10-Q: Finnovate Completes Scage Merger, Faces Nasdaq Delisting

Finnovate Acquisition Corp. successfully completed its business combination with Scage, a zero-emission solution provider, on June 27, 2025, despite prior delisting from Nasdaq and ongoing liquidity concerns.

Summary

• Finnovate Acquisition Corp. (FNVT) completed its business combination with Scage, a zero-emission solution provider in China, on June 27, 2025.
• Scage Future (Pubco) commenced trading on Nasdaq under symbols SCAG and SCAGW on June 30, 2025.
• The initial business combination agreement valuation of $1.0 billion for Scage was reduced to $800 million via an amendment on June 18, 2024.
• The company experienced multiple extensions of its business combination deadline, from May 8, 2023, to November 8, 2025, with contributions from the Sponsor and Sunorange to the Trust Account.
• Significant shareholder redemptions occurred at each extension vote, reducing Class A Ordinary Shares subject to possible redemption from 12,626,668 in May 2023 to 742,834 in May 2025.
• The company was delisted from Nasdaq on November 12, 2024, due to failure to meet listing requirements, including the public shareholders requirement and the deadline for completing a business combination. Securities now trade on OTC Markets.
• For the three months ended March 31, 2025, the company reported a net income of $75,299, a decrease from $242,095 in the same period of 2024.
• Operating, general and administrative expenses significantly decreased to $5,793 in Q1 2025 from $321,203 in Q1 2024.
• Interest earned on investments held in the Trust Account also decreased to $81,079 in Q1 2025 from $563,129 in Q1 2024, reflecting reduced funds in the Trust Account due to redemptions.
• The company had a working capital deficit of $5,222,899 as of March 31, 2025.
• Multiple promissory notes from related parties (Sponsor, Sunorange) and Scage were outstanding, totaling over $3 million, to fund working capital and Trust Account extensions.

Sentiment

Score: 3

Explanation: While the business combination was ultimately completed, the company faced significant challenges including Nasdaq delisting, substantial shareholder redemptions, reduced valuation, and identified internal control weaknesses. The completion of the merger is a positive, but the path to get there and the underlying financial health of the SPAC itself were highly problematic.

Positives

• Successful consummation of the Business Combination with Scage on June 27, 2025.
• Scage Future (Pubco) commenced trading on Nasdaq under SCAG and SCAGW on June 30, 2025.
• Significant reduction in operating, general and administrative expenses from $321,203 in Q1 2024 to $5,793 in Q1 2025.
• Net income for Q1 2025 was $75,299.

Negatives

• Delisted from Nasdaq on November 12, 2024, due to failure to meet listing requirements, including the public shareholders requirement and the deadline for completing a business combination.
• Significant shareholder redemptions at each extension vote, reducing the Trust Account balance from $175.95 million initially to $10.42 million by March 31, 2025.
• Net income decreased from $242,095 in Q1 2024 to $75,299 in Q1 2025.
• Interest earned on Trust Account investments decreased substantially from $563,129 in Q1 2024 to $81,079 in Q1 2025 due to redemptions.
• The company had a working capital deficit of $5,222,899 as of March 31, 2025.
• Identified material weaknesses in internal control over financial reporting related to complex financial instruments, professional fees, prepaid expenses, and related party payables/notes.
• The business combination consideration was reduced from $1.0 billion to $800 million.

Risks

• Substantial doubt about the Company's ability to continue as a going concern due to liquidity concerns and mandatory liquidation if a business combination is not completed within the Combination Period (extended to November 8, 2025).
• Results of operations and ability to complete an initial Business Combination may be adversely affected by economic uncertainty and volatility in financial markets, including downturns, increases in oil prices, inflation, interest rates, supply chain disruptions, declines in consumer confidence, ongoing effects of the COVID-19 pandemic, and geopolitical instability, such as the military conflicts in Ukraine and the Middle East.
• The company is subject to all risks associated with early-stage and emerging growth companies.
• If the company fails to complete a Business Combination within the Combination Period, warrants will expire worthless.
• The Sponsor has agreed to be liable for claims by third parties that reduce Trust Account funds below certain thresholds, but this liability has exceptions.
• The company's financial statements may not be comparable to other public companies due to its election to use the extended transition period for complying with new or revised financial accounting standards as an emerging growth company.

Future Outlook

The company successfully completed its business combination with Scage on June 27, 2025, and Scage's ADSs and warrants commenced trading on Nasdaq on June 30, 2025. This marks the transition from a blank check company to an operating entity. However, the company previously faced significant challenges, including Nasdaq delisting and ongoing liquidity concerns, which raised substantial doubt about its ability to continue as a going concern if the business combination had not been completed. The future outlook is now tied to Scage's performance as a zero-emission solution provider.

Management Comments

• "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 financial statements."
• "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."

Industry Context

The successful completion of the business combination with Scage positions the combined entity within the rapidly evolving zero-emission vehicle (NEV trucks) and e-fuel solutions sector in China. This industry is characterized by significant growth potential driven by environmental regulations and technological advancements, but also intense competition and capital requirements. The delisting from Nasdaq prior to the merger completion highlights the challenges faced by SPACs in meeting listing requirements and consummating deals within specified timelines, a common theme in the SPAC market.

Comparison to Industry Standards

• The reduction of the business combination valuation from $1.0 billion to $800 million suggests a re-evaluation of Scage's market value, potentially reflecting market conditions or due diligence findings, which could be a negative signal compared to initial expectations for SPAC mergers.
• The repeated extensions of the business combination deadline and subsequent significant shareholder redemptions are common in the SPAC industry, often indicating difficulties in finding suitable targets or securing investor confidence, and typically result in a smaller post-merger entity than initially envisioned.
• The delisting from Nasdaq due to non-compliance with listing rules (e.g., minimum public shareholders, annual meeting) is a severe negative outcome for a SPAC, indicating a failure to maintain market standards and potentially limiting access to capital and investor visibility compared to peers that successfully maintain their listings.

Management Changes

Corporate Governance

Legal Proceedings

• To the knowledge of management, there is no material litigation currently pending or contemplated against the company, any of its officers or directors in their capacity as such or against any of its property.

Related Party Transactions

• Working Capital Loan from Sponsor: Forgiven on May 8, 2023, and reclassified to additional paid-in capital.
• June 2023 Promissory Note: Up to $1,200,000 issued to the Sponsor, non-interest bearing, convertible into warrants, $1,100,000 outstanding as of March 31, 2025.
• November 2023 Promissory Note: Up to $1,500,000 issued to Sunorange Investment for working capital, non-interest bearing, $1,204,630 outstanding as of March 31, 2025.
• May 2024 Promissory Note: Up to $225,000 issued to the Sponsor for Trust Account contributions, non-interest bearing, $225,000 outstanding as of March 31, 2025.
• November 2024 Promissory Note: Up to $259,588 issued to the Sponsor for Trust Account contributions, non-interest bearing, $173,612 outstanding as of March 31, 2025.
• Administrative Services Agreement: Company paid $3,000 per month to the Sponsor for office space and support, terminated as of September 30, 2024.
• Sponsor Distribution: On January 3, 2025, the Sponsor distributed its Class A Ordinary Shares, Class B Ordinary Share, and Private Placement Warrants to its constituent members, including company officers.

Stakeholder Impact

• Shareholders: Public shareholders experienced significant redemptions at each extension vote, reducing their ownership stake. Those who remained through the merger now hold shares in Pubco (Scage Future) trading on Nasdaq. The delisting from Nasdaq prior to the merger likely impacted liquidity and visibility for remaining shareholders.
• Sponsor/Sunorange: Provided significant financial support through promissory notes and contributions to the Trust Account to facilitate extensions and the business combination. Sunorange gained significant influence and ownership through the Investment Agreement and management changes.
• Management: Experienced a complete change in key executive roles and board composition as part of the Sunorange Investment.
• Creditors: The company's going concern risk and working capital deficit highlight potential challenges for creditors, although promissory notes from related parties provide some liquidity.
• Scage: Successfully completed its business combination, gaining a Nasdaq listing and capital, albeit at a reduced valuation.

Next Steps

• Scage ADSs and assumed warrants commenced trading on Nasdaq under SCAG and SCAGW on June 30, 2025.
• Management will continue to enhance internal controls and procedures to address identified material weaknesses.
• The combined entity will operate as Scage, a zero-emission solution provider.

Key Dates

Keywords

SPAC, Business Combination, Scage, Zero-emission vehicles, NEV trucks, E-fuel solutions, Nasdaq delisting, Trust Account, Shareholder redemptions, Going concern, Financial results, Quarterly report, FINNOVATE ACQUISITION CORP.