Business Context and Reporting Period
This is Galata Acquisition Corp.’s unaudited Form 10-Q for the quarter ended March 31, 2023, signed May 17, 2023. Galata is a special purpose acquisition company (SPAC), not Marti Technologies’ operating-company quarterly report. It had not begun operations and reported no operating revenue; its activity was formation, public-company costs, and pursuing a business combination with Marti Technologies Inc.
Financial Results and Liquidity
| Metric | Q1 2023 / March 31, 2023 | Comparable period / prior year-end |
|---|---|---|
| Operating revenue | None | None |
| General and administrative expense | $357,226 | $838,607 in Q1 2022 |
| Interest income | $1,578,358 | $13,846 in Q1 2022 |
| Net income (loss) | $1,221,132; $0.07 per share | $(824,761); $(0.05) per share in Q1 2022 |
| Net cash used in operating activities | $109,106 | $9,246 in Q1 2022 |
| Cash outside trust | $142,759 | $251,865 at December 31, 2022 |
| Investments held in trust | $150,323,003 | $148,744,645 at December 31, 2022 |
| Current liabilities | $3,368,733 | $3,153,645 at December 31, 2022 |
| Working capital deficit | $3,187,515 | Prior-period comparison not clearly stated |
| Deferred underwriting commission | $5,031,250 | Unchanged |
Net income reflected trust-account interest rather than operating earnings. Operating expenses fell year over year, while higher trust interest drove the shift from a quarterly loss to profit. The company reported no long-term debt or lease obligations as of quarter-end. Public Class A shares subject to possible redemption were classified outside permanent equity at $147,448,003.
Business Combination, Outlook, and Risks
- Galata’s proposed transaction would merge its subsidiary into Marti, with Marti surviving as a wholly owned subsidiary. The parties had expected completion in Q2 or Q3 2023, subject to shareholder approval and closing conditions.
- Marti waived the $50 million minimum-cash closing condition in December 2022; an April 28, 2023 amendment formally removed it and extended the business combination agreement’s outside termination date to July 31, 2023. Galata’s original 24-month combination deadline was July 13, 2023.
- PIPE financing originally contemplated $47.5 million of convertible notes. Amendments raised the stated annual interest rate to 15% (10% cash and 5% payment-in-kind). The April 2023 revised indenture provides a 10% conversion premium and monthly conversion-price resets for the first 12 months, subject to a $1.65 floor and $11.00 cap. Certain investors representing $35.5 million of notes entered that amendment.
- A May 2023 agreement gave a director affiliate the option, not the obligation, to subscribe for up to $40 million of convertible notes. This was subsequent to quarter-end and is not assured funding.
- Management identified substantial doubt about Galata’s ability to continue as a going concern for at least one year after issuance, citing limited cash outside trust, a working capital deficit, and uncertainty about completing a business combination. The financial statements include no adjustments for the outcome of this uncertainty.
- Disclosure controls and procedures were deemed ineffective due to material weaknesses in accounting for complex financial instruments and timely period-end account reconciliations. Management said it performed additional analysis to support the financial statements.
- Failure to complete a business combination within the applicable period could require redemption of public shares and liquidation; warrants could expire worthless. The filing also discusses economic and market uncertainty, including inflation, interest rates, banking-system instability, and U.S. debt-ceiling risks.
Most Important Facts for Investors to Verify
- Whether the Marti transaction closed, whether required approvals and other conditions were met, and the applicable deadline or any further extensions.
- Actual post-redemption cash available at closing and the amount and certainty of PIPE, credit, or other financing; the former minimum-cash condition was removed.
- The final convertible-note principal, interest, conversion-price reset mechanics, and potential dilution under the amended terms.
- Galata’s short-term liquidity and going-concern position; trust assets are restricted and are not equivalent to cash available for corporate expenses.
- Remediation of the disclosed internal-control material weaknesses. Also reconcile the filing’s inconsistent MD&A reference to redeemable shares at $150.3 million with the balance sheet and note, which report temporary equity of $147.4 million and trust investments of $150.3 million.