Hennessy Capital Investment Corp. VII 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS References in this Quarterly Report on Form 10-Q (this “Quarterly Report”) to “HVII” refer to Hennessy Capital Investment Corp. VII. References to HVII’s “management” or HVII’s “management team” refer to HVII’s officers and directors. References to the “sponsor” refer to HC VII Sponsor LLC. The following discussion and analysis of HVII’s financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto contained elsewhere in this Quarterly Report. Special Note Regarding Forward Looking Statements This Quarterly Report (including, without limitation, statements under the heading “ Management’s Discussion and Analysis of Financial Condition and Results of Operations” ) includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). HVII’s forward-looking statements include, but are not limited to, statements regarding HVII or HVII’s management team’s expectations, hopes, beliefs, intentions or strategies regarding the future and any other statements that are not statements of current or historical facts. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. These forward-looking statements may be identified by the use of forward-looking terminology, including the words “anticipates,” “believes,” “continues,” “could,” “estimates,” “expects,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “projects,” “predicts,” “should,” “will,” or “would,” or, in each case, their negative or other variations or comparable terminology, but the absence of these words does not mean that a statement is not forward-looking. HVII cautions that forward-looking statements are not guarantees of future performance and that its actual results of operations, financial condition and liquidity, and developments in the industry in which it operates, may differ materially from those made in or suggested by the forward-looking statements contained in this Quarterly Report, and undue reliance should not be placed on forward-looking statements. In addition, even if HVII’s results or operations, financial condition and liquidity, and developments in the industry in which it operates are consistent with the forward-looking statements contained in this Quarterly Report, those results or developments may not be indicative of results or developments in subsequent periods. The forward-looking statements contained in this Quarterly Report are based on HVII’s current expectations and beliefs concerning future developments and their potential effects on HVII. There can be no assurance that future developments affecting HVII will be those that it has anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond HVII’s control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks, uncertainties and assumptions include, but are not limited to, the following risks, uncertainties, assumptions and other factors: ● HVII’s ability to select an appropriate target business or businesses; ● HVII’s ability to complete its business combination; ● HVII’s expectations around the performance of a prospective target business or businesses; ● HVII’s success in retaining or recruiting, or changes required in, its officers, key employees or directors following its business combination; ● HVII’s officers and directors allocating their time to other businesses and potentially having conflicts of interest with HVII’s business or in approving its business combination; ● HVII’s potential ability to obtain additional financing to complete its business combination; ● HVII’s pool of prospective target businesses, including the location and industry of such target businesses; 19 ● the ability of HVII’s officers and directors to generate a number of potential business combination opportunities; ● HVII’s public securities’ potential liquidity and trading; ● the lack of a market for HVII’s securities; ● the availability to HVII of funds from interest income on the trust account (the “Trust Account”) balance; ● the Trust Account not being subject to claims of third parties; ● HVII’s financial performance; or ● the other risks and uncertainties discussed under the heading “Risk Factors” and elsewhere in this Quarterly Report, in HVII’s Annual Report on Form 10-K for the year ended December 31, 2024. The foregoing risks and uncertainties may not be exhaustive. Should one or more of these risks or uncertainties materialize, or should any of HVII’s assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. HVII undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. Overview HVII is a SPAC incorporated in the Cayman Islands on September 27, 2024, formed 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. HVII intends to effectuate its business combination using cash derived from the proceeds of its initial public offering and the sale of the private placement units and any sale of securities in connection with its business combination, its shares, debt or a combination of cash, shares and debt. The issuance of additional ordinary shares in a business combination: ● may significantly dilute the equity interest of HVII’s public shareholders, which dilution would increase if the anti-dilution provisions in the Class B ordinary shares resulted in the issuance of Class A ordinary shares on a greater than one-to-one basis upon conversion of the Class B ordinary shares; ● may subordinate the rights of holders of ordinary shares if preference shares is issued with rights senior to those afforded to ordinary shares; ● could cause a change of control if a substantial number of ordinary shares are issued, which may affect, among other things, HVII’s ability to use its net operating loss carry forwards, if any, and could result in the resignation or removal of HVII’s present officers and directors; ● may have the effect of delaying or preventing a change of control of HVII by diluting the equity ownership or voting rights of a person seeking to obtain control of HVII; and ● may adversely affect prevailing market prices for Class A ordinary shares and/or share rights. Similarly, if HVII issues debt securities or otherwise incur significant indebtedness, it could result in: ● default and foreclosure on HVII’s assets if its operating revenues after a business combination are insufficient to repay its debt obligations; 20 ● acceleration of HVII’s obligations to repay the indebtedness even if it makes all principal and interest payments when due if HVII breaches certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant; ● HVII’s immediate payment of all principal and accrued interest, if any, if the debt is payable on demand; ● HVII’s inability to obtain necessary additional financing if the debt contains covenants restricting its ability to obtain such financing while the debt is outstanding; ● HVII’s inability to pay dividends on ordinary shares; ● using a substantial portion of HVII’s cash flow to pay principal and interest on its debt, which will reduce the funds available for dividends on ordinary shares, expenses, capital expenditures, acquisitions and other general corporate purposes; ● limitations on HVII’s flexibility in planning for and reacting to changes in its business and in the industry in which it operates; ● increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; ● limitations on HVII’s ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, execution of its strategy and other purposes; and ● other disadvantages compared to its competitors who have less debt. ● HVII expects to continue to incur significant costs in the pursuit of its acquisition plans. It cannot assure that its plans to complete a business combination will be successful. Factors That May Adversely Affect HVII’s Results of Operations HVII’s results of operations and its ability to complete a 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 HVII’s control. HVII’s results of operations and its ability to consummate a business combination could be impacted by, among other things, downturns in the financial markets or in economic conditions, increases in oil prices, inflation, fluctuations in interest rates, increases in tariffs, supply chain disruptions, declines in consumer confidence and spending, public health considerations, and geopolitical instability, such as the military conflicts in Ukraine and the Middle East. HVII 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 HVII’s business and its ability to complete a business combination. Results of Operations HVII has neither engaged in any operations nor generated any operating revenues to date. The only activities from inception through March 31, 2025, were organizational activities and those necessary to prepare for HVII’s initial public offering, described below. HVII does not expect to generate any operating revenues until after the completion of its business combination. It expects to generate non-operating income in the form of interest income from funds held after the initial public offering. Subsequent to its initial public offering, HVII has incurred 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 three months ended March 31, 2025, HVII had net income of $1,018,007, which consisted of interest earned on marketable securities held in the Trust Account of $1,494,489, interest earned on cash equivalents of $12,553 offset by $489,035 of general and administrative costs. 21 Liquidity and Capital Resources Until the consummation of the initial public offering, HVII’s only source of liquidity was an initial purchase of Class B ordinary shares, par value $0.0001 per share, by HVII’s sponsor for $25,000 and loans from HVII’s sponsor, which were repaid at the closing of the initial public offering. Subsequent to the period covered by this Report, on January 21, 2025, HVII consummated the initial public offering of 19,000,000 units, which includes the partial exercise by the underwriters of their over-allotment option in the amount of 1,500,000 units, at $10.00 per unit, generating gross proceeds of $190,000,000. Simultaneously with the closing of the initial public offering, HVII consummated the sale of an aggregate of 690,000 private placement units at a price of $10.00 per private placement unit, generating gross proceeds of $6,900,000. Of the 690,000 private placement units, 500,000 private placement units were purchased by the HVII’s sponsor, and an aggregate of 190,000 private placement units were purchased by the underwriters of HVII’s initial public offering: Cohen & Company Capital Markets (133,000); Clear Street LLC (28,500); and Loop Capital Markets LLC (28,500). Following the closing of the initial public offering and the sale of the private placement units, a total of $190,000,000 was placed in the Trust Account. HVII incurred $12,656,782 of transaction costs consisting of $3,800,000 of cash underwriting fee, $7,600,000 of deferred underwriting fee and $1,256,782 of other offering costs. HVII intends to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (which interest shall be net of permitted withdrawals and excluding deferred underwriting commissions), to complete its business combination. To the extent that HVII’s share capital or debt is used, in whole or in part, as consideration to complete its 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 its growth strategies. HVII intends 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 and to pay taxes to the extent the interest earned on the Trust Account is not sufficient to pay HVII’s income taxes. In addition, HVII may pay commitment fees for financing, fees to consultants to assist it with its search for a target business or as a down payment or to fund a “no-shop” provision (a provision designed to keep target businesses from “shopping” around for transactions with other companies or investors on terms more favorable to such target businesses) with respect to a particular proposed business combination, although HVII does not have any current intention to do so. If HVII entered into an agreement where it paid for the right to receive exclusivity from a target business, the amount that would be used as a down payment or to fund a “no-shop” provision would be determined based on the terms of the specific proposed business combination and the amount of HVII’s available funds at the time. HVII’s forfeiture of such funds (whether as a result of its breach or otherwise) could result in its not having sufficient funds to continue searching for, or conducting due diligence with respect to, prospective target businesses. In order to fund working capital deficiencies or finance transaction costs in connection with a business combination, HVII’s sponsor or an affiliate of HVII’s sponsor or certain of HVII’s officers and directors may, but are not obligated to, loan HVII funds as may be required. If HVII completes a business combination, it may repay such loaned amounts out of the proceeds of the Trust Account released to HVII. In the event that a business combination does not close, HVII may use a portion of the working capital held outside the Trust Account to repay such loaned amounts, but no proceeds from the Trust Account would be used for such repayment. Up to $2,500,000 of such loans 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 placement units. Except for the foregoing, the terms of such loans by HVII’s sponsor, an affiliate of HVII’s sponsor or HVII’s officers and directors, if any, have not been determined and no written agreements exist with respect to such loans. HVII does not expect to seek loans from parties other than HVII’s sponsor, an affiliate of HVII’s sponsor or its officers and directors, if any, as HVII does not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in the Trust Account. 22 HVII does not believe it will need to raise additional funds in order to meet the expenditures required for operating its business. However, if HVII’s 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, HVII may have insufficient funds available to operate its business prior to its business combination. Moreover, HVII may need to obtain additional financing either to complete its business combination or because it becomes obligated to redeem a significant number of its public shares upon completion of its business combination, in which case HVII may issue additional securities or incur debt in connection with such business combination. If HVII raises additional funds through the incurrence of indebtedness, such indebtedness would have rights that are senior to HVII’s equity securities and could contain covenants that restrict HVII’s operations. Further, due to the anti-dilution rights of the founder shares, public shareholders may incur material dilution. In addition, HVII intends to target businesses with enterprise values that are greater than it could acquire with its current funds, and, as a result, if the cash portion of the purchase price exceeds the amount available from the Trust Account, net of amounts needed to satisfy redemptions by public shareholders, HVII may be required to seek additional financing to complete such proposed business combination. HVII may also obtain financing prior to the closing of its business combination to fund its working capital needs and transaction costs in connection with its search for and completion of its business combination. There is no limitation on HVII’s ability to raise funds through the issuance of equity or equity-linked securities or through loans, advances or other indebtedness in connection with its business combination, any backstop or similar agreements HVII may enter into following the consummation of this offering or otherwise. Subject to compliance with applicable securities laws, HVII would only complete such financing simultaneously with the completion of HVII’s business combination. If HVII is unable to complete its business combination because it does not have sufficient funds available to it, HVII will be forced to cease operations and liquidate the Trust Account. In addition, following its business combination, if cash on hand is insufficient, HVII may need to obtain additional financing in order to meet its obligations. Off-Balance Sheet Financing Arrangements HVII has no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of March 31, 2025. HVII does 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. HVII has 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 HVII does not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay an aggregate of $15,000 per month for office space, utilities and secretarial and administrative support services and an agreement to pay Nicholas Geeza, HVII’s chief financial officer, an aggregate of $10,000 per month. HVII began incurring these fees on January 17, 2025, and will continue to incur these fees monthly until the earlier of the completion of its business combination and its liquidation. The underwriters of HVII’s initial public offering were entitled to a cash underwriting discount of $0.20 per unit, or $3,800,000 in the aggregate, which was paid to the underwriters in cash at the closing of the initial public offering. Additionally, the underwriters are entitled to a deferred underwriting discount of up to $0.40 per unit, or up to $7,600,000 in the aggregate (subject to reduction based on the funds remaining in the Trust Account after giving effect to the public shares that are redeemed in connection with a business combination), payable to the underwriters for deferred underwriting commissions on amounts remaining in the Trust Account after all redemptions by public shareholders have been met. The deferred underwriting discount will become payable to the underwriters from the amounts held in the Trust Account solely in the event HVII completes its business combination. Critical Accounting Estimates The preparation of unaudited condensed 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 unaudited condensed financial statements and income and expenses during the periods reported. Actual results could materially differ from those estimates. HVII has not identified any critical accounting estimates. 23 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK HVII is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information otherwise required under this item.