X3 Acquisition Corp. Ltd. 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 X3 Acquisition Corp. Ltd. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to X3 Acquisition Management LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited condensed 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, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (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 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. 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 SEC. The Company’s securities filings can be accessed on 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 the Cayman Islands on July 31, 2025 formed for the purpose of effecting a merger, amalgamation, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). We intend to effectuate our Business Combination using cash derived from the proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, our shares, debt or a combination of cash, shares and debt. We may seek to extend the completion window consistent with applicable laws, regulations and stock exchange rules by amending our amended and restated memorandum and articles of association. Such an amendment would require the approval of our public shareholders, who 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 special purpose acquisition companies (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 from July 31, 2025 (inception) through March 31, 2026 were organizational activities, those necessary to prepare for the Initial Public Offering, described below, and subsequent to the closing of the Initial Public Offering, identifying a target company for a Business Combination. We do not expect to generate any operating revenues until after the completion of our Business Combination. We generate non-operating income in the form of interest income on marketable securities held in the Trust Account. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance, among other things), as well as for due diligence expenses. For the three months ended March 31, 2026, we had a net income of $913,196 which consists of interest earned on marketable securities held in Trust Account of $1,486,330, change on overallotment liability of $41,900, offset by compensation expense of $393,600 and general and administrative costs of $221,434. Liquidity, Capital Resources and Going Concern Until the consummation of the Initial Public Offering, our only source of liquidity was an initial purchase of Class B ordinary shares, par value $0.0001 per share, by the Sponsor and loans from the Sponsor. As of March 31, 2026, we had $921,248 in cash and working capital surplus of $1,162,945. On January 22, 2026, we consummated the Initial Public Offering of 20,000,000 Units at $10.00 per Unit, generating gross proceeds of $200,000,000. Simultaneously with the closing of the Initial Public Offering, we consummated the sale of an aggregate of 5,000,000 Private Placement Warrants to the Sponsor, at a price of $1.00 per Private Placement Warrant, or $5,000,000 in the aggregate. 16 On January 26, 2026, we consummated the closing of an additional 2,500,000 Units sold pursuant to the underwriters’ over-allotment option, generating gross proceeds of $25,000,000. Simultaneously with the consummation of the over-allotment option on January 26, 2026, we also consummated the sale of an additional 375,000 Private Placement Warrants to the Sponsor at a price of $1.00 per Private Placement Warrant, generating gross proceeds of $375,000. Following the Initial Public Offering, including the partial exercise by the underwriters of their over-allotment option, and the sale of the Private Placement Warrants, a total of $225,000,000 was placed in the trust account. We incurred total transactions costs amounting to $9,571,416, consisting of $3,375,000 of cash underwriting fee, $5,625,000 of deferred underwriting fee, and $571,416 of other offering costs. For the three months ended March 31, 2026, net cash used in operating activities was $136,680. Net income of $913,196 was affected by interest earned on marketable securities held in Trust Account of $1,486,330, change in Fair Value of Overallotment liability of $41,900, offset by compensation expense of $393,600, payment of operation costs through promissory note of $30,225 and amortization of prepaid expense of $1,085. Changes in operating assets and liabilities used $53,444 of cash for operating activities As of March 31, 2026, we had marketable securities held in the Trust Account of $226,486,330 (including approximately $1,486,330 of interest income). We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (less income taxes payable), to complete our 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. As of March 31, 2026, we had cash of $921,248. We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete a Business Combination. In order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, our Sponsor or an affiliate of our Sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete a Business Combination, we may repay such loaned amounts out of the proceeds of the Trust Account released to us. 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 loaned amounts, 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 convertible into warrants of the post business combination entity at a price of $1.00 per warrant at the option of the lender. The warrants would be identical to the Private Placement Warrants. In connection with the Company’s assessment of going concern considerations in accordance with ASC 205-40, “Presentation of Financial Statements - Going Concern,” as of March 31, 2026, Management believes we may need to raise additional capital through loans or additional investments from its Sponsor, shareholders, officers, directors, or third parties. The Company’s officers, directors and Sponsor may, but are not obligated to, loan the Company funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet the Company’s working capital needs. Accordingly, we may not be able to obtain additional financing. If we are unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses. We cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all. The Company’s liquidity condition raises substantial doubt about our ability to continue as a going concern for a period of time within one year after the date that the accompanying unaudited condensed financial statements are issued. Management plans to address this uncertainty through a Business Combination. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after the Completion Window. We intend to complete the initial Business Combination before the end of the Completion Window. However, there can be no assurance that we will be able to consummate any business combination by the end of the Completion Window. Off-Balance Sheet Arrangements We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of March 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 We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement with the Sponsor or an affiliate to pay an aggregate of $10,000 per month for office space, utilities and secretarial and administrative support. These monthly fees will cease upon the completion of the initial business combination or the liquidation of the Company. The Company granted the underwriters a 45-day option from the date of the Initial Public Offering to purchase up to an additional 3,000,000 Units to cover over-allotments, if any. On January 26, 2026, the Company consummated the closing of an additional 2,500,000 Units sold pursuant to the underwriters’ over-allotment option. The underwriters had 45 days from the date of the Initial Public Offering to purchase the remaining 500,000 Units. On March 6, 2026, the underwriters’ over-allotment option expired for 500,000 Units. The underwriters were entitled to a cash underwriting discount of 1.50% of the gross proceeds of the Initial Public Offering, or $3,375,000 in the aggregate, which was paid at the closing of the Initial Public Offering and during the partial exercise of the over-allotment option. Additionally, the underwriters are entitled to a deferred underwriting discount of 2.50% of the gross proceeds of the Initial Public Offering, or $5,625,000 in the aggregate, and is payable to the underwriters based on the total amount of funds remaining in the trust account after redemptions of public shares; provided that the underwriters have agreed to waive their rights to the deferred underwriting commissions if the trust account is less than $70 million on the closing date of the initial business combination. 17 Critical Accounting Estimates The preparation of unaudited condensed 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 unaudited condensed financial statements, and income and expenses during the periods reported. Making estimates requires management to exercise significant judgement. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the unaudited condensed financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could materially differ from those estimates. As of March 31, 2026, we did not have any critical accounting estimates to be disclosed. Net Income per Class B Ordinary Share The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. The Company has two classes of shares, which are referred to as Class A ordinary shares and Class B ordinary shares. Income and losses are shared pro rata between the two classes of shares. Net income per Class B Ordinary Share is computed by dividing net loss by the weighted average number of ordinary shares outstanding for the period. Accretion associated with the redeemable Ordinary Shares is excluded from income per Class B Ordinary Share as the redemption value approximates fair value. Recent Accounting Pronouncements Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our unaudited condensed financial statements. Item 3. Quantitative and Qualitative Disclosures About Market Risk Not required for smaller reporting companies.