ShoulderUP Technology Acquisition Corp. (SUAC, SUACU, SUACW)

Unlocking the Potential of ShoulderUp Technology Acquisition Corp: 10-K Review & Investment Score

Introduction

Warren.AI 💰 4.5 / 10

ShoulderUp Technology Acquisition Corp ("ShoulderUp" or the "Company") is a blank check (SPAC) vehicle founded in May 2021 to effect a business combination with a yet‐to‐be‐named operating company. On November 19, 2021, ShoulderUp raised $300 million through an initial public offering (IPO) of 30 million units at $10.00 each. Each unit comprised one share of Class A common stock and one‐half of a warrant to buy additional shares at $11.50. In parallel, the sponsor purchased 1.35 million private units for $13.5 million. Approximately $306 million was placed in a trust account to fund a future merger, and $1.66 million was retained for working capital.

Over the past three years, ShoulderUp extended its deadline to complete its Business Combination multiple times (from May 2023 to February 2025), redemptions totaled nearly 30 million shares, and the Underwriters waived $11.2 million of deferred fees to preserve trust funds. On March 18, 2024, ShoulderUp signed a business combination agreement with SEE ID, Inc., a cybersecurity/identity‐technology company. Following shareholder approval on February 6, 2025, the Company now awaits final consummation and the combined entity’s Nasdaq listing.

In this review, we dissect ShoulderUp’s 10-K for the year ended December 31, 2024, analyze the SPAC’s financial condition, evaluate the deal dynamics, and provide an investment score of 4.5/10. We also offer our key takeaways and net loss details.

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1. What Is a SPAC? How ShoulderUp Works

A Special Purpose Acquisition Company is a publicly traded shell that raises capital to acquire one or more private businesses, enabling a faster route to public markets. Key SPAC mechanics:

• Trust Account: IPO proceeds are held in trust earning minimal interest, redeemable by public shareholders if they opt out at merger time.
• Sponsor Shares & Warrants: Sponsor founders buy shares cheaply (Founder Shares) and warrants to align economic incentives.
• Business Combination Window: SPACs must complete an acquisition within a deadline (18–24 months) or liquidate.
• Redemption Rights: Public shareholders can redeem their shares for a pro rata portion of the trust in cash if they oppose the combination.

ShoulderUp raised $313.5 million (including its private placement), deposited $306 million in trust, and earmarked $1.66 million for operations. Deferred underwriting fees of $11.2 million were held in trust until an acquisition closes. Sponsor Founder Shares represent ~25% of the post-IPO capitalization and can convert 1:1 at merger close, subject to adjustment.

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2. Management & Board: Expertise vs. SPAC Track Record

ShoulderUp’s leadership blends cybersecurity, finance, and government experience:

• Phyllis Newhouse, CEO: Ex-U.S. Army Special Forces NCO and founder of XtremeSolutions (cybersecurity services, 40% veterans), board member Sabre Corp.
• Rashaun Williams, CFO: Multi-stage VC cofounder (Robinhood, Coinbase, Lyft), family office investor, finance educator.
• Shawn Henry, Chairman: Former FBI Executive Assistant Director (Global Cyber), ex-President of CrowdStrike services.
• Independent Directors: Lauren Anderson (ex-FBI supervisor), Janice Bryant Howroyd (ActOne Group founder), Stacey Abrams (entrepreneur, political leader).

The team’s credentials are strong in tech, cybersecurity, and capital markets, which may help in sourcing and integrating target companies. However, sponsor shares and loans may skew incentives toward deal completion, even if terms are suboptimal.

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3. 2024 Financial Highlights & Cash Position

Statement of Operations (YE 12/31/2024 vs. YE 2023)

Metric	2024	2023
Net (Loss) Income	$(2.036 million)	$0.332 million
General & Admin Expenses	$1.279 million	$0.999 million
Change in Derivative Liability	$(0.929 million)	$(3.113 million)
Trust Interest Income	$0.691 million	$5.824 million
Income & Franchise Tax Expense	$(0.200 million)	$1.381 million

• Net Loss of $2.04 million due to minimal operating activity and close of deadlines.
• Operating Expenses ran roughly $1.3 million, including legal/administrative fees to the Sponsor ($120k/month).
• Trust Earnings collapsed as funds were redeemed, falling from $5.8 million in 2023 to $0.7 million in 2024.
• Derivative Liability rose by $0.93 million due to Non-Redemption Agreements with long-winding deadlines.
• Tax Accruals: Accrued franchise and income taxes of $237k; cumulative trust withdrawals for taxes now stand at $2.9 million.

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

Item	2024	2023
Operating Cash	$0.433 million	$0.403 million
Trust Account Cash	$5.585 million	$21.099 million
Working Capital Deficit	$(5.496 million)	$(3.777 million)
Promissory Notes & Sponsor Payable	$0.838 million	$0.118 million
Non-Redemption Agreements Liability	$8.887 million	$6.646 million
Deferred Underwriting Commissions (Waived)	$0	$11.2 million
Total Liabilities	$14.816 million	$22.027 million
Temporary Equity (Redeemable Stock)	$5.596 million	$21.108 million
Stockholders’ Deficit	$(14.394 million)	$(21.633 million)

• Trust Cash dropped sharply as redemptions ($291 million in 2023 plus $12 million in 2024) were paid out.
• Non-Redemption Liability of $8.9 million represents future payouts to investors who agreed not to redeem at extension votes.
• Sponsor Loans ($600k) & Fees Payable ($238k) highlight liquidity constraints; monthly $120k service fee to Sponsor is mounting.
• Dividend-style redemptions have eroded trust capital; only $5.6 million remains to finance a deal.

Going Concern

ASC 205-40 requires disclosure of substantial doubt if working capital is inadequate. Management notes the Company has a working capital deficit of $5.5 million, minimal operating cash, and a near-exhausted trust fund. Sponsor loans ($600k) and a secured $300k note in January 2025 help patch liquidity shortfalls, but substantial doubt is disclosed. Unless a closeable transaction raises new financing, the SPAC risks liquidation.

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4. Multiple Deadline Extensions & Redemption Dynamics

Since its IPO, ShoulderUp extended its merger deadline four times—from May 2023 to February 2025—at special stockholder meetings. Each extension triggered redemption votes:

• April 2023 Extension: 25.8 million shares redeemed ($269.6 million).
• Nov 2023 Extension: 2.17 million shares redeemed ($22.9 million).
• May 2024 Extension: 1.13 million shares redeemed ($12.1 million).
• Nov 2024 Extension: 349k shares redeemed ($3.8 million).
• Dec 2024 Extension: 1.08k shares redeemed ($11.8k).
• Jan 2025 Extension: 240 shares redeemed ($2.6k).

To secure votes, ShoulderUp entered Non-Redemption Agreements with certain investors, issuing Founder Shares (and post-deal Class B conversions) as incentives. Over $8.9 million is now reserved as a derivative liability, estimated at fair value under ASC 815. Underwriters waived $11.2 million in deferred fees in September 2024, preserving trust funds.

Redemption Risk: Every extension vote erodes the trust and raises the threshold to combine with SEE ID. The remaining public float is now < 0.5 million shares out of 30 million originally issued, creating illiquidity and an artificially inflated SPAC valuation to complete the merger.

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5. SEE ID Merger: Deal Terms & Outlook

The Merger Agreement (March 18, 2024)

• Structure: ShoulderUp subsidiaries will merge into ShoulderUp and SEE ID to form a Nasdaq-listed combined company (through a holdco).
• Minimum Cash Condition: At least $6 million must remain at close, net of redemptions and transaction expenses.
• Share Issuance: Merger consideration to existing SEE ID shareholders to be negotiated; Sponsor Founder Shares will convert 1:1 (25% pro forma stake).
• Warrants: 15.675 million will remain outstanding post-deal (ex market-making and sponsor).

Challenges & Risks

1. Funding Shortfall – Only $5.6 million remains in trust. To meet the $6 million minimum, shoulderUp needs at least $0.4 million outside the trust or new PIPE financing, which would further dilute shareholders or increase debt risk.
2. Illiquid Float – < 0.5 million tradable shares in OTC market (SUAC ticker) means market trading is highly volatile and bid–ask spreads are wide. Post-merger float may remain constrained, even if listed on Nasdaq.
3. Extension Payouts – Sponsor already promised not to redeem Founder Shares for extensions and issued additional Founder Shares. The large Non-Redemption liability further depletes equity value.
4. Operational Execution – SEE ID must build U.S. capital markets infrastructure, comply with SOX and SEC reporting, and retain management unfamiliar with public filings.
5. Timing – SPAC market remains muted in 2024–2025; raising a PIPE or debt at attractive pricing is uncertain.

Potential Upside

• Experienced Team – Leadership has deep cybersecurity, government and capital markets experience; potential to build SEE ID platform post-merger.
• Target Synergies – SEE ID could benefit from U.S. listing, broadened investor base and incremental capital for growth.
• PIPE Catalysts – A successful PIPE might infuse fresh working capital, support operations and reduce reliance on Sponsor loans.

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6. Investment Pros & Cons

Pros

1. Strong Cybersecurity Leadership: Combined SPAC management and SEE ID executives have extensive expertise.
2. Potential for Extended Growth Funding: Access to public market capital and strategic PIPE partnerships.
3. Aligned Sponsor Incentives: Sponsor’s warrants and founder share economics encourage deal close.

Cons

1. Liquidity & Cash Crunch: Only $5.6 million in trust vs. $6 million minimum for deal close, plus working capital debt.
2. Execution & Market Risk: SEE ID must navigate SOX, SEC compliance and build trading float in an uncertain SPAC market.
3. Illiquid Share Trading: OTC listing with very low float creates wide spreads and volatile pricing.
4. Past Extension Overhang: Six deadline extensions and massive redemptions ($300 million+) have eroded capital and sentiment.

Net Operating Result

• 2024 Net Loss: $(2.036 million)
• 2023 Net Income: $0.332 million (driven by trust interest)

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7. Conclusion & Score: 4.5 / 10

ShoulderUp has successfully navigated multiple extension votes, secured a merger agreement with SEE ID, and retained a capable management team. However, the SPAC faces urgent financing needs to meet its $6 million post-redemption cash condition, a precarious working capital deficit, and persistent sponsor liabilities. The illiquid float, redemption overhang, and uncertain SPAC market further weigh on valuation.

Our Rating: 4.5 / 10

Key Drivers for a Higher Score

• Completion of a successful PIPE raise to meet the minimum cash requirement.
• Transition to Nasdaq trading, boosting market liquidity and analyst coverage.
• SEE ID operational execution and revenue ramp post-merger.

Key Off-Ramps

• Failure to close the Business Combination or to raise supplemental capital likely triggers liquidation at a steep loss.
• Sponsor loan strain and further debt on SPAC balance sheet could lead to going concern or dilution events.

On balance, the speculative nature of this SPAC merger, combined with a precarious cash position and repeated extension payouts, tempers our optimism. Risk‐seekers intrigued by a post-merger cybersecurity platform could find the opportunity attractive, but the odds of a positive return remain modest.

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Disclosure: We do not own units or stock in ShoulderUp. Our analysis is based on publicly available information and the Company s 10-K as of December 31, 2024.