Item 7. Management’s Discussion and Analysis
ITEM 7. MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion
of the Company’s historical performance and financial condition should be read together with the financial statements and related
notes in “Item 8. Financial Statements and Supplemental Data” of this Report. This discussion contains forward-looking statements
based on the views and beliefs of our management, as well as assumptions and estimates made by our management, see “Cautionary Statement
Regarding Forward-Looking Information”. These statements by their nature are subject to risks and uncertainties, and are influenced
by various factors. As a consequence, actual results may differ materially from those in the forward-looking statements. See “Item
1A. Risk Factors” of this report for the discussion of risk factors.
Summary of The Information Contained in
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Our Management’s Discussion
and Analysis of Financial Condition and Results of Operations (MD&A) is provided in addition to the accompanying financial statements
and notes to assist readers in understanding our results of operations, financial condition, and cash flows. MD&A is organized as
follows:
●
Company Overview . Discussion of our business and overall analysis of financial
and other highlights affecting us, to provide context for the remainder of MD&A.
●
Liquidity and Capital Resources . An analysis of changes in our balance sheets and cash flows
and discussion of our financial condition.
●
Results of Operations . An analysis of our financial results for the years ended December 31,
2024 and 2023.
●
Critical Accounting Estimates. A
Summary of critical accounting estimates.
Company Overview
We are a blank check company
incorporated in the state of Delaware on September 30, 2021 formed for the purpose of effecting a merger, amalgamation, share exchange,
asset acquisition, share purchase, reorganization or other similar business combination with one or more businesses. We intend to effectuate
our initial business combination using cash derived from the proceeds of the Initial Public Offering and the sale of the private placement
units, our shares, debt or a combination of cash, shares and debt.
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Liquidity and Capital Resources
As of December 31, 2024,
the Company had $953,069 in cash and working capital of $728,460.
Until the consummation of
the Initial Public Offering, our only source of liquidity was an initial purchase of shares of common stock, par value $0.0001 per share,
by the sponsor and loans from the sponsor.
On November 22, 2024, we
consummated the Initial Public Offering of 6,900,000 units, which includes the full exercise by the underwriters of their over-allotment
option in the amount of 900,000 units, at $10.00 per unit, generating gross proceeds of $69,000,000. Simultaneously with the closing
of the Initial Public Offering, we consummated the sale of 265,000 private placement units at a price of $10.00 per private placement
unit in a private placement to the sponsor, generating gross proceeds of $2,650,000.
Following the Initial Public
Offering, a total of $69,000,000 was placed in the trust account. We incurred $3,423,710 of expenses associated with the Initial Public
Offering, consisting of $517,500 of cash underwriting discount, $2,070,000 of deferred underwriting fees, $77,280 fair value of the Representative
Shares, and $758,930 of other offering costs.
For the year ended December 31,
2024, cash used in operating activities was $305,589. Net income of $2,632 was impacted by interest earned on marketable securities held
in the trust account of $310,897 and payment of operation costs through the promissory note of $11,050. Changes in operating assets and
liabilities provided $7,407.
For the year ended December 31,
2023, cash used in cash used in operating activities was $114,712. Net loss of $184,365 was impacted by changes in operating assets and
liabilities, which provided $69,653.
For the year ended December 31,
2024, cash used in investing activities was $69,000,000, representing the investment of cash in our trust account. We had no cash used
in investing activities for the year ended December 31, 2023.
For the year ended December 31,
2024, cash provided by financing activities was $70,256,546, mainly due to proceeds from the IPO and the sale of the private placement
units.
For the year ended December 31,
2023, cash provided by financing activities was $116,790, consisting mainly of proceeds from our promissory note with our sponsor.
As of December 31,
2024, we had investments of $69,310,897 held in the trust account. Through December 31, 2024 and 2023, we have not withdrawn any
interest earned from the trust account.
We intend to use substantially
all of the funds held in the trust account, including any amounts representing interest earned on the trust account (less income taxes
payable), to complete our initial business combination. To the extent that our share capital or debt is used, in whole or in part, as
consideration to complete our initial 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.
As of December 31,
2024, we had cash of approximately $953,069. We intend to use the funds held outside the trust account primarily to identify and evaluate
target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar
locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of
prospective target businesses, and structure, negotiate and complete a business combination.
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In order to finance transaction
costs in connection with an initial business combination, the sponsor or an affiliate of the sponsor, or certain of the Company’s
officers and directors may, but are not obligated to, loan the Company funds as may be required (“ Working Capital Loans ”).
If the Company completes an initial business combination, the Company would repay the Working Capital Loans out of the proceeds of the
trust account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the trust
account. In the event that an initial business combination does not close, the Company may use a portion of proceeds held outside the
trust account to repay the Working Capital Loans, but no proceeds held in the trust account would be used to repay the Working Capital
Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements
exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of an initial business combination,
without interest, or, at the lender’s discretion, up to $1,500,000 of such Working Capital Loans may be convertible into units
at a price of $10.00 per unit. The units would be identical to the private placement units. As of December 31, 2024 and December 31,
2023, no such Working Capital Loans were outstanding.
We do not believe we will
need to raise additional funds in order 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 an 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 complete our initial business combination or because we become
obligated to redeem 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 initial business combination.
Off-Balance Sheet Financing Arrangements
We have no obligations,
assets or liabilities, which would be considered off-balance sheet arrangements as of December 31, 2024. We do not participate in transactions
that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which
would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance
sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased
any non-financial assets.
Contractual Obligations
We do not have any long-term
debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay the sponsor $10,000
per month for office space, utilities, secretarial support and other administrative and consulting services.
The Company granted the
underwriters a 45-day option from the date of the Initial Public Offering to purchase up to 900,000 additional units to cover over-allotments,
if any, at the Initial Public Offering price less the underwriting discounts and commissions. On November 22, 2024, simultaneously with
the closing of the Initial Public Offering, the underwriters elected to fully exercise the over-allotment option to purchase an additional
900,000 units at a price of $10.00 per Unit.
The underwriters were entitled
to a cash underwriting discount of 0.75% of the gross proceeds of the Initial Public Offering, or $517,500, which was paid upon the closing
of the Initial Public Offering, together with 138,000 shares of our common stock. Additionally, the underwriters were entitled to a deferred
underwriting discount of 3.00% of the gross proceeds of the Initial Public Offering, or $2,070,000, payable upon the closing of an initial
business combination from the amounts held in the trust account.
Results of Operations
We have neither engaged
in any operations nor generated any revenues to date. Our only activities from September 30, 2021 (inception) through December 31,
2024, were organizational activities, those necessary to prepare for the Initial Public Offering, described below. We do not expect to
generate any operating revenues until after the completion of our Business Combination. We generate non-operating income in the form
of interest income on marketable securities held in the Trust Account. We incur expenses as a result of being a public company (for legal,
financial reporting, accounting and auditing compliance), as well as for due diligence expenses.
For the year ended December 31,
2024, we had net income of $2,632, which consists of interest income on investments held in the trust account of $310,897, offset by
operating costs of $246,139, provision for income taxes of $61,039 and interest expense of $1,087.
For the year ended December 31,
2023, we had a net loss of $184,365, which consists of general and administrative expense.
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Critical Accounting Estimates
The preparation of financial
statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets
and liabilities at the date of the financial statements, and income and expenses during the periods reported. Making estimates requires
management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation
or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate,
could change in the near term due to one or more future confirming events. Accordingly, the actual results could materially differ from
those estimates. As of December 31, 2024, we did not have any critical accounting estimates to be disclosed.
Recent Accounting Standards
In November 2023, the Financial
Accounting Standards Board (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 officer decision maker (“ CODM ”),
as well as the aggregate amount of other segment items included in the reported measure of segment profit or loss. The ASU requires
that a public entity disclose the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment
profit or loss in assessing segment performance and deciding how to allocate resources. Public entities will be required to provide all
annual disclosures currently required by Topic 280 in interim periods, and entities with a single reportable segment are required
to provide all the disclosures required by the amendments in this ASU and existing segment disclosures in Topic 280. This ASU is
effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024,
with early adoption permitted.
We
do not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect
on our financial statements.
For more information on
recently issued accounting standards, see “Note 2— Summary of Significant Accounting Policies”, to the Notes to Financial
Statements included herein.
Commitments and Contractual
Obligations
Registration Rights
The holders of founder shares,
private placement warrants and warrants that may be issued upon conversion of Working Capital Loans, if any (and any shares of common
stock issuable upon the exercise of the private placement warrants and warrants that may be issued upon conversion of Working Capital
Loans (define below under “ Item 13. Certain Relationships and Related Transactions and Director Independence ”) and
upon conversion of the founder shares), are entitled to certain registration rights pursuant to a registration rights agreement (discussed
in greater detail below under “ Item 13. Certain Relationships and Related Transactions and Director Independence ”).
These holders will be entitled to certain demand and “ piggy-back ” registration rights. We will bear the expenses incurred
in connection with the filing of any such registration statements.
Underwriting Agreement
The underwriters were entitled
to a cash underwriting discount of 0.75% of the gross proceeds of the Initial Public Offering, or $517,500, which was paid upon the closing
of the Initial Public Offering. Additionally, the underwriters are entitled to a deferred underwriting discount of 3.00% of the gross
proceeds of the Initial Public Offering, or $2,070,000, payable upon the closing of an initial business combination from the amounts
held in the trust account, as well as 120,750 representative shares with the fair value of $77,268 issued to the underwriters in connection
with closing of the Initial Public Offering.
The deferred fee will become
payable to the underwriter from the amounts held in the trust account solely in the event that the Company completes an initial business
combination, subject to the terms of the underwriting agreement.
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JOBS Act
The JOBS Act contains provisions
that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an “ emerging growth
company ” and under the JOBS Act are allowed to comply with new or revised accounting pronouncements based on the effective
date for private (not publicly-traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as
a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required
for non-emerging growth companies. As a result, the financial statements may not be comparable to companies that comply with new or revised
accounting pronouncements as of public company effective dates.
Additionally, subject to
certain conditions set forth in the JOBS Act, if, as an “ emerging growth company, ” we plan to rely on rules which
allow us to, among other things, delay the required (i) provision of an auditor’s attestation report on our system of internal
controls over financial reporting pursuant to Section 404, (ii) provision of all of the compensation disclosure that may be required
of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) compliance with any
requirement that may be adopted by the Public Company Accounting Oversight Board (PCAOB) regarding mandatory audit rotation or a supplement
to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis),
and (iv) disclosure certain executive compensation related items such as the correlation between executive compensation and performance
and comparisons of the CEO’s compensation to median employee compensation. These exemptions will apply for a period of five years
following the completion of our IPO or until we are longer an “ emerging growth company, ” whichever is earlier.
Common Stock Subject to Possible Redemption
We account for our common
stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ ASC ”)
Topic 480 “ Distinguishing Liabilities from Equity. ” Shares of common stock subject to mandatory redemption (if any)
are classified as liability instruments and are measured at fair value. Shares of conditionally redeemable common stock (including common
stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of
uncertain events not solely within our control) are classified as temporary equity. At all other times, shares of common stock are classified
as stockholders’ equity. Our common stock features certain redemption rights that are considered to be outside of our control and
subject to the occurrence of uncertain future events. Accordingly, as of December 31, 2024, 6,900,000 shares of common stock subject
to possible redemption are presented as temporary equity, outside of the stockholders’ equity section of our balance sheet.
Net Loss Per Common Share
We comply with accounting
and disclosure requirements of ASC Topic 260, “ Earnings Per Share. ” Net loss per common share is computed by dividing
net loss applicable to common stockholders by the weighted average number of shares of common stock outstanding for the period. We have
not considered the effect of the warrants sold in the initial public offering and the concurrent private placement to purchase an aggregate
of 6,900,000 warrants to in the calculation of diluted earnings per share, since their inclusion would be anti-dilutive under the treasury
stock method. As a result, diluted earnings per common share is the same as basic earnings per common share for the period.
Net loss per share of common
stock is computed by dividing net loss by the weighted average number of common shares outstanding during the period. We apply the two-class
method in calculating loss per share.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
Pursuant to Item 305(e)
of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a “ smaller
reporting company, ” as defined by Rule 229.10(f)(1).
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