8-K: Horizon Space SPAC Terminates Deal, Extends Deadline

Horizon Space Acquisition I Corp. terminated its business combination agreement with Squirrel HoldCo and secured a one-month extension to find a new target.

Summary

• The business combination agreement with Squirrel Enlivened Technology Co., Ltd (Squirrel HoldCo), originally dated September 16, 2024, was terminated by mutual agreement, effective October 3, 2025, with no termination fees due to either party.
• An amendment to the underwriting agreement was entered into on September 29, 2025, with Network 1 Financial Securities, Inc., converting the $2,415,000 deferred underwriting commission (3.5% of IPO gross proceeds) into 805,000 ordinary shares of the post-combination entity at $3.00 per share.
• The company secured a one-month extension to complete its initial business combination, shifting the deadline from September 27, 2025, to October 27, 2025.
• Horizon Space Acquisition I Sponsor Corp. (the Sponsor) deposited $120,000 into the trust account to fund this one-month extension.
• An unsecured promissory note for $120,000, dated September 30, 2025, was issued to the Sponsor, bearing no interest and convertible into private units at $10.00 per unit upon a business combination.

Sentiment

Score: 3

Explanation: The termination of a business combination agreement is a significant negative event for a SPAC, indicating a failure to achieve its primary goal. While an extension was secured, it comes with additional costs and further uncertainty, reflecting a challenging situation for the company.

Positives

• No termination fee was incurred by either party as a result of the business combination agreement's termination.
• The company successfully secured a one-month extension to continue searching for a suitable business combination target, preventing immediate liquidation.
• The conversion of deferred underwriting commission into shares at $3.00 per share provides a clear resolution for this liability, contingent on a successful business combination.

Negatives

• The termination of the business combination agreement with Squirrel HoldCo represents a significant setback, indicating a failure to complete the initial proposed merger.
• The company is incurring additional costs ($120,000) to extend its operational period, which adds to pre-merger expenses.
• The conversion of deferred underwriting commission into shares at $3.00 per share could lead to dilution for existing shareholders if the eventual merger valuation is higher.
• The company remains without a definitive business combination target, introducing further uncertainty about its future.

Risks

• Failure to consummate a business combination by the extended deadline of October 27, 2025, could lead to the liquidation of the trust account and return of funds to public shareholders.
• The Sponsor's promissory note for the extension fee is convertible into private units, which could dilute public shareholders upon the consummation of a business combination.
• Network 1 Financial Securities, Inc. forfeits its deferred underwriting commission and shares if the company fails to consummate a business combination and liquidates.
• The company faces the ongoing challenge of identifying and successfully negotiating a new business combination target within the remaining timeframe.

Future Outlook

The company has extended its deadline to October 27, 2025, to complete an initial business combination and is actively seeking a new target following the termination of its previous agreement. It may pursue further one-month extensions up to December 27, 2025, if funded by the Sponsor.

Management Comments

• The termination was by mutual agreement of the Company and Squirrel HoldCo pursuant to Section 10.1(a) of the Business Combination Agreement and no termination fee or other payment is due to either party from the other as a result of the termination.

Industry Context

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Related Party Transactions

• The Sponsor, Horizon Space Acquisition I Sponsor Corp., deposited $120,000 into the Trust Account and received an unsecured promissory note from the Company.
• The CEO, Mingyu (Michael) Li, signed on behalf of both the Maker (Company) and the Payee (Sponsor) for the promissory note, indicating a related party transaction.

Stakeholder Impact

• Shareholders face increased uncertainty due to the terminated merger and the need to find a new target. There is potential for dilution from the conversion of the promissory note and deferred underwriting commission into shares.
• Underwriters (Network 1 Financial Securities, Inc.) will receive deferred underwriting commission in shares of the post-combination entity at $3.00 per share, but risk forfeiture if no business combination occurs.
• The Sponsor provided funding for the extension and holds a convertible promissory note, indicating continued commitment but also exposure to the company's success in finding a target.

Next Steps

• Continue to seek and identify a new target for an initial business combination by October 27, 2025.
• File a registration statement with the SEC for the Deferred Underwriting Shares in connection with the initial business combination.
• Potentially pursue further one-month extensions up to December 27, 2025, subject to additional funding by the Sponsor.

Key Dates

Recommendation

The termination of the initial business combination agreement creates significant uncertainty and indicates a failure to execute the company's primary objective. While an extension was secured, it comes with additional costs and potential dilution, and the company is now back to searching for a new target. This situation typically leads to a decline in investor confidence and share price for SPACs, making a 'sell' recommendation appropriate for risk-averse investors.

Keywords

SPAC, Horizon Space Acquisition I Corp, HSPO, Business Combination, Termination, Underwriting Agreement, Extension, Promissory Note, De-SPAC, Merger, Acquisition, Network 1 Financial Securities, Squirrel Enlivened Technology