Lionheart Holdings 10-K

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 statement and the notes thereto contained elsewhere in this Report. Overview We are a blank check company incorporated in the Cayman Islands on February 21, 2024 formed for the purpose of effecting a Business Combination. We intend to effectuate our Business Combination using cash derived from the proceeds of the Initial Public Offering and the Private Placement, the proceeds of the sale of our Ordinary Shares in connection with our initial Business Combination (pursuant to any forward purchase agreements or backstop agreements into which we may enter), Ordinary Shares issued to the owners of the target, debt issued to bank or other lenders or the owners of the target, other securities issuances, or a combination of the foregoing. 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. We may seek to extend the Combination Period consistent with applicable laws, regulations and stock exchange rules by amending our Amended and Restated Charter. 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 in accordance with the Nasdaq 36-Month Requirement. If we do not meet the Nasdaq 36-Month Requirement, our securities will likely be subject to a suspension of trading and delisting from Nasdaq. Our Sponsor may also, in its discretion, explore transactions under which it would sell its interest in our Company to another sponsor entity, which may result in a change to our Management Team. Results of Operations We have neither engaged in any operations nor generated any revenues to date. Our only activities from February 21, 2024 (inception) through December 31, 2024 were organizational activities, those necessary to prepare for the Initial Public Offering, described below, completion of the Initial Public Offering, and following the Initial Public Offering, 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. 22 For the period from February 21, 2024 (inception) through December 31, 2024, we had net income of $5,839,656, which consists of interest income on marketable securities held in the Trust Account of $6,335,105, offset by general and administrative and formation costs of $495,449. Factors That May Adversely Affect our Results of Operations Our results of operations and our ability to complete an initial Business Combination may be adversely affected by various factors that could cause economic uncertainty and volatility in the financial markets, many of which are beyond our control. Our results of operations and our ability to consummate an initial Business Combination could be impacted by, among other things, downturns in the financial markets or in economic conditions, increases in oil prices, inflation, increases in interest rates and tariffs, supply chain disruptions, declines in consumer confidence and spending, public health considerations, and geopolitical instability, such as the military conflicts in Ukraine, the Middle East and Southeast Asia. We cannot at this time predict the likelihood of one or more of the above events, their duration or magnitude or the extent to which they may negatively impact our business and our ability to complete an initial Business Combination. Liquidity and Capital Resources On March 8, 2024, the Sponsor agreed to loan us an aggregate of up to $300,000 to cover expenses related to the Initial Public Offering pursuant to the IPO Promissory Note. This loan was non-interest bearing and was payable on the earlier of December 31, 2024, or the date on which we consummate the Initial Public Offering. The outstanding balance of $180,000 was repaid at the closing of the Initial Public Offering on June 20, 2024, and borrowings under the IPO Promissory Note are no longer available. On June 20, 2024, we consummated the Initial Public Offering of 23,000,000 Units at $10.00 per Unit, which included the full exercise of the Over-Allotment Option in the amount of 3,000,000 Option Units at $10.00 per Option Unit, and the sale of an aggregate of 6,000,000 Private Placement Warrants to the Sponsor and Cantor, at a price of $1.00 per Private Placement Warrants, or $6,000,000 in the aggregate, in the Private Placement that closed simultaneously with the Initial Public Offering. For the period from February 21, 2024 (inception) through December 31, 2024, cash used in operating activities was $641,108. Net income of $5,839,656 was affected by interest earned on marketable securities held in the Trust Account of $6,335,105 and payment of formation costs through the IPO Promissory Note of $5,000. Changes in operating assets and liabilities used $150,659 of cash for operating activities. As of December 31, 2024, we had marketable securities held in the Trust Account of approximately $236,335,105 (including approximately $6,335,105 of interest income) consisting of the U.S. Department of the Treasury bills with a maturity of 185 days or less. We may withdraw interest from the Trust Account to pay taxes, if any. To mitigate the risk that we might be deemed to be an investment company for purposes of the Investment Company Act, which risk increases the longer that we hold investments in the Trust Account, we may, at any time (based on our Management’s ongoing assessment of all factors related to our potential status under the Investment Company Act), instruct the trustee to liquidate the investments held in the Trust Account and instead to hold the funds in the Trust Account in cash or in an interest-bearing demand deposit account at a bank 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, if any), 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, 2024, we had cash of $891,017. 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, the Sponsor, or certain of our officers and directors or their affiliates may, but are not obligated to, loan us funds as may be required. If we complete a Business Combination, we would repay such Working Capital Loans. 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 Working Capital Loans, but no proceeds from our Trust Account would be used for such repayment. Up to $1,500,000 of such Working Capital Loans may be convertible into warrants of the post Business Combination entity at a price of $1.00 per warrant at the option of the lender. 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. 23 Contractual Obligations We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than as set forth below. Administrative Services Agreement Commencing on June 18, 2024, and until completion of our initial Business Combination or liquidation, we reimburse an affiliate of our Sponsor $15,000 per month for c ertain office space, utilities and secretarial and Administrative Services as may be reasonably required by our Company pursuant to the Administrative Services Agreement. Under the Administrative Services Agreement, there was $95,000 incurred for the period from February 21, 2024 (inception) through December 31, 2024. Underwriting Agreement The underwriters of the Initial Public Offering had a 45-day option from the date of the Initial Public Offering to purchase up to an additional 3,000,000 Option Units to cover over-allotments, if any. On June 20, 2024, simultaneously with the closing of the Initial Public Offering, the Over-Allotment Option was fully exercised to purchase the additional 3,000,000 Option Units at a price of $10.00 per Option Unit. The underwriters of the Initial Public Offering were entitled to a cash underwriting discount of $4,000,000 (2.0% of the gross proceeds of the Units offered in the Initial Public Offering, excluding any proceeds from Units sold pursuant to the full exercises of the Over-Allotment Option), paid at the closing of the Initial Public Offering. Additionally, the underwriters are entitled to a deferred underwriting discount of 4.0% of the gross proceeds of the Initial Public Offering held in the Trust Account, other than those sold pursuant to the Over-Allotment Option and 6.0% of the gross proceeds sold pursuant to the full exercise of the Over-Allotment Option, amounting to $9,800,000 in the aggregate upon the completion of the initial Business Combination subject to the terms of the Underwriting Agreement, d ated June 17, 2024, we entered into with Cantor, as representative of the underwriters of the Initial Public Offering (the “Underwriting Agreement”). This deferred fee will become payable to the underwriters of the Initial Public Offering solely in the event that we complete a Business Combination, subject to the terms of the Underwriting Agreement. If we fail to consummate an initial Business Combination within the Combination Period, such deferred fee will be included with the funds held in the Trust Account that will be available to fund the redemption of our Public Shares upon the liquidation of the Trust Account. Legal Engagement Letter Lionheart Capital, an affiliate of our Sponsor, has engaged Wasserstrom to represent Lionheart Capital and its affiliated companies, as corporate general counsel and otherwise in connection with any corporate and/or transactional matters. The engagement letter between Lionheart Capital and Wasserstrom is for an indefinite period only subject to termination rights of either party, of which no termination has occurred since the agreement was executed. Jessica Wasserstrom, the principal of Wasserstrom, currently holds the title of Chief Legal Officer of Lionheart Capital and its affiliated companies. In connection therewith, Wasserstrom was specifically engaged by us to provide counsel for general corporate legal matters. As of December 31, 2024, we incurred an aggregate of $175,000 of legal fees from Wasserstrom, which were recorded within accrued offering costs in the financial statement contained elsewhere in this Report. On June 25, 2024, we paid $50,000 and the remaining $125,000 is recorded within deferred legal fees since it is due at the time of the Business Combination. Critical Accounting Estimates The preparation of the audited financial statement and related disclosures contained elsewhere in this Report 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 statement, 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 contained elsewhere in this Report, which Management consider in formulating its estimated, could change in the near term due to one or more future confirming events. Accordingly, the actual results could materially differ from those estimates. As of December 31, 2024, we did not have any critical accounting estimates to be disclosed. 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. 24 Item 8. Financial Statements and Supplementary Data. Reference is made to pages F-1 through F-19 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.