Iron Horse Acquisitions Corp. 10-K Analysis & Summary – 2/21/2025

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Iron Horse Acquisitions Corp. –

10-K

Annual report

Filing date:

02/21/2025

TLDR:

Iron Horse Acquisitions Corp. reported a net income of $1,375,819 for 2024, primarily from interest income, but faces a going concern issue if a business combination is not completed by March 29, 2025. The company entered into an amended Share Exchange Agreement with Zhong Guo Liang Tou Group Limited (CFI).

ELI5:

Iron Horse is a company that’s trying to find another company to merge with, but they need to do it quickly or they might not be able to stay in business. They made some money from investments, but they have a deadline to find a company to merge with.

Accession #:

0001213900-25-015846

Published on

March 16, 2025

Analyst Summary

Net income of $1,375,819 for 2024, driven by interest income on trust account securities.
Extension of business combination deadline to March 29, 2025.
Entry into an amended and restated Share Exchange Agreement with Zhong Guo Liang Tou Group Limited (CFI).
Current ratio is very low at 0.017, indicating potential liquidity concerns.
The company’s ability to continue as a going concern is dependent on completing a business combination by March 29, 2025.
Common stock subject to possible redemption increased from $69,000,000 in 2023 to $71,829,574 in 2024.
P/E ratio is 66.375 based on a stock price of $10.62 and non-redeemable EPS of $0.16.
Net Income Growth: -545.2%
EPS Growth: -194.1%

Opportunities and Risks

Business Combination: Successful completion of the proposed acquisition of CFI could create value for stockholders.
Experienced Management Team: The management team’s experience in mergers and acquisitions and the media and entertainment industry could be beneficial in identifying and evaluating target businesses.
Going Concern: The company’s ability to continue as a going concern is highly dependent on completing a business combination by March 29, 2025.
Redemption Risk: Significant redemptions by public stockholders could reduce the funds available for the business combination and negatively impact the pro forma ownership structure.
SPAC Regulatory Environment: Changes in regulations impacting SPACs could affect the company’s ability to complete a business combination.
Economic and Geopolitical Risks: Market turbulence, rising interest rates, and geopolitical concerns could negatively impact the company’s business prospects.
Internal Control Weakness: The identified lack of segregation of duties and insufficient written policies and procedures for accounting, IT, and financial reporting represents a material weakness in internal control over financial reporting.

Potential Implications

Company Performance

Successful completion of the CFI acquisition could improve company performance.
Failure to complete a business combination by March 29, 2025, will negatively impact the company’s ability to continue as a going concern.
The company’s financial health is largely dependent on the successful execution of a business combination strategy.

Stock Price

Positive stock price movement if the CFI acquisition is completed.
Potential negative impact on stock price if redemptions are significant or the business combination fails.

SEC Filing Report: Iron Horse Acquisitions Corp. (10-K)

Executive Summary

This report analyzes Iron Horse Acquisitions Corp.’s 10-K filing for the year ended December 31, 2024. Iron Horse is a Special Purpose Acquisition Company (SPAC) actively seeking a business combination. Key findings include the extension of the business combination deadline, entry into an amended and restated Share Exchange Agreement with Zhong Guo Liang Tou Group Limited (CFI), and a net income driven primarily by interest income on trust account securities. However, the company’s ability to continue as a going concern is in doubt if a business combination is not completed by March 29, 2025. Given the uncertainty surrounding the business combination and the going concern issue, a HOLD rating is appropriate. Investors should closely monitor the progress of the proposed acquisition of CFI and any potential redemptions by public stockholders.

Company Overview

Iron Horse Acquisitions Corp. is a blank check company formed to effect a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or similar business combination. The company completed its IPO in December 2023. While initially focused on the media and entertainment industry, Iron Horse has broadened its search and entered into an agreement to acquire CFI, a company outside of its initial target sector.

Detailed Analysis

Management’s Discussion and Analysis (MD&A)

Business Combination Agreement: Iron Horse entered into an amended and restated Share Exchange Agreement with CFI, signaling a significant step towards completing a business combination.
Extension of Deadline: The company extended the deadline to complete a business combination to March 29, 2025, indicating potential challenges in finalizing a deal within the original timeframe.
Acquisition Strategy: While the initial focus was on media and entertainment, the company considered opportunities across various sectors and geographies, ultimately deciding to pursue CFI.
Liquidity and Capital Resources: The MD&A highlights the company’s reliance on the trust account for funding a business combination and the need for additional financing.
Going Concern: The MD&A explicitly states that the company’s ability to continue as a going concern is dependent on completing a business combination by March 29, 2025, raising a significant red flag.

Financial Statement Analysis

Key Ratios and Trends:

Net Income: The company reported net income of $1,375,819 for 2024, a significant improvement from the net loss of $308,792 in 2023. This was primarily driven by interest income earned on marketable securities held in the trust account.
Liquidity: The company’s cash position outside the trust account is limited ($454 as of December 31, 2024), highlighting its dependence on the trust account and potential need for additional financing.
Liabilities: Current liabilities significantly increased from $861,640 in 2023 to $2,591,689 in 2024, reflecting accrued expenses, income taxes payable, and promissory notes.

Balance Sheet Highlights:

Account	December 31, 2024	December 31, 2023
Cash	$454	$656,977
Marketable Securities in Trust Account	$72,752,485	$69,000,000
Total Assets	$72,796,002	$69,690,134
Total Liabilities	$5,110,189	$3,380,140

Income Statement Highlights:

Account	Year Ended December 31, 2024	Year Ended December 31, 2023
Net Income (Loss)	$1,375,819	($308,792)
Interest Income on Trust Account	$3,526,053	$0
Formation and Operational Costs	$1,709,829	$309,018

Cash Flow Highlights:

Account	Year Ended December 31, 2024	Year Ended December 31, 2023
Net Cash Used in Operating Activities	($1,012,960)	($83,200)
Net Cash Used in Investing Activities	($226,432)	($69,000,000)
Net Cash Provided by Financing Activities	$582,869	$69,740,177

Uncommon Metrics

Extension Notes: The issuance of extension notes to fund the extension of the business combination deadline indicates potential difficulties in securing a target within the original timeframe.
Lawsuit Settlement: The settlement of a lawsuit against Omnia, while positive, highlights the potential for legal challenges and associated costs.

Risk and Opportunity Assessment

Risks:

Going Concern: The company’s ability to continue as a going concern is highly dependent on completing a business combination by March 29, 2025.
Redemption Risk: Significant redemptions by public stockholders could reduce the funds available for the business combination and negatively impact the pro forma ownership structure.
SPAC Regulatory Environment: Changes in regulations impacting SPACs could affect the company’s ability to complete a business combination.
Economic and Geopolitical Risks: Market turbulence, rising interest rates, and geopolitical concerns could negatively impact the company’s business prospects.
Internal Control Weakness: The identified lack of segregation of duties and insufficient written policies and procedures for accounting, IT, and financial reporting represents a material weakness in internal control over financial reporting.

Opportunities:

Business Combination: Successful completion of the proposed acquisition of CFI could create value for stockholders.
Experienced Management Team: The management team’s experience in mergers and acquisitions and the media and entertainment industry could be beneficial in identifying and evaluating target businesses.

Conclusion and Actionable Insights

Iron Horse Acquisitions Corp. faces significant challenges, primarily related to its ability to complete a business combination within the stipulated timeframe and the resulting going concern issue. While the proposed acquisition of CFI represents a potential opportunity, the risks associated with redemptions, regulatory changes, and economic uncertainty warrant caution. The identified material weakness in internal control over financial reporting is also a concern. Therefore, a HOLD rating is appropriate. Investors should closely monitor the progress of the proposed acquisition of CFI, any potential redemptions by public stockholders, and the company’s efforts to address the internal control weakness.

Iron Horse Acquisitions Corp. Financial Analysis (Year Ended December 31, 2024)

This report analyzes the financial performance of Iron Horse Acquisitions Corp. (IROH) based on its 10-K filing for the year ended December 31, 2024. The analysis includes a review of key financial ratios and metrics, compared against prior periods and industry benchmarks where available. The report also provides a summary assessment of the company’s financial health and outlook.

1. Financial Ratio and Metric Analysis

Profitability

Gross Profit Margin: Not applicable. As a SPAC, Iron Horse Acquisitions Corp. does not have sales or cost of goods sold.
Operating Profit Margin:
- Ratio/Metric: Loss from Operations / Total Revenue. Since there is no revenue, the calculation is (-$1,709,829) / $0 = N/A.
Net Profit Margin:
- Ratio/Metric: Net Income / Total Revenue. Since there is no revenue, the calculation is $1,375,819 / $0 = N/A.
Return on Assets (ROA):
- Ratio/Metric: Net Income / Total Assets = $1,375,819 / $72,796,002 = 0.0189 or 1.89%
Return on Equity (ROE):
- Ratio/Metric: Net Income / Total Stockholders’ Equity = $1,375,819 / (-$4,143,761) = -0.3320 or -33.20%
Earnings Per Share (EPS) – Basic and Diluted:
- Ratio/Metric:
  - Redeemable Shares: $0.16
  - Non-Redeemable Shares: $0.16

Liquidity

Current Ratio:
- Ratio/Metric: Current Assets / Current Liabilities = $43,517 / $2,591,689 = 0.017
Quick Ratio (Acid-Test Ratio):
- Ratio/Metric: (Current Assets – Inventory) / Current Liabilities. Since there is no inventory, the calculation is $43,517 / $2,591,689 = 0.017
Cash Ratio:
- Ratio/Metric: Cash / Current Liabilities = $454 / $2,591,689 = 0.000175

Solvency/Leverage

Debt-to-Equity Ratio:
- Ratio/Metric: Total Liabilities / Total Stockholders’ Equity = $5,110,189 / (-$4,143,761) = -1.233
Debt-to-Assets Ratio:
- Ratio/Metric: Total Liabilities / Total Assets = $5,110,189 / $72,796,002 = 0.0702 or 7.02%
Interest Coverage Ratio (Times Interest Earned): Not applicable. The company has income before taxes, but no interest expense is explicitly listed.

Activity/Efficiency

As a SPAC, Iron Horse Acquisitions Corp. has limited operational activity, so inventory turnover, DSO, and DPO are not applicable.

Asset Turnover:
- Ratio/Metric: Revenue / Total Assets. Since there is no revenue, the calculation is $0 / $72,796,002 = 0

Valuation

Price-to-Earnings Ratio (P/E):
- Ratio/Metric: Stock Price / EPS. Using the current stock price of $10.62 and the non-redeemable EPS of $0.16, the P/E ratio is $10.62 / $0.16 = 66.375
Price-to-Book Ratio (P/B):
- Ratio/Metric: Market Cap / Book Value of Equity. Market Cap = $10.62 * 8,867,000 shares = $94,164,540. Book Value of Equity = -$4,143,761. P/B = $94,164,540 / (-$4,143,761) = -22.73
Price-to-Sales Ratio (P/S):
- Ratio/Metric: Market Cap / Revenue. Since there is no revenue, the calculation is $94,164,540 / $0 = N/A.
Enterprise Value to EBITDA (EV/EBITDA):
- Ratio/Metric: EV / EBITDA. EV = Market Cap + Total Debt – Cash. Total Debt = $229,770 (Loan Payable) + $425,013 (Promissory Note) + $627,781 (Promissory Note – Related Party) + $2,518,500 (Deferred Underwriting Fee Payable) = $3,801,064. EV = $94,164,540 + $3,801,064 – $454 = $97,965,150. EBITDA = Net Income + Interest + Taxes + Depreciation and Amortization. EBITDA = $1,375,819 + $746,540 = $2,122,359. EV/EBITDA = $97,965,150 / $2,122,359 = 46.16

Growth Rates

Revenue Growth: Not applicable. As a SPAC, Iron Horse Acquisitions Corp. does not have revenue.
Net Income Growth:
- Ratio/Metric: (Net Income Current Year – Net Income Previous Year) / Net Income Previous Year = ($1,375,819 – (-$308,792)) / (-$308,792) = -5.452 or -545.2%
EPS Growth:
- Ratio/Metric: (EPS Current Year – EPS Previous Year) / EPS Previous Year = ($0.16 – (-$0.17)) / (-$0.17) = -1.941 or -194.1%

Other Relevant Metrics

Common stock subject to possible redemption: Increased from $69,000,000 in 2023 to $71,829,574 in 2024. This represents the value of public shares that could be redeemed by shareholders if they disapprove of a proposed business combination or if the company fails to complete a business combination within the specified timeframe.
Administrative Services Agreement: The company pays $12,000 per month to its sponsor for management support, administrative, office space, and other services. These fees will cease 12 months from the date of the IPO consummation.

2. Commentary

Iron Horse Acquisitions Corp. is a SPAC, and its financial performance reflects this status. The company generated net income of $1,375,819 in 2024, a significant improvement from the net loss in 2023, primarily driven by interest earned on marketable securities held in the Trust Account. However, the company’s current ratio is very low, indicating potential liquidity concerns. The negative book value of equity results in a negative P/B ratio, which is not meaningful for analysis. The company’s focus remains on identifying and completing a business combination within the allotted timeframe, and its financial health is largely dependent on the successful execution of this strategy.