20-F: Scage Future 20-F: NEV Growth, Going Concern Doubts

Scage Future reports significant revenue growth in 2025 driven by NEV sales and components, but faces substantial doubt about its ability to continue as a going concern due to persistent net losses and negative operating cash flows.

Summary

• Scage Future, a zero-emission solution provider in China, focuses on heavy-duty NEV trucks and e-fuel solutions, with operations commencing in 2019.
• The company consummated a Business Combination on June 27, 2025, and its ADSs and Assumed Warrants began trading on Nasdaq on June 30, 2025, under symbols SCAG and SCAGW.
• Net revenues increased significantly to US$11.1 million for the year ended June 30, 2025, up from US$6.1 million in 2024 and US$0.4 million in 2023.
• Despite revenue growth, the company incurred a net loss of US$13.1 million in 2025, compared to US$6.0 million in 2024 and US$6.6 million in 2023.
• Net cash used in operating activities was US$5.9 million in 2025, US$6.2 million in 2024, and US$4.9 million in 2023.
• The company reported a working capital deficit of US$20.4 million as of June 30, 2025, and an accumulated deficit of US$40.2 million.
• Scage Future has a limited operating history and its business model has yet to be fully tested, with continuous operations dependent on securing sufficient external financing.
• The company has a product portfolio including plug-in hybrid dump trucks (Dragon King, Sky Turtle), plug-in hybrid trucks (Galaxy II), autonomous tractor trailers (Q-truck), all-electric semi-tractor trucks (Andromeda), and hydrogen-electric hybrid semi-tractor trucks (Andromeda+), along with farm tractors.
• As of June 30, 2025, 103 Q-trucks and 3 Galaxy II models had been delivered, with 103 Q-truck and 3 Galaxy II orders received.
• The company plans to launch Andromeda++ by 2025, featuring lower operating costs and a longer lifespan for its hydrogen system, with expected cost reductions of over 30%.

Sentiment

Score: 3

Explanation: The company exhibits strong technological innovation and market growth potential in a rapidly expanding industry. However, persistent and increasing net losses, negative operating cash flows, a significant working capital deficit, and an explicit 'going concern' warning from auditors indicate severe financial distress and high operational risk. The default on a promissory note further exacerbates these concerns, outweighing the positive aspects of revenue growth and strategic plans.

Positives

• Net revenues increased significantly by 82% from US$6.1 million in 2024 to US$11.1 million in 2025, primarily driven by NEV components sales.
• The company has a comprehensive vehicle portfolio addressing diverse commercial transportation needs, including all-electric, plug-in hybrid, and hydrogen-powered fuel cell trucks.
• Proprietary technologies, including electric control and steering systems, intelligently distributed hybrid power (IDHP) system, and solid oxide electrolysis cell (SOEC) hydrogen production technology, underpin competitiveness.
• Strong R&D capabilities with 39 full-time staff and an average of 15 years of industry experience, leading to continuous innovation.
• Established full industry supply chain coverage with well-known global partners like CATL, Bosch, and Wabco, ensuring stable access to critical components.
• Strategic collaborations with vehicle manufacturers (XCMG, C&C Trucks) ensure stable manufacturing and delivery capabilities.
• Plans to establish a manufacturing facility with a capacity of 50,000 units by 2026, expected to raise profit margins by 8% to 15%.
• Commitment to building a network of 60 hydrogen refueling and electricity charging stations by 2027 and 400 by 2030, leveraging SOEC technology for on-site hydrogen production.
• Development of zero-carbon fleet transportation model utilizing automated intermodal networks for improved efficiency and reduced costs.
• The company has successfully completed the Business Combination and listed on Nasdaq, providing access to public capital markets.

Negatives

• Incurred a net loss of US$13.1 million for the year ended June 30, 2025, an increase from US$6.0 million in 2024, and has not been profitable since inception.
• Negative net cash flows from operating activities of US$5.9 million in 2025, US$6.2 million in 2024, and US$4.9 million in 2023.
• Substantial doubt about the company's ability to continue as a going concern, as noted in the audited financial statements for 2025 and 2024, due to net losses, negative operating cash flow, and a significant working capital deficit of US$20.4 million.
• Gross loss of US$0.7 million (6.4% margin) in 2025, compared to a gross profit of US$0.5 million (8.8% margin) in 2024, primarily due to lower profit margins on NEV components and low-price sales of Dragon King vehicles.
• General and administrative expenses increased significantly by 177.2% to US$10.7 million in 2025, largely due to professional service fees and listing bonuses associated with the Business Combination.
• Limited operating history in the heavy-duty commercial NEV and e-fuel solution industries makes future revenue and expense budgeting difficult.
• Dependence on a limited number of vehicle models and customers, with non-binding memoranda of understanding and letters of intent not guaranteed to convert into actual orders.
• Defaulted on the first installment of a promissory note agreement with EarlyBirdCapital, Inc. (EBC), leading to an increased interest rate of 15% per annum on the outstanding principal of US$1,009,375.
• Identified two material weaknesses in internal control over financial reporting as of June 30, 2025 and 2024: insufficient financial reporting personnel and lack of sufficient IT general controls.

Risks

• Limited operating history and significant challenges in the heavy-duty commercial NEV and e-fuel solution industries make business evaluation difficult and increase investment risk.
• Inability to accurately estimate demand for NEV trucks could lead to inefficiencies and hinder revenue generation.
• Need to raise additional funds, which may not be available on favorable terms or at all, potentially diluting existing shareholders or imposing restrictive covenants.
• Substantial doubt about the ability to continue as a going concern, which could limit access to additional funding.
• Dependence on a limited number of vehicle models, making sales and financial condition vulnerable if a model is not well-received.
• Manufacturing in collaboration with partners is subject to risks such as production delays, capacity constraints, disputes, and quality control issues.
• Uncertainty in converting non-binding customer agreements into actual orders, and risk of order cancellations.
• Significant delays in the design and delivery of trucks could harm business and prospects.
• Building a network of hydrogen fueling stations requires substantial financial and management resources, with risks related to strategic placement, capacity, security, and regulatory compliance.
• Inability to produce or source hydrogen needed for fueling stations could jeopardize the business model.
• Barriers to commercializing trucks in the heavy-duty trucking industry, including capital requirements, long lead times, and regulatory hurdles.
• Future growth is dependent on customer willingness to adopt NEV trucks, which is influenced by factors like public perception, cost, infrastructure availability, and government incentives.
• Performance issues or defects in trucks could adversely affect sales, reputation, and lead to recalls or liability claims.
• Adverse changes in cooperation with business partners could harm business, including termination of agreements or disputes over intellectual property.
• Intense competition in the zero-emission transportation industry from both new and established automakers with greater resources.
• Inadequate availability of hydrogen or failure to secure e-fuel supply at competitive prices or with a competitive emissions profile.
• Risks associated with construction, cost overruns, and delays in building hydrogen infrastructure.
• Dependence on executive officers, key employees, and qualified personnel, with potential disruptions if services are lost.
• Challenges in developing complex technology and operating systems, both in-house and with vendors, which may not be successful or meet requirements.
• Inability to expand intellectual property portfolio or develop necessary technology.
• Material losses and costs from warranty claims, product recalls, and product liabilities.
• Developments in alternative technologies (e.g., advanced diesel) could adversely affect demand for NEV trucks.
• Increases in costs, disruption of supply, or shortage of raw materials (e.g., lithium-ion battery cells) could harm business.
• Limited insurance coverage exposes the company to significant costs and business disruption.
• Brand and reputation vulnerable to negative publicity, misconduct allegations, or adverse events related to NEV trucks or hydrogen energy.
• Subject to claims, disputes, lawsuits, and other legal/administrative proceedings.
• Risks associated with strategic alliances or acquisitions, including sharing proprietary information, non-performance by third parties, and integration challenges.
• Unauthorized control or manipulation of vehicle systems could result in loss of confidence and harm business.
• Interruption or failure of information technology and communications systems could impact service provision.
• Need to defend against intellectual property infringement claims, which may be costly and time-consuming.
• Inability to protect intellectual property rights could adversely affect reputation and disrupt business.
• Challenges and risks in expanding into overseas markets, including inability to attract customers, competitive conditions, regulatory compliance, and exchange rate fluctuations.
• Research and development efforts may not yield expected results, leading to significant expenditures without corresponding benefits.
• Subject to various environmental, safety, and other laws and regulations that could impose substantial costs and delays.
• Unavailability, reduction, or elimination of government and economic subsidies could materially affect business.
• Risks associated with autonomous driving technology, including safety concerns and liability.
• Natural disasters, widespread health epidemics (like COVID-19), or geopolitical events could materially and adversely affect business operations and financial performance.
• Failure to maintain an effective system of internal control over financial reporting could lead to inaccurate financial results or fraud, adversely affecting investor confidence and stock price.
• Subject to anti-corruption, anti-bribery, anti-money laundering, financial and economic sanctions laws, with non-compliance leading to fines and penalties.
• PRC government's significant authority to influence China operations, potentially changing economic, political, or social conditions.
• Recent regulatory developments in China regarding overseas listings and data security could limit capital raising and affect business value.
• Potential delisting from Nasdaq under the Holding Foreign Companies Accountable Act (HFCAA) if PCAOB cannot inspect auditors for two consecutive years.
• Severe or prolonged downturn in the global or Chinese economy could adversely affect business.
• Uncertainties in the PRC legal system and changes in interpretation/enforcement of laws.
• Difficulties in effecting service of legal process, enforcing foreign judgments, or conducting investigations within China.
• Increased regulatory scrutiny and negative publicity surrounding China-based companies listed in the U.S.
• Tension in international trade and rising political tension, particularly between the United States and China, may adversely impact business.
• Reliance on dividends and distributions from PRC subsidiaries, which may be limited by PRC regulations on capital transfer and currency exchange.
• PRC regulations on loans and direct investment by offshore holding companies may delay or prevent use of offshore funds.
• PRC regulations regarding registration requirements for employee stock ownership plans or share option plans could lead to penalties.
• Classification as a PRC resident enterprise for tax purposes could result in unfavorable tax consequences for the company and non-PRC shareholders.
• Uncertainties with respect to indirect transfers of equity interests in PRC resident enterprises by non-PRC holding companies.
• Custodians or authorized users of non-tangible assets (chops and seals) may fail responsibilities or misuse assets.
• Fluctuations in exchange rates could adversely affect results of operations and investment value.
• Enforcement of PRC Labor Contract Law and other labor-related regulations may adversely affect business and results of operations.
• Price volatility of securities due to market reaction to Business Combination, general economic conditions, and sales by shareholders.
• Redemption of unexpired Assumed Warrants prior to exercise at a disadvantageous time for holders.
• Foreign private issuer status means less stringent U.S. proxy rules and reporting obligations.
• Difficulties for shareholders in protecting interests through U.S. courts due to Cayman Islands and PRC legal differences.
• Anti-takeover provisions in A&R MAA could delay or discourage takeover attempts.
• A market for securities may not develop or be sustained, affecting liquidity and price.
• If securities or industry analysts cease coverage or change recommendations adversely, price and trading volume could decline.
• Holders of ADSs may not have the same voting rights as registered shareholders or receive voting materials in time.
• Company and depositary bank can amend or terminate the deposit agreement without prior consent of ADS holders.
• Limitations on transfer of ADSs.
• ADS holders might not receive distributions if unlawful or impracticable.
• Rights to pursue claims against the depositary bank are limited by deposit agreement terms, including potential waiver of jury trial.
• Additional disclosure requirements and regulatory scrutiny from the SEC due to China-based operations could increase compliance costs or suspend future offerings.
• Principal shareholders, including the Founder, can exert significant influence over corporate matters, potentially depriving other shareholders of a premium.
• Issuance of additional share capital will dilute other shareholders.
• No intention to pay dividends before becoming profitable, relying on share price appreciation for returns.
• Significant portion of outstanding shares subject to lock-up, but eventual release could cause price drop.
• Reduced reporting and disclosure requirements as an emerging growth company may make securities less attractive to investors.
• Increased costs and management time required for operating as a public company.
• Potential classification as a Passive Foreign Investment Company (PFIC) for U.S. federal income tax purposes could lead to adverse tax consequences for U.S. Holders.
• If ADSs or Warrants are not eligible for deposit and clearing within DTC facilities, transactions may be disrupted.

Future Outlook

Scage Future plans to capitalize on increasing governmental support and customer demand for zero-emission vehicles by promoting NEV trucks and innovating hybrid-powered models compatible with advanced driving technologies. The company intends to focus R&D on high-growth vehicle models and application scenarios, including long-haul freight, port operations, and specialty vehicles. A key strategic initiative is to establish a manufacturing facility with a capacity of 50,000 units by 2026, aiming to increase profit margins by 8% to 15%. Customer acquisition will be enhanced through deeper engagement with corporate clients, tailored energy solutions, and the construction of 60 hydrogen refueling and electricity charging stations by 2027, expanding to 400 by 2030. Global expansion into the Middle East, Southeast Asia, Central Asia, Europe, and North America is also planned, along with selective pursuit of cooperation, investment, and acquisition opportunities in core vehicle components, manufacturing, and e-fuel supply facilities.

Management Comments

• Our mission is to decarbonize and power the global commercial transportation industry with our next-generation zero-emission technologies and e-fuel solutions, championing a sustainable future.
• We believe that our advanced technologies allow us to develop vehicles capable of delivering optimal function in collaboration with vehicle manufacturers.
• Our platform-based vehicle design and development system will enable us to cost-efficiently develop a wide range of vehicle models and provide customized solutions for our customers in collaboration with vehicle manufacturers.
• Quality is of utmost importance to our business; we implement strict quality control in our R&D and supply chain processes.
• Our R&D capabilities form the cornerstone of our competitiveness and long-term growth.
• We are confident that our management team will continue to lead us to innovate, excel and succeed in our industry.
• We expect that our gross margin will improve as the scale of economy of our business increases in accordance with the increase in our vehicle and component sales.
• We intend to pursue private financing of debt or equity to improve liquidity and fund operations.

Industry Context

The heavy-duty commercial NEV market is relatively new and untested, but is experiencing rapid growth driven by global decarbonization efforts and favorable government policies, such as China's 'double carbon' policy and U.S. tax credits for commercial NEVs. The market size in China grew at a CAGR of 127.9% from 2018-2022 and is projected to grow at 65.9% from 2023-2027. Globally, it grew at 131.3% from 2018-2022 and is expected to grow at 69.8% from 2023-2027. Scage Future operates in an intensely competitive environment with both established diesel vehicle manufacturers (Daimler, Ford, Volvo) and disruptive NEV manufacturers (Nikola, Arrival, Rivian, Workhorse, BYD Motors). The industry is shifting towards integrated intelligent commercial NEV solutions, encompassing the entire value chain from design to after-sales services, with a focus on low-carbon and zero-carbon fuels.

Comparison to Industry Standards

• Galaxy II truck is noted as one of the earliest hybrid heavy-duty NEV trucks commercialized in China, indicating an early mover advantage in a nascent market.
• Dragon King's average diesel consumption is 25% less than certain similar-sized, diesel-fueled off-load trucks, suggesting a competitive fuel efficiency advantage.
• EV-2604 Electric Farm Tractor's electric drive system achieves a comprehensive efficiency of ~80%, far surpassing the 35-40% overall efficiency of traditional diesel tractors, leading to energy costs approximately one-third of diesel-powered equipment for the same workload.
• The planned manufacturing facility with a capacity of 50,000 units by 2026, focusing on whole vehicles and high-value key components, is anticipated to raise profit margins by 8% to 15%, distinguishing the company from industry peers.
• The company's SOEC hydrogen production technology is highlighted for its more efficient hydrogen production system, longer usage cycle, and reduced production costs compared to yttria-stabilized zirconia materials-based SOEC technology.

Management Changes

Corporate Governance

Legal Proceedings

• On June 26, 2025, the Company entered into two Promissory Note Agreements with EarlyBirdCapital, Inc. (EBC) for an aggregate principal amount of $2,518,750.
• On September 26, 2025, the first installment of $504,685.50 plus interest under the second Promissory Note Agreement became due.
• On October 20, 2025, EBC's counsel sent a letter stating that the failure to make payment constituted an Event of Default, resulting in the outstanding principal of $1,009,375 bearing a default interest rate of 15% per annum from September 26, 2025.
• EBC's counsel further stated intent to commence legal proceedings if payment is not made by October 31, 2025.

Related Party Transactions

• Mr. Chao Gao (Principal Shareholder, Chairman, CEO) provided US$2,653,042 in loans to the Group in 2025 and received US$666,255 in repayments. He also assigned US$2,000,000 in loans from two original creditors to himself, becoming the sole creditor for this amount as of June 20, 2025.
• Mr. Jimin An (Director and CEO of subsidiaries) had US$166,018 in expenses paid on behalf of the Group in 2025, received US$85,292 in reimbursements, provided US$1,427,027 in loans, and received US$1,303,661 in loan repayments.
• Mr. Ziqian Guan (Director) had US$116,661 in expenses paid on behalf of the Group in 2025, received US$103,429 in reimbursements, and received US$23,564 in advances for daily operations.
• Mr. Yuanchi Guo (Director) had no significant transactions in 2025, but received US$11,855 for expenses paid on behalf of the Group in 2024.
• Nanjing Feiqizhi Logistics Technology Co., Ltd. (shared supervisor) had no payments for purchases in 2025 but received US$14,139 in rent from the Group.
• Finnovate Sponsor L.P. (Sponsor of Finnovate) is owed US$1,269,819 for payments for daily operations as of June 30, 2025.
• The Group provided interest-free loans to third parties (business partners of an affiliate of a Finnovate consultant) totaling US$1,409,774 in 2024, which were fully settled by June 30, 2025.
• Scage International accepted an unsecured promissory note of up to US$1,500,000 from Finnovate for working capital needs, with US$200,000 outstanding as of June 30, 2024, and nil as of June 30, 2025.

Stakeholder Impact

• Shareholders face significant risk of investment loss due to the 'going concern' doubt, persistent net losses, and potential dilution from future capital raises.
• Employees may face uncertainty regarding job security and future compensation given the company's financial challenges, although competitive compensation packages are offered.
• Customers may experience concerns regarding the long-term viability of the company and its ability to fulfill warranty obligations or provide ongoing services, despite current efforts to enhance customer support.
• Suppliers may face increased credit risk and potential delays in payments, especially given the company's working capital deficit and reliance on a single source for many components.
• Creditors, particularly EarlyBirdCapital, Inc., are directly impacted by the default on promissory notes, leading to increased interest rates and potential legal action, highlighting heightened credit risk.

Next Steps

• Continue to innovate hybrid-powered models compatible with assisted, fleet, and autonomous driving technologies.
• Establish a manufacturing facility with a capacity of 50,000 units by 2026, focusing on whole vehicles and high-value key components.
• Enhance customer acquisition by deepening engagement with industry-leading corporate customers and providing tailored services.
• Construct 60 hydrogen refueling and electricity charging stations by 2027 and 400 by 2030.
• Establish more than 300 direct stores and outposts across China by 2027.
• Establish five to 10 experience stores and service centers in China, Mongolia, and Saudi Arabia, with a goal of 200 worldwide by 2027.
• Expand global footprint into international markets, specifically the Middle East and Southeast Asia.
• Selectively pursue strategic alliance, investment, and acquisition opportunities across the heavy-duty NEV market value chain.
• Remediate identified material weaknesses in internal control over financial reporting by hiring qualified accounting personnel, implementing training, and setting up IT general control frameworks.
• Address the default on the Promissory Note Agreement with EarlyBirdCapital, Inc. to avoid further legal proceedings.

Key Dates

Recommendation

The filing presents a dire financial situation for Scage Future. The explicit 'substantial doubt about our ability to continue as a going concern' from auditors, coupled with persistent and increasing net losses (US$13.1 million in 2025), negative operating cash flows, and a significant working capital deficit (US$20.4 million), indicates severe financial instability. The default on a promissory note to a key financial advisor (EarlyBirdCapital, Inc.) further underscores liquidity issues and raises serious questions about the company's ability to manage its obligations. While revenue growth is positive, it is overshadowed by deteriorating profitability and fundamental solvency concerns. The company's reliance on future, uncertain financing to continue operations, combined with the high-risk nature of its early-stage business model in a competitive industry, makes the stock a 'strong sell' for any seasoned investor or institution. The risk of complete loss of investment is substantial.

Keywords

Heavy-duty NEV trucks, E-fuel solutions, Zero-emission vehicles, Hydrogen fuel cells, Electric vehicles, Commercial transportation, China market, SOEC hydrogen production, Autonomous driving, Logistics, Mining, Port transportation, Corporate governance, SEC filing, Nasdaq listing, Going concern, Financial performance, Capital raise, Risk management