UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For
the quarterly period ended
or
For the transition period from_________ to___________
Commission
File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol (s) | Name of each exchange on which registered | ||
| The Stock Market LLC | ||||
| The Stock Market LLC | ||||
| The Stock Market LLC |
Indicate
by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large Accelerated Filer | ☐ | Accelerated Filer | ☐ |
| ☒ | Smaller Reporting Company | ||
| Emerging Growth Company |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
As of May 17, 2024, there were Class A ordinary shares, par value $0.0001 per share, and Class B ordinary share, par value $0.0001 per share, of the registrant issued and outstanding.
TABLE OF CONTENTS
| 2 |
FINNOVATE ACQUISITION CORP.
CONDENSED BALANCE SHEETS
| As of | ||||||||
March 31, 2024 (Unaudited) | December 31, 2023 | |||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total Current Assets | ||||||||
| Investments held in Trust Account | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities, Redeemable Ordinary Shares and Shareholders’ Deficit | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Working capital loan – related party | ||||||||
| Promissory note payable | ||||||||
| Promissory note payable – related party | ||||||||
| Due to related party | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Class A ordinary shares subject to possible redemption, shares at redemption value of $ and $ at March 31, 2024 and December 31, 2023, respectively | ||||||||
| Shareholders’ Deficit | ||||||||
| Preference shares, $ par value; shares authorized; shares issued and outstanding | ||||||||
| Class A ordinary shares, $ par value, shares authorized, issued and outstanding (excluding shares subject to possible redemption) at March 31, 2024 and December 31, 2023 | ||||||||
| Class B Ordinary Shares, $ par value, shares authorized, issued and outstanding at March 31, 2024 and December 31, 2023 | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Shareholders’ Deficit | ( | ) | ( | ) | ||||
| Total Liabilities, Redeemable Ordinary Shares and Shareholders’ Deficit | $ | $ | ||||||
The accompanying notes are an integral part of these condensed financial statements.
| 3 |
FINNOVATE ACQUISITION CORP.
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND FOR THE THREE MONTHS ENDED MARCH 31, 2023
(UNAUDITED)
| For the Three Months Ended | ||||||||
| March 31, 2024 | March 31, 2023 | |||||||
| Operating, general and administrative expenses | $ | $ | ||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income | ||||||||
| Interest earned on Investments held in Trust Account | ||||||||
| Interest earned on Bank Account | ||||||||
| Total other income | ||||||||
| Net Income | $ | $ | ||||||
| Basic and diluted weighted average shares outstanding, redeemable Class A ordinary shares | ||||||||
| Basic and diluted net income per redeemable Class A ordinary share | $ | $ | ||||||
| Basic and diluted weighted average shares outstanding, non-redeemable ordinary shares | ||||||||
| Basic and diluted net income per non-redeemable ordinary share | $ | $ | ||||||
The accompanying notes are an integral part of these condensed financial statements.
| 4 |
FINNOVATE ACQUISITION CORP.
CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND MARCH 31, 2023
(UNAUDITED)
| Ordinary Shares | Additional | Total | ||||||||||||||||||||||||||
| Class A | Class B | paid-in | Accumulated | Shareholder’s | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | capital | deficit | Deficit | ||||||||||||||||||||||
| Balance - December 31, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Remeasurement of Class A redeemable shares to redemption value | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Extension Contribution | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||
| Balance - March 31, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
The accompanying notes are an integral part of these condensed financial statements.
| 5 |
FINNOVATE ACQUISITION CORP.
CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND MARCH 31, 2023
(UNAUDITED)
| Ordinary Shares | Additional | Total | ||||||||||||||||||||||||||
| Class A | Class B | paid-in | Accumulated | Shareholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | capital | deficit | Deficit | ||||||||||||||||||||||
| Balance – December 31, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Remeasurement of Class A redeemable shares to redemption value | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||
| Balance - March 31, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
The accompanying notes are an integral part of these condensed financial statements.
| 6 |
FINNOVATE ACQUISITION CORP.
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND FOR THE THREE MONTHS ENDED MARCH 31, 2023
(UNAUDITED)
| For the Three Months Ended | ||||||||
| March 31, 2024 | March 31, 2023 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | $ | ||||||
| Interest earned on Investments held in Trust Account | ( | ) | ( | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses | ( | ) | ||||||
| Accounts payable and accrued expenses | ||||||||
| Due to Related Party | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Extension Contribution | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Proceeds from promissory note | ||||||||
| Proceeds from affiliate promissory note | ||||||||
| Proceeds from promissory note – related party | ||||||||
| Net cash provided by financing activities | ||||||||
| Net change in cash | ( | ) | ||||||
| Cash at beginning of period | ||||||||
| Cash at end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Remeasurement of Class A redeemable shares to redemption value | $ | $ | ||||||
The accompanying notes are an integral part of these condensed financial statements.
| 7 |
FINNOVATE ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 – ORGANIZATION AND BUSINESS BACKGROUND
Organization and General
Finnovate Acquisition Corp. (the “Company”) was incorporated in the Cayman Islands on March 15, 2021. The Company was formed for the purpose of entering into a merger, share exchange, asset acquisition, share purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities (the “Business Combination”). The Company is not limited to a particular industry or sector for purposes of consummating a Business Combination. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of March 31, 2024, the Company had not commenced any operations. All activity for the period from March 15, 2021 (inception) through March 31, 2024 relates to the Company’s formation and its initial public offering (“Initial Public Offering” or “IPO”) described below, and, since the IPO, the search for a target for its Business Combination. The Company will not generate any operating revenues until after the completion of a Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income from the proceeds derived from the IPO. The Company has selected December 31 as its fiscal year end.
IPO
On
November 8, 2021, the Company completed the sale of units (the “Units” and, with respect to the shares of Class
A Ordinary Shares, par value $ per share (the “Class A Ordinary Shares”) included in the Units being offered, the “Public
Shares”) at $ per Unit. On November 12, 2021, the Company closed on the full over-allotment resulting in the sale of an additional
Units. The IPO and subsequent exercise of the over- allotment generated gross proceeds of $
Simultaneously
with the closing of the IPO, the Company completed the sale of private placement warrants (the “Private Placement Warrants”)
at a price of $ per Private Placement Warrant in a private placement (the “Private Placement”) to Finnovate Sponsor,
LP (the “Sponsor”) as well as to EarlyBirdCapital, Inc. (“EarlyBirdCapital”). On November 12, 2021, pursuant
to the full exercise of the over- allotment option, the Sponsor purchased an additional
Following
the closing of the IPO on November 8, 2021 and the subsequent exercise of the over-allotment option, $
| 8 |
Initial Business Combination
The
Company’s executive officers and directors (“Management” or “Management Team”) has broad discretion with
respect to the specific application of the net proceeds of the IPO and the sale of the Private Placement Warrants, although substantially
all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that the
Company will be able to complete a Business Combination successfully. The Company must complete a Business Combination with one or more
operating businesses or assets that together have an aggregate fair market value equal to at least
The Company will provide its holders of its Public Shares, including the holders of its Founder Shares (as defined below) prior to the Initial Public Offering (the “Initial Shareholders”) and Management Team to the extent its Initial Shareholders and/or the members of the Management Team purchase Public Shares, provided that each Initial Shareholder’s and member of its Management Team’s status as a “Public Shareholder” will only exist with respect to such Public Shares (the “Public Shareholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of the Business Combination at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account calculated as of two business days prior to the consummation of the Business Combination, including interest earned on the funds held in the Trust Account and not previously released to the Company to pay taxes (which interest shall be net of taxes payable), divided by the number of then issued and outstanding Public Shares, subject to the limitations described herein.
The amount in the Trust Account is $per Public Share as of March 31, 2024. The per-share amount the Company will distribute to investors who properly redeem their shares will not be reduced by the underwriting commissions the Company will pay to the underwriter. The redemption rights will include the requirement that a beneficial holder must identify itself in order to validly redeem its shares. There will be no redemption rights upon the completion of the Business Combination with respect to the warrants. The Company’s initial shareholders, directors and officers have entered into a letter agreement with the Company, pursuant to which they have agreed to waive their redemption rights with respect to the shares of Class B ordinary shares, par value $ per share (“Class B Ordinary Shares”) purchased in March 2021 (the “Founder Shares”, described in more detail in Note 5) and Public Shares held by them in connection with the completion of the Business Combination.
The
Company will only proceed with a Business Combination if the Company has net tangible assets of at least $
Notwithstanding
the above, if the Company seeks shareholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender
offer rules, the Amended and Restated Memorandum provides that a Public Shareholder, together with any affiliate of such shareholder
or any other person with whom such shareholder is acting in concert or as a “group” (as defined under Section 13 of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more
than an aggregate of
The Sponsor has agreed (a) to waive its redemption rights with respect to its Founder Shares and Public Shares held by it in connection with the completion of a Business Combination and (b) not to propose an amendment to the Amended and Restated Memorandum (i) to modify the substance or timing of the Company’s obligation to allow redemption in connection with the Company’s Business Combination or to redeem 100% of its Public Shares if the Company does not complete a Business Combination or (ii) with respect to any other provision relating to shareholders rights or pre- Business Combination activity, unless the Company provides the Public Shareholders with the opportunity to redeem their Public Shares in conjunction with any such amendment.
| 9 |
The
Company will have until November 8, 2024 to complete a Business Combination (the “Combination Period”, see Note 10). If the
Company is unable to complete a Business Combination within the Combination Period, the Company 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, equal to the aggregate amount then on deposit in the Trust Account including interest
earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations (less up to $
The Sponsor has agreed to waive its liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period. However, if the Sponsor acquires Public Shares in or after the IPO, such Public Shares will be entitled to liquidating distributions from the Trust Account if the Company fails to complete a Business Combination within the Combination Period. The underwriter has agreed to waive its right to its underwriting commission (see Note 8) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than the IPO price per Unit ($).
In order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below (1) $ per Public Share or (2) such lesser amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay franchise and income taxes. This liability will not apply with respect to claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims under the Company’s indemnity of the underwriter of the IPO against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (except the Company’s independent registered public accounting firm), prospective target businesses and other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
Liquidity, Capital Resources and Going Concern
As
of March 31, 2024, the Company had $
In
order to finance transaction costs in connection with a Business Combination, the Company’s Sponsor or an affiliate of the Sponsor
or certain of the Company’s officers and directors may, but are not obligated to, loan the Company with funds as may be required
(Working Capital Loans, described in more detail in Note 5). As of March 31, 2024 and December 31, 2023, the Company had
| 10 |
On
June 2, 2023, the Company issued a promissory note (the “June 2023 Promissory Note”) in the aggregate principal amount of
up to $
On
November 8, 2023, the Company issued a promissory note in the principal amount of up to $
On
January 26, 2024, the Company issued an unsecured promissory note (the “January 2024 Promissory Note”) in the aggregate principal
amount of up to $
These conditions, involving liquidity concerns and mandatory liquidation, raise substantial doubt about the Company’s 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. There is no assurance that the Company’s plan to consummate a Business Combination will be successful or successful within the Combination Period. The condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Sunorange Investment
On
April 27, 2023, the Company entered into an agreement (the “Investment Agreement”) with the Sponsor and Sunorange Limited
(the “Sunorange”), pursuant to which Sunorange and its designees acquired partnership interests in the Sponsor and Class
B Ordinary Shares directly held by certain Company directors, which combined interests entitled Sunorange to receive, in the aggregate,
Class B Ordinary Shares and
| 11 |
On
May 8, 2023, the Company completed the closing of the Sunorange Investment after
In
connection with the closing of the Sunorange Investment, on May 8, 2023, Sunorange caused $
Business Combination Agreement
On
August 21, 2023, the Company and Scage International Limited (“Scage”) entered into the Scage Business Combination Agreement.
Scage is a zero-emission solution provider in China, focusing on the development and commercialization of heavy-duty NEV trucks and e-fuel
solutions. Upon consummation of the two mergers and the other transaction contemplated by the Business Combination Agreement (the “Scage
Business Combination”), Scage Future, a newly formed holding company (“Pubco”) will seek to be listed on Nasdaq. The
outstanding securities of Scage and the Company will be converted into the right to receive securities of Pubco. The transaction represents
a post-Business Combination valuation of $1.0 billion ($
On
August 29, 2023, the Company engaged a third-party consultant to provide the Company with an introduction to potential targets for its
Business Combination. Pursuant to the terms of the agreement, the Company has agreed to pay a contingent fee of
Lock-Up Agreements
Simultaneously with the execution of the Business Combination Agreement, Pubco, Scage, the Company and certain shareholders of Scage (“Key Scage Shareholders”), as shareholders holding shares of Scage sufficient to constitute the Required Company Shareholder Approval (as that term is defined in the Business Combination Agreement) as the holder of record or the beneficial owner within the meaning of Rule 135-3 of the Exchange Act, each entered into Lock-Up Agreements (each, a “Key Seller Lock-Up Agreement”). It is a condition to the Closing that all stockholders of Scage between signing and Closing enter into a Lock-Up Agreement (each, a “Seller Lock-Up Agreement”).
Pursuant
to each Key Seller Lock-Up Agreement, each Key Scage Shareholder agreed not to, during the period commencing from the date and time at
which the Closing is actually held (the “Closing Date”) and ending on
Pursuant to each Seller Lock-Up Agreement, the remaining Scage shareholders agreed not to make a Prohibited Transfer during the period commencing from the Closing Date and ending on the 6-month anniversary of the Closing Date (subject to early release if Pubco consummates a Change of Control).
| 12 |
Shareholder Support Agreement
Simultaneously with the execution of the Business Combination Agreement, the Company, Scage, and Key Scage Shareholders entered into a Shareholder Support Agreement (the “Shareholder Support Agreement”), pursuant to which, among other things, Key Scage Shareholders have agreed (a) to support the adoption of the Business Combination Agreement and the approval of the transactions contemplated therein, subject to certain customary conditions, and (b) not to transfer any of their subject shares (or enter into any arrangement with respect thereto), subject to certain customary conditions.
Sponsor Support Agreement
Simultaneously with the execution of the Business Combination Agreement, the Company, Scage, Pubco and the Sponsor entered into a Sponsor Support Agreement (the “Sponsor Support Agreement”), pursuant to which the Sponsor agreed to vote all of its shares of the Company in favor of the Business Combination Agreement and the transactions contemplated therein. The Sponsor Support Agreement also prevents transfers of securities of the Company held by the Sponsor between the date of the Sponsor Support Agreement and the termination of the Sponsor Support Agreement.
Insider Letter Amendment
Simultaneously with the execution of the Business Combination Agreement, the Company, Scage, the Sponsor, Pubco, Calvin Kung, Wang Chiu Wong, Chunyi Hao, Tiemei Li, and Sanjay Prasad entered into an amendment (the “Insider Letter Amendment”) to that certain letter agreement, dated November 8, 2021 (the “Insider Letter”), by and among the Company, the Sponsor and the directors, officers or other initial shareholders of the Company named therein, pursuant to which Pubco and Scage are added as parties to the Insider Letter.
Non-Competition and Non-Solicitation Agreement
Simultaneously with the execution of the Business Combination Agreement, certain shareholders and officers (each, a “Subject Party”) of the Company each entered into a noncompetition and non-solicitation agreement with the Company, Pubco, Scage, and the Sponsor (collectively, the “Non-Competition and Non-Solicitation Agreement”). Under the Non-Competition and Non-Solicitation Agreement, the Subject Party agrees not to compete with Pubco, the Sponsor, the Company, Scage, and their respective affiliates during the three-year period following the Closing and, during such three-year restricted period, not to solicit employees or customers of such entities. The Non-Competition and Non-Solicitation Agreement also contains customary confidentiality and non-disparagement provisions.
Assignment, Assumption, and Amendment to Warrant Agreement
Prior to the Closing, the Company, Pubco and Continental, as warrant agent (the “Warrant Agent”), will enter the Assignment, Assumption, and Amendment to Warrant Agreement (the “Warrant Amendment”), which will amend that certain Warrant Agreement, dated as of November 8, 2021, relating to the Company warrants (the “Warrant Agreement”), filed with the SEC on November 8, 2021. Pursuant to the Warrant Amendment: (i) Pubco will assume the obligations of the Company under the Warrant Agreement, such that, among other things, Pubco will be added as a party thereto and (ii) references to the Company’s Class A Ordinary Shares in the Warrant Agreement shall mean Pubco ordinary shares.
Risks and Uncertainties
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, the ongoing effects of the COVID-19 pandemic, including resurgences and the emergence of new variants, and geopolitical instability, such as the military conflicts in Ukraine and the Middle East. We cannot at this time fully 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.
Management is currently evaluating the impact of such risks and has concluded that while it is reasonably possible that they could have a negative effect on the Company’s financial position, results of its operations, close of the IPO and/or search for a target company, the specific impact is not readily determinable as of the date of these unaudited condensed financial statements. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
| 13 |
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of Management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.
The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 as filed with the SEC on April 1, 2024 (the “2023 Annual Report”). The interim results for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or for any future periods.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it 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 independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder 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. The Company has 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, the Company, 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 the Company’s unaudited condensed financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires the Company’s 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 unaudited condensed financial statements and the reported amounts of revenues and expenses during the reporting period.
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 unaudited condensed 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.
| 14 |
Cash and Cash Equivalents
The
Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.
The Company had cash of $
Investment Held in Trust Account
As
of March 31, 2024 and December 31, 2023, the assets held in the Trust Account consisted of $
Concentration of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution,
which, at times, may exceed the Federal Depository Insurance Coverage of $
Offering Costs Associated with the Initial Public Offering
The
Company complies with the requirements of Accounting Standards Codification (“ASC”) 340-10-S99-1 and SEC Staff Accounting
Bulletin (“SAB”) Topic 5A — “Expenses of Offering”. Offering costs consist principally of professional
and registration fees incurred through the balance sheet date that are related to the IPO. Offering costs were charged to Shareholder’s
Equity upon the completion of the IPO and subsequent exercise of the over-allotment. Accordingly, following the IPO on November 8, 2021
and subsequent exercise of the over-allotment on November 12, 2021, offering costs totaling $
Fair Value Measurements
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”), approximates the carrying amounts represented in the accompanying balance sheet, primarily due to their short-term nature.
The fair value of the Company’s financial assets and liabilities reflects Management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
| Level 1 | — | Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments and block discounts are not being applied. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these securities does not entail a significant degree of judgment. |
| Level 2 | — | Valuations based on (i) quoted prices in active markets for similar assets and liabilities, (ii) quoted prices in markets that are not active for identical or similar assets, (iii) inputs other than quoted prices for the assets or liabilities, or (iv) inputs that are derived principally from or corroborated by market through correlation or other means. |
| Level 3 | — | Valuations based on inputs that are unobservable and significant to the overall fair value measurement. |
| 15 |
The Company accounts for its Class A Ordinary Shares subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity” (“ASC 480”). Ordinary shares subject to mandatory redemption are classified as a liability instrument and are measured at fair value. Conditionally redeemable Class A Ordinary Shares and Class B Ordinary Shares (collectively, “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 the Company’s control) is classified as temporary equity. At all other times, Ordinary Shares are classified as shareholder’s equity. The Company’s Class A Ordinary Shares feature certain redemption rights that are considered to be outside of the Company’s control and subject to the 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 Company’s balance sheet.
Immediately upon the closing of the IPO, the Company 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.
As
a result of the shareholder vote held on May 8, 2023, shareholders exercised their right to redemption which left a remainder
of Class A Ordinary Shares subject to possible redemption. These shareholders were paid an aggregate of $
As of March 31, 2024 and December 31, 2023, the Class A Ordinary Shares subject to possible redemption reflected in the balance sheet is reconciled in the following table:
| March 31, 2024 | December 31, 2023 | |||||||
| As of beginning of the period | $ | $ | ||||||
| Plus: | - | - | ||||||
| Remeasurement of carrying value to redemption value | ||||||||
| Extension Contributions | ||||||||
| Less: | ||||||||
| Redemptions of Class A ordinary shares subject to possible redemption | ( | ) | ||||||
| $ | $ | |||||||
Warrants
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480 and ASC 815. The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own Ordinary Shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all of the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. The Company accounts for its outstanding warrants as equity-classified instruments.
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes” (“ASC 740”). Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the unaudited condensed financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
| 16 |
ASC
740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions
taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be
sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits
as income tax expense. There were
There is currently no taxation imposed on income by the government of the Cayman Islands. In accordance with Cayman income tax regulations, income taxes are not levied on the Company. Consequently, income taxes are not reflected in the Company’s unaudited condensed financial statements. The Company’s Management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
The Company complies with accounting and disclosure requirements of the Financial Accounting Standards Board’s (“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. The Company has two classes of shares, redeemable Ordinary Shares and non-redeemable Ordinary Shares. The Company’s redeemable Ordinary Shares are comprised of Class A shares sold in the IPO. The Company’s non-redeemable shares are comprised of Class A shares held by EarlyBirdCapital and Class B shares purchased by the Sponsor which were converted into Class A shares with their original legend in May 2023. Earnings and losses are shared pro rata between the two classes of shares. The Company’s 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 the Company 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 rights issued in connection with the IPO since exercise of the rights 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 loss per share for the period presented.
| For the three months ended | ||||||||||||||||
| March 31, 2024 | March 31, 2023 | |||||||||||||||
| Redeemable Ordinary Shares | Non-Redeemable Ordinary Shares | Redeemable Ordinary Shares | Non-Redeemable Ordinary Shares | |||||||||||||
| Basic and diluted net income per share: | ||||||||||||||||
| Numerator: | ||||||||||||||||
| Allocation of net income | $ | $ | $ | $ | ||||||||||||
| Denominator: | ||||||||||||||||
| Weighted-average shares outstanding | ||||||||||||||||
| Basic and diluted net income per share | $ | $ | $ | $ | ||||||||||||
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Recent Accounting Standards
In August 2020, the FASB issued ASU No. 2020-06, “Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”). The update simplifies the accounting for convertible instruments by removing certain separation models in Subtopic 470-20, Debt—Debt with Conversion and Other Options for convertible instruments and introducing other changes. As a result of ASU No. 2020-06, more convertible debt instruments will be accounted for as a single liability measured at its amortized cost and more convertible preference shares will be accounted for as a single equity instrument measured at its historical cost, as long as no features require bifurcation and recognition as derivatives. The amendments are effective for smaller reporting companies for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company adopted ASU 2020-06 on January 1, 2024. There was no material impact on its financial position, results of operations or cash flows.
In June 2022, the FASB issued ASU 2022-03, ASC Subtopic 820 “Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions” (“ASU 2022-03”). The ASU amends ASC 820 to clarify that a contractual sales restriction is not considered in measuring an equity security at fair value and to introduce new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value. The ASU applies to both holders and issuers of equity and Equity-Linked Securities measured at fair value. The amendments in this ASU are effective for the Company in fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance. The Company adopted ASU 2022-03 on January 1, 2024. There was no material impact on its financial position, results of operations or cash flows.
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. The Company is currently evaluating the impact of its pending adoption of ASU 2023-09 on its financial position, results of operations or financial statement disclosure.
Management does not believe that any other recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s unaudited condensed financial statements.
NOTE 3 – INITIAL PUBLIC OFFERING
On
November 8, 2021, the Company completed its IPO of Units at a price of $ per Unit. The Company granted the underwriter
a 45-day option from the date of the IPO to purchase up to additional Units to cover over-allotments, if any, at the IPO price
less the underwriting discounts and commissions. On November 12, 2021, the Company closed on the underwriters’ full exercise of
their over-allotment option which resulted in the sale of an additional Units. The IPO and subsequent over-allotment exercise
generated gross proceeds of $
Each Unit consists of one share of Class A Ordinary Shares and three-quarters of one redeemable Public Warrant. Each whole Public Warrant entitles the holder thereof to purchase one share of Class A Ordinary Shares at a price of $ per share, subject to adjustment (see Note 9).
Following
the closing of the IPO on November 8, 2021, and subsequent exercise of the over-allotment an aggregate of $
NOTE 4 – PRIVATE PLACEMENT WARRANTS
The
Sponsor and EarlyBirdCapital agreed to purchase an aggregate of
| 18 |
Each
whole Private Placement Warrant is exercisable for one whole share of Class A Ordinary Shares at a price of $
NOTE 5 – RELATED PARTY TRANSACTIONS
Founder Shares
In
March 2021, the Sponsor paid $
The Sponsor and the Company’s directors and executive officers have agreed, subject to certain limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier of (A) one year after the completion of a Business Combination and (B) subsequent to a Business Combination, (x) if the last reported sale price of the Class A Ordinary Shares equals or exceeds $ per share (as adjusted for share splits, share reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after a Business Combination, or (y) the date on which the Company completes a liquidation, merger, share exchange, reorganization or other similar transaction that results in all of the Company’s shareholders having the right to exchange their shares of Class A Ordinary Shares for cash, securities or other property.
On May 8, 2023, the Company issued an aggregate of (the “Sponsor Shares”) of the Company’s Class A Ordinary Shares to the Sponsor upon the conversion of an equal number of shares of Class B Ordinary Shares (the “Sponsor Conversion”). Combined with the Director Share conversion discussed below, the Sponsor Conversion left Class B ordinary share outstanding. These Sponsor Shares continue to hold the same legend as they did prior to their conversion. Accordingly, these shares are accounted for as Class A Ordinary Shares at their par value.
EarlyBirdCapital Founder Shares
In March 2021, the Company issued to EarlyBirdCapital and its designees an aggregate of Class A Ordinary Shares (“EBC Founder Shares”) at a price of $ per share. The Company estimated the fair value of the EBC Founder Shares to be $based upon the price of the Founder Shares issued to the Sponsor. The holders of the EBC Founder Shares have agreed not to transfer, assign or sell any such shares until the completion of a Business Combination. In addition, the holders have agreed (i) to waive their conversion rights (or right to participate in any tender offer) with respect to such shares in connection with the completion of a Business Combination and (ii) to waive their rights to liquidating distributions from the Trust Account with respect to such shares if the Company fails to complete a Business Combination within the Combination Period.
The EBC Founder Shares have been deemed compensation by the Financial Industry Regulatory Authority (“FINRA”) and are therefore subject to a lock-up for a period of 180 days immediately following the effective date of the registration statement related to the IPO pursuant to FINRA Rule 5110(e)(1). Pursuant to FINRA Rule 5110(e)(1), these securities will not be the subject of any hedging, short sale, derivative, put or call transaction that would result in the economic disposition of the securities by any person for a period of 180 days immediately following the effective date of the registration statements related to the IPO, nor may they be sold, transferred, assigned, pledged or hypothecated for a period of 180 days immediately following the effective date of the registration statements related to the IPO except to any underwriter and selected dealer participating in the IPO and their officers or partners, associated persons or affiliates.
Director Shares
In
October 2021, the Sponsor transferred Founder Shares to the independent directors (“Director Shares”) at a price of
$ per share. The Company estimated the fair value of the Director Shares to be $
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On May 8, 2023, the Company issued an aggregate of Class A Ordinary Shares (together with the Sponsor Shares, the “Converted Class A Ordinary Shares”) to the Directors and the holders of the Company’s Class B Ordinary Shares upon the conversion of an equal number of shares of Class B Ordinary Shares (together with the Sponsor Conversion, the “Conversion”). On the same day, in connection with the closing of the Sunorange Investment, of the Converted Class A Ordinary Shares held by the Directors were transferred to designees of Sunorange.
The
conversion of these Director Shares from Class B to Class A was not the result of a Business Combination, and the Company has previously
recognized $
Related Party Loans
In
March 2021, the Sponsor issued an unsecured Promissory Note to the Company, pursuant to which the Company was permitted to borrow an
aggregate principal amount of $
In
addition, in order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, the Sponsor
or an affiliate of the Sponsor may, but is not obligated to, provide the Company with Working Capital Loans. Any such loans would be
on an interest-free basis. If the Company completes a Business Combination, the Company may repay the Working Capital Loans out of the
proceeds of the Trust Account released to the Company. In the event that a Business Combination does not close, the Company may use a
portion of proceeds held outside the Trust Account to repay the Working Capital Loans, but no proceeds held in the Trust Account would
be used to repay the Working Capital Loans. At the lender’s discretion, up to $
On
June 2, 2023, the Company issued the June 2023 Promissory Note in the aggregate principal amount of up to $
On
November 8, 2023, the Company issued the November 2023 Promissory Note the amount of $
Administrative Services Agreement
Commencing
on the date that the Company’s securities are first listed on a U.S. national securities exchange, the Company has committed to
pay a total of $
| 20 |
NOTE 6 —PROMISSORY NOTE
On
January 26, 2024, the Company issued an unsecured promissory note in the aggregate principal amount of up to $
NOTE 7 —INVESTMENTS HELD IN TRUST ACCOUNT
As
of March 31, 2024, investments in the Company’s Trust Account consisted of $
March 31, 2024 | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Observable Inputs (Level 3) | |||||||||||||
| Cash in demand deposit account | $ | $ | $ | $ | ||||||||||||
| $ | $ | $ | $ | |||||||||||||
December 31, 2023 | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Observable Inputs (Level 3) | |||||||||||||
| Money market fund | $ | $ | $ | $ | ||||||||||||
| $ | $ | $ | $ | |||||||||||||
NOTE 8 – COMMITMENTS AND CONTINGENCIES
Registration Rights
The holders of the Founder Shares and Private Placement Warrants (and any shares of Class A Ordinary Shares issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of the Working Capital Loans and upon conversion of the Founder Shares) will be entitled to registration rights pursuant to a registration rights agreement signed on the effective date of the IPO, requiring the Company to register such securities for resale (in the case of the Founder Shares, only after conversion to shares of Class A Ordinary Shares). The holders of these securities will be entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders will have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of a Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. However, the registration rights agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective until termination of the applicable lock-up period. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The Company granted the underwriter a 45-day option from the date of the IPO to purchase up to additional Units to cover over-allotments, if any, at the IPO price less the underwriting discounts and commissions. The underwriter fully exercised this option which closed subsequent to the IPO.
EarlyBirdCapital
earned an underwriting discount of $
| 21 |
Business Combination Marketing Agreement
The
Company has engaged EarlyBirdCapital as an advisor in connection with the Business Combination to assist in holding meetings with shareholders
to discuss the potential Business Combination and the target business’ attributes, introduce the Company to potential investors
that are interested in purchasing securities in connection with the Business Combination, assist in obtaining shareholder approval for
the Business Combination and assist with press releases and public filings in connection with the Business Combination. The Company will
pay EarlyBirdCapital a cash fee for such services solely in the event of consummation of the Business Combination in an amount equal
to
Consulting Agreement
The
Company has engaged a third-party consultant to provide the Company with assistance in various aspects of any potential Business Combination.
Pursuant to the terms of the agreement, the Company has agreed to pay a contingent fee of at least $
On
August 29, 2023, the Company engaged a third-party consultant to provide the Company with an introduction to potential targets for its
Business Combination. Pursuant to the terms of the agreement, the Company has agreed to pay a contingent fee of
Legal Agreement
The
Company has engaged a third-party legal firm to provide the Company with assistance in various aspects of any potential Business Combination.
Pursuant to the terms of the agreement, the Company has agreed to contingent payments upon the achievement of certain milestones. As
of March 31, 2024, the Company has incurred and paid roughly $
NOTE 9 – SHAREHOLDERS’ DEFICIT
Preference Shares — The Company is authorized to issue preference shares, with a par value of $ per share, with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s Board of Directors. As of March 31, 2024 and December 31, 2023, there were preference shares issued or outstanding.
Class
A Ordinary Shares — The Company is authorized to issue shares of Class A Ordinary Shares with a par value of $
per share. Holders of Class A Ordinary Shares are entitled to
Class B Ordinary Shares — The Company is authorized to issue shares of Class B Ordinary Shares with a par value of $ per share. As of March 31, 2024 and December 31, 2023, there was Class B Ordinary Share issued and outstanding.
Holders of Class A Ordinary Shares and Class B Ordinary Shares will vote together as a single class on all matters submitted to a vote of shareholders except as required by law. Under the terms of the Sunorange Investment, the Class B Ordinary Shares were converted to Class A Ordinary Shares although the Sponsor will retain at least one Class B ordinary share.
Any
Founder Shares outstanding at the time of the Business Combination will automatically convert into shares of Class A Ordinary Shares
on a one-for-one basis, subject to adjustment. In the case that additional shares of Class A Ordinary Shares, or Equity-Linked Securities,
are issued or deemed issued in excess of the amounts offered in the IPO and related to the closing of a Business Combination, the ratio
at which shares of Class B Ordinary Shares shall convert into shares of Class A Ordinary Shares will be adjusted (unless the holders
of a majority of the outstanding shares of Class B Ordinary Shares agree to waive such adjustment with respect to any such issuance or
deemed issuance) so that the number of shares of Class A Ordinary Shares issuable upon conversion of all shares of Class B Ordinary Shares
will equal, in the aggregate, on an as-converted basis,
| 22 |
Warrants — Public Warrants may only be exercised for a whole number of shares. No fractional warrants will be issued upon separation of the Units and only whole warrants will trade. The Public Warrants will become exercisable on the later of (a) 12 months from the closing of the IPO and (b) 30 days after the completion of a Business Combination.
The Company will not be obligated to deliver any shares of Class A Ordinary Shares pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the shares of Class A Ordinary Shares underlying the warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect to registration, or a valid exemption from registration is available. No warrant will be exercisable, and the Company will not be obligated to issue any shares of Class A Ordinary Shares upon exercise of a warrant unless the share of Class A Ordinary Shares issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants.
The Company has agreed that as soon as practicable, but in no event later than 20 business days after the closing of a Business Combination, it will use its commercially reasonable efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the shares of Class A Ordinary Shares issuable upon exercise of the warrants, and the Company will use its commercially reasonable efforts to cause the same to become effective within 60 business days after the closing of a Business Combination, and to maintain the effectiveness of such registration statement and a current prospectus relating to those shares of Class A Ordinary Shares until the warrants expire or are redeemed, as specified in the warrant agreement; provided that if the Class A Ordinary Shares is at the time of any exercise of a warrant not listed on a national securities exchange such that they satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement, but it will use its commercially reasonably efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available. If a registration statement covering the shares of Class A Ordinary Shares issuable upon exercise of the warrants is not effective by the 60th day after the closing of a Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption, but the Company will use its commercially reasonably efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
Redemption of warrants. Once the warrants become exercisable, the Company may redeem the Public Warrants:
| ● | in whole and not in part; | |
| ● | at a price of $ | |
| ● | upon not less than 30 days’ prior written notice of redemption to each warrant holder; and | |
| ● | if, and only if, |
If and when the Public Warrants become redeemable by the Company, it may exercise its redemption right even if the Company is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
| 23 |
The Private Placement Warrants are identical to the Public Warrants underlying the Units being sold in the IPO.
NOTE 10 – SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the unaudited condensed financial statements were issued. Based upon this review the Company did not identify any subsequent events, other than those described below, that would have required adjustment or disclosure in the unaudited condensed financial statements.
On
May 2, 2024, the Company held an extraordinary general meeting in lieu of an annual general meeting of shareholders (the “2024
EGM”). At the 2024 EGM, the shareholders approved a proposal to amend the Company’s amended and restated memorandum and articles
of association to extend the date by which the Company has to consummate an initial business combination from May 8, 2024 to November
8, 2024 (or such earlier date as determined by the Board in its sole discretion) (the “2024 Extension”), among other proposals.
Shareholders holding shares of the Company’s Class A ordinary 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 $
On May 6, 2024, the Company received a deficiency notice (the “Notice”) from the Listing Qualifications Department (the “Staff”) of Nasdaq notifying the Company that since it was first notified on October 9, 2023, the Company 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 (the “Minimum Total Holders Requirement”), by the end of the 180-day extension period ended April 8, 2024. Pursuant to the Notice, the Company’s securities may be subject to suspension and delisting pending the outcome of a hearing before the Nasdaq Hearings Panel (the “Panel”), which the Company requested on May 13, 2024. The Company’s hearing request has stayed the suspension of the Company’s securities, and the Company’s securities will continue to trade on The Nasdaq Global Market until the hearing process concludes and the Panel issues a written decision.
On
May 15, 2024, the Company issued a promissory note (the “May 2024 Promissory Note”) in the aggregate principal amount of
up to $
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Item 2. 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 unaudited condensed financial statements and the notes thereto included in this Report under “Item 1. Financial Statements.”
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.
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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.
On January 24, 2024, the SEC adopted new rules and regulations for special purpose acquisition companies (“SPACs”), which will become effective on July 1, 2024 (the “2024 SPAC Rules”). The 2024 SPAC Rules require, among other matters, (i) additional disclosures relating to SPAC Business Combination transactions; (ii) additional disclosures relating to dilution and to conflicts of interest involving sponsors and their affiliates in both SPAC initial public offerings and Business Combination transactions; (iii) additional disclosures regarding projections included in SEC filings in connection with proposed Business Combination transactions; and (iv) the requirement that both the SPAC and its target company be co-registrants for Business Combination registration statements. In addition, the SEC’s adopting release provided guidance describing circumstances in which a SPAC could become subject to regulation under the Investment Company Act, including its duration, asset composition, business purpose, and the activities of the SPAC and its management team in furtherance of such goals. The 2024 SPAC Rules may materially affect our ability to negotiate and complete our initial Business Combination and may increase the costs and time related thereto.
Recent Developments
2024 Extension of our Combination Period
On May 2, 2024, we held the 2024 EGM to amend our Amended and Restated Memorandum to approve the 2024 Extension.
There were 9,085,832 of our Ordinary Shares issued and outstanding on April 4, 2024, the record date for the 2024 EGM. At the 2024 EGM, there were 7,997,433 Ordinary Shares present in person or by proxy, representing approximately 88.02% of the total Ordinary Shares outstanding as of the record date, which constituted a quorum.
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. 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.
In connection with the 2024 EGM, Sunorange will contribute to us loans of the lesser of (i) $37,500 or (ii) $0.025 for each Public Share that is not redeemed for each calendar month (commencing on May 8, 2024 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 November 8, 2024.
On May 15, 2024, we issued the May 2024 Promissory Note in the aggregate principal amount of up to $225,000 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 our May 8, 2024 shareholder vote to approve the 2024 Extension. 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 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. As of March 31, 2024, the Sponsor had deposited an aggregate of $1,100,000 into the Trust Account to support the 2024 Extension on behalf of the Company. As of May 15, 2024, the outstanding balance of the May 2024 Promissory Note was $37,500, and no interest was accrued.
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Nasdaq Compliance — Minimum Total Holders
On May 6, 2024, we received a Notice from the Staff of Nasdaq notifying us that since we were first notified on October 9, 2023, we did not regain compliance with the Minimum Total Holders Requirement 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. Pursuant to the Notice, our securities may be subject to suspension and delisting pending the outcome of a hearing before the Panel, which we requested on May 13, 2024. Our hearing request has stayed the suspension of our securities, and our securities will continue to trade on The Nasdaq Global Market until the hearing process concludes and the Panel issues a written decision.
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 shall replace David Gershon as Chairman of the Board and Chief Executive Officer and Wang Chiu (Tommy) Wong shall replace Ron Golan as Chief Financial Officer and director on the Board, effective upon closing of the Sunorange Investment; (ii) Jonathan Ophir and Uri Chaitchik shall tender 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 shall tender their resignations as directors, to be effective upon expiration of the Waiting Period and whose vacancies shall be 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 is 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 March 31, 2024, $1,100,000 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.
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On June 2, 2023, we issued the June 2023 Promissory Note in the aggregate principal amount of up to $1,200,000 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 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 March 31, 2024 and May 17, 2024, the Trust Account had received an aggregate of $1,100,000 and $1,200,000, respectively, to support the 2023 Extension on behalf of the Company. As of March 31, 2024 and May 17, 2024, the outstanding balance of the June 2023 Promissory Note was $1,000,000 and $1,100,000, respectively, 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 the Scage Business Combination Agreement with Pubco, First Merger Sub, Second Merger Sub and Scage. The Scage Business Combination Agreement was unanimously approved by our Board of Directors. If the Scage Business Combination Agreement is approved by our stockholders, and the Scage Business Combination is consummated, (i) First Merger Sub will merge with and into Scage, with Scage surviving the First Merger as a wholly-owned subsidiary of Pubco and the outstanding securities of Scage being converted into the right to receive securities of Pubco; and (ii) immediately following the First Merger, Second Merger Sub will merge with and into our Company, with our Company surviving the Second Merger as a wholly-owned subsidiary of Pubco and the outstanding securities of our Company being converted into the right to receive securities of Pubco.
For a full description of the Scage Business Combination Agreement and the proposed Scage Business Combination, please see “Item 1. Business” of our 2023 Annual Report.
Results of Operations
As of March 31, 2024, we have not commenced any operations. All activity for the period from March 15, 2021 (inception) through March 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, 2023.
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For the three months ended March 31, 2024, we had a net income of $242,095 consisting of $563,298 in interest earned on the bank account and the investment held in Trust Account offset by $321,203 in operating, general and administrative expenses.
For the three months ended March 31, 2023, we had a net income of $1,608,034, consisting of $1,910,298 in interest earned on the bank account and the investment held in Trust Account offset by $302,264 in operating, 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 March 31, 2024, we had cash outside our Trust Account of $5,436 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 three months ended March 31, 2024, we used $261,957 in operating activities, which was largely driven by $563,129 in interest earned on our investments held in the Trust Account offset by $242,095 in net income.
For the three months ended March 31, 2024, we used $300,000 in our investing activities, which was driven by $300,000 in extension contributions.
For the three months ended March 31, 2024, we were provided $567,356 in our financing activities, which was the result of $567,356 in proceeds from our promissory notes.
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 the Company. As of March 31, 2024, $52,063,473 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 conversion 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 March 31, 2024 and December 31, 2023, we had no outstanding borrowings under the Working Capital Loan, respectively.
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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 the November 2023 Promissory Note in the principal amount of up to $1,500,000 to Sunorange. The November 2023 Promissory Note was issued 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 November 2023 Promissory 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 March 31, 2024, we had $709,859 outstanding under the November 2023 Promissory Note.
On January 26, 2024, we issued the January 2024 Promissory Note in the aggregate principal amount of up to $1,500,000 to Scage, for the Company’s 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 an initial Business Combination by the Company and the Company’s liquidation. As of March 31, 2024, we had $200,000 outstanding under the January 2024 Promissory 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 agreed by the shareholders at the 2023 EGM and the 2024 EGM, we have until November 8, 2024 to complete a Business Combination.
If we are not able to consummate a Business Combination before November 8, 2024, 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, 2024, 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, 2024.
Off-Balance Sheet Financing Arrangements
We did not have any off-balance sheet arrangements as of March 31, 2024 as defined in Item 303(a)(4)(ii) of Regulation S-K.
Contractual Obligations
As of March 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.
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).
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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 unaudited condensed financial statements related to this agreement. No expense has been recorded in the unaudited condensed financial statements related to this agreement, nor is any due.
On August 29, 2023, the Company engaged a third-party consultant to provide the Company with introduction to potential targets for its Business Combination. Pursuant to the terms of the agreement, the Company has agreed to pay a contingent fee of 0.5% of the implied enterprise value of the target if the Company consummates a Business Combination. As the Business Combination is not considered probable, no expense for which has been included in the unaudited condensed 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 unaudited condensed 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 Unaudited Condensed 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 unaudited condensed 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 the Company’s 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.
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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 per share for the period presented.
Recent Accounting Standards
In August 2020, the FASB issued ASU No. 2020-06, “Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”). The update simplifies the accounting for convertible instruments by removing certain separation models in Subtopic 470-20, “Debt— Debt with Conversion and Other Options” for convertible instruments and introducing other changes. As a result of ASU 2020-06, more convertible debt instruments will be accounted for as a single liability measured at its amortized cost and more convertible preference shares will be accounted for as a single equity instrument measured at its historical cost, as long as no features require bifurcation and recognition as derivatives. The amendments are effective for smaller reporting companies for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. We adopted ASU 2020-06 on January 1, 2024. There was no material impact on our financial position, results of operations or cash flows.
In June 2022, the FASB issued ASU 2022-03. ASU 2022-03 amends ASC 820 to clarify that a contractual sales restriction is not considered in measuring an equity security at fair value and to introduce new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value. ASU 2022-03 applies to both holders and issuers of equity and Equity-Linked Securities measured at fair value. The amendments in ASU 2022-03 are effective for the Company in fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance. We adopted ASU 2022-03 on January 1, 2024. There was no material impact on our financial position, results of operations or cash flows.
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 its pending adoption of ASU 2023-09 on our financial position, results of operations or financial statement disclosure.
We do not believe that any other recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on our unaudited condensed 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 unaudited condensed financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
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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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this Item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to Management, including our Chief Executive Officer and Chief Financial Officer (together, the “Certifying Officers”), or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our Management, including our Certifying Officers, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on the foregoing, our Certifying Officers concluded that our disclosure controls and procedures were not effective as of the end of the quarterly period ended March 31, 2024, due to material weaknesses in our internal control over financial reporting of complex financial instruments, recognition of billed and unbilled professional fees, recognition of prepaid expenses, classification of related party payables and accounting for related party notes payable as further described below.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Specifically, we concluded that our controls over recognition of billed and unbilled professional fees, recognition of prepaid expenses, the classification of related party payables, and accounting for related party notes payable was not effectively designed or maintained. Our Management performed additional analysis as deemed necessary to ensure that our unaudited condensed financial statements included in this Report were prepared in accordance with GAAP. Accordingly, Management believes that the unaudited condensed financial statements included in this Report present fairly, in all material respects, our financial position, results of operations and cash flows of the periods presented.
In light of the material weakness described above, our Management Team has performed additional accounting and financial analyses and other post-closing procedures. We have enhanced, and will continue to enhance, internal controls and procedures, including access to accounting literature, identification and consideration of third-party professionals with whom to consult regarding complex accounting applications and implantation of additional layers of reviews in the financial close process. While we have processes to properly identify and evaluate the appropriate accounting technical pronouncements and other literature for all significant or unusual transactions, we plan to continue to improve these processes to ensure that the nuances of such transactions are effectively evaluated in the context of the increasingly complex accounting standards.
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We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Changes in Internal Control over Financial Reporting
Other than as discussed above, there have been no changes to our internal control over financial reporting during the quarterly period ended March 31, 2024 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
To the knowledge of our Management Team, there is no material litigation currently pending or contemplated against us, any of our officers or directors in their capacity as such or against any of our property.
Item 1A. Risk Factors
As a smaller reporting company under Rule 12b-2 of the Exchange Act, we are not required to include risk factors in this Report. For additional risks relating to our operations, other than as set forth below, see the section titled “Risk Factors” contained in our (i) Registration Statement on Form S-1 initially filed with the SEC on October 15, 2021, as amended, and declared effective on November 3, 2021 (the “IPO Registration Statement”), (ii) 2023 Annual Report and (iii) Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2023, June 30, 2023, and September 30, 2023 as filed with the SEC on May 22, 2023, November 6, 2023, and December 14, 2023, respectively. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risks could arise that may also affect our business or ability to consummate an initial Business Combination. We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future filings with the SEC.
For risks related to Scage and the Scage Business Combination, please see the Registration Statement on Form F-4 to be filed with the SEC in connection with the Scage Business Combination.
We have received a notice from the Staff of Nasdaq notifying us that we were not in compliance with the Minimum Total Holders Requirement. If we cannot regain compliance, our securities will be subject to delisting, and the liquidity and the trading price of our securities could be adversely affected.
On May 6, 2024, we received a deficiency notice (the “Notice”) from the Listing Qualifications Department (the “Staff”) of Nasdaq notifying us that since it was first notified on October 9, 2023, we had not regained compliance with the Minimum Total Holders Requirement, 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. Pursuant to the Notice, our securities may be subject to suspension and delisting pending the outcome of a hearing before the Panel, which we requested on May 13, 2024. Our hearing request has stayed the suspension of our securities, and our securities will continue to trade on The Nasdaq Global Market until the hearing process concludes and the Panel issues a written decision.
If Nasdaq delists our securities from trading on its exchange and we are not able to list our securities on another national securities exchange, we expect our securities could be quoted on an over-the-counter market. If this were to occur, we could face significant material adverse consequences, including:
| ● | a limited availability of market quotations for our securities; |
| ● | reduced liquidity for our securities; |
| ● | a determination that our Class A Ordinary Shares are a “penny stock” which will require brokers trading in our Class A Ordinary Shares to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities; |
| ● | a limited amount of news and analyst coverage; |
| ● | a decreased ability to issue additional securities or obtain additional financing in the future; and |
| ● | being subject to regulation in each state in which we offer our securities, including in connection with our initial Business Combination. |
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Unregistered Sales of Equity Securities
None.
Use of Proceeds
For a description of the use of proceeds generated in our Initial Public Offering and Private Palcement, see Part II, Item 2 of our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2022, as filed with the SEC on November 10, 2022. There has been no material change in the planned use of proceeds from our Initial Public Offering and Private Placement as described in the IPO Registration Statement. The specific investments in our Trust Account may change from time to time.
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.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
There were no such repurchases of our equity securities by us or an affiliate during the quarterly period covered by this Report.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Trading Arrangements
During
the quarterly period ended March 31, 2024, none of our directors or officers (as defined in Rule 16a-1(f) promulgated under the Exchange
Act)
Item 6. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Report.
| * | Filed herewith. |
| ** | Furnished herewith. |
| (1) | Incorporated herein by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on November 8, 2021. |
| (2) | Incorporated herein by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K/A filed with SEC on May 24, 2023. |
| (3) | Incorporated herein by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on February 1, 2024. |
| (4) | Incorporated herein by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on May 8, 2024. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
FINNOVATE ACQUISITION CORPORATION
| SIGNATURE | TITLE | DATE | ||
| /s/ Calvin Kung | Chairman and Chief Executive Officer | May 20, 2024 | ||
| Calvin Kung | (principal executive officer) | |||
| /s/ Wang Chiu Wong | Chief Financial Officer | May 20, 2024 | ||
| Wang Chiu Wong | (principal financial and accounting officer) |
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