the CODM and an explanation of how the CODM uses
the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. Public entities
will be required to provide all annual disclosures currently required by Topic 280 in interim periods, and entities with a single reportable
segment are required to provide all the disclosures required by the amendments in this ASU and existing segment disclosures in Topic 280.
This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December
15, 2024, with early adoption permitted. The Company adopted ASU 2023-07 on September 13, 2024 (inception).
In December 2023, the FASB
issued ASU 2023-09, Income Taxes (ASC Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which requires disclosure of incremental
income tax information within the rate reconciliation and expanded disclosures of income taxes paid, among other disclosure requirements.
ASU 2023-09 is effective for fiscal years beginning after December 15, 2025. Early adoption is permitted. Management does not believe
the adoption of ASU 2023-09 will have a material impact on its financial statements and disclosures.
Management does not believe
that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our financial
statements.
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Item
7A. Quantitative and Qualitative Disclosures about Market Risk.
We are a smaller reporting
company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this Item.
Item
8. Financial Statements and Supplementary Data.
Reference is made to pages
F-1 through F-24 comprising a portion of this Report, which are incorporated herein by reference.
Item
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.