| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| (State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
| Title of Each Class |
Trading Symbols |
Name of Each Exchange on Which Registered | ||
Large accelerated filer |
☐ | Accelerated filer | ☐ | |||
Non-accelerated filer |
☒ | Smaller reporting company | ||||
| Emerging growth company | ||||||
INVESTCORP AI ACQUISITION CORP
TABLE OF CONTENTS
2
September 30, 2024 (Unaudited) |
December 31, 2023 |
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ASSETS |
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Current Assets |
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Cash |
$ | $ | ||||||
Other assets – current |
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Total current assets |
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Cash and securities held in Trust Account |
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Total Assets |
$ |
$ |
||||||
LIABILITIES, REDEEMABLE ORDINARY SHARES AND SHAREHOLDERS’ DEFICIT |
||||||||
Current Liabilities |
||||||||
Accrued expenses |
$ | $ | ||||||
Working Capital Loan - Sponsor |
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Convertible Promissory Note - Sponsor |
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Due to Sponsor |
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Total current liabilities |
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Warrant liability |
||||||||
Total Liabilities |
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Commitments and Contingencies (Note 6) |
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Class A common stock: |
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Shareholders’ Deficit |
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Preference shares, $ |
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Class A ordinary shares, $ |
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Class B ordinary shares, $ |
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Additional paid in capital |
||||||||
Accumulated deficit |
( |
) | ( |
) | ||||
Total Shareholders’ Deficit |
( |
) |
( |
) | ||||
Total Liabilities and Shareholders’ Deficit |
$ |
$ |
||||||
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2024 |
2023 |
2024 |
2023 |
|||||||||||||
Formation costs and operating expenses |
$ | $ | $ | $ | ||||||||||||
Loss from operations |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Other income (expense): |
||||||||||||||||
Interest earned on marketable securities held in Trust Account |
||||||||||||||||
Change in FV of warrant liability |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Other income, net |
||||||||||||||||
Net (loss) income |
$ |
( |
) |
$ |
$ |
$ |
||||||||||
Weighted average shares outstanding of Class A ordinary shares redeemable shares |
||||||||||||||||
Basic and diluted net (loss) income per ordinary share, Class A ordinary shares redeemable shares |
$ |
( |
) |
$ |
$ |
$ |
||||||||||
Weighted average shares outstanding of Class B ordinary shares non-redeemable shares |
||||||||||||||||
Basic and diluted net (loss) income per ordinary share, Class B ordinary shares non-redeemable shares |
$ |
( |
) |
$ |
$ |
$ |
||||||||||
Class B Ordinary |
Additional |
Total |
||||||||||||||||||
Shares |
Paid-in Capital |
Accumulated Deficit |
Shareholders’ Deficit |
|||||||||||||||||
Shares |
Amount |
|||||||||||||||||||
Balance — December 31, 2023 |
$ |
$ |
$ |
( |
) |
$ |
( |
) | ||||||||||||
Accretion of Class A ordinary shares subject to possible redemption |
— | — | — | ( |
) | ( |
) | |||||||||||||
Net income |
— | — | — | |||||||||||||||||
Balance — March 31, 2024 |
$ |
$ |
$ |
( |
) |
$ |
( |
) | ||||||||||||
Accretion of Class A ordinary shares subject to possible redemption |
— | — | — |
( |
) | ( |
) | |||||||||||||
Net income |
— | — | — | |||||||||||||||||
Balance — June 30, 2024 |
$ |
$ |
$ |
( |
) |
$ |
( |
) | ||||||||||||
Accretion of Class A ordinary shares subject to possible redemption |
— | — | — | ( |
) | ( |
) | |||||||||||||
Conversion of Class B ordinary shares to Class A |
||||||||||||||||||||
Net loss |
— | — | — | ( |
) | ( |
) | |||||||||||||
Balance — September 30, 2024 |
$ |
$ |
$ |
( |
) |
$ |
( |
) | ||||||||||||
Class B Ordinary |
Additional |
Total |
||||||||||||||||||
Shares |
Paid-in Capital |
Accumulated Deficit |
Shareholders’ Deficit |
|||||||||||||||||
Shares |
Amount |
|||||||||||||||||||
Balance — December 31, 2022 |
$ |
$ |
$ |
( |
) |
$ |
( |
) | ||||||||||||
Accretion of Class A ordinary shares subject to possible redemption |
— | — | — | ( |
) | ( |
) | |||||||||||||
Net income |
— | — | — | |||||||||||||||||
Balance — March 31, 2023 |
$ |
$ |
$ |
( |
) |
$ |
( |
) | ||||||||||||
Accretion of Class A ordinary shares subject to possible redemption |
— | — | — | ( |
) | ( |
) | |||||||||||||
Net income |
— | — | — | |||||||||||||||||
Balance — June 30, 2023 |
$ |
$ |
$ |
( |
) |
$ |
( |
) | ||||||||||||
Accretion of Class A ordinary shares subject to possible redemption |
— | — | — | ( |
) | ( |
) | |||||||||||||
Net income |
— | — | — | |||||||||||||||||
Balance — September 30, 2023 |
$ |
$ |
$ |
( |
) |
$ |
( |
) | ||||||||||||
For the Nine Months Ended September 30, 2024 |
For the Nine Months Ended September 30, 2023 |
|||||||
Cash flow from Operating Activities: |
||||||||
Net income |
$ | $ | ||||||
Adjustments to reconcile net income to net cash used in operating activities: |
||||||||
Change in fair value of warrant liability |
||||||||
Interest earned on marketable securities held in Trust Account |
( |
) | ( |
) | ||||
Changes in operating assets and liabilities: |
||||||||
Other assets |
||||||||
Accounts payables and accrued expenses |
||||||||
Due to Sponsor |
( |
) | ( |
) | ||||
Net cash used in operating activities |
( |
) |
( |
) | ||||
Cash flow from Investing Activities: |
||||||||
Proceeds from Trust Account for payment to Redeeming Shareholders |
||||||||
Cash deposited in Trust Account |
( |
) | ( |
) | ||||
Net cash provided by investing activities |
||||||||
Cash flow from Financing Activities: |
||||||||
Payments to Redeeming Shareholders |
( |
) | ( |
) | ||||
Proceeds from promissory note – related party |
||||||||
Proceeds from convertible promissory notes - Sponsor |
||||||||
Net cash used in financing activities |
( |
) |
( |
) | ||||
Net Change in Cash and Restricted Cash |
( |
) |
( |
) | ||||
Cash and restricted cash at the beginning of the period |
||||||||
Cash and Restricted Cash at the end of the period |
$ |
$ |
||||||
Non-cash investing and financing activities: |
||||||||
Accretion of Class A ordinary shares subject to possible redemption |
$ | $ | ||||||
For the Three Months Ended September 30, |
||||||||||||||||
2024 |
2023 |
|||||||||||||||
Class A, Ordinary Shares |
Class B, Ordinary Shares |
Class A, Ordinary Shares |
Class B, Ordinary Shares |
|||||||||||||
Basic and diluted net income per common share |
||||||||||||||||
Numerator: |
||||||||||||||||
Allocation of net income, as adjusted |
$ | ( |
) | $ | ( |
) | $ | $ | ||||||||
Denominator: |
||||||||||||||||
Basic and diluted weighted average shares outstanding |
||||||||||||||||
Basic and diluted net income per ordinary share |
$ | ( |
) | $ | ( |
) | $ | $ | ||||||||
For the Nine Months Ended September 30, |
||||||||||||||||
2024 |
2023 |
|||||||||||||||
Class A, Ordinary Shares |
Class B, Ordinary Shares |
Class A, Ordinary Shares |
Class B, Ordinary Shares |
|||||||||||||
Basic and diluted net income per common share |
||||||||||||||||
Numerator: |
||||||||||||||||
Allocation of net income, as adjusted |
$ | $ | $ | $ | ||||||||||||
Denominator: |
||||||||||||||||
Basic and diluted weighted average shares outstanding |
||||||||||||||||
Basic and diluted net income per ordinary share |
$ | $ | $ | $ | ||||||||||||
| • | Level 1 - Assets and liabilities with unadjusted, quoted prices listed on active market exchanges. Inputs to the fair value measurement are observable inputs, such as quoted prices in active markets for identical assets or liabilities. |
| • | Level 2 - Inputs to the fair value measurement are determined using prices for recently traded assets and liabilities with similar underlying terms, as well as direct or indirect observable inputs, such as interest rates and yield curves that are observable at commonly quoted intervals. |
| • | Level 3 - Inputs to the fair value measurement are unobservable inputs, such as estimates, assumptions, and valuation techniques when little or no market data exists for the assets or liabilities. |
Class A ordinary shares subject to possible redemption at December 31, 2022 |
$ |
|||
Plus: |
||||
Accretion of carrying value to redemption value |
||||
Less: |
||||
Shares redeemed in August 2023 |
||||
Class A ordinary shares subject to possible redemption at December 31, 2023 |
$ |
|||
Plus: |
||||
Accretion of carrying value to redemption value |
||||
Less: |
||||
Shares redeemed in August 2024 |
||||
Class A ordinary shares subject to possible redemption at September 30, 2024 |
$ |
|||
| • | in whole and not in part; |
| • | at a price of $ |
| • | upon not less than |
| • | if, and only if, the reported last sale price of the Class A ordinary shares equals or exceeds $ |
| • | in whole and not in part; |
| • | at a price of $ |
| • | if, and only if, the closing price of our Class A ordinary shares equals or exceeds $ 30-trading day period ending trading days before the Company sends the notice of redemption to the warrant holders; and |
| • | if the closing price of our Class A ordinary shares for any 20 trading days within a |
| Level 1: | Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. |
| Level 2: | Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active. |
| Level 3: | Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability. |
Level |
September 30, 2024 |
December 31, 2023 |
||||||||
Assets: |
||||||||||
Investments held in Trust Account – U.S. Treasury Securities Money Market Fund |
1 | $ | |
$ | |
|||||
Liabilities: |
||||||||||
Public Warrants |
1 | $ | $ | |||||||
Private Warrants |
3 | $ | $ | |||||||
September 30, 2024 |
December 31, 2023 |
|||||||
Private Warrants |
Private Warrants |
|||||||
Stock Price |
$ | |
$ | |
||||
Exercise Price |
$ | $ | ||||||
Risk-free rate of interest |
% | % | ||||||
Volatility |
% | % | ||||||
Term |
||||||||
Fair value as of December 31, 2022 |
$ | |||
(1) |
||||
Fair value as of March 31, 2023 |
||||
(1) |
( |
) | ||
Fair value as of June 30, 2023 |
||||
(1) |
||||
Fair value as of September 30, 2023 |
||||
(1) |
( |
) | ||
Fair value as of December 31, 2023 |
||||
(1) |
||||
Fair value as of March 31, 2024 |
||||
(1) |
( |
) | ||
Fair value as of June 30, 2024 |
||||
(1) |
||||
Fair value as of September 30, 2024 |
$ | |||
| (1) | Changes in valuation inputs or other assumptions are recognized in change in fair value of warrant liabilities in the statements of operations. |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to Investcorp AI Acquisition Corp. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to ICE I Holdings Pte. Ltd. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Overview
We are a blank check company incorporated on February 19, 2021, as a Cayman Islands exempted company and formed for the purpose of effectuating a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses, which we refer to throughout this Annual Report as our “initial business combination”. While we may pursue an initial business combination target in any industry, we intend to focus our search on companies within the Indian market. We intend to effectuate our initial business combination using remaining cash in the trust account from the proceeds of the offering and the private placement of the Private Placement Warrants (as defined below), the proceeds of the sale of our shares in connection with our initial business combination (pursuant to forward purchase agreements or backstop agreements we may enter into following the consummation of the Initial Public Offering or otherwise), shares issued to the owners of the target, debt issued to bank or other lenders or the owners of the target, or a combination of the foregoing.
Recent Developments
On October 1, 2024, Bigtincan Holdings Limited (“BTH”) issued a press release announcing a non-binding proposal submitted to BTH by the Company to consummate a business combination.
On October 11, 2024, the Company issued a press release announcing the conclusion of its diligence work and negotiations with BTH in connection with an offer made by IVCA to consummate a business combination with BTH.
On October 15, 2024, the Company held an extraordinary general meeting of shareholders (the “Extraordinary General Meeting”) and approved the proposal to change the Company’s name from Investcorp India Acquisition Corp to Investcorp AI Acquisition Corp. Subsequent to the approval for the name change proposal, the Company filed an amendment to the Amended and Restated Memorandum and Articles of Association with the Cayman Islands Registrar of Companies.
On October 21, 2024, the Company issued a press release announcing the execution of a business combination agreement and a scheme implementation deed, each dated October 20, 2024 and each by and among the SPAC, Bigtincan Holdings Limited, an Australian public company listed on the Australian Securities Exchange with Australian Company Number 154 944 797.
On October 28, 2024, the Company and Bigtincan Holdings Limited issued a joint press release announcing the release of a question and answer webcast in connection with the previously announced business combination and scheme implementation deed.
If the Company is unable to complete a Business Combination prior to May 12, 2025, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but no 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 us to pay taxes, divided by the number of then outstanding public shares, which redemption will completely extinguish public shareholder’s rights as shareholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining shareholders and the Company’s board
23
of directors, proceed to commence a voluntary liquidation and thereby a formal dissolution of the Company, subject in each case to its obligations under Delaware law to provide for claims of creditors and the requirements of applicable law. In the event the Company does not complete a Business Combination within the Combination Period and, in such event, the 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 Public Initial Offering price per Unit of $10.00.
The Sponsor has agreed that it will 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 entered into a written letter of intent, confidentiality or similar agreement or Business Combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10.30 per Public Share and (ii) the actual amount per Public Share held in the Trust Account as of the day of liquidation of the Trust Account, if less than $10.30 per share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to monies held in the Trust Account (whether or not such waiver is enforceable) nor will it apply to any claims under the Company’s indemnity of the underwriter of Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). However, the Company has not asked the Sponsor to reserve for such indemnification obligations, nor has the Company independently verified whether the Sponsor has sufficient funds to satisfy its indemnity obligations and believe that the Sponsor’s only assets are securities of the Company. Therefore, the Company cannot assure its shareholders that the Sponsor would be able to satisfy those obligations. None of the Company’s officers or directors will indemnify the Company for claims by third parties including, without limitation, claims by vendors and prospective target businesses. 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, prospective target businesses or 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.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities for the period from February 19, 2021 (inception) through September 30, 2024, were organizational activities, those necessary to prepare for the Initial Public Offering, described below, and after our Initial Public Offering, identifying target companies for a business combination. We do not expect to generate any operating revenues until after the completion of our initial business combination. We generate non-operating income in the form of interest income on cash and cash equivalents held after the Initial Public Offering. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as due diligence expenses.
For the three months ended September 30, 2024, we had net loss of $229,238, which consists of operating costs of $614,608, offset by interest earned from marketable securities held in the Trust Account of $965,870 and a loss due to change in fair value of warrants of $580,500. For the three months ended September 30, 2023, we had net income of $1,210,015, which consists of operating costs of $461,510, loss due to change in fair value of warrants of $831,938, offset by interest earned from investments held in the Trust Account of $2,503,463.
For the nine months ended September 30, 2024, we had net income of $1,786,538, which consists of operating costs of $1,127,875, offset by interest earned from marketable securities held in the Trust Account of $3,785,163 and a loss due to change in fair value of warrants of $870,750. For the nine months ended September 30, 2023, we had net income of $6,755,292, which consists of operating costs of $1,307,228, loss due to change in fair value of warrants of $552,038, offset by interest earned from investments held in the Trust Account of $8,614,558.
Liquidity, Capital Resources, and Going Concern Consideration
As of September 30, 2024, the Company had $73,202 in cash and a working capital deficit of $3,122,377.
24
On May 12, 2022, we consummated the Initial Public Offering of 22,500,000 Class A Public Shares at $10.00 per Public Share, generating gross proceeds of $225,000,000. Additionally, the underwriter exercised their over-allotment option, resulting in an additional 3,375,000 Units issued for an aggregate amount of $33,750,000. Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 14,400,000 Private Placement Warrants at a price of $1.00 per Private Placement Warrant in a private placement to ICE I Holdings Pte, Ltd. (the “Sponsor”), generating gross proceeds of $14,400,000. In connection with the underwriter’s exercise of their over-allotment option, the Company also consummated the sale of an additional 1,687,500 Private Placement Warrants at $1.00 per Private Placement Warrant generating total proceeds of $1,687,500.
For the nine months ended September 30, 2024, cash used in operating activities was $683,575. Net income of $1,786,536 was affected by a gain on the change in the fair value of the warrant liability of $870,750 and interest income of $3,785,163. Changes in operating assets and liabilities used $444,302 of cash for operating activities.
For the nine months ended September 30, 2023, cash used in operating activities was $605,151. Net income of $6,755,292 was affected by a gain on the change in the fair value of the warrant liability of $552,038 and interest income of $8,614,558. Changes in operating assets and liabilities used $702,077 of cash for operating activities.
As of September 30, 2024, we had cash held in the Trust Account of $17,169,326. Interest income on the balance in the Trust Account may be used by us to pay taxes. We intend to use substantially all of the funds held the Trust Account and the proceeds from the sale of the forward purchase shares to complete our Business Combination. To the extent that our share capital or debt is used, in whole or in part, as consideration to complete our Business Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
As of September 30, 2024, we had cash of $73,202 held outside of the Trust Account. We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, properties, or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete a Business Combination.
In order to finance transaction costs in connection with a Business Combination, the Company’s Sponsor, an affiliate of the Sponsor, or the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (the “Working Capital Loans”). Such Working Capital Loans would be evidenced by promissory notes. The notes would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $3,000,000 of notes may be converted upon consummation of a Business Combination into warrants at a price of $1.00 per warrant. The warrants will be identical to the Private Placement Warrants. 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.
In connection with the Company’s assessment of going concern considerations in accordance with ASU 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” the Company has until May 12, 2025, 32 months from the closing of the IPO, to consummate a Business Combination unless an extension is granted. It is uncertain that the Company will be able to consummate an initial Business Combination within this time. If an initial Business Combination is not consummated within this time, there will be a mandatory liquidation and subsequent dissolution of the Company. Management has determined that the liquidity condition and mandatory liquidation, should an initial Business Combination not occur, and potential subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after May 12, 2025.
Off-Balance Sheet Arrangements
As of September 30, 2024 and December 31, 2023, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any commitments or contractual obligations.
25
Contractual Obligations
We do not have any long-term debt obligations, capital lease obligations, operating lease obligations, purchase obligations or other long-term liabilities, other than described below:
Registration Rights
The holders of the Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans (and any Class A ordinary shares issuable upon the exercise of the Private Placement Warrants) will have registration rights to require the Company to register a sale of any of its securities held by them pursuant to a registration rights agreement. The holders of these securities are entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of a business combination. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Working Capital Loans
In order to finance transaction costs in connection with a Business Combination, the Company’s Sponsor, an affiliate of the Sponsor, or the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (the “Working Capital Loans”). Such Working Capital Loans would be evidenced by promissory notes. The notes would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $3,000,000 of notes may be converted upon consummation of a Business Combination into warrants at a price of $1.00 per warrant. The warrants will be identical to the Private Placement Warrants. 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.
On December 8, 2023, the Company entered into a non-interest bearing convertible unsecured loan in the principal amount of up to $3,000,000 from the Sponsor to provide the Company with additional working capital and to fund the Extension Contributions. The Loan constitutes a Working Capital Loan as defined above. The loan does not bear any interest and will be repayable by the Company to the Sponsor upon the earlier of: (i) promptly after the date the business combination is consummated and (ii) August 12, 2024. The portion of the Loan used to provide the Company with additional working capital will not be deposited into the Trust Account. If the Company does not consummate an initial business combination during the Extension Period, the Loan will be repaid only from funds held outside of the Trust Account or will be forfeited, eliminated or otherwise forgiven. The Loan is convertible into private placement warrants at a price of $1.00 per warrant at the option of the lender. Such warrants would be identical to the private placement warrants in connection with the initial public offering. The conversion option represents an embedded derivative under ASC 815-15, “Embedded Derivatives.” The Company has determined that based on the valuation of its Private Placement Warrants and the fact that a Business Combination is not considered probable until such time as it is consummated, the value of this conversion option is de minimis. As of September 30, 2024 and December 31, 2023, there was $780,000 and $300,000 outstanding, respectively.
Promissory Note—Related Party
On March 12, 2021, the Sponsor agreed to loan the Company an aggregate of up to $300,000 to cover expenses related to the Initial Public Offering pursuant to a promissory note (the “Note”). The Note is non-interest bearing and is payable on the earlier of (i) December 31, 2021 (which was amended to September 30, 2022, on January 25, 2022), or (ii) the consummation of the Initial Public Offering. As of September 30, 2024 and December 31, 2023, there were no amounts outstanding on the Note and it is no longer available to the Company.
Convertible Promissory Note - Sponsor
On August 9, 2023, the Sponsor agreed to loan the Company an aggregate of up to $1,200,000 to cover expenses related to the Contributions (the “2023 Note”). The note is non-interest bearing and is payable on the earlier of (i) May 12, 2024, or (ii) the consummation of a Business Combination. Upon receiving notice of the closing of a Business Combination, the Sponsor shall convert the unpaid principal balance of the 2023 Note into a number of non-transferable, non-redeemable ordinary shares of the Company equal to (x) the principal amount of the 2023 Note being converted, divided by (y) the conversion price of $10.00, rounded up to the nearest whole number of shares. As of September 30, 2024 and December 31, 2023, the outstanding principal balance was $1,300,000 and $500,000, respectively.
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Underwriter’s Agreement
The Company granted the underwriter a 45-day option to purchase up to 3,375,000 additional Units to cover over-allotments at the Initial Public Offering price, less the underwriting discounts and commissions. Concurrently with the consummation of the IPO, the underwriters exercised the over- allotment option to purchase an additional 3,375,000 units.
Critical Accounting Estimates
This management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with GAAP. The preparation of our financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to fair value of financial instruments and accrued expenses. We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The Company has identified the following as its critical accounting estimates:
Class A Ordinary Shares Subject to Possible Redemption
The Company accounts for its Class A ordinary shares subject to possible redemption in accordance with the guidance in ASC 480. Class A ordinary shares subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Conditionally redeemable Class A ordinary shares (including Class A 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, Class A ordinary shares are classified as shareholders’ 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, the Class A ordinary shares is subject to possible redemption and is presented as temporary equity, outside of the shareholders’ equity section of the Company’s balance sheet.
On August 11, 2023 shareholders of the Company held an extraordinary general meeting of shareholders (the “Extraordinary General Meeting”). At the Extraordinary General Meeting, the Company’s shareholders approved the proposal to amend the Company’s Amended and Restated Memorandum and Articles of Association to give the Company the right to extend the date by which it has to consummate a business combination from August 12, 2023 to August 12, 2024. At the Extraordinary General Meeting, the shareholders of record were provided the opportunity to exercise their redemption rights (the “Extension Amendment Proposal”). Holders of 16,085,554 shares of Class A ordinary shareholders exercised their right to redemption at a per share redemption price of approximately $10.74. On August 18, 2023, a total of $172,774,717 in redemption payments were made in connection with this redemption. Following the redemption, the Company had a total of 9,789,446 shares of Class A ordinary shares outstanding.
On August 12, 2024, the Company held an extraordinary general meeting (the “Extraordinary General Meeting”) and approved a proposal, by special resolution, to amend the Company’s amended and Restated Memorandum and Articles of Association to extend the date by which the Company has to consummate a business combination for an additional nine months from August 12, 2024 to May 12, 2025. In connection with the vote to extend the date by which the Company has to consummate a business combination, the holders of 8,314,066 Class A Ordinary shares properly exercised their rights to redeem their shares for cash at a redemption price of approximately $11.40 per share, for an aggregate redemption amount of approximately $95,447,584. Following the redemption, the Company had a total of 1,475,380 shares of Class A ordinary shares outstanding.
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The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable ordinary shares to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable ordinary shares are affected by charges against additional paid in capital (to the extent available) and accumulated deficit.
Warrants
The Company accounts for the Warrants as either equity-classified or liability-classified instruments based on an assessment of the specific terms of the Warrants and the applicable authoritative guidance in ASC 480, and ASC 815. The assessment considers whether they are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and 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 holders of the Warrants 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 of issuance of the Warrants 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, such 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 the criteria for equity classification, such warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of liability-classified warrants are recognized as a non-cash gain or loss on the statements of operations.
Recently Issued Accounting Standards
In August 2020, the FASB issued ASU No. 2020-06 Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815–40) (“ASU 2020-06”). ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The ASU is part of the FASB’s simplification initiative, which aims to reduce unnecessary complexity in GAAP. The ASU’s amendments are effective for smaller reporting companies for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. The Company adopted ASU 2020-06 on January 1, 2024. The adoption of ASU 2020-06 did not have a material impact on the Company’s unaudited condensed financial statements and disclosures.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 requires additional quantitative and qualitative income tax disclosures to enable financial statements users better assess how an entity’s operations and related tax risks and tax planning and operational opportunities affect its tax rate and prospects for future cash flows. For public business entities, ASU 2023-09 is effective for annual periods beginning after December 15, 2024, which will be fiscal 2025 for us. The Company expects the adoption to result in disclosure changes only.
Management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial statements.
JOBS Act
On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We will qualify as an “emerging growth company” and under the JOBS Act will be 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 such, our financial statements may not be comparable to companies that comply with 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 auditor’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 auditor’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
Under the supervision and with the participation of our management, including our current chief executive officer and chief financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of September 30, 2024, as defined in Rules 13a-15(e) and 15d- 15(e) under the Exchange Act.
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Based on this evaluation, our chief executive officer and chief financial officer have concluded that, during the period covered by this report, our disclosure controls and procedures were not effective as of September 30, 2024, because of an identified material weakness in our internal control over financial reporting. The material weakness identified relates to an ineffective review control to prevent or detect a material misstatement, which resulted in a material adjustment to accrued expenses in relation to the filing of its Form 8-K on May 26, 2022 and an overaccrual of legal fees in the year ended December 31, 2023.
The Company, with the oversight of its Audit Committee, is actively undertaking remediation efforts to address the material weakness identified above and is developing measures and controls to prevent a re-occurrence of such a deficiency in the future.
The Company is committed to maintaining an effective internal control environment, and although it has made progress in this area, additional steps need to be taken, as indicated above, and sufficient time needs to elapse before management can conclude that the newly implemented controls are operating effectively and that the material weakness has been adequately remediated.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 1A. RISK FACTORS
Factors that could cause our actual results to differ materially from those in this Quarterly Report are any of the risks described in (i) our final prospectus for our Initial Public Offering filed with the SEC on May 10, 2022, and (ii) our annual report on Form 10-K filed with the SEC on April 17, 2024. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. As of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in (i) our final prospectus for our Initial Public Offering filed with the SEC on May 10, 2022 or (ii) our annual report on Form 10-K filed with the SEC on April 17, 2024, except we may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Unregistered Sales of Equity Securities
In March 2021, our Sponsor purchased 7,187,500 Class B ordinary shares, par value $0.0001, for an aggregate price of $25,000. In March 2022, our sponsor surrendered, for no consideration, 718,750 founder shares, resulting in our sponsor holding 6,468,750 founder shares for an aggregate purchase price of $25,000 or approximately $0.0039 per share.
On May 12, 2022, we consummated the Initial Public Offering of 22,500,000 unit, at $10.00 per Unit, generating gross proceeds of $225,000,000. Additionally, the underwriter exercised their over-allotment option, resulting in an additional 3,375,000 Units issued for an aggregate amount of $33,750,000.
Simultaneously with the closing of the Initial Public Offering, pursuant to the Private Placement Warrants Purchase Agreements, the Company completed the private sale of 16,087,500 warrants to the Sponsor at a purchase price of $1.00 per Private Placement Warrant, generating gross proceeds to the Company of $16,087,500. The Private Placement Warrants are identical to the Warrants included as part of the Units sold in the IPO.
No underwriting discounts or commissions were paid with respect to such sale. The issuance of the Private Placement Warrants was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended.
Use of Proceeds
In connection with the Initial Public Offering, we incurred offering costs of $6,037,027, consisting of $5,175,000 of underwriting fees, and $862,027 of other offering costs. After deducting the underwriting discounts and commissions and the Initial Public Offering expenses, $266,512,500 of the net proceeds from our Initial Public Offering and from the Private Placement of the Private Placement Warrants was placed in the Trust Account. The net proceeds of the Initial Public Offering and certain proceeds from the sale of the Private Placement Warrants are held in the Trust Account and invested as described in the initial public offering prospectus.
There has been no material change in the planned use of the proceeds from the Initial Public Offering and Private Placement.
Redemptions
On August 12, 2024, a special meeting of the stockholders was held to extend the date by which the Company must consummate a business combination. In connection with this meeting, the stockholders of record were provided the opportunity to exercise their redemption rights. Holders of 8,314,066 Class A ordinary shares properly exercised their rights to redeem their shares for cash at a redemption price of approximately $11.40 per share, for an aggregate redemption amount of approximately $94,780,352.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
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ITEM 6. EXHIBITS
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
| * | Filed herewith. |
| ** | These certifications are furnished to the SEC pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing. |
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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.
| INVESTCORP AI ACQUISITION CORP | ||
| /s/ Nikhil Kalghatgi |
November 19, 2024 | |
| Name: Nikhil Kalghatgi | ||
| Title: Principal Executive Officer | ||
| /s/ Dean Clinton |
November 19, 2024 | |
| Name: Dean Clinton | ||
| Title: Principal Financial Officer and Principal Accounting Officer | ||
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