RACY Relativity Acquisition Corp - 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Cautionary Note Regarding Forward-Looking Statements

All statements other than statements of historical fact included in this Report including, without limitation, statements under this item regarding our financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. When used in this Report, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions, as they relate to us or our management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors detailed in our filings with the SEC. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety by this paragraph.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and the notes thereto contained elsewhere in this Report.

Overview

We are a blank-check company incorporated as a Delaware corporation on April 13, 2021, for the purposes of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. We may pursue an initial business combination target in any business or industry.

Recent Developments

Extension of our Combination Period

We initially had up to 12 months from the closing of the Initial Public Offering (until February 15, 2023) to complete a Business Combination, except that the Sponsor had two 3-month extensions available to it, for a total of up to 18 months from the closing of the Initial Public Offering (until August 15, 2023) to complete the initial Business Combination. We currently have until February 15, 2027 to consummate an initial Business Combination (subject to further extension with the approval of stockholders pursuant to the Fourth Amended and Restated Charter, consistent with applicable laws, regulations and stock exchange rules).

We have extended our time to complete a business combination four times, with our stockholders having the ability to redeem each time. Following such redemptions, there are currently 62,488 Public Shares outstanding and a total of 4,309,988 shares of Class A Common Stock and one share of Class B Common stock outstanding.

Instinct Brothers Co., Ltd Business Combination

On February 28, 2025, we entered into a Business Combination Agreement (the “Business Combination Agreement”) by and among (i) Relativity Acquisition Corp., a Delaware corporation (together with its successors, the “Purchaser”), (ii) Relativity Holdings Inc., a Delaware corporation and a wholly owned subsidiary of the Purchaser (“Pubco”), (iii) Relativity Purchaser Merger Sub II Inc., a company to be formed in the Cayman Islands and a wholly owned subsidiary of Pubco (the “Merger Sub” and the Merger Sub, collectively with the Purchaser and Pubco, the “Purchaser Parties”), (iv) Instinct Brothers Co., Ltd, a corporation organized under the laws of Japan (an “Operating Company” and “Target Company”) and its shareholder named on Annex I hereto ( “Seller”), (vi) Tomoki Nagano (“Founder”), (vii) Relativity Acquisition Sponsor, LLC, a Delaware limited liability company, in the capacity as the representative for the stockholders of Pubco (other than the Seller) (the “Purchaser Representative”), and (viii) Tomoki Nagano in the capacity as the representative for the Seller (the “Seller Representative”). The transactions contemplated by the Business Combination Agreement are referred to herein as the “Transaction.”

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Pursuant to the Business Combination Agreement, subject to the terms and conditions set forth therein, (a) the Merger Sub will merge with and into Relativity, with Relativity surviving the merger as a wholly-owned subsidiary of Pubco, and (b) each Seller shall contribute all of its ownership interests in each Operating Company to Pubco in exchange for aggregate consideration in the amount of $200,000,000 (the “Contribution Consideration”), to be paid in the common stock of Pubco valued at $10.00 per share of common stock. At the Closing, each public warrant of Relativity shall be converted into one Pubco public warrant and each private warrant of Relativity shall be converted into one Pubco private warrant, in each case with such Pubco warrant having substantially the same terms and conditions as set forth in the respective Relativity warrants, except that in each case they shall represent the right to acquire shares of Pubco common stock in lieu of shares of Relativity Class A common stock.

On March 25, 2026, we held a special meeting of stockholders (the “Meeting”). At the Meeting, the Company’s stockholders approved:

a proposal to adopt and approve the business combination agreement, dated as of February 28, 2025 (as amended and restated on October 22, 2025), by and among the Company, Relativity Holdings Inc., Instinct Bio Technical Company Inc., parties thereto, as described in more detail in the proxy statement relating to the Meeting.

a proposal to amend the second amended and restated certificate of incorporation of the Company to eliminate the requirement that the Company, or any entity that succeeds the Company, retain at least $5,000,001 of net tangible assets following the redemption of public shares in connection with the business combination.

The obligations of the parties to complete the Closing are subject to various conditions. We are working toward completing the proposed business combination as soon as possible.

Results of Operations

As of December 31, 2025, we had not commenced any operations. All activity for the period from April 13, 2021 (inception) through December 31, 2025, relates to our formation and initial public offering and identifying a target company for a business combination. We will not generate any operating revenues until after the completion of a business combination, at the earliest. We generated non-operating income in the form of interest income from the proceeds derived from the initial public offering and placed in the trust account.

For the year ended December 31, 2025, we had net loss of $1,225,143, which consists of general and administrative costs of $1,028,665, a change in the fair value of warrant liability of $226,183 and provision for income taxes of $7,352, offset by income from investment in trust account of $23,369 and a gain from forgiveness of professional fees of $13,688.

For the year ended December 31, 2024, we had net loss of $440,564, which consists of general and administrative costs of $741,798, provision for income taxes of $81,983 and a change in the fair value of warrant liability of $15,780 offset by gain from extinguishment of promissory note of $360,114 and income from investments held in the trust account of $38,883.

Factors That May Adversely Affect Our Results of Operations

Our results of operations and our ability to complete an initial Business Combination may be adversely affected by various factors that could cause economic uncertainty and volatility in the financial markets, many of which are beyond our control. Our results of operations and our ability to consummate an initial Business Combination could be impacted by, among other things, downturns in the financial markets or in economic conditions, increases in oil prices, inflation, fluctuations in interest rates, increases in tariffs, supply chain disruptions, declines in consumer confidence and spending, public health considerations, and geopolitical instability, such as the military conflicts in Ukraine and the Middle East. We cannot at this time predict the likelihood of one or more of the above events, their duration or magnitude or the extent to which they may negatively impact our business and our ability to complete an initial Business Combination.

Liquidity, Capital Resources and Going Concern

As of December 31, 2025, the Company had $7,140 in its operating bank account and working capital deficit of $3,123,694.

On February 15, 2022, we consummated the Initial Public Offering of 14,375,000 Units, including 1,875,000 Units pursuant to the exercise of the underwriters’ over-allotment option in full, at $10.00 per Unit, generating gross proceeds of $143,750,000.

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Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 653,750 Private Placement Units in the Private Placement to our Sponsor at a price of $10.00 per Private Placement Unit, generating total gross proceeds of $6,537,500.

Transaction costs amounted to $3,890,326, consisting of $1,437,500 of underwriting commissions, $1,972,398 of the excess of the fair value of Class B Common Stock issued to the Initial Public Offering underwriter over the share subscription receivable and $480,428 of other offering costs.

Following the closing of our Initial Public Offering, $146,625,000.00 from the net proceeds of the sale of the Units in our Initial Public Offering and the sale of the Private Placement Units in the Private Placement was placed in the Trust Account maintained by Continental, as trustee. In connection with our 2022 Special Meeting held on December 21, 2022, stockholders holding 14,221,705 Public Shares exercised their right to redeem such shares for a pro rata portion of the funds in our Trust Account. As a result, approximately $146 million (approximately $10.29 per Public Share) was removed from the Trust Account to pay such holders.

On February 13, 2024, the Company announced that it had extended the date by which it has to consummate a Business Combination from February 15, 2024 to February 15, 2025 (the “Combination Period”). In connection with the extension on February 13, 2024, stockholders holding 90,054 Public Shares exercised their right to redeem such shares for a pro rata portion of the funds in the Company’s Trust Account. As a result, approximately $1.02 million (approximately $11.32 per Public Share) was removed from the Trust Account to pay such holders. Following the redemptions, the Company had 63,241 Public Shares outstanding.

On February 13, 2025, the Company held the 2025 Meeting. At the 2025 Meeting, the Company’s stockholders approved an amendment to the Company’s fourth amended and restated certificate of incorporation (the “Charter Amendment”) to extend the date by which the Company must consummate its initial business combination from February 15, 2025 to February 15, 2026 or such earlier date as determined by the Company’s board of directors. In connection with the extension on February 13, 2025, stockholders holding 753 Public Shares exercised their right to redeem such shares for a pro rata portion of the funds in the Company’s Trust Account. As a result, approximately $9,266 (approximately $12.31 per Public Share) was removed from the Trust Account to pay such holders.

On February 12, 2026, the Company held a special meeting of stockholders (the “February 2026 Meeting”). At the February 2026 Meeting, the Company’s stockholders approved an amendment to the Company’s fifth amended and restated certificate of incorporation (the “February 2026 Charter Amendment”) to extend the date by which the Company must consummate its initial business combination from February 15, 2026 to February 15, 2027 or such earlier date as determined by the Company’s the Board. In connection with the February 2026 Meeting, stockholders holding 6,587 shares of Class A common stock exercised their right to redeem such shares for a pro rata portion of the funds in the Company’s Trust Account. As a result, approximately $84,172 (approximately $12.77 per Public Share) was removed from the Trust Account to pay such holders. Following redemptions, the Company has 55,901 Class A common stock outstanding.

On March 25, 2026, the Company held a special meeting of stockholders (the “March 2026 Meeting”). At the March 2026 Meeting, the Company’s stockholders approved a proposal to adopt and approve the business combination agreement, dated as of February 28, 2025 (as amended and restated on October 22, 2025) and a proposal to amend the second amended and restated certificate of incorporation of the Company to eliminate the requirement that the Company, or any entity that succeeds the Company, retain at least $5,000,001 of net tangible assets following the redemption of public shares in connection with the business combination. In connection with the 2026 Meeting, stockholders holding 15,279 shares of Class A common stock exercised their right to redeem such shares for a pro rata portion of the funds in the Company’s Trust Account. As a result, approximately $192,821 (approximately $12.62 per Public Share) will be removed from the Trust Account immediately prior to the closing of the business combination to pay such holders. Following redemptions, the Company will have 40,622 Public Shares outstanding.

Following redemptions, the Company has 62,488 and 63,241 Public Shares outstanding as of December 31, 2025 and 2024, respectively.

As of December 31, 2025 and 2024, approximately $794,299 and $769,267 remained in the Trust Account, respectively.

We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account, to complete our initial Business Combination. We may withdraw interest to pay our taxes and liquidation expenses if we are unsuccessful in completing a Business Combination. We may pay our franchise taxes from funds from the Initial Public Offering held outside of the Trust Account or from interest earned on the funds held in the Trust Account and released to us for this purpose. Our annual income tax obligations will depend on the amount of interest and other income earned on the amounts held in the Trust Account reduced by our operating expense and franchise taxes. We expect the interest earned on the amount in the Trust Account will be sufficient to pay our income taxes. To the extent that our equity or debt is used, in whole or in part, as consideration to complete our initial Business Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.

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Further, our Sponsor or an affiliate of the Sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required for Working Capital Loans. If we complete a Business Combination, we would repay the Working Capital Loans out of the proceeds of the Trust Account released to us. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, we may use a portion of the working capital held outside the Trust Account to repay the Working Capital Loans, but no proceeds from the Trust Account would be used to repay the Working Capital Loans. Up to $1,500,000 of such Working Capital Loans may be convertible into Units at a price of $10.00 per unit at the option of the lender. The units would be identical to the Private Placement Units. At December 31, 2025 and 2024, no such Working Capital Loans were outstanding.

On August 10, 2023, we issued the SVES Promissory Note to SVES LLC under which SVES LLC agreed to extend us $300,000 for working capital purposes. The SVES Promissory Note is non-interest bearing and payable on the closing of the SVES Business Combination. In the event the SVES Business Combination is not consummated, the SVES Promissory Note shall be null and void and we shall not have any obligation to the payee. As of December 31, 2023, SVES LLC had funded $15,600 on the promissory note and had $284,400 available for withdrawal. Due to the termination of the SVES Business Combination, on May 15, 2024, the SVES Promissory Note is null and void.

On July 15, 2024, the Company entered into a promissory note (“Mazaii Note”) with Mazaii Corp Ltd. pursuant to which Mazaii agreed to loan the Company an aggregate principal amount of up to $250,000. The Mazaii note is non-interest bearing and payable on the date on which the Company consummates a Business Combination. In the event a Business Combination Agreement is not consummated, the Mazaii note shall be null and void and the Company shall not have any obligation to the Payee hereunder. The exclusivity period of the LOI expired on September 12, 2024 by which time both parties had chosen to not proceed. As a result, the Mazaii Note became null and void.

On January 24, 2025, the Company entered into a promissory note (“Instinct Note”) with Instinct Bio Technical Company Pte Ltd. (“Instinct”) pursuant to which Instinct agreed to loan the Company an aggregate principal amount of up to $400,000. The Instinct Note is non-interest bearing and payable on the date on which the Company consummates a Business Combination. In the event a Business Combination Agreement is not consummated, the Instinct Note shall be null and void and the Company shall not have any obligation to the Payee hereunder. As of December 31, 2025, the Company had an outstanding balance of $433,190 under the Instinct Note.

The Company will need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating a Business Combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our Business Combination. Moreover, we may need to obtain additional financing either to complete our Business Combination or because we become obligated to redeem a significant number of our Public Shares upon consummation of our Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of our Business Combination. If we are unable to complete our Business Combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the Trust Account. In addition, following our Business Combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.

Further, we have determined that if we are unable to complete a Business Combination within the Combination Period, then we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our Board of Directors, dissolve and liquidate. The date for mandatory liquidation and subsequent dissolution as well as our working capital deficit raise substantial doubt about our ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should we be required to liquidate after the applicable extension date.

We pay an affiliate of the Sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support, pursuant to the Administrative Support Agreement. Upon completion of our initial Business Combination or our liquidation, we will cease paying these monthly fees. For the year ended December 31, 2025, the Company incurred $120,000 of administrative service fees, and $245,000 payable recoded as accrued costs and expenses on the accompanying condensed consolidated balance sheets. For the year ended December 31, 2024, the Company incurred and paid $120,000 of administrative service fees.

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In connection with the Company’s assessment of going concern considerations in accordance with FASB ASC Topic 205-40, “Presentation of Financial Statements—Going Concern,” the Company has until February 15, 2027 (absent any extensions of such period, pursuant to the terms described above) to consummate the proposed Business Combination. It is uncertain whether the Company will be able to consummate the proposed Business Combination by this date. If a Business Combination is not consummated by this date, unless that time is extended (as provided above, or pursuant to a stockholder vote), there will be a mandatory liquidation and subsequent dissolution of the Company. Management has determined that the liquidity condition and mandatory liquidation, should a Business Combination not occur, and potential subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate by February 15, 2027. The Company intends to complete the proposed Business Combination before the end of the Combination Period. However, there can be no assurance that the Company will be able to consummate any Business Combination by the end of the Combination Period.

Emerging Growth Company Status

We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. We have elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, we as an emerging growth company can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

Critical Accounting Estimates

This Management’s Discussion and Analysis of our Financial Condition and Results of Operations is based on our financial statements and the notes thereto contained elsewhere in this Report, which have been prepared in accordance with U.S. GAAP. The preparation of our consolidated financial statements in conformity with U.S. GAAP requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

Making estimates requires Management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which Management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates. We determined the more significant accounting estimates included in our financial statements is the determination of the fair value of derivative financial instruments.

Derivative Financial Instruments

We evaluate our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with FASB ASC Topic 815, “Derivatives and Hedging”. For derivative financial instruments that are accounted for as liabilities, such as our Warrants, the derivative instrument is initially recorded at its fair value on the grant date and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations contained elsewhere in this Report. The classification of derivative instruments, including whether such condensed consolidated balance sheets as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date.

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The valuation of our Public Warrants is based on a traded market. Our Private Placement Warrants are valued using a Monte Carlo options pricing model which utilizes assumptions related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield. We estimate the volatility of our Common Stock based on projected volatility of comparable public companies that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the Warrants is based on Management assumptions regarding the timing and likelihood of completing a Business Combination. The dividend rate is based on the historical rate, which we anticipate to remain at zero.

The estimates used to calculate the fair value of our derivative assets and liabilities change at each balance sheet date based on our stock price and other assumptions described above. If our assumptions change or we experience significant volatility in our stock price or interest rates, the fair value calculated from one balance sheet period to the next could be materially different.

Recent Accounting Standards

Management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on our consolidated financial statements.

Off-Balance Sheet Arrangements

As of December 31, 2025, we did not have any off-balance sheet arrangements.