10-Q: Cactus Acquisition Extends Deadline, Faces Liquidation Risk

Cactus Acquisition Corp. 1 Ltd. extended its business combination deadline to November 2, 2026, but faces substantial doubt about its ability to continue as a going concern amid significant share redemptions and a working capital deficiency.

Summary

• Extended the mandatory liquidation date for its business combination to November 2, 2026, following shareholder approval of the Fourth Extension.
• Experienced significant share redemptions in connection with both the Third and Fourth Extensions, reducing publicly-held Class A ordinary shares to 52,239.
• Reported a net loss of $359,000 for the nine months ended September 30, 2025, and $199,000 for the three months ended September 30, 2025.
• Maintained a cash balance of $8,000 in its operating account and $9,263,000 in its trust account as of September 30, 2025.
• Has a working capital deficiency of $2,711,000 as of September 30, 2025.
• Is pursuing a business combination with Tembo e-LV B.V., with a Business Combination Agreement signed on August 29, 2024.
• VivoPower International PLC, Tembo's owner, received a non-binding proposal from Energi Holdings Limited to acquire 51% of Tembo for a $200 million enterprise value, which Energi supports the SPAC's combination with Tembo.
• Delisted from Nasdaq on November 5, 2024, and now trades on the OTC market under the symbol CCTSF.

Sentiment

Score: 3

Explanation: The company faces significant operational and financial challenges, including a 'going concern' warning, delisting from Nasdaq, and substantial shareholder redemptions. While an extension for the business combination and a potential strategic investment in the target are positive, the overall financial health and control environment present considerable risks.

Positives

• Shareholders approved the Fourth Extension, providing an additional year (until November 2, 2026) to complete a business combination.
• A Business Combination Agreement with Tembo e-LV B.V. is in place, indicating progress towards a target acquisition.
• Energi Holdings Limited, a global energy solutions company, has expressed support for the business combination with Tembo and has a non-binding proposal to acquire a 51% stake in Tembo, potentially strengthening the target.
• Operating expenses decreased to $542,000 for the nine months ended September 30, 2025, from $936,000 in the prior year period.
• Financial expenses decreased to $100,000 for the nine months ended September 30, 2025, from $210,000 in the prior year period.

Negatives

• The company has a substantial doubt about its ability to continue as a going concern due to the need to complete a business combination and raise sufficient funds.
• Experienced significant shareholder redemptions in connection with both the Third and Fourth Extensions, reducing the trust account balance and public float.
• Delisted from Nasdaq and now trades on the OTC market, which may impact liquidity and investor perception.
• Reported a net loss of $359,000 for the nine months ended September 30, 2025, and a working capital deficiency of $2,711,000.
• Interest earned on marketable securities held in the trust account significantly decreased to $283,000 for the nine months ended September 30, 2025, from $840,000 in the prior year period.
• Identified a material weakness in internal controls over financial reporting related to accounting for founder share assignment and insufficient finance personnel.

Risks

• Inability to consummate the business combination with Tembo e-LV B.V. by the mandatory liquidation date of November 2, 2026.
• Failure to obtain required shareholder and regulatory approvals or satisfy other closing conditions for the business combination.
• Potential inability to obtain additional financing to support transaction expenses or post-closing operations, leading to insufficient funds to operate.
• Significant dilution of equity interest for initial public offering investors if additional ordinary shares are issued in a business combination.
• Subordination of rights of Class A ordinary shareholders if preference shares are issued with senior rights.
• Risk of a change of control affecting the ability to use net operating loss carry forwards or resulting in management changes.
• Adverse effects on prevailing market prices for Class A ordinary shares and/or warrants due to additional share issuance or significant indebtedness.
• Risks associated with issuing debt securities or incurring significant indebtedness, including default, acceleration of obligations, inability to obtain additional financing, and limitations on flexibility.
• Substantial doubt about the company's ability to continue as a going concern if a business combination is not completed or sufficient funds are not raised.
• Material weakness in internal controls over financial reporting related to accounting for founder share assignment and insufficient finance personnel, posing financial reporting risks.
• Reliance on third-party digital technologies for operations, exposing the company to cybersecurity threats without sufficient internal protection resources.
• The non-binding nature of Energi's proposal to acquire a stake in Tembo means it may not materialize, impacting the target's financial strength.

Future Outlook

The company intends to complete its initial business combination with Tembo e-LV B.V. before the new mandatory liquidation date of November 2, 2026. It also plans to apply for up-listing on the Nasdaq Stock Market in connection with the completion of the business combination. The company anticipates needing additional loans from third parties to fund its operations and the business combination, and the outstanding promissory notes are expected to convert to equity upon the closing of the Tembo transaction. There can be no assurance that the business combination will be consummated or that sufficient funds will be raised.

Management Comments

• We intend to complete an Initial Business Combination before the mandatory liquidation date.
• Company management believes that the financial statements included in this Form 10-Q present fairly, in all material respects, our financial position, results of operations and cash flows for the period presented.
• We will continue to improve these processes to ensure that the nuances of such significant or non-routine transactions are effectively evaluated in the context of the appropriate accounting standards.

Industry Context

This filing reflects the ongoing challenges faced by many Special Purpose Acquisition Companies (SPACs) in the current market environment, characterized by increased regulatory scrutiny (e.g., 2024 SPAC Rules), higher redemption rates, and difficulty in securing attractive business combinations. The significant redemptions and the need for multiple extensions highlight the difficulty in closing deals and maintaining investor confidence. The delisting from Nasdaq to OTC further underscores these challenges, as it often reduces liquidity and investor interest. The pivot in target industry focus (from healthcare to energy renewables) also suggests the competitive landscape for SPAC targets. The potential strategic acquisition of Tembo by Energi Holdings Limited could be a positive development for the target company, but also introduces another layer of complexity to the SPAC's proposed combination.

Comparison to Industry Standards

• The high redemption rates (1,148,799 shares for Third Extension, 711,333 shares for Fourth Extension) are consistent with broader SPAC market trends where investors often redeem shares rather than hold through extensions or uncertain business combinations, especially in a higher interest rate environment.
• The need for multiple extensions (Third and Fourth) to complete a business combination is common among SPACs struggling to find or close suitable deals within their initial timeframe.
• The delisting from Nasdaq to the OTC market is a significant negative deviation from industry standards for publicly traded companies, often indicating a failure to meet listing requirements and potentially leading to reduced investor access and liquidity.
• The reliance on sponsor loans and promissory notes from third parties to cover operating expenses and fund the business combination is typical for SPACs that have experienced substantial redemptions and have limited cash outside the trust account.
• The identified material weakness in internal controls over financial reporting is a governance concern that deviates from best practices for public companies, even for SPACs.

Management Changes

Corporate Governance

Related Party Transactions

• Sponsor loan from ARWM Inc Pte. Ltd. (third sponsor) with a balance of $836,000 as of September 30, 2025, extended to September 30, 2026.
• Transfer of 80% of founder shares and private warrants from original sponsor (Cactus Healthcare Management LP) to EVGI Ltd (first successor sponsor) on February 23, 2024.
• Transfer of 100% of EVGI Ltd's securities (founder shares and private warrants) to ARWM Pte Limited (third sponsor) on May 16, 2024, which also involved changes in management and the board of directors.
• Sponsor obligated to transfer 25,000 founder shares per month to non-redeeming shareholders from May 3, 2025, to October 2, 2025, if the business combination did not close by May 2, 2025, with 75,000 shares valued at $177,000 for Q3 2025 and 50,000 shares valued at $111,000 for Q2 2025.

Stakeholder Impact

• Shareholders: Significant redemptions have reduced the public float and trust account balance, impacting the capital available for the business combination. Non-redeeming shareholders received additional founder shares from the sponsor. Potential for further dilution if additional equity financing is required. Delisting to OTC may reduce liquidity and investor interest.
• Creditors: Promissory note holders (sponsors and third parties) face repayment risk if the business combination is not consummated, as notes would be repaid only from funds outside the trust account or forfeited.
• Management/Directors: Changes in management and the board occurred as part of sponsor alliance transactions. The CEO/CFO is responsible for addressing internal control weaknesses.

Next Steps

• Complete the business combination with Tembo e-LV B.V. before November 2, 2026.
• Obtain required shareholder and regulatory approvals (including SEC clearance of Form F-4) and satisfy other closing conditions for the business combination.
• Complete financial audits under PCAOB standards for the combined company.
• Negotiate and finalize the potential strategic acquisition of 51% of Tembo by Energi Holdings Limited.
• Address the material weakness in internal controls over financial reporting.
• Seek additional financing (loans or equity) to support transaction expenses and post-closing operations.
• Apply for up-listing on the Nasdaq Stock Market in connection with the completion of the business combination.
• Continue discussions with Energi Holding Limited regarding a potential extension of the maturity date for the $600,000 promissory note beyond November 2, 2025.

Key Dates

Recommendation

The company faces substantial doubt about its ability to continue as a going concern, has been delisted from Nasdaq to the OTC market, and has experienced significant shareholder redemptions, severely depleting its trust account. While a business combination agreement is in place and an extension has been secured, the financial position is precarious with a large working capital deficiency and reliance on further external financing. The identified material weakness in internal controls adds to governance concerns. These factors collectively indicate high risk and poor prospects for current shareholders, suggesting a 'sell' recommendation for risk-averse investors.

Keywords

SPAC, Cactus Acquisition Corp. 1 Ltd., Tembo e-LV B.V., Business Combination, De-SPAC, Electric Light Vehicles, Energy Renewables, SEC Filing, 10-Q, Financial Report, Liquidation Date, Share Redemptions, Nasdaq Delisting, OTC Market, Going Concern, Promissory Notes, Energi Holdings Limited, Corporate Governance, Internal Controls