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 provides information that Terra Innovatum Global N.V. management believes is relevant to an assessment and understanding
of Terra Innovatum Global N.V.’s results of operations and financial condition. This discussion should be read together with Terra
Innovatum Global N.V’s audited consolidated financial statements as of and for the year ended December 31, 2025 and 2024, and the
related notes included elsewhere in this Form 10-K.
This discussion may contain
forward-looking statements based upon current expectations that involve risks and uncertainties. Terra Innovatum Global N.V.’s
actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including
those set forth under “Risk Factors” or in other parts of this Form 10-K.
Presentation of Financial Information
Beginning with the quarterly
report on Form 10-Q for the three and nine months ended September 30, 2025, we have elected to present all dollar amounts rounded to
the nearest thousand dollars, unless otherwise indicated. In prior periods, including those presented in the Form S-4 Amendment No. 5
filed on September 11, 2025, financial information was presented in whole dollars. This change has been made to enhance the readability
and consistency of financial disclosures. As a result, certain prior period amounts may not be directly comparable due to rounding differences.
Company Overview
We are a pioneering nuclear energy technology
company developing the SOLO TM Micro-Modular Nuclear Reactor ( “SOLO” ), a breakthrough solution designed to
address critical challenges in affordable clean decentralized energy production. Our reactor represents a significant technological and
engineering advancement, offering a compact, safe, and economically compelling alternative to traditional energy generation and supply
solutions. The SOLO reactor’s core innovation lies in its ability to generate 1 MWe of electricity baseload with a continuous operational
cycle of up to 15 years, extendable to 45 years through refueling, with a fixed and competitive projected levelized cost of
energy. Our strategic roadmap targets commercial deployment by 2028, with a clear focus on delivering a scalable, modular nuclear solution
that can be deployed across diverse geographies and markets — from industrial and infrastructure to remote and off-grid
applications. Key differentiators include a gas-cooled design, multiple safety shutdown mechanisms, safeguard-by-design, small footprint,
and the ability to use commercially available Low Enriched Uranium ( “LEU” ), which significantly reduces regulatory
and technological barriers typical in nuclear energy development. We have made substantial progress in de-risking its First-of-a-Kind
( “FOAK” ) reactor, including initiating regulatory engagement with the U.S. Nuclear Regulatory Commission ( “NRC” ),
and establishing a robust supply chain strategy. We have completed the reactor design, validated key technological components, and are
targeting licensing and commercial deployment of the FOAK reactor by 2028.
Recent Developments
Business Combination and Public Listing
On October 9, 2025, we completed our Business
Combination with GSR III Acquisition Corp. ( “GSR III” ), pursuant to a Business Combination Agreement executed in April
2025. In connection with the transaction, Terra Innovatum Srl. completed a reorganization, including the formation of Terra Innovatum
Global Srl., the contribution of all Terra Innovatum Srl. quotas, and a cross-border conversion into Terra Innovatum Global N.V. ( “Terra” ).
At Closing, all GSR III securities converted into Terra ordinary shares on a one-for-one basis (net of redemptions), and Private Investment
in Public Equity ( “PIPE” ) investors purchased securities at $10.00 per share. Net proceeds from the Business Combination
and PIPE financing totaled approximately $106,713. The transaction was accounted for as a recapitalization, with Terra as the accounting
acquirer.
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Conversion of Bridge Loans
Between May and September 2025, we issued $5,690
of unsecured bridge loans (the “Bridge Loans” ) bearing 15% payment in kind ( “PIK” ) interest. Upon
Closing of the Business Combination, all outstanding notes converted into 851,483 ordinary shares at a conversion price of $7.00 per share,
and we issued warrants to purchase up to 851,483 ordinary shares at exercise prices of $11.50 and $15.00 each with a 36-month term. No
Bridge Loan financing remained outstanding after conversion.
Preferred Share Conversion
At the Closing of the Business Combination, we
issued 8,040 Convertible Preferred Shares, which are contingently convertible into ordinary shares based on milestone achievement. On
October 16, 2025, certain milestones were met, and on November 13, 2025, our Board of Directors issued a confirmation statement in connection
with the conversion of 4,020 preferred shares into 40,200,000 ordinary shares. Following the conversion, 4,020 preferred shares remained
outstanding.
Related Party Agreements
Massimo Morichi
On April 18, 2025, we entered into a consulting
agreement with Massimo Morici, our Chief Strategy Officer and a member of the Board of Directors, which was amended on December 23, 2025
and extended to December 31, 2025, pursuant to which Mr. Morici provided strategic and consulting services to us. During the year ended
December 31, 2025, we awarded Mr. Morici an extraordinary bonus of $119 in connection with the completion of the business combination
and related listing, $79 for reimbursable expenses under the agreement (treated as compensation for services) and $198 to Mr. Morici for
his consultancy services. This consultancy expired on December 31, 2025.
Guillaume Moyen
On April 4, 2025, we entered into a consulting
agreement with Guillaume Moyen, our former Chief Financial Officer and member of the Board of Directors, which was amended on September
30, 2025, pursuant to which Mr. Moyen provided business support and advisory services to us. During the year ended December 31, 2025,
we awarded Mr. Moyen an extraordinary bonus of $100 in connection with the completion of the business combination and related listing
and $167 to Mr. Moyen for his consultancy services. This consultancy expired on December 31, 2025.
Related Party Loan
During 2024 and 2025, we entered into two interest-free
loan agreements with Terra Innovatum Srl. legacy quotaholders (related parties) consisting of (i) an agreement executed in 2024 for approximately
$216 (the “2024 Loan Agreement” ), which was fully funded by March 31, 2025, and (ii) an agreement executed on March
21, 2025 for $74 (the “2025 Loan Agreement” ), which was funded through April 10, 2025. Both loans were unsecured and
scheduled to mature on December 31, 2040, with automatic annual extensions permitted through December 31, 2045, unless earlier repayment
was requested by the legacy Terra Innovatum Srl. quotaholders. The loans were issued at par with no fees or discounts and do not include
any rights or preferences that would affect the economics of the arrangement; accordingly, the terms were negotiated directly with related
parties and were not intended to reflect market-based pricing.
Because the lenders were related
parties, we applied the Accounting Standards Codification (“ASC’) 835-30 related-party exception and did not impute interest.
The loans were repaid in full upon the Closing of the Business Combination, and no amounts were outstanding as of December 31, 2025.
Lease Agreement
On April 1, 2025, we entered into a lease
agreement with Nine Nuclear and Industrial Engineering S.R.L. ( “Nine” ), a related party, to sublease three office rooms
from a property unit located in Lucca, Sorbano del Giudice, Via della Chiesa XXXII n. 759. The three office rooms will be used exclusively
for professional office purposes and related activities. The term of the lease agreement is 24 months starting from April 1,
2025 and ending on March 31, 2027. Each party may withdraw from the lease agreement at any time before the expiration date of the
contract without any penalty. The rent is $12 (€11) per annum, $1 (€1) and an immaterial monthly fee as a flat-rate reimbursement
for utilities and cleaning costs (the “Lease Fee” ), with the total monthly amount to be paid no later than the 10 th
of each month. The Lease Fee will be updated annually by 75% of the variation in the official consumer price indices for worker and employee
families as determined by the Italian Statistics Day ( “ISTAT” ) in the previous year and subsequently year by year,
with the first update taking effect on April 1, 2026. During the year ended December 31, 2025 we paid $10 in rent.
Engineering Services Agreements
In July 2025, we entered into an engineering services
agreement with Nine, a related party, to support the design of the SOLO project. Per the terms of the agreement, Nine committed to deliver
certain technical services to us with a total value of $215 (€184) plus value added tax ( “VAT” ). We expensed the
costs associated with these services during the year ended December 31, 2025. Any unpaid amounts as of year-end are included in accrued
expenses and other current liabilities.
In July 2025, we entered into an engineering services
agreement with FPoliSolutions LLC ( “FPoli Solutions” ), a related party. As per the terms of the agreement, FPoliSolutions
will provide support for the development of the SOLO Micro Modular Reactor including technical assistance in safety analysis, hazard modeling,
radiological consequence evaluation, risk-informed safety assessments, and techno-economic analysis for $90 with work completed during
September 2025.
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In October 2025, we entered into an amendment
to our existing engineering services agreement with FPoliSolutions. The amendment extends the scope of work through December 31, 2025,
and adds one full-time engineer on a fixed-price basis of $107.
SPAC Financial Advisory Services
On December 18, 2024, we entered into an engagement
letter with a financial advisory services provider (the “SPAC Financial Advisor” ) to assist with the negotiation, structuring,
and execution of our business combination with a special purpose acquisition company ( “SPAC” ) (the “SPAC Financial
Advisory Services Agreement” ). Under the agreement, the SPAC Financial Advisor also supported the preparation of marketing materials
and efforts to secure potential backstop financing.
In connection with the Closing on October 9,
2025, we issued 223,000 ordinary shares to the SPAC Financial Advisor and also issued 40 Convertible Preferred Shares, which were
contingently convertible into our ordinary shares at a ratio of 10,000 ordinary shares per Convertible Preferred Share, subject to
milestone-based tranche conversion conditions pursuant to the Business Combination Agreement and the SPAC Financial Advisory
Services Agreement. On October 16, 2025, certain conversion milestones were achieved, and on November 13, 2025, our Board of
Directors issued a confirmation statement in connection with the conversion of 20 preferred shares resulting in the issuance of
200,000 ordinary shares to the SPAC Financial Advisor.
During the year ended December 31, 2025, we paid
the cash success fee of $2,500 and the milestone fee of $225. During the year ended December 31, 2024, we paid the retainer fee of $50
and the LOI signature fee of $25. As of December 31, 2025, we had no non-cancelable remaining cash commitments under the SPAC Financial
Advisory Services Agreement, as all remaining obligations are either contingent on future events or relate to reimbursable costs recognized
when incurred.
Investor Relations and Advisory Services
Agreements
In October 2025, we entered into an investor relations
and advisory services agreement (the “October 27, 2025 Investor Relations and Advisory Services Agreement” ) with the
same vendor, effective November 1, 2025. The initial term extends through April 30, 2026, with automatic annual renewals unless terminated
by either party with 60 days’ notice.
The agreement provides for a fixed monthly fee
of $25, covering up to 84 hours of services allocated as follows: (i) 50 hours of investor relations, public relations, media, capital
markets, and market-intelligence support for $17; (ii) 14 hours of social-media and communications services for $4; and (iii) 20 hours
of business-development support for $5. We are also required to pay a 3% monthly service fee related to access to market-intelligence
platforms. Additional services, including support for special situations such as M&A or crisis management, are billed at the vendor’s
standard hourly rates, which may reach up to $1 per hour depending on personnel level.
Capital Markets Advisory Agreements
September 22, 2025 Capital Markets Advisory Agreement
In September 2025, we entered into a agreement
(the “September 22, 2025 Capital Markets Advisory Agreement” ) for a 12-month engagement period commencing August 19,
2025. Under the agreement, the vendor provides strategic capital markets advisory services, including support through the Closing and
post-close public company advisory. As consideration for these services, a cash fee of $150 is payable upon close of the business combination,
with additional cash fees of $125 90 days after close and $125 180 days after close. The agreement includes standard indemnification provisions
and may be terminated upon 10 days’ written notice.
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October 14, 2025 Capital Markets Advisory
Agreement
In October 2025, we entered into a agreement (the
“October 14, 2025 Capital Markets Advisory Agreement” ) with a vendor for a term of 24 months. Under the agreement,
the vendor will provide advisory services including assistance with research coverage, investor meetings, non-deal roadshows, and participation
in the vendor hosted investor conferences. As compensation for these services, a total of $600 is due, structured as follows: $300 in
cash, payable 12 months from the agreement date and $300 in cash, payable 24 months from the agreement date. These fees are subject to
reduction by any fees paid to the vendor for other transactions during the term, up to a maximum offset of $600. In the event of a change
of control during the term, the full advisory fee becomes immediately due and payable. The agreement contains standard indemnification
clauses and may be terminated earlier only in the event of breach or for cause.
October 23, 2025 Capital Markets Advisory
Agreement
In October 2025, we entered into an agreement
(the “October 23, 2025 Capital Markets Advisory Agreement” ) with a vendor to serve as our financial and capital markets
advisor for a one-year term. Under the agreement, the vendor will provide advisory services including investor positioning, coordination
of investor meetings, and participation in investor conferences, among other mutually agreed services. As consideration for these services,
an advisory fee of $700 is due, payable in three installments, $233 which was paid upon execution of the agreement in October 2025, $233
on March 15, 2026, and $233 upon the end of the term of the agreement, October 23, 2026. The agreement contains standard indemnification
clauses and may be terminated earlier only in the event of breach or for cause.
October 27, 2025 Capital Markets Advisory
Agreement
In October 2025, we entered into an agreement
(the “October 27, 2025 Capital Markets Advisory Agreement” ) with a vendor for a 12-month engagement period beginning
January 1, 2026. Under the October 27, 2025 Capital Markets Advisory Agreement, the vendor will provide strategic capital markets advisory
services, including development of capital market strategy, institutional investor relationship development, participation in conferences
and investor meetings and non-deal roadshows and related support. As compensation for these services, an advisory fee of $350 is due,
structured as follows: $105 which was paid upon execution of the agreement on October 27, 2025 and $245 payable on January 1, 2026. The
October 27, 2025 Capital Markets Advisory Agreement includes standard indemnification clauses and may be terminated with 90 days’
written notice.
Engineering Services Agreement
In December 2025, we entered into a agreement
(the “December 1, 2025 Engineering Services Agreement” ) for vendor-provided engineering services in support of SOLO
licensing activities. The agreement specifies total consideration of €433 (plus applicable VAT), payable in four monthly installments
of €108.25 each, with payment due within 10 days of invoice. The agreement includes customary confidentiality, intellectual property,
and governing-law provisions. The agreement contains standard indemnification clauses and may be terminated only for material breach,
in which case we are obligated to pay only for services rendered through termination date.
Feasibility and Industrialization Study Agreement
In November 2025, we entered into an agreement
with a vendor to conduct a feasibility and industrialization study (the “Feasibility and Industrialization Study Agreement” )
for the SOLO Micro Modular Nuclear Reactor project. The Feasibility and Industrialization Study Agreement outlines a comprehensive scope
of engineering, fabrication planning, cost analysis, and regulatory support activities to be performed by the vendor. Under the Feasibility
and Industrialization Study Agreement, total consideration based on estimated man-hours and hourly rates as defined in the agreement is
due with a payment structure including 10% of the total price payable within 7 days of execution, and the remaining balance payable monthly
based on progress milestones and time sheets.
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The Feasibility and Industrialization
Study Agreement allows for price adjustments if actual man-hours exceed estimates by more than 5%, or if additional activities are agreed
upon. Any such adjustments will be subject to separate written agreement. The term of the Feasibility and industrialization Study Agreement
is a minimum of 6 months and up to 24 months, effective upon receipt of the advance payment. Either party may terminate the agreement
under specified conditions, including non-payment or breach.
Senior Advisor Agreement
On August 21, 2025, we entered into an agreement
(the “Senior Advisor Agreement” ) with an independent contractor to serve as a strategic advisor and promoter for us,
particularly in connection with the Business Combination. The term of the Senior Advisor Agreement is 36 months and outlines the independent
contractor’s responsibilities, including strategic advisory, business development, investor introductions, and support for commercial
agreements related to SOLO. Compensation includes a one-time grant of 180,000 restricted shares in the post-combination public entity
(vesting over 36 months) and 1% commission on qualifying new business the independent contractor originates. As of December 31, 2025,
these restricted shares have not been granted.
Financial Performance
For the years ended December 31, 2025 and 2024,
we reported a net income of $539,524 and net loss of $34, respectively. Net cash used by operating activities was $10,297 for the year
ended December 31, 2025 compared to net cash used of $42 for the year ended December 31, 2024.
Key Factors and Trends Affecting Our Business
and Results of Operations
We believe the following
factors and trends may cause previously reported financial information not to be necessarily indicative of future operating results or
future financial conditions:
●
Product Development Plan
The commercial rollout of
any advanced nuclear reactors depends on securing regulatory approvals for its design, construction, and operation. Our regulatory engagement
plan was submitted to the NRC, and the NRC is currently reviewing a number of safety related topics related to SOLO. Although our
team has significant prior experience working with the NRC, we cannot control NRC’s review process and review periods may take
longer than anticipated.
●
Funding and Investment
We have limited financial
resources. There can be no assurance that sufficient funding will be available to us to fund our operating expenses and to further develop
our business. We anticipate that we will likely need to raise additional capital to fund our operations while we implement and execute
our business plan. Our continued solvency is dependent upon our ability to obtain additional working capital to complete our reactor
development, to successfully market our reactors and to achieve commerciality for our reactors. We have encountered and expect to continue
to encounter risks and uncertainties frequently experienced by companies in rapidly evolving industries. Accordingly, we may be unable
to prepare accurate internal financial forecasts or replace anticipated revenue that we do not receive as a result of delays, changed
circumstances, or changed market conditions arising from these factors, and our results of operations in future reporting periods may
be below the expectations of investors or analysts.
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●
Macroeconomic Conditions and Global Market Dynamics
Our business operates in
a complex global environment with multiple interconnected economic factors that can significantly impact our technological development,
regulatory trajectory, and potential market penetration. As a nuclear technology company with an international human capital strategy
and multinational supply chain, we are sensitive to macroeconomic trends and risks.
●
Global Supply Chain Dynamics
We utilize a strategic outsourced
manufacturing approach for the SOLO project, leveraging international human resources and implementing an international manufacturing
model for our FOAK reactor. This strategy exposes us to global supply chain vulnerabilities, including potential impacts from geopolitical
tensions, trade agreements, tariffs, and manufacturing disruptions. Our current assembly preparation in Europe for reactor deployment
in the U.S. introduces additional complexity in navigating international trade regulations, currency exchange risks, and logistical
challenges.
By partnering with specialized
suppliers certified in nuclear engineering and precision manufacturing, we aim to avoid significant capital investments in manufacturing
facilities and concentrate our resources on core competencies such as reactor design, technological innovation, and regulatory compliance.
Our procurement strategy involves direct engagement with multiple suppliers for critical components, ensuring supply chain reliability
and maintaining the flexibility to adapt our technology to evolving market and regulatory requirements.
●
Inflation and Cost Pressures
Inflationary trends represent
a risk to our development trajectory. Escalating costs in specialized manufacturing, regulatory compliance, technical talent acquisition,
and raw material procurement could potentially erode our projected economic advantages.
●
Energy Market Evolution
The global energy transition, driven by decarbonization
efforts and increasing demand for reliable low-carbon baseload power, creates both opportunities and challenges. The explosive growth
in data center energy requirements, particularly with artificial intelligence ( “AI” ) and computational infrastructure
expansion, presents a promising market segment. However, economic growth cycles, shifts in energy policy, and potential slowdowns in technological
adoption could materially affect our market positioning and revenue projections.
To mitigate the AI driven
market concentration risks, we have strategically designed SOLO with multi-sector versatility, targeting a diverse range of energy-intensive
industries including industrial manufacturing (cement, steel, mining, paper production), critical infrastructure services (airports,
ports, logistics hubs), agricultural and food processing applications (greenhouses, vertical farming, food processing plants), energy
storage (ammonia production, pink hydrogen) and essential utility services like desalination and water treatment. This intentional market
diversification allows us to create resilience against sector-specific economic fluctuations, leveraging SOLO’s ability to provide
both electricity and thermal energy across multiple high-demand sectors, including emerging opportunities in medical radioisotope production.
●
Regulatory and Geopolitical Landscape
Our multinational operational
model requires navigating complex regulatory environments across different jurisdictions. Changes in nuclear energy policies and geopolitical
tensions could significantly impact our potential market access. The evolving global stance on nuclear energy, particularly small modular
reactors, introduces both strategic opportunities and potential regulatory constraints.
●
Technological and Labor Market Dynamics
The specialized nature of
our technology demands access to a global pool of highly skilled technical talent. Potential labor market shifts, competition for specialized
nuclear engineering expertise, and varying international education and training standards could influence our human resource strategy
and technology development velocity.
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●
Economic Uncertainty Factors
Macroeconomic uncertainties,
including potential recessionary periods, fluctuations in investment trends in energy related technology, and broader economic growth
patterns, could affect our funding capabilities, customer acquisition strategies, and overall business development trajectory.
Emerging Growth Company and Smaller Reporting
Company Status
Section 102(b)(1) of the Jumpstart Our
Business Startups Act ( “JOBS Act” ) exempts emerging growth companies from being required to comply with new or revised
financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared
effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended) are required
to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended
transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable.
Until we are considered to be an emerging growth company, we have elected not to opt out of such extended transition period which means
that when an accounting standard is issued or revised and it has different application dates for public or private companies, as an emerging
growth company we can adopt the new or revised standard at the time private companies adopt the new or revised standard.
We are also a “smaller
reporting company” as defined in the Securities Exchange Act of 1934. We may continue to be a smaller reporting
company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available
to smaller reporting companies until the fiscal year following the determination that our voting and non-voting ordinary shares held
by non-affiliates is $250,000 or more measured on the last business day of our second fiscal quarter, or our annual revenues
are less than $100,000 during the most recently completed fiscal year and our voting and non-voting ordinary shares held by non-affiliates
is $700,000 or more measured on the last business day of our second fiscal quarter.
Segment Reporting
We are a development-stage nuclear energy technology
company focused on the research, development, and future commercialization of our SOLO micro-modular nuclear reactor. Our chief operating
decision maker ( “CODM” ), consisting of our chief executive officer and founding officers acting collectively, reviews
financial information on a consolidated basis for purposes of evaluating performance and allocating resources. The CODM does not review
discrete financial information by product, function, or geographic location. As a result, we have determined that we operate as a single
operating segment, which is also our sole reportable segment. The measure of segment profit or loss and segment assets is the same as
that presented in the consolidated financial statements. The CODM primarily uses consolidated general and administrative expenses and
development costs to assess operating performance and liquidity. We have not generated revenue from external customers, as our SOLO product
remains under development.
Results of Operations
The period-to-period comparisons
of our results of operations have been prepared using the historical periods included in our financial statements. The following discussion
should be read in conjunction with the financial statements and related notes included elsewhere in this Form 10-K.
Key Components of Results of Operations
Revenue
To date, we have not generated
any revenue from product sales and do not expect to generate any revenue from the sale of products for the foreseeable future.
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Operating Expenses
General and administrative
Our general and administrative consists primarily
of advisory fees in connection with the Business Combination, legal fees, audit, accounting and other professional services fees, share-settled
contingent liability fees, Board of Directors compensation, insurance fees, transportation costs, fees for food and lodging, advertising
fees, patent application fees, rental costs, certificates and procedure fees, employee benefits, bank charges, periodic fees, and other
miscellaneous expenses.
Development costs
Development costs represent costs incurred to
design and engineer SOLO. These costs include technical consulting and personnel-related expenses (such as salaries, employee benefits,
and bonuses), software and computing costs, hardware and experimental supplies, and fees for outside engineering, analytical, and consulting
services.
Other Income (Expenses)
Other income — related party
Our other income-related
party consists of fees from engineering consulting services that we provide to related parties that are unrelated to our core business.
We do not expect to earn these fees following the Business Combination.
Other expense, net
Our other expense, net primarily consists of other
expenses associated with the Bridge Loans, foreign currency transaction gains and losses, and interest.
Interest expense
Our interest expense consists
of interest recorded for the Bridge Loans.
Change in fair value – share settled
contingent liability
The change in fair value — share
settled contingent liability consists of the change in fair value of certain issuances of Convertible Preferred Shares.
Change in fair value — warrant
liabilities
The change in fair value — warrant
liabilities consists of the change in fair value of certain PIPE and Bridge Loan warrants.
Provision for income taxes
Provision (or benefit) for
income taxes consists of the expense or income related to income taxes.
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Results of Operations
Year Ended December 31, 2025 Compared to
Year Ended December 31, 2024
The following table sets
forth our historical results for the periods indicated and the changes between periods:
For the Year Ended December 31,
2025
2024
$ Variance
% Variance
Operating expenses:
General and administrative
$ 32,311
$ 78
$ 32,233
41,324 %
Development costs
1,388
75
1,313
1,751 %
Total operating expenses
33,699
153
33,546
21,925 %
Loss from operations
(33,699 )
(153 )
33,546
21,925 %
Other income (expenses):
Other income - related party
-
129
(129 )
(100 )%
Other expense, net
(1,906 )
-
1,906
NM
Interest expense
(1,426 )
-
1,426
NM
Change in fair value - share settled contingent liability
559,967
-
559,967
NM
Change in fair value - warrant liabilities
16,588
-
16,588
NM
Total other income, net
573,223
129
573,094
444,259 %
Income (loss) before income taxes
539,524
(24 )
539,548
2,248,117 %
(Provision) benefit for income taxes
-
(10 )
10
100 %
Net income (loss)
$ 539,524
$ (34 )
$ 539,558
1,586,935 %
NM – not meaningful
Operating Expenses
General and administrative
General
and administrative increased by $32,233 for the year ended December 31, 2025 compared to the same period in 2024 primarily due to increases
of (i) $19,725 related to the share-settled contingent liability, (ii) $7,207 for compensation to third parties, (iii) $2,082 for board
of director compensation, (iv) $1,774 for professional fees, (v) $594 for insurance, (vi) $250 for transportation, (vii) $211 for food
and lodging, and (viii) $100 for advertising. The remaining $290 increase is primarily driven by patent application fees, rental costs,
certificates and procedures, employee benefits, bank charges, periodic fees, and other miscellaneous expenses.
We expect to continue to incur additional general and administrative
expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the
Securities Exchange Commission ( “SEC” ) and Nasdaq Stock Market, additional insurance costs, investor relations activities
and other administrative and professional services. As a result, we expect general and administrative expenses to increase in absolute
dollars in future periods.
Development costs
Development costs increased
by $1,313 for the year ended December 31, 2025 compared to the same period in 2024 primarily due to increases of $1,256 in technical
consultancy fees and $25 in salaries and wages. The remaining $32 increase is primarily driven by employee benefits and travel costs.
Other Income (Expense)
Other income — related party
During the year ended December
31, 2024, we provided $129 of engineering consulting services to an affiliate unrelated to our core business. These services are considered
other income associated with related parties and were not provided during the year ended December 31, 2025.
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Other expense, net
Other expense, net was $1,906 during the year
ended December 31, 2025 compared to zero during the same period in 2024. This was primarily due to (i) a $1,372 increase driven by non-cash
losses recognized upon issuance of bridge loan warrants, as the fair value of the warrants exceeded the associated loan proceeds at initial
recognition, and a (ii) net foreign currency loss of $1,028, which is partially offset by (iii) an increase in interest income of $494.
Interest expense
Interest expense totaled $1,426 for the year ended
December 31, 2025, attributable to the Bridge Loans. There was no interest expense during the same period in 2024.
Change in fair value – share settled
contingent liability
There was a $559,967 unrealized gain in fair value
attributable to the change in fair value of the share settled contingent liability. There was no share settled contingent liability in
2024.
Change in fair value — warrant
liabilities
The $16,588 unrealized gain in fair value attributable
to warrant liabilities consists of the change in fair value of certain PIPE and Bridge Loan warrants. There was no warrant liability in
2024.
Provision for income taxes
The provision for income
taxes decreased from $10 to zero from the year ended December 31, 2024 to December 31, 2025.
Net income (loss)
Net income for the year ended December 31, 2025
was $539,524 compared to net loss of $34 for the year ended December 31, 2024. The $539,558 net change was primarily due to the $559,967
unrealized gain on change in fair value - share settled contingent liability and $16,588 unrealized gain on change in fair value of warrant
liabilities. These increases were partially offset by increases of $33,546 in operating expenses, $1,906 in other expense, net and $1,426
in interest expense. The remaining $119 net change is primarily attributable to the decreases in other income from related party
and provision for income taxes from the year ended December 31, 2024 to December 31, 2025.
Liquidity and Capital Resources
Liquidity represents our ability to generate sufficient
cash to support ongoing operations, meet obligations, and fund future growth. Since inception, we have financed our activities primarily
through capital contributions, as we have not yet generated revenue from our core operations. We do not expect to generate meaningful
revenue unless and until we complete development, obtain regulatory licenses, and enter the commercialization phase of the SOLO, which
we do not anticipate before 2028. Accordingly, we are dependent on our existing cash resources to fund operations while we advance toward
commercialization. In the short term, our liquidity is supported by the proceeds received upon closing the Business Combination on October
9, 2025, which, together with the related PIPE financing, generated net proceeds of approximately $106,713. At Closing, all outstanding
Bridge Loans converted into 851,483 ordinary shares at a price of $7.00 per share, eliminating near-term debt service commitments. We
expect to outsource manufacturing activities, which reduces near-term capital expenditure requirements.
As of December 31, 2025, we had cash of $102,882
and an accumulated deficit of approximately $607,276. Net cash used in operating activities was $10,297 for the year ended December 31,
2025. We have historically incurred recurring operating losses and generated negative cash flows from operations.
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We continue to evaluate and pursue potential liquidity-enhancing
actions, which may include equity or debt financing, strategic transactions, or other funding arrangements; however, no definitive agreements
are currently in place. Until sufficient funding is obtained or obligations are otherwise satisfied, we may be required to limit discretionary
spending and defer or scale back certain planned activities.
Our primary sources of liquidity
are cash on hand, and our primary uses of liquidity are operating expenses and licensing activities. We continue to actively monitor
our liquidity position and may seek additional financing, including future equity offerings, strategic arrangements, or other capital-raising
transactions, to support our long-term development and commercialization strategy.
Contractual Cash Requirements (Cancellable Agreements)
As discussed under “Recent Developments” above, we entered into several advisory and engineering arrangements during 2024
and 2025 in connection with the Business Combination and our post-combination activities. Although these agreements are cancellable under
their respective terms and therefore do not constitute non-cancelable purchase commitments, we currently expect to incur cash outflows
associated with these arrangements under our ongoing operating plan.
Cash Flows
The following table provides
detailed information about our net cash flows for the year ended December 31, 2025 and 2024:
Year Ended December 31,
2025
2024
Net cash provided by (used in):
Operating activities
$ (10,297 )
$ (42 )
Investing activities
(108 )
-
Financing activities
112,263
112
Net increase in cash
$ 101,858
$ 70
Operating Activities
Net cash used by operating activities for the
year ended December 31, 2025 was $10,297. This amount was primarily driven by (i) net income of $539,524, (ii) non-cash adjustments of
$553,996, (iii) net working capital increases of $4,173, and (iv) an increase in other non-current liabilities of $2.
Net cash used by operating
activities for the year ended December 31, 2024 was $42. This amount was primarily attributable to (i) net loss of $34 and (ii) net
working capital decreases of $12, which is partially offset by (iii) an increase in other non-current liabilities of $4.
Investing Activities
Net cash used by investing activities for the
year ended December 31, 2025 was $108, which was related to the purchases of equipment. There was no net cash from investing activities
during the year ended December 31, 2024.
Financing Activities
Net cash provided by financing activities of $112,263
for the year ended December 31, 2025 was primarily driven by (i) $69,878 of proceeds from Business Combinations, net of transaction costs,
(ii) $36,835 of proceeds from PIPE financing, and (iii) $5,690 of proceeds from Bridge Loans. The proceeds were partially offset by $116
of payments to related party loans and $24 of debt issuance cost payments related to Bridge Loans.
Net cash provided by financing
activities for the year ended December 31, 2024 consisted of proceeds of $112 from an interest-free loan agreement that we entered into
with our shareholders on December 18, 2024.
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Critical Accounting Policies and Estimates
Critical Accounting Policy: Bridge Financing and Warrants
In connection with our financing activities, we
entered into Bridge Loan agreements that include detachable warrants. We also entered into PIPE warrants and advisor warrant agreements.
These arrangements require us to evaluate whether certain debt and warrant instruments represent freestanding financial instruments and,
where applicable, determine the appropriate classification under ASC 480-10 and ASC 815-40. In addition, we evaluated whether these instruments
met the definition of a derivative under ASC 815-10.
We determined that certain instruments, including
the Bridge Loan Warrants and PIPE Warrants, meet the definition of a derivative, as they include an underlying (our common shares), require
no initial net investment, and may be subject to net settlement. In performing this assessment, we considered whether the underlying shares
associated with the instruments could be rapidly absorbed into the market, including analysis of trading volume. Other instruments, such
as advisor warrants, are not within the scope of ASC 480 or ASC 815 and are classified as equity.
While the classification of certain warrants is
based on the specific contractual terms and the application of relevant accounting guidance, the accounting for the overall bridge financing
arrangements involves significant judgment and estimation. In particular, we are required to determine the fair value of the detachable
warrants at issuance. Certain warrants are contingently issuable upon the occurrence of specified events; however, such warrants are considered
issued for accounting purposes and are recognized at fair value upon inception.
As a result, the initial carrying value of the
bridge loan may differ significantly from the proceeds received, and in certain cases, a loss may be recognized at inception when the
fair value of the warrants exceeds the proceeds received.
Warrants that do not meet all criteria for equity
classification are recorded as liabilities at fair value and remeasured at each reporting date, with changes in fair value recognized
in earnings. Warrants that meet equity classification criteria (including advisor warrants) are recorded at their initial fair value and
recognized as a component of additional paid-in capital.
Critical Accounting Policy: Convertible Preferred
Shares and Complex Equity Instruments
In connection with the Business Combination and
related arrangements, we issued Convertible Preferred Shares that are contingently convertible into ordinary shares upon the achievement
of specified market-based and regulatory milestones; we also issued additional Convertible Preferred Shares to an advisor under similar
milestone-based conditions, which are accounted for in accordance with ASC 718, Compensation- Stock Compensation. Determining whether
these instruments are classified as equity or as liabilities requires significant judgment, including assessment of (i) whether settlement
is fixed or may vary, (ii) the nature of the contingent features, and (iii) whether the instruments meet the scope exceptions in ASC 815
and the equity classification criteria in ASC 480/ASC 815-40. Classification conclusions affect where amounts are presented in the financial
statements and whether subsequent remeasurement at fair value is required. Changes in facts and circumstances—such as the resolution
of milestones—could require reclassification between equity and liabilities, with a corresponding impact on earnings.
Critical Accounting Policy: Business Combination
Accounting and Recapitalization
We accounted for the
October 9, 2025 de-SPAC transaction as a recapitalization, with Terra Innovatum Global Srl. identified as the accounting acquirer and
GSR III not meeting the definition of a business under ASC 805. This conclusion required significant judgment and resulted in recognizing
the net monetary assets of GSR III at historical carrying amounts with no recognition of goodwill or other intangible assets. Different
judgments regarding the existence of a business, the accounting acquirer, or the nature of identifiable assets could have resulted in
materially different accounting, including the recognition and measurement of intangible assets and goodwill.
Critical Accounting Policy: Foreign Currency
Translation and Transactions
We operate across multiple
jurisdictions and transact in multiple currencies, including euro-denominated vendor agreements and U.S. dollar reporting. Determining
functional currencies for our entities and measuring remeasurement/translation effects involve judgment and can affect the timing and
classification of foreign-currency gains and losses in the statement of operations. We recognize transaction gains and losses arising
from foreign-currency-denominated balances through earnings. Exchange-rate volatility can materially affect reported operating results,
cash flows, and liquidity trends, particularly for engineering services and feasibility programs that are priced in currencies other
than the functional currency.
Critical Accounting Estimate: Fair Value Measurements
– Level 3 Instruments
We use option pricing model valuation techniques
that rely on significant unobservable inputs ( “Level 3” ) to measure certain instruments at fair value or to allocate
proceeds at initial recognition, including share-settled contingent liabilities and, at issuance, certain equity-linked instruments and
warrants. Key inputs include expected volatility, discount rates, equity value, contractual terms, and the probability and timing of milestone
achievement. Small changes in these inputs can produce material changes in fair value, impacting earnings (for liabilities) or the allocation
of proceeds within equity (for non-remeasured instruments). We evaluate inputs each period with reference to market data, peer benchmarks,
and updated operating facts and circumstances.
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The fair value of these
Level 3 instruments is most sensitive to assumptions related to expected volatility and the probability and timing of milestone achievement.
A higher expected volatility or an increase in the probability of achieving performance or regulatory milestones would generally increase
the fair value of these instruments, while lower volatility or delayed milestone achievement would reduce fair value. Because certain
of these instruments are classified as liabilities and remeasured at each reporting date, reasonably possible changes in these assumptions
could result in material volatility in our reported earnings.
For example, holding other
assumptions constant, an increase in assumed volatility or milestone probability would have resulted in a higher fair value measurement
and a corresponding reduction in net income, while the opposite would have resulted in lower fair value and higher reported earnings.
Critical Accounting Estimate: Fair Value of
Warrants
The valuation of both equity-classified and liability-classified
warrants involves significant estimation uncertainty. We use option pricing models that require us to make assumptions about key inputs,
including expected volatility, risk-free interest rates, term to expiration, and the fair value of the underlying equity. These inputs
are inherently subjective and difficult to predict, and even small changes in any of them can materially affect the resulting fair value.
The estimation process is particularly sensitive to market conditions and company-specific developments. We continuously evaluate these
assumptions, and changes in inputs or classification could materially affect our financial condition and results of operations.
The fair value of our warrants
is most sensitive to changes in expected volatility and the fair value of our ordinary shares. A higher assumed volatility or increase
in share price would generally increase the fair value of the warrants, while decreases in these inputs would have the opposite effect.
Because liability-classified warrants are remeasured through earnings, reasonably possible changes in these assumptions could materially
affect our results of operations from period to period.
Critical Accounting Estimate: Share-settled
Contingent Liability
We record share-settled contingent liabilities
for arrangements in which a variable number of equity instruments are issued with contingent conversion outcomes based on the achievement
of specified market-based or regulatory milestones. These instruments are classified as liabilities and measured at fair value because
the timing and extent of settlement depend on the occurrence of future events that are not within our control.
Valuation of these instruments
requires significant judgment, including assumptions related to expected equity volatility, discount rates, milestone probabilities,
timing of achievement, and future share price outcomes. Fair value is generally estimated using a Monte Carlo simulation model, which
incorporates multiple potential settlement scenarios and probability-weighted outcomes. Changes in these assumptions can materially impact
fair value and may result in significant period-to-period volatility in earnings.
Because these contingent instruments remain outstanding
until the underlying conditions are satisfied or expire, actual outcomes may differ from our estimates, resulting in potential variability
in future reported results. During 2025, the resolution of certain milestones resulted in a significant reduction in the fair value of
this liability, which materially increased net income. If future milestones are achieved earlier or later than expected, or if market
conditions lead to significant changes in volatility or share price assumptions, the fair value of the remaining contingent instruments
could change materially, resulting in corresponding gains or losses recognized in earnings.
Critical Accounting Estimate: PIPE Financing
We account for the PIPE Financing, which consists
of Class A ordinary shares and accompanying Half-Warrants and Quarter-Warrants, at fair value on the issuance date in accordance with
ASC 820. Because the PIPE units include multiple freestanding financial instruments with different economic characteristics, we allocate
the proceeds received by first measuring the warrants at their fair value, with the remaining proceeds allocated to the Class A ordinary
shares.
The accompanying warrants provide holders with
the right to purchase Class A ordinary shares at fixed exercise prices of $12.00 per share for the Half-Warrants and $16.00 per share
for the Quarter-Warrants, subject to standard anti-dilution adjustments. In addition, the warrants include issuer redemption features
that permit us to redeem outstanding warrants for nominal consideration if our share price meets specified trading price thresholds for
a defined period. These contractual terms significantly affect the fair value of the warrants.
The fair value of the PIPE warrants is estimated
using valuation techniques that require significant judgment, including Monte Carlo simulation models, which incorporate assumptions related
to expected share price volatility, risk-free interest rates, contractual term, redemption features, and simulated future share price
paths. These assumptions are classified as Level 3 inputs under the fair value hierarchy.
Changes in key valuation inputs, particularly
assumptions related to volatility and modeled share price trajectories, can materially affect the estimated fair value of the warrants
and the resulting allocation of proceeds between equity and liability-classified instruments. Such changes could have a significant impact
on additional paid-in capital and earnings in the period of issuance or subsequent reporting periods. We evaluate the reasonableness of
valuation assumptions each reporting period based on observable market data, comparable company volatility metrics, and prevailing trading
conditions.
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Off-Balance Sheet Arrangements
We do not have any off-balance
sheet arrangements (as that term is defined in Item 303 of Regulation S-K) that are reasonably likely to have a current or
future material effect on our financial condition, expenses, results of operations, liquidity, or capital resources.
Related Party Transactions
Refer to Note 4. “Related Party Transactions”
of the Notes to our Financial Statements included elsewhere in this Form 10-K for a discussion of related party transactions.
Recent Accounting Standards and Pronouncements
Refer to Note 3. “Summary of Significant
Accounting Policies” of the Notes to our Financial included elsewhere in this Form 10-K for a discussion of recent accounting standards
and pronouncements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK.
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA.
The full text of our audited consolidated financial
statements begins on page F-1 of this report and is included herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None