Item 7. Management’s Discussion and Analysis
Item 7. Management’s Discussion And Analysis Of Financial Condition And Results Of Operations
The following discussion should be read in conjunction with our financial statements and related notes thereto included elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Overview
We are a blank check company incorporated as a Cayman Islands exempted company on October 21, 2024, for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities. Our efforts to identify a prospective target business will not be limited to a particular industry or geographic region. We intend to utilize cash derived from the proceeds of our initial public offering (the “IPO”) in effecting our initial business combination.
We are an emerging growth company and, as such, we are subject to all of the risks associated with emerging growth companies.
We presently have no revenue. All activities for the period from October 21, 2024 (inception) through December 31, 2025 relate to the formation and the IPO and the efforts for the initial business combination. We will have no operations other than the active solicitation of one or more target businesses with which to complete a business combination, and we will not generate any operating revenue until after our initial business combination, at the earliest. We will have non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the IPO.
On May 1, 2025, we consummated an IPO of 6,900,000 Public Units, which includes the underwriters’ full exercise of the over-allotment option, at a price of $10.00 per Public Unit, generating gross proceeds of $69,000,000.
Simultaneously with the closing of the IPO, we consummated the sale of 280,000 Private Units, at a price of $10.00 per Private Unit, in a private placement to our sponsor, RedOne Investment Limited, generating gross proceeds of $2,800,000.
Offering costs amounted to $3,934,900, consisting of $1,035,000 of underwriting commissions, $2,415,000 of deferred underwriting commissions which will be in the form of ordinary shares at $10.00 per share upon the consummation of the Company’s initial business combination, and $484,900 of other offering costs.
Upon the closing of the IPO and the private placement, $69,000,000 was placed in a trust account (the “Trust Account”) with Wilmington Trust, National Association acting as trustee. This amount equals 6,900,000 ordinary shares subject to possible redemption multiplied by redemption value of $10.00 per share.
As indicated in the accompanying financial statements, as of December 31, 2025, we had $756,592 in cash held outside the Trust Account available for working capital purposes.
We cannot assure you that our plans to complete our initial business combination will be successful. If we are unable to complete our initial business combination within 15 months from the date of the IPO, we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than five business days thereafter, redeem 100% of the outstanding public shares at a price pro rata to the amount held in the Trust Account (less taxes payable and up to US$50,000 of interest to pay dissolution expenses) and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining holders of ordinary shares and our board of directors, liquidate and dissolve. In the event of liquidation, the holders of the founder shares and Private Units will not participate in any redemption distribution with respect to their founder shares or Private Units, until all of the claims of any redeeming shareholders and creditors are fully satisfied (and then only from funds held outside the Trust Account).
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Results of Operations
Our all activities from October 21, 2024 (inception) up to the consummation of the IPO was in preparation for the IPO.
Since the consummation of the IPO, our activities have been primarily focused on evaluating potential business combination candidates. We do not anticipate generating any operating revenues until the consummation of our initial business combination. We expect to generate non-operating income in the form of interest income from the proceeds derived from the IPO. We will incur expenses associated with being a public company, as well as costs related to the search for suitable business combination targets.
For the year ended December 31, 2025, we had a net income of $1,257,633. We incurred $600,384 of general and administrative expenses and earned $1,858,017 of interest income from investments in our Trust Account.
For the period from October 21, 2024 to December 31, 2024, we had a net loss of $14,124, which consisted of $14,124 in formation, general and administrative expenses.
Liquidity and Capital Resources
As of December 31, 2025, we had $756,592 in cash held outside the Trust Account available for our working capital purposes.
Prior to the consummation of the IPO, our liquidity needs had been satisfied through a payment from the sponsor of $25,000 for the founder shares, and the loan under an unsecured promissory note from the sponsor of $300,000. On May 1, 2025, the $300,000 loan was repaid fully to the sponsor and no amounts were owed under the promissory note.
We consummated the IPO and private placement on May 1, 2025. Upon the consummation of the IPO and the private placement, $69,000,000 of cash was placed in the Trust Account with Wilmington Trust, National Association acting as trustee. As of December 31, 2025, an aggregate of $70,858,017 was held in the Trust Account invested in U.S. treasury bills, notes or bonds having a maturity of 180 days or less or in money market funds meeting the applicable conditions under Rule 2a-7 promulgated under the Investment Company Act of 1940, as amend.
In order to meet our working capital needs following the consummation of the IPO, our initial shareholders, officers and directors or their affiliates may, but are not obligated to, loan us funds, from time to time or at any time, in amount they deem reasonable in their sole discretion. Each working capital loan would be evidenced by a promissory note and would either be paid upon consummation of our initial business combination, without interest, or, at the lender’s discretion, up to $1,000,000 of the working capital loan may be converted upon consummation of our business combination into additional Private Units at a price of $10.00 per unit. If we do not complete a business combination, the working capital loan will only be repaid with funds not held in the Trust Account and only to the extent available. To date, there were no amounts outstanding under any working capital loans.
Based on the foregoing, management believes that we will have sufficient working capital and borrowing capacity to meet our needs through the earlier of the consummation of a business combination or one year from this filing. Over this time period, we will be using these funds for paying existing accounts payable, identifying and evaluating prospective initial business combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the business combination.
If our estimates of the costs of undertaking due diligence and negotiating our initial 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 initial business combination. Moreover, we may need to obtain additional financing either to consummate our initial business combination or because we become obligated to convert a significant number of our public shares upon consummation of our initial business combination, in which case we may issue additional securities or incur debt in connection with such business combination. Subject to compliance with applicable securities laws, we would only consummate such financing simultaneously with the consummation of our initial business combination. Following our initial business combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.
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We performed an assessment on our ability to continue as a going concern in accordance with Financial Accounting Standard Board’s Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. We have $756,592 cash, working capital of $690,592, and will continue to incur significant costs in pursuit of an acquisition. That raises substantial doubt about our ability to continue as a going concern. In addition, there is no assurance that we will be able to consummate the initial business combination within 15 months from the date of the IPO. In the event that we fail to consummate a business combination within the required period, we will face mandatory liquidation and dissolution subject to certain obligations under applicable laws or regulations. No adjustments have been made to the carrying amounts of assets or liabilities regarding the possibility of us not continuing as a going concern, as a result of cash shortage or failing to consummate a business combination within 15 months from the date of the IPO. Management plans to continue its efforts to consummate a business combination within 15 months from the date of the IPO.
Critical Accounting Policies
Management’s discussion and analysis of our results of operations and liquidity and capital resources are based on our audited financial information. We describe our significant accounting policies in Note 2 - Significant Accounting Policies, of the Notes to Financial Statements included in this report. The preparation of our financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Judgments are based on historical experience, terms of existing contracts, industry trends and information available from outside sources, as appropriate. However, by their nature, judgments are subject to an inherent degree of uncertainty, and, therefore, actual results could differ from our estimates.
Offering Costs Associated with the IPO
Offering costs consist of underwriting, legal, accounting, registration and other expenses incurred through the date of the closing of the IPO that are directly related to the IPO. As of May 1, 2025, offering costs totaled $3,934,900. The amount was consisted of $1,035,000 of underwriting commissions, $2,415,000 of deferred underwriting commissions (payment shall be in the form of ordinary shares at $10.00 per share deferred until consummation of the Company’s initial business combination), and $484,900 of other offering costs. We comply with the requirements of the ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A – “Expenses of Offering”. Offering costs were charged to shareholders’ equity upon the completion of the IPO. We allocated offering costs between public shares and public rights based on the estimated fair values of them at the date of issuance. Accordingly, $3,820,394 was allocated to public shares and was charged to temporary equity; $114,506 was allocated to public rights and was charged to shareholders’ equity.
Ordinary Shares Subject to Possible Redemption
We account for ordinary shares subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Ordinary shares subject to mandatory redemption (if any) 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 the Company’s control) are classified as temporary equity. At all other times, ordinary shares are classified as shareholders’ equity. Our public 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 per share as temporary equity, outside of the shareholders’ equity section of our balance sheets. We recognize 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 or accumulated deficit if additional paid-in capital equals to zero.
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Net Income (Loss) per Share
We comply with accounting and disclosure requirements of FASB ASC 260, “Earnings Per Share”. In order to determine the net income (loss) attributable to both the redeemable shares and non-redeemable shares, we first consider 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 income (loss) less interest income in trust account less any dividends paid. We then allocate 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 is considered to be dividends paid to the public shareholders.
For the year ended December 31, 2025 and for the period from October 21, 2024 to December 31, 2024, we did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into ordinary shares and then share in the earnings of us. As a result, diluted income (loss) per share is the same as basic loss per share for the period presented. The calculation of diluted income (loss) per share does not consider the effect of the rights issued in connection with the IPO and the private placement since the conversion of rights to ordinary shares will be contingent on the occurrence of future events.
Recent Accounting Standards
In November 2023, the FASB issued Accounting Standards Update (“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 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. We adopted ASU 2023-07 on January 1, 2025.
Management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of December 31, 2025 and 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.
Contractual Obligations
Underwriting Agreement
A deferred underwriting commission of $0.35 per Public Unit sold, totaling $2,415,000 will be in the form of representative shares at $10.00 per share deferred until consummation of the initial business combination.
Registration Rights
The initial shareholders will be entitled to registration rights with respect to their initial shares, as well as the holders of the private units and holders of any securities issued to our initial shareholders, officers, directors or their affiliates in payment of working capital loans or extension loans made to us, will be entitled to registration rights with respect to the private units (and underlying securities), pursuant to an agreement signed on the effective date of the IPO. The holders of such securities are entitled to demand that we register these securities at any time after we consummate a business combination. In addition, the holders have certain “piggy-back” registration rights on registration statements filed after the consummation of a business combination.
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Engagement agreement with Legal Counsel
We have entered into an engagement agreement with its legal counsel with respect to the initial business combination. The fee will be based on the number of hours spent. An aggregate of $150,000 will be paid prior to the closing of the business combination, and the balance will be due upon the closing of the business combination.
Engagement Agreement – Fairness Opinion
An aggregate of $30,000 will be paid prior to and upon the effectiveness of the registration statement of the initial business combination, based on an engagement agreement entered into by us with the provider of fairness opinion for the initial business combination.
Engagement Agreement – Financial Advisory
We have retained a financial advisor with respect to the initial business combination. An initial retainer of $150,000 was paid during the year ended December 31, 2025. And we agree to pay 500,000 newly issued shares of common stock at $10.00 per share at the closing of the business combination if we complete the initial business combination within 30 months from the engagement date.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.