Business context and reporting period
This is Galata Acquisition Corp.’s unaudited Form 10-Q for the quarter ended June 30, 2022, filed August 11, 2022. Despite the request metadata, the filing is for the SPAC, not Marti Technologies, Inc. Galata had not begun operations and reported no operating revenue; its activities related to formation, its IPO, and seeking a business combination.
Financial results and liquidity
| Metric | Three months ended June 30, 2022 | Six months ended June 30, 2022 |
|---|---|---|
| Revenue | None | None |
| General and administrative expense | $504,880 | $1,343,487 |
| Interest income | $194,355 | $208,201 |
| Net loss | $310,525 | $1,135,286 |
| Net loss per share | $0.02 | $0.06 |
At June 30, 2022, cash outside the trust was $496,261, while trust investments were $146.84 million. Total assets were $147.47 million; current liabilities were $1.86 million, including accrued expenses, and the working capital deficit was $1.23 million. Total liabilities were $6.89 million, including a $5.03 million deferred underwriting commission payable only if a business combination closes. Redeemable Class A shares of $143.96 million are classified outside permanent equity; stockholders’ deficit was $3.38 million. The company reported no long-term debt.
Six-month operating cash outflow was $114,665, reducing cash from $610,926 at year-end 2021 to $496,261. Trust assets were restricted for the business combination or shareholder redemptions and were not ordinary operating liquidity.
Changes versus the prior comparable period
Results are not meaningfully comparable with 2021, when Galata was newly formed and had not yet completed its IPO. The company remained pre-revenue; second-quarter and six-month losses largely reflected higher public-company and administrative costs, partly offset by interest income. Accrued expenses rose to $1.86 million from $706,224 at December 31, 2021. Trust investments increased by approximately $208,000, and the carrying value of redeemable shares increased by $212,988.
Outlook, transaction, and risks
- Proposed Marti transaction: On July 29, 2022, after quarter-end, Galata agreed to combine with Marti Technologies. The parties expected closing in the fourth quarter of 2022, subject to shareholder approval and other closing conditions.
- Proposed financing: Galata agreed to issue $47.5 million of convertible notes, bearing 12% annual interest (8% cash and 4% payment-in-kind), convertible at an initial rate of approximately 87 shares per $1,000 principal. Closing is conditioned on a $150 million minimum-cash requirement, including post-redemption trust funds and note proceeds. These were proposed terms, not quarter-end debt.
- Business-combination deadline and going concern: Galata had until July 13, 2023 to complete a combination. Management stated that insufficient operating liquidity and uncertainty of completing a transaction created substantial doubt about the company’s ability to continue as a going concern for at least one year after issuance of the statements.
- Controls: Management concluded disclosure controls were ineffective because of material weaknesses in accounting for complex financial instruments and timely period-end account reconciliations. Management said it performed additional analysis to prepare the statements.
- Other risks and contingencies: Management said potential effects of COVID-19 and the Russia-Ukraine conflict were not determinable. No legal proceedings or off-balance-sheet arrangements were reported. If no combination closes by the deadline, public shares are to be redeemed and warrants may expire worthless.
Most important facts for investors to verify
- Whether the proposed Marti combination closed, and the final transaction terms, shareholder redemptions, and post-closing capitalization.
- Whether the $150 million minimum-cash condition was satisfied and the $47.5 million convertible-note financing was funded on the stated terms.
- Galata’s available operating cash, accrued expenses, and plans to address the disclosed going-concern uncertainty.
- Remediation of the disclosed material weaknesses in financial reporting controls.
- Final costs and obligations at closing, including the $5.03 million deferred underwriting commission.