Quartzsea Acquisition Corp 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations References to the “Company,” “Quartzsea,” “our,” “us” or “we” refer to Quartzsea Acquisition Corporation. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited financial statements and the notes related thereto. 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. 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 10-K 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 as a Cayman Islands exempted company and incorporated for the purpose of effecting a merger, share exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. We intend to effectuate our initial business combination using cash from the proceeds of the Initial Public Offering (“IPO” as defined below), and the private placement of the private placement units, the proceeds of the sale of our securities in connection with our initial business combination, our shares, debt or a combination of cash, stock and debt. 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. Recent Developments On March 17, 2026, the Company entered into a Termination, Settlement and Mutual General Release Agreement with Broadway Tech, pursuant to which the Merger Agreement and the transactions contemplated thereby were terminated in their entirety, effective as of March 17, 2026. The termination agreement provides for mutual releases of claims relating to the Merger Agreement and the proposed transaction. The parties entered into the termination agreement due to the prolonged China Securities Regulatory Commission approval process and related PRC regulatory uncertainty. No termination fees were payable by either party in connection with the termination. On May 13, 2026, Quartzsea entered into a Merger Agreement with Eight Directions Technology Limited and related parties to effect a business combination pursuant to which Eight Directions will become a wholly owned subsidiary of Eight Directions Global Limited (“PubCo”), the publicly traded successor entity. The transaction implies an equity value for Eight Directions of approximately $515.0 million, to be paid in PubCo ordinary shares valued at $10.00 per share. The business combination remains subject to customary closing conditions, including approval by Quartzsea shareholders, the effectiveness of the SEC registration statement, and Nasdaq listing approval. 19 On June 23, 2026, Quartzsea’s shareholders approved an extension of the deadline to consummate its initial business combination from June 19, 2026 to October 19, 2026, with the ability to extend the deadline for up to four additional one-month periods. Under the Business Combination Agreement, Eight Directions is responsible for funding the required monthly extension contributions to Quartzsea’s trust account. The first extension contribution of $175,000 was funded on June 25, 2026. In connection with the extension meeting, holders of 1,275,382 Quartzsea ordinary shares elected to redeem their shares for an aggregate payment of approximately $13.4 million. Following the redemptions, 10,134,518 Quartzsea ordinary shares remained outstanding, and approximately $73.6 million remained in Quartzsea’s trust account. Results of Operations We have neither engaged in any operations nor generated any revenues to date. Our only activities from November 5, 2024 (inception) through May 31, 2026, were organizational activities and those necessary to consummate the IPO, 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 marketable securities held after the IPO. We expect to 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 May 31, 2026, we had net income of $573,672, which consisted of interest income of $770,261, offset by general and administrative expenses of $196,589. For the six months ended May 31, 2026, we had net income of $1,102,757, which consisted of interest income of $1,530,207, offset by general and administrative expenses of $427,450. For the three months ended May 31, 2025, we had net loss of $27,147, which consisted of interest income of $700,600, offset by general and administrative expenses of $727,747. For the six months ended May 31, 2025, we had net loss of $58,402, which consisted of interest income of $702,849, offset by general and administrative expenses of $761,251. Liquidity and Capital Resources On March 19, 2025, we consummated our IPO of 7,200,000 units (the “Units”), at $10.00 per Unit. In connection with the closing of the IPO, the underwriter fully exercised its over-allotment option to purchase 1,080,000 additional Units for an aggregate of 8,280,000 Units sold. The Units were sold at an offering price of $10.00 per Unit, generating total gross proceeds of $82,800,000. Simultaneously with the closing of our IPO, we consummated the sale of 231,900 Private Placement Units at a price of $10.00 per Private Placement Unit in a private placement to the Sponsor, generating total gross proceeds of $2,319,000. Upon the closing of the IPO and the private placement on March 19, 2025, a total of $82,800,000 from the net proceeds of the IPO and the sale of the Private Placement Units 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. 20 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 4.0% 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 May 31, 2026, the Company had $5,156 of cash and a working capital deficit of $1,035,078. The Company has incurred and expects to continue to incur significant costs in pursuit of the consummation of an initial Business Combination. Subsequent to May 31, 2026, on June 23, 2026, the Company’s shareholders approved amendments to the Company’s governing documents and Investment Management Trust Agreement to extend the deadline to consummate an initial business combination from June 19, 2026 to October 19, 2026, with the ability to extend such deadline on a month-to-month basis for up to four additional one-month periods. If the Company does not complete a business combination within the prescribed timeline, it will be required to cease operations and liquidate in accordance with its Amended and Restated Memorandum and Articles of Association. In accordance with ASC 205-40, Presentation of Financial Statements—Going Concern , management evaluated whether conditions and events raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financial statements are issued. Management concluded that, due to the Company’s liquidity condition and requirement to complete a business combination within the prescribed period to avoid liquidation, substantial doubt exists about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Off-Balance Sheet Arrangements We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of May 31, 2026. 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 Promissory Note — Related Party On November 5, 2024, the Sponsor agreed to loan the Company up to an aggregate amount of $500,000 to be used, in part, for transaction costs incurred in connection with the Initial Public Offering (the “Promissory Note”). The Promissory Note is unsecured, interest-free and due on the date on which the Company closes the IPO. We repaid the outstanding balance of $500,000 to the Sponsor on March 19, 2025 upon the closing of the IPO. As of May 31, 2026 and November 30, 2025, no amount was outstanding under the Promissory Note. 21 Administrative Services Agreement The Company entered into an Administrative Services Agreement with the Sponsor on November 5, 2024, commencing on the effective date of the registration statement of the initial public offering through the earlier of the consummation of a business combination or the Company’s liquidation, to pay the Sponsor a total of $20,000 per month for office space and administrative and support services. On February 12, 2025, the Company and the Sponsor entered into the First Amendment to the Administrative Services Agreement, pursuant to which the monthly fee was amended to $15,000. On March 7, 2025, the Company and the Sponsor entered into the Second Amendment to the Administrative Services Agreement, pursuant to which the monthly fee was amended to $20,000. The Company incurred $60,000 and $120,000 for the three and six months ended May 31, 2026, respectively. The Company incurred and paid the Sponsor $51,400 for each of the three and six months ended May 31, 2025. As of May 31, 2026 and November 30, 2025, the Company accrued $180,000 and $60,000 on the accompanying balance sheets, respectively. Underwriting Agreement We granted SPAC Advisory Partners (“SAP”), the representative of the underwriters, a 45-day option from the date of IPO, to purchase up to 1,080,000 additional Units to cover over-allotments, if any, at the IPO price less the underwriting discounts and commissions. The underwriter fully excised its over-allotment option on March 19, 2025. The underwriter is entitled to a cash underwriting discount of 0.75% on the first $69,000,000 of the gross proceeds from the IPO, plus 0.50% on the remaining $13,800,000, totaling $586,500 including the full exercise of the over-allotment option by the underwriter. In addition, the underwriter is entitled to a deferred underwriting commission of 4.0% of the gross proceeds of the IPO, or $3,312,000, which was recorded as a non-current liability as of May 31, 2026. On March 3, 2026, the Company entered into Amendment No. 1 to the Underwriting Agreement, which revised the calculation and payment terms of the deferred underwriting commission. Pursuant to the amendment, the deferred underwriting commission will be payable from the trust account upon consummation of the Company’s initial business combination and equals 4.00% of the gross proceeds from the sale of the firm units and option units, subject to a cap equal to 4.00% of the funds remaining in the trust account after giving effect to all properly submitted redemptions in connection with the initial business combination. The amendment also clarifies that the underwriters may waive the deferred underwriting commission prior to the consummation of the Company’s initial business combination. Right of First Refusal We granted SAP a right of first refusal for a period commencing from the consummation of the IPO until the earlier of (i) 10 months after the consummation of the initial business combination (or the liquidation of the Trust Account in the event that the Company fails to consummate its initial business combination within the prescribed time period) or (ii) 36 months after the consummation of the IPO in accordance with FINRA Rule 5110(g)(6)(A) to act as lead financial advisor, capital markets advisor, underwriter and/or private placement agent in connection with any initial business combination or in connection with any financing that occurs between the closing of the IPO and the date that is the earlier of (i) 10 months after the closing of the initial business combination or (ii) 36 months after the consummation of the IPO. Finder’s Fee Agreement On April 22, 2025, the Company entered into a Finder’s Fee Agreement with Hugh Grow Investment Ltd. (the “Finder”). Pursuant to the Finder’s Fee Agreement, the Company agreed to pay the Finder a one-time, non-refundable retainer fee in the amount of $350,000, payable upon the execution of Finder’s Fee Agreement (the “Retainer Fee”). The Company also agreed to pay the Finder a success fee in the amount of $3,500,000, payable upon the closing (or closings) of a transaction (as defined in the Finder’s Fee Agreement). In addition, the Company agreed to reimburse the Finder on a monthly basis for all reasonable, actual, and verifiable out-of-pocket expenses incurred in connection with the Finder’s engagement under the agreement, provided that such expenses shall not exceed $150,000 without the Company’s prior written approval. On April 29, 2025, the Company entered into an amendment to the Finder’s Fee Agreement, pursuant to which the Retainer Fee was adjusted to $150,000. On July 18, 2025, the Company entered into the second amendment to the Finder’s Fee Agreement, pursuant to which the Success Fee was amended to consist of 1,560,000 ordinary shares (the “Finder Shares”) of the surviving publicly traded company (the “Surviving Company”). Sixty (60%) of the Finder Shares shall be subject to lock-up restriction for six months from the date of issuance, while Forty (40%) of Finder Shares shall be free from any lock-up restriction, subject to the applicable securities laws and regulations. As of May 31, 2026, the Retainer Fee had been paid in full, and there was no outstanding balance. 22 The Company acknowledges and agrees that the Finder is not a registered broker-dealer under U.S. securities laws, and is not acting as a broker-dealer in connection with the transaction. New Merger Agreement with Eight Directions Technology Limited On May 13, 2026, Quartzsea, the Purchaser and Merger Sub entered into the Merger Agreement with Eight Directions. Pursuant to the Merger Agreement, Quartzsea will merge with and into the Purchaser, with the Purchaser surviving as the publicly traded holding company, and Merger Sub will merge with and into Eight Directions, with Eight Directions surviving as a wholly owned subsidiary of the Purchaser. Upon consummation of the Proposed Business Combination, each outstanding ordinary share of Quartzsea will be converted into the right to receive one Class A ordinary share of the Purchaser, and each outstanding right of Quartzsea will be converted into the right to receive one-fifth of one Class A ordinary share of the Purchaser. The Proposed Business Combination values Eight Directions at an agreed pre-money equity value of approximately $515.0 million. Consummation of the Proposed Business Combination is subject to customary closing conditions, including approval by Quartzsea’s shareholders, effectiveness of the applicable registration statement filed with the SEC and approval of the Purchaser’s securities for listing on Nasdaq. There can be no assurance that the Proposed Business Combination will be completed. Critical Accounting Policies and Estimates The preparation of unaudited condensed consolidated financial statements and related disclosures in conformity with GAAP 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 Standards Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s financial statements. Off-Balance Sheet Arrangements; Commitments and Contractual Obligations; Quarterly Results As of May 31, 2026, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any commitments or contractual obligations. 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 initial public offering or until we are no longer an “emerging growth company,” whichever is earlier. 23 Item 3. Quantitative and Qualitative Disclosures About Market Risk. Not required for smaller reporting companies.