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 “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. 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,” “Item 1A. Risk Factors” and elsewhere in this Annual Report on Form 10-K.
Overview
We are a blank check company incorporated in the Cayman Islands on May 14, 2018 formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or 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 Units, our shares, debt or a combination of cash, shares and debt.
We expect 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.
Proposed GRT Business Combination
On October 21, 2024,
we entered the Merger Agreement for the Proposed GRT Business Combination with GRT and Merger Sub. On February 28, 2025, the parties to
the Merger Agreement entered into the First Amendment to amend Section 10.01 of the Merger Agreement to extend the Outside Date defined
thereunder from February 28, 2025 to August 28, 2025.
The Merger Agreement may
be terminated under certain circumstances at any time prior to the Effective Time, including, among others, by (i) mutual written consent
by us and GRT, (ii) either party if the transactions contemplated by the Merger Agreement have not been completed by the Outside Date,
(iii) either party if any representation or warranty of the opposing party is not materially true and correct or if the opposing party
fails to perform in any material respect any covenant or agreement, subject to a 30-day cure period and other exceptions, and (iv) either
party if the other party’s board of directors withdraws or changes its recommendation that its respective shareholders vote in favor
of the proposals agreed upon, or if either party’s shareholders do not approve all the required proposals at the respective shareholder
meetings of either party (or at any adjournment or postponement thereof). See “Item 1. Business—Proposed GRT Business Combination”
for details.
Results of Operations
Our entire activity from
inception up to June 20, 2024 was in preparation for the Initial Public Offering. Since the Initial Public Offering, our activity has
been limited to the evaluation of business combination candidates and negotiating the Merger Agreement with GRT and conducting due diligence
and other activities with respect to the Proposed GRT Business Combination. We do not expect to generate any operating revenues until
after the completion of our initial Business Combination. We expect to generate non-operating income in the form of interest income on
marketable securities held after the Initial Public Offering. 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
searching for, and completing, a Business Combination.
For the year ended December 31,
2024, we had net income of $909,838, which consisted of dividend income on marketable securities held in the Trust Account of $1,799,136,
offset by expenses of $889,298.
Liquidity
and Capital Resources
On June 20, 2024, we consummated the Initial Public Offering of 6,900,000 Units, generating gross proceeds of $69,000,000. Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 238,000 Private Units to the Sponsor at a price of $10.00 per Private Unit generating gross proceeds of $2,380,000.
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Following the Initial Public
Offering and the sale of the Private Units, a total of $69,000,000 was placed in the Trust Account. We incurred $3,448,233 in transaction
costs, including $1,380,000 of underwriting fees, $1,725,000 of deferred underwriting fees and $343,233 of other offering costs.
For the year ended December 31,
2024, net cash used in operating activities was $876,327. Net income of $909,838 was mainly impacted by dividend earned on marketable
securities held in trust account of $1,799,136.
At December 31, 2024, we had investments held in the Trust Account of $70,799,136. 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, to complete our Business Combination. We may withdraw interest from the Trust Account to pay taxes, if any. To the extent that our share capital or debt is used, in whole or in part, as consideration to complete a 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.
At December 31, 2024,
we had cash of $76,747 held outside of the Trust Account. We intend to use the funds from the August 2024 Sponsor loan and the funds
held outside the Trust Account primarily to complete the Proposed GRT Business Combination or if necessary, to identify and evaluate
alternative 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 Sponsor or an affiliate of our Sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. Such Working Capital Loans would be evidenced by promissory notes. If we complete a Business Combination, we may repay such notes out of the proceeds of the Trust Account released to us. 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 notes, but no proceeds from our Trust Account would be used for such repayment. Up to $1,500,000 of notes may be convertible into units, at a price of $10.00 per unit, at the option of the lender. The units would be identical to the Private Units.
On August 30, 2024, we issued
an unsecured promissory note (the “2024 Note”) in the principal amount of up to $1,000,000 to our Sponsor pursuant to which
we may borrow additional funds. The 2024 Note bears no interest and is due on the earlier of: (i) December 31, 2025 or (ii) the date on
which we consummate our initial business combination. As of December 31, 2024, there was $677,851 outstanding under the 2024
Note. The principal balance may be prepaid at any time. Once an amount is drawn down under the 2024 Note, it shall not be available for
future drawdown requests even if prepaid. The 2024 Note is subject to customary events of default, the occurrence of certain of which
entitles the Sponsor to declare, by written notice to us, the unpaid principal balance of the 2024 Note and all other sums payable with
regard to the 2024 Note becoming immediately due and payable.
In order to complete a Business Combination, the Company will need to raise additional capital through loans or additional investments from its Sponsor, shareholders, officers, directors, or third parties. The Company’s officers, directors and 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. These conditions raise substantial doubt about the Company’s ability to continue as a going concern if a Business Combination is not consummated.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of December 31, 2024. 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.
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Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay the Sponsor a monthly fee of $10,000 for certain general and administrative services, including office space, utilities and administrative services, provided to the Company. We began incurring these fees on June 20, 2024 and will continue to incur these fees monthly until the earlier of the completion of a Business Combination or the Company’s liquidation.
The underwriters are entitled to a deferred fee of two and one-half percent (2.5%) of the gross proceeds of the Initial Public Offering, or $1,725,000. The deferred fee will be paid in cash upon the closing of a Business Combination from the amounts held in the Trust Account, subject to the terms of the underwriting agreement.
On January 28, 2021, the Company issued an unsecured promissory note to the Sponsor, pursuant to which the Company may borrow up to an aggregate principal amount of $300,000 (the “Promissory Note”). On December 2, 2022, the Company and the Sponsor mutually agreed to increase the principal amount up to $500,000. On December 29, 2023, the Company amended and restated the Promissory Note. The Promissory Note bears no interest and is repayable in full upon earlier of consummation of an initial public offering of our securities or December 31, 2024. The loan under the promissory note was paid off on June 20, 2024. The issuance of the Promissory Note was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended.
On August 30,
2024, the Company issued the 2024 Note to the Sponsor, pursuant to which the Company may borrow up to an aggregate principal amount
of $1,000,000. The 2024 Note bears no interest and is repayable in full upon the earlier of consummation of the initial business
combination of the Company or December 31, 2025. The issuance of the 2024 Note was made pursuant to the exemption from
registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended.
Pursuant to the terms of our memorandum and articles of association and the trust agreement entered into between us and Wilmington Trust, National Association and Vstock Transfer LLC in connection with our IPO, in order for the time available for us to consummate our initial business combination to be extended, our sponsor or its affiliates or designees, upon five days advance notice prior to the applicable deadline, must deposit into the trust account $230,000 ($0.033 per public share) on or prior to the date of the applicable deadline.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America 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. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:
Ordinary Shares Subject to Redemption
We account for our ordinary shares subject to possible conversion in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Ordinary shares subject to mandatory redemption are classified as a liability instrument and are measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) are classified as temporary equity. At all other times, ordinary shares are classified as shareholders’ equity. Our ordinary shares feature certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, ordinary shares subject to possible redemption are presented at redemption value as commitments and contingencies, outside of the shareholders’ equity section of our balance sheets.
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable ordinary shares to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable ordinary shares are affected by charges against additional paid-in capital and accumulated deficit if additional paid in capital equals to zero.
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Net Loss Per Ordinary Share
Our statement of operations includes a presentation of income (loss) per share for ordinary shares subject to possible redemption in a manner similar to the two-class method of income (loss) per share. In order to determine the net income (loss) attributable to both the redeemable shares and non-redeemable shares, the Company first considered the undistributed income (loss) allocable to both the redeemable shares and non-redeemable shares and the undistributed income (loss) is calculated using the total net loss less any dividends paid. The Company then allocated the undistributed income (loss) ratably based on the weighted average number of shares outstanding between the redeemable and non-redeemable shares. Any remeasurement of the accretion to redemption value of the ordinary shares subject to possible redemption was considered to be dividends paid to the public shareholders.
Offering Costs Associated with the Initial Public Offering
Offering costs consist of
underwriting, legal, accounting, registration and other expenses incurred through the balance sheet date that are directly related to
the IPO. As of December 31, 2024, offering costs amounted to $3,448,233 consisting of $1,380,000 of underwriting fees, $1,725,000
of deferred underwriting fees, and $343,233 of other offering costs. The Company complies with the requirements of ASC 340-10-S99-1 and
SEC Staff Accounting Bulletin Topic 5A “Expenses of Offering”. The Company allocates offering costs between public shares
and public rights based on the estimated fair values of the public shares and public rights at the date of issuance.
Recent Accounting Standard
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.
Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our financial statements.