Item 7. Management’s Discussion and Analysis
Item
7. Management’s Discussion and
Analysis of Financial Condition and Results of Operations.
Cautionary
Note Regarding Forward-Looking Statements
All
statements other than statements of historical fact included in this Report including, without limitation, statements under this Item
regarding our financial position, possible Business Combinations and the financing thereof, and related matters, and the plans and objectives
of Management for future operations, are forward-looking statements within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act. When used in this Report, words such as “may,” “should,” “could,” “would,”
“anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions,
as they relate to us or our Management, identify forward-looking statements. We have based these forward-looking statements on our Management’s
current expectations and projections about future events, as well as assumptions made by, and information currently available to our
Management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors
detailed in our filings with the SEC. All subsequent written or oral forward-looking statements attributable to us or persons acting
on our behalf are qualified in their entirety by this paragraph.
The
following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial
statements and the notes thereto included elsewhere in this Report.
Overview
We
are a blank check company incorporated in the Cayman Islands on January 23, 2025 for the purpose of effecting a Business Combination.
Our Sponsor is Republic Sponsor 1 LLC.
Although
we are not limited in our search for target businesses to a particular industry or sector for the purpose of consummating the Business
Combination, we are focusing our search on industries that complement our Management Team’s background in fintech, software and
cryptocurrency. We are an early stage and emerging growth company and, as such, we are subject to all of the risks associated with early
stage and emerging growth companies. We expect to continue to incur significant costs in the pursuit of our acquisition plans. There
can be no assurance that our plans to complete a Business Combination will be successful.
Our
IPO Registration Statement became effective on April 30, 2025. On May 1, 2025, we consummated our Initial Public Offering of 30,000,000
Units, including 3,600,000 Option Units issued pursuant to the partial exercise of the Over-Allotment Option. Each Unit consists of one
Public Share and one-half of one Public Warrant. The Units were sold at a price of $10.00 per Unit, generating gross proceeds to us of
$300,000,000.
Simultaneously
with the closing of the Initial Public Offering and pursuant to the Private Placement Warrants Purchase Agreements, we completed the
sale of an aggregate of 7,280,000 Private Placement Warrants to the Sponsor and Cantor in the Private Placement at a purchase price of
$1.00 per Private Placement Warrant, generating gross proceeds to us of $7,280,000. Of those 7,280,000 Private Placement Warrants, the
Sponsor purchased 4,640,000 Private Placement Warrants and Cantor purchased 2,640,000 Private Placement Warrants. The Private Placement
Warrants are identical to the Public Warrants, except as otherwise disclosed in the IPO Registration Statement.
Following
the closing of the Initial Public Offering and Private Placement, an amount of $300,000,000 from the net proceeds of the Initial
Public Offering and the Private Placement was initially placed in the Trust Account located in the United States with Continental acting
as trustee. The Trust Account may be invested only (i) in U.S. government securities, within the meaning set forth in Section 2(a)(16)
of the Investment Company Act with a maturity of 185 days or less, (ii) in any open-ended investment company that holds itself out as
a money market fund selected by us meeting the conditions of paragraphs (d)(2), (d)(3) and (d)(4) of Rule 2a-7 of the Investment Company
Act, or (iii) as cash or cash items (including in demand deposit accounts) at a bank as determined by us, until the earlier of: (x) the
completion of the Business Combination and (y) the distribution of the Trust Account, as described below.
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We
have until May 1, 2027 (24 months from the closing of the Initial Public Offering), or until such (x) earlier date as our Board may approve
or (y) later date as our shareholders may approve, pursuant to the Amended and Restated Articles, to consummate the Business Combination.
If we are unable to complete the Business Combination by the end of the Combination Period, we will (i) cease all operations except for
the purpose of winding up, (ii) as promptly as reasonably possible, but not more than ten business days thereafter, redeem the Public
Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest
earned on the funds held in the Trust Account and not previously released to us to pay taxes, if any, divided by the number of then outstanding
Public Shares, which redemption will completely extinguish Public Shareholders’ rights as shareholders (including the right to
receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following
such redemption, subject to the approval of our remaining shareholders and our Board, dissolve and liquidate, subject, in each case,
to our obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law.
We
may seek to extend the Combination Period consistent with applicable laws, regulations and stock exchange rules by amending our
Amended and Restated Articles. Any such amendment would require the approval of our shareholders, and our Public Shareholders will be provided the opportunity to redeem all or a portion of their Public Shares in connection with the vote on such approval.
Such redemptions will decrease the amount held in our Trust Account and our capitalization, and may affect our ability to maintain
our listing on Nasdaq. In addition, the Nasdaq Rules currently require SPACs (such as us) to complete their initial Business
Combination in accordance with the Nasdaq 36-Month Requirement. If we do not meet the Nasdaq 36-Month Requirement, our securities
will likely be subject to a suspension of trading and delisting from Nasdaq
Results
of Operations
We
have neither engaged in any operations nor generated any revenues to date. Our only activities since January 23, 2025 (inception) through
December 31, 2025 have been (i) organizational activities and (ii) activities relating to (x) the Initial Public Offering and (y) identifying
and evaluating prospective acquisition candidates and activities in connection with the initial Business Combination. We will not generate
any operating revenues until after completion of our initial Business Combination. We have generated non-operating income in the form
of interest income on investments held in the Trust Account after the Initial Public Offering. We expect to incur increased expenses
as a result of being a public company (for legal, financial reporting, accounting and auditing compliance, among other things), as well
as for due diligence expenses.
For
the period from January 23, 2025 (inception) through December 31, 2025, we had a net income $7,718,712, which consisted of earnings from
investments held in Trust Account of $8,053,817 and interest income - operating account of $24,001 offset by general and administrative
costs of $359,106.
Liquidity
and Capital Resources
Following
the Initial Public Offering, including the partial exercise of the Over-Allotment Option, and the Private Placement, a total of $300,000,000
was initially placed in the Trust Account. We incurred fees of $18,629,500, consisting of $5,280,000 of cash underwriting fee, $12,720,000
of deferred underwriting fee, and $629,500 of other offering costs.
For
the period from January 23, 2025 (inception) through December 31, 2025, cash used in operating activities was $387,853. Net income of
$7,718,712 was affected by payment of general and administrative costs through the IPO Promissory Note of $65,934 and earnings from investments
held in Trust Account of $8,053,817. Changes in operating assets and liabilities used $118,682 of cash.
As
of December 31, 2025, we had marketable securities held in the Trust Account of $308,053,817 (including $8,053,817 of interest income).
We may withdraw interest from the Trust Account to pay taxes, if any. We intend to use substantially all of the funds held in the Trust
Account, including any amounts representing interest earned on the Trust Account (which interest shall be net of income taxes payable,
if any, and exclude the Deferred Fee), to complete our Business Combination. To the extent that our share capital or debt is used, in
whole or in part, as consideration to complete our 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.
To
mitigate the risk that we might be deemed to be an investment company for purposes of the Investment Company Act, which risk increases
the longer that we hold investments in the Trust Account, we may, at any time, (based on our Management Team’s ongoing assessment
of all factors related to our potential status under the Investment Company Act) instruct the trustee to liquidate the investments held
in the Trust Account and instead to hold the funds in the Trust Account in cash or in an interest-bearing demand deposit account at a
bank.
As
of December 31, 2025, we had marketable securities held in the Trust Account of $308,053,817 (including $8,053,817 of interest income).
We 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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Our
liquidity needs through December 31, 2025 have been satisfied through (i) a contribution of $25,000 from the Sponsor in exchange for
the issuance of our Founder Shares, (ii) a loan pursuant to the IPO Promissory Note, and (iii) the net proceeds from the consummation
of the Private Placement not held in the Trust Account.
Promissory
Note
Prior
to the closing of our Initial Public Offering, our Sponsor agreed to loan us an aggregate of up to $300,000 under the IPO Promissory
Note to cover expenses related to the Initial Public Offering. Such loans and advances were non-interest bearing and payable on the earlier
of December 31, 2025 or the completion of our Initial Public Offering. The loan of $294,256 was fully repaid upon the consummation of
our Initial Public Offering on May 5, 2025. No additional borrowing is available under the IPO Promissory Note.
Working
Capital Loans
In
order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, the Sponsor, or certain
of our officers and directors or their affiliates may, but are not obligated to, loan us Working Capital Loans, as may be required. If
we complete a Business Combination, we will repay such Working Capital Loans. In the event that a Business Combination does not close,
we may use a portion of the working capital held outside the Trust Account to repay such Working Capital Loans, but no proceeds from
our Trust Account would be used for such repayment. Up to $1,500,000 of such Working Capital Loans may be converted into warrants of
the post-Business Combination entity at a price of $1.00 per warrant. The warrants would be identical to the Private Placement Warrants.
As of December 31, 2025, we did not have any borrowings under any Working Capital Loans.
Contractual
Obligations
We
do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than as follows:
Underwriting
Agreement
We
granted the Underwriters a 45-day option from the date of the Initial Public Offering to purchase up to an additional 3,960,000 Option
Units to cover over-allotments, if any. On May 1, 2025, the Underwriters partially exercised their Over-Allotment Option., with 45 days
to purchase the remaining 360,000 Option Units. On June 15, 2025, the remaining Over-Allotment Option expired worthless.
The
Underwriters of the Initial Public Offering are entitled to a deferred underwriting discount of (i) 4.0% of the gross proceeds of the
Initial Public Offering, other than the proceeds pursuant to the Over-Allotment Option and (ii) 6.0% of the gross proceeds pursuant to
the Over-Allotment Option, or $12,720,000 in the aggregate, payable upon the closing of an initial Business Combination, but such Deferred
Fee shall be due solely on amounts remaining in the Trust Account following all properly submitted shareholder redemptions in connection
with the consummation of our initial Business Combination pursuant to the Underwriting Agreement.
Registration
Rights Agreement
The
holders of (i) the Founder Shares, (ii) the Private Placement Warrants and (iii) any private placement-equivalent warrants issued in
connection with the Working Capital Loans, if any (and in each case holders of their underlying securities, as applicable) are entitled
to registration rights pursuant to the Registration Rights Agreement, requiring us to register such securities for resale (in the case
of the Founder Shares, only after conversion to our Class A Ordinary Shares). The holders of the majority of these securities are entitled
to make up to three demands, excluding short form demands, that we register such securities. In addition, the holders have certain “piggyback”
registration rights with respect to registration statements filed subsequent to the consummation of a Business Combination and rights
to require us to register for resale such securities pursuant to Rule 415 under the Securities Act. Cantor may only make a demand on
one occasion and only during the five-year period beginning on the effective date of the IPO Registration Statement. In addition, Cantor
may participate in a “piggyback” registration only during the seven-year period beginning on the effective date of the IPO
Registration Statement. We will bear the expenses incurred in connection with the filing of any such registration statements.
Letter
Agreement
Our
Sponsor, directors and officers have entered into the Letter Agreement with us, pursuant to which, they have waived their rights to liquidating
distributions from the Trust Account with respect to any Founder Shares held by them if we fail to complete our initial Business Combination
within the Combination Period. However, if they acquire Public Shares in or after the Initial Public Offering, they will be entitled
to liquidating distributions from the Trust Account with respect to such Public Shares if we fail to complete our initial Business Combination
within the Combination Period.
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Additionally,
pursuant to the Letter Agreement, our Sponsor, directors and officers will not propose any amendment to our Amended and Restated Articles
to modify (i) the substance or timing of our obligation to allow redemption in connection with our initial Business Combination or to
redeem 100% of our Public Shares if we do not complete our initial Business Combination within the Combination Period or (ii) any other
material provisions relating to shareholders’ rights or pre-initial Business Combination activity, unless we provide our Public
Shareholders with the opportunity to redeem their Public Shares upon approval of any such amendment at a per-share price, payable in
cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account
and not previously released to us to pay our taxes, divided by the number of then outstanding Public Shares.
Critical
Accounting Estimates and Standards
We
have identified the following as our critical accounting policies. See our financial statements and notes thereto included elsewhere
in this Report for additional information regarding these critical accounting policies and other significant accounting policies.
Use
of Estimates
The
preparation of the financial statements and notes thereto included elsewhere in this Report in conformity with GAAP requires Management
to make estimates and assumptions that affect the reported amounts of assets and liabilities, income and expenses, and the disclosure
of contingent assets and liabilities, in our financial statements. These accounting estimates require the use of assumptions about matters,
some of which are highly uncertain at the time of estimation. Management bases its estimates on historical experience and on various
other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments, and
we evaluate these estimates on an ongoing basis. To the extent actual experience differs from the assumptions used, our financial statements
and notes thereto included elsewhere in this Report could be materially affected. We believe that the following accounting policies involve
a higher degree of judgment and complexity. As of December 31, 2025, we did not have any critical accounting estimates to be disclosed.
Class
A Ordinary Shares Subject to Possible Redemption
We
account for the Class A Ordinary Shares subject to possible redemption in accordance with the guidance in FASB ASC Topic 480, “Distinguishing
Liabilities from Equity ” . Class A Ordinary Shares subject to mandatory redemption (if any) are classified as liability instruments
and measured at fair value. Conditionally redeemable Class A Ordinary Shares (including Class A Ordinary Shares 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, Class A Ordinary Shares are classified as shareholders’ equity.
All of the Public Shares feature certain redemption rights that are considered to be outside of our control and subject to the occurrence
of uncertain future events. Accordingly, Class A Ordinary Shares subject to possible redemption are presented at redemption value as
temporary equity, outside of the shareholders’ equity section of our balance sheet included elsewhere in this Report.
Net
Income Per Ordinary Share
We
comply with the accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” Net income per Ordinary
Share is computed by dividing net income applicable to shareholders by the weighted average number of Ordinary Shares outstanding for
the applicable periods. We apply the two-class method in calculating earnings per Ordinary Share and allocate net income pro rata to
Class A Ordinary Shares subject to possible redemption, nonredeemable Class A Ordinary Shares and Class B Ordinary Shares. Accretion
associated with the redeemable Class A Ordinary Shares is excluded from earnings per share as the redemption value is not in excess of
the fair value.
Recent
Accounting Standards
In
November 2024, the FASB issued ASU 2024-03, requiring public entities to disclose additional information about specific expense categories
in the notes to the financial statements on an interim and annual basis. ASU 2024-03 is effective for fiscal years beginning after December
15, 2026, and for interim periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating
the impact of adopting ASU 2024-03
Management
does not believe that there are any other recently issued, but not yet effective, accounting standards, which, if currently adopted,
would have a material effect on the financial statements and notes thereto included elsewhere in this Report.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
We
are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise
required under this Item.
Item 8. Financial Statements and Supplementary Data.
Reference
is made to pages F-1 through F-19 comprising a portion of this Report, which are incorporated herein by reference.
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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.