UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2024
or
☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to ______________
Iron Horse Acquisitions Corp.
(Exact name of registrant as specified in its charter)
| Delaware | 001-41898 | 87-4105289 | ||
| (State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
| P.O. Box 2506 Toluca Lake, CA | 91610 | |
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code: (310) 290-5383
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Common Stock | IROH | The Nasdaq Stock Market LLC | ||
| Rights | IROHR | The Nasdaq Stock Market LLC | ||
| Units | IROHU | The Nasdaq Stock Market LLC | ||
| Warrants | IROHW | The Nasdaq Stock Market LLC |
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
| Emerging Growth Company | ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☒ No ☐
At June 30, 2024, the aggregate market value of the voting and non-voting common stock held by non-affiliates of the Registrant was $ 69,414,000.
As of February 21, 2025, the Registrant had 8,867,000 shares of common stock outstanding (inclusive of shares included in our units).
DOCUMENTS INCORPORATED BY REFERENCE
None.
Iron Horse Acquisitions Corp.
Annual Report on Form 10-K for the Year Ended December 31, 2024
i
CERTAIN TERMS
When used throughout this Annual Report on Form 10-K, references to:
| ● | “we,” “us,” “our,” or “the Company” are to Iron Horse Acquisitions Corp. |
| ● | the “Board” are to our Board of Directors. |
| ● | the “SEC” are to the U.S. Securities and Exchange Commission. |
| ● | “NASDAQ” are to the Nasdaq Global Market. |
| ● | the “Securities Act” are to the Securities Act of 1933, as amended. |
| ● | the “Exchange Act” are to the Securities Exchange Act of 1934, as amended. |
| ● | our “Prospectus” are to the final prospectus, filed with the SEC pursuant to Rule 424(b)(4) under the Securities Act on December 29, 2023 (covering Registration Statement No’s. 333-275076 and 333-276282). |
| ● | our “IPO” or “initial public offering” are to the initial public offering of our securities pursuant to our Prospectus, which offering was consummated on December 29, 2023. |
| ● | our “units” are to the units sold in our IPO, each having a price of $10.00 and consisting of one share of common stock, par value $0.0001 per share, one warrant, and one right entitling the holder to receive one-fifth (1/5) of one share of common stock upon consummation of our initial business combination, subject to adjustment as described in our Prospectus. |
| ● | our “public shares” are to shares of our common stock sold as part of the units in the IPO. |
| ● | our “warrants” are to the redeemable warrants sold as part of the units in the IPO. |
| ● | our “rights” are to the rights, each entitling the holder to receive one-fifth (1/5) of one share of common stock upon consummation of our initial business combination, sold as part of the units in the IPO. |
| ● | “public stockholders” are to the holders of our public shares, including our officers and directors to the extent they own public shares, provided that their status as “public stockholders” shall only exist with respect to such public shares. |
| ● | our “sponsor” are to Bengochea SPAC Sponsors I LLC. |
| ● | “EF Hutton” are to EF Hutton LLC, the representative of the underwriters in our IPO. |
| ● | our “management” or our “management team” refer to our officers and directors. |
| ● | our “initial stockholders” are to our sole stockholder prior to our IPO (excluding EF Hutton), Bengochea SPAC Sponsors I LLC. |
| ● | our “Founder Shares” are to the shares of common stock issued to our initial stockholders prior to our IPO. |
| ● | an “initial business combination” or a “business combination” are to the merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities that we are seeking to source, negotiate and consummate in accordance with our organizational documents. |
| ● | “equity-linked securities” are to any debt or equity securities issued in a transaction, including but not limited to a private placement of equity or debt, that are convertible, exercisable or exchangeable for shares of common stock. |
ii
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Statements in this Annual Report that are not purely historical are forward-looking statements. Our forward-looking statements include, but are not limited to, statements regarding our or our management’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipates,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predicts,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this Annual Report may include, for example, statements about:
| ● | our ability to complete our initial business combination; |
| ● | our success in retaining or recruiting, or changes required in, our officers, key employees or directors following our initial business combination; |
| ● | our officers and directors allocating their time to other businesses and potentially having conflicts of interest with our business or in approving our initial business combination; |
| ● | our potential ability to obtain additional financing to complete a business combination; |
| ● | our pool of prospective target businesses; |
| ● | the ability of our officers and directors to generate a number of potential investment opportunities; |
| ● | potential changes in control if we acquire one or more target businesses for stock; |
| ● | our public securities’ potential liquidity and trading; |
| ● | the lack of a market for our securities; |
| ● | the impact on our business prospects of recently announced or proposed changes to rules or regulations impacting special purpose acquisition companies; |
| ● | the impact on our business prospects of ongoing market turbulence, rising interest rates, or geopolitical concerns and government instability; |
| ● | our expectations regarding the time during which we will be an “emerging growth company” under the JOBS Act or a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K; |
| ● | our use of proceeds not held in the trust account; or |
| ● | our financial performance following our IPO or following our initial business combination. |
The forward-looking statements contained in this Annual Report are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under the heading “Risk Factors” in our Prospectus. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
iii
part I
ITEM 1. BUSINESS
General
We are a blank check company incorporated as a Delaware corporation whose business purpose is to effect a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.
On December 29, 2023, we consummated our IPO of 6,900,000 Units, which amount includes partial exercise of the underwriters’ over-allotment option for 800,000 Units and 100,000 Units registered pursuant to a registration statement on Form S-1MEF (File No. 333-276282) pursuant to Rule 462(b) under the Securities Act of 1933, as amended, filed on December 27, 2023, in addition to the Units registered pursuant to the Company’s registration statement on Form S-1 (File No. 333-275076) with respect to the IPO. Each Unit consisting of one share of Common Stock, one warrant to purchase one share of Common Stock at a price of $11.50, and one right entitling the holder to receive one-fifth (1/5) of one share of Common Stock upon consummation of our initial business combination. The Units were sold at a price of $10.00 per Unit, generating gross proceeds of $$69,000,000. Simultaneously with the closing of the IPO, we consummated the private placement (the “Private Placement”) with Bengochea SPAC Sponsors I LLC, our sponsor, of 2,457,000 warrants, generating total proceeds of $2,457,000.
The Private Warrants are identical to the Warrants (as defined below) sold in the IPO except that the Private Warrants are non-redeemable and may be exercised on a cashless basis, in each case so long as they continue to be held by the Sponsor, or its permitted transferees. Additionally, our Sponsor agreed not to transfer, assign, or sell any of the Private Warrants or underlying securities (except in limited circumstances, as described in the Private Placement Warrants Subscription Statement) until the date we complete our initial business combination. The Sponsor was granted certain demand and piggyback registration rights in connection with the purchase of the Private Warrants.
A total of $69,000,000 of the net proceeds from the sale of Units in the IPO and the net proceeds from the Privat e Placement was placed in a trust account established for the benefit of our public shareholders in a trust account at J.P. Morgan Chase Bank, N.A. maintained by Continental Stock Transfer & Trust Company, acting as trustee. None of the funds held in trust will be released from the trust account, other than interest income to pay any tax obligations, until the earlier of (i) the consummation of the initial business combination, (ii) our failure to consummate a business combination by March 29, 2025 (or, if extended, June 29, 2024, if applicable), (iii) the redemption of any public shares properly submitted in connection with a stockholder vote to amend our amended and restated certificate of incorporation (a) to modify the substance or timing of the ability of holders of our public shares to seek redemption in connection with our initial business combination or our obligation to redeem 100% of the public shares if we do not complete an initial business combination by March 29, 2025 (or, if extended, June 29, 2024), if applicable, or (b) with respect to any other provision relating to stockholders’ rights or pre-business combination activity.
Recent Developments
Entry into the Share Exchange Agreement
On September 27, 2024, we entered into a Share Exchange Agreement, which was subsequently amended and restated effective December 18, 2024, by and among Iron Horse, Rosy Sea Holdings Limited, a company incorporated and existing under the laws of the British Virgin Islands (“Seller”) and Zhong Guo Liang Tou Group Limited, a company incorporated and existing under the laws of the British Virgin Islands (“CFI”) and a wholly owned subsidiary of Seller. Pursuant to the terms of the Business Combination Agreement, Iron Horse will purchase from Seller the ordinary shares of CFI, in exchange for shares of Common Stock of Iron Horse, as a result of which CFI will become a wholly owned subsidiary of Iron Horse. In connection with the acquisition, Iron Horse will change its name to “CN Healthy Food Tech Group Corp.” The board of directors of Iron Horse has unanimously (i) approved and declared advisable the Business Combination Agreement and the transactions contemplated by the Business Combination Agreement and Additional Agreements, and (ii) resolved to recommend approval of the Business Combination Agreement and related matters by the stockholders of Iron Horse once the Registration Statement has been declared effective. The Share Exchange Agreement provides, among other things, that we will purchase from Seller the ordinary shares of CFI in exchange for shares of the Company’s Common Stock, as a result of which the CFI will become a wholly owned subsidiary of Iron horse. Assuming that public holders of Common Stock eligible to have the Company redeem all or a portion of their shares of Common Stock in connection with the proposals to be presented to the Company’s stockholders at a meeting of such stockholders (the “Stockholder Meeting”) approve (the “Stockholders’ Approval”) the Business Combination Agreement and the transactions contemplated thereby and by the related agreements (the “Transactions”) and certain related proposals (collectively, the “Transaction Proposals”) for a pro rata share of the funds on deposit in the Trust Account, the Company will issue to Seller 47,888,000 shares of Common Stock (the “Consideration”) pursuant to the Business Combination Agreement. The number of shares of Common Stock constituting the Consideration will be reduced on a one-for-one basis by the number of shares of Common Stock that remain in the Trust Account immediately prior to the closing of the Transactions (the “Closing”), such that if no eligible shares are redeemed, the number of shares of Common Stock constituting the Consideration will be 40,988,000.
1
Acquisition Strategy
Our team leveraged its skills and expertise to identify attractive target companies and provide guidance on the benefits of being a publicly-traded entity, including broader access to capital, increased liquidity for potential acquisitions, expanded branding opportunities in the marketplace, and reputational and consumer confidence gains, and on the process of transitioning from a private company to a public registrant. Consistent with this strategy, we identified various parameters and criteria that we think are important and relevant in evaluating prospective target businesses. We applied these parameters in evaluating prospects.
Although we disclosed in the IPO prospectus that we intended to initially focus on target companies within the media & entertainment industry with a primary focus on the United States, and in particular on identifying attractive targets among content studios and film production, family entertainment, animation, music, gaming, e-sports, talent management, and talent-facing brands and businesses, we considered prospective target businesses that were not limited to that industry or to a specific geographic region although. During this search process, we evaluated approximately 59 business combination opportunities in North America as well as in Asia and in Europe, across a broad range of sectors including media, entertainment, live events, sports, health & fitness, AI, gaming, music, online gambling, fashion, consumer products, and more before deciding to move ahead with CFI.
| ● | Growth Prospects: We intended to seek companies with high growth trajectories that are driven by competitive advantages that can be accelerated or magnified through a partnership with us and access to the public markets. |
| ● | Earnings Potential: We intended to acquire one or more businesses that have multiple and diverse potential drivers of revenue and earnings growth and that have the potential to generate strong and stable free cash flow. |
| ● | M&E Focus: We intended to prioritize entities within our team’s core spheres of expertise and from among our team’s proprietary connections, such as celebrity content producers and brands, family entertainment, animation, gaming, and music businesses which we believe have benefited from the evolving M&E ecosystem. This included businesses in entertainment for which AI-based technologies can enhance cash flows by improving efficiency or output or reduce costs. |
| ● | Diversity: We intended to seek targets that can benefit from our team’s diversity and relationships in the M&E sector. This included prospective targets who can enhance their existing business and generate value by working with individual members of our team or becoming part of our team’s network; targets who are minority owned-or-operated; and targets who wish to increase or highlight their executive diversity. |
| ● | Public Advantages: We intended to seek target companies that are public market ready and whose leadership teams have the vision to take advantage of and appreciate the benefits of becoming a publicly-traded entity. |
| ● | Evolving Circumstance: We intended to seek companies which are capitalizing on M&E industry shifts and trends created by various factors such as the migration from cable television to streaming services and the proliferation of generative AI-based technologies. |
| ● | Valuations: We considered ourselves to be rigorous, disciplined and valuation-centric investors, with a keen understanding of market value and successful track record. We intended to seek companies with a respectable market share and growth potential in the segments in which they operate. |
These criteria are not intended to be exhaustive. Any evaluation relating to the merits of a particular initial business combination may be based, to the extent relevant, on these general guidelines, as well as other considerations, factors and criteria deemed relevant by our management in effecting our initial business combination consistent with our business objectives.
As noted above, since CFI is not in the media and entertainment space, not all of the initial criteria and guidelines above were applicable. However, in evaluating CFI, we conducted a due diligence review which encompassed, among other things, meetings with incumbent management and employees, document reviews, interviews of distributors and suppliers, inspections of facilities, as well as reviewing financial and other information that was will be made available to us.
2
Selection of a Target Business and Structuring of a Business Combination
Subject to our management team’s fiduciary obligations and the limitations that a target business have a fair market value of at least 80% of the balance in the trust account (net of deferred underwriting commissions and taxes payable) at the time of the execution of a definitive agreement for our initial business combination, and that we must acquire a controlling interest in the target business, our management will have virtually unrestricted flexibility in identifying and selecting a prospective target business. We have not established any specific attributes or criteria (financial or otherwise) for prospective target businesses other than the parameters described in the section titled “Acquisition Strategy” in this Annual Report. In evaluating a prospective target business, our management may consider a variety of factors in addition to those parameters, including:
| ● | financial condition and results of operation; |
| ● | growth potential; |
| ● | brand recognition and potential; |
| ● | experience and skill of management and availability of additional personnel; |
| ● | capital requirements; |
| ● | competitive position; |
| ● | barriers to entry; |
| ● | stage of development of the products, processes or services; |
| ● | existing distribution and potential for expansion; |
| ● | degree of current or potential market acceptance of the products, processes or services; |
| ● | proprietary aspects of our tangible and intangible assets and the extent of intellectual property or other protections for our products, formulas, brands or media; |
| ● | impact of regulation on the business; |
| ● | regulatory environment of the industry; |
| ● | costs associated with effecting the business combination; |
| ● | industry leadership, sustainability of market share and attractiveness of industries in which a target business participates; and |
| ● | macro competitive dynamics in the industry within which the company competes. |
These criteria are not intended to be exhaustive. Any evaluation relating to the merits of a particular business combination will be based, to the extent relevant, on the above factors as well as other considerations deemed relevant by our management team in effecting a business combination consistent with our business objective. In evaluating a prospective target business, we will conduct an extensive due diligence review which will encompass, among other things, meetings with incumbent management and inspection of facilities, as well as review of financial and other information which is made available to us. This due diligence review will be conducted either by our directors, officers, and/or strategic advisors, our professional advisors (such as lawyers, accountants, and financial advisors), and by unaffiliated third parties we may engage or that our sponsor may engage on our behalf pursuant to our administrative services agreement with our sponsor.
The time and costs required to select and evaluate a target business and to structure and complete our initial business combination cannot presently be ascertained with any degree of certainty. Any costs incurred with respect to the identification and evaluation of a prospective target business with which a business combination is not ultimately completed will result in a loss to us and reduce the amount of capital available to otherwise complete a business combination.
Fair Market Value of Target Business
NASDAQ listing rules require that the target business or businesses that we acquire must collectively have a fair market value equal to at least 80% of the balance of the funds in the trust account (net of deferred underwriting commissions and taxes payable) at the time of the execution of a definitive agreement for our initial business combination. Notwithstanding the foregoing, if we are not then listed on NASDAQ for whatever reason, we would no longer be required to meet the foregoing 80% fair market value test.
3
We currently anticipate structuring a business combination to acquire 100% of the equity interests or assets of the target business or businesses. We may, however, structure our initial business combination where we merge directly with the target business or a newly formed subsidiary or where we acquire less than 100% of such interests or assets of the target business in order to meet certain objectives of the target management team or stockholders or for other reasons, but we do not intend to complete such business combination unless the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act of 1940, as amended. Even if the post-transaction company owns or acquires 50% or more of the voting securities of the target, our stockholders prior to the business combination may collectively own a minority interest in the post-transaction company, depending on valuations ascribed to the target and us in the business combination transaction. For example, we could pursue a transaction in which we issue a substantial number of new shares in exchange for all of the outstanding capital stock of a target. In this case, we could acquire a 100% controlling interest in the target; however, as a result of the issuance of a substantial number of new shares, our stockholders immediately prior to our initial business combination could own less than a majority of our outstanding shares subsequent to our initial business combination. If less than 100% of the equity interests or assets of a target business or businesses are owned or acquired by the post-transaction company, the portion of such business or businesses that is owned or acquired is what will be valued for purposes of the 80% of trust account balance test.
The fair market value of the target will be determined by our Board of Directors based upon one or more standards generally accepted by the financial community (such as actual and potential sales, earnings, cash flow and/or book value). The proxy solicitation materials or tender offer documents used by us in connection with any proposed transaction will provide public stockholders with our analysis of the fair market value of the target business, as well as the basis for our determinations. If our Board is not able to independently determine that the target business has a sufficient fair market value, we will obtain an opinion from an unaffiliated, independent investment banking firm, or another independent entity that commonly renders valuation opinions, with respect to the satisfaction of such criteria. We will not be required to obtain an opinion from an investment banking firm as to the fair market value if our Board of Directors independently determines that the target business complies with the 80% threshold.
Business Combination Agreement
On September 27, 2024, Iron Horse entered into the Business Combination Agreement which was subsequently amended and restated effective December 18, 2014, by and among Iron Horse, Seller and CFI. and a wholly owned subsidiary of Seller. Pursuant to the terms of the Business Combination Agreement, Iron Horse will purchase from Seller the ordinary shares of CFI in exchange for shares of Common Stock of Iron Horse, as a result of which CFI will become a wholly owned subsidiary of Iron Horse. In connection with the acquisition, Iron Horse will change its name to “CN Healthy Food Tech Group Corp.” The board of directors of Iron Horse has unanimously (i) approved and declared advisable the Business Combination Agreement and the transactions contemplated by the Business Combination Agreement and Additional Agreements, and (ii) resolved to recommend approval of the Business Combination Agreement and related matters by the stockholders of Iron Horse once the Registration Statement has been declared effective. The following is a summary of the material changes that were included in the amended and restated Business Combination Agreement: (i) including CFI as a party to the Business Combination, which included CFI making the representations and warranties; (ii) including compensation to the Sponsor in the amount of $2,000,000 to be paid at the Closing; and (iii) updating Section 11.6 to include the additional Acquiror expenses that will be paid by CFI at the Closing and to include that the Acquiror Promissory Note will remain outstanding if the Closing does not occur due to a Terminating Acquiror Breach, that is not cured, or regulatory action.
Assuming that Iron Horse’s public stockholders elect to redeem all such eligible shares of Common Stock, Iron Horse will issue to Seller 47,888,000 shares of Common Stock (the “Consideration Shares”) pursuant to the Business Combination Agreement. The number of shares of Common Stock constituting the Consideration Shares will be reduced on a one-for-one basis by the number of shares of Common Stock that remain in the trust account immediately prior to the closing of the Business Combination (the “Closing”), such that if no eligible shares are redeemed, the number of shares of Common Stock constituting the Consideration Shares will be 40,988,000.
Representations and Warranties; Covenants
The parties to the Business Combination Agreement have agreed to customary representations and warranties for transactions of this type including representations and warranties with respect to CFI made by Seller. In addition, the parties agreed to be bound by certain customary covenants for transactions of this type, including, among others, covenants with respect to the conduct of Iron Horse and CFI and its subsidiaries during the period between the execution of the Business Combination Agreement and the Closing. Each of Seller and Iron Horse also agreed to use reasonable best efforts to obtain all material consents and approvals of third parties that the parties are required to obtain in order to consummate the Transactions, and to take or cause such other action as may be reasonably necessary or as the other party may reasonably request to consummate the Transactions as soon as practicable. Additionally, the parties have agreed not to facilitate, negotiate or enter into competing transactions, as further provided in the Business Combination Agreement.
Iron Horse and Seller also agreed, among other things, that during the period between the execution of the Business Combination Agreement and the Closing, to the extent permitted by applicable law, they will, and will cause their subsidiaries to, allow the other party and its representatives to continue to conduct due diligence investigations and examinations of CFI and its subsidiaries (on the part of Iron Horse) or Iron Horse (on the part of Seller), and cooperate with the other party and its representatives regarding all other due diligence matters, including document requests.
4
Iron Horse agreed to take all action within its power so that immediately following the Closing, Iron Horse’s board of directors will consist of no fewer than five individuals, two of whom may be designated by Iron Horse’s sponsor, and a majority of whom must qualify as independent directors under applicable stock exchange regulations, and that shall comply with all diversity requirements under applicable law. Seller agreed to take all action within its power so that immediately following the Closing, the board of directors of CFI and each subsidiary thereof consist of directors designated in writing by Iron Horse and that complies with applicable law.
Non-Solicitation Restrictions
Each of Iron Horse and CFI has agreed that from the date of the Agreement to the earlier of the Closing and the termination of the Agreement, neither CFI, on the one hand, nor Iron Horse, on the other hand, will (and will cause their respective Representatives not to) directly or indirectly:
| ● | enter into, solicit, initiate or continue any discussions or negotiations with, or encourage or respond to any inquiries or proposals by, or participate in any negotiations with, or provide any information to, or otherwise cooperate in any way with, any person or other entity or “group” within the meaning of Section 13(d) of the Exchange Act, concerning any Alternative Transaction, |
| ● | enter into any agreement regarding, continue or otherwise participate in any discussions regarding, or furnish to any person any information with respect to, or cooperate in any way that would otherwise reasonably be expected to lead to, any Alternative Transaction, or |
| ● | commence, continue or renew any due diligence investigation regarding any Alternative Transaction. Such exclusivity provisions terminate immediately upon the earlier of (i) the Closing, or (ii) the termination of the Agreement. |
Conditions to Closing
Under the Business Combination Agreement, the obligations of Iron Horse to consummate the Transactions are subject to the satisfaction or waiver of certain closing conditions, including, without limitation:
| ● | the Stockholders’ Approval having been obtained; |
| ● | all regulatory approvals, consents, actions, inactions, or waivers necessary or advisable to lawfully complete the Transactions having been obtained, expired or terminated, as applicable; |
| ● | the registration statement containing the proxy statement/prospectus to be filed by Iron Horse with the Securities and Exchange Commission (the “SEC”) relating to the shares of Common Stock to be issued pursuant to the Business Combination Agreement (the “Registration Statement”) becoming effective under the Securities Act of 1933, as amended (the “Securities Act”), no stop order suspending the effectiveness of the Registration Statement having been issued, and no proceeding seeking such a stop order having been threatened or initiated by the SEC and not withdrawn; |
| ● | the Common Stock to be issued in connection with the Transactions having been approved for listing on The Nasdaq Stock Market LLC; |
| ● | no order or law having been issued by any governmental entity, securities exchange or similar body that is then in effect or pending and that has the effect of making the Transactions illegal or that otherwise prevents or prohibits consummation of the Transactions; |
| ● | the representations and warranties of Seller being true and correct, subject to the materiality standards contained in the Business Combination Agreement; |
| ● | material compliance by Seller with its pre-closing covenants; |
| ● | the absence of a Company Material Adverse Effect (as defined in the Business Combination Agreement); |
| ● | Seller having executed the Shareholder Support Agreement and the Lock-Up Agreement (each as defined below); and |
| ● | Iron Horse having completed and being reasonably satisfied with its due diligence review of CFI. |
5
Under the Business Combination Agreement, the obligations of Seller to consummate the Transactions are subject to the satisfaction or waiver of certain closing conditions, including, without limitation:
| ● | the representations and warranties of Iron Horse being true and correct, subject to the materiality standards contained in the Business Combination Agreement; |
| ● | material compliance by Iron Horse with its pre-closing covenants; and |
| ● | the absence of an Acquiror Material Adverse Effect (as defined in the Business Combination Agreement). |
Termination
The Business Combination Agreement provides that it may be terminated, and the Transactions abandoned, under certain customary and limited circumstances, including, without limitation:
| ● | upon the mutual written consent of Seller and Iron Horse; |
| ● | by either Seller or Iron Horse if any governmental entity, court, securities exchange or similar body shall have issued an order that has the effect of making consummation of the Transactions illegal or otherwise preventing or prohibiting consummation of the Transactions and such order shall have become final and nonappealable; |
| ● | by Seller within 10 business days after Iron Horse changes its recommendation with respect to the Transaction Proposals; |
| ● | by either Seller or Iron Horse if Iron Horse holds the Stockholder Meeting and the Stockholders’ Approval is not received; |
| ● | by Iron Horse if Seller has not delivered required audited and unaudited financial statements of CFI by certain dates; |
| ● | by either Seller or Iron Horse if the other is in breach of any of its representations, warranties, covenants or agreements set forth in the Business Combination Agreement such that certain conditions to the Closing cannot be satisfied and such breach is not capable of being cured or is not cured within 30 days after receipt of notice of such breach; or |
| ● | by either Seller or Iron Horse if the Closing has not occurred on or before September 1, 2025. |
Neither Seller nor Iron Horse is required to pay a termination fee or reimburse the other for its expenses as a result of a termination of the Business Combination Agreement. Each of them will, however, remain liable for willful and material breaches of the Business Combination Agreement prior to termination.
Other Agreements
Shareholder Support Agreement
The Business Combination Agreement provides that, subsequent to the execution and delivery of the Business Combination Agreement, Seller, Iron Horse and CFI will enter into a voting and support agreement pursuant to which, among other things, Seller will agree that it will not transfer and will vote its ordinary shares of CFI in favor of the Business Combination Agreement (including by execution of a written consent) and the Transactions, and that it will take such other actions as may be necessary to further its performance of the Business Combination Agreement and the consummation of the Transactions.
Sponsor Support Agreement
The Business Combination Agreement provides that, subsequent to the execution and delivery of the Business Combination Agreement, Seller, Iron Horse and Iron Horse’s sponsor will enter into a voting support agreement pursuant to which, among other things, the sponsor will agree that it will not transfer and will vote its shares of Common Stock and Iron Horse’s preferred stock, or any additional shares of Common Stock or Iron Horse’s preferred stock that it acquires prior to the Stockholder Meeting, in favor of the Business Combination Agreement and the Transactions and each of the Transaction Proposals.
Lock-Up Agreement
The Business Combination Agreement provides that, subsequent to the execution and delivery of the Business Combination Agreement, Seller will enter into lock-up agreements with Iron Horse pursuant to which, among other things, Seller will agree that it will not sell, for the period set forth therein, the shares of Common Stock it receives under the Business Combination Agreement.
6
Registration Rights Agreement
The Business Combination Agreement provides that Iron Horse and Seller will at the Closing enter into a registration rights agreement pursuant to which, among other things, Iron Horse will agree to provide Seller with certain rights relating to the registration for resale of the shares of Common Stock it receives under the Business Combination Agreement.
Consulting Agreements
The Business Combination Agreement provides that New CFI will enter into a Consulting Agreement with each of Mr. Bengochea and Mr. Caragol, which will be effective immediately after Closing. Mr. Bengochea and Mr. Caragol shall assist New CFI’s management, Board of Directors and Board committees in regard (i) financial reporting, (ii) SEC filings (iii) coordination with its auditors, (iv) governance issues, (v) investor relations, and (vi) any other activities that are reasonably requested. In addition, they will attend all New CFI’s Board of Director meetings as an observer. The Consulting Agreement will be for a six month term post-Closing, unless earlier terminated or extended by the parties. The consulting fee shall be 500,000 restricted shares of New CFI common stock, which shares shall be registered on a registration statement post-Closing. Any additional compensation to be paid upon extension of the term shall be mutually agreed to by and between New CFI and each of Mr. Bengochea and Mr. Caragol. New CFI shall reimburse each of Mr. Bengochea and Mr. Caragol for ordinary and customary expenses incurred in performing the consulting services. Any extraordinary expenses, require consent of New CFI.
Effecting Our Initial Business Combination
We are not presently engaged in, and we will not engage in, any operations for an indefinite period of time following the IPO. We intend to effectuate our initial business combination using cash from the proceeds of the IPO and the private placement of the private placement warrants.
In connection with the proposed business combination, we are seeking stockholder approval at a meeting called for such purpose at which stockholders may seek to convert their shares, regardless of whether they vote for or against the proposed business combination or don’t vote at all, into their pro rata share of the aggregate amount then on deposit in the trust account (net of taxes payable), subject to the limitations described herein and in our amended and restated certificate of incorporation. We will consummate our initial business combination only if a majority of the outstanding shares of common stock voted are voted in favor of the business combination. We have no specified maximum percentage threshold for redemptions in our amended and restated certificate of incorporation and even those public stockholders who vote in favor of our initial business combination have the right to convert their public shares. As a result, this may make it easier for us to consummate our initial business combination.
Public stockholders may therefore have to wait up to 18 months, if we extend the time to complete a business combination by another three months, as described in this Annual Report) from the closing of our IPO in order to be able to receive a pro rata share of the trust account.
Our initial stockholders, officers and directors have agreed (1) to vote any shares of common stock owned by them in favor of any proposed business combination, (2) not to convert any shares of common stock in connection with a stockholder vote to approve a proposed initial business combination and (3) not sell any shares of common stock in any tender in connection with a proposed initial business combination.
None of our officers, directors, initial stockholders or their affiliates has indicated any intention to purchase units or shares of common stock from persons in the open market or in private transactions. However, if we hold a meeting to approve a proposed business combination and a significant number of stockholders vote, or indicate an intention to vote, against such proposed business combination or that they wish to convert their shares, our officers, directors, initial stockholders or their affiliates could make such purchases in the open market or in private transactions in order to reduce the number of redemptions. Notwithstanding the foregoing, our officers, directors, initial stockholders and their affiliates will not make purchases of shares of common stock if the purchases would violate Section 9(a)(2) or Rule 10b-5 of the Exchange Act, which are rules designed to stop potential manipulation of a company’s stock.
Redemption Rights (a/k/a Conversion Rights)
At any meeting called to approve an initial business combination, public stockholders may seek to convert their shares, regardless of whether they vote for or against the proposed business combination or do not vote at all, into their pro rata share of the aggregate amount then on deposit in the trust account as of two business days prior to the consummation of the initial business combination, less any taxes then due but not yet paid. The per-share amount we will distribute to investors who properly convert their shares will not be reduced by the deferred underwriting commissions we will pay to EF Hutton.
Our initial stockholders and our officers and directors will not have redemption rights with respect to any shares of common stock owned by them, directly or indirectly, whether acquired prior to the IPO or purchased by them in the IPO or in the aftermarket. Additionally, the holders of Founder Shares will not have redemption rights with respect to the 35,000 shares of Common stock we issued to EF Hutton and its designees in the IPO (the “Representative Shares”).
7
We may require public stockholders, whether they are a record holder or hold their shares in “street name,” to either (i) tender their certificates to our transfer agent or (ii) deliver their shares to the transfer agent electronically using Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System, at the holder’s option, in each case prior to a date set forth in the proxy materials sent in connection with the proposal to approve the business combination.
There is a nominal cost associated with the above-referenced delivery process and the act of certificating the shares or delivering them through the DWAC System. The transfer agent will typically charge the tendering broker a nominal amount and it would be up to the broker whether or not to pass this cost on to the holder. However, this fee would be incurred regardless of whether or not we require holders seeking to exercise redemption rights. The need to deliver shares is a requirement of exercising redemption rights regardless of the timing of when such delivery must be effectuated.
However, in the event we require stockholders seeking to exercise redemption rights prior to the consummation of the proposed business combination and the proposed business combination is not consummated this may result in an increased cost to stockholders.
Any proxy solicitation materials we furnish to stockholders in connection with a vote for any proposed business combination will indicate whether we are requiring stockholders to satisfy such certification and delivery requirements. Accordingly, a stockholder would have from the time the stockholder received our proxy statement up until the vote on the proposal to approve the business combination to deliver his or her shares if he or she wishes to seek to exercise his or her redemptions rights. This time period varies depending on the specific facts of each transaction. However, as the delivery process can be accomplished by the stockholder, whether or not he is a record holder or his shares are held in “street name,” in a matter of hours by simply contacting the transfer agent or his broker and requesting delivery of his shares through the DWAC System, we believe this time period is sufficient for an average investor. However, we cannot assure you of this fact. Please see the risk factor in our Prospectus titled “In connection with any stockholder meeting called to approve a proposed initial business combination, we may require stockholders who wish to convert their shares in connection with a proposed business combination to comply with specific requirements for conversion that may make it more difficult for them to exercise their conversion rights prior to the deadline for exercising their rights.” for further information on the risks of failing to comply with these requirements.
Any request to convert such shares once made, may be withdrawn at any time up to the vote on the proposed business combination or the expiration of the tender offer. Furthermore, if a holder of public shares delivered his or her certificate in connection with an election of their redemption and subsequently decides prior to the applicable date not to elect to exercise such rights, he or she may simply request that the transfer agent return the certificate (physically or electronically).
If the initial business combination is not approved or completed for any reason, then our public stockholders who elected to exercise their redemption rights would not be entitled to convert their shares for the applicable pro rata share of the trust account. In such case, we will promptly return any shares delivered by public holders.
Liquidation if No Business Combination
Our amended and restated certificate of incorporation provides that we will have only 12 months from the closing of our IPO to complete an initial business combination. However, we may extend the period of time to consummate a business combination up to two times, each by an additional three months (for a total of 18 months to complete a business combination). In order to extend the time available for the Company to consummate a business Combination, without the need for a separate stockholder vote, our sponsor must, upon five days’ advance notice prior to the application deadline, deposit into the trust account $229,770 ($0.0333 per unit), or an aggregate of $459,540, for each three-month extension, on or prior to the date of the application deadline. On December 16, 2024, Iron Horse deposited $229,770 into the trust account to extend the amount of time it has available to complete a business combination to March 29, 2025. In the event that the stockholders, or affiliates or designees, elect to extend the time to complete the Company’s initial business combination and deposit the applicable amount of money into trust, the initial stockholders will receive a non-interest bearing, unsecured promissory note equal to the amount of any such deposit that will not be repaid in the event that the Company is unable to close a business combination unless there are funds available outside the trust account to do so. Such note would be paid upon consummation of the Company’s initial business combination.
If we have not completed an initial business combination by such date and stockholders have not otherwise amended our charter to extend this date, 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 100% of the outstanding public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including any interest not previously released to us but net of taxes payable and up to $100,000 of interest income that may be released to us for liquidation expenses, divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our Board of Directors, dissolve and liquidate, subject (in the case of (ii) and (iii) above) to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
8
Our initial stockholders, officers and directors have agreed that they will not propose any amendment to our amended and restated certificate of incorporation that would affect our public stockholders’ ability to convert or sell their shares to us in connection with a business combination as described herein or affect the substance or timing of our obligation to redeem 100% of our public shares if we do not complete a business combination within 12 months (or up to 18 months, if we extend the time to complete a business combination as described in this Annual Report) from the closing of our IPO unless we provide our public stockholders with the opportunity to convert their shares of common stock upon such approval at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest not previously released to us but net of franchise and income taxes payable, divided by the number of then outstanding public shares. This redemption right shall apply in the event of the approval of any such amendment, whether proposed by our initial stockholders, executive officers, directors or any other person.
Under the Delaware General Corporation Law, stockholders may be held liable for claims by third parties against a corporation to the extent of distributions received by them in a dissolution. The pro rata portion of our trust account distributed to our public stockholders upon the redemption of 100% of our outstanding public shares in the event we do not complete our initial business combination within the required time period may be considered a liquidation distribution under Delaware law. If the corporation complies with certain procedures set forth in Section 280 of the Delaware General Corporation Law intended to ensure that it makes reasonable provision for all claims against it, including a 60-day notice period during which any third-party claims can be brought against the corporation, a 90-day period during which the corporation may reject any claims brought, and an additional 150-day waiting period before any liquidating distributions are made to stockholders, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would be barred after the third anniversary of the dissolution. It is our intention to redeem our public shares as soon as reasonably possible following our 12-month anniversary (or up to 18 months, if we extend the time to complete a business combination as described in this Annual Report), and, therefore, we do not intend to comply with those procedures. As such, our stockholders could potentially be liable for any claims to the extent of distributions received by them (but no more) and any liability of our stockholders may extend well beyond the third anniversary of such date.
Furthermore, if the pro rata portion of our trust account distributed to our public stockholders upon the redemption of 100% of our public shares in the event we do not complete our initial business combination within the required time period is not considered a liquidation distribution under Delaware law and such redemption distribution is deemed to be unlawful, then pursuant to Section 174 of the Delaware General Corporation Law, the statute of limitations for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years, as in the case of a liquidation distribution.
Because we will not be complying with Section 280 of the Delaware General Corporation Law, Section 281(b) of the Delaware General Corporation Law requires us to adopt a plan, based on facts known to us at such time that will provide for our payment of all existing and pending claims or claims that may be potentially brought against us within the subsequent ten years. However, because we are a blank check company, rather than an operating company, and our operations will be limited to searching for prospective target businesses to acquire, the only likely claims to arise would be from our current and former vendors (such as lawyers, auditors investment bankers, etc.) or prospective target businesses.
We are required to seek to have all third parties (including any vendors or other entities we may engage) and any prospective target businesses enter into agreements with us waiving any right, title, interest or claim of any kind they may have in or to any monies held in the trust account. As a result, the claims that could be made against us will be limited, thereby lessening the likelihood that any claim would result in any liability extending to the trust. We therefore believe that any necessary provision for creditors will be reduced and should not have a significant impact on our ability to distribute the funds in the trust account to our public stockholders. Nevertheless, MaloneBailey, LLP, our independent registered public accounting firm, and the underwriters of the offering, will not execute agreements with us waiving such claims to the monies held in the trust account. Furthermore, there is no guarantee that other vendors, service providers and prospective target businesses will execute such agreements. Nor is there any guarantee that, even if they execute such agreements with us, they will not seek recourse against the trust account. Bengochea SPAC Sponsors I LLC, an entity affiliated with Mr. Bengochea, has agreed that it will be liable to ensure that the proceeds in the trust account are not reduced below $10.00 per share by the claims of target businesses or claims of vendors or other entities that are owed money by us for services rendered or contracted for or products sold to us, but we cannot assure you that it will be able to satisfy its indemnification obligations if it is required to do so. We have not independently verified whether Bengochea SPAC Sponsors I LLC has sufficient funds to satisfy its indemnity obligations, we have not asked it to reserve for such obligations and we do not believe it has any significant liquid assets. Accordingly, we believe it is unlikely that it will be able to satisfy its indemnification obligations if it is required to do so. Additionally, the agreement Bengochea SPAC Sponsors I LLC entered into specifically provides for two exceptions to the indemnity given: it will have no liability (1) as to any claimed amounts owed to a target business or vendor or other entity who has executed an agreement with us waiving any right, title, interest or claim of any kind they may have in or to any monies held in the trust account, or (2) as to any claims for indemnification by EF Hutton against certain liabilities, including liabilities under the Securities Act. As a result, if we liquidate, the per-share distribution from the trust account could be less than $10.00 due to claims or potential claims of creditors.
9
We anticipate notifying the trustee of the trust account to begin liquidating such assets promptly after our 12-month anniversary (or up to 18 months, if we extend the time to complete a business combination as described in this Annual Report) and anticipate it will take no more than 10 business days to effectuate such distribution. The holders of the Founder Shares have waived their rights to participate in any liquidation distribution from the trust account with respect to such shares. There will be no distribution from the trust account with respect to our rights or warrants, which will expire worthless. We will pay the costs of any subsequent liquidation from our remaining assets outside of the trust account. If such funds are insufficient, we will use the up to $100,000 of interest earned on the funds held in the trust account that may be released to us for our liquidation expenses.
If we are unable to complete an initial business combination and expend all of the net proceeds of the IPO, other than the proceeds deposited in the trust account, and without taking into account interest, if any, earned on the trust account, or any increase as a result of our extending the time to consummate a business combination as described herein, the initial per-share redemption price would be $10.00. As discussed above, the proceeds deposited in the trust account could become subject to claims of our creditors that are in preference to the claims of public stockholders.
Our public stockholders shall be entitled to receive funds from the trust account only in the event of our failure to complete a business combination within the required time period, if the stockholders seek to have us convert or purchase their respective shares upon a business combination which is actually completed by us or upon certain amendments to our amended and restated certificate of incorporation prior to consummating an initial business combination. In no other circumstances shall a stockholder have any right or interest of any kind to or in the trust account.
If we are forced to file a bankruptcy case or an involuntary bankruptcy case is filed against us which is not dismissed, the proceeds held in the trust account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our stockholders. To the extent any bankruptcy claims deplete the trust account, we cannot assure you we will be able to return to our public stockholders at least $10.00 per share.
If we are forced to file a bankruptcy case or an involuntary bankruptcy case is filed against us which is not dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover all amounts received by our stockholders. Furthermore, because we intend to distribute the proceeds held in the trust account to our public stockholders promptly after 12 months (or up to 18 months, if we extend the time to complete a business combination as described in this Annual Report) from the closing of our IPO, this may be viewed or interpreted as giving preference to our public stockholders over any potential creditors with respect to access to or distributions from our assets. Furthermore, our Board may be viewed as having breached their fiduciary duties to our creditors and/or may have acted in bad faith, and thereby exposing itself and our company to claims of punitive damages, by paying public stockholders from the trust account prior to addressing the claims of creditors. We cannot assure you that claims will not be brought against us for these reasons.
Amended and Restated Certificate of Incorporation
Our amended and restated certificate of incorporation contains certain requirements and restrictions relating to our operations that will apply to us until the consummation of our initial business combination. These provisions cannot be amended without the approval of a majority of our stockholders. If we seek to amend any provisions of our amended and restated certificate of incorporation that would affect our public stockholders’ ability to convert or sell their shares to us as described herein or affect the substance or timing of our obligation to redeem 100% of our public shares if we do not complete a business combination within 12 months (or up to 18 months, if we extend the time to complete a business combination as described in this Annual Report) from the closing of our IPO, we will provide public stockholders with the opportunity to convert their public shares in connection with any such vote. This redemption right shall apply in the event of the approval of any such amendment, whether proposed by any executive officer, director, initial stockholder, or any other person. Our initial stockholders, officers and directors have agreed to waive any redemption rights with respect to any Founder Shares and any public shares they may hold in connection with any vote to amend our amended and restated certificate of incorporation. Specifically, our amended and restated certificate of incorporation provides, among other things, that:
| ● | we shall either (1) seek stockholder approval of our initial business combination at a meeting called for such purpose at which stockholders may seek to convert their shares, regardless of whether they vote for or against the proposed business combination or don’t vote at all, into their pro rata share of the aggregate amount then on deposit in the trust account (net of taxes payable), or (2) provide our stockholders with the opportunity to sell their shares to us by means of a tender offer (and thereby avoid the need for a stockholder vote) for an amount equal to their pro rata share of the aggregate amount then on deposit in the trust account (net of taxes payable), in each case subject to the limitations described herein and in our amended and restated certificate of incorporation; |
| ● | we will consummate our initial business combination only if a majority of the outstanding shares of common stock voted are voted in favor of the business combination; |
| ● | if our initial business combination is not consummated within 12 months (or up to 18 months, if we extend the time to complete a business combination as described in this Annual Report) from the closing of our IPO, then we will redeem all of the outstanding public shares and thereafter liquidate and dissolve our company; |
10
| ● | we may not consummate any other business combination, merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar transaction prior to our initial business combination; and |
| ● | prior to our initial business combination, we may not issue additional stock that participates in any manner in the proceeds of the trust account, or that votes as a class with the common stock sold in our IPO on an initial business combination. |
Financial Position
With funds available for an initial business combination initially in the amount of $66,481,500 assuming no redemptions before non-reimbursable fees and expenses associated with our initial business combination and after payment of $2,518,500 of deferred underwriting fees and any offering costs, we offer a target business a variety of options such as creating a liquidity event for its owners, providing capital for the potential growth and expansion of its operations or strengthening its balance sheet by reducing its debt or leverage ratio. Because we are able to complete our initial business combination using our cash, debt or equity securities, or a combination of the foregoing, we have the flexibility to use the most efficient combination that will allow us to tailor the consideration to be paid to the target business to fit its needs and desires. However, we have not taken any steps to secure third party financing and there can be no assurance it will be available to us.
Employees
We have two executive officers. These individuals are not obligated to devote any specific number of hours to our matters and intend to devote only as much time as they deem necessary to our affairs. Since the selection of CFI as the business target, management has spent more time investigating and negotiating and processing the business combination (and consequently spend more time on our affairs) than had been spent prior to locating a suitable target business. We presently expect our executive officers to devote such amount of time as they reasonably believe is necessary to our business. We do not intend to have any full-time employees prior to the consummation of a business combination.
ITEM 1A. RISK FACTORS
As a smaller reporting company we are not required to make disclosures under this Item.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 1C. CYBERSECURITY
We are a SPAC with no business operations. Since our IPO, our sole business activity has been identifying and evaluating suitable acquisition transaction candidates. Therefore, we do not consider that we face significant cybersecurity risk and have not adopted any cybersecurity risk management program or formal processes for assessing cybersecurity risk. Our Board is generally responsible for the oversight of risks from cybersecurity threats, if there is any. We have not encountered any cybersecurity incidents since our IPO.
ITEM 2. PROPERTIES
We do not own any real estate or other physical properties materially important to our operations. We maintain our principal executive offices at P.O. Box 2506, Toluca Lake, California 91610, telephone number is (310) 290-5383. The cost for this space is provided to us by our sponsor, Bengochea SPAC Sponsors I LLC, as part of the $12,000 per month payment we make to it for office space and related services. We consider our current office space adequate for our current operations.
ITEM 3. LEGAL PROCEEDINGS
On January 4, 2024, the Company initiated a lawsuit against Omnia Global a/k/a Omnia Schweiz GmbH, Daniel Hansen, Mette Abel Hansen, and James Mair Findlay (collectively, “Omnia”) by filing a complaint in the U.S. District Court for the Southern District of New York, Case No. 1:24-cv-00048 alleging that Omnia had breached the Pre-Purchase Agreement by and between the Company and Omnia, dated as of May 12, 2023. The Company and Omnia have agreed to an amicable resolution of the lawsuit on mutually acceptable terms and without admission of fault by any party. On March 11, 2024, the Company settled an outstanding lawsuit against Omnia and the sponsor received the net lawsuit settlement amount of $206,500 on behalf of the Company ($295,000 gross settlement less $88,500 legal fees incurred). As of September 30, 2024, all payments due pursuant to the settlement have been made
Other than the above-mentioned (and now settled) lawsuit against Omnia, there is no material litigation, arbitration or governmental proceeding currently pending against us or any members of our management team in their capacity as such, and we and the members of our management team have not been subject to any such proceeding in the 12 months preceding the date of this Annual Report.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
11
part II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our units began to trade on the Nasdaq Global Market under the symbol “IROHU” on December 29, 2023. The shares of common stock, warrants and rights comprising the units began separate trading on NASDAQ on February 16, 2024, under the symbols “IROH,” “IROHW” and “IROHR,” respectively.
Holders of Record
As of February 21, 2025, there were 8,867,000 (inclusive of shares included in our units) of our shares of common stock issued and outstanding, held by a total of four (4) record holders. The number of record holders was determined from the records of our transfer agent and does not include beneficial owners of shares of common stock whose shares are held in the names of various security brokers, dealers, and registered clearing agencies.
Dividend Policy
We have not paid any cash dividends on our common stock to date and do not intend to pay cash dividends prior to the completion of our initial business combination. The payment of cash dividends after consummation of our initial business combination will depend upon revenues and earnings, if any, capital requirements and general financial condition subsequent to completion of a business combination. Further, if we incur any indebtedness, our ability to declare dividends may be limited by restrictive covenants we may agree to in connection therewith. The payment of any dividends subsequent to a business combination will be within the discretion of our Board of Directors at such time. It is the present intention of our Board of Directors to retain all earnings, if any, for use in our business operations and, accordingly, our Board of Directors does not anticipate declaring any dividends in the foreseeable future. In addition, our Board of Directors is not currently contemplating and does not anticipate declaring any stock dividends in the foreseeable future.
Securities Authorized for Issuance Under Equity Compensation Plans
None.
Recent Sales of Unregistered Securities
None.
Use of Proceeds
On December 29, 2023, the Company consummated its IPO of 6,900,000 units, which amount includes a partial exercise of the underwriters’ over-allotment option for 800,000 units and 100,000 units registered under a separate registration statement on Form S-1MEF. Each Unit consists of one share of common stock, one full warrant, and one right to receive one-fifth (1/5) of one share of common stock upon the consummation of an initial business combination. The units were sold at an offering price of $10.00 per unit, generating gross proceeds of $69,000,000.
A total of $69,000,000 of the net proceeds from the sale of Units in the initial public offering and the Private Placement was placed in a trust account established for the benefit of the Company’s public stockholders.
In connection with the closing of the IPO, we consummated the Private Placement with the sponsor of 2,457,000 private warrants, generating total proceeds of $2,457,000. The private warrants were issued pursuant to an exemption from registration under the Securities Act of 1933, as amended pursuant to Section 4(2) of the securities Act.
The private warrants are identical to the warrants sold as part of the public units in our IPO. Additionally, the sponsor agreed not to transfer, assign or sell any of the private warrants or underlying securities (except in limited circumstances, as described in our Prospectus) until 180 days after the completion of our initial business combination. The sponsor was granted certain demand and piggyback registration rights in connection with the purchase of the private warrants.
As of February 19, 2025, a total of $73,013,605 was held in a Trust Account established for the benefit of the Company’s public stockholders.
We paid a total of $586,500 in underwriting discounts and commissions (not including the deferred underwriting commission payable at the consummation of our initial business combination.
12
For a description of the use of the proceeds generated in our IPO, see Part II, Item 7 (Management’s Discussion and Analysis of Financial Condition and Results of Operations) of this Form 10-K.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
ITEM 6. [RESERVED]
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with our audited financial statements and the notes related thereto which are included in “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. Certain information contained in the discussion and analysis set forth below includes forward-looking statements. 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 and Risk Factor Summary,” and elsewhere in this Annual Report on Form 10-K.
Overview
We are a blank check company formed under the laws of the State of Delaware on November 23, 2021, whose business purpose is to effect a merger, capital stock 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 IPO and the sale of the Private Placement Warrants (as defined below), our capital stock, debt or a combination of cash, stock and debt.
On December 29, 2023, we consummated our IPO”) of 6,900,000 Units, which includes the partial exercise by the underwriters of their over-allotment option in the amount of 800,000 Units, at $10.00 per Unit, generating gross proceeds of $69,000,000. Simultaneously with the closing of the IPO, we consummated the sale of 2,457,000 warrants (the “Private Placement Warrants”) at a price of $1.00 per Private Placement Warrant, in a private placement to the sponsor, generating gross proceeds of $2,457,000.
Following the IPO and the sale of the Private Placement Warrants, a total of $69,000,000 was placed in the Company’s Trust Account with Continental Stock Transfer & Trust Company acting as trustee (the “Trust Account”). We incurred $4,651,705 of transaction expenses in connection with the IPO and the sale of the Private Placement Warrants, consisting of $586,500 of cash underwriting fees, $2,518,500 of deferred underwriting fees, and $1,546,705 of other offering costs.
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.
On September 29, 2024, the Company entered into a business combination agreement (the “Business Combination Agreement”), dated as of September 27, 2024, with Rosey Sea Holdings Limited, a company incorporated and existing under the laws of the British Virgin Islands (“Seller”) and the owner of 100% of the issued and outstanding capital stock of Zhong Guo Liang Tou Group Limited, a company incorporated and existing under the laws of the British Virgin Islands (the “Target”), pursuant to which the Company will purchase from Seller the ordinary shares of the Target in exchange for shares of Common Stock, as a result of which the Target will become a wholly owned subsidiary of the Company. Depending on the number of shares of Common Stock that the holders elect to have the Company redeem in connection with the proposals presented at the Company’s meeting of stockholders to approve the Business Combination Agreement and the transactions contemplated thereby and by the related agreements and certain related matters (collectively, the “Transactions”), the Company will issue between 40,988,000 and 47,888,000 shares of Common Stock to Seller pursuant to the Business Combination Agreement.
On October 14, 2024, the Company issued unsecured promissory note to the Target to pay or cause to be paid, the Acquiror Transaction Expenses, as may be incurred from time to time and as such expenses become due and payable. This loan is non-interest bearing, unsecured and repayable upon the date on which the Company consummates its initial business transaction or, at the Company’s discretion, if funds allow. As of December 31, 2024, there was $425,013 outstanding under the promissory note.
On December 4, 2024, the Company issued an extension note to the Target to fund the Company’s extension, which extends the period of time to complete a Business Combination to March 29, 2025. As of December 31, 2024, there was $229,770 outstanding under this note reported in Loan Payable in the accompanying audited balance sheets.
The consummation of the Transactions is subject to the satisfaction of customary closing conditions, including the effectiveness of the registration statement that the Company is required to file with the SEC, required Nasdaq and regulatory approvals, and the approval of the Business Combination Agreement, the Transactions and other required shareholder proposals by the Company’s stockholders.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities from November 23, 2021 (inception) through December 31, 2024 were organizational activities and those necessary to prepare for the IPO and, subsequent to the IPO, identifying a target company for a business combination. We do not expect to generate any operating revenues until after the completion of our initial 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), as well as for due diligence expenses in connection with searching for an appropriate target for, and completing, a business combination.
13
For the year ended December 31, 2024, we had net income of $1,375,819, which consists of change in fair value of overallotment liability of $11,135, gain on lawsuit settlements of $295,000 and interest earned on marketable securities held in the Trust Account of $3,526,053, partially offset by formation and operating costs of $1,709,829 and provision for income taxes of $746,540.
For the year ended December 31, 2023, we had a net loss of $308,792, which consists of formation and operating costs of $309,018, partially offset by the income tax benefit of $226.
Liquidity and Capital Resources
For the year ended December 31, 2024, cash used in operating activities was $1,012,960. Net income of $1,375,819 was affected by the change in fair value of the overallotment liability of $11,135, and interest earned on marketable securities held in the Trust Account of $3,526,053. Changes in operating assets and liabilities provided $1,148,409 of cash from operating activities.
For the year ended December 31, 2023, cash used in operating activities was $83,200. Net loss of $308,792 was affected by payment of office expenses made by sponsor of $269,251 and a courtesy discount on legal fees of $11,301. Changes in operating assets and liabilities used $32,358 of cash from operating activities.
As of December 31, 2024, we had $72,752,485 of cash held in the Trust Account. Through December 31, 2024, we have withdrawn $3,338 of interest earned from the marketable securities held in the Trust Account. 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 a business combination. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete a 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, 2024, we had cash of $454 outside the Trust Account. Until consummation of a business combination, we intend to use the funds held outside the Trust Account to fund our SEC and tax compliance and 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.
We may need to raise additional funds in order to meet the expenditures required for operating our business. If our estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating a business combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our consummation of a business combination. Moreover, we may need to obtain additional financing either to complete a business combination or because we become obligated to redeem a significant number of our public shares upon consummation of a business combination, in which case we may issue additional securities or incur debt in connection with such business combination.
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 funds as may be required. If we complete a business combination, we would repay such loaned amounts. In the event that we do not complete a business combination, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from the Trust Account would be used for such repayment. Such loans may be convertible into warrants to purchase common stock of the post-business combination entity at a price of $1.00 per warrant, at the option of the lender. These warrants would be identical to the Private Placement Warrants, including as to exercise price, exercisability and exercise period.
Going Concern
In connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standard Board’s Accounting Standards Update 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” we have determined that mandatory liquidation, should we not complete a business combination and an extension of our deadline to do so not be approved by the stockholders of the Company, and potential subsequent dissolution and the liquidity issue raise substantial doubt about the Company’s ability to continue as a going concern through March 29, 2025 (or June 29, 2025, if we extend the period of time to consummate a business combination as provided in our amended and restated certificate of incorporation), the scheduled liquidation date of the Company if it does not complete a business combination prior to such date. Management plans to complete a business combination before the mandatory liquidation date. However, there can be no assurance that we will be able to consummate any business combination by March 29, 2025 (or, if extended, June 29, 2024). These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
14
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of December 31, 2024.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities. We are party to an administrative services agreement with the sponsor. The sponsor has agreed that until the Company consummates a business combination, it will make office space, as well as general and administrative services including utilities and administrative support, available to the Company as may be required by the Company from time to time.
The underwriters in the IPO were entitled to a deferred underwriting discount of 3.65% of the gross proceeds of the IPO, or $2,518,500, payable upon the closing of an initial business combination. 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.
Critical Accounting Estimates
The preparation of 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 estimates as of December 31, 2024.
Recent Accounting Standards
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments in this ASU require disclosures, on an annual and interim basis, of significant segment expenses that are regularly provided to the chief operating officer decision maker (“CODM”), as well as the aggregate amount of other segment items included in the reported measure of segment profit or loss. The ASU requires that a public entity disclose the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. Public entities will be required to provide all annual disclosures currently required by Topic 280 in interim periods, and entities with a single reportable segment are required to provide all the disclosures required by the amendments in this ASU and existing segment disclosures in Topic 280. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.
Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our financial statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required for smaller reporting companies.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
This information appears following Item 15 of this Annual Report and is included herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
15
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended December 31, 2024, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial and accounting officer have concluded that during the period covered by this report, our disclosure controls and procedures were not effective at a reasonable assurance level and, accordingly, provided reasonable assurance that the information required to be disclosed by us in reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
Management’s Annual Report on Internal Control Over Financial Reporting
As required by SEC rules and regulations implementing Section 404 of the Sarbanes-Oxley Act, our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external reporting purposes in accordance with GAAP. Our internal control over financial reporting includes those policies and procedures that:
| (1) | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our company, |
| (2) | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors, and |
| (3) | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect errors or misstatements in our financial statements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of our internal control over financial reporting at December 31, 2024. In making these assessments, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework (2013). Based on our assessments and those criteria, management determined that we did not maintain effective internal control over financial reporting as of December 31, 2024, due to the lack of segregation of duties within account processes due to limited personnel and insufficient written policies and procedures for accounting, IT and financial reporting and record keeping.
Changes in Internal Control Over Financial Reporting
Other than the matters set forth above, there were no changes in our internal control over financial reporting that occurred during the fourth quarter of the fiscal year covered by this Annual Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
16
part III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following table sets forth information about our directors and executive officers as of March __, 2025.
| Name | Age | Title | ||
| Jose Antonio Bengochea | 33 | Chief Executive Officer and Director | ||
| William Caragol | 57 | Chief Financial Officer and Chief Operating Officer | ||
| Brian Turner | 64 | Chair | ||
| Ken Hertz | 65 | Director | ||
| Jane Waxman | 59 | Director | ||
| Scott Morris | 66 | Director |
Jose Antonio Bengochea, Esq., is our Founder and has served as our Chief Executive Officer since November 2021. Mr. Bengochea is also a member of our Board of Directors. Mr. Bengochea is the Founder and Chief Executive Officer of Bengochea Capital LLC, an investment firm founded in 2020 to pursue frontier asset classes and, through Mr. Bengochea’s network of connections to various industry executives and celebrities, to examine global opportunities in media and entertainment. Bengochea Capital has been present at the Cannes Film Festival, among other prestigious events, and was a registered media entity with the Recording Academy for the 2023 Grammy Awards and is a registered media entity for the upcoming 2024 Grammy Awards. Prior to founding Bengochea Capital, Mr. Bengochea was a part of Sony’s Global Business Development team in Los Angeles from 2018 to 2020. After graduating Harvard Law School and Harvard Business School with a J.D. and M.B.A. in 2017, Mr. Bengochea worked as a corporate attorney at the law firm Jenner & Block in New York City. Mr. Bengochea also holds an A.B. summa cum laude from Harvard University where he designed his own degree, entitled Comparative Imperial History, with a secondary degree in Archaeology. Mr. Bengochea also serves as Chief Executive Officer and Chairman of the Board of Iron Horse Acquisitions Corp. II, a special purpose acquisition corporation, which filed its registration statement for an initial public offering in January 2025. Given Mr. Bengochea’s extensive experience in mergers and acquisitions as well as his experience in the media and entertainment industry, we believe Mr. Bengochea will provide valuable advice as we consider potential merger candidates.
William Caragol, our Chief Operating Officer since inception and our Chief Financial Officer since October 2024, has over thirty years of experience working with growth stage companies. In 2018, he founded and is the Managing Director of Quidem LLC, a corporate strategic and financial advisory firm. Since July 2021 he has been the Chief Financial Officer of Mainz Biomed N.V. (NASDAQ: MYNZ), a molecular genetics diagnostic company specializing in the early detection of cancer. Since 2015, Mr. Caragol has been Chairman of the Board of Thermomedics, Inc., a privately held medical diagnostic equipment company. Since July 2021, Mr. Caragol has served on the Board of Directors of Worksport Ltd. (NASDAQ: WKSP), a growth stage technology company. Since July 2023, Mr. Caragol has served on the Board of Directors of Janover, Inc. (NASDAQ: JNVR), a B2B fintech marketplace company. From 2021 to 2023, Mr. Caragol served on the Board of Directors and was Chairman of the Audit Committee of Greenbox POS (NASDAQ: GBOX) a financial technology company leveraging proprietary blockchain security to build customized payment solutions. Mr. Caragol earned a B.S. in business administration and accounting from Washington & Lee University and is a member of the American Institute of Certified Public Accountants. Mr. Caragol also serves as Chief Financial Officer and Director of Iron Horse Acquisitions Corp. II, a special purpose acquisition corporation, which filed its registration statement for an initial public offering in January 2025. Given his financial expertise and successful career as a director and senior executive of numerous public companies, we believe Mr. Caragol will provide valuable perspectives to executing our strategy of identifying and evaluating merger candidates.
Brian Turner, our Chair of the Board since inception, has served on numerous public and private companies Boards of Directors since July 2009. Mr. Turner was the Chief Financial Officer of Coinstar Inc. from 2003 until June 2009. Prior to Coinstar, from 2001 to 2003, he served as Senior Vice President of Operations, Chief Financial Officer, and Treasurer of Real Networks, Inc., a digital media and technology company. Prior to Real Networks, from 1999 to 2001, Mr. Turner was employed by Bsquare Corp., a software company, where he initially served as Senior Vice President of Operations, Chief Financial Officer, and Secretary, before being promoted to President and Chief Operating Officer. From 1995 to 1999, Mr. Turner was Chief Financial Officer and Vice President of Administration of Radisys Corp., an embedded software company. Mr. Turner’s experience also includes 13 years at PricewaterhouseCoopers LLP where he held several positions including Director of Corporate Finance. Mr. Turner was formerly Chairman of the Board of Microvision, Inc. (NASDAQ: MVIS), a public company in the lidar space, and was formerly the Chair of the Audit Committee for MVIS. Since October, 2024 Mr. Turner is a director of Aesthetic Revolution, Inc. Mr. Turner has also been a director for several private companies. Mr. Turner holds a Bachelors of Business Administration in Accounting and a Bachelors of Arts in Political Science from the University of Washington. . Given his financial expertise and successful career as a director and senior executive of numerous public companies, we believe Mr. Turner will provide valuable perspectives to executing our strategy of evaluating merger candidates.
17
Ken Hertz, a member of our Board of Directors since inception, has served as a Senior Partner in the Los Angeles law firm of Hertz Lichtenstein Young & Polk LLP since 2007. Mr. Hertz and his partners specialize in representing talent, senior executives, entrepreneurs, agencies, and brands in entertainment, fashion, sports, media, and technology industries. Prior to forming the firm, Mr. Hertz had been a partner in Hansen Jacobson & Teller, since 1989. Before that, he was global head of music — business and legal affairs — for The Walt Disney Company. He is also a principal in memBrain — an entertainment marketing and strategy consulting firm that advises a number of C-Suite executives on their company’s entertainment related marketing strategies. memBrain has worked with Intel, McDonald’s, Hasbro, MillerCoors, Li & Fung and Logitech. Mr. Hertz has also been an active early-stage venture investor and advisor since 1997 and is a frequent speaker and commentator on the subjects of entertainment, marketing and convergence. He is often quoted in the New York Times, Los Angeles Times, and Wall Street Journal, has appeared on CNBC’s monthly newsmagazine “Business Nation,” has been an instructor at UCLA’s Anderson Graduate School of Management, Marshall School of Business, Stanford Business School, and an adjunct professor of law at USC. He graduated from UCLA with a J.D. in 1984 and U.C. Berkeley in 1981 with a B.S. Given Mr. Hertz’s extensive experience in mergers and acquisitions as well as his experience in the media and entertainment industry, we believe Mr. Hertz will provide valuable advice as we consider potential merger candidates
Jane Waxman, our Chief Financial Officer from inception through October 2024 and a director since inception, has extensive experience in the film entertainment industry with a diverse background in operations and financial management. Throughout her 30-year tenure at 20th Century Fox from 1990 to 2019, she served in a variety of roles within the finance organization. Most notably, as Executive Vice President and Deputy CFO, she was responsible for driving strategic priorities, setting financial priorities, policies and procedures and controls for the global finance organization. In her roles, she provided financial leadership and guidance to over 300 employees in all finance divisions including film production, theatrical, home entertainment and television marketing and distribution, financial reporting, accounting, corporate compliance, and strategic sourcing. Before joining 20th Century Fox, Ms. Waxman was a Senior Auditor at Ernst & Young. Ms. Waxman earned her bachelor’s degree from the University of California, Santa Barbara. She currently also serves on the board of Jonathan Jaques Children’s Cancer Center at Miller’s Children’s Hospital and served as sponsorship committee co-chair from 2010 to 2017. Given Ms. Waxman’s extensive experience as a financial executive in the media and entertainment industry, we believe Ms. Waxman will provide valuable advice as we consider potential merger candidates
Scott Morris, a member of our Board of Directors since inception, has been Chairman of Avista (NYSE: AVA) since 2008. Mr. Morris started his career at AVA in 1981. From 2008 to 2019, he served as the Company’s Chief Executive Officer and served as Avista’s President from 2008 to 2018. Prior to that, Mr. Morris was also the company’s Chief Operating Officer. His experiences include management positions in multiple industries, including construction, customer service, and utilities. He is a graduate of Gonzaga University and received his master’s degree from Gonzaga University in organizational leadership. He also attended the Stanford Business School Financial Management Program and the Kidder Peabody School of Financial Management. Mr. Morris serves on the boards of McKinstry Inc. and California Water Service. He is also a Trustee Emeritus of Gonzaga University. He has served on a number of Spokane nonprofit and economic development Boards. Given his financial expertise and successful career as a director and senior executive of several public companies, we believe Mr. Morris will provide valuable perspectives to executing our strategy of evaluating merger candidates.
Number and Terms of Office of Officers and Directors
We have five directors on our Board of Directors. Our Board of Directors is divided into three classes, each of which will generally serve for a term of three years with only one class of directors being elected in each year. Direction elections will be held at our annual meetings of stockholders. In accordance with NASDAQ corporate governance requirements, we are not required to hold an annual meeting until one year after our first fiscal year end following our listing on NASDAQ. Each class of directors is comprised of the following members:
| Class | Director Name | Year Term Expires | ||
| Class A | Ken Hertz | 2027 | ||
| Class B | Jane Waxman | 2025 | ||
| Class B | Scott Morris | 2025 | ||
| Class C | Jose Antonio Bengochea | 2026 | ||
| Class C | Brian Turner | 2026 |
Our officers are appointed by the Board and serve at the discretion of the Board, rather than for specific terms of office. Our Board is authorized to appoint persons to the offices set forth in our organizational documents as it deems appropriate. Our organizational documents provide that our officers may consist of a Chair of the Board (if such individual is also an officer), Vice Chairman of the Board (if such individual is also an officer), Chief Executive Officer, President, Chief Financial Officer, Chief Operating Officer, Secretary and Treasurer. Our Board, in its discretion, may also elect one or more Vice Presidents (including Executive Vice Presidents and Senior Vice Presidents), Assistant Secretaries, Assistant Treasurers, a Controller and such other officers as in the judgment of the Board may be necessary or desirable.
18
Committees of the Board of Directors
Our Board has four standing committees: an executive committee, an audit committee, a compensation committee and a nominating and corporate governance committee. NASDAQ rules and Rule 10A-3 of the Exchange Act require that the audit committee of a listed company be comprised solely of independent directors, and subject to certain limited exceptions, NASDAQ rules require that the compensation committee and nominating committee of a listed company be comprised solely of independent directors. Our audit committee, compensation committee and nominating and corporate governance committee are each governed by a written charter, which charters are incorporated by reference as s Exhibits 99.1, 99.2, and 99.3 to this Annual Report. In addition, a copy of any or all of these charters will be provided by us without charge upon request.
Executive Committee
The members of our executive committee are Ken Hertz, Brian Turner and Jose A. Bengochea. Ken Hertz is the chair of the executive committee. The executive committee has been formed for the purpose of broadening potential deal pipeline and sourcing targets from the networks of the executive committee members.
Audit Committee
The members of our audit committee are Brian Turner, Scott Morris, and Ken Hertz, each of whom is an independent director under NASDAQ’s listing standards. Brian Turner is the chair of the audit committee. The audit committee’s duties, which are specified in our Audit Committee Charter, include, but are not limited to:
| ● | reviewing and discussing with management and the independent auditor the annual audited financial statements, and recommending to the Board whether the audited financial statements should be included in our Form 10-K; |
| ● | discussing with management and the independent auditor significant financial reporting issues and judgments made in connection with the preparation of our financial statements; |
| ● | discussing with management major risk assessment and risk management policies; |
| ● | monitoring the independence of the independent auditor; |
| ● | verifying the rotation of the lead (or coordinating) audit partner having primary responsibility for the audit and the audit partner responsible for reviewing the audit as required by law; |
| ● | reviewing and approving all related-party transactions; |
| ● | inquiring and discussing with management our compliance with applicable laws and regulations; |
| ● | pre-approving all audit services and permitted non-audit services to be performed by our independent auditor, including the fees and terms of the services to be performed; |
| ● | appointing or replacing the independent auditor; |
| ● | determining the compensation and oversight of the work of the independent auditor (including resolution of disagreements between management and the independent auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related work; |
| ● | establishing procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or reports which raise material issues regarding our financial statements or accounting policies; and |
| ● | approving reimbursement of expenses incurred by our management team in identifying potential target businesses. |
Financial Experts on Audit Committee
The audit committee will at all times be composed exclusively of “independent directors” who are “financially literate” as defined under NASDAQ’s listing standards. NASDAQ’s standards define “financially literate” as being able to read and understand fundamental financial statements, including a company’s balance sheet, income statement and cash flow statement.
In addition, the audit committee has, and will continue to have, at least one member who has past employment experience in finance or accounting, requisite professional certification in accounting, or other comparable experience or background that results in the individual’s financial sophistication. The Board has determined that each of Brian Turner and Scott Morris qualifies as an “audit committee financial expert,” as defined under rules and regulations of the SEC.
19
Nominating and Corporate Governance Committee
The members of our nominating and corporate governance committee are Scott Morris, Ken Hertz, and Brian Turner, each of whom is an independent director under NASDAQ’s listing standards. Scott Morris serves as chair of the nominating and corporate governance committee.
The primary purposes of our nominating and corporate governance committee will be to assist the Board in:
| ● | identifying, screening and reviewing individuals qualified to serve as directors and recommending to the Board candidates for nomination for election at the annual meeting of stockholders or to fill vacancies on the Board; |
| ● | developing, recommending to the Board and overseeing implementation of our corporate governance guidelines; |
| ● | coordinating and overseeing the annual self-evaluation of the Board, its committees, individual directors and management in the governance of the company; and |
| ● | reviewing on a regular basis our overall corporate governance and recommending improvements as and when necessary. |
Guidelines for Selecting Director Nominees
The guidelines for selecting nominees, which are specified in the Nominating and Corporate Governance Committee Charter, generally provide that person to be nominated:
| ● | should have demonstrated notable or significant achievements in business, education or public service; |
| ● | should possess the requisite intelligence, education and experience to make a significant contribution to the Board and bring a range of skills, diverse perspectives and backgrounds to its deliberations; and |
| ● | should have the highest ethical standards, a strong sense of professionalism and intense dedication to serving the interests of the stockholders. |
The Nominating and Corporate Governance Committee will consider a number of qualifications relating to management and leadership experience, background and integrity and professionalism in evaluating a person’s candidacy for membership on our Board. The Nominating and Corporate Governance Committee may require certain skills or attributes, such as financial or accounting experience, to meet specific board needs that arise from time to time and will also consider the overall experience and makeup of its members to obtain a broad and diverse mix of board members. The Nominating and Corporate Governance Committee does not distinguish among nominees recommended by stockholders and other persons. There have been no material changes to the procedures by which stockholders may recommend nominees to the Board.
Compensation Committee
The members of the compensation committee of the Board are Ken Hertz, Brian Turner, and Scott Morris, each of whom is an independent director under NASDAQ’s listing standards. Ken Hertz is the chair of the compensation committee. The compensation committee’s duties, which are specified in our Compensation Committee Charter, include, but are not limited to:
| ● | reviewing and approving on an annual basis the corporate goals and objectives relevant to our Chief Executive Officer’s compensation, evaluating our Chief Executive Officer’s performance in light of such goals and objectives and determining and approving the remuneration (if any) of our Chief Executive Officer based on such evaluation; |
| ● | reviewing and approving the compensation of all of our other executive officers; |
| ● | reviewing our executive compensation policies and plans; |
| ● | implementing and administering our incentive compensation equity-based remuneration plans; |
| ● | assisting management in complying with our proxy statement and annual report disclosure requirements; |
20
| ● | approving all special perquisites, special cash payments and other special compensation and benefit arrangements for our executive officers and employees; |
| ● | if required, producing a report on executive compensation to be included in our annual proxy statement; and |
| ● | reviewing, evaluating and recommending changes, if appropriate, to the remuneration for directors. |
Code of Ethics
We have adopted a Code of Ethics applicable to all of our directors and officers, including our principal executive officer, principal financial officer and principal accounting officer. A copy of our Code of Ethics is incorporated by reference as Exhibit 14 to this Annual Report. In addition, a copy of the Code of Ethics will be provided by us without charge upon request. We intend to disclose any amendments to or waivers of certain provisions of our Code of Ethics in a Current Report on Form 8-K.
Insider Trading Policy
We have not adopted an insider trading policy and procedures governing the purchase, sale, and/or other dispositions of the registrant’s securities by directors, officers and employees, or the registrant itself, that are reasonably designed to promote compliance with insider trading laws, rules and regulations, and any listing standards applicable to the registrant. We expect that such a policy will be adopted by the post-business combination company in connection with a business combination transaction.
Conflicts of Interest
In general, officers and directors of a corporation incorporated under the laws of the State of Delaware are required to present business opportunities to a corporation if:
| ● | the corporation could financially undertake the opportunity; |
| ● | the opportunity is within the corporation’s line of business; and |
| ● | it would not be fair to the corporation and its stockholders for the opportunity not to be brought to the attention of the corporation. |
Our amended and restated certificate of incorporation provides that:
| ● | except as may be prescribed by any written agreement with us, we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of our company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue; and |
| ● | our officers and directors will not be liable to our company or our stockholders for monetary damages for breach of any fiduciary duty by reason of any of our activities to the fullest extent permitted by Delaware law. |
Our officers and directors are, and may in the future become, affiliated with other companies. In order to minimize potential conflicts of interest which may arise from such other corporate affiliations, each of our officers and directors has contractually agreed, pursuant to a written agreement with us, until the earliest of our execution of a definitive agreement for a business combination, our liquidation or such time as he or she ceases to be an officer or director, to present to our company for our consideration, prior to presentation to any other entity, any suitable business opportunity which may reasonably be required to be presented to us, subject to any fiduciary or contractual obligations he or she might have. The foregoing agreement does not restrict our officers from becoming affiliated with other companies in the future which could take priority over our company; however, we believe that such agreement still benefits us because our officers and directors are obligated to present suitable business opportunities to us to the extent that none of their other fiduciary or contractual obligations require them to present it to another entity.
21
The following table summarizes the pre-existing fiduciary or contractual obligations of our officers and directors:
| Name of Individual(s) | Name of Affiliated Company | Position at Affiliated Company | ||
| Jose Antonio Bengochea | Bengochea Capital, LLC
Bengochea SPAC Sponsors I LLC | CEO, Founder
CEO | ||
| Iron Horse Acquisitions Corp. II | CEO and Chairman | |||
| Jane Waxman | None | None | ||
| William J. Caragol, Jr | Quidem LLC
Mainz Biomed N.V.
Janover, Inc.
Worksport Ltd.
Thermomedics Inc.
Iron Horse Acquisitions Corp. II | Managing Director
CFO
Director
Chairman
CFO and Director | ||
| Brian Virgil Turner | McKinstry Inc.
Institute of Systems Biology
Ecellix Inc.
Netwrix, Inc.
Aesthetic Revolution, Inc. | Director, Audit Chair
Director, Audit Chair
Director
Director
Director | ||
Avista
Gonzaga University, Board of Trustees | Chairman of the Board
Director | |||
| Scott Lawrence Morris | ||||
| McKinstry Inc. | Director | |||
| California Water Service | Director | |||
| Ken Hertz | Hertz Lichtenstein Young & Polk LLP
Membrain, LLC
JUST Goods, Inc. | Partner
Founder
Director, Co-Founder |
While the foregoing may limit the pool of potential business combination candidates, we do not believe that this limitation will be material.
Investors should also be aware of the following additional potential conflicts of interest:
| ● | None of our officers and directors is required to commit their full time to our affairs and, accordingly, they may have conflicts of interest in allocating their time among various business activities. |
| ● | Unless we consummate our initial business combination, our officers, directors and initial stockholders will not receive reimbursement or repayment for any out-of-pocket expenses incurred by them, or loans made to us, to the extent that such expenses exceed the amount of available proceeds not deposited in the trust account. |
| ● | The Founder Shares beneficially owned by our initial stockholders, and the private warrants purchased by our initial stockholders, and any warrants which our officers or directors may purchase in the aftermarket will expire worthless if a business combination is not consummated. This is because our officers and directors and affiliates will not receive liquidation distributions from the trust account with respect to any of the Founder Shares or warrants. |
For the foregoing reasons, our Board may have a conflict of interest in determining whether a particular target business is appropriate to effect a business combination with.
22
To further minimize conflicts of interest, we have agreed not to consummate an initial business combination with an entity that is affiliated with any of our officers, directors or initial stockholders unless we have obtained an opinion from an independent investment banking firm, or another independent entity that commonly renders valuation opinions, that the business combination is fair to our unaffiliated stockholders from a financial point of view. We will also need to obtain the approval of a majority of our disinterested independent directors. Furthermore, in no event will any of our initial stockholders, members of our management team or their respective affiliates be paid any compensation prior to, or for any services they render in order to effectuate, the consummation of an initial business combination (regardless of the type of transaction that it is) other than the payment of a total of $12,000 per month to our sponsor in exchange for management support, administrative, office space, and other services, as well as repayment of the loan from our sponsor and reimbursement of any out-of-pocket expenses.
Limitation on Liability and Indemnification of Officers and Directors
Our amended and restated certificate of incorporation provides that our directors and officers will be indemnified by us to the fullest extent authorized by Delaware law as it now exists or may in the future be amended. In addition, our amended and restated certificate of incorporation provides that our directors will not be personally liable for monetary damages to us for breaches of their fiduciary duty as directors, unless they violated their duty of loyalty to us or our stockholders, acted in bad faith, knowingly or intentionally violated the law, authorized unlawful payments of dividends, unlawful stock purchases or unlawful redemptions, or derived an improper personal benefit from their actions as directors.
We have entered into agreements with our officers and directors to provide contractual indemnification in addition to the indemnification provided for in our amended and restated certificate of incorporation. Our bylaws also will permit us to secure insurance on behalf of any officer, director or employee for any liability arising out of his or her actions, regardless of whether Delaware law would permit indemnification. We have purchased a policy of directors’ and officers’ liability insurance that insures our directors and officers against the cost of defense, settlement or payment of a judgment in some circumstances and insures us against our obligations to indemnify the directors and officers.
These provisions may discourage stockholders from bringing a lawsuit against our directors for breach of their fiduciary duty. These provisions also may have the effect of reducing the likelihood of derivative litigation against directors and officers, even though such an action, if successful, might otherwise benefit us and our stockholders. Furthermore, a stockholder’s investment may be adversely affected to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions. We believe that these provisions, the insurance and the indemnity agreements are necessary to attract and retain talented and experienced directors and officers.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
Delinquent Section 16(a) Beneficial Ownership Reports
Section 16(a) of the Exchange Act requires our executive officers, directors and persons who beneficially own more than 10% of a registered class of our equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of our shares of common stock and other equity securities. These executive officers, directors, and greater than 10% beneficial owners are required by SEC regulation to furnish us with copies of all Section 16(a) forms filed by such reporting persons.
Specific due dates have been established by the SEC, and we are required to disclose in this Annual Report any failure to file required ownership reports by these dates. Based solely upon a review of forms filed with the SEC and the written representations of such person, we are aware of the following: (i) the sponsor, Bengochea SPAC Sponsors I LLC, a greater than 10% stockholder, failed to timely file a Form 3 when the registration statement on Form S-1 (File No. 333-275076) and the registration statement on Form S-1MEF (File No. 333-276282) with respect to the IPO became effective on December 26, 2023; (ii) the sponsor, Bengochea SPAC Sponsors I LLC, failed to timely file a Form 4 to report the purchase of 2,457,000 private warrants in a private placement that was consummated simultaneously with the closing of the IPO on December 29, 2023; and (iii) the sponsor, Bengochea SPAC Sponsors I LLC, failed to timely file a Form 5 within 45 days after the company’s fiscal year ended on December 31, 2023 to report the transactions described above, which should have been reported on a Form 3 or Form 4.
ITEM 11. EXECUTIVE COMPENSATION
Executive Compensation
No executive officer has received any cash compensation for services rendered to us. However, we entered into an administrative services agreement pursuant to which, commencing on the date of the closing of our IPO and lasting for 12 months from such date of closing of our IPO, we will pay $12,000 per month to our sponsor in exchange for management support, administrative, office space, and other services, which amounts our sponsor would have discretion to use as it sees fit in connection with its operations, including, potentially, by making payments to our Chief Executive Officer in his individual capacity because he is also the Chief Executive Officer of our sponsor. This arrangement would be solely pursuant to any agreements between our Chief Executive Officer and our sponsor, to which the Company is not a party, and any such payments would not be intended to provide our Chief Executive Officer with compensation in lieu of a salary for his service as Chief Executive Officer of the Company. Our sponsor, officers and directors, or any affiliate of our sponsor or officers, will also be reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. There is no limit on the amount of out-of-pocket expenses reimbursable by us; provided, however, that to the extent such expenses exceed the available proceeds not deposited in the trust account, such expenses would not be reimbursed by us unless we consummate an initial business combination. They may also receive repayment for any loans made by them to us for working capital needs or extending our time to consummate an initial business combination.
No other cash compensation of any kind, including any finder’s fee, reimbursement, consulting fee or monies in respect of any payment of a loan, will be paid by us to our sponsor, officers and directors, or any affiliate of our sponsor or officers, prior to, or in connection with any services rendered in order to effectuate the consummation of our initial business combination (regardless of the type of transaction that it is).
23
After our initial business combination, members of our management team who remain with the combined company may be paid consulting, management or other fees from the combined company with any and all amounts being fully disclosed to stockholders, to the extent then known, in the proxy solicitation materials furnished to our stockholders. As disclosed above, the Business Combination Agreement provides that New CFI will enter into a Consulting Agreement with each of Mr. Bengochea and Mr. Caragol, which will be effective immediately after closing of the business combination. Mr. Bengochea and Mr. Caragol shall assist New CFI’s management, board of directors and committees in regard to (i) financial reporting, (ii) SEC filings (iii) coordination with its auditors, (iv) governance issues, (v) investor relations, and (vi) any other activities that are reasonably requested. In addition, they will attend all New CFI’s Board of Director meetings as an observer. The Consulting Agreement will be for a six month term post-Closing, unless earlier terminated or extended by the parties. The consulting fee shall be 500,000 restricted shares of New CFI common stock, which shares shall be registered on a registration statement post-Closing. Any additional compensation to be paid upon extension of the term shall be mutually agreed to by and between New CFI and each of Mr. Bengochea and Mr. Caragol. New CFI shall reimburse each of Mr. Bengochea and Mr. Caragol for ordinary and customary expenses incurred in performing the consulting services. Any extraordinary expenses, require consent of New CFI.
Clawback Policy
As required by the NASDAQ rules, our Board has adopted a clawback policy (the “Clawback Policy”) permitting the Company to seek the recovery of incentive compensation received by any the Company’s current and former executive officers (as determined by the Compensation Committee of the Company’s Board in accordance with Section 10D of the Exchange Act and the rules of the Nasdaq Global Market) and such other senior executives/employees who may from time to time be deemed subject to the Clawback Policy by the Compensation Committee (collectively, the “Covered Executives”) during the three completed fiscal years immediately preceding the date on which the Company is required to prepare an accounting restatement of its financial statements due to the Company’s material noncompliance with any financial reporting requirement under the securities laws. The amount to be recovered will be the excess of the incentive compensation paid to the Covered Executive based on the erroneous data over the incentive compensation that would have been paid to the Covered Executive had it been based on the restated results, as determined by the Compensation Committee. If the Compensation Committee cannot determine the amount of excess incentive compensation received by the Covered Executive directly from the information in the accounting restatement, then it will make its determination based on a reasonable estimate of the effect of the accounting restatement. Because we do not anticipate paying any cash compensation to our prospective Covered Executives, we do not anticipate paying any incentive compensation which could become subject to clawback under the Clawback Policy.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth information regarding the beneficial ownership of our shares of common stock as of the date of this Annual Report by:
| ● | each person known by us to be the beneficial owner of more than 5% of our outstanding shares of common stock; |
| ● | each of our officers and directors; and |
| ● | all of our officers and directors as a group. |
Unless otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all shares of common stock beneficially owned by them. The following table does not reflect any contractual rights the individuals below may have to ultimately receive any of the private placement warrants owned by Bengochea SPAC Sponsors I LLC, as the private placement warrants are not exercisable within 60 days of the date of this Annual Report on Form 10-K.
| Name and Address of Beneficial Owner (1) | Amount and Nature of Beneficial Ownership | Approximate Percentage of Outstanding Shares of Common Stock | ||||||
| Jose Antonio Bengochea (2) | 1,932,000 | 21.79 | % | |||||
| Brian Turner (3) | 155,000 | 1.75 | % | |||||
| Jane Waxman | 65,000 | * | ||||||
| William Caragol (4) | 80,000 | * | ||||||
| Ken Hertz | 55,000 | * | ||||||
| Scott Morris (5) | 95,000 | 1.07 | % | |||||
| Bengochea SPAC Sponsors I LLC (6) | 1,932,000 | 21.79 | % | |||||
| All directors and executive officers as a group (6 individuals) (7) | 835,000 | 9.42 | %(8) | |||||
| (1) | Unless otherwise indicated, the business address of each of the individuals is c/o Iron Horse Acquisitions Corp., P.O. 2506, Toluca Lake, California 91610. Share amounts indicated for each director and each officer are inclusive of both amounts held by the sponsor on behalf of each individual for their service as a director or officer of the Company as well as amounts held by the sponsor on behalf of each individual, to the extent applicable, in their capacities as investors in the sponsor. |
24
| (2) | This number includes, (i) 47,500 shares held by the sponsor on behalf of Mr. Bengochea for his service as a director and officer of the Company, (ii) 701,500 shares held by the sponsor of which (a) 149,000 shares are held for individuals on the basis of funds paid to Bengochea Capital LLC, a limited liability company controlled solely by Mr. Bengochea and invested in the sponsor, (b) 215,000 shares that at the closing of an initial business combination, may be transferred to (or allocated between) Mr. Bengochea and a fund that invested in Bengochea Capital LLC, and (c) 337,500 shares are held on behalf of Mr. Bengochea; (iii) 532,000 shares, in the aggregate, held by the sponsor on behalf of our current and former directors, officers, and advisors as a group (other than Mr. Bengochea), which shares are for services and funds paid to the Sponsor, and (iv) 651,000 shares held by the sponsor on behalf of a fund that invested in Bengochea Capital LLC. |
| (3) | Figures in this row include 70,000 shares held by the sponsor on behalf of Mr. Turner for his service as a director of the Company as well as 85,000 shares held by the sponsor on behalf of Mr. Turner on the basis of funds invested by Mr. Turner in Bengochea Capital LLC. |
| (4) | Figures in this row include 30,000 shares held by the sponsor on behalf of Mr. Caragol for his service as an officer of the Company as well as 50,000 shares held by the sponsor on behalf of Mr. Caragol on the basis of funds invested by Mr. Caragol in Bengochea Capital LLC. |
| (5) | Figures in this row include 45,000 shares held by the sponsor on behalf of Mr. Morris for his service as a director of the Company as well as 50,000 shares held by the sponsor on behalf of Mr. Morris on the basis of funds invested by Mr. Morris in Bengochea Capital LLC. |
| (6) | This number includes, (i) 47,500 shares held by the sponsor on behalf of Mr. Bengochea for his service as a director and officer of the Company, (ii) 701,500 shares held by the sponsor of which (a) 149,000 shares are held for individuals on the basis of funds paid to Bengochea Capital LLC, a limited liability company controlled solely by Mr. Bengochea and invested in the sponsor, (b) 215,000 shares that at the closing of an initial business combination, may be transferred to (or allocated between) Mr. Bengochea and a fund that invested in Bengochea Capital LLC, and (c) 337,500 shares are held on behalf of Mr. Bengochea; (iii) 532,000 shares, in the aggregate, held by the sponsor on behalf of our current and former directors, officers, and advisors as a group (other than Mr. Bengochea), which shares are for services and funds paid to the Sponsor, and (iv) 651,000 shares held by the sponsor on behalf of a fund that invested in Bengochea Capital LLC. The sponsor is controlled by Bengochea Capital LLC, which is owned solely by Mr. Bengochea. As of the date of this proxy statement/prospectus, Bengochea Capital LLC and Mr. Bengochea are deemed to have voting and dispositive power over the shares. The address for Mr. Bengochea and Bengochea Capital LLC is P.O. Box 2506 Toluca Lake, CA, 91610. Mr. Bengochea and Bengochea Capital LLC disclaims beneficial ownership with respect to 1,547,000 shares. |
| (7) | Figures in this row only include all shares held by the sponsor on behalf of our directors and officers as a group, whether such shares are attributable to a director or officer on the basis of his or her service as such or on the basis of funds invested by a director or officer in Bengochea Capital LLC (including, in the case of Mr. Bengochea, funds invested through Bengochea Capital LLC). |
| (8) | All percentages are approximate, and are based upon a total of 8,867,000 shares of common stock outstanding (inclusive of shares included in our units) as of February 21, 2025. |
| (*) | Less than 1%, rounded down to the nearest 0.1% |
Our initial stockholders own approximately 22% of the issued and outstanding shares of common stock. Because of the ownership block held by our officers, directors and initial stockholders, such individuals may be able to effectively exercise influence over all matters requiring approval by our stockholders, including the election of directors and approval of significant corporate transactions other than approval of our initial business combination.
All of the Founder Shares have been placed in escrow with Continental Stock Transfer & Trust Company, as escrow agent, until the earlier of 180 days after the date of the consummation of our initial business combination, or earlier if, subsequent to our initial business combination, we consummate a liquidation, merger, stock exchange or other similar transaction which results in all of our stockholders having the right to exchange their shares of common stock for cash, securities or other property.
During the escrow period, the holders of these shares will not be able to sell or transfer their securities except for transfers, assignments or sales (i) among our initial stockholders or to our initial stockholders’ members, officers, directors, consultants or their affiliates, (ii) to a holder’s stockholders or members upon its liquidation, (iii) by bona fide gift to a member of the holder’s immediate family or to a trust, the beneficiary of which is the holder or a member of the holder’s immediate family, for estate planning purposes, (iv) by virtue of the laws of descent and distribution upon death, (v) pursuant to a qualified domestic relations order, (vi) to us for no value for cancellation in connection with the consummation of our initial business combination, or (vii) in connection with the consummation of a business combination at prices no greater than the price at which the shares were originally purchased, in each case (except for clause (vi) or with our prior consent) where the transferee agrees to the terms of the escrow agreement and to be bound by these transfer restrictions, but will retain all other rights as our stockholders, including, without limitation, the right to vote their shares of common stock and the right to receive cash dividends, if declared. If dividends are declared and payable in shares of common stock, such dividends will also be placed in escrow. If we are unable to effect a business combination and liquidate, there will be no liquidation distribution with respect to the Founder Shares.
25
Our sponsor has also agreed not to transfer, assign or sell any of the private warrants and underlying securities (except in connection with the same limited exceptions that the Founder Shares may be transferred as described above) until after the completion of our initial business combination. In the event of a liquidation prior to our initial business combination, the private warrants will likely be worthless.
There are no circumstances or arrangements under which there will be direct transfers of membership interests of the sponsor by Bengochea Capital LLC. In October 2023, Bengochea Capital LLC entered into Founder’s Shares and Private Warrant Purchase Agreements whereby Bengochea Capital has reserved, in the aggregate, 1,932,000 shares of Founder Shares and 2,457,000 Private Warrants held by the sponsor to be transferred to certain individuals and funds, after the expiration of the lock-up period.
In order to meet our working capital needs following the consummation of our IPO, our initial stockholders, officers, directors and their affiliates may, but are not obligated to, loan us funds, on a non-interest bearing basis, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion. Each loan would be evidenced by a promissory note. The notes would be paid upon consummation of our initial business combination, without interest. In the event that the 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.
Our executive officers are our “promoters,” as that term is defined under the federal securities laws.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
In November 2021, we issued 5,750,000 Founder Shares to our sponsor, for $25,000 in cash, at a purchase price of approximately $0.00435 per share, in connection with our organization. In September 2022, the initial stockholders surrendered 2,875,000 Founder Shares for no consideration, resulting in there being an aggregate of 2,875,000 Founder Shares outstanding. In September 2023, the initial stockholders surrendered 943,000 Founder Shares for no consideration, resulting in there being an aggregate of 1,932,000 Founder Shares outstanding. In December 2023, we issued an additional 32,200 Founder Shares to maintain the proportionate share of the sponsor in the Company, resulting in the sponsor holding 1,964,200 Founder Shares. Bengochea SPAC Sponsors I LLC shall subsequently transfer, in connection with the consummation of our initial business combination, certain of such shares to our officers, directors and other individuals at the same price originally paid for such shares. Following the expiration date for the over-allotment option exercise described in our Prospectus, our initial stockholders forfeited an aggregate of 32,200 shares of common stock in proportion to the portion of the over-allotment option that was not exercised by the underwriters in our IPO, so that the holders would collectively own 22% of the Company’s issued and outstanding shares after the IPO. On February 12, 2024, the remainder of the over-allotment option to purchase 115,000 Units expired and the 32,200 Founder Shares were forfeited, resulting in the sponsor holding an aggregate of 1,932,000 Founder Shares.
The holders of our Founder Shares, as well as the holders of the Representative Shares, private warrants and any warrants our initial stockholders, officers, directors or their affiliates may be issued in payment of working capital loans made to us (and all underlying securities), will be entitled to registration rights pursuant to a registration rights agreement we entered into on December 27, 2023. The holders of a majority of these securities are entitled to make up to two demands that we register such securities. The holders of the majority of the founder’s shares can elect to exercise these registration rights at any time commencing three months prior to the date on which these shares of common stock are to be released from escrow. The holders of a majority of the Representative Shares, private warrants and warrants issued in payment of working capital loans made to us (or underlying securities) can elect to exercise these registration rights at any time after we consummate a business combination. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to our consummation of a business combination. Notwithstanding anything to the contrary, EF Hutton may only make a demand on one occasion and only during the five-year period beginning on the effective date of the registration statement of which this Annual Report forms a part. In addition, EF Hutton may participate in a “piggy-back” registration only during the seven-year period beginning on the effective date of the registration statement of which this Annual Report forms a part. We will bear the expenses incurred in connection with the filing of any such registration statements.
Prior to the closing of our IPO, our sponsor agreed to loan us up to $1,500,000 to be used for a portion of the expenses of the IPO. On November 30, 2021, and as amended on July 11, 2022, November 1, 2022, May 15, 2023, June 30, 2023, and October 4, 2023, the Company issued a $1,500,000 (as amended) principal amount unsecured promissory note to the sponsor, which is an affiliate of the Company’s Chief Executive Officer. This loan is non-interest bearing, unsecured and repayable upon the date on which the Company consummates its initial business transaction or, at the Company’s discretion, if funds allow. As of December 31, 2024 and 2023, there was $627,781 and $557,781 outstanding under the promissory note – related party, respectively. This loan is non-interest bearing, unsecured and repayable upon the date on which the Company consummates its initial business combination or, at the holder’s discretion, if funds allow. The principal balance may be prepaid at any time.
We pay $12,000 per month to our sponsor in exchange for management support, administrative, office space, and other services. We will cease paying these monthly fees 12 months from the date of the close of our IPO. See “Executive Compensation” for further information relating to this payment and the possibility that some portion of the amount may be paid by our sponsor to our Chief Executive Officer.
We have entered into agreements with our officers and directors to provide contractual indemnification in addition to the indemnification provided for in our amended and restated certificate of incorporation.
26
On January 4, 2024, the Company initiated a lawsuit against Omnia Global a/k/a Omnia Schweiz GmbH, Daniel Hansen, Mette Abel Hansen, and James Mair Findlay (collectively, “Omnia”) by filing a complaint in the U.S. District Court for the Southern District of New York, Case No. 1:24-cv-00048 alleging that Omnia had breached the Pre-Purchase Agreement by and between the Company and Omnia, dated as of May 12, 2023. The Company and Omnia have agreed to an amicable resolution of the lawsuit on mutually acceptable terms and without admission of fault by any party. On March 11, 2024, the Company settled an outstanding lawsuit against Omnia and the sponsor received the net lawsuit settlement amount of $206,500 on behalf of the Company ($295,000 gross settlement less $88,500 legal fees incurred). As of December 31, 2024, all payments due pursuant to the settlement have been made.
Other than the foregoing payments, no compensation or fees of any kind will be paid to our initial stockholders, members of our management team or their respective affiliates, for services rendered prior to or in connection with the consummation of our initial business combination (regardless of the type of transaction that it is). However, such individuals will receive reimbursement for any out-of-pocket expenses incurred by them in connection with activities on our behalf, such as identifying potential target businesses, performing business due diligence on suitable target businesses and business combinations as well as traveling to and from the offices, plants or similar locations of prospective target businesses to examine their operations. There is no limit on the amount of out-of-pocket expenses reimbursable by us; provided, however, that to the extent such expenses exceed the available proceeds not deposited in the trust account, such expenses would not be reimbursed by us unless we consummate an initial business combination.
After our initial business combination, members of our management team who remain with us may be paid consulting, management or other fees from the combined company with any and all amounts being fully disclosed to stockholders, to the extent then known, in the proxy solicitation materials furnished to our stockholders. However, the amount of such compensation may not be known at the time of the stockholder meeting held to consider an initial business combination, as it will be up to the directors of the post-combination business to determine executive and director compensation. In this event, such compensation will be publicly disclosed at the time of its determination in a Current Report on Form 8-K or a periodic report, as required by the SEC. As disclosed above, the Business Combination Agreement provides that New CFI will enter into a Consulting Agreement with each of Mr. Bengochea and Mr. Caragol, which will be effective immediately after closing of the business combination. Mr. Bengochea and Mr. Caragol shall assist New CFI’s management, board of directors and committees in regard to (i) financial reporting, (ii) SEC filings (iii) coordination with its auditors, (iv) governance issues, (v) investor relations, and (vi) any other activities that are reasonably requested. In addition, they will attend all New CFI’s Board of Director meetings as an observer. The Consulting Agreement will be for a six month term post-Closing, unless earlier terminated or extended by the parties. The consulting fee shall be 500,000 restricted shares of New CFI common stock, which shares shall be registered on a registration statement post-Closing. Any additional compensation to be paid upon extension of the term shall be mutually agreed to by and between New CFI and each of Mr. Bengochea and Mr. Caragol. New CFI shall reimburse each of Mr. Bengochea and Mr. Caragol for ordinary and customary expenses incurred in performing the consulting services. Any extraordinary expenses, require consent of New CFI.
All ongoing and future transactions between us and any of our officers and directors or their respective affiliates will be on terms believed by us to be no less favorable to us than are available from unaffiliated third parties. Such transactions will require prior approval by a majority of our uninterested “independent” directors or the members of our Board who do not have an interest in the transaction, in either case who had access, at our expense, to our attorneys or independent legal counsel. We will not enter into any such transaction unless our disinterested “independent” directors determine that the terms of such transaction are no less favorable to us than those that would be available to us with respect to such a transaction from unaffiliated third parties.
Related Party Policy
Our Code of Ethics requires us to avoid, wherever possible, all related party transactions that could result in actual or potential conflicts of interests, except under guidelines approved by the Board (or the audit committee). Related-party transactions are defined as transactions in which (1) the aggregate amount involved will or may be expected to exceed $120,000 in any calendar year, (2) we or any of our subsidiaries is a participant, and (3) any (a) executive officer, director or nominee for election as a director, (b) greater than 5% beneficial owner of our shares of common stock, or (c) immediate family member, of the persons referred to in clauses (a) and (b), has or will have a direct or indirect material interest (other than solely as a result of being a director or a less than 10% beneficial owner of another entity). A conflict of interest situation can arise when a person takes actions or has interests that may make it difficult to perform his or her work objectively and effectively. Conflicts of interest may also arise if a person, or a member of his or her family, receives improper personal benefits as a result of his or her position.
Our audit committee, pursuant to its written charter, is responsible for reviewing and approving related-party transactions to the extent we enter into such transactions. The audit committee will consider all relevant factors when determining whether to approve a related party transaction, including whether the related party transaction is on terms no less favorable to us than terms generally available from an unaffiliated third-party under the same or similar circumstances and the extent of the related party’s interest in the transaction. No director may participate in the approval of any transaction in which he or she is a related party, but that director is required to provide the audit committee with all material information concerning the transaction. We also require each of our directors and executive officers to complete a directors’ and officers’ questionnaire that elicits information about related party transactions.
27
These procedures are intended to determine whether any such related party transaction impairs the independence of a director or presents a conflict of interest on the part of a director, employee or officer.
To further minimize conflicts of interest, we have agreed not to consummate an initial business combination with an entity that is affiliated with any of our initial stockholders, officers or directors unless we have obtained an opinion from an independent investment banking firm, or another independent entity that commonly renders valuation opinions, that the business combination is fair to our unaffiliated stockholders from a financial point of view. We will also need to obtain approval of a majority of our disinterested independent directors. However, the following payments will be made to our sponsor, officers or directors, or our or their affiliates, none of which will be made from the proceeds of our IPO held in the trust account prior to the completion of our initial business combination:
| ● | Repayment of up to an aggregate of $1,500,000 in loans made to us by our sponsor to cover offering-related and organizational expenses; |
| ● | Payment of $12,000 per month to our sponsor in exchange for management support, administrative, office space, and other services. We will cease paying these monthly fees 12 months from the date of the consummation of our IPO. |
| ● | Reimbursement for any out-of-pocket expenses related to identifying, investigating and completing an initial business combination; |
| ● | Repayment of non-interest-bearing extension loans which may be made by our sponsor or an affiliate of our sponsor or certain of our officers and directors to extend the time we have to consummate an intended initial business combination. Such loans may be convertible into warrants, at a price of $1.00 per warrant, at the option of the lender. The warrants would be identical to the private placement warrants, including as to exercise price, exercisability and exercise period; and |
| ● | Repayment of non-interest bearing loans which may be made by our sponsor or an affiliate of our sponsor or certain of our officers and directors to finance transaction costs in connection with an intended initial business combination, the terms of which have not been determined nor have any written agreements been executed with respect thereto. |
Our audit committee will review on a quarterly basis all payments that were made to our sponsor, officers or directors, or our or their affiliates.
Director Independence
NASDAQ listing standards require that a majority of our Board be independent. We comply with this requirement. Currently Brian Turner, Ken Hertz and Scott Morris are each considered an “independent director” under the NASDAQ listing rules, which is defined generally as a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship, which, in the opinion of the company’s board of directors would interfere with the director’s exercise of independent judgment in carrying out the responsibilities of a director.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The firm of MaloneBailey, LLP (“MaloneBailey”) acts as our independent registered public accounting firm. The following is a summary of fees paid to MaloneBailey for services rendered.
Audit Fees. Audit fees consist of fees billed for professional services rendered for the audit of our year-end financial statements and services that are normally provided by MaloneBailey in connection with regulatory filings. The aggregate fees billed by MaloneBailey for professional services rendered for the audit of our Form 8-K financial statements and other required filings with the SEC for the year ended December 31, 2024 and 2023 totaled $156,897 and $115,000, respectively. These amounts include interim procedures and audit fees, as well as attendance at audit committee meetings.
Audit-Related Fees. Audit-related services consist of fees billed for assurance and related services that are reasonably related to performance of the audit or review of our financial statements and are not reported under “Audit Fees.” These services include attest services that are not required by statute or regulation and consultations concerning financial accounting and reporting standards. We did not pay MaloneBailey for consultations concerning financial accounting and reporting standards for the year ended December 31, 2024 and 2023.
Tax Fees. For the year ended December 31, 2024 and 2023, the aggregate fees billed by MaloneBailey for services rendered for tax compliance, tax advice and tax planning totaled $13,390 and $0, respectively.
All Other Fees. For the year ended December 31, 2024 and 2023, MaloneBailey did not render any services to us other than those set forth above.
Pre-Approval Policy
Our audit committee was formed in connection with the effectiveness of our registration statement for our initial public offering. As a result, the audit committee did not pre-approve all of the foregoing services, although any services rendered prior to the formation of our audit committee were approved by our Board. Since the formation of our audit committee, and on a going-forward basis, the audit committee has and will pre-approve all audit services and permitted non-audit services to be performed for us by our auditors, including the fees and terms thereof (subject to the de minimis exceptions for non-audit services described in the Exchange Act which are approved by the audit committee prior to the completion of the audit).
28
part IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
| (a) | The following documents are filed as part of this Form 10-K: |
| (1) | Financial Statements: |
| Report of Independent Registered Public Accounting Firm (PCAOB ID 206) | F-2 | |
| Financial Statements | ||
| Balance Sheets | F-3 | |
| Statements of Operations | F-4 | |
| Statements of Changes in Stockholders’ Deficit | F-5 | |
| Statements of Cash Flows | F-6 | |
| Notes to Financial Statements | F-7 to F-24 |
| (2) | Financial Statement Schedules: |
None.
| (3) | Exhibits |
We hereby file as part of this Annual Report the exhibits listed in the attached Exhibit Index. Exhibits which are incorporated herein by reference can be inspected and copied at the public reference facilities maintained by the SEC, 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Copies of such material can also be obtained from the Public Reference Section of the SEC, 100 F Street, N.E., Washington, D.C. 20549, at prescribed rates or on the SEC website at www.sec.gov.
29
EXHIBIT INDEX
30
31
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Dated: February 21, 2025 | IRON HORSE ACQUISITIONS CORP. | |
| By: | /s/ Jose Bengochea | |
| Name: | Jose A. Bengochea | |
| Title: | Chief Executive Officer | |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Name | Position | Date | ||
| /s/ Jose Bengochea | Chief Executive Officer | February 21, 2025 | ||
| Jose Bengochea | (Principal Executive Officer) and Director | |||
| /s/ William Caragol | Chief Financial Officer and Chief Operating Officer | February 21, 2025 | ||
| William Caragol | (Principal Financial and Accounting Officer) | |||
| /s/ Brian Turner | Chair of the Board | February 21, 2025 | ||
| Brian Turner | ||||
| /s/ Jane Waxman | Director | February 21, 2025 | ||
| Jane Waxman | ||||
| /s/ Scott Morris | Director | February 21, 2025 | ||
| Scott Morris | ||||
| /s/ Ken Hertz | Director | February 21, 2025 | ||
| Ken Hertz |
32
IRON HORSE ACQUISITIONS CORP.
INDEX TO FINANCIAL STATEMENTS
| Report of Independent Registered Public Accounting Firm (PCAOB ID 206) | F-2 | |
| Financial Statements | ||
| Balance Sheets | F-3 | |
| Statements of Operations | F-4 | |
| Statements of Changes in Stockholders’ Deficit | F-5 | |
| Statements of Cash Flows | F-6 | |
| Notes to Financial Statements | F-7 to F-24 |
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of
Iron Horse Acquisitions Corp.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Iron Horse Acquisitions Corp., (the “Company”) as of December 31, 2024 and 2023, and the related statements of operations, stockholders’ deficit, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Going Concern Matter
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 1 to the financial statements, the Company’s business plan is dependent on the completion of a business combination within a prescribed period of time and if not completed will cease all operations except for the purpose of liquidating. The date for mandatory liquidation and subsequent dissolution raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
| /s/ MaloneBailey, LLP |
www.malonebailey.com
We have served as the Company’s auditor since 2023.
Houston, Texas
February 21, 2025
F-2
IRON HORSE ACQUISITIONS CORP.
BALANCE SHEETS
December 31, | December 31, 2023 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash | $ | 454 | $ | 656,977 | ||||
| Prepaid expenses and other current assets | 834 | 33,157 | ||||||
| Prepaid insurance | 42,229 | — | ||||||
| Total Current Assets | 43,517 | 690,134 | ||||||
| Marketable securities held in Trust Account | 72,752,485 | 69,000,000 | ||||||
| Total Assets | $ | 72,796,002 | $ | 69,690,134 | ||||
| Liabilities and Stockholders’ Deficit | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | 87,578 | $ | — | ||||
| Accrued expenses | 400,233 | 70,810 | ||||||
| Accrued offering costs | 75,000 | 221,914 | ||||||
| Income taxes payable | 746,314 | — | ||||||
| Overallotment liability | — | 11,135 | ||||||
| Loan payable | 229,770 | — | ||||||
| Promissory note | 425,013 | — | ||||||
| Promissory note – related party | 627,781 | 557,781 | ||||||
| Total Current Liabilities | 2,591,689 | 861,640 | ||||||
| Deferred underwriting fee payable | 2,518,500 | 2,518,500 | ||||||
| Total Liabilities | 5,110,189 | 3,380,140 | ||||||
| Commitments and Contingencies (Note 5) | ||||||||
| Common stock subject to possible redemption, 6,900,000 shares at redemption value of $10.41 and $10.00 per share as of December 31, 2024 and 2023, respectively | 71,829,574 | 69,000,000 | ||||||
| Stockholders’ Deficit | ||||||||
| Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding | — | — | ||||||
| Common stock, $0.0001 par value; 50,000,000 shares authorized, 1,967,000 and 1,999,200 shares issued and outstanding (excluding 6,900,000 shares subject to possible redemption) as of December 31, 2024 and 2023, respectively(1) | 197 | 200 | ||||||
| Additional paid-in capital | — | — | ||||||
| Accumulated deficit | (4,143,958 | ) | (2,690,206 | ) | ||||
| Total Stockholders’ Deficit | (4,143,761 | ) | (2,690,006 | ) | ||||
| Total Liabilities and Stockholders’ Deficit | $ | 72,796,002 | $ | 69,690,134 | ||||
| (1) | At December 31, 2023, includes an aggregate of 32,200 Founder Shares subject to forfeiture by the initial stockholder to the extent that the underwriters’ over-allotment option is not exercised in full. On February 12, 2024, the remainder of the over-allotment option to purchase 115,000 Units expired and 32,200 Founder Shares were forfeited, resulting in the Sponsor holding an aggregate of 1,932,000 Founder Shares (Note 6). |
The accompanying notes are an integral part of these financial statements.
F-3
IRON HORSE ACQUISITIONS CORP.
STATEMENTS OF OPERATIONS
| For the Year Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Formation and operational costs(1) | $ | 1,709,829 | $ | 309,018 | ||||
| Loss from operations | (1,709,829 | ) | (309,018 | ) | ||||
| Other income: | ||||||||
| Interest earned on marketable securities held in Trust Account | 3,526,053 | — | ||||||
| Change on overallotment liability | 11,135 | — | ||||||
| Lawsuit settlements | 295,000 | — | ||||||
| Total other income | 3,832,188 | — | ||||||
| Income (Loss) before provision for income taxes | 2,122,359 | (309,018 | ) | |||||
| Provision for income taxes | (746,540 | ) | 226 | |||||
| Net income (loss) | $ | 1,375,819 | $ | (308,792 | ) | |||
| Basic and diluted weighted average shares outstanding of redeemable shares | 6,900,000 | 71,429 | ||||||
| Basic and diluted net income (loss) per common share, redeemable shares | $ | 0.16 | $ | (0.17 | ) | |||
| Basic weighted average shares outstanding of non-redeemable shares(2) | 1,967,000 | 1,709,423 | ||||||
| Basic net income (loss) per common share, non-redeemable shares | $ | 0.16 | $ | (0.17 | ) | |||
| Diluted weighted average shares outstanding of non-redeemable shares(2) | 1,967,000 | 1,764,192 | ||||||
| Diluted net income (loss) per common share, non-redeemable shares | $ | 0.16 | $ | (0.17 | ) | |||
| (1) | For the year ended December 31, 2024 and 2023, includes $168,658 and $5,382 franchise tax expense, respectively. |
| (2) | Excludes an aggregate of 32,200 shares of common stock subject to forfeiture, at December 31, 2023 by the initial stockholder to the extent that the underwriters’ over-allotment option is not exercised in full (Note 6). |
The accompanying notes are an integral part of these financial statements.
F-4
IRON HORSE ACQUISITIONS CORP.
STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 2024 AND 2023
| Common Stock Subject to Possible Redemption | Common Stock | Additional Paid-In | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance – December 31, 2022(1) | — | $ | — | 1,932,000 | $ | 193 | $ | 24,807 | $ | (200,374 | ) | $ | (175,374 | ) | ||||||||||||||
| Issuance of founder shares | — | — | 32,200 | 3 | (3 | ) | — | — | ||||||||||||||||||||
| Sale of units at initial public offering | 6,900,000 | 69,000,000 | — | — | — | — | — | |||||||||||||||||||||
| Sale of 2,457,000 private placement warrants | — | — | — | — | 2,457,000 | — | 2,457,000 | |||||||||||||||||||||
| Fair Value of public warrants at issuance | — | — | — | — | 43,470 | — | 43,470 | |||||||||||||||||||||
| Fair value of rights included in public units | — | — | — | — | 3,283,710 | — | 3,283,710 | |||||||||||||||||||||
| Allocated value of transaction costs to Common Stock | — | — | — | — | (275,665 | ) | — | (275,665 | ) | |||||||||||||||||||
| Issuance of Representative Shares | — | — | 35,000 | 4 | — | — | 4 | |||||||||||||||||||||
| Remeasurement of Common Stock subject to possible redemption | — | — | — | — | (5,533,319 | ) | (2,181,040 | ) | (7,714,359 | ) | ||||||||||||||||||
| Net loss | — | — | — | — | — | (308,792 | ) | (308,792 | ) | |||||||||||||||||||
| Balance - December 31, 2023(1) | 6,900,000 | $ | 69,000,000 | 1,999,200 | $ | 200 | $ | — | $ | (2,690,206 | ) | $ | (2,690,006 | ) | ||||||||||||||
| Remeasurement of Common Stock subject to possible redemption | — | 2,838,568 | — | — | (3 | ) | (2,829,571 | ) | (2,829,574 | ) | ||||||||||||||||||
| Forfeiture of Founder Shares | (32,000 | ) | (3 | ) | 3 | — | — | |||||||||||||||||||||
| Net income | — | — | — | — | — | 1,375,819 | 1,375,819 | |||||||||||||||||||||
| Balance – December 31, 2024 | 6,900,000 | $ | 71,838,571 | 1,967,000 | $ | 197 | $ | — | $ | (4,143,958 | ) | $ | (4,143,761 | ) | ||||||||||||||
| (1) | Includes an aggregate of 32,200 shares of common stock subject to forfeiture, at December 31, 2023, by the initial stockholder to the extent that the underwriters’ over-allotment option is not exercised in full (Note 6). |
The accompanying notes are an integral part of these financial statements.
F-5
IRON HORSE ACQUISITIONS CORP.
STATEMENTS OF CASH FLOWS
| Year Ended December 31, | Year Ended December 31, | |||||||
| 2024 | 2023 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net loss | $ | 1,375,819 | $ | (308,792 | ) | |||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Payment of office expenses made by sponsor | — | 269,251 | ||||||
| Courtesy discount on legal fees | — | (11,301 | ) | |||||
| Change in fair value of Overallotment liability | (11,135 | ) | — | |||||
| Interest earned on marketable securities held in Trust Account | (3,526,053 | ) | — | |||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses and other current asset | 32,323 | (33,157 | ) | |||||
| Short-term prepaid insurance | (42,229 | ) | — | |||||
| Accounts payable | 87,578 | — | ||||||
| Accrued expenses | 329,423 | 799 | ||||||
| Accrued offering cost | (5,000 | ) | — | |||||
| Income taxes payable | 746,314 | — | ||||||
| Net cash used in operating activities | (1,012,960 | ) | (83,200 | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Investment of cash into trust Account | (229,770 | ) | (69,000,000 | ) | ||||
| Cash withdrawn from Trust Account to pay franchise and income taxes | 3,338 | — | ||||||
| Net cash used in investing activities | (226,432 | ) | (69,000,000 | ) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from sale of Units, net of underwriting discounts paid | — | 68,413,500 | ||||||
| Proceeds from promissory note - related party | 70,000 | — | ||||||
| Proceeds from promissory note | 425,013 | — | ||||||
| Proceeds from loan payable | 229,770 | — | ||||||
| Proceeds from sale of private placements warrants | — | 2,457,000 | ||||||
| Repayment of promissory note - related party | — | (1,014,523 | ) | |||||
| Payment of offering costs | (141,914 | ) | (115,800 | ) | ||||
| Net cash provided by financing activities | 582,869 | 69,740,177 | ||||||
| Net Change in Cash and cash equivalents | (656,523 | ) | 656,977 | |||||
| Cash and cash equivalents – Beginning of period | 656,977 | — | ||||||
| Cash and cash equivalents – End of period | $ | 454 | $ | 656,977 | ||||
| Non-Cash investing and financing activities: | ||||||||
| Remeasurement of Common Stock subject to possible redemption | $ | 2,829,574 | $ | 7,714,359 | ||||
| Deferred underwriting fee payable | $ | — | $ | 2,518,500 | ||||
| Issuance of representative shares | $ | — | $ | 4 | ||||
| Issuance of founder shares | $ | 3 | $ | 3 | ||||
| Offering costs included in accrued offering costs | $ | — | $ | 221,914 | ||||
| Offering costs paid via promissory notes | $ | — | $ | 632,273 | ||||
The accompanying notes are an integral part of these financial statements.
F-6
IRON HORSE ACQUISITIONS CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2024
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Iron Horse Acquisitions Corp. (the “Company”) was incorporated in Delaware on November 23, 2021 as a blank check company whose objective is to acquire, through a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination, one or more businesses or entities (a “Business Combination”).
As of December 31, 2024, the Company had not yet commenced any operations. All activity from November 23, 2021 (inception) through December 31, 2024 relates to the Company’s formation and the Initial Public Offering (the “IPO”), which is described below, and subsequent to the IPO, identifying a target company for a Business Combination. The Company has selected December 31 as its fiscal year-end.
The registration statement for the IPO was declared effective on December 26, 2023. On December 29, 2023, the Company consummated the IPO of 6,900,000 units (the “Units” and, with respect to the shares of common stock included in the Units being offered, the “Public Shares”), which includes the partial exercise by the underwriters of their over-allotment option in the amount of 800,000 Units, at $10.00 per Unit, generating gross proceeds of $69,000,000 which is described in Note 3.
Simultaneously with the closing of the IPO, the Company consummated the sale of 2,457,000 warrants (the “Private Placement Warrants”) at a price of $1.00 per Private Placement Warrant, in a private placement to the Company’s sponsor, Bengochea SPAC Sponsors I LLC (the “sponsor”), generating gross proceeds of $2,457,000, which is described in Note 4.
Transaction costs amounted to $4,651,705 consisting of $586,500 of cash underwriting fees, $2,518,500 of deferred underwriting fees, and $1,546,705 of other offering costs.
The Units were listed on the Nasdaq Global Market tier of The Nasdaq Stock Market LLC (“Nasdaq”). Pursuant to Nasdaq’s listing rules, the Company’s initial Business Combination must be with a target business or businesses whose collective fair market value is at least equal to 80% of the balance in the trust account at the time of the execution of a definitive agreement for such Business Combination (net of taxes payable and deferred underwriting commissions), although this may entail simultaneous acquisitions of several target businesses. There is no assurance that the Company will be able to affect a Business Combination successfully.
Following the closing of the IPO on December 29, 2023, an amount of $69,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the IPO and the sale of the Private Placement Warrants was placed in the Company’s trust account (“Trust Account”) with Continental Stock Transfer & Trust Company acting as trustee (the “Trustee”) and invested in United States government treasury bills, bonds or notes, having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act until the earlier of (i) the consummation of the Company’s initial Business Combination, (ii) the redemption of any shares of common stock included in the Units sold in the IPO that have been properly tendered in connection with a stockholder vote to amend the Company’s certificate of incorporation to modify the substance or timing of its obligation to redeem 100% of such shares of common stock if it does not complete its initial Business Combination within 12 months from the closing of the IPO (or 18 months from the closing of the IPO if the Company extends the time to complete a Business Combination as provided in its amended and restated certificate of incorporation), provided that, pursuant to the terms of the amended and restated certificate of incorporation and the investment management trust agreement entered into between the Company and the Trustee, the only way to extend the time available for the Company to consummate its initial business combination in the absence of a charter amendment is for the sponsor, upon at least five days’ advance notice prior to the applicable deadline, to deposit into the trust account $229,770, or $233,600 if the underwriters’ over-allotment option is exercised in full, or an aggregate of $459,540, or $467,199 if the over-allotment option is exercised in full, for each three-month extension, on or prior to the date of the applicable deadline, and (iii) the Company’s failure to consummate a Business Combination within the prescribed time. If the Company is unable to consummate an initial business combination within such time period, the Company will redeem 100% of its outstanding Public Shares for a pro rata portion of the funds held in the Trust Account, 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 the Company for taxes (and less up to $100,000 of interest which can be used for liquidation expenses) divided by the number of then outstanding Public Shares, subject to applicable law and as further described herein, and then seek to dissolve and liquidate. Placing funds in the Trust Account may not protect those funds from third party claims against the Company. Although the Company will seek to have all vendors, service providers, prospective target businesses or other entities it engages, execute agreements with the Company waiving any claim of any kind in or to any monies held in the Trust Account, there is no guarantee that such persons will execute such agreements. The remaining net proceeds (not held in the Trust Account) may be used to pay for business, legal and accounting due diligence on prospective acquisitions and continuing general and administrative expenses. Additionally, certain interest earned on the Trust Account balance may be released to the Company to pay the Company’s tax obligations.
F-7
IRON HORSE ACQUISITIONS CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2024
The Company, after signing a definitive agreement for the acquisition of a target business and in connection with consummating such a Business Combination, is required to provide stockholders who acquired shares of common stock sold as part of the Units in the IPO (“Public Stockholders”) with the opportunity to have the Company redeem their Public Shares for a pro rata share of the Trust Account. The holders of the Founder Shares (as defined in Note 6) agreed to vote any shares they then hold in favor of any proposed Business Combination and will waive any conversion rights with respect to these shares pursuant to letter agreements executed prior to the IPO.
The Company will seek stockholder approval of any initial Business Combination at a meeting called for such purpose in connection with which Public Stockholders may seek to convert their Public Shares, regardless of whether they vote for or against the proposed Business Combination. Alternatively, the Company may conduct a tender offer and allow conversions in connection therewith. If the Company seeks stockholder approval of an initial Business Combination, any Public Stockholder voting either for or against such proposed Business Combination or not voting at all will be entitled to demand that his Public Shares be converted into a full pro rata portion of the amount then in the Trust Account (initially $10.00 per share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company or necessary to pay its taxes). Holders of warrants sold as part of the Units will not be entitled to vote on the Proposed Business Combination and will have no conversion or liquidation rights with respect to the shares of common stock underlying such warrants.
If the Company is unable to complete its initial Business Combination and expends all of the net proceeds from the sale of the Private Placement Warrants not deposited in the Trust Account, without taking into account any interest earned on the Trust Account, the Company expects that the initial per-share redemption price for the Public Shares will be $10.00. The proceeds deposited in the Trust Account could, however, become subject to claims of the Company’s creditors that are in preference to the claims of the Company’s stockholders. In addition, if the Company is forced to file a bankruptcy case or an involuntary bankruptcy case is filed against it that is not dismissed, the proceeds held in the Trust Account could be subject to applicable bankruptcy law and may be included in its bankruptcy estate and subject to the claims of third parties with priority over the claims of the Company’s common stockholders. Therefore, the actual per-share redemption/conversion price may be less than $10.00.
On October 25, 2024, the Company received the resignation of Ms. Jane Waxman as Chief Financial Officer of the Company effective immediately. Ms. Waxman’s resignation was due to personal reasons and was not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices. Ms. Waxman will continue to serve as a director of the Company. On the same date, the Company’s current Chief Operating Officer, William Caragol, was appointed as the Company’s Chief Financial Officer by the Company’s board of directors.
Liquidity and Going Concern Consideration
As of December 31, 2024, the Company had cash of $454 and working capital deficit of $2,548,172.
Until the consummation of an Initial Business Combination, the Company will be using the funds held outside the Trust Account for identifying and evaluating target businesses, performing due diligence on prospective target businesses, paying for travel expenditures, reviewing corporate documents and material agreements of prospective target businesses, and structuring, negotiating and completing an Initial Business Combination.
F-8
IRON HORSE ACQUISITIONS CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2024
On October 14, 2024, the Company issued unsecured promissory note to the Target to pay or cause to be paid, the Acquiror Transaction Expenses, as may be incurred from time to time and as such expenses become due and payable. This loan is non-interest bearing, unsecured and repayable upon the date on which the Company consummates its initial business transaction or, at the Company’s discretion, if funds allow. As of December 31, 2024, there was $425,013 outstanding under the promissory note.
On December 4, 2024, the Company issued an extension note to the Target to fund the Company’s extension, which extends the period of time to complete a Business Combination to March 29, 2025. As of December 31, 2024, there was $229,770 outstanding under this note reported in Loan Payable in the accompanying audited balance sheets.
As of December 31, 2024, the Company had cash of $454 and a working capital deficit of $2,548,172. In connection with the Company’s assessment of going concern considerations in accordance with the authoritative guidance in Financial Accounting Standard Board (“FASB”) Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that the Company currently lacks the liquidity it needs to sustain operations for a reasonable period of time, which is considered to be at least one year from the date that the financial statements are issued as it expects to continue to incur significant costs in pursuit of its acquisition plans. In addition, the Company has until March 29, 2025 (or June 29, 2025 if we extend the period of time to consummate a Business Combination by the full amount of time) (“Combination Period”) to consummate a Business Combination. It is uncertain whether the Company will be able to consummate a Business Combination by this time. If a Business Combination is not consummated by March 29, 2025 (or June 29, 2025, if extended), there will be a mandatory liquidation and subsequent dissolution. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after March 29, 2025 (or June 29, 2025, if extended). The Company intends to continue to seek to complete a Business Combination before the mandatory liquidation date. The Company is within 12 months of its mandatory liquidation date as of the time of filing of this Annual Report on Form 10-K.
Risks and Uncertainties
United States and global markets are experiencing volatility and disruption following the geopolitical instability resulting from the invasion of Ukraine by Russia and conflicts in the Middle East and around the Red Sea. In response to the ongoing Russia-Ukraine conflict, the North Atlantic Treaty Organization (“NATO”) deployed additional military forces to eastern Europe, and the United States, the United Kingdom, the European Union and other countries have announced various sanctions and restrictive actions against Russia, Belarus and related individuals and entities, including the removal of certain financial institutions from the Society for Worldwide Interbank Financial Telecommunication (SWIFT) payment system. Certain countries, including the United States, have also provided and may continue to provide military aid or other assistance, increasing geopolitical tensions among a number of nations. The invasion of Ukraine by Russia and conflicts in the Middle East and around the Red Sea and the resulting measures that have been taken, and could be taken in the future, by NATO, the United States, the United Kingdom, the European Union, Middle East and other countries have created global security concerns that could have a lasting impact on regional and global economies. Although the length and impact of the ongoing conflicts are highly unpredictable, they could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions and increased cyber-attacks against U.S. companies. Additionally, any resulting sanctions could adversely affect the global economy and financial markets and lead to instability and lack of liquidity in capital markets.
Any of the above mentioned factors, or any other negative impact on the global economy, capital markets or other geopolitical conditions resulting from the Russian invasion of Ukraine, conflicts in the Middle East and around the Red Sea and subsequent sanctions or related actions, could adversely affect the Company’s search for an initial business combination and any target business with which the Company may ultimately consummate an initial business combination.
Inflation Reduction Act of 2022
On August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things, a new U.S. federal 1% excise tax on certain repurchases of stock by publicly traded U.S. domestic corporations and certain U.S. domestic subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023. The excise tax is imposed on the repurchasing corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is generally 1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. The U.S. Department of the Treasury (the “Treasury”) has been given authority to provide regulations and other guidance to carry out and prevent the abuse or avoidance of the excise tax.
F-9
IRON HORSE ACQUISITIONS CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2024
Any redemption or other repurchase that occurs after December 31, 2022, in connection with a Business Combination, extension vote or otherwise, may be subject to the excise tax. Whether and to what extent the Company would be subject to the excise tax in connection with a Business Combination, extension vote or otherwise would depend on a number of factors, including (i) the fair market value of the redemptions and repurchases in connection with the Business Combination, extension or otherwise, (ii) the structure of a Business Combination, (iii) the nature and amount of any “PIPE” or other equity issuances in connection with a Business Combination (or otherwise issued not in connection with a Business Combination but issued within the same taxable year of a Business Combination) and (iv) the content of regulations and other guidance from the Treasury. In addition, because the excise tax would be payable by the Company and not by the redeeming holder, the mechanics of any required payment of the excise tax have not been determined. The foregoing could cause a reduction in the cash available on hand to complete a Business Combination and in the Company’s ability to complete a Business Combination.
Business Combination Agreement
On September 29, 2024, the Company entered into a business combination agreement, dated as of September 27, 2024 (the “Business Combination Agreement”), with Rosey Sea Holdings Limited, a company incorporated and existing under the laws of the British Virgin Islands (“Seller”) and the owner of 100% of the issued and outstanding capital stock of Zhong Guo Liang Tou Group Limited, a company incorporated and existing under the laws of the British Virgin Islands (the “Target”).
The Business Combination Agreement provides, among other things, that the Company will purchase from Seller the ordinary shares of the Target in exchange for shares of the Company’s common stock, par value $0.0001 per share (“Common Stock”), as a result of which the Target will become a wholly owned subsidiary of the Company. Assuming that holders of Common Stock eligible to have the Company redeem all or a portion of their shares of Common Stock in connection with the proposals to be presented to the Company’s stockholders at a meeting of such stockholders (the “Stockholder Meeting”) to approve (the “Stockholders’ Approval”) the Business Combination Agreement and the transactions contemplated thereby and by the related agreements (the “Transactions”) and certain related proposals (collectively, the “Transaction Proposals”) for a pro rata share of the funds on deposit in the Trust Account, the Company will issue to Seller 47,888,000 shares of Common Stock (the “Consideration”) pursuant to the Business Combination Agreement. The number of shares of Common Stock constituting the Consideration will be reduced on a one-for-one basis by the number of shares of Common Stock that remain in the Trust Account immediately prior to the closing of the Transactions (the “Closing”), such that if no eligible shares are redeemed, the number of shares of Common Stock constituting the Consideration will be 40,988,000.
Representations and Warranties; Covenants
The parties to the Business Combination Agreement have agreed to customary representations and warranties for transactions of this type including representations and warranties with respect to the Target made by Seller. In addition, the parties agreed to be bound by certain customary covenants for transactions of this type, including, among others, covenants with respect to the conduct of the Company and the Target and its subsidiaries during the period between the execution of the Business Combination Agreement and the Closing. Each of Seller and the Company also agreed to use reasonable best efforts to obtain all material consents and approvals of third parties that the parties are required to obtain in order to consummate the Transactions, and to take or cause such other action as may be reasonably necessary or as the other party may reasonably request to consummate the Transactions as soon as practicable. Additionally, the parties have agreed not to facilitate, negotiate or enter into competing transactions, as further provided in the Business Combination Agreement.
The Company and Seller also agreed, among other things, that during the period between the execution of the Business Combination Agreement and the Closing, to the extent permitted by applicable law, they will, and will cause their subsidiaries to, allow the other party and its representatives to continue to conduct due diligence investigations and examinations of the Target and its subsidiaries (on the part of the Company) or the Company (on the part of Seller), and cooperate with the other party and its representatives regarding all other due diligence matters, including document requests.
F-10
IRON HORSE ACQUISITIONS CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2024
The Company agreed to take all action within its power so that immediately following the Closing, the Company’s board of directors will consist of no fewer than five individuals, two of whom may be designated by the Company’s sponsor, and a majority of whom must qualify as independent directors under applicable stock exchange regulations, and that shall comply with all diversity requirements under applicable law. Seller agreed to take all action within its power so that immediately following the Closing, the board of directors of the Target and each subsidiary thereof consist of directors designated in writing by the Company and that complies with applicable law.
Conditions to Each Party’s Obligations
Under the Business Combination Agreement, the obligations of the Company to consummate the Transactions are subject to the satisfaction or waiver of certain closing conditions, including, without limitation: (i) the Stockholders’ Approval having been obtained; (ii) all regulatory approvals, consents, actions, inactions, or waivers necessary or advisable to lawfully complete the Transactions having been obtained, expired or terminated, as applicable; (iii) the registration statement containing the proxy statement/prospectus to be filed by the Company with the Securities and Exchange Commission (the “SEC”) relating to the shares of Common Stock to be issued pursuant to the Business Combination Agreement (the “Registration Statement”) becoming effective under the Securities Act of 1933, as amended (the “Securities Act”), no stop order suspending the effectiveness of the Registration Statement having been issued, and no proceeding seeking such a stop order having been threatened or initiated by the SEC and not withdrawn; (iv) the Common Stock to be issued in connection with the Transactions having been approved for listing on Nasdaq; (v) no order or law having been issued by any governmental entity, securities exchange or similar body that is then in effect or pending and that has the effect of making the Transactions illegal or that otherwise prevents or prohibits consummation of the Transactions; (vi) the representations and warranties of Seller being true and correct, subject to the materiality standards contained in the Business Combination Agreement; (vii) material compliance by Seller with its pre-closing covenants; (viii) the absence of a Company Material Adverse Effect (as defined in the Business Combination Agreement); (ix) Seller having executed the Shareholder Support Agreement and the Lock-Up Agreement (each as defined below); and (x) the Company having completed and being reasonably satisfied with its due diligence review of the Target.
Under the Business Combination Agreement, the obligations of Seller to consummate the Transactions are subject to the satisfaction or waiver of certain closing conditions, including, without limitation: (i) the representations and warranties of the Company being true and correct, subject to the materiality standards contained in the Business Combination Agreement; (ii) material compliance by the Company with its pre-closing covenants; and (iii) the absence of an Acquiror Material Adverse Effect (as defined in the Business Combination Agreement).
Termination
The Business Combination Agreement provides that it may be terminated, and the Transactions abandoned, under certain customary and limited circumstances, including, without limitation: (i) upon the mutual written consent of Seller and the Company; (ii) by either Seller or the Company if any governmental entity, court, securities exchange or similar body shall have issued an order that has the effect of making consummation of the Transactions illegal or otherwise preventing or prohibiting consummation of the Transactions and such order shall have become final and non appealable; (iii) by Seller within 10 business days after the Company changes its recommendation with respect to the Transaction Proposals; (iv) by either Seller or the Company if the Company holds the Stockholder Meeting and the Stockholders’ Approval is not received; (v) by the Company if Seller has not delivered required audited and financial statements of the Target by certain dates; (vi) by either Seller or the Company if the other is in breach of any of its representations, warranties, covenants or agreements set forth in the Business Combination Agreement such that certain conditions to the Closing cannot be satisfied and such breach is not capable of being cured or is not cured within 30 days after receipt of notice of such breach; or (vii) by either Seller or the Company if the Closing has not occurred on or before September 1, 2025.
F-11
IRON HORSE ACQUISITIONS CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2024
Neither Seller nor the Company is required to pay a termination fee or reimburse the other for its expenses as a result of a termination of the Business Combination Agreement. Each of them will, however, remain liable for willful and material breaches of the Business Combination Agreement prior to termination.
Trust Account Waiver
Seller agreed that neither it nor its affiliates will have any right, title, interest or claim of any kind in or to any monies in the Company’s trust account held for its public shareholders, and agreed not to, and waived any right to, make any claim against the Trust Account (including any distributions therefrom).
Other Agreements
The Business Combination Agreement provides that, subsequent to the execution and delivery of the Business Combination Agreement, Seller, the Company and the Target will enter into a voting and support agreement pursuant to which, among other things, Seller will agree that it will not transfer and will vote its ordinary shares of the Target in favor of the Business Combination Agreement (including by execution of a written consent) and the Transactions, and that it will take such other actions as may be necessary to further its performance of the Business Combination Agreement and the consummation of the Transactions (the “Shareholder Support Agreement”).
The Business Combination Agreement also provides that, subsequent to the execution and delivery of the Business Combination Agreement, Seller, the Company and the Company’s sponsor will enter into a voting support agreement pursuant to which, among other things, the sponsor will agree that it will not transfer and will vote its shares of Common Stock and the Company’s preferred stock, or any additional shares of Common Stock or the Company’s preferred stock that it acquires prior to the Stockholder Meeting, in favor of the Business Combination Agreement and the Transactions and each of the Transaction Proposals.
The Business Combination Agreement provides that, subsequent to the execution and delivery of the Business Combination Agreement, Seller will enter into lock-up agreements with the Company pursuant to which, among other things, Seller will agree that it will not sell, for the period set forth therein, the shares of Common Stock it receives under the Business Combination Agreement (the “Lock-Up Agreement”).
Finally, the Business Combination Agreement provides that the Company and Seller will at the Closing enter into a registration rights agreement pursuant to which, among other things, the Company will agree to provide Seller with certain rights relating to the registration for resale of the shares of Common Stock it receives under the Business Combination Agreement.
On December 18, 2024, the Company, Zhong Guo Liang Tou Group Limited, a company incorporated and existing under the laws of the British Virgin Islands (“CFI”), and Rosy Sea Holdings Limited, a company incorporated and existing under the laws of the British Virgin Islands (“Seller”) and the owner of 100% of the issued and outstanding capital stock of CFI, entered into an Amended and Restated Business Combination Agreement (the “Amended Agreement”).
The material changes that were included in the Amended Agreement: (i) including CFI as a party to the Business Combination, which included CFI making the representations and warranties; (ii) including compensation to the Sponsor in the amount of $2,000,000 to be paid at the Closing; and (iii) updating Section 11.6 to include the additional Acquiror expenses that will be paid by the Seller at the Closing and to include that the Acquiror Financing Note will remain outstanding if the Closing does not occur due to a Terminating Acquiror Breach, that is not cured, or regulatory action.
F-12
IRON HORSE ACQUISITIONS CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2024
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements are presented in U.S. dollars and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the accounting and disclosure rules and regulations of the Securities and Exchange Commission (the “SEC”).
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not applicable to emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Making estimates requires management to exercise significant judgment. 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 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 differ significantly from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company had $454 and $656,977 in cash as of December 31, 2024 and 2023, respectively, and no cash equivalents.
Marketable Securities Held in Trust Account
As of December 31, 2024, the Company invested substantially all the assets held in the Trust Account in U.S. Treasury Bills. The Company accounts for its marketable securities as trading securities under ASC 320, where securities are presented at fair value on the balance sheets and with unrealized gains or losses, if any, presented on the statements of operations. From inception through December 31, 2024, the Company withdrew $3,338 of interest earned on the Trust Account. As of December 31, 2024 and 2023, the assets held in Trust Account amounted to $72,752,485 and $69,000,000, respectively.
F-13
IRON HORSE ACQUISITIONS CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2024
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentration of credit risk consist of a cash account in a financial institution that, at times, may exceed the Federal Deposit Insurance Corporation coverage limit of $250,000. The Company has not experienced losses on this account and management believes that the Company is not exposed to significant risks on such account.
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the accompanying balance sheets, primarily due to their short-term nature.
Franchise Tax
Delaware, where the Company is incorporated, imposes a franchise tax that applies to most business entities that are formed or qualified to do business, or which are otherwise doing business, in Delaware. Delaware franchise tax is based on authorized shares or on assumed par and non-par capital, whichever yields a lower result. Under the authorized shares method, each share is taxed at a graduated rate based on the number of authorized shares. For the year ended December 31, 2024 and 2023, the Company incurred $168,258 and $5,382 of franchise tax, respectively.
Income Taxes
The Company accounts for income taxes under ASC 740, “Income Taxes.” ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statements and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized. As of December 31, 2024 and 2023, the Company’s deferred tax asset of $281,337 and $82,463, respectively, had a full valuation allowance recorded against it. The Company’s effective tax rate was 35.18% and 0.07% for the year ended December 31, 2024 and 2023, respectively. The effective tax rate differs from the statutory tax rate of 21% for the year ended December 31, 2024 and 2023, due to the valuation allowance on the deferred tax assets related to organization expenses and the change in fair value of over-allotment option liability.
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of December 31, 2024 and 2023. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
The Company has identified the United States as its only “major” tax jurisdiction. The Company has been subject to income taxation by major taxing authorities since inception. These examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
F-14
IRON HORSE ACQUISITIONS CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2024
The provision for (benefit from) income taxes for the year ended December 31, 2024 and 2023 was $746,540 and $(226), respectively, and income taxes payable as of December 31, 2024 was $746,314.
Offering Costs
The Company complies with the requirements of the ASC 340-10-S99 and SEC Staff Accounting Bulletin Topic 5A – “Expenses of Offering”. Deferred offering costs consist of underwriting, legal, accounting and other expenses incurred through the balance sheet date that are directly related to the IPO. Offering costs were allocated to the separable financial instruments issued in the IPO based on relative fair value basis, compared to total proceeds received. Offering costs allocated to the Public Shares were charged to temporary equity and offering costs allocated to Public Rights and Warrants were charged to stockholders’ deficit at the completion of the IPO.
Redeemable Share Classification
The Public Shares contain a redemption feature that allows for the redemption of such Public Shares in connection with the Company’s liquidation or if there is a shareholder vote or tender offer in connection with the Company’s initial Business Combination. In accordance with ASC 480-10-S99, the Company classifies Public Common Stock subject to redemption outside of permanent equity as the redemption provisions are not solely within the control of the Company. The Public Shares sold as part of the Units in the IPO were issued with other freestanding instruments (i.e., Public Warrants) and as such, the initial carrying value of Public Shares classified as temporary equity are the allocated proceeds determined in accordance with ASC 470-20. The Company recognizes changes in redemption value immediately as it occurs and will adjust the carrying value of redeemable shares to equal the redemption value at the end of each reporting period. Immediately upon the closing of the IPO, the Company recognized the accretion from initial book value to redemption amount value. The change in the carrying value of redeemable shares will result in charges against additional paid-in capital and accumulated deficit. Accordingly, as of December 31, 2024 and 2023, Common Stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ deficit section of the Company’s balance sheets. The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable shares to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable shares are affected by charges against additional paid in capital and accumulated deficit.
As of December 31, 2024 and 2023, the common stock subject to possible redemption reflected in the balance sheets are reconciled in the following table:
| Gross proceeds | $ | 69,000,000 | ||
| Less: | ||||
| Proceeds allocated to Public Warrants | (43,470 | ) | ||
| Proceeds allocated to Public Rights | (3,283,710 | ) | ||
| Proceeds allocated to over-allotment option | (11,135 | ) | ||
| Common Stock issuance cost | (4,376,044 | ) | ||
| Plus: | ||||
| Remeasurement of carrying value to redemption value | 7,714,359 | |||
| Common Stock subject to possible redemption, December 31, 2023 | 69,000,000 | |||
| Plus: | ||||
| Remeasurement of carrying value to redemption value | 2,829,574 | |||
| Common Stock subject to possible redemption, December 31, 2024 | $ | 71,829,574 |
Net Income (Loss) per Common Stock
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. Net income (loss) per share of Common Stock is computed by dividing net income (loss) by the weighted average number of shares of Common Stock outstanding for the period. Remeasurement of carrying value to redemption value of redeemable shares of Common Stock is excluded from income (losses) per share as the redemption value approximates fair value.
F-15
IRON HORSE ACQUISITIONS CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2024
The calculation of diluted income (loss) per share does not consider the effect of the rights and warrants issued in connection with the (i) IPO, and (ii) the private placement as the exercise of the rights and warrants are contingent upon the occurrence of future events. As of December 31, 2024, the rights and warrants are exercisable to purchase 1,380,000 and 9,357,000 shares of Common Stock, respectively, in the aggregate. The weighted average of these shares was excluded from the calculation of diluted net income (loss) per share of Common Stock as the inclusion of such rights and warrants would be anti-dilutive. The rights and warrants cannot be converted to shares of Common Stock prior to an initial Business Combination; therefore, they have been classified as anti-dilutive.
The following table reflects the calculation of basic and diluted net income (loss) per share of Common Stock (in dollars, except per share amounts):
| For the Year Ended | For the Year Ended | |||||||||||||||
| December 31, 2024 | December 31, 2023 | |||||||||||||||
| Redeemable | Non-redeemable | Redeemable | Non-redeemable | |||||||||||||
| Basic net income (loss) per common stock | ||||||||||||||||
| Numerator: | ||||||||||||||||
| Allocation of net income (loss) | $ | 1,070,616 | $ | 305,203 | $ | (12,385 | ) | $ | (296,407 | ) | ||||||
| Denominator: | ||||||||||||||||
| Basic weighted average shares outstanding | 6,900,000 | 1,967,000 | 71,429 | 1,709,423 | ||||||||||||
| Basic net income (loss) per common stock | $ | 0.16 | $ | 0.16 | $ | (0.17 | ) | $ | (0.17 | ) | ||||||
| Diluted net income (loss) per common stock | ||||||||||||||||
| Numerator: | ||||||||||||||||
| Allocation of net income (loss) | $ | 1,070,616 | $ | 305,203 | $ | (12,016 | ) | $ | (296,776 | ) | ||||||
| Denominator: | ||||||||||||||||
| Diluted weighted average shares outstanding | 6,900,000 | 1,967,000 | 71,429 | 1,764,192 | ||||||||||||
| Diluted net income (loss) per common stock | $ | 0.16 | $ | 0.16 | $ | (0.17 | ) | $ | (0.17 | ) | ||||||
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with FASB ASC Topic 815, “Derivatives and Hedging”. Derivative instruments are initially recorded at fair value on the grant date and re-valued at each reporting date, with changes in the fair value reported in the statement of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative assets and liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instruments could be required within 12 months of the balance sheet date. At December 31, 2023, the over-allotment option is deemed to be a freestanding financial instrument indexed on the contingently redeemable shares and was accounted for as a liability pursuant to ASC 480. On February 12, 2024, the remainder of the over-allotment option to purchase 115,000 Units expired and the over-allotment option liability was derecognized in the statement of operations.
Warrant Instruments
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the instruments’ specific terms and applicable authoritative guidance in ASC 480 and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the instruments are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the instruments meet all of the requirements for equity classification under ASC 815, including whether the instruments are indexed to the shares of Common Stock and whether the instrument holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the instruments are outstanding. Upon further review of the warrant agreement, management concluded that the warrants issued pursuant to the warrant agreement qualify for equity accounting treatment.
F-16
IRON HORSE ACQUISITIONS CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2024
Recent Accounting Pronouncements
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments in this ASU require disclosures, on an annual and interim basis, of significant segment expenses that are regularly provided to the chief operating officer decision maker (“CODM”), as well as the aggregate amount of other segment items included in the reported measure of segment profit or loss. The ASU requires that a public entity disclose the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. Public entities will be required to provide all annual disclosures currently required by Topic 280 in interim periods, and entities with a single reportable segment are required to provide all the disclosures required by the amendments in this ASU and existing segment disclosures in Topic 280. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.
Management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.
Note 3 — INITIAL PUBLIC OFFERING
Pursuant to the IPO, the Company sold 6,900,000 Units, which includes the partial exercise by the underwriters of their over-allotment option in the amount of 800,000 Units, at a price of $10.00 per Unit. Each Unit consists of one share of Common Stock, one redeemable warrant (the “Public Warrants”), and one right to one-fifth of one share of Common Stock upon the consummation of the Company’s initial Business Combination, so a Warrant holder must hold rights in multiples of five in order to receive shares for all of its rights upon the closing of an initial Business Combination. Each Public Warrant is exercisable to purchase one share of Common Stock at an exercise price of $11.50.
Each Public Warrant will become exercisable 30 days after the completion of the Company’s initial Business Combination and will expire five years after the completion of the Company’s initial Business Combination or earlier upon redemption or liquidation. However, if the Company does not complete its initial Business Combination on or prior to the 12-month period allotted (or up to 18 months if the Company extends the time to complete a Business Combination as provided in its amended and restated certificate of incorporation) to complete the Business Combination, the Public Warrants will expire at the end of such period. If the Company is unable to deliver registered shares of Common Stock to the holder upon exercise of the Public Warrants during the exercise period, there will be no net cash settlement of the Public Warrants and the Public Warrants will expire worthless, unless they may be exercised on a cashless basis in the circumstances described in the warrant agreement. Once the Warrants become exercisable, the Company may redeem the outstanding warrants in whole and not in part at a price of $0.01 per Public Warrant upon a minimum of 30 days’ prior written notice of redemption, only in the event that the last sale price of the shares of Common Stock equals or exceeds $18.00 per share for any 20 trading days within the 30-trading day period commencing at any time after the Public Warrants have become exercisable and ending on the third trading day before the Company sends the notice of redemption to the Public Warrant holders.
Note 4 — PRIVATE PLACEMENT
Simultaneously with the closing of the IPO, the sponsor purchased an aggregate of 2,457,000 Private Placement Warrants, at a price of $1.00 per Private Placement Warrant, or $2,457,000 in the aggregate, in a private placement. The terms of the Private Placement Warrants are identical to those of the Public Warrants, other than as described in Note 7. The holders have agreed not to transfer, assign or sell any of the Private Placement Warrants or underlying securities (except to certain permitted transferees) until the completion of the initial Business Combination.
F-17
IRON HORSE ACQUISITIONS CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2024
Note 5 — COMMITMENTS AND CONTINGENCIES
Registration Rights
The holders of the Founder Shares, Representative Shares (as defined in Note 7), and Private Placement Warrants, as well as any warrants that may be issued in payment of Working Capital Loans (as defined in Note 6) made to the Company, are entitled to registration rights pursuant to an agreement signed prior to or on the effective date of the IPO. The holders of a majority of these securities are entitled to make up to three demands that the Company register such securities. The holders of the majority of the Founder Shares can elect to exercise these registration rights at any time commencing three months prior to the date on which these shares of common stock are to be released from escrow. The holders of a majority of the Representative Shares, Private Placement Warrants and warrants issued in payment of Working Capital Loans (or underlying securities) can elect to exercise these registration rights at any time after the Company consummates a Business Combination. Notwithstanding anything to the contrary, EF Hutton may only make a demand on one occasion and only during the five-year period beginning on the effective date of the IPO. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the consummation of a Business Combination; provided, however, that EF Hutton may participate in a “piggy-back” registration only during the seven-year period beginning on the effective date of the IPO. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The Company granted the underwriters a 45-day option from the date of the IPO to purchase up to 915,000 additional Units to cover over-allotments, if any, at the IPO price less the underwriting discounts and commissions. On December 29, 2023, the underwriters partially exercised their over-allotment option for an additional 800,000 Units. On February 12, 2024, the remainder of the over-allotment option to purchase 115,000 Units expired.
The underwriters were entitled to a cash underwriting discount of 0.85% of the gross proceeds of the IPO, or $586,500, paid upon the closing of the IPO. Additionally, the underwriters were entitled to a deferred underwriting discount of 3.65% of the gross proceeds of the IPO, or $2,518,500, payable upon the closing of an initial Business Combination.
Note 6 — RELATED PARTY TRANSACTIONS
Founder Shares
In November 2021, the Company issued an aggregate of 5,750,000 shares of Common Stock (the “Founder Shares”) for an aggregate purchase price of $25,000. In September 2022, 2,875,000 Founder Shares were returned to the Company for no consideration bringing the total issued Founder Shares to 2,875,000. In September 2023, 943,000 Founder Shares were returned to the Company for no consideration bringing the total issued Founder Shares to 1,932,000, as retrospectively presented in the financial statements. In December 2023, the Company determined to issue an additional 32,200 Founder Shares to maintain the proportionate share of the sponsor in the Company, resulting in the sponsor holding 1,964,200 Founder Shares. The Founder Shares included an aggregate of up to 32,200 shares subject to forfeiture by the holders to the extent that the underwriters’ over-allotment was not exercised in full or in part, so that the holders would collectively own 22% of the Company’s issued and outstanding shares after the IPO (assuming the initial stockholders did not purchase any Public Shares in the IPO). On February 12, 2024, the remainder of the over-allotment option to purchase 115,000 Units expired and the 32,200 Founder Shares were forfeited, resulting in the sponsor holding an aggregate of 1,932,000 Founder Shares. The holders of the Founder Shares agreed not to transfer, assign or sell any of the Founder Shares (except to certain permitted transferees) until (i) 180 days after the completion of a Business Combination and (ii) if, subsequent to a Business Combination, the Company completes a liquidation, merger, share exchange or other similar transaction which results in all of the Company’s stockholders having the right to exchange their Common Stock for cash, securities or other property.
F-18
IRON HORSE ACQUISITIONS CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2024
Promissory Note — Related Party
On November 30, 2021, and as amended on July 11, 2022, November 1, 2022, May 15, 2023, June 30, 2023, and October 4, 2023, the Company issued a $1,500,000 (as amended) principal amount unsecured promissory note to the sponsor, which is an affiliate of the Company’s Chief Executive Officer. This loan is non-interest bearing, unsecured and repayable upon the date on which the Company consummates its initial business transaction or, at the Company’s discretion, if funds allow. As of December 31, 2024 and 2023, there was $627,781 and $557,781 outstanding under the promissory note – related party, respectively.
Due from Sponsor
On January 4, 2024, the Company initiated a lawsuit against Omnia Global a/k/a Omnia Schweiz GmbH, Daniel Hansen, Mette Abel Hansen, and James Mair Findlay (collectively, “Omnia”) by filing a complaint in the U.S. District Court for the Southern District of New York, Case No. 1:24-cv-00048 alleging that Omnia had breached the Pre-Purchase Agreement by and between the Company and Omnia, dated as of May 12, 2023. The Company and Omnia have agreed to an amicable resolution of the lawsuit on mutually acceptable terms and without admission of fault by any party. On March 11, 2024, the Company settled an outstanding lawsuit against Omnia and the sponsor received the net lawsuit settlement amount of $206,500 on behalf of the Company ($295,000 gross settlement less $88,500 legal fees incurred). As of December 31, 2024, all payments due pursuant to the settlement have been made.
Administrative Service Agreement
The Company presently occupies office space provided by an entity controlled by the sponsors. Such entity agreed that until the Company consummates a Business Combination, it will make such office space, as well as general and administrative services including utilities and administrative support, available to the Company as may be required by the Company from time to time. The Company agreed to pay a total of $12,000 per month to the sponsor in exchange for management support, administrative services fees, office space, and other services. The Company will cease paying these monthly fees 12 months from the date of the IPO. For the year ended December 31, 2024, the Company incurred and paid $141,600 for administrative services fees. As of December 31, 2023, the Company incurred an amount of $2,400 for administrative services fees, all of which was included in accrued expenses in the accompanying balance sheets.
Working Capital Loans
In order to finance transaction costs in connection with a Business Combination, the Initial Stockholders, the sponsor, the Company’s officers and directors or their affiliates may, but are not obligated to, loan the Company funds from time to time or at any time, as may be required (“Working Capital Loans”). Each Working Capital Loan would be evidenced by a promissory note. The notes would either be paid upon consummation of our initial Business Combination, without interest, or, at holder’s discretion, if there are excess proceeds. In the event that the 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 the Trust Account would be used for such repayment. These loans would be repaid at completion of the initial Business Combination. As of December 31, 2024 and 2023, no Working Capital Loans were outstanding.
F-19
IRON HORSE ACQUISITIONS CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2024
Note 7 — STOCKHOLDERS’ DEFICIT
Preferred Stock
The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share, with such designation, rights and preferences as may be determined from time to time by the Company’s board of directors. As of December 31, 2024 and 2023, there are no shares of preferred stock issued and outstanding.
Common Stock
The Company is authorized to issue 50,000,000 shares of Common Stock. As of December 31, 2024 and 2023, 1,967,000 and 1,999,200 shares of Common Stock, respectively, were issued and outstanding, excluding 6,900,000 shares of Common Stock subject to possible redemption. The number of shares of Common Stock issued and outstanding gives effect to the February 2024 forfeiture of 32,200 shares of Common Stock, which were subject to forfeiture to the extent that the underwriters’ over-allotment option was not exercised in full. All of these shares were placed into an escrow account on the closing of the IPO. On February 12, 2024, the remainder of the over-allotment option to purchase 115,000 Units expired and the 32,200 Founder Shares were forfeited, resulting in the sponsor holding an aggregate of 1,932,000 Founder Shares. Subject to certain limited exceptions, these shares will not be transferred, assigned, sold, or released from escrow for a period ending on the 180-day anniversary of the date of the consummation of the initial Business Combination, or earlier if, subsequent to the initial Business Combination, the Company consummates a liquidation, merger, stock exchange or other similar transaction which results in all of the Company’s stockholders having the right to exchange their shares of Common Stock for cash, securities or other property.
Rights
Each holder of a right will receive one-fifth of one share of Common Stock upon consummation of a Business Combination, even if the holder of such right redeemed all shares held by it in connection with a Business Combination. No fractional shares will be issued upon the exchange of the rights. No additional consideration will be required to be paid by a holder of rights in order to receive its additional shares upon consummation of a Business Combination as the consideration related thereto has been included in the Unit purchase price paid by investors in the IPO. If the Company enters into a definitive agreement for a Business Combination in which the Company will not be the surviving entity, the definitive agreement will provide for the holders of rights to receive the same per share consideration the holders of the shares of Common Stock will receive in the transaction on an as- converted into Common Stock basis and each holder of a right will be required to affirmatively convert its rights in order to receive one-fifth of one share underlying each right (without paying additional consideration).
Additionally, in no event will the Company be required to net cash settle the rights. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of rights will not receive any of such funds with respect to their rights, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such rights. Accordingly, the rights may expire worthless.
Representative Shares
The Company issued to EF Hutton and/or its designees in the IPO 35,000 shares of Common Stock (the “Representative Shares”) at the time of the consummation of IPO. The holders of the Representative Shares have agreed not to transfer, assign or sell any such shares until the completion of a Business Combination. In addition, the holders have agreed they will (i) waive their redemption rights with respect to such shares in connection with the completion of a Business Combination and (ii) waive their rights to liquidating distributions from the Trust Account with respect to such shares if the Company fails to complete a Business Combination within the Combination Period.
Warrants
Public Warrants may only be exercised for a whole number of shares. No fractional Public Warrants will be issued upon separation of the Units and only whole Public Warrants will trade. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination or (b) 12 months from the closing of the Initial Public Offering; provided in each case that the Company has an effective registration statement under the Securities Act covering the shares of common stock issuable upon exercise of the Public Warrants and a current prospectus relating to them is available (or the Company permits holders to exercise their Public Warrants on a cashless basis and such cashless exercise is exempt from registration under the Securities Act). The Company has agreed that as soon as practicable, after the closing of the Business Combination, the Company will use its best efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the common stock issuable upon exercise of the Public Warrants. The Company will use its best efforts to cause the same to become effective and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the Public Warrants in accordance with the provisions of the public warrant agreement. Notwithstanding the foregoing, if the Company’s common stock is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under the Securities Act, the Company, at its option, may require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement. The Public Warrants will expire five years after the completion of the Business Combination or earlier upon the Company’s redemption or liquidation.
F-20
IRON HORSE ACQUISITIONS CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2024
The Company may redeem the Public Warrants:
| ● | in whole and not in part; | |
| ● | at a price of $0.01 per warrant; | |
| ● | upon a minimum of 30 days’ prior written notice of redemption to each warrant holder; and | |
| ● | if, and only if, the last reported sale price (the “closing price”) of common stock equals or exceeds $18.00 per share (as adjusted) for any 20 trading days within a 30-trading day period commencing at any time after the shares underlying the warrants have become exercisable and ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders. |
The Company will not redeem the Public Warrants as described above unless a registration statement under the Securities Act covering the common stock issuable upon exercise of the Public Warrants is then effective and a current prospectus relating to those common stock is available throughout the 30-day redemption period. Any such exercise would not be on a cashless basis and would require the exercising warrant holder to pay the exercise price for each Public Warrant being exercised.
The Warrants issued in the Private Placement (“Private Placement Warrants”) will be identical to the Public Warrants, except that the Private Placement Warrants and the common stock issuable upon exercise of the Private Placement Warrants will not be transferable, assignable or saleable until 30 days after the completion of the Business Combination, subject to certain limited exceptions.
In no event will the Company be required to net cash settle any warrant. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless. As of December 31, 2024 and 2023, there were 6,900,000 Public Warrants and 2,457,000 Private Placement Warrants outstanding.
Note 8 — INCOME TAX
The Company did not have any significant deferred tax assets or liabilities as of December 31, 2024 and 2023.
The Company’s net deferred tax assets are as follows:
| December 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Deferred tax assets | ||||||||
| Net operating loss carryforward | $ | — | $ | 1,962 | ||||
| Startup Costs | 281,337 | 80,501 | ||||||
| Total deferred tax assets | 281,337 | 82,463 | ||||||
| Valuation allowance | (281,337 | ) | (82,463 | ) | ||||
| Deferred tax assets, net of allowance | $ | — | $ | — | ||||
F-21
IRON HORSE ACQUISITIONS CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2024
The income tax provision for the year ended December 31, 2024 and 2023 consists of the following:
| December 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Federal | ||||||||
| Current | $ | 746,540 | $ | (226 | ) | |||
| Deferred | (198,874 | ) | (64,668 | ) | ||||
| State | ||||||||
| Current | $ | — | $ | — | ||||
| Deferred | — | — | ||||||
| Change in valuation allowance | 198,874 | 64,668 | ||||||
| Income tax provision | $ | 746,540 | $ | (226 | ) | |||
As of December 31, 2024 and 2023, the Company had a total of $0 and $4,306, respectively, of U.S. federal net operating loss carryovers available to offset future taxable income. The federal net operating loss can be carried forward indefinitely.
In assessing the realization of the deferred tax assets, management considers whether it is more likely than not that some portion of all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences representing net future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. After consideration of all of the information available, management believes that significant uncertainty exists with respect to future realization of the deferred tax assets and has therefore established a full valuation allowance. For the year ended December 31, 2024 and 2023, the change in the valuation allowance was $198,874 and $64,668, respectively.
A reconciliation of the federal income tax rate to the Company’s effective tax rate is as follows:
| December 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Statutory federal income tax rate | 21.00 | % | 21.00 | % | ||||
| Merger & Acquisition expenses | 4.91 | % | 0.00 | % | ||||
| Change in fair value of over-allotment option liability | (0.11 | )% | 0.00 | % | ||||
| Valuation allowance | 9.38 | % | (20.93 | )% | ||||
| Income tax provision | 35.18 | % | 0.07 | % | ||||
The Company’s effective tax rates for the periods presented differ from the expected (statutory) rates due to the valuation allowances on deferred tax assets.
The Company files income tax returns in the U.S. federal jurisdiction in various state and local jurisdictions and is subject to examination by the various taxing authorities.
F-22
IRON HORSE ACQUISITIONS CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2024
Note 9 — FAIR VALUE MEASUREMENTS
The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
| Level 1: | Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. |
| Level 2: | Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active. |
| Level 3: | Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability. |
The following table presents information about the Company’s assets that are measured at fair value on December 31, 2024 and 2023 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.
| Level | December 31, 2024 | December 31, 2023 | ||||||||||
| Assets: | ||||||||||||
| Marketable securities held in Trust Account | 1 | $ | 72,752,485 | $ | 69,000,000 | |||||||
The following table presents information about the Company’s derivative financial instrument and equity instruments that are measured at fair value at December 31, 2023, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.
| Level | December 31, 2023 | |||||
| Liabilities: | ||||||
| Over-allotment option | 3 | $ | 11,135 | |||
| Equity: | ||||||
| Fair value of Public Warrants subject to possible redemption allocation | 3 | $ | 43,470 | |||
| Fair value of rights for common stock subject to possible redemption allocation | 3 | $ | 3,283,710 | |||
The over-allotment option was accounted for as a liability in accordance with ASC 815-40 and was presented within liabilities on the balance sheets. The over-allotment liability is measured at fair value at inception and on a recurring basis, with changes in fair value presented within the change in fair value of over-allotment liability in the statement of operations. On February 12, 2024, the remainder of the over-allotment option to purchase 115,000 Units expired and the over-allotment option liability was derecognized in the statement of operations.
The Company accounted for warrants and rights issued at the IPO under equity treatment, as such, no subsequent measurement is required.
The Company used a Black-Scholes model to value the over-allotment option. The over-allotment option liability was classified within Level 3 of the fair value hierarchy at the measurement dates due to the use of unobservable inputs inherent in pricing models are assumptions related to expected share-price volatility, expected life and risk-free interest rate. The Company estimates the volatility of its ordinary share based on historical volatility that matches the expected remaining life of the option. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the option. The expected life of the option is assumed to be equivalent to their remaining contractual term.
F-23
IRON HORSE ACQUISITIONS CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2024
The Public Warrants and rights were valued using Monte Carlo models. The Public Warrants and rights have been classified within stockholders’ deficit and will not require remeasurement after issuance. The following table presents the quantitative information regarding market assumptions used in the valuation of the Public Warrants and rights:
| December 29, 2023 | ||||
| Market price of public stock | $ | 9.52 | ||
| Term (years) | 2.38 | |||
| Risk-free rate | 4.07 | % | ||
| Volatility | 3.27 | % | ||
Note 10 — SEGMENT INFORMATION
ASC Topic 280, “Segment Reporting,” establishes standards for companies to report in their financial statement information about operating segments, products, services, geographic areas, and major customers. Operating segments are defined as components of an enterprise for which separate financial information is available that is regularly evaluated by the Company’s chief operating decision maker, or group, in deciding how to allocate resources and assess performance.
The Company’s chief operating decision maker has been identified as the Chief Executive Officer (“CODM”), who reviews the operating results for the Company as a whole to make decisions about allocating resources and assessing financial performance. Accordingly, management has determined that the Company only has one operating segment.
When evaluating the Company’s performance and making key decisions regarding resource allocation, the CODM reviews several key metrics, formation and operational costs and interest earned on marketable securities held in Trust Account which include the accompanying audited statements of operations.
The key measures of segment profit or loss reviewed by our CODM are interest earned on marketable securities held in Trust Account and formation and operational costs. The CODM reviews interest earned on marketable securities held in Trust Account to measure and monitor stockholder value and determine the most effective strategy of investment with the Trust Account funds while maintaining compliance with the trust agreement. Formation and operational costs are reviewed and monitored by the CODM to manage and forecast cash to ensure enough capital is available to complete a business combination within the business combination period. The CODM also reviews formation and operational costs to manage, maintain and enforce all contractual agreements to ensure costs are aligned with all agreements and budget.
Note 11 — SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date the financial statements were issued. Based on this review, the Company did not identify any other subsequent events that would have required adjustment or disclosure in the financial statements.
On January 11, 2025, the company issued a promissory note in the principal amount of $157,899, in relation to October 14, 2024 unsecured promissory note to the Target to pay or cause to be paid, the Acquiror Transaction Expenses, as may be incurred from time to time and as such expenses become due and payable. This loan is non-interest bearing, unsecured and repayable upon the date on which the Company consummates its initial business transaction or, at the Company’s discretion, if funds allow. As of filing date of this Annual Report, there was $582,912 outstanding under the promissory note.
F-24
