QETA

Business Context and Reporting Period

Company: Quetta Acquisition Corp (QETA), a Delaware corporation and blank check company (SPAC).

Reporting Period: Quarter ended March 31, 2025.

Business Status: The Company has not commenced operations. Activities are limited to formation, IPO follow-up, and identifying a target for a Business Combination. The Company focuses on target businesses in Asia, specifically financial technology and film product design/manufacturing.

Key Transaction: On February 14, 2025, the Company entered into a Merger Agreement with KM QUAD (parent of Jiujiang Lida Technology Co., Ltd.), a Chinese film product manufacturer. The transaction values KM QUAD at $300 million.

Key Financial Metrics

Material Changes vs. Prior Period

• Significant Redemptions: In January 2025, 5,199,297 shares were tendered for redemption, removing approximately $55.15 million from the Trust Account. This reduced the Trust Account balance from $73.1 million (Dec 31, 2024) to $18.4 million (Mar 31, 2025).
• Shift to Net Loss: The Company reported a net loss of $193,671 in Q1 2025, compared to net income of $611,704 in Q1 2024. This is primarily due to a sharp decline in interest income from the Trust Account following redemptions and increased operational costs.
• Excise Tax Liability: A new liability of $551,522 was recorded for the 1% excise tax on stock repurchases (redemptions) under the Inflation Reduction Act. This liability was not present in the prior period.
• Extension Fees: The Company extended its deadline to complete a business combination to October 10, 2026. Extension fees of $180,000 were paid into the Trust Account during the quarter.
• Promissory Note: The Company received $250,000 from KM QUAD as the first installment of extension fees, recorded as a promissory note. A second installment of $290,000 was due April 20, 2025, but had not been deposited as of May 1, 2025.

Outlook, Risks, and Management Commentary

• Going Concern: Management has determined that substantial doubt exists regarding the Company's ability to continue as a going concern within one year. This is due to the working capital deficit, the need for significant capital to complete the merger, and the uncertainty of the transaction's closing.
• Merger Status: The proposed merger with KM QUAD is subject to regulatory approvals (including CSRC in China) and shareholder approvals. If the closing does not occur by October 10, 2025, due to regulatory delays, Quetta is responsible for extension fees up to $100,000 per month.
• Unpaid Obligations: As of May 1, 2025, KM QUAD has not deposited the second installment of extension fees ($290,000). The Company has not yet filed its 2025 excise tax return or remitted the $551,522 payment, facing potential penalties and interest.
• Internal Controls: Management concluded that disclosure controls and procedures were ineffective as of March 31, 2025.
• Liquidity: The Company relies on the Trust Account and potential financing from the target company or third parties to fund operations and transaction costs. Cash outside the Trust Account is limited to $243,921.

Investor Verification Checklist

• Merger Closing Conditions: Verify the status of regulatory approvals (specifically CSRC) and shareholder votes required to close the KM QUAD transaction.
• Extension Fee Payment: Confirm whether KM QUAD has deposited the outstanding $290,000 second installment of extension fees.
• Excise Tax Payment: Monitor whether the Company has filed and paid the $551,522 excise tax liability to avoid accruing penalties and interest.
• Going Concern Resolution: Assess the Company's ability to raise additional capital if the merger fails or is significantly delayed, given the current working capital deficit.
• Internal Control Remediation: Review subsequent filings for updates on the remediation of ineffective disclosure controls.