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, possible Business Combinations and the financing thereof, and related matters, and the plans and objectives
of Management for future operations, are forward-looking statements within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act. When used in this Report, words such as “may,” “should,” “could,” “would,”
“anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions,
as they relate to us or our Management, identify forward-looking statements. We have based these forward-looking statements on our Management’s
current expectations and projections about future events, 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 included elsewhere in this Report.
Overview
We
are a blank check company incorporated in the Cayman Islands on June 20, 2025, for the purpose of effecting a Business Combination. Our
Sponsor is Galata Acquisition Sponsor II, LLC.
Although
we are not limited in our search for target businesses to a particular industry or sector for the purpose of consummating the
Business Combination, we are focusing our search on the energy, financial technology (fintech), real estate, and technology
sectors, although we may pursue an acquisition opportunity in any business, industry, sector or geographical location. We are
focusing on industries that complement our Management Team’s background, and to capitalize on the ability of our Management
Team to identify and acquire a business. We are an early stage and emerging growth company and, as such, we are subject to all of
the risks associated with early stage and emerging growth companies. We expect to continue to incur significant costs in the pursuit
of our acquisition plans. There can be no assurance that our plans to complete a Business Combination will be successful.
Our
IPO Registration Statement became effective on September 18, 2025. On September 22, 2025, we consummated our Initial Public Offering
of 17,250,000 Units, including 2,250,000 Option Units issued pursuant to the full exercise of the Over-Allotment Option. Each Unit consists
of one Public Share and one-third of one Public Warrant. The Units were sold at a price of $10.00 per Unit, generating gross proceeds
to us of $172,500,000.
Simultaneously
with the closing of the Initial Public Offering and pursuant to the Private Placement Warrants Purchase Agreements, we completed the
sale of an aggregate of 5,300,000 Private Placement Warrants to the Sponsor and BTIG in the Private Placement at a purchase price of
$1.00 per Private Placement Warrant, generating gross proceeds to us of $5,300,000. Of those 5,300,000 Private Placement Warrants, the
Sponsor purchased 3,575,000 Private Placement Warrants and BTIG purchased 1,725,000 Private Placement Warrants. The Private Placement
Warrants are identical to the Public Warrants, except as otherwise disclosed in the IPO Registration Statement.
Following
the closing of the Initial Public Offering and Private Placement, an amount of $172,500,000 from the net proceeds of the Initial Public
Offering and the Private Placement was initially placed in the Trust Account located in the United States with Continental acting as
trustee. Pursuant to the Trust Agreement, the Trust Account may be invested only (i) in U.S. government securities, within the meaning
set forth in Section 2(a)(16) of the Investment Company Act with a maturity of 185 days or less, (ii) in any open-ended investment company
that holds itself out as a money market fund selected by us meeting the conditions of paragraphs (d)(2), (d)(3) and (d)(4) of Rule 2a-7
of the Investment Company Act, or (iii) as cash or cash items (including in demand deposit accounts) at a bank as determined by us, until
the earlier of: (x) the completion of the Business Combination and (y) the distribution of the Trust Account, as described below.
We
have until September 22, 2027 (24 months from the closing of the Initial Public Offering), or until such (x) earlier date as our Board
may approve or (y) later date as our shareholders may approve, pursuant to the Amended and Restated Articles, to consummate the Business
Combination. If we are unable to complete the Business Combination by the end of the Combination Period, we will (i) cease all operations
except for the purpose of winding up, (ii) as promptly as reasonably possible, but not more than ten business days thereafter, redeem
the 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 on the funds held in the Trust Account and not previously released to us to pay taxes, if any, divided by the number
of then outstanding Public Shares, which redemption will completely extinguish Public Shareholders’ rights as shareholders (including
the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible
following such redemption, subject to the approval of our remaining shareholders and our Board, dissolve and liquidate, subject, in each
case, to our obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law.
31
We
may seek to extend the Combination Period consistent with applicable laws, regulations and stock exchange rules by amending our Amended
and Restated Articles. Any such amendment would require the approval of our shareholders and our Public Shareholders 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 their 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 suspension of
trading and delisting from Nasdaq. Our Sponsor may also, in its discretion, consider selling 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 since June 20, 2025 (inception) through
December 31, 2025 have been (i) organizational activities and (ii) activities relating to (x) the Initial Public Offering and (y) identifying
and evaluating prospective acquisition candidates and activities in connection with the initial Business Combination. We will not generate
any operating revenues until after completion of our initial Business Combination. We have generated non-operating income in the form
of interest income on investments held in the Trust Account after the Initial Public Offering. We expect to incur increased expenses
as a result of being a public company (for legal, financial reporting, accounting and auditing compliance, among other things), as well
as for due diligence expenses.
For
the period from June 20, 2025 (inception) through December 31, 2025, we had a net income of $1,534,988, which consists of interest income
on marketable securities held in the Trust Account of $1,816,692, partially offset by general and administrative fees of $281,704.
Liquidity,
Capital Resources and Going Concern
Following
the Initial Public Offering, including the full exercise of the Over-Allotment Option, and the Private Placement, a total of $172,500,000
was initially placed in the Trust Account. We incurred costs of $10,060,403, consisting of $3,450,000 of cash underwriting fee, the Deferred
Fee of $6,037,500 and $572,903 of other offering costs.
For
the period from June 20, 2025 (inception) through December 31, 2025, cash used in operating activities was $365,659. Net income of $1,534,988
was affected by formation costs paid by the Sponsor in exchange for the issuance of the Founder Shares of $14,675, payment of general
and administrative costs through the IPO Promissory Note of $42,178 and interest earned on marketable securities held in Trust Account
of $1,816,692. Changes in operating assets and liabilities used $140,808 of cash for operating activities.
As
of December 31, 2025, we had marketable securities held in the Trust Account of $174,316,692 (including $1,816,692 of interest income)
consisting of U.S. Treasury Bills with a maturity of 185 days or less. 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 (which interest shall be net of taxes payable, if any, and exclude the Deferred Fee), 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.
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 Team’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.
As
of December 31, 2025, we had cash held outside of the Trust Account of $954,585. We 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.
Our
liquidity needs through December 31, 2025 have been satisfied through (i) a contribution of $25,000 from the Sponsor in exchange for
the issuance of our Founder Shares, (ii) a loan pursuant to the IPO Promissory Note and (iii) the net proceeds from the consummation
of the Initial Public Offering and the Private Placement held outside the Trust Account.
32
IPO
Promissory Note
Prior
to the closing of our Initial Public Offering, our Sponsor agreed to loan us an aggregate of up to $300,000 to be used for a portion
of the expenses of the Initial Public Offering pursuant to the IPO Promissory Note. The loan was non-interest bearing, unsecured and
due at the closing of the Initial Public Offering. On September 24, 2025, we repaid the total outstanding balance of the IPO Promissory
Note amounting to $202,680. Borrowings under the IPO Promissory Note are no longer available.
Working
Capital Loans
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 Working Capital Loans as may be required. If
we complete a Business Combination, we will 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 converted into units of the
post-Business Combination entity at a price of $1.00 per unit. The warrants would be identical to the Private Placement Warrants. Other
than as set forth above, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with
respect to such Working Capital Loans. As of December 31, 2025, we did not have any borrowings under any Working Capital Loans.
We
do not believe we will need to raise additional funds 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.
Contractual
Obligations
We
do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than as follows:
Administrative
Services Agreement
Commencing
on September 18, 2025, and until the completion of our Business Combination or liquidation, we reimburse the Sponsor $10,000 per month
for office space, utilities, and secretarial and administrative support pursuant to the Administrative Services Agreement. For the period
from June 20, 2025 (inception) through December 31, 2025, we incurred $34,000, in fees for these services, of which such amount is included
in accrued expenses in the balance sheet of the financial statements included in this Report under Item 1. “Financial Statements”.
Underwriting
Agreement
We
granted the Underwriters a 45-day option from the date of the Initial Public Offering to purchase up to an additional 2,250,000 Option
Units to cover over-allotments, if any. On September 22, 2025, the Underwriters fully exercised their Over-Allotment Option.
Pursuant
to the Underwriting Agreement, the Underwriters are entitled to the Deferred Fee of up to $0.35 per Unit, or up to $6,037,500 in the
aggregate, payable to the representative on behalf of the Underwriters only upon the consummation of an initial Business Combination.
The Deferred Fee will be payable to the underwriters upon the closing of the initial Business Combination in two portions, as follows:
(i) $0.15 per Unit sold in the Initial Public Offering shall be paid to the underwriters in cash, and (ii) up to $0.20 per Unit sold
in the Initial Public Offering shall be paid to the Underwriters in cash, based on the funds remaining in the Trust Account after giving
effect to Public Shares that are redeemed in connection with an initial Business Combination.
Registration
Rights Agreement
The
holders of (i) the Founder Shares, (ii) the Private Placement Warrants and (iii) any private placement-equivalent warrants issued in
connection with the Working Capital Loans, if any (and in each case holders of their underlying securities, as applicable) are entitled
to registration rights pursuant to the Registration Rights Agreement, requiring us to register such securities for resale (in the case
of the Founder Shares, only after conversion to our Class A Ordinary Shares). The holders of the majority of these securities are entitled
to make up to three demands, excluding short form demands, that we register such securities. In addition, the holders have certain “piggyback”
registration rights with respect to registration statements filed subsequent to the consummation of a Business Combination and rights
to require us to register for resale such securities pursuant to Rule 415 under the Securities Act. BTIG may only make a demand on one
occasion and only during the five-year period beginning on the effective date of the IPO Registration Statement. In addition, BTIG may
participate in a “piggyback” registration only during the seven-year period beginning on the effective date of the IPO Registration
Statement. We will bear the expenses incurred in connection with the filing of any such registration statements.
33
Letter
Agreement
Our
Sponsor, directors and officers have entered into the Letter Agreement with us, pursuant to which, they have waived their rights to liquidating
distributions from the Trust Account with respect to any Founder Shares held by them if we fail to complete our initial Business Combination
within the Combination Period. However, if they acquire Public Shares in or after the Initial Public Offering, they will be entitled
to liquidating distributions from the Trust Account with respect to such Public Shares if we fail to complete our initial Business Combination
within the Combination Period.
Additionally,
pursuant to the Letter Agreement, our Sponsor, directors and officers will not propose any amendment to our Amended and Restated Articles
to modify (i) the substance or timing of our obligation to allow redemption in connection with our initial Business Combination or to
redeem 100% of our Public Shares if we do not complete our initial Business Combination within the Combination Period or (ii) any other
material provisions relating to shareholders’ rights or pre-initial Business Combination activity, unless we provide our Public
Shareholders with the opportunity to redeem their Public Shares upon approval of any such amendment at a per-share price, payable in
cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account
and not previously released to us to pay our taxes, divided by the number of then outstanding Public Shares.
Pursuant
to the Letter Agreement entered into with us, each of our Sponsor, directors and officers have agreed to a lock-up and restrictions on
their ability to transfer, assign, or sell the Founder Shares and Private Placement Warrants and securities underlying the Private Placement
Warrants. Further, the Sponsor membership interests are locked up and not transferable because the Letter Agreement prohibits indirect
transfers. Our Letter Agreement may be amended without shareholder approval. Such transfer restrictions have been amended in connection
with Business Combinations for certain other SPACs. While we do not expect our Board to approve any amendment to the Letter Agreement
prior to our initial Business Combination, it may be possible that our Board, in exercising its business judgment and subject to its
fiduciary duties, chooses to approve one or more amendments to the Letter Agreement.
Critical Accounting
Estimates
The
preparation of the financial statements and notes thereto included elsewhere in this Report in conformity with GAAP requires Management
to make estimates and assumptions that affect the reported amounts of assets and liabilities, income and expenses, and the disclosure
of contingent assets and liabilities, in our financial statements. These accounting estimates require the use of assumptions about matters,
some of which are highly uncertain at the time of estimation. Management bases its estimates on historical experience and on various
other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments, and
we evaluate these estimates on an ongoing basis. To the extent actual experience differs from the assumptions used, our financial statements
and notes thereto included elsewhere in this Report could be materially affected. We believe that the following accounting policies involve
a higher degree of judgment and complexity. As of December 31, 2025, we did not have any critical accounting estimates to be disclosed.
Recent Accounting
Standards
In
November 2023, the FASB issued ASU Topic 2023-07, “Segment reporting (Topic 280): Improvements to Reportable Segment
Disclosures” (“ASU 2023-07”). The amendments in ASU 2023-07 require disclosures, on an annual and interim
basis, of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”), as well
as the aggregate amount of other segment items included in the reported measure of segment profit or loss. ASU 2023-07 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 FASB ASC Topic 280, “Segment Reporting” (“ASC 280”). in interim
periods, and entities with a single reportable segment are required to provide all the disclosures required by the amendments in ASU 2023-07
and existing segment disclosures in ASC 280. ASU 2023-07 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. We adopted ASU 2023-07
on June 20, 2025, the date of our incorporation.
Management
does not believe that there are any other recently issued, but not yet effective, accounting standards, which, if currently adopted,
would have a material effect on the financial statements and notes thereto included in this Report.
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-20 comprising a portion of this Report, which are incorporated herein by reference.
34
Item
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.