Marti Technologies(MRT) - 2023 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the unaudited condensed financial statements and management's discussion for Galata Acquisition Corp Item 1. Financial Statements (Unaudited) This section presents Galata Acquisition Corp.'s unaudited condensed financial statements and comprehensive explanatory notes Condensed Balance Sheets The Condensed Balance Sheets show Galata Acquisition Corp.'s financial position, with slight increases in assets and liabilities, and a larger accumulated deficit Condensed Balance Sheets | Metric | March 31, 2023 (Unaudited) ($) | December 31, 2022 (Audited) ($) | | :--------------------------------------- | :-------------------------- | :-------------------------- | | Cash | $142,759 | $251,865 | | Total Current Assets | $181,218 | $323,356 | | Investments held in Trust Account | $150,323,003 | $148,744,645 | | Total Assets | $150,504,221 | $149,068,001 | | Total Current Liabilities | $3,368,733 | $3,153,645 | | Total Liabilities | $8,399,983 | $8,184,895 | | Class A ordinary shares subject to possible redemption | $147,448,003 | $145,869,645 | | Accumulated Deficit | $(5,344,124) | $(4,986,898) | | Total Stockholders' Deficit | $(5,343,765) | $(4,986,539) | Condensed Statements of Operations The Condensed Statements of Operations show a shift from net loss in Q1 2022 to net income in Q1 2023, driven by increased interest income Condensed Statements of Operations | Metric | Three Months Ended March 31, 2023 ($) | Three Months Ended March 31, 2022 ($) | | :------------------------------------------------ | :-------------------------------- | :-------------------------------- | | General and administrative expenses | $357,226 | $838,607 | | Interest income | $1,578,358 | $13,846 | | Net income (loss) | $1,221,132 | $(824,761) | | Class A Ordinary Shares - Basic and diluted net income (loss) per ordinary share | $0.07 | $(0.05) | | Class B Ordinary Shares - Basic and diluted net income (loss) per ordinary share | $0.07 | $(0.05) | Condensed Statements of Changes in Stockholders' Deficit This statement shows an increased accumulated deficit from January 1 to March 31, 2023, due to Class A share remeasurement, offset by net income Changes in Stockholders' Deficit (Q1 2023) | Metric | January 1, 2023 ($) | March 31, 2023 ($) | | :------------------------------------------------ | :-------------- | :------------- | | Balance, Accumulated Deficit | $(4,986,898) | $(5,344,124) | | Remeasurement of Class A ordinary shares to redemption value | N/A | $(1,578,358) | | Net income | N/A | $1,221,132 | | Balance, Total Stockholders' Deficit | $(4,986,539) | $(5,343,765) | Changes in Stockholders' Deficit (Q1 2022) | Metric | January 1, 2022 ($) | March 31, 2022 ($) | | :------------------------------------------------ | :-------------- | :------------- | | Balance, Accumulated Deficit | $(2,030,137) | $(2,854,898) | | Net loss | N/A | $(824,761) | | Balance, Total Stockholders' Deficit | $(2,029,778) | $(2,854,539) | Condensed Statements of Cash Flows The Condensed Statements of Cash Flows show net cash used in operating activities, resulting in a net decrease in cash despite Q1 2023 net income Condensed Statements of Cash Flows | Metric | Three Months Ended March 31, 2023 ($) | Three Months Ended March 31, 2022 ($) | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Net income (loss) | $1,221,132 | $(824,761) | | Interest earned on assets held in Trust | $(1,578,358) | $(13,846) | | Net cash used in operating activities | $(109,106) | $(9,246) | | Cash at end of period | $142,759 | $601,680 | Notes to Condensed Financial Statements (Unaudited) These notes provide essential context for the condensed financial statements, covering the company's SPAC nature, Marti business combination, accounting policies, and subsequent events NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS AND LIQUIDITY Galata Acquisition Corp., a SPAC, faces significant liquidity challenges and going concern doubt due to uncertainties in completing its business combination with Marti by July 2023 - Company incorporated on February 26, 2021, as a Special Purpose Acquisition Company (SPAC) to effect a business combination[20] - Initial Public Offering (IPO) consummated on July 13, 2021, raising $125,000,000 from 12,500,000 units, with an additional $18,750,000 from the over-allotment option[23][25] - An aggregate of $146,625,000 from IPO and Private Placement proceeds was placed in a Trust Account, to be invested in U.S. government securities or money market funds[27] - Entered into a Business Combination Agreement with Marti Technologies Inc. on July 29, 2022, with an expected completion in Q2 or Q3 2023[39][40] - Marti waived the BCA Minimum Cash Condition ($50,000,000) on December 23, 2022[42] - Amendment No. 1 to the Business Combination Agreement (April 28, 2023) formally removed the BCA Minimum Cash Condition and extended the termination date to July 31, 2023[43] - Subscription Agreements for Convertible Notes totaling $47,500,000 were entered into with PIPE Investors, with interest rates and minimum cash conditions amended[48][49][50] - As of March 31, 2023, the company had a cash balance of $142,759 and a working capital deficit of $3,187,515[55] - Management has determined there is substantial doubt about the company's ability to continue as a going concern due to insufficient liquidity and uncertainty in consummating a business combination by July 13, 2023[56] NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note details accounting policies for unaudited condensed financial statements, covering GAAP, emerging growth status, investments, share redemption, and fair value measurements - Unaudited condensed financial statements prepared in accordance with GAAP for interim financial information and SEC regulations[59][60] - Company is an 'emerging growth company' and has elected not to opt out of the extended transition period for new or revised financial accounting standards[63][64] - Investments held in the Trust Account were $150,323,003 (March 31, 2023) and $148,744,645 (December 31, 2022), consisting of a money market fund carried at fair value (Level 1)[68][100] - Class A ordinary shares subject to possible redemption are classified as temporary equity due to redemption rights outside the company's control, with changes in redemption value recognized immediately[72] Class A Ordinary Shares Subject to Redemption | Item | March 31, 2023 ($) | December 31, 2022 ($) | | :------------------------------------------ | :------------- | :---------------- | | Class A ordinary shares subject to possible redemption | $147,448,003 | $145,869,645 | | Remeasurement of carrying value to redemption value (Q1 2023) | $1,578,358 | N/A | | Remeasurement of carrying value to redemption value (FY 2022) | N/A | $2,119,645 | - Net income (loss) per share is computed by dividing net income (loss) by the weighted average number of ordinary shares outstanding, with Class A and Class B shares presented as one class for calculation[78][79] NOTE 3. INITIAL PUBLIC OFFERING The company completed its IPO on July 13, 2021, selling 12,500,000 units at $10.00 each, generating $143,750,000 total gross proceeds including over-allotment IPO Details | IPO Detail | Amount ($) | | :-------------------------------- | :------------- | | Units sold in IPO | 12,500,000 | | Price per Unit | $10.00 | | Gross proceeds from IPO | $125,000,000 | | Additional Units from over-allotment | 1,875,000 | | Gross proceeds from over-allotment | $18,750,000 | | Total Gross Proceeds | $143,750,000 | NOTE 4. PRIVATE PLACEMENT Concurrently with the IPO, the Sponsor purchased 7,250,000 Private Placement Warrants for $7,250,000, with proceeds added to the Trust Account and subject to restrictions Private Placement Details | Private Placement Detail | Amount ($) | | :-------------------------------- | :------------- | | Private Placement Warrants sold | 7,250,000 | | Price per Private Placement Warrant | $1.00 | | Total proceeds from Private Placement | $7,250,000 | - Proceeds from Private Placement Warrants were added to the Trust Account[87] - Sponsor and officers/directors agreed to lock-up restrictions on Private Placement Warrants for 30 days post-Business Combination[88] NOTE 5. RELATED PARTY TRANSACTIONS This note details related party transactions, including Founder Shares, a Sponsor promissory note, potential Working Capital Loans, and a convertible note with Callaway Capital Management - Sponsor purchased 3,593,750 Class B ordinary shares (Founder Shares) for $25,000[89] - Founder Shares are subject to lock-up restrictions until one year after Business Combination or specific share price thresholds are met[90] - Unsecured promissory note from Sponsor for up to $250,000; no amount outstanding as of March 31, 2023, and December 31, 2022[91] - Callaway Capital Management, an affiliate of a director, has an option to subscribe for up to $40,000,000 in Convertible Notes[93] NOTE 6. COMMITMENTS AND CONTINGENCIES The company has commitments for registration rights and a $5,031,250 deferred underwriting fee, payable only upon Business Combination completion - Holders of Founder Shares, Private Placement Warrants, and Working Capital Loan warrants are entitled to registration rights[94] - Underwriters are entitled to a deferred fee of $5,031,250, payable only if the company completes a Business Combination[96] NOTE 7. FAIR VALUE MEASUREMENTS The company applies ASC 820 for fair value measurements, classifying assets and liabilities into a three-level hierarchy, with Trust Account securities using Level 1 inputs - Fair value hierarchy classifies inputs as Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[99] Fair Value of Marketable Securities | Asset | Fair Value (March 31, 2023) ($) | Fair Value (December 31, 2022) ($) | Fair Value Hierarchy Level | | :------------------------------------ | :-------------------------- | :--------------------------- | :------------------------- | | Marketable securities held in Trust Account | $150,323,003 | $148,744,645 | Level 1 | NOTE 8. SHAREHOLDERS' DEFICIT This note outlines the company's authorized and outstanding share capital, including Class B ordinary shares and the terms of Public and Private Placement Warrants - Authorized share capital includes 1,000,000 preferred shares (none issued), 200,000,000 Class A ordinary shares (none issued/outstanding excluding redeemable shares), and 20,000,000 Class B ordinary shares (3,593,750 issued/outstanding)[101][102][103] - Class B ordinary shares convert to Class A ordinary shares on a one-for-one basis at the time of initial business combination, subject to anti-dilution adjustments[105] - Public Warrants become exercisable 30 days after Business Combination or 12 months from IPO closing, expiring five years after Business Combination or earlier upon redemption/liquidation[106] - Company may redeem outstanding Public Warrants at $0.01 per warrant if Class A ordinary share price equals or exceeds $18.00 for 10 trading days within a 20-trading day period[109] - Private Placement Warrants are identical to Public Warrants but are not transferable, assignable, or saleable until 30 days after Business Combination, with limited exceptions[112] NOTE 9. SUBSEQUENT EVENTS Subsequent events include BCA amendments removing minimum cash and extending termination, revised Convertible Note terms, removal of lock-up restrictions, and Callaway Capital's option for Convertible Notes - BCA Amendment (April 28, 2023) removed the $50,000,000 minimum cash condition and extended the Business Combination Agreement termination date to July 31, 2023[115] - Second PIPE Amendment (April 28, 2023) removed lock-up restrictions for PIPE Investors, decreased the Convertible Note conversion premium from 15.0% to 10.0%, and introduced monthly conversion price resets[116] - Amendments to Letter Agreements (May 1, 2023) removed lock-up restrictions for the Sponsor and Insiders[120] - Callaway Subscription Agreement (May 4, 2023) grants Callaway or its designee an option to subscribe for up to $40,000,000 aggregate principal amount of Convertible Notes[121] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section discusses Galata Acquisition Corp.'s financial condition, liquidity, and capital resources, highlighting its SPAC status, Marti business combination, and significant going concern uncertainty - Company is a SPAC with no operating revenue, focused on identifying and completing a business combination[126][128] - Net income for the three months ended March 31, 2023, was $1,221,132, primarily from $1,578,358 in interest income on Trust assets, offset by $357,226 in general and administrative expenses[155] - As of March 31, 2023, cash was $142,759, and there was a working capital deficit of $3,187,515[156] - Net cash used in operating activities was $109,106 for the three months ended March 31, 2023[156] - Substantial doubt exists about the company's ability to continue as a going concern due to insufficient liquidity and the uncertainty of completing a business combination by July 13, 2023[160] - No off-balance sheet arrangements or long-term debt/capital lease obligations as of March 31, 2023[161][162] - Underwriters are entitled to a deferred fee of $5,031,250, contingent on the completion of an initial business combination[164][167] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Galata Acquisition Corp. is exempt from detailed market risk disclosures - Company is a smaller reporting company and is not required to provide detailed market risk disclosures[173] Item 4. Controls and Procedures Disclosure controls and procedures were ineffective as of March 31, 2023, due to material weaknesses, though management believes financial statements are fairly presented - Disclosure controls and procedures were not effective as of March 31, 2023[175] - Material weaknesses identified in internal controls related to accounting for complex financial instruments and timely period-end reconciliation of account-level balances[175] - Management performed additional analysis to ensure fair presentation of condensed financial statements despite material weaknesses[175] - No change in internal control over financial reporting occurred during the quarter, except as noted[176] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, and other disclosures for Galata Acquisition Corp Item 1. Legal Proceedings Galata Acquisition Corp. reports no legal proceedings as of the date of this Quarterly Report on Form 10-Q - No legal proceedings to report[179] Item 1A. Risk Factors This section highlights new or updated risk factors, including adverse market conditions, economic uncertainty, and the U.S. debt ceiling's potential impact on the Business Combination - No material changes to previously disclosed risk factors, except as noted[180] - Market conditions, economic uncertainty, or downturns (e.g., instability in banking systems, increasing interest rates, high inflation, potential recession, U.S. debt ceiling issues) could adversely affect the company's business and ability to consummate a Business Combination[181][182] - For a complete list of risks related to the proposed business combination with Marti, refer to the 'Risk Factors' section in Form F-4[180] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This item details unregistered equity sales, including Founder Shares and Private Placement Warrants, and the intended use of proceeds from the Trust Account and outside funds - Issued 3,593,750 Founder Shares to the Sponsor for $25,000 in March 2021[183] - Sold 6,500,000 Private Placement Warrants at $1.00 each to the Sponsor concurrently with the IPO, and an additional 750,000 Private Placement Warrants with the over-allotment option[184][186] - Substantially all funds in the Trust Account (including interest, less deferred underwriting commissions) are intended for the initial business combination[187] - Approximately $500,000 of proceeds held outside the Trust Account will be used for identifying and evaluating target businesses, due diligence, and structuring the business combination[188] Item 3. Defaults Upon Senior Securities Galata Acquisition Corp. reports no defaults upon senior securities - No defaults upon senior securities[190] Item 4. Mine Safety Disclosures This item is not applicable to Galata Acquisition Corp.'s operations - Mine Safety Disclosures are not applicable to the company[191] Item 5. Other Information There is no other information to report under this item - No other information to report[192] Item 6. Exhibits This section lists all exhibits filed, including key amendments to agreements and required certifications for the Quarterly Report - Key exhibits include Amendment No. 1 to the Business Combination Agreement, Form of Revised Indenture, Form of Amendment to Convertible Note Subscription Agreement, and Forms of Amendment to Sponsor and Insider Letter Agreements[195] - Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to Sarbanes-Oxley Act Sections 302 and 906 are furnished[195]