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Item 7. Management’s Discussion and Analysis

2024-04-17 compared with 2023-03-31 · 55 added, 90 removed, 36 unchanged (80% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in

conjunction with our audited financial statements and the notes related thereto contained elsewhere in this report.

Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks

and uncertainties.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited financial statements and the notes related thereto contained elsewhere in this report.

Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under “Cautionary Note Regarding Forward-Looking Statements,” “Item 1A.

Risk Factors” and elsewhere in this report.

We are a blank check company incorporated as a Delaware corporation and formed for the purpose of effecting a merger, share exchange, asset acquisition, stock purchase, recapitalization,

reorganization or similar business combination with one or more businesses or entities.

We intend to effectuate our initial business combination using cash from the proceeds of our initial public offering and the Private Placement Units, the proceeds

of the sale of our capital stock in connection with our initial business combination, shares issued to the owners of the target, debt issued to banks or other lenders or the owners of the target, or a combination of the foregoing.

We are a blank check company incorporated as a Delaware corporation and formed for the purpose of effecting a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or similar business combination with one or more businesses or entities.

We intend to effectuate our initial business combination using cash from the proceeds of our IPO and the Private Placement Units, the proceeds of the sale of our capital stock in connection with our initial business combination, shares issued to the owners of the target, debt issued to banks or other lenders or the owners of the target, or a combination of the foregoing.

The issuance of additional shares in connection with an initial business combination:

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may subordinate the rights of holders of our common stock if preferred stock is issued with rights senior to those afforded our common stock;

could cause a change in control if a substantial number of shares of our common stock is issued, which may affect, among other things, our ability to use our net operating loss carry forwards,

if any, and could result in the resignation or removal of our present officers and directors;

could cause a change in control if a substantial number of shares of our common stock is issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors;

may have the effect of delaying or preventing a change of control of us by diluting the stock ownership or voting rights of a person seeking to obtain control of us;

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default and foreclosure on our assets if our operating revenues after an initial business combination are insufficient to repay our debt obligations;

acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain

financial ratios or reserves without a waiver or renegotiation of that covenant;

acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant;

our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand;

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our inability to pay dividends on our common stock;

using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our common stock if declared, our ability to pay

expenses, make capital expenditures and acquisitions, and fund other general corporate purposes;

using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our common stock if declared, our ability to pay expenses, make capital expenditures and acquisitions, and fund other general corporate purposes;

limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate;

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Results of Operations

Our entire activity since inception through December 31, 2022 related to our formation and initial public offering.

We do not expect to generate any operating revenues until after the

completion of an initial business combination.

We expect to generate non-operating income in the form of interest income on cash and cash equivalents held after our initial public offering.

We expect that we will incur increased expenses as a result

of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses in connection with searching for, and completing, an initial business combination.

For the years ended December 31, 2022 and 2021, we had a net loss of $35,388 and $3,308, respectively, which consisted of operating costs.

Our entire activity since inception through December 31, 2023 related to our formation and IPO.

We do not expect to generate any operating revenues until after the completion of an initial business combination.

We generated non-operating income in the form of interest income on investments held after our IPO.

We will incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses in connection with searching for, and completing, an initial business combination.

For the year ended December 31, 2023, we had net income of $403,780 which consisted of income from investments held in the Trust Account of $2,775,291, offset by general and administrative expenses of $1,830,700 and provision for income taxes of $540,811.

For the year ended December 31, 2022, we had a net loss of $35,388 which consisted of general and administrative expenses.

Liquidity and Capital Resources

Our liquidity needs had been satisfied prior to the completion of our initial public offering through a capital contribution from our Sponsor of $25,000 for the founder shares

and an aggregate of $1,200,000 in loans from our Sponsor under unsecured promissory notes.

Upon the closing of our initial public offering, the promissory notes were be deemed to be repaid and settled in connection with the private placement.

Our liquidity needs had been satisfied prior to the completion of our IPO through a capital contribution from our Sponsor of $25,000 for the founder shares and an aggregate of $1,200,000 in loans from our Sponsor under unsecured promissory notes.

Upon the closing of our IPO, the promissory notes were be deemed to be repaid and settled in connection with the private placement.

Further, we have incurred and expect to continue to incur significant costs in pursuit of our financing and acquisition plans.

The net proceeds from (i) the sale of the Units in our initial public offering (including the Units sold in the

exercise of the Over-Allotment Option), after deducting offering expenses of approximately $1,310,000, underwriting commissions of $1,380,000 and excluding deferred underwriting commissions of $2,070,000, and (ii) the sale of the Private Placement

Units for an aggregate purchase price of $4,300,000 was $70,610,000.

The net proceeds from (i) the sale of the Units in our IPO (including the Units sold in the exercise of the Over-Allotment Option), after deducting offering expenses of approximately $1,310,000, underwriting commissions of $1,380,000 and excluding deferred underwriting commissions of $2,070,000, and (ii) the sale of the Private Placement Units for an aggregate purchase price of $4,300,000 was $70,610,000.

Of this amount, $70,207,500 was placed in the Trust Account, including $2,070,000 of deferred underwriting commissions.

The proceeds held in the Trust Account will be invested

The proceeds held in the Trust Account will be invested only in U.S.

government treasury obligations with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act which invest only in direct U.S.

government treasury obligations.

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 deferred underwriting commissions), to complete our initial business combination.

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 deferred underwriting commissions), to complete our initial business combination.

We may withdraw interest to pay taxes.

We estimate our annual franchise tax obligations, based on the number of authorized shares of our common

stock, to be $200,000, which is the maximum amount of annual franchise taxes payable by us as a Delaware corporation per annum, which we may pay from funds from this offering held outside of the Trust Account or from interest earned on the funds

held in our Trust Account and released to us for this purpose.

We estimate our annual franchise tax obligations, based on the number of authorized shares of our common stock, to be $200,000, which is the maximum amount of annual franchise taxes payable by us as a Delaware corporation per annum, which we may pay from funds held outside of the Trust Account or from interest earned on the funds held in our Trust Account and released to us for

this purpose.

Our annual income tax obligations will depend on the amount of interest and other income earned on the amounts held in the Trust Account.

We expect the interest earned on the amount in

the Trust Account will be sufficient to pay our income taxes.

To the extent that our capital stock 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.

We expect the interest earned on the amount in the Trust Account will be sufficient to pay our income taxes.

To the extent that our capital stock 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, 2023, the Company had $15,419 in its operating bank account and a working capital deficit of $2,015,645.

The Company’s liquidity needs prior to the

consummation of the initial public offering had been satisfied through proceeds from advances from related party and from the issuance of common stock.

Subsequent to the consummation of the initial public offering, the Company’s liquidity was

satisfied through the net proceeds from the consummation of the initial public offering and the proceeds from the private placement held outside of the Trust Account.

In order to fund working capital deficiencies or finance transaction costs in connection with an initial business

combination, our Sponsor, officers and directors or their affiliates may, but are not obligated to, loan us funds as may be required.

The Company’s liquidity needs prior to the consummation of our IPO had been satisfied through proceeds from advances from related party and from the issuance of common stock.

Subsequent to the consummation of our IPO, the Company’s liquidity was satisfied through the net proceeds from the consummation of the IPO, the proceeds from the Private Placement Units held outside of the Trust Account and loans from the Sponsor, officers and directors and their affiliates.

In order to fund working capital deficiencies or finance transaction costs in connection with an initial business combination, our Sponsor, officers and directors or their affiliates may, but are not obligated to, loan us funds as may be required.

If we complete our initial business combination, we would repay such loaned amounts.

In the event that our initial

business combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from our Trust Account would be used for such repayment.

Up to $1,000,000 of such loans may

be convertible into Units, at a price of $10.00 per unit at the option of the lender, upon consummation of our initial business combination.

In the event that our initial business combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from our Trust Account would be used for such repayment.

Up to $1,000,000 of such loans may be convertible into Units, at a price of $10.00 per unit at the option of the lender, upon consummation of our initial business combination.

The Units would be identical to the Private Placement Units.

The terms of such loans by our Sponsor,

officers and directors or their affiliates, if any, have not been determined and no written agreements exist with respect to such loans.

We do not expect to seek loans from parties other than our Sponsor, officers and directors or their affiliates

as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our Trust Account.

Loans made by Chardan or any of its related persons, if any, will not be convertible

into any of our securities and Chardan and its related persons will have no recourse with respect to their ability to convert their loans into any of our securities.

Based on the foregoing and the limited amount of working capital that the Company received into the operating account from the private placement, management believes that the

Company will not have sufficient working capital to meet its working capital needs through the earlier of the consummation of an initial business combination or nine months from the initial public offering.

These conditions raise substantial

doubt about the Company’s ability to continue as a going concern.

Over this time period, the Company will be using the remaining funds held outside of the Trust Account 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 initial business combination.

Further needs for operating capital beyond the Company’s current operating cash balance may need to be funded through loans from the Company’s Sponsor.

The financial statements do not include any

adjustments that might result from the outcome of this uncertainty.

If the Company is unable to complete a Business Combination by November 14, 2023 (subject to extension by majority approval by the Company’s stockholders voting), the Company will cease all

operations except for the purpose of liquidating.

This date for mandatory liquidation and subsequent dissolution combined with uncertainty as to whether the Company has sufficient liquidity to fund operations through the liquidation date or

thereafter should a deferral occur raises substantial doubt about the Company’s ability to continue as a going concern.

Management plans to evaluate potential business combination opportunities and intends to complete a business combination.

The terms of such loans by our Sponsor, officers and directors or their affiliates, if any, have not been determined and no written agreements exist with respect to such loans.

We do not expect to seek loans from parties other than our Sponsor, officers and directors or their affiliates as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our Trust Account.

Loans made by Chardan or any of its related persons, if any, will not be convertible into any of our securities and Chardan and its related persons will have no recourse with respect to their ability to convert their loans into any of our securities.

Based on the foregoing and the limited amount of working capital that the Company received into the operating account from the private placement, management believes that the Company will not have sufficient working capital to meet its working capital needs through the earlier of the consummation of an initial business combination or 15 months from the IPO.

These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

Over this time period, the Company will be using the remaining funds held outside of the Trust Account 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 initial business combination.

Further needs for operating capital beyond the Company’s current operating cash balance may need to be funded through loans from the Company’s Sponsor, officers and directors and their affiliates.

The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

If the Company is unable to complete a Business Combination by May 14, 2024 (subject to extension by approval of the Company’s stockholders), the Company will cease all operations except for the purpose of liquidating.

This date for mandatory liquidation and subsequent dissolution combined with uncertainty as to whether the Company has sufficient liquidity to fund operations through the liquidation date or thereafter should a deferral occur raises substantial doubt about the Company’s ability to continue as a going concern.

Management intends to complete a business combination.

Off-Balance Sheet Arrangements

We have no obligations, assets or liabilities which would be considered off-balance sheet arrangements as of December 31, 2023.

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.

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, purchase obligations or long-term liabilities, other than an agreement to pay an affiliate of our Sponsor

a monthly fee of $7,500, for office space, utilities and secretarial and administrative support.

We began incurring these fees on February 9, 2023 and will continue to incur these fees monthly until the earlier of the completion of our initial

business combination or our liquidation.

We do not have any long-term debt, capital lease obligations, operating lease obligations, purchase obligations or long-term liabilities, other than an agreement to pay an affiliate of our Sponsor a monthly fee of $7,500, for office space, utilities and secretarial and administrative support.

We began incurring these fees on March 1, 2023 and will continue to incur these fees monthly until the earlier of the completion of our initial business combination or our liquidation.

Chardan is entitled to a deferred underwriting commission of $2,070,000.

The deferred fee will be waived by Chardan in the event that we do not complete an initial business combination, subject to the

terms of the underwriting agreement.

Also, we have incurred legal fees related to our initial public offering of $100,000.

The deferred fee will be waived by Chardan in the event that we do not complete an initial business combination, subject to the terms of the underwriting agreement.

Also, we have incurred deferred legal fees payable upon consummation of our initial business combination of approximately $450,000.

These fees will only become due and payable upon the consummation of a business combination.

The holders of the founder shares, equity participation shares, placement units, and units that may be issued upon conversion of working capital loans (and in each case holders of their component

securities, as applicable) are entitled to registration rights pursuant to the registration rights agreement.

These holders are entitled to make up to two demands, excluding short form registration demands, that we register such securities for sale

under the Securities Act.

The holders of the founder shares, equity participation shares, placement units, and units that may be issued upon conversion of working capital loans (and in each case holders of their component securities, as applicable) are entitled to registration rights pursuant to the registration rights agreement.

These holders are entitled to make up to two demands, excluding short form registration demands, that we register such securities for sale under the Securities Act.

In addition, these holders will have “piggyback” registration rights to include their securities in other registration statements filed by us.

We will bear the expenses incurred in connection with the filing of any such

registration statements.

Chardan may not exercise its demand and “piggyback” registration rights after five and seven years, respectively, after the date of our prospectus issued in connection with our initial public offering and may not exercise

its demand rights on more than one occasion.

We will bear the expenses incurred in connection with the filing of any such registration statements.

Critical Accounting Policies and Estimates

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.

Actual results could materially differ from those

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.

Actual results could materially differ from those estimates.

We have not identified any critical accounting estimates.

Quantitative and Qualitative Disclosures about Market Risk

We are a smaller reporting company as defined in Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.

Financial Statements and Supplementary Data

This information appears following Item 16 of this Annual Report on Form 10-K and is included herein by reference.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis