Item 7. Management’s Discussion and Analysis
Item
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The
following discussion and analysis of the company’s financial condition and results of operations should be read in conjunction
with our audited financial statements and the notes related thereto which are included in “ Financial Statements and Supplementary
Data ” of this Report. Certain information contained in the discussion and analysis set forth below includes forward-looking
statements. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors,
including those set forth under “ Special Note Regarding Forward-Looking Statements ,” “ Risk Factors ”
and elsewhere in this Report.
References
to the “company,” “our,” “us” or “we” refer to DT Cloud Star Acquisition Corporation.
The following discussion and analysis of the company’s financial condition and results of operations should be read in conjunction
with the audited financial statements and the notes related thereto which are included in “Financial Statements and Supplementary
Data” of this Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements.
Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including
those set forth under “Cautionary Note Regarding Forward-Looking Statements and Risk Factor Summary,” “Risk Factors”
and elsewhere in this Report.
Cautionary
Note Regarding Forward-Looking Statements
This
Report includes forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act.
We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking
statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of
activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements
expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such
as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,”
“believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Factors
that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other SEC filings.
Overview
We
are a blank check company incorporated in the Cayman Islands on November 29, 2022 as an exempted company with limited liability. We were
formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, recapitalization, reorganization or
similar business combination with one or more businesses or entities, which we refer to as a “target business.” We are an
emerging growth company and, as such, we are subject to all of the risks associated with emerging growth companies.
We
have neither engaged in any operations nor generated any revenues to date. Our entire activity since inception has been to prepare for
our initial public offering, which was consummated on July 26, 2024 and, after the initial public offering, identifying a target company
for a business combination.
As
indicated in the accompanying financial statements, as of December 31, 2024, we had cash and cash in escrow of $411,429 and working capital
of $339,724. Further,
we expect to incur significant costs in the pursuit of our initial business combination. We cannot assure you that our plans to raise
capital or to complete our initial business combination will be successful.
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We
will have until 15 months from the closing of our initial public offering to complete a business combination. If we anticipate that we
may be unable to consummate our initial business combination within such period, we may seek shareholder approval to amend our amended
and restated memorandum and articles of association to extend the date by which we must consummate our initial business combination.
If we seek shareholder approval for an extension, our public shareholders will be offered an opportunity to redeem their shares at a
per share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest (net of taxes
payable), divided by the number of then issued and outstanding public shares, subject to applicable laws. If we are unable to complete
our initial business combination within the 15-month period or such period that may be extended, we will (1) cease all operations except
for the purpose of winding up; (2) 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), 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 our board of directors, proceed to commence
a voluntary liquidation and thereby a formal dissolution of our company, subject in each case to its obligations to provide for claims
of creditors and the requirements of applicable law.
Going
Concern Consideration
As
of December 31, 2024, we had approximately $ 411,429 in cash and cash in escrow and working
capital of approximately $ 339,724 . We had net income of $1,193,616 for the year ended December
31, 2024, which is mainly from the interest and dividends earned in trust account.
Our
liquidity needs prior to the consummation of the initial public offering were satisfied through the receipt of $25,000 from the sale
of the initial shares, as well as a promissory note from our sponsor up to an aggregate amount of $300,000 to be used, in part, for transaction
costs incurred in connection with the initial public offering. As of December 31, 2024 and 2023, the principal amount due and owing under
the promissory note was $ nil and $ nil , respectively.
Subsequent to the consummation of the initial public offering, our liquidity has been satisfied through the net proceeds from the consummation
of the initial public offering and the private placement held outside of the trust account. In addition, in order to finance transaction
costs in connection with a business combination, sponsor, officers, directors, or their affiliates may provide us with working capital
loans as may be required (of which up to $300,000 may be converted into units). See “—Liquidity and Capital Resources”
for details.
We
have incurred and expect to continue to incur significant costs in pursuit of our acquisition plans. We initially had 15 months from
the consummation of our initial public offering to consummate the initial business combination. If we do not complete a business combination
within 15 months from the consummation of our initial public offering, we will trigger an automatic winding up, dissolution and liquidation
pursuant to the terms of the amended and restated memorandum and articles of association. As a result, this has the same effect as if
we had formally gone through a voluntary liquidation procedure under the Companies Act (As Revised) of the Cayman Islands. Accordingly,
no vote would be required from our shareholders to commence such a voluntary winding up, dissolution and liquidation. However, we may
extend the period of time to consummate a business combination. If we are unable to consummate our initial business combination within
the 15-month period (unless further extended), we will, as promptly as possible but not more than ten business days thereafter, redeem
100% of our outstanding public shares for a pro rata portion of the funds held in the trust account, including a pro rata portion of
any interest earned on the funds held in the trust account and not necessary to pay taxes, and then seek to liquidate and dissolve. However,
we may not be able to distribute such amounts as a result of claims of creditors which may take priority over the claims of our public
shareholders. In the event of dissolution and liquidation, our warrants and rights will expire and will be worthless.
In
connection with our assessment of going concern considerations in accordance with Accounting Standards Update (“ASU”) 2014-15,
“Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” our management has determined
that if we are unsuccessful in consummating an initial business combination within the prescribed period of time from the closing of
our initial public offering, the requirement that we cease all operations, redeem the public shares and thereafter liquidate and dissolve
raises substantial doubt about the ability to continue as a going concern. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty. Our management has determined that we have funds that are sufficient to fund the working
capital needs of us until the consummation of an initial business combination or the winding up of our company as stipulated in the amended
and restated memorandum and articles of association. The accompanying financial statements have been prepared in conformity with U.S.
GAAP, which contemplate continuation of our company as a going concern.
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Liquidity
and Capital Resources
We consummated the initial public offering of 6,900,000 units, which includes the exercise in full by the underwriters
of their over-allotment option to purchase up to an additional 900,000 units on July 25, 2024. The units were sold at an offering price
of $10.00 per unit, generating gross proceeds of $69,000,000. Simultaneously with the closing of our initial public offering on July
26, 2024, we consummated the private placement with the sponsor of 206,900 units at a price of $10.00 per private unit, generating total
gross proceeds of $2,069,000.
Following
our initial public offering and the private placement, a total of $69,000,000 of the net proceeds were deposited in the trust account.
We intend to use substantially all of the funds held in the trust account, including any amounts representing interest earned on the
trust account (excluding deferred underwriting commissions and less taxes payable) to complete our initial business combination. We may
withdraw interest from the trust account to pay our taxes. To the extent that our equity or debt is used, in whole or in part, as consideration
to complete our initial 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. We intend to use the funds
held outside the trust account primarily for identifying and evaluating prospective acquisition candidates, performing business due diligence
on prospective target businesses, traveling to and from the offices, plants or similar locations of prospective target businesses, reviewing
corporate documents and material agreements of prospective target businesses, selecting the target business to acquire and structuring,
negotiating and consummating the business combination.
For
the year ended December 31, 2024, cash used by operating activities was $196,752, primarily due to prepayment of formation and operational
costs. Net cash used in investing activates was $69,000,000 to invest the cash in a trust account established for the benefit of our
public shareholders, with Wilmington Trust National Association acting as trustee. Net cash provided by financing activities was $69,608,181,
primarily due to the consummation the IPO of 6,900,000 units at $10.00 per unit, generating gross proceeds of $69,000,000 and the proceeds
from sale of units to the founder in private placement generating total gross proceeds of $2,069,000. Offering cost amounted to $1,485,819,
consisting of $1,035,000 of underwriting commissions and $450,819 of other offering costs. As of December 31, 2024, we had cash at bank
of $411,429.
On
December 31, 2024, the Company had working capital of $339,724, excluding deferred underwriting commissions and the available cash held
in the Trust Account for marketable securities, which indicated a lack of liquidity it needed to sustain operations for a reasonable
period of time, which was considered to be one year from the issuance of the financial statements.
In
order to fund working capital deficiencies or finance transaction costs in connection with an initial business combination, our sponsor,
officers, directors, or their affiliates may, but are not obligated to, loan us funds as may be required. If we complete our initial
business combination, we will repay such loaned amounts. In the event that the initial 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 $300,000 of such loans may be convertible upon consummation of the initial business combination
into private units at a price of $10.00 per unit.
On
October 28, 2024, we issued an unsecured promissory note to the sponsor, pursuant to which we may borrow up to an aggregate principal
amount of $300,000 (the “Working Capital Loan Note”). The Working Capital Loan Note is non-interest-bearing and payable on
the consummation of the initial business combination or converted upon consummation of the business combination into additional private
units at a price of $10.00 per unit. As of December 31, 2024, the principal amount due and owing under the Working Capital Loan Note
was $nil.
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Results
of Operations
We
have neither engaged in any operations nor generated any revenue to date. Our entire activity since inception through December 31, 2024
related to our formation, the preparation for the initial public offering, and since the closing of the initial public offering, the
search for a prospective e initial business combination. We do not expect to generate any operating revenues until the closing and completion
of our initial business combination, at the earliest. We will generate non-operating income in the form of interest income from the amount
held in the trust account. We expect that we will incur increased 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 search for, and completing,
a business combination.
For
the year ended December 31, 2024, we had net income of $1,193,616, which consisted of operating costs of $272,248, offset by interest
and dividends earned on marketable securities held in the operating account and Trust Account of $1,465,864.
Contractual
Obligations
Registration
Rights
Pursuant
to a registration rights agreement entered into on July 24, 2024, the holders of the initial
shares, private placement units (including securities contained therein), and units (including
securities contained therein) that may be issued on conversion of working capital loans are entitled to certain customary registration
rights for the resale of such securities. The holders of these securities are entitled to make requests for no more than two demand registrations,
excluding short form demands, that we register such securities. In addition, the holders have certain “piggy-back” registration
rights with respect to registration statements filed subsequent to our completion of initial business combination and rights to require
us to register for resale such securities pursuant to Rule 415 under the Securities Act. We will bear the expenses incurred in connection
with the filing of any such registration statements.
Underwriting
Agreement
The
underwriters are entitled to a cash underwriting commission of 2.5% of the gross proceeds of the initial public offering upon the closing
of the initial business combination, including (1) $0.15 per unit, or $1,035,000 in the aggregate, payable to the underwriters in cash
upon the consummation of the initial public offering, and (2) $0.10 per unit, or $690,000 in the aggregate, for deferred underwriting
commissions that will be placed in the trust account as described in the final
prospectus related to the initial public offering and payable to the underwriters in cash upon
the consummation of the initial business combination. In addition, we agreed to issue 69,000 ordinary shares (the “Representative
Shares”) to Alliance Global Partners (“A.G.P.”) upon the consummation
of the initial public offering as part of the underwriting compensation in connection with the offering. On July 26, 2024 we issued 69,000
Representative Shares to A.G.P. at the closing of our initial public offering, which have been received by A.G.P.
Administrative
Services Agreement
On
July 24, 2024, we entered into an agreement with the Sponsor, pursuant to which we agreed to pay the Sponsor a total of $10,000 per month
for secretarial and administrative support services provided to us through the earlier of consummation of the initial business combination
and our liquidation.
In
addition, our Sponsor, officers and directors, or any of their respective affiliates, will be reimbursed for any out-of-pocket expenses
incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on
suitable business combinations. There is no cap or ceiling on the reimbursement of out-of-pocket expenses incurred by such persons in
connection with activities on our behalf.
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Critical
Accounting Estimates
The
preparation of financial statements and related disclosures in conformity with U.S. 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 the reported amounts of income and expenses during the periods reported. Actual results could materially differ from
those estimates. A critical accounting estimate to our financial statements includes the valuation of ordinary shares subject to possible
redemption. We have not identified any critical accounting estimates.
Recent
Accounting Pronouncements
Our
management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have
a material effect on our unaudited financial statements.
Off-Balance
Sheet Arrangements and Contractual Obligations
As
of December 31, 2024, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii)
of Regulation S-K .
JOBS
Act
We
qualify as an “emerging growth company” under the JOBS Act and are allowed to comply with new or revised accounting pronouncements
based on the effective date for private (not publicly traded) companies. We elected to delay the adoption of new or revised accounting
standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such
standards is required for non-emerging growth companies. As a result, our financial statements may not be comparable to companies that
comply with new or revised accounting pronouncements as of public company effective dates.
As
an “emerging growth company”, we are not required to, among other things, (1) provide an auditor’s attestation report
on our system of internal controls over financial reporting pursuant to Section 404, (2) provide all of the compensation disclosure that
may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (3) comply
with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s
report providing additional information about the audit and the financial statements (auditor discussion and analysis), and (4) disclose
certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of
the CEO’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion
of our initial public offering or until we are no longer an “emerging growth company,” whichever is earlier.
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
This
information appears following Item 15 of this Report and is incorporated herein by reference.
Item
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
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