Embrace Change Acquisition (EMCG) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the unaudited consolidated financial statements and management's discussion and analysis for Embrace Change Acquisition Corp Item 1. Financial Statements This section presents Embrace Change Acquisition Corp.'s unaudited consolidated financial statements, providing a snapshot of its financial position and performance Consolidated Balance Sheets The consolidated balance sheets reflect increased total assets and liabilities, resulting in a larger stockholders' deficit by June 30, 2025 Table: Consolidated Balance Sheets | Item | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :------------------ | | Cash | $469 | $66,985 | | Prepaid expenses | $42,500 | - | | Total Current Assets | $42,969 | $66,985 | | Cash and investments held in trust account | $26,781,718 | $26,087,209 | | Total Assets | $26,824,687 | $26,154,194 | | Accounts payable and accrued expenses | $1,556,560 | $1,100,072 | | Due to related party | $144,060 | $144,060 | | Due to third party | $1,175,000 | $775,000 | | Convertible promissory note – related party | $851,112 | $851,112 | | Promissory note – third party | $56,927 | $54,664 | | Total Current Liabilities | $3,783,659 | $2,924,908 | | Deferred underwriter fee payable | $2,966,000 | $2,966,000 | | Total Liabilities | $6,749,659 | $5,890,908 | | Ordinary shares subject to possible redemption | $26,781,718 | $26,087,209 | | Accumulated deficit | $(6,706,920) | $(5,824,153) | | Total Stockholders' Deficit | $(6,706,690) | $(5,823,923) | Consolidated Statements of Operations The company reported a net loss for the three and six months ended June 30, 2025, contrasting with net income in prior year periods Table: Consolidated Statements of Operations | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Formation and operating costs | $(374,642) | $(77,927) | $(730,504) | $(127,727) | | Investment income earned on cash and investments held in Trust Account | $277,146 | $755,157 | $544,509 | $1,490,735 | | Interest expense | $(1,138) | - | $(2,263) | - | | Net income (loss) | $(98,634) | $677,230 | $(188,258) | $984,507 | | Basic and diluted net income (loss) per ordinary share | $(0.02) | $0.09 | $(0.04) | $0.13 | Consolidated Statements of Changes in Stockholders' Deficit The statements reflect a significant increase in accumulated deficit for periods ended June 30, 2025, driven by net losses and share re-measurement Table: Consolidated Statements of Changes in Stockholders' Deficit | Item | December 31, 2024 | March 31, 2025 | June 30, 2025 | | :------------------------------------------------ | :------------------ | :--------------- | :------------ | | Balance – Accumulated Deficit | $(5,824,153) | $(6,181,140) | $(6,706,920) | | Re-measurement of ordinary shares subject to redemption | - | $(267,363) | $(277,146) | | Additional amount deposit into Trust Account subject to redemption | - | - | $(150,000) | | Net loss | - | $(89,624) | $(98,634) | | Item | December 31, 2023 | March 31, 2024 | June 30, 2024 | | :------------------------------------------------ | :------------------ | :--------------- | :------------ | | Balance – Accumulated Deficit | $(4,114,326) | $(4,842,627) | $(4,920,554) | | Amount deposited into trust account subject to redemption | - | $(300,000) | - | | Re-measurement of ordinary shares subject to redemption | - | $(735,578) | $(755,157) | | Net income | - | $307,277 | $677,230 | Consolidated Statements of Cash Flows Cash flows from operating activities showed higher net cash outflow for the six months ended June 30, 2025, compared to 2024 Table: Consolidated Statements of Cash Flows | Cash Flow Activity | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--------------------------------------- | :--------------------------- | :--------------------------- | | Net income (loss) | $(188,258) | $984,507 | | Net cash used in operating activities | $(316,516) | $(241,301) | | Net cash used in investing activities | $(150,000) | $(300,000) | | Net cash provided by financing activities | $400,000 | $540,525 | | Net change in cash | $(66,516) | $(776) | | Cash at the end of the period | $469 | $4,532 | Notes to Consolidated Financial Statements These notes provide detailed disclosures on the company's organization, accounting policies, financial instruments, and subsequent events NOTE 1. DESCRIPTION OF ORGANIZATION, BUSINESS OPERATIONS AND GOING CONCERN Embrace Change Acquisition Corp. is a blank check company facing substantial doubt about its going concern ability without a timely business combination - The Company is a blank check company (SPAC) incorporated in the Cayman Islands, formed to effect a business combination, and has not yet commenced any operations as of June 30, 2025[23][24] - The Company's Initial Public Offering (IPO) was consummated on August 12, 2022, generating gross proceeds of $73,928,550, with $75,776,764 placed in a trust account[25][27] - Shareholders have approved multiple extensions for the business combination period, most recently to August 12, 2026, with significant share redemptions occurring at each extension vote[32][35][37] - Management has determined that if a Business Combination is not completed by August 12, 2026, there is substantial doubt about the Company's ability to continue as a going concern, particularly with $275,000 of required extension payments not yet deposited into the Trust Account[50] - On January 26, 2025, the Company entered into a merger agreement with Tianji Tire Global (Cayman) Limited for a business combination, where Tianji will become a direct wholly owned subsidiary of Purchaser (the surviving entity after the Company merges into Purchaser)[44] - The merger consideration involves Purchaser issuing 45,000,000 ordinary shares, valued at $450,000,000, to Tianji shareholders[46] NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note outlines the company's significant accounting policies, including basis of presentation, fair value measurements, and income tax treatment - The Company is an 'emerging growth company' and has elected not to opt out of the extended transition period for complying with new or revised financial accounting standards[56][57] - Cash and investments held in the Trust Account are classified as trading securities and measured at fair value, primarily in U.S. Treasury Bills[59] Table: Fair Value Hierarchy of Assets (Level 1) | Description | June 30, 2025 (Level 1) | December 31, 2024 (Level 1) | | :-------------------------------- | :---------------------- | :------------------------ | | Cash and Investments held in Trust Account | $26,781,718 | $26,087,209 | - Ordinary shares subject to possible redemption are classified as temporary equity in accordance with ASC 480[65][66] - The Company is an exempted Cayman Islands company and is not subject to income taxes in the Cayman Islands or the United States, resulting in a zero tax provision[69] Net Income (Loss) Per Share The net income (loss) per share calculation shows a basic and diluted loss for the three and six months ended June 30, 2025, a decline from prior year net income Table: Basic and Diluted Net Income (Loss) Per Ordinary Share | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net income (loss) | $(98,634) | $677,230 | $(188,258) | $984,507 | | Weighted average number of ordinary shares | 4,520,024 | 7,423,175 | 4,520,024 | 7,423,175 | | Basic and diluted net income (loss) per ordinary share | $(0.02) | $0.09 | $(0.04) | $0.13 | Risks and Uncertainties Geopolitical events, including the Russia-Ukraine conflict, may materially affect the company's ability to consummate a business combination or secure financing - The Russia-Ukraine conflict and related sanctions may materially and adversely affect the Company's ability to consummate a Business Combination or secure financing[79] NOTE 3. INITIAL PUBLIC OFFERING The IPO on August 12, 2022, generated $73,928,550 from 7,392,855 units, each comprising one ordinary share, one warrant, and one right - The IPO on August 12, 2022, generated gross proceeds of $73,928,550 from 7,392,855 units[80] - Each unit in the IPO consisted of one ordinary share, one warrant, and one right[81] - Total offering costs amounted to approximately $3,898,030, including $2,587,499 for deferred underwriting commissions[82] NOTE 4. PRIVATE PLACEMENT A private placement with the Sponsor generated $3,737,500 from 373,750 private units, which lack redemption rights and have transfer restrictions - The Private Placement with the Sponsor generated $3,737,500 from the sale of 373,750 private units[83] - Private Units are identical to IPO units but have no redemption rights or liquidating distributions from the trust account and are subject to transfer restrictions[84] NOTE 5. RELATED PARTY TRANSACTIONS This note details related party transactions, including founder shares, amounts due to the CFO, and convertible promissory notes from the Sponsor and CFO - The Company issued 2,156,250 founder shares to the Sponsor for $25,000, subsequently reduced to 1,848,214 shares due to forfeitures[86] - As of June 30, 2025, $144,060 was due to a related party (CFO) for expenses, unsecured, non-interest bearing, and due on demand[88] - The Company borrowed $851,112 under convertible promissory notes from the Sponsor ($10,000) and CFO ($841,112) for extension and working capital purposes[89][90][91] - These notes are unsecured, non-interest bearing, and convertible into private placement units upon business combination[92] NOTE 6. DUE TO THIRD PARTY As of June 30, 2025, the company owed $1,175,000 to Tianji and its subsidiaries for extension purposes, unsecured, non-interest bearing, and due on demand - As of June 30, 2025, the Company owed $1,175,000 to Tianji and its subsidiaries, up from $775,000 at December 31, 2024. These amounts are unsecured, non-interest bearing, and due on demand[95] NOTE 7. PROMISSORY NOTE - THIRD PARTY The company issued a $300,000 unsecured promissory note to a third party with 9.127% annual interest, with $50,000 principal remaining unpaid and past due by June 30, 2025 - The Company issued a $300,000 unsecured promissory note to an unrelated third party on August 5, 2024, with an annual interest rate of 9.127%[96] - As of June 30, 2025, $50,000 of the principal remained unpaid and past due[96] - Interest expense under this note was $1,138 for the three months and $2,263 for the six months ended June 30, 2025[97] NOTE 8. COMMITMENTS AND CONTINGENCIES This note details registration rights and the modified deferred underwriting fee, which resulted in a $378,501 loss on modification - The deferred underwriting fee of $2,587,499 was revised on March 4, 2024, to $750,000 in cash and 200,000 registered shares payable upon the closing of a business combination[100] - This modification resulted in a $378,501 loss on the modification of deferred underwriting commission, recorded in the consolidated statements of operations[100] NOTE 9. STOCKHOLDERS' DEFICIT This section details the company's ordinary shares, warrants, and rights, including 2,295,893 ordinary shares outstanding as of June 30, 2025 - As of June 30, 2025, there were 2,295,893 ordinary shares issued and outstanding, excluding 2,224,131 shares subject to possible redemption[103] - Public Warrants become exercisable 30 days after a business combination, entitling holders to purchase one ordinary share at $11.50, subject to adjustment and redemption conditions[104][112] - Each right entitles the holder to receive one-eighth of one ordinary share upon consummation of a Business Combination, without additional consideration[108] NOTE 10. SUBSEQUENT EVENTS Subsequent to June 30, 2025, the company received an additional $500,000 from Tianji and shareholders approved a further extension to August 12, 2026 - Subsequent to June 30, 2025, the Company received an additional $500,000 from Tianji and its subsidiaries, bringing the total due to third parties to $1,675,000[110] - On August 11, 2025, shareholders approved extending the Business Combination Period from August 12, 2025, to August 12, 2026[111] - In connection with the August 11, 2025, meeting, 2,097,743 ordinary shares were tendered for redemption, leaving 2,422,281 shares outstanding[113] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition, operational results, liquidity, capital resources, and going concern considerations Overview Embrace Change Acquisition Corp. is a blank check company focused on a business combination, incurring costs without generating operating revenues yet - The Company is a blank check company formed for a business combination, with no specific target selected yet[116] - The Company will not generate any operating revenues until after the completion of its Business Combination[116] Recent Developments Recent developments include multiple business combination extensions, significant share redemptions, Nasdaq delisting notices, and debt financing - The Company extended its Combination Period multiple times, most recently to August 12, 2026, with significant share redemptions occurring at each extension vote[118][119][121] - The Company received several Nasdaq notices regarding non-compliance, including a delisting notice on August 14, 2025, for failing to complete its initial business combination by August 9, 2025[123][124][125][128][129] - The deferred underwriting fee was modified on March 4, 2024, to $750,000 in cash and 200,000 registered shares, payable upon the closing of the business combination[130] - The Company borrowed $1,175,000 from Tianji and its subsidiaries (unsecured, non-interest bearing) and $300,000 from an unrelated third party (promissory note with 9.127% interest), with $50,000 of the latter remaining unpaid and past due as of June 30, 2025[131][132][133] - On January 26, 2025, the Company entered into a merger agreement with Tianji Tire Global (Cayman) Limited for a business combination, involving a reincorporation merger and an acquisition merger, with Tianji becoming a subsidiary of the Purchaser[134] - The merger consideration for Tianji shareholders is 45,000,000 Purchaser Ordinary Shares, valued at $450,000,000[136] Results of Operations The company reported a net loss for the three and six months ended June 30, 2025, a significant decline from prior year net income Table: Results of Operations Summary | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net income (loss) | $(98,634) | $677,230 | $(188,258) | $984,507 | | Operating costs | $(374,642) | $(77,927) | $(730,504) | $(127,727) | | Investment income earned on cash and investments held in Trust Account | $277,146 | $755,157 | $544,509 | $1,490,735 | | Interest expense | $(1,138) | - | $(2,263) | - | | Loss on modification of deferred underwriting commission | - | - | - | $(378,501) | Liquidity and Capital Resources As of June 30, 2025, the company had limited cash and a working capital deficit, with liquidity met through IPO proceeds, private placement, and related/third-party loans - As of June 30, 2025, the Company had cash of $469 and a working capital deficit of $3,740,690[141] - Liquidity is primarily sourced from proceeds outside the Trust Account, convertible promissory notes from related parties (Sponsor and CFO, totaling $851,112), and loans from third parties (Tianji and an unrelated party, totaling $1,175,000 and $56,927 respectively as of June 30, 2025)[142][143][144][145][147][149] Going Concern Consideration Management identified substantial doubt about the company's ability to continue as a going concern without completing a business combination by August 12, 2026 - Management has determined that failure to complete an Initial Business Combination by August 12, 2025 (now August 12, 2026) raises substantial doubt about the Company's ability to continue as a going concern[150] - As of the date of the financial statements, $275,000 of required extension payments had not been deposited into the Trust Account[150] Off-Balance Sheet Financing Arrangements The company confirms it had no off-balance sheet arrangements as of June 30, 2025 - The Company had no off-balance sheet arrangements as of June 30, 2025[151] Contractual Obligations The company has no long-term debt or lease obligations; its primary contractual obligation is the modified deferred underwriting fee - The Company has no long-term debt, capital lease obligations, operating lease obligations, or long-term liabilities[152] - The deferred underwriting fee was modified to $750,000 in cash and 200,000 registered shares, payable upon the closing of a Business Combination[152] Critical Accounting Estimates As of June 30, 2025, the company reported no critical accounting estimates - As of June 30, 2025, there were no critical accounting estimates[153] Recent Accounting Standards Management believes recently issued, but not yet effective, accounting pronouncements would not materially affect the company's financial statements - Management does not believe that any recently issued, but not yet effective, accounting pronouncements would have a material effect on the Company's financial statements[154] Off-Balance Sheet Arrangements; Commitments and Contractual Obligations; Quarterly Results The company reiterates no off-balance sheet arrangements or contractual obligations and no unaudited quarterly operating data due to no operations to date - The Company did not have any off-balance sheet arrangements or commitments/contractual obligations as of the report date[155] - No unaudited quarterly operating data is included as the Company has conducted no operations to date[155] Item 3. Quantitative and Qualitative Disclosure about Market Risks As a smaller reporting company, Embrace Change Acquisition Corp. is exempt from market risk disclosures - As a smaller reporting company, the registrant is not required to make disclosures under this item[156] Item 4. Controls and Procedures Management concluded the company's disclosure controls and procedures were not effective as of June 30, 2025, with no material changes in internal control Evaluation of Disclosure Controls and Procedures Management concluded the company's disclosure controls and procedures were not effective as of June 30, 2025 - Management concluded that the Company's disclosure controls and procedures were not effective as of June 30, 2025[158] Changes in Internal Control over Financial Reporting There were no material changes in the company's internal control over financial reporting during the fiscal quarter ended June 30, 2025 - There has been no material change in the Company's internal control over financial reporting during the fiscal quarter ended June 30, 2025[159] PART II. OTHER INFORMATION This section provides other required information, including legal proceedings, risk factors, equity sales, and exhibits Item 1. Legal Proceedings The company reported no legal proceedings - There are no legal proceedings to report[160] Item 1A. Risk Factors There have been no material changes to previously disclosed risk factors in the Form S-1 registration statements - There have been no material changes to the previously disclosed risk factors in the registration statements on Form S-1[161] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the issuance of founder shares, IPO, and private placement, including shares issued, proceeds, and trust account deposits - The Company issued 1,848,214 founder shares to initial shareholders, after forfeitures, under Section 4(a)(2) of the Securities Act[162] - The IPO on August 12, 2022, generated gross proceeds of $73,928,550 from the sale of units at $10.00 per unit[163] - A private placement with the sponsor generated $3,737,500 from 373,750 private units, which are identical to IPO units but with transfer restrictions and no redemption rights[164] - A total of $75,776,764 from the net proceeds of the IPO and private placement was deposited into a trust account[165] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities - There are no defaults upon senior securities[167] Item 4. Mine Safety Disclosures The company reported no mine safety disclosures - There are no mine safety disclosures[168] Item 5. Other Information The company reported no other information - There is no other information to report[169] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO/CFO certifications and XBRL documents - The exhibits include certifications from the CEO and CFO (pursuant to Sections 302 and 906 of Sarbanes-Oxley Act) and various XBRL taxonomy documents[170] Signatures The report was signed by Zheng Yuan, Chief Financial Officer, on August 19, 2025 - The report was signed by Zheng Yuan, Chief Financial Officer, on August 19, 2025[174]