10-Q: Kairous Acquisition Corp. Limited Terminates Merger, Initiates Liquidation Amidst Financial Strain

Kairous Acquisition Corp. Limited, a blank check company, has terminated its proposed business combination with Bamboo Mart Limited and commenced liquidation of its trust account after failing to extend its business combination period.

Summary

• Kairous Acquisition Corp. Limited (KACL) failed to extend its business combination period beyond May 16, 2025, leading to the termination of its proposed merger with Bamboo Mart Limited.
• The company is now in the process of liquidating its trust account and redeeming all outstanding public ordinary shares.
• As of March 31, 2025, KACL reported a net loss of $60,106 for the three months and $272,455 for the nine months ended March 31, 2025, a significant decline from net income in the prior year periods.
• Cash held in the Trust Account decreased to $10,599,917 as of March 31, 2025, from $16,152,108 as of June 30, 2024, due to redemptions.
• Total liabilities increased to $7,091,093 as of March 31, 2025, from $5,939,024 as of June 30, 2024.
• The company has a working capital deficit of $4,358,737 as of March 31, 2025, and an accumulated deficit of $7,088,972.
• The board of directors intends to seek an amendment to the Charter to remove the obligation to liquidate and dissolve, aiming to remain listed on OTC Markets and pursue alternative opportunities.
• The company previously terminated a merger agreement with Wellous Group Limited on June 22, 2023.

Sentiment

Score: 1

Explanation: The company has failed to complete its primary objective of a business combination, is undergoing liquidation, and faces significant financial distress with a going concern warning. This represents a highly negative outcome for shareholders.

Negatives

• Failed to extend the business combination period beyond May 16, 2025, leading to the termination of the proposed merger with Bamboo Mart Limited.
• Commenced liquidation of the trust account and redemption of public shares.
• Reported a net loss of $60,106 for the three months ended March 31, 2025, compared to a net income of $46,544 for the same period in 2024.
• Reported a net loss of $272,455 for the nine months ended March 31, 2025, compared to a net income of $69,863 for the same period in 2024.
• Cash balance decreased to $0 as of March 31, 2025, from $985 as of June 30, 2024.
• Cash held in the Trust Account decreased by approximately $5.55 million from June 30, 2024, to March 31, 2025.
• Total current liabilities increased to $4,361,093 as of March 31, 2025, from $3,209,024 as of June 30, 2024.
• Accumulated deficit increased to $7,088,972 as of March 31, 2025, from $5,866,072 as of June 30, 2024.
• Has a working capital deficit of $4,358,737 as of March 31, 2025, indicating insufficient liquidity.
• Management has determined that its history of losses and insufficient liquidity raise substantial doubt about the company's ability to continue as a going concern.
• Disclosure controls and procedures were not effective as of March 31, 2025, primarily due to failure to timely file certain forms or reports.

Risks

• Substantial doubt about the company's ability to continue as a going concern due to history of losses and insufficient liquidity.
• The company is required to cease all operations, redeem public shares, and liquidate/dissolve if it does not close a business combination by September 30, 2025 (as per the last A&R Merger Agreement, though the current business combination is terminated).
• Geopolitical, trade, political, or sanctions risks (e.g., Russia-Ukraine, Israel-Hamas conflicts) could materially and adversely affect the company's ability to consummate a business combination or the operations of a target business.
• Increased market volatility or decreased market liquidity in third-party financing may impact the company's ability to raise equity and debt financing.
• The deferred underwriting fee of $2,730,000 will not be reversed until the Trust Account is liquidated, potentially impacting funds available for public shareholders if the company does not complete a business combination.
• The Sponsor's liability to indemnify the Trust Account against third-party claims is subject to waivers, and if a waiver is unenforceable, the Sponsor may not be responsible for such claims.

Future Outlook

The company's proposed business combination with Bamboo Mart Limited has been terminated. The company is currently liquidating its trust account and redeeming public shares. The board of directors intends to seek an amendment to the Charter to remove the obligation to liquidate and dissolve, aiming to remain listed on the OTC Markets and pursue alternative opportunities, including potentially another merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or similar business combination.

Management Comments

• Management has determined that its history of losses and insufficient liquidity raise substantial doubt about the ability to continue as a going concern.
• The board of directors intends to seek to amend the Charter to remove the obligation to liquidate and dissolve the Company, such that the Company may remain listed on the OTC Markets and allow it to seek alternative opportunities, including potentially a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.

Industry Context

This announcement reflects the inherent risks and challenges faced by Special Purpose Acquisition Companies (SPACs) in completing their initial business combinations within mandated timelines. The failure to secure an extension and the subsequent termination of the merger agreement with Bamboo Mart Limited, following a prior termination with Wellous Group Limited, highlights the difficulties some SPACs encounter in identifying and closing suitable deals, especially in a volatile market environment. The decision to liquidate and redeem shares is a common outcome for SPACs that fail to de-SPAC, though the intent to amend the charter to remain listed on OTC Markets for future opportunities is a less common, but not unprecedented, strategy to avoid full dissolution.

Comparison to Industry Standards

• Kairous Acquisition Corp. Limited's failure to complete a business combination within its extended timeline, leading to liquidation, is a common outcome for a significant portion of SPACs. For instance, in 2022-2023, a notable number of SPACs, such as Churchill Capital Corp IV (which failed to merge with Lucid Motors initially but later succeeded) or Pershing Square Tontine Holdings (which failed to acquire Universal Music Group), faced similar pressures, with many ultimately liquidating.
• The redemption rate of KACL's public shares, with 818,795 shares remaining subject to redemption from an initial 7,800,000 units, indicates a high level of redemptions prior to the final liquidation, which is consistent with the trend of increasing redemptions seen across the SPAC market, particularly for deals perceived as less attractive or when extension votes are held.
• The company's accumulated deficit and working capital deficit are typical for a SPAC that has not completed a business combination and has incurred significant administrative and extension costs without generating operating revenue. This financial state is comparable to other SPACs nearing their dissolution deadline, such as those that liquidated in 2023 like Gores Holdings VIII, Inc. or Queen's Gambit Growth Capital, which also reported substantial accumulated deficits prior to their wind-down.

Management Changes

Corporate Governance

Related Party Transactions

• The Sponsor (Kairous Asia Limited) provided Extension Loans totaling $2,240,000 and a Working Capital Note with $1,375,341 outstanding as of March 31, 2025.
• NR Instant Produce PCL (NRIP), a parent company of the Sponsor Shareholder, receives $5,000 per month for office space, utilities, and administrative support.
• Regeneration Capital (Cayman) Limited (the Buyer) acquired a 49% equity interest in the Sponsor from Kairous Ventures Limited (KVL) for $1,486,504, and later took legal title of the remaining 51% equity interest due to KVL's default on a $1,300,000 loan facility agreement.
• The Buyer, under common control with Bamboo Mart Limited and NRIP, sold equity interests in KAL (the Sponsor) to Mr. Oran Vongsuraphichet (7.2% for $300,000) and Ms. Benyapa Rungruangnavarat (33.9% for $1,200,000) to support the company's operating activities.
• A share repurchase agreement was entered into on June 24, 2025, between the Buyer and Ms. Benyapa to repurchase 783,000 ordinary shares in KAL for THB 183,490,000 (approximately $6.1 million), guaranteed by NRF (not yet closed).

Stakeholder Impact

• **Shareholders:** Public shareholders will receive their pro rata portion of the proceeds from the trust account liquidation, which may be less than the initial IPO price. Founder shares and private placement units held by the Sponsor and affiliates will not participate in liquidating distributions from the Trust Account.
• **Sponsor:** The Sponsor has provided significant extension and working capital loans, which were convertible into ordinary shares upon a business combination. With the termination, the fate of these loans and their conversion terms is uncertain, potentially resulting in losses for the Sponsor.
• **Underwriters:** The deferred underwriting commission of $2,730,000, contingent upon the consummation of a business combination, will not be paid as the business combination is terminated and the trust account is being liquidated.
• **Employees/Management:** The company is winding down operations, which implies a cessation of activities and potential impact on any personnel involved in its limited operations.

Next Steps

• Liquidate the trust account and redeem all outstanding public ordinary shares.
• Seek to amend the Charter to remove the obligation to liquidate and dissolve the company.
• Remain listed on the OTC Markets.
• Seek alternative opportunities, including potentially a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or similar business combination.

Key Dates

Recommendation

Keywords

SPAC, Special Purpose Acquisition Company, Liquidation, Trust Account, Redemption, Business Combination, Merger Termination, Going Concern, Financial Results, SEC Filing, 10-Q, Kairous Acquisition Corp. Limited, Bamboo Mart Limited