Quetta Acquisition Corp 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to Quetta Acquisition Corporation. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to Yocto Investments LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties. Special Note Regarding Forward-Looking Statements This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form 10-Q including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the completion of the Proposed Business Combination (as defined below), the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements, including that the conditions of the Proposed Business Combination are not satisfied. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s Annual Report on Form S-1 filed with the U.S. Securities and Exchange Commission (the “SEC”). The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise. Overview We are a blank check company incorporated in Delaware on May 1, 2023. We were formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses or entities, which we refer to herein as our “initial business combination.” Our efforts to identify a prospective target business are not limited to any particular industry or geographic region, although we intend to focus on target businesses in Asia that operate in the financial technology sector. We intend to utilize cash derived from the proceeds of our initial public offering (“IPO” as defined below) and the private placement of Private Units, our securities, debt or a combination of cash, securities and debt, in effecting our initial business combination. We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete an initial business combination will be successful. Extensions of Time Period to Complete a Business Combination On October 18, 2024, the Company entered into a non-binding LOI with QUAD, regarding a potential business combination (the “Proposed Transaction”). The LOI is non-binding and no agreement providing for any Proposed Transaction or any other transaction or the participation by either party therein will be deemed to exist unless and until definitive agreements have been executed. As a result of the execution of the LOI, the deadline by which the Company must complete its initial business combination has been extended to January 10, 2025. On January 10, 2025, the Company held a special meeting of stockholders (the “January Special Meeting”). During the January Special Meeting, stockholders approved the proposal to amend Company’s amended and restated certificate of incorporation and Trust Agreement to extend the date by which the Company has to consummate a business combination from January 10, 2025 to October 10, 2026 (thirty six (36) months from the consummation of the IPO), on a month-by-month basis, up to a total of twenty-one (21) times, by depositing $60,000 into the Company’s trust account for each such one-month extension. Redemption In connection with the stockholders’ vote at the January Special Meeting of stockholders held by the Company on January 10, 2025, 5,199,297 shares were tendered for redemption. As a result, approximately $55,152,224 (approximately $10.608 per share) were removed from the Company’s trust account to pay such holders, without taking into account additional allocation of payments to cover any tax obligation of the Company, since that date. As a result, approximately $18,040,430 remained in the trust account. Following the redemptions, the Company has 3,747,748 shares of common stock issued and outstanding. Acquisition Criteria Expansion In connection with the stockholders’ vote at the January Special Meeting of stockholders held by the Company on January 10, 2025, stockholders approved the proposal to include any entity with its principal business operations in the geographical regions of the People’s Republic of China, the Hong Kong special administrative region, and the Macau special administrative region in the Company’s acquisition criteria in its search for a prospective target business for its business combination. 17 Trust Amendment The Company has until 36 months (or until October 10, 2026) from the closing of the IPO to consummate a Business Combination. In addition, in the event that the Company fails to timely make a payment for any given month during the twenty-one (21) month period the Company elects to make an extension, the Company shall have a period of forty five (45) days to pay any applicable past due payment, which shall be calculated to be equal to the principal of the past due payment, plus any accrued but unpaid interest in the amount of three percent (3%) (the “Cure Period”). If the Company fails to make any applicable past due payment during the Cure Period, then the Company shall immediately cease all operations, except for the purpose of winding up, and liquidate and dissolve with the same effect as if the Company failed to complete a business combination within thirty-six (36) months from the consummation of the IPO. The foregoing description of the Amendment to the Investment Management Trust Agreement does not purport to be complete and is qualified in its entirety by the terms and conditions of the actual agreement, filed hereto as Exhibit 10.2, and is incorporated by reference herein. The Company has completed an initial payment of $60,000 pursuant to the Amendment to the Investment Management Trust Agreement and such initial payment has been deposited into the Company’s trust account to extend the time the Company has to complete a business combination until February 10, 2025. Subsequently, the Company deposited $60,000 each time from February 2025 to August 2025 into the trust account to extend the time the Company has to complete a business combination until September 10, 2025. Merger Agreement In Connection With KM QUAD Business Combination On February 14, 2025, Quetta entered into entered into an Agreement and Plan of Merger (the “Merger Agreement”) with KM QUAD, a Cayman Islands company (“KM QUAD”), the parent company of Jiujiang Lida Technology Co., Ltd., a film product design and manufacturer in China. Upon consummation of the transaction contemplated by the Merger Agreement, (i) Quetta will reincorporate by merging with and into Quad Global Inc., a Cayman Islands exempted company and wholly-owned subsidiary of Quetta (“Quad Global” or the “Purchaser”), and (ii) concurrently with the reincorporation merger, Quad Group Inc., a Cayman Islands exempted company and wholly-owned subsidiary of Quad Global, will be merged with and into KM QUAD, resulting in KM QUAD being a wholly-owned subsidiary of Quad Global. At the effective time of the transaction, KM QUAD’s shareholders and management will receive 30 million ordinary shares of Quad Global. The shares held by certain KM QUAD’s shareholders will be subject to lock-up agreements for a period of six months following the closing of the transaction, subject to certain exceptions. Upon the closing of the transactions contemplated by the Merger Agreement, the Company will merge with and into Purchaser, resulting in all Quetta stockholders becoming shareholders of the Purchaser as described under the below section titled “Redomestication Merger.” Concurrently therewith, Merger Sub will merge with and into KM QUAD, resulting in Purchaser acquiring 100% of the issued and outstanding equity securities of QUAD (the “Acquisition Merger”). Upon the closing of the Acquisition Merger, the ordinary shares of Purchaser issued shall consist of class A ordinary shares (“Purchaser Class A Ordinary Shares”) and class B ordinary shares (“Purchaser Class B Ordinary Shares,” together with Purchaser Class A Ordinary Shares, “Purchaser Ordinary Shares”) where each Purchaser Class A Ordinary Share shall be entitled to one (1) vote on all matters subject to a vote at general and special meetings of the post-closing company and each Purchaser Class B Ordinary Share shall be entitled to 10 votes on all matters subject to a vote at general and special meetings of the post-closing company. The aggregate consideration to be paid to KM QUAD shareholders for the Acquisition Merger is $300 million, payable in newly issued purchaser ordinary shares valued at $10.00 per share. The Transaction, which has been approved by the boards of directors of both Quetta and KM QUAD, is subject to regulatory approvals, the approvals by the shareholders of Quetta and KM QUAD, respectively, and the satisfaction of certain other customary closing conditions including the following: KM QUAD shall bear (i) 50% of the transaction costs incurred by Quetta, excluding any amounts payable at closing from the Trust Account, provided that KM QUAD’s obligation to pay such transaction costs incurred by Quetta shall not exceed $500,000 in total; (ii) 50% of the expenses incurred by Quetta in connection with maintaining ongoing public company responsibilities, provided that KM QUAD’s obligation to pay such Public Company Expenses incurred by Quetta shall not exceed $100,000 in total; and (iii) the extension fees of Quetta covering nine extensions over nine months, in the total amount of $540,000. If the Closing does not occur prior to October 10, 2025 due to a delay in obtaining regulatory approvals, Quetta shall be responsible for any extension fees and other related fees incurred by Quetta beyond October 10, 2025 not to exceed $100,000 per month. Pursuant to the Merger Agreement, on or before February 14, 2025, KM QUAD deposited $250,000, the first installment of the term extension fees to the Company’s bank account in exchange for a promissory note issued by the Company. KM QUAD shall wire $290,000, the second installment of the extension fees, to the Company’s bank account on or before April 20, 2025 in exchange for a promissory note issued by the Company, provided that the Merger Agreement has not been terminated prior to that date. On May 29, 2025, KM QUAD deposited the second installment of $290,000. Board change On April 29, 2025, the Company reported the death of Brandon Miller, a member of the Company’s board of directors (the “Board”) and the Chairperson of the Audit Committee. On the same day, the Board appointed Qi Gong, a current member of the Board, to serve as Chairperson of the Audit Committee. The Board also appointed Ping Zhang as a member of the Board, including committee positions on the Audit Committee, the Compensation Committee, and the Nominating Committee, to fill the vacancy created by Mr. Miller’s death. 18 Results of Operations We have neither engaged in any operations nor generated any operating revenues to date. Our activities from May 1, 2023 (inception) through June 30, 2025 were organizational activities and those necessary to prepare for our IPO, which is described below, and subsequent to the IPO, identifying a target company for an initial business combination. We do not expect to generate any operating revenues until after the completion of our initial business combination. We expect to generate non-operating income in the form of interest income on investments held in trust account after the IPO. 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, a Business Combination. For the three months ended June 30, 2025, we had net loss of $607,950, which consisted of general and administrative expenses of $723,999, related party administrative fees of $30,000, franchise tax expense of $10,200 and income tax expense of $37,507, partially offset by interest income of $193,756. For the six months ended June 30, 2025, we had net loss of $801,621, which consisted of general and administrative expenses of $1,101,101, related party administrative fees of $60,000, franchise tax expense of $20,200 and income tax expense of $94,242, offset by interest income of $473,922. For the three months ended June 30, 2024, we had net income of $544,417, which consisted of formation and operational costs of $150,225, related party administrative fees of $30,000, franchise tax expense of $17,477 and income tax expense of $192,626, offset by interest income of $934,745. For the six months ended June 30, 2024, we had net income of $1,156,121, which consisted of formation and operational costs of $227,254, related party administrative fees of $60,000, franchise tax expense of $33,677 and income tax expense of $383,682, offset by interest income of $1,860,734. Liquidity and Capital Resources On October 11, 2023, we completed our initial public offering (“IPO”) of 6,900,000 units (the “Public Units’), including the full exercise of the over-allotment option of 900,000 Units granted to the underwriters. The Public Units were sold at an offering price of $10.00 per unit generating gross proceeds of $69,000,000. Each Unit consists of one share of common stock and one-tenth (1/10) of one right (“Public Right”). Each Public Right will convert into one share of common stock upon the consummation of a Business Combination. Simultaneously with the IPO, we sold to our Sponsor 253,045 units at $10.00 per unit (the “Private Units”) in a private placement generating total gross proceeds of $2,530,450. The Private Units are identical to the Public Units except with respect to certain registration rights and transfer restrictions. Each Private Unit consists of one share of common stock (“Private Share”) and one-tenth (1/10) of one right (“Private Right”). Each Private Right will convert into one share of common stock upon the consummation of a Business Combination. Additionally, we issued the underwriters 69,000 shares of common stock for the representative shares, at the closing of the IPO as part of representative compensation. Upon the closing of the IPO and the private placement on October 11, 2023, a total of $69,690,000 was placed in a trust account (the “Trust Account”) maintained by Continental Stock Transfer & Trust Company as a trustee and will be invested only in U.S. government treasury bills 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 of 1940, as amended (the “Investment Company Act”), and that invest only in direct U.S. government treasury obligations. We intend to use substantially all of the net proceeds of the IPO and the private placement, including the funds held in the Trust Account, in connection with our initial business combination and to pay our expenses relating thereto, including deferred underwriting discounts and commissions payable to the underwriters in the IPO in an amount equal to 3.5% of the total gross proceeds raised in the IPO upon consummation of our initial business combination. To the extent that our capital stock is used in whole or in part as consideration to effect our initial business combination, the remaining proceeds held in the Trust Account as well as any other net proceeds not expended will be used as working capital to finance the operations of the target business. Such working capital funds could be used in a variety of ways including continuing or expanding the target business’ operations, for strategic acquisitions and for marketing, research and development of existing or new products. Such funds could also be used to repay any operating expenses or finders’ fees which we had incurred prior to the completion of our initial business combination if the funds available to us outside of the Trust Account were insufficient to cover such expenses. As of June 30, 2025, the Company had cash of $225,929 and a working capital deficit of $2,134,700. The Company has incurred and expects to continue to incur significant professional costs to remain as a publicly traded company and to incur significant transaction costs in pursuit of the consummation of a Business Combination. In connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standard Board’s Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that these conditions raise substantial doubt about the Company’s ability to continue as a going concern. In addition, if the Company is unable to complete a Business Combination within the Combination Period, the Company’s board of directors would proceed to commence a voluntary liquidation and thereby a formal dissolution of the Company. There is no assurance that the Company’s plans to consummate a Business Combination will be successful within the Combination Period. As a result, management has determined that such additional conditions also raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. 19 Off-Balance Sheet Arrangements We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of June 30, 2025. 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. JOBS Act On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We will qualify as an “emerging growth company” and under the JOBS Act will be 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, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates. Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions, we may not be required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide 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) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm 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) disclose 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 no longer an “emerging growth company,” whichever is earlier. Contractual Obligations We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than described below. Administrative Services Agreement We have entered into an administrative services agreement pursuant to which we will pay the Sponsor a total of $10,000 per month for office space, utilities, secretarial and administrative support. However, pursuant to the terms of such agreement, the Sponsor agreed to defer the payment of such monthly fee. Any such unpaid amount will accrue without interest and be due and payable no later than the date of the consummation of the initial Business Combination. The Company accrued $20,000 and $30,000 administrative fees due to the Sponsor on the accompanying balance sheets as of June 30, 2025 and December 31, 2024, respectively. Underwriting Agreement Upon closing of a Business Combination, the underwriters will be entitled to a deferred fee of 3.5% of the gross proceeds of the IPO, or $2,415,000. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that we complete a Business Combination, subject to the terms of the underwriting agreement. Additionally, we issued the underwriters 69,000 shares common stock, or the representative shares, at the closing of the IPO as part of representative compensation. Promissory Note in Connection with Extension Payments In the event that the closing of the KM QUAD Business Combination does not occur by February 10, 2025, the Company shall have the right to extend the time to complete the KM QUAD Business Combination up to twenty-one (21) times for one month each time until October 10, 2026. QUAD shall be responsible for the extension fees covering nine extensions over nine months, in total amount of $540,000. On or before February 14, 2025, KM QUAD wired the first installment of the prepaid extension fees, in the amount of $250,000, to the Company’s designated bank account in exchange for a promissory note issued by the Company. KM QUAD shall wire the second installment of the prepaid extension fees, in the amount of $290,000, to the Company’s designated bank account on or before April 20, 2025 in exchange for a promissory note issued by the Company, provided that the Agreement has not been terminated prior to that date. If the closing of the KM QUAD Business Combination does not occur prior to October 10, 2025 due to a delay in obtaining CSRC approvals, KM QUAD shall be responsible for any extension fees and other related fees incurred by the Company beyond October 10, 2025 not to exceed $100,000 per month. If the closing of the KM QUAD Business Combination or termination of the Agreement occurs prior to October 10, 2025, the Company shall return the remaining balance of the prepaid extension fees, if any, to KM QUAD on a pro rata basis. Alternatively, at the closing of the KM QUAD Business Combination, the Company shall have the right to convert any prepaid extension fees that were paid and not returned into Purchaser Class A Ordinary Shares at $10.00 per share. Critical Accounting Policies and Estimates The preparation of unaudited 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 policies and estimates. Recent accounting pronouncements Management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial statements. 20 Item 3. Quantitative and Qualitative Disclosures About Market Risk Not required for smaller reporting companies.