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 financial statements and the notes thereto contained elsewhere in this Report.
Overview
We are a blank check company incorporated in the Cayman Islands on March 15, 2021 and formed for the purpose of entering into a Business Combination with one or more businesses. We consummated our Initial Public Offering on November 8, 2021 and are currently in the process of consummating the Scage Business Combination.
The issuance of additional shares in an initial Business Combination:
may significantly dilute the equity interest of investors in the Initial Public Offering, which dilution would increase if the anti-dilution provisions in our Class B Ordinary Shares resulted in the issuance of our Class A Ordinary Shares on a greater than one- to-one basis upon conversion of our Class B Ordinary Shares;
may subordinate the rights of holders of our Class A Ordinary Shares if shares of preferred shares are issued with rights senior to those afforded our Class A Ordinary Shares;
could cause a change in control if a substantial number of shares of our Class A Ordinary Shares are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors;
may have the effect of delaying or preventing a change of control of us by diluting the share ownership or voting rights of a person seeking to obtain control of us; and
may adversely affect prevailing market prices for our Class A Ordinary Shares and/or Warrants.
Similarly, if we issue debt securities, or otherwise incur significant debt, it could result in:
default and foreclosure on our assets if our operating revenues after an initial Business Combination are insufficient to repay our debt obligations;
acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of such covenants;
our immediate payment of all principal and accrued interest, if any, if the debt is payable on demand;
our inability to obtain necessary additional financing if the debt contains covenants restricting our ability to obtain such financing while the debt is outstanding;
our inability to pay dividends on our ordinary or preferred shares;
using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our Ordinary Shares if declared and our ability to pay expenses, make capital expenditures and acquisitions and fund other general corporate purposes;
limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate;
increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; and
limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements and execution of our strategy and for other purposes, and other disadvantages compared to our competitors who have less debt.
We completed the sale of 15,000,000 Units at $10.00 per Unit on November 8, 2021. Simultaneous with the closing of the Initial Public Offering, we completed the sale of 7,900,000 Private Placement Warrants at a price of $1.00 per Private Placement Warrant in a private placement to our Sponsor as well as to EarlyBirdCapital, generating gross proceeds of $7,900,000 from the sale of the Private Placement Warrants.
On November 12, 2021, we closed on the full exercise of the underwriters’ over-allotment option, which resulted in the sale of an additional 2,250,000 Units for additional gross proceeds to us of $22,500,000 and aggregate IPO and over-allotment gross proceeds of $172,500,000. Simultaneously with the exercise of the over-allotment, the Sponsor purchased an additional 900,000 Private Placement Warrants, which resulted in additional gross proceeds of $900,000 and aggregate private placement proceeds from the IPO and over-allotment of $8,800,000.
Following the closing of the IPO on November 8, 2021 and the subsequent exercise of the over-allotment option, $175,950,000 ($10.20 per Unit) from the net proceeds of the sale of the Units in the IPO and the sale of the Private Placement Warrants was placed in the Trust Account, located in the United States at a nationally recognized financial institution, with Continental acting as trustee and until November 2, 2023 invested only in in United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government treasury obligations. Pursuant to the Trust Agreement, the trustee will not be permitted to invest in other securities or assets. As of November 2, 2023, the funds in the Trust Account were moved to an interest-bearing demand deposit account.
Sunorange Investment
On April 27, 2023, we entered into the Investment Agreement with the Sponsor and Sunorange, pursuant to which Sunorange and its designees shall acquire partnership interests in the Sponsor and Class B Ordinary Shares directly held by certain of our directors, which combined interests will entitle Sunorange to receive, in the aggregate, the Insider Securities, consisting of 3,557,813 Class B Ordinary Shares and 6,160,000 Private Placement Warrants, and we shall introduce a change in Management and the Board as follows: (i) Calvin Kung replaced David Gershon as Chairman of the Board and Chief Executive Officer and Wang Chiu (Tommy) Wong replaced Ron Golan as Chief Financial Officer and director on the Board, effective upon closing of the Sunorange Investment; (ii) Jonathan Ophir and Uri Chaitchik tendered their resignations as Chief Investment Officer and Senior Consultant, respectively, effective upon closing of the Sunorange Investment; and (iii) Mitch Garber, Gustavo Schwed and Nadav Zohar tendered their resignations as directors, effective upon expiration of the Waiting Period and whose vacancies were filled by New Management.
On May 8, 2023, we completed the closing of the Sunorange Investment after our shareholders approved of certain proposals at the 2023 EGM, and after certain closing conditions were met, including but not limited to: (i) a minimum of $30 million remaining in the Trust Account after accounting for all redemptions in connection with the 2023 EGM; (ii) us obtaining or extending a directors and officers insurance policy on terms satisfactory to the parties; (iii) the conversion of Class B Ordinary Shares into Class A Ordinary Shares as needed to retain shareholders and meet continued listing requirements of Nasdaq in the event that the 2023 Extension was approved; (iv) the amendment of the Sponsor’s existing limited partnership agreement; (v) the transfer of 61,875 Class B Ordinary Shares from certain of our directors to Sunorange or its designees and (vi) the cancellation of the outstanding Working Capital Loan from the Sponsor and the reduction of certain advisory fees to be due upon the closing of an initial Business Combination.
In connection with the closing of the Sunorange Investment, on May 8, 2023, Sunorange caused $300,000 to be deposited into the Trust Account to support the first three months of the 2023 Extension. Sunorange has agreed to deposit into the Trust Account an additional $100,000 for each successive month, or portion thereof, that is needed by us to complete an initial Business Combination until May 8, 2024. Through December 31, 2024, $1,200,000 has been deposited into the Trust Account in support of the 2023 Extension.
2023 Extension of our Combination Period
On May 8, 2023, we held the 2023 EGM to amend our Amended and Restated Memorandum to: (i) approve the 2023 Extension and (ii) to entitle holders of Class B Ordinary Shares to convert such shares into Class A Ordinary Shares prior to the closing of an initial Business Combination at the election of the holder. There were 21,712,500 of our Ordinary Shares issued and outstanding on April 14, 2023, the record date for the 2023 EGM. At the 2023 EGM, there were 14,402,264 ordinary shares present in person or by proxy, representing approximately 66.33% of the total Ordinary Shares outstanding as of the record date, which constituted a quorum. Shareholders holding 12,626,668 Class A Ordinary Shares exercised their right to redeem such shares for a pro rata portion of the funds in our Trust Account. These shares were redeemed for approximately $10.50 per share for a total redemption value paid from the Trust Account of approximately $132,616,922. In connection with the 2023 EGM and pursuant to the Investment Agreement, Sunorange will contribute to us loans of the lesser of (i) $100,000 or (ii) $0.033 for each Public Share that is not redeemed for each calendar month (commencing on May 8, 2023 and ending on the 8th day of each subsequent month), or portion thereof, that is needed by us to complete an initial Business Combination until May 8, 2024.
On June 2, 2023, we issued a promissory note in the aggregate principal amount of up to $1,200,000 to the Sponsor (the “June 2023 Promissory Note”), which will be deposited into the Trust Account for the benefit of each Public Share that was not redeemed in connection with our May 8, 2023 shareholder vote to approve the 2023 Extension. The Sponsor agreed to pay $100,000 per month until the completion of an initial Business Combination, commencing on May 8, 2023 and continuing through May 8, 2024. The June 2023 Promissory Note bears no interest and is due and payable upon the earlier to occur of (i) the date on which we consummate our Business Combination and (ii) the date that our winding up is effective. At the election of the Sponsor, up to $1,200,000 of the unpaid principal amount of the June 2023 Promissory Note may be converted into Conversion Warrants at a conversion price of $1.00 per Warrant. The Conversion Warrants shall be identical to the Private Placement Warrants issued by us at the IPO. We have determined that the fair value of the June 2023 Promissory Note is its face value as the note was not issued with a substantial premium. The Sponsor funded the first three months of the June 2023 Promissory Note in its first payment. As of December 31, 2024, the Sponsor had deposited an aggregate of $1,100,000 into the Trust Account to support the 2023 Extension on behalf of us. As of December 31, 2023 and December 31, 2024, the outstanding balance of the June 2023 Promissory Note was $800,000 and $1,100,000, and no interest was accrued.
Founder Share Conversion
On May 8, 2023, we issued an aggregate of 4,237,499 Founder Shares to the Sponsor upon the Founder Share Conversion. Also on May 8, 2023, we issued an aggregate of 75,000 Class A Ordinary Shares to our former independent directors and the holders of our 75,000 Class B Ordinary Shares upon the conversion of an equal number of shares of Class B Ordinary Shares. On the same day, in connection with the closing of the Sunorange Investment, the Class A Ordinary Shares held by the directors were transferred to designees of Sunorange. The Class A Ordinary Shares issued in connection with the Founder Share Conversion are subject to the same restrictions as applied to the Class B Ordinary Shares before the Founder Share Conversion, including, among other things, certain transfer restrictions, waiver of redemption rights and the obligation to vote in favor of an initial Business Combination as described in the IPO Registration Statement. Following the Conversion, there were 9,085,831 Class A Ordinary Shares issued and outstanding and one Class B Ordinary Share issued and outstanding. As a result of the Founder Share Conversion, the Sponsor and certain designees of Sunorange hold, in the aggregate, approximately 47.5% of our Class A Ordinary Shares that are outstanding.
Scage Business Combination
On August 21, 2023, we entered into a Business Combination Agreement, as amended on June 18, 2024, October 31, 2024 and April 2, 2025 (the “Business Combination Agreement”) with Scage Future, an exempted company incorporated with limited liability in the Cayman Islands (“Pubco”), Hero 1, an exempted company incorporated with limited liability in the Cayman Islands and a wholly-owned subsidiary of Pubco (“First Merger Sub”), Hero 2, an exempted company incorporated with limited liability in the Cayman Islands and a wholly-owned subsidiary of Pubco (“Second Merger Sub”), and Scage International Limited, an exempted company incorporated with limited liability in the Cayman Islands (“Scage”). For more information about the business combination with Scage (the “Scage Business Combination”), see the Scage Registration Statement.
2024 Extensions of our Combination Period
On May 2, 2024, we held an extraordinary general meeting in lieu of an annual general meeting of shareholders (the “May 2024 EGM”) to amend the Articles to approve the extension of the date by which the Company has to consummate an initial business combination from May 8, 2024 to November 8, 2024 (the “Second Extension Amendment”). Shareholders holding 2,374,826 Class A ordinary shares exercised their right to redeem such shares for a pro rata portion of the funds in our Trust Account (the “May 2024 Redemptions”). These shares were redeemed for approximately $11.33 per share for a total redemption value paid from the Trust Account of approximately $26,907,976. On May 15, 2024, we issued an unsecured promissory note in the aggregate principal amount of up to $225,000 (the “May 2024 Note”) to the Sponsor, which will be deposited into the Trust Account for the benefit of each public share that was not redeemed in connection with the Second Extension Amendment. The Sponsor agreed to pay $37,500 per month until the completion of our initial business combination, commencing on May 8, 2024 and continuing through November 8, 2024. The May 2024 Note bears no interest and is due and payable upon the earlier to occur of (i) the date on which we consummate our initial business combination and (ii) the date that our winding up is effective. As of December 31, 2024, the Sponsor had deposited an aggregate of $225,000 into the Trust Account to support the Second Extension Amendment on behalf of us.
On November 6, 2024, we held an extraordinary general meeting of shareholders (the “November 2024 EGM”) to amend the Articles to approve the extension of the date by which the Company has to consummate an initial business combination from November 8, 2024 to May 8, 2025 (the “Third Extension Amendment”). Shareholders holding 1,383,214 Class A ordinary shares exercised their right to redeem such shares for a pro rata portion of the funds in our Trust Account (the “November 2024 Redemptions”). These shares were redeemed for approximately $11.68 per share for a total redemption value paid from the Trust Account of approximately $16.16 million. On November 11, 2024, we issued an unsecured promissory note in the aggregate principal amount of up to $259,588 (the “November 2024 Note”) to the Sponsor, which will be deposited into the Trust Account for the benefit of each public share that was not redeemed in connection with the Third Extension Amendment. The Sponsor agreed to pay $43,264 per month until the completion of our initial business combination, commencing on November 8, 2024 and continuing through May 8, 2025. The November 2024 Note bears no interest and is due and payable upon the earlier to occur of (i) the date on which we consummate our initial business combination and (ii) the date that our winding up is effective. We also agreed to waive our right to withdraw $50,000 out of $100,000 of interest accrued on the Trust Account to pay dissolution expenses. As of December 31, 2024, the Sponsor had deposited an aggregate of $43,264 into the Trust Account to support the Third Extension Amendment on behalf of us.
On May 6, 2025, we held an extraordinary general meeting of shareholders (the “May 2025 EGM”) to approve the extension of the date by which the Company has to consummate an initial business combination from May 8, 2025 to November 8, 2025 (the “Fourth Extension Amendment”). Shareholders holding 742,834 Class A ordinary shares exercised their right to redeem such shares for a pro rata portion of the funds in our Trust Account (the “May 2025 Redemption”). These shares were redeemed for approximately $12.18 per share for a total redemption value paid from the Trust Account of approximately $9.0 million.
Following the Founder Share Conversion, the 2023 Redemptions, the May 2024 Redemptions, the November 2024 Redemptions and the May 2025 Redemption, currently there were 4,584,957 Class A ordinary shares and one Class B ordinary share issued and outstanding.
Nasdaq Compliance
On January 22, 2024, we received a deficiency notice from the Staff of Nasdaq notifying us that we are not in compliance with Nasdaq Listing Rule 5620(a), which requires that Nasdaq-listed companies hold an annual meeting of shareholders within twelve months of their fiscal year end (the “Annual Meeting Requirement”), because we did not hold an annual meeting of shareholders within twelve months of our fiscal year ended December 31, 2022. The notification received has no immediate effect on our Nasdaq listing. On March 7, 2024, we submitted to Nasdaq a plan to regain compliance with the Annual Meeting Requirement, pursuant to which we requested an extension through June 28, 2024, by which date we must regain compliance with the Annual Meeting Requirement.
On May 6, 2024, we received a deficiency notice from the Listing Qualifications Department of Nasdaq notifying that since it was first notified on October 9, 2023, we had not regained compliance with Nasdaq Listing Rule 5450(a)(2), which requires a company listed on The Nasdaq Global Market to have a minimum of 400 total shareholders by the end of the 180-day extension period ended April 8, 2024.
On July 3, 2024, we received written notice from Nasdaq indicating that the Nasdaq Hearings Panel (the “Panel”) had granted our request for continued listing on Nasdaq, subject to we completing a business combination with an operating entity and evidencing compliance with the criteria for initial listing on Nasdaq, including the applicable holders requirement, by November 4, 2024.
On November 6, 2024, we notified the Panel that we would not be able to close the initial business combination by the Panel’s November 4, 2024 deadline. On November 8, 2024, we received written notice from the Panel indicating that the Panel had determined to delist our securities from Nasdaq and that trading in our securities would be suspended at the open of trading on November 12, 2024 due to our failure to timely satisfy the terms of the Panel’s decision on July 3, 2024. Since such time, our securities have been quoted on the OTC Markets under the tickers “FNVUF,” “FNVTF,” and “FNVWF,” respectively.
On April 28, 2025, Nasdaq notified the Company that on April 30, 2025, it would announce that it will delist the Company’s ordinary shares, warrants and units. The Company’s securities were suspended on November 12, 2024, and have not been traded on Nasdaq since that time. Since November 12, 2024, the Company’s units, ordinary shares and warrants have been eligible to be quoted on the OTC Markets under the tickers “FNVUF,” “FNVTF,” and “FNVWF,” respectively. Nasdaq filed a Form 25 with the SEC to complete the delisting on May 21, 2025. The delisting became effective ten days after the Form 25 was filed . Following the effectiveness of the Form 25, the Company’s units, ordinary shares and warrants will continue to be eligible to be quoted on the OTC Markets under the tickers “FNVUF,” “FNVTF,” and “FNVWF,” respectively.
Waiver of Dissolution Expenses from Trust Account Interest
On November 5, 2024, we announced that we agreed to waive our right to withdraw $50,000 out of up to $100,000 of interest accrued on the Trust Account to pay dissolution expenses, should we ultimately liquidate prior to an initial business combination. As a result, we will not withdraw up to $50,000 out of up to $100,000 of interest, as permitted by our Amended and Restated Memorandum and Articles of Association, for such dissolution expenses upon liquidation. Only up to $50,000 of interest, to the extent accrued, will be released to us to pay dissolution expenses, and the balance of any interest then-accrued will be held in the trust account and will be released to public shareholders upon the earliest to occur of (i) the redemption of the Public Shares in connection with a vote seeking to amend the provisions of the Amended and Restated Memorandum And Articles of Association, (ii) the completion of our initial business combination and (iii) the redemption of 100% of the Public Shares if we are unable to complete our initial business combination by May 8, 2025 or such earlier date as determined by the Board. On May 6, 2025, we held an extraordinary general meeting of shareholders (the “May 2025 EGM”) to approve the extension of the date by which the Company has to consummate an initial business combination from May 8, 2025 to November 8, 2025 (the “Fourth Extension Amendment”).
Recent Developments
Sponsor Distribution
On January 3, 2025, the Sponsor consummated a distribution of its assets in accordance with its governing documents, which included the distribution of 4,237,499 Class A ordinary shares and one (1) Class B ordinary share and 8,243,038 private placement warrants then held by the Sponsor to its constituent members (the “Sponsor Distribution”). Following the Sponsor Distribution, the Sponsor no longer holds any of our securities. In the Sponsor Distribution, Mr. Calvin Kung, our Chief Executive Officer and Director, received 25,000 Class A Ordinary Shares. Mr. Wang Chiu (Tommy) Wong, our Chief Financial Officer and Director, received 226,153 Class A Ordinary Shares, of which 15,000 Class A Ordinary Shares were distributed to Mr. Wong in his personal capacity and 211,153 Class A Ordinary Shares were distributed to Sun Tone Limited, for which Mr. Wong is the sole owner and director. Mr. Wong also received 464,964 private placement warrants through Sun Tone Limited. While the recipients of our securities in the Sponsor Distribution agreed to remain subject to the lock-up restrictions, distributees who are not affiliates of us are not required to vote their shares in favor of our initial business combination, and a portion of the distributed shares may be released from such lock-up restrictions prior to the initial business combination in connection with applicable stock exchange listing requirements.
Scage Business Combination Meeting
On March 28, 2025, we held an extraordinary general meeting of shareholders to approve, among other things, the Scage Business Combination (the “Scage Business Combination Meeting”), at which the business combination proposal, among other proposals, was approved by Finnovate shareholders. Shareholders holding 856,543 Class A ordinary shares exercised their right to redeem such shares for a pro rata portion of the funds in our Trust Account and the final redemption price for the Business Combination Meeting will be calculated as of two business days prior to the consummation of the Business Combination. Such payment to the redeemed shareholders of Finnovate in connection with the Business Combination Meeting will only be made if and when the Business Combination is consummated. The closing of the Business Combination is subject to the fulfillment of various closing conditions, including but not limited to applicable exchange listing approvals.
Change of independent registered public accounting firm
On March 24, 2025, our Audit Committee of the Board dismissed Marcum LLP (“Marcum”) and engaged HTL International, LLC (“HTL”) to serve as the independent registered public accounting firm for the fiscal year ended December 31, 2024, effective immediately. The services previously provided by Marcum will now be provided by HTL.
Further Extension of Combination Period
On May 6, 2025, we held an extraordinary general meeting of shareholders (the “May 2025 EGM”) to approve the extension of the date by which the Company has to consummate an initial business combination from May 8, 2025 to November 8, 2025 (the “Fourth Extension Amendment”). Shareholders holding 742,834 Class A ordinary shares exercised their right to redeem such shares for a pro rata portion of the funds in our Trust Account (the “May 2025 Redemption”). These shares were redeemed for approximately $12.18 per share for a total redemption value paid from the Trust Account of approximately $9.0 million.
Extension Deposits
As of June 5, 2025, the Sponsor had deposited an aggregate of $260,554 (including accrued interest) into the Trust Account to support the Third Extension Amendment on behalf of the Company.
Results of Operations
As of December 31, 2024, we have not commenced any operations. All activity for the period from March 15, 2021 (inception) through December 31, 2024, relates to our formation and Initial Public Offering that occurred on November 8, 2021, and, since the completion of the Initial Public Offering, searching for a target to consummate an initial Business Combination. We will not generate any operating revenues until after the completion of an initial Business Combination, at the earliest. We will generate non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering and placed in the Trust Account. There has been no significant change in our financial or trading position and no material adverse change has occurred since the date of our audited financial statements, December 31, 2024.
For the year ended December 31, 2024, we had a net loss of $215,486 mainly consisting of $1,622,093 in formation, general and administrative expenses offset by $1,406,607 in interest earned on the bank account and the investment held in Trust Account.
For the year ended December 31, 2023, we had a net income of $2,494,909 consisting of $4,488,038 in interest earned on the bank account and the investment held in Trust Account offset by $1,993,129 in formation, general and administrative expenses.
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 business could be impacted by, among other things, downturns in the financial markets or in economic conditions, increases in oil prices, inflation, increases in interest rates, 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, 2024, we had cash outside our Trust Account of $769 available for working capital needs. All remaining cash was held in the Trust Account and is generally unavailable for our use prior to our initial Business Combination.
For the year ended December 31, 2024, we used $877,915 in operating activities, which was largely driven by $1,406,139 in interest earned on our investments held in the Trust Account and a net loss of $215,486, which was offset by changes in prepaid expenses of $13,359, accounts payable and accrued expenses of $703,351 and due to related party of $27,000.
For the year ended December 31, 2024, we were provided $42,397,606 from our investing activities, which was driven by $43,065,870 cash withdrawn from the Trust Account due to redemptions payments, offsetting $668,264 in Extension contributions.
For the year ended December 31, 2024, we utilized $41,518,959 in our financing activities, which was the result of the $43,065,870 redemptions payments, offsetting proceeds from our promissory notes of $1,546,911.
As noted above, pursuant to our Initial Public Offering on November 8, 2021 and the full exercise of the over-allotment option on November 12, 2021, we sold 17,250,000 Units at a price of $10.00 per Unit, generating gross proceeds to us of $172,500,000. These funds as well as a portion of the $8,800,000 in proceeds from the sale of Private Placement Warrants were placed in the Trust Account such that the Trust Account held an aggregate of $175,900,000, or $10.20 per Unit, as of November 12, 2021. These funds are to be invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 180 days or less or in any open-ended investment company that holds itself out as a money market fund meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined by us. As of December 31, 2024, approximately $10.21 million of the Initial Public Offering proceeds as well as interest earned thereon were held in the Trust Account.
On November 1, 2023, we instructed Continental to liquidate the investments held in the Trust Account and instead to hold the funds in the Trust Account in an interest-bearing demand deposit account at Morgan Stanley with Continental continuing to act as trustee, until the earlier of the consummation of our initial Business Combination or our liquidation. As a result, following the liquidation of investments in the Trust Account, the remaining proceeds from the Initial Public Offering and Private Placement are no longer invested in U.S. government securities or money market funds invested in U.S. government securities.
In order to fund working capital deficiencies or finance transaction costs in connection with an intended initial Business Combination, our Initial Shareholders or their affiliates or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete our initial Business Combination, we would repay such loaned amounts (subject to the redemption rights described below). In the event that our initial Business Combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from our Trust Account would be used for such repayment. Up to $1,500,000 of such loans may at the option of the lender determined at the time of the loan be convertible into Warrants at a price of $1.00 per Warrant of the post-initial Business Combination entity. The Warrants would be identical to the Private Placement Warrants, including as to exercise price, exercisability and exercise period of the underlying Warrants. As of December 31, 2024 and 2023, we had no outstanding borrowings under the Working Capital Loan, respectively.
On May 8, 2023, in connection with the Sunorange Investment, the Working Capital Loan and all amounts outstanding thereunder were canceled in full. This was deemed to be a benefit to us under SAB Topic 5T. In order to recognize this benefit, we de-recognized the outstanding promissory note and reclassified it to additional paid-in capital, as an in-substance capital contribution.
On November 8, 2023, we issued a promissory note in the principal amount of up to $1,500,000 to Sunorange (the “November 2023 Promissory Note”) in connection with advances made by Sunorange since May 8, 2023 and advances Sunorange may make in the future to us for working capital expenses. The note is non-interest bearing and payable upon the earlier of (i) the date of the consummation of the Business Combination or (ii) the date of our liquidation. As of December 31, 2024, we had $1,204,630 outstanding under the November 2023 Promissory Note.
On January 26, 2024, we issued a promissory note in the aggregate principal amount of up to $1,500,000 to Scage (the “January 2024 Promissory Note”) for our working capital needs, including but not limited to any payment obligations to support the 2023 Extension. The note does not bear interest and matures upon the earlier of the closing of our initial Business Combination and our liquidation. As of December 31, 2024, we had $316,520 outstanding under the January 2024 Promissory Note.
On May 15, 2024, we issued the May 2024 Note in the aggregate principal amount of up to $225,000 to the Sponsor, which were deposited into the Trust Account for the benefit of each Public Share that was not redeemed in connection with the Second Extension Amendment. The Sponsor agreed to pay $37,500 per month until the completion of an initial Business Combination, commencing on May 8, 2024 and continuing through November 8, 2024. The May 2024 Note bears no interest and is due and payable upon the earlier to occur of (i) the date on which we consummate our Business Combination and (ii) the date that our winding up is effective. As of December 31, 2024, we had $225,000 outstanding under the May 2024 Note.
On November 11, 2024, we issued the November 2024 Note in the aggregate principal amount of up to $259,588 to the Sponsor, which will be deposited into the Trust Account for the benefit of each Public Share that was not redeemed in connection with the Third Extension Amendment. The Sponsor agreed to pay $43,264 per month until the completion of an initial Business Combination, commencing on November 8, 2024 and continuing through May 8, 2025. The November 2024 Note bears no interest and is due and payable upon the earlier to occur of (i) the date on which we consummate our Business Combination and (ii) the date that our winding up is effective. As of December 31, 2024, we had $43,264 outstanding balance under the November 2024 Note.
We could use a portion of the funds not being placed in the Trust Account to pay commitment fees for financing, fees to consultants to assist us with our search for a target business or as a down payment or to fund a “no-shop” provision (a provision designed to keep target businesses from “shopping” around for transactions with other companies or investors on terms more favorable to such target businesses) with respect to a particular proposed initial Business Combination, although we do not have any current intention to do so. If we entered into an agreement where we paid for the right to receive exclusivity from a target business, the amount that would be used as a down payment or to fund a “no-shop” provision would be determined based on the terms of the specific initial Business Combination and the amount of our available funds at the time. Our forfeiture of such funds (whether as a result of our breach or otherwise) could result in our not having sufficient funds to continue searching for, or conducting due diligence with respect to, prospective target businesses.
As approved by the shareholders at the May 2025 EGM, we have until November 8, 2025 to complete a Business Combination, unless being extended further by shareholders’ approval, or such earlier time as the Board determines.
If we are not able to consummate a Business Combination with the Combination Period, we will commence an automatic winding up, dissolution and liquidation. Our management has determined that the automatic liquidation, should a Business Combination not occur, and potential subsequent dissolution also raise substantial doubt about our ability to continue as a going concern for a period of time within one year after the date that the unaudited condensed financial statements are issued. While management intends to complete a Business Combination on or before November 8, 2025, it is uncertain whether we will be able to do so. No adjustments have been made to the carrying amounts of assets or liabilities should we be required to liquidate after November 8, 2025.
Off-Balance Sheet Financing Arrangements
We did not have any off-balance sheet arrangements as of December 31, 2024 as defined in Item 303(a)(4)(ii) of Regulation S-K.
Contractual Obligations
As of December 31, 2024, we did not have any long-term debt, capital or operating lease obligations.
We have entered into an Administrative Services Agreement pursuant to which we are paying our sponsor for office space, utilities and administrative support services, in the amount of $3,000 per month, which agreement was terminated as of October 1, 2024.
We have engaged EarlyBirdCapital as an advisor in connection with our initial Business Combination to assist us in holding meetings with our shareholders to discuss the potential initial Business Combination and the target business’ attributes, introduce us to potential investors that are interested in purchasing our securities in connection with our initial Business Combination, assist us in obtaining shareholder approval for the initial Business Combination and assist us with our press releases and public filings in connection with the initial Business Combination. In connection with the Sunorange Investment, we have agreed to pay EarlyBirdCapital a reduced cash fee for such services upon the consummation of our initial Business Combination in an amount equal to 1.75% of the gross proceeds of our IPO (exclusive of any applicable finders’ fees which might become payable). Upon consummation of the Scage Business Combination, EarlyBirdCapital’s transaction fee will be equal to $3,018,750 payable in cash, convertible note or a combination of both, at our option.
We previously engaged a third-party consultant to provide us with assistance in various aspects of our potential Business Combination. Pursuant to the terms of the agreement, we have agreed to pay a contingent fee of at least $3,500,000 if we consummate a Business Combination. No expense for which has been included in the financial statements related to this agreement. No expense has been recorded in the financial statements related to this agreement, nor is any due. As of May 8, 2023, this agreement was terminated.
On August 29, 2023, we engaged a third-party consultant to provide us with introduction to potential targets for our Business Combination. Pursuant to the terms of the agreement, as amended and restated on October 13, 2024, we have agreed to pay a contingent fee of 0.05% of the implied enterprise value of the target if we consummate a Business Combination. As the Business Combination is not considered probable, no expense for which has been included in the financial statements related to this agreement.
Critical Accounting Estimates
The preparation of financial statements and related disclosures in conformity with GAAP requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. As of the end of the reporting period, we have not identified any critical accounting estimates.
Critical Accounting Policies
Management’s discussion and analysis of our results of operations and liquidity and capital resources are based on our audited financial information. We describe our significant accounting policies in “Note 2 – Summary of Significant Accounting Policies, of the Notes to Financial Statements included in this Report” with those considered critical outlined below. Our audited financial statements have been prepared in accordance with GAAP. Certain of our accounting policies require that Management applies significant judgments in defining the appropriate assumptions integral to financial estimates. On an ongoing basis, Management reviews the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with GAAP. Judgments are based on historical experience, terms of existing contracts, industry trends and information available from outside sources, as appropriate. However, by their nature, judgments are subject to an inherent degree of uncertainty, and, therefore, actual results could differ from our estimates.
Class A Ordinary Shares Subject to Possible Redemption
We account for our Class A Ordinary Shares subject to possible redemption in accordance with the guidance in FASB ASC Topic 480 “Distinguishing Liabilities from Equity.” Ordinary Shares subject to mandatory redemption are classified as a liability instrument and are measured at fair value. Conditionally redeemable Ordinary Shares (including Ordinary Shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) are classified as temporary equity. At all other times, Ordinary Shares are classified as shareholder’s equity. Our Class A Ordinary Shares feature certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, Class A Ordinary Shares subject to possible redemption are presented at redemption value as temporary equity, outside of the shareholder’s equity section of the balance sheet.
Immediately upon the closing of the Initial Public Offering, we recognized the accretion from initial book value to redemption amount. Increases or decreases in the carrying amount of redeemable Ordinary Shares are affected by charges against additional paid-in capital and accumulated deficit.
Net Income Per Ordinary Share
We comply with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” Net income per share is computed by dividing net income by the weighted average number of ordinary shares outstanding during the period. We have two classes of shares, redeemable Ordinary Shares and non-redeemable Ordinary Shares. Our redeemable Ordinary Shares are comprised of Class A Ordinary Shares sold in the Initial Public Offering. Our non-redeemable shares are comprised of Class A Ordinary Shares held by EarlyBirdCapital and Class B Ordinary Shares purchased by the sponsor which were converted to Class A Ordinary Shares in May 2023. Earnings and losses are shared pro rata between the two classes of shares. Our statement of operations applies the two-class method in calculating net income per share. Basic and diluted net income per share for redeemable Ordinary Shares and non-redeemable Ordinary Shares is calculated by dividing net income, allocated proportionally to each class of Ordinary Shares, attributable to us by the weighted average number of shares of redeemable and non-redeemable Ordinary Shares outstanding.
The calculation of diluted income per Ordinary Share does not consider the effect of the Warrants issued in connection with the Initial Public Offering since exercise of the Warrants is contingent upon the occurrence of future events and the inclusion of such rights would be anti-dilutive. Accretion of the carrying value of Class A Ordinary Shares to redemption value is excluded from net income per redeemable share because the redemption value approximates fair value. As a result, diluted income per share is the same as basic income (loss) per share for the period presented.
Recent Accounting Standards
In November 2023, the FASB issued ASU 2023-07, which is an update to Topic 280, Segment Reporting. The amendments in this update improve financial reporting by requiring disclosure of incremental segment information on an annual and interim basis for all public entities to enable investors to develop more decision-useful financial analyses. The amendments in this update: (1) require that a public entity disclose, on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss (collectively referred to as the “significant expense principle”), (2) require that a public entity disclose, on an annual and interim basis, an amount for other segment items by reportable segment and a description of its composition. The other segment items category is the difference between segment revenue less the segment expenses disclosed under the significant expense principle and each reported measure of segment profit or loss, (3) require that a public entity provide all annual disclosures about a reportable segment’s profit or loss and assets currently required by Topic 280 in interim periods, (4) clarify that if the CODM uses more than one measure of a segment’s profit or in assessing segment performance and deciding how to allocate resources, a public entity may report one or more of those additional measures of segment profit. However, at least one of the reported segment profit or measures (or the single reported measure, if only one is ) should be the measure that is most consistent with the measurement principles used in measuring the corresponding amounts in the public entity’s consolidated financial statements. In other words, in addition to the measure that is most consistent with the measurement principles under U.S. GAAP, a public entity is not from reporting additional measures of a segment’s profit or that are used by the CODM in assessing segment performance and deciding how to allocate resources, (5) require that a public entity the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or in assessing segment performance and deciding how to allocate resources, and (6) require that a public entity that has a single reportable segment provide all the disclosures required by the amendments in this update and all existing segment disclosures in Topic 280. The amendments in this update also do not change how a public entity identifies its operating segments, aggregates those operating segments, or applies the quantitative thresholds to determine its reportable segments. The amendments in this update are for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. A public entity should apply the amendments in this update retrospectively to all prior periods presented in the financial statements. Upon transition, the segment expense categories and amounts in the prior periods should be based on the significant segment expense categories identified and in the period of adoption. We adopted ASU 2023-07 in the annual financial statements for the fiscal year ended December 31, 2024.
In December 2023, the FASB issued ASU No 2023-09, Income Taxes (Topic 740) — Improvements to Income Tax Disclosures (“ASU 2023-09”) in order to enhance the transparency and usefulness of income tax disclosures. The guidance is applicable to all entities subject to income tax, and it will require disclosure of certain categories within the rate reconciliation to improve consistency as well as disclosure of reconciling items which meet a certain quantitative threshold which will improve transparency. Additionally, entities must disclose the amount of taxes paid to federal, state and foreign municipalities. For public business entities ASU 2023-09 is effective for annual periods beginning after December 15, 2024. We are currently evaluating the impact of our pending adoption of ASU 2023-09 on our financial position, results of operations or financial statement disclosure.
In March 2024, the FASB issued ASU No. 2024-02, Codification Improvements-Amendments to Remove References to the Concepts Statements (“ASU 2024-02”). The amendments in this update affect a variety of Topics in the Codification. The amendments apply to all reporting entities within the scope of the affected accounting guidance. This update contains amendments to the Codification that remove references to various Concepts Statements. In most instances, the references are extraneous and not required to understand or apply the guidance. In other instances, the references were used in prior statements to provide guidance in certain topical areas. ASU 2024-02 is effective for public business entities for fiscal years beginning after December 15, 2024. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2025. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance. We do not expect to adopt this guidance early and do not expect the adoption of this ASU to have a material impact on our future consolidated financial statements.
In November 2024, the FASB issued ASU 2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”) which requires detailed disclosures in the notes to financial statements disaggregating specific expense categories and certain other disclosures to provide enhanced transparency into the nature and function of expenses. The FASB further clarified the effective date in January 2025 with the issuance of ASU 2025-01, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date (“ASU 2025-01”). ASU 2024-03 is effective for annual periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. The requirements should be applied on a prospective basis while retrospective application is permitted. We do not expect to adopt this guidance early and do not expect the adoption of this ASU to have a material impact on our future consolidated financial statements.
We do not believe that any other recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on our audited financial statements contained elsewhere in this Report.
JOBS Act
The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an “emerging growth company” under the JOBS Act and are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be required to, among other things, (i) provide an independent registered public accounting firm’s attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the independent registered public accounting firm’s report providing additional information about the audit and the financial statements (auditor discussion and analysis), and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our Initial Public Offering or until we are no longer an “emerging growth company,” whichever is earlier.
