Aquaron Acquisition Corp.(AQUNU) - 2025 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents Aquaron Acquisition Corp.'s unaudited financial statements and management's discussion and analysis Item 1. Condensed Financial Statements (Unaudited) This section presents Aquaron Acquisition Corp.'s unaudited condensed financial statements and notes for Q1 2025 and Q4 2024 Unaudited Condensed Balance Sheets This section provides Aquaron Acquisition Corp.'s financial position as of March 31, 2025, and December 31, 2024 Condensed Balance Sheet Highlights | Metric | March 31, 2025 (Unaudited) | December 31, 2024 (Audited) | | :-------------------------------- | :--------------------------- | :-------------------------- | | Cash | $290 | $7,830 | | Prepaid income tax | $214,777 | $224,564 | | Total Current Assets | $215,067 | $232,394 | | Investments held in Trust Account | $9,394,896 | $9,255,615 | | Total Assets | $9,609,963 | $9,488,009 | | Total Current Liabilities | $3,707,197 | $3,118,636 | | Deferred underwriting fee payable | $2,525,896 | $2,525,896 | | Total Liabilities | $6,233,093 | $5,644,532 | | Common stock subject to possible redemption | $9,394,896 | $9,255,615 | | Accumulated deficit | $(6,018,189) | $(5,412,301) | | Total Stockholders' Deficit | $(6,018,026) | $(5,412,138) | Unaudited Condensed Statements of Operations This section details Aquaron Acquisition Corp.'s financial performance for the three months ended March 31, 2025, and 2024 Condensed Statements of Operations Highlights | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | General and administrative expenses | $464,483 | $79,082 | | Franchise tax expenses | $5,900 | $10,800 | | Loss from operations | $(470,383) | $(89,882) | | Interest earned on investments held in Trust Account | $63,679 | $274,776 | | Unrealized gain on investments held in Trust Account | $33,391 | $143,038 | | Net (loss) income | $(383,100) | $98,814 | | Basic and diluted net (loss) income per share of redeemable common stock | $(0.04) | $0.09 | | Basic and diluted net loss per share of non-redeemable common stock | $(0.22) | $(0.10) | - The company experienced a significant shift from net income of $98,814 in Q1 2024 to a net loss of $383,100 in Q1 2025, primarily driven by increased general and administrative expenses and a substantial decrease in interest and unrealized gains from trust account investments[12] Unaudited Condensed Statements of Changes in Stockholders' Deficit This section outlines changes in Aquaron Acquisition Corp.'s stockholders' deficit for periods ended March 31, 2025, and 2024 Changes in Stockholders' Deficit | Metric | As of January 1, 2025 | As of March 31, 2025 | | :------------------------------------ | :-------------------- | :------------------- | | Common Stock Shares | 1,623,060 | 1,623,060 | | Common Stock Amount | $163 | $163 | | Accumulated Deficit | $(5,412,301) | $(6,018,189) | | Total Stockholders' Deficit | $(5,412,138) | $(6,018,026) | | Metric | As of January 1, 2024 | As of March 31, 2024 | | :------------------------------------ | :-------------------- | :------------------- | | Common Stock Shares | 1,623,060 | 1,623,060 | | Common Stock Amount | $163 | $163 | | Accumulated Deficit | $(4,295,522) | $(4,728,943) | | Total Stockholders' Deficit | $(4,295,359) | $(4,728,780) | - The accumulated deficit increased from $(5,412,301) at January 1, 2025, to $(6,018,189) by March 31, 2025, primarily due to net loss, accretion of common stock to redemption value, and excise tax liability[13] Unaudited Condensed Statements of Cash Flows This section presents Aquaron Acquisition Corp.'s cash flows from operating, investing, and financing activities for Q1 2025 and Q1 2024 Condensed Statements of Cash Flows Highlights | Cash Flow Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Net (loss) income | $(383,100) | $98,814 | | Net cash used in operating activities | $(25,329) | $(140,171) | | Net cash used in investing activities | $(42,211) | $(114,421) | | Net cash provided by financing activities | $60,000 | $281,948 | | Net change in cash | $(7,540) | $27,356 | | Cash, beginning of the period | $7,830 | $339 | | Cash, end of the period | $290 | $27,695 | - The company experienced a net decrease in cash of $7,540 in Q1 2025, ending with $290 in cash, a significant reduction from the $27,356 net increase and $27,695 ending cash in Q1 2024, primarily due to reduced financing activities and lower interest/unrealized gains from the Trust Account[16] Notes to Unaudited Condensed Financial Statements This section provides detailed explanations and disclosures supporting the unaudited condensed financial statements Note 1 — Description of Organization and Business Operations This note describes Aquaron Acquisition Corp.'s SPAC formation, IPO, business combination efforts, Nasdaq delisting, and going concern issues - Aquaron Acquisition Corp. is a blank check company (SPAC) incorporated in Delaware on March 11, 2021, with the purpose of effecting a business combination, intending to focus on the new energy sector[19][20] - The company consummated its IPO on October 6, 2022, raising $50,000,000 from 5,000,000 units, with additional proceeds from an over-allotment option and private placements, totaling $54,984,377 deposited into a Trust Account[22][23][24] - The company has extended its Business Combination Period multiple times, most recently to May 6, 2026, approved by stockholders on May 6, 2025, with these extensions involving significant share redemptions by public stockholders[32][33][34][115] - Aquaron terminated its merger agreement with Bestpath (Shanghai) IoT Technology Co., Ltd. on July 12, 2024, and concurrently entered into a new merger agreement with HUTUR E Ltd. and its subsidiaries, implying an equity value of $1.0 billion for Huture[38][39][41] - The company was delisted from Nasdaq on March 7, 2025, due to non-compliance with the Minimum Public Holders Rule and is now quoted on the over-the-counter market[48][50] - As of March 31, 2025, the company had $290 in cash and a working capital deficit of $3,492,130, raising substantial doubt about its ability to continue as a going concern if a business combination is not completed by August 6, 2025[51][53] - The company recorded excise tax liabilities of $630,384 as of March 31, 2025, and $546,877 as of December 31, 2024, due to stock redemptions under the Inflation Reduction Act of 2022, with penalties and interest accruing[57][71] Note 2 — Summary of Significant Accounting Policies This note outlines Aquaron Acquisition Corp.'s significant accounting policies, including GAAP conformity and treatment of investments - The financial statements are prepared in conformity with U.S. GAAP and SEC rules, with management's estimates and assumptions affecting reported amounts[58][61] - The company is an 'emerging growth company' and has elected to use the extended transition period for complying with new or revised financial accounting standards[59][60] - Investments held in the Trust Account are classified as trading securities, measured at fair value, and totaled $9,394,896 as of March 31, 2025[64] Effective Tax Rate and Deferred Tax Assets | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Effective tax rate | (2.6)% | 69.87% | | Deferred Tax Asset (Liability) | March 31, 2025 | December 31, 2024 | | :------------------------------------ | :------------- | :---------------- | | Startup/Organization Expenses | $307,101 | $286,379 | | Amortization of startup cost | $(6,275) | $(5,793) | | Unrealized gain on investments held in Trust Account | $(7,012) | $(7,275) | | Total deferred tax asset (liability) | $293,814 | $273,311 | | Valuation allowance | $(293,814) | $(273,311) | | Deferred tax asset, net of allowance | $0 | $0 | - Common stock subject to possible redemption is classified as temporary equity and presented at redemption value, with changes in redemption value recognized in accumulated deficit[76][77] - The company early adopted ASU 2020-06 for convertible promissory notes, accounting for them as debt (liability) on the balance sheet[78] Note 3 — Initial Public Offering This note details Aquaron Acquisition Corp.'s October 2022 IPO, including units sold, gross proceeds, and public share redemption features - On October 6, 2022, the company sold 5,000,000 Units at $10.00 per Unit, generating $50,000,000 gross proceeds, with an additional 417,180 Over-Allotment Option Units sold on October 14, 2022, for $4,171,800[83] - Each Unit consists of one share of common stock and one right, with each right converting into one-fifth (1/5) of one share of common stock upon consummation of a Business Combination[83] - Public shares contain a redemption feature, classifying them as temporary equity outside of permanent equity, with changes in redemption value recognized in accumulated deficit over an expected 12-month period[84][86] Note 4 — Private Placement This note describes the private placement of units to the Sponsor, detailing units, purchase price, and disposition if no business combination occurs - The Sponsor purchased 256,250 Private Units at $10.00 per unit for $2,562,500, and an additional 12,515.40 Private Units for $125,154, simultaneously with the IPO and over-allotment option exercise[87] - Each Private Unit consists of one Private Share and one Private Right, which will convert into one-fifth (1/5) of one share of common stock upon a Business Combination[87] - Proceeds from Private Units were added to the Trust Account; if no Business Combination is completed, these proceeds will fund public share redemptions, and Private Units will expire worthless[87] Note 5 — Related Party Transactions This note details Aquaron Acquisition Corp.'s related party transactions, including Insider Shares, Sponsor promissory notes, and amounts due - The company issued 1,437,500 Insider Shares to Initial Stockholders for $25,000, with a portion subject to forfeiture based on the underwriters' over-allotment option[88] - The Sponsor provided multiple unsecured, interest-free promissory notes totaling $849,626 outstanding as of March 31, 2025, for transaction costs and working capital, with conversion rights into common stock at $10.00 or $8.33 per share[90][91][92] - As of March 31, 2025, $148,757 was due to a related party (Sponsor) for working capital and expenses paid on behalf of the company[93] Note 6 — Commitments and Contingencies This note outlines Aquaron Acquisition Corp.'s commitments and contingencies, including registration rights and deferred underwriting fees - Holders of Founder Shares, Private Units, and shares from working capital loans are entitled to registration rights[94] - Underwriters are entitled to a deferred fee of $1,896,013 (3.5% of IPO gross proceeds), 0.75% of IPO gross proceeds in common stock, and 54,172 Private Units, all contingent upon the closing of a Business Combination[96] - Chardan holds a Unit Purchase Option (UPO) to buy 97,509 Units at $11.50 per Unit, exercisable between the close of a Business Combination and its fifth anniversary[97] - The company entered a financial advisory agreement with Arbor Lake Investment Limited, with compensation payable in PubCo Class A Ordinary Shares upon the closing of the Huture merger[98] - Legal fees of $350,000 are payable to Hunter Taubman Fischer & Li LLC upon the closing of the Business Combination[99] Note 7 — Stockholders' Deficit This note details Aquaron Acquisition Corp.'s stockholders' deficit components, including common stock and public rights - The company is authorized to issue 10,000,000 shares of common stock ($0.0001 par value); as of March 31, 2025, 1,623,060 shares were issued and outstanding (excluding 805,352 shares subject to possible redemption)[100] - Each public right converts into one-fifth (1/5) of one share of common stock upon consummation of a Business Combination, with no additional consideration required[101] - If a Business Combination is not completed and the Trust Account is liquidated, holders of rights will not receive any funds and the rights will expire worthless[102] Note 8 — Fair Value Measurements This note describes Aquaron Acquisition Corp.'s fair value measurements for financial instruments, adhering to ASC 825 and the fair value hierarchy - The fair value of the company's financial instruments approximates their carrying amounts due to their short-term nature[75] - The company uses a fair value hierarchy (Level 1, 2, 3) to classify assets and liabilities based on observable and unobservable inputs[103][108] Fair Value of Investments Held in Trust Account (Level 1) | Asset | March 31, 2025 | December 31, 2024 | | :-------------------------------- | :------------- | :---------------- | | Investments held in the Trust Account | $9,394,896 | $9,255,615 | Note 9 — Other Loans This note details Aquaron Acquisition Corp.'s other loans and payables, including amounts due to Huture and promissory notes for extensions - Amounts due to Huture for transaction costs and working capital totaled $291,881 as of March 31, 2025, up from $240,514 as of December 31, 2024[106] - Bestpath provided loans totaling $760,000 outstanding as of March 31, 2025, through unsecured, interest-free promissory notes, to extend the Business Combination Period, with conversion rights at approximately $8.33 per share[107] - Huture provided loans totaling $160,000 outstanding as of March 31, 2025, through unsecured, interest-free promissory notes, to extend the Business Combination Period, with conversion rights at approximately $8.33 per share[110] Note 10 — Segment Information This note states Aquaron Acquisition Corp. operates as a single operating segment, with the CEO reviewing overall results - The company has determined it has only one operating segment, as the CEO reviews overall operating results to make resource allocation and performance decisions[111][112] - Key metrics reviewed by the CODM include general and administrative expenses, interest earned on investments held in Trust Account, and unrealized gain on investments held in Trust Account[112] Note 11— Subsequent Events This note discloses subsequent events, including additional promissory notes to Huture and stockholder approval for Business Combination Period extensions - The company issued unsecured promissory notes to Huture totaling $52,394.10 in April, May, and July 2025 to fund extensions of the Business Combination Period[114] - On May 6, 2025, stockholders approved extending the Business Combination Period to May 6, 2026, leading to the redemption of 697,365 shares with a value of approximately $8,176,785[115] Item 2. Management's Discussion and Analysis of Financial Statements This section provides management's discussion and analysis of Aquaron Acquisition Corp.'s financial condition, operations, and risks Overview This overview introduces Aquaron Acquisition Corp. as a blank check company seeking a business combination in the new energy sector - Aquaron Acquisition Corp. is a blank check company formed in March 2021 to effect a business combination, with an intended focus on the new energy sector[118] - The company has not generated operating revenues and expects to incur significant costs in pursuit of acquisition plans, with no assurance of successful completion of a Business Combination[119] Risks and Uncertainties This section discusses potential negative effects from inflation, interest rates, geopolitical events, and excise tax liabilities - Management acknowledges potential negative effects on financial position and operations from persistent inflation, rising interest rates, financial market instability, geopolitical events, and the lingering effects of COVID-19, though the specific impact is not readily determinable[120] - The Inflation Reduction Act of 2022 imposes a 1% excise tax on stock repurchases (including redemptions), which has impacted the company's tax provisions for fiscal years 2023-2025, resulting in a $630,384 excise tax liability as of March 31, 2025[121][122] - The company has not yet paid excise taxes incurred from January 1, 2023, to December 31, 2023, and faces additional interest and penalties if unable to pay in full[122] Recent Developments This section outlines recent events, including the Huture merger agreement, business combination extensions, and Nasdaq delisting - The Bestpath Merger Agreement was terminated on July 12, 2024, and a new merger agreement was entered into with HUTUR E Ltd. and its subsidiaries on the same date[123][124] - The merger with Huture involves Merger Sub 1 merging into Huture and Merger Sub 2 merging into Aquaron, with Huture becoming a wholly-owned subsidiary of PubCo and Aquaron becoming a direct wholly-owned subsidiary of PubCo[125] - The Mergers imply a current equity value of Huture at $1.0 billion, with PubCo Ordinary Shares valued at $10.00 at closing, and the transaction includes potential earn-out shares and an equity incentive pool for PubCo[126][127] - Both Huture shareholders (representing over 50% equity) and the Sponsor have entered into voting and support agreements in favor of the merger transactions[129][130] - Stockholders approved extensions of the Business Combination Period multiple times, most recently to May 6, 2026, with significant share redemptions occurring at each extension vote[131][132][133] - The company was delisted from Nasdaq on March 7, 2025, due to non-compliance with the Minimum Public Holders Rule and is now traded on the over-the-counter market[134][136] Results of Operations This section analyzes Aquaron Acquisition Corp.'s net loss for Q1 2025 compared to net income in Q1 2024 - For the three months ended March 31, 2025, the company reported a net loss of $383,100, primarily due to $464,483 in general and administrative expenses and $9,787 in income tax expense, partially offset by $63,679 in interest and $33,391 in unrealized gains from the Trust Account[138] - In contrast, for the three months ended March 31, 2024, the company reported a net income of $98,814, driven by $274,776 in interest and $143,038 in unrealized gains from the Trust Account, despite general and administrative expenses of $79,082 and various tax expenses[139] Liquidity and Capital Resources This section discusses Aquaron Acquisition Corp.'s cash position, working capital deficit, reliance on loans, and going concern uncertainties - As of March 31, 2025, the company had $290 in cash and a working capital deficit of $3,492,130[144] - The company has relied on loans from the Sponsor, Bestpath, and Huture to fund extensions of the Business Combination Period and cover transaction costs[144][145] - Management has determined that the company's ability to continue as a going concern is in substantial doubt if a Business Combination is not completed by August 6, 2025, or if additional financing is not secured[145][146] Off-Balance Sheet Financing Arrangements This section confirms Aquaron Acquisition Corp. has no off-balance sheet financing arrangements as of March 31, 2025 - As of March 31, 2025, the company has no obligations, assets, or liabilities considered off-balance sheet arrangements[147] Contractual Obligations This section details Aquaron Acquisition Corp.'s contractual obligations, including deferred underwriting fees and registration rights - The company has no long-term debt, capital lease obligations, operating lease obligations, or long-term liabilities[148] - Contractual obligations include registration rights for certain security holders and deferred underwriting fees of $1,896,013, plus common stock and Private Units, payable upon the closing of a business combination[149][150] Critical Accounting Estimates This section states that management identified no critical accounting estimates for the three months ended March 31, 2025 - Management did not identify any critical accounting estimates for the three months ended March 31, 2025[151] Recent Accounting Standards This section discusses Aquaron Acquisition Corp.'s adoption of ASU 2023-07 and assessment of ASU 2023-09 - The company adopted ASU No. 2023-07, Segment Reporting, as of March 31, 2025, which requires additional segment information disclosure[152] - The company is currently assessing the impact of ASU 2023-09, Income Taxes, effective for annual periods beginning after December 15, 2024, which requires specific categories in rate reconciliation and additional information for significant reconciling items[153] Item 3. Quantitative and Qualitative Disclosure about Market Risks As a smaller reporting company, Aquaron Acquisition Corp. is not required to provide quantitative and qualitative disclosures about market risks - The company is exempt from providing quantitative and qualitative disclosures about market risks due to its status as a smaller reporting company[155] Item 4. Controls and Procedures Management concluded Aquaron Acquisition Corp.'s disclosure controls and procedures were ineffective due to material weaknesses in related party transaction oversight - Management concluded that the company's disclosure controls and procedures were ineffective as of March 31, 2025[157][158] - Material weaknesses were identified in internal control over financial reporting, particularly insufficient oversight regarding the review and approval of related party transactions and their disclosures[158] - The company is implementing remediation measures, but there is no assurance that these will be timely or fully effective, potentially impacting financial reporting and investor perceptions[159] - No material changes in internal control over financial reporting occurred during the fiscal quarter ended March 31, 2025[161] PART II - OTHER INFORMATION This section provides other required information, including legal proceedings, risk factors, unregistered sales, and exhibits Item 1. Legal Proceedings Aquaron Acquisition Corp. has no legal proceedings to report for the period - There are no legal proceedings to report[163] Item 1A. Risk Factors. No material changes to previously disclosed risk factors have occurred as of the date of this Quarterly Report - No material changes to previously disclosed risk factors have occurred as of the date of this Quarterly Report[164] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. This section details unregistered equity sales, including private placements to the Sponsor, and restricted use of IPO proceeds - Simultaneously with the IPO, the Sponsor purchased 256,250 Private Units for $2,562,500, and an additional 12,515.40 Private Units for $125,154, in unregistered sales[166][167] - A total of $54,984,377 from the IPO and private placements was deposited into a trust account for public stockholders[169] - Proceeds in the trust account, including interest, are restricted and cannot be used to pay excise taxes or similar fees, including those imposed by the Inflation Reduction Act of 2022[170] Item 3. Defaults Upon Senior Securities Aquaron Acquisition Corp. has no defaults upon senior securities - There are no defaults upon senior securities[172] Item 4. Mine Safety Disclosures Aquaron Acquisition Corp. has no mine safety disclosures - There are no mine safety disclosures[173] Item 5. Other Information There is no other information to report - There is no other information to report[174] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO/CFO certifications and Inline XBRL documents - Exhibits include certifications from the CEO and CFO (pursuant to Rules 13a-14(a), 15d-14(a), and 18 U.S.C. Section 1350) and various Inline XBRL documents (Instance, Schema, Calculation, Definition, Label, Presentation Linkbase Documents, and Cover Page Interactive Data File)[175] SIGNATURES This section contains the official signatures of Aquaron Acquisition Corp.'s Chief Executive Officer and Chief Financial Officer - The report was signed by Yi Zhou, Chief Executive Officer and Director, and Qingze Zhao, Chief Financial Officer and Director, on July 22, 2025[178]