Finnovate Acquisition Corp. (FNVTF, FNVWF)

Finnovate Acquisition Corp. 10-K Deep Dive

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Finnovate Acquisition Corp. (Nasdaq: FNVT, FNVTW, FNVTU) is a blank-check company (SPAC) formed in March 2021 in the Cayman Islands. Its sole business purpose: complete a merger, share exchange, or similar business combination by November 8, 2025 (the Combination Period). This post unpacks the Company’s 10-K for the fiscal year ended December 31, 2024.

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1. Business Overview (Item 1)

Structure and Strategy
Finnovate is led by CEO and Chairman Calvin Kung and CFO Wang Chiu (Tommy) Wong, joined by directors Chunyi (Charlie) Hao, Tiemei (Sarah) Li and Sanjay Prasad—each deemed independent under Nasdaq rules.

Capital Raise and Trust Account
• November 8, 2021 IPO: 15 million Units at $10 each = $150 million • Over-allotment (Nov 12, 2021): +2.25 million Units = $22.5 million
• Private placement of warrants: $8.8 million
• Trust Account: $175.95 million (all IPO and warrant proceeds ➔ trust)
• Investments: short-term U.S. government securities and money-market funds maturing within 185 days (liability-free).
• Nov 1, 2023: Trust investments liquidated; now held in interest-bearing deposit to prevent Investment Company Act risk.

Redemption and Liquidation Rights
Public shareholders may redeem their Class A shares for their pro-rata share of the Trust (≈$11.80 per share as of 12/31/2024). If the SPAC fails to merge by the deadline, all Public Shares will redeem at that price and the SPAC will liquidate. Insider redemption rights are waived on Founder Shares.

2. Financial Condition (Items 7 & 8)

Balance Sheet Highlights (12/31/2024 vs. 2023)

• Cash outside trust: $769 vs. $37
• Trust Account:
• 2024: $10,208,877 (10.21 million)
• 2023: $51,200,344
• Working Capital Deficit: $(5.09 million) vs. $(2.80 million)
• Promissory Notes (related parties) total ≈$2.89 million (for extension advances and working capital)
• Total liabilities: $5.11 million vs. $2.83 million

Income Statement

• 2024 Net Loss: $(215,486)
• 2023 Net Income: $2.49 million
• 2024 Expenses: $1.62 million (G&A)
• 2024 Interest Income: $1.41 million (Trust) + $468 (bank)

Cash Flows

• Operating: $(0.88 million) reflecting net loss & operating working capital changes
• Investing: +$42.4 million (redeeming $43.1 million from Trust for redemptions; extension deposits $0.67 million)
• Financing: $(41.5 million) for redemptions, offset by related-party advances $1.55 million

Critical Concern: Substantial doubt about going concern. SPAC funds are locked in trust—only merger or liquidation can unlock them. Outside trust, the Company has virtually no liquidity.

3. Recent Key Transactions

Extension Votes & Redemptions

1. May 8, 2023: Extended merger deadline to May 8, 2024. 12.63 million Public Shares redeemed at ~$10.50/share ➔ $132.6 million redeemed.
2. May 2, 2024: Extended deadline to Nov 8, 2024. 2.37 million redeemed at $11.33/share ➔ $26.9 million.
3. Nov 6, 2024: Extended to May 8, 2025. 1.38 million redeemed at $11.68/share ➔ $16.16 million.
4. May 6, 2025: Extended to Nov 8, 2025. 0.74 million redeemed at $12.18/share ➔ $9 million.

Sponsor Distributions & Notes

• Sponsor forgave initial $250k IPO loan.
• June 2023 Promissory Note: up to $1.2 million of extension deposits convertible to warrants; $1.10 million outstanding 12/31/2024.
• Nov 2023 Note: $1.50 million advances for working capital; $1.20 million outstanding.
• Jan 2024 Note: up to $1.50 million from Scage for working capital; $0.32 million outstanding.
• May 2024 Note: up to $225k deposited for May extension.
• Nov 2024 Note: up to $259.6k for Nov extension; $43.3k deposited.

4. Scage Business Combination (Item 1)

Overview
On August 21, 2023, Finnovate entered into a business combination agreement to merge with Scage International Limited, a Cayman-listed Chinese e-truck and e-fuel solutions provider.

Deal Terms

• Aggregate Merger Consideration: $800 million (↓20% from $1 billion), subject to net debt adjustment.
• Structure: Reverse-merger via two-step merger (First Merger into Scage, Second Merger into Finnovate).
• Share Exchange: Scage shareholders and warrant holders receive Pubco ordinary shares and warrants at $11.50 exercise price.
• Preferred Shares Conversion: Scage preferred shares convert into Pubco ordinary shares.
• ADS Facility: Permits U.S. trading in ADSs.

Approvals & Conditions

• Requires shareholder votes of both companies & Nasdaq listing approval.
• Must maintain net tangible assets ≥ $5 million or be exempt from SEC penny-stock rules.
• Scage must complete a reorganization by July 20, 2024 (extended from Sept 30, 2023).
• Outside date extensions: Oct 31, 2024 and March 31, 2025 (now July 31, 2025).
• Closing expenses capped at $9 million (before July 31, 2025).

Related Agreements

• Lockup Agreements: 36-month and 6-month lockups for Scage insiders and other shareholders
• Shareholder/Sponsor Support: Commitments to vote in favor of the transaction
• Non-Competition/Non-Solicitation: 3-year covenants for Scage officers and key shareholders
• Insider Letter Amendment: Adds Pubco & Scage to IPO-era insider waiver.

Closing Status

• March 28, 2025: Special meeting approved the Scage business combination; 0.856 million shares tendered for redemption.
• Final share redemption price set 2 business days prior to deal close.
• Closing remains subject to regulatory, exchange and shareholder approvals.

5. Risk Factors (Item 1A)

Major risks highlighted in the 10-K include:

1. SPAC Risk & Return: SPACs have historically underperformed IPOs. High fees, redemption pressures and deal uncertainty penalize returns.
2. Deal Uncertainty/Timeline: Multiple deadline extensions risk de-SPAC fatigue and working capital constraints; if no deal by Nov 2025, the SPAC will liquidate.
3. Cash Constraints: Only ~$770 outside trust; relies on related-party advances for expenses. Operating loss risks running out of cash.
4. No Revenue/No Operating Assets: The SPAC owns no business until merger; no operations or cash flow (only interest in trust).
5. Redemption Dilution: Large redemptions shrink the trust account, raise per-share cash value but reduce new-co financing.
6. Sponsor Conflicts: Sponsor benefits from warrants and Founder Shares; may push a lower-value deal.
7. Regulatory: SECs 2024 SPAC rules & CFIUS reviews could delay or restrict the deal with a Chinese issuer.
8. Market Conditions: Inflation, interest rates, supply chains, geo-political tensions (Ukraine, Middle East) and EV competition could weigh on the merger target post-deal.
9. Fair Value Accounting: Warrant liability adjustments flow through P&L, adding non-cash quarterly volatility.

These risks could lead to deal failure or a post-merger equity value below the cash redemption price (currently ~$11.80 per share).

6. Corporate Governance (Item 10)

• Board: 5 directors (Kung, Wong, Hao, Li, Prasad)
• Committees: Audit committee (Hao, Li [Financial Expert], Prasad) & compensation committee (Hao, Li, Prasad)
• Code of Ethics: Filed as Exhibit 14; Insider Trading Policy adopted Apr 21, 2025
• Sarbanes-Oxley 404: Material weaknesses identified (complex accounting, billed vs. unbilled fees, prepaid expenses, related-party note accounting); remedial steps planned.

7. Next Steps & Closing Outlook

Upcoming Milestones

• Shareholder vote and final redemption deadline
• Nasdaq listing approval for Pubco & ADSs
• CFIUS and other regulatory clearances

Catalysts to Watch

• Updated merger proxy or tender offer
• Final closing date extension filings
• Post-deal pro forma balance sheet & financing
• Public trading debut of combined company (ADS ticker)

Key Takeaway
Finnovate’s SPAC vehicle is on a deadline treadmill, having extended three times. The target deal with Scage offers a story in Chinese zero-emission trucks and e-fuel, but closing is not guaranteed. Public investors face redemption risk, deal risk and post-deal EV market risk. Unless you’re a Scage bull ready to ride the Chinese EV wave, this SPAC is a high-risk, high-uncertainty play with limited optionality.

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