Spark I Acquisition (SPKL) - 2025 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Presents the unaudited condensed financial statements and management's discussion for Spark I Acquisition Corporation Item 1. Financial Statements of Spark I Acquisition Corporation Presents Spark I Acquisition Corporation's unaudited condensed financial statements and comprehensive notes for the periods ended June 30, 2025, and December 31, 2024 Condensed Balance Sheets Presents the company's financial position, detailing assets, liabilities, and shareholders' deficit at specific dates Condensed Balance Sheets (Unaudited) | Metric | June 30, 2025 ($) | December 31, 2024 ($) | | :----------------------------------- | :-------------- | :------------------ | | ASSETS | | | | Cash | $1,101,828 | $375,403 | | Prepaid expenses | $74,661 | $104,411 | | Total Current Assets | $1,176,489 | $479,814 | | Investments held in trust | $109,172,314 | $106,926,172 | | Total Assets | $110,348,803 | $107,405,986 | | LIABILITIES AND SHAREHOLDERS' DEFICIT | | | | Accrued expenses and offering costs | $843,123 | $505,218 | | Related party payable | $3,500 | $3,500 | | Note payable - Sponsor | $1,000,000 | — | | Convertible note payable - Sponsor | $1,540,000 | — | | Sponsor advance | — | $840,000 | | Total Current Liabilities | $3,386,623 | $1,348,718 | | Deferred underwriting fee payable | $3,500,000 | $3,500,000 | | Total Liabilities | $6,886,623 | $4,848,718 | | Class A ordinary shares subject to possible redemption | $109,172,314 | $106,926,172 | | Total Shareholders' Deficit | $(5,710,134) | $(4,368,904) | | Total Liabilities and Shareholders' Deficit | $110,348,803 | $107,405,986 | Condensed Unaudited Statements of Operations Details the company's revenues, expenses, and net income for the specified interim periods Condensed Unaudited Statements of Operations | Metric | Three Months Ended June 30, 2025 ($) | Three Months Ended June 30, 2024 ($) | Six Months Ended June 30, 2025 ($) | Six Months Ended June 30, 2024 ($) | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Administrative fee - related party | $285,650 | $331,465 | $555,300 | $652,680 | | Formation and operating expenses | $478,217 | $138,726 | $785,932 | $373,443 | | TOTAL EXPENSES | $763,867 | $470,191 | $1,341,232 | $1,026,123 | | Interest Income | $1 | $2 | $2 | $3 | | Unrealized gain on investments held in Trust Account | $1,126,449 | $1,341,032 | $2,246,142 | $2,667,341 | | TOTAL OTHER INCOME | $1,126,450 | $1,341,034 | $2,246,144 | $2,667,344 | | Net income | $362,583 | $870,843 | $904,912 | $1,641,221 | | Basic and diluted net income per share, Class A ordinary shares | $0.02 | $0.05 | $0.06 | $0.10 | | Basic and diluted net income per Class B ordinary share | $0.02 | $0.05 | $0.06 | $0.10 | Condensed Unaudited Statements of Changes in Shareholders' Deficit Outlines changes in equity components, including net income and remeasurement adjustments, over the reporting period - The Company's total shareholders' deficit increased from $(4,368,904) at January 1, 2025, to $(5,710,134) at June 30, 2025, primarily due to net income being offset by remeasurement adjustments of Class A ordinary shares subject to possible redemption[11] - For the six months ended June 30, 2025, net income was $904,912, while the remeasurement of Class A ordinary shares subject to possible redemption resulted in a decrease of $2,246,142[11] Condensed Unaudited Statements of Cash Flows Summarizes cash inflows and outflows from operating, investing, and financing activities for the interim periods Condensed Unaudited Statements of Cash Flows | Cash Flow Activity | Six Months Ended June 30, 2025 ($) | Six Months Ended June 30, 2024 ($) | | :--------------------------------------- | :----------------------------- | :----------------------------- | | Net income | $904,912 | $1,641,221 | | Interest earned on investments held in Trust Account | $(2,246,142) | $(2,667,341) | | Net Cash Used In Operating Activities | $(973,575) | $(932,964) | | Proceeds from Convertible note payable - Sponsor | $700,000 | — | | Proceeds from Note payable - Sponsor | $1,000,000 | — | | Net Cash Provided By Financing Activities | $1,700,000 | — | | Net change in cash | $726,425 | $(932,964) | | Cash at beginning of period | $375,403 | $1,404,174 | | Cash at end of period | $1,101,828 | $471,210 | | Conversion of Sponsor advance to convertible note payable - Sponsor | $840,000 | — | Notes to Condensed Unaudited Financial Statements Provides detailed explanations and disclosures supporting the condensed financial statements NOTE 1 — DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS AND GOING CONCERN Describes the company's formation, business purpose, IPO details, and assesses its ability to continue as a going concern - Spark I Acquisition Corporation was formed on July 12, 2021, as a blank check company to effect a business combination, and has not generated operating revenues to date, generating non-operating income from interest on IPO proceeds[16][17] - The Company consummated its Initial Public Offering of 10,000,000 units at $10.00 per unit on October 11, 2023, generating $100,000,000 gross proceeds, with $10.05 per unit placed in a Trust Account[18][21] - Public shareholders have redemption rights for their shares, but the Company will not redeem shares if net tangible assets fall below $5,000,001[22][24] - If a business combination is not completed by September 29, 2026, the Company will redeem 100% of public shares and liquidate[27] - As of June 30, 2025, the Company had a working capital deficit of $2,210,134, and management has determined that its liquidity condition raises substantial doubt about its ability to continue as a going concern for the next twelve months[32][34] NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Outlines the key accounting principles and methods applied in preparing the financial statements - The Company is an 'emerging growth company' and has elected to use the extended transition period for complying with new or revised financial accounting standards[40][41] - Class A ordinary shares subject to possible redemption are classified as temporary equity, with changes in redemption value recognized immediately and adjusted at each reporting period[43][44] Class A Ordinary Shares Subject to Possible Redemption Reconciliation | Period | Amount ($) | Shares | | :------------------------------------------ | :------------- | :--------- | | Class A ordinary shares subject to possible redemption, January 1, 2024 | $101,677,510 | 10,000,000 | | Remeasurement adjustment on redeemable ordinary shares | $2,667,341 | — | | Class A ordinary shares subject to possible redemption, June 30, 2024 | $104,344,851 | 10,000,000 | | Class A ordinary shares subject to possible redemption, January 1, 2025 | $106,926,172 | 10,000,000 | | Remeasurement adjustment on redeemable ordinary shares | $2,246,142 | — | | Class A ordinary shares subject to possible redemption, June 30, 2025 | $109,172,314 | 10,000,000 | - Net income per ordinary share is computed using the two-class method, excluding the remeasurement adjustment for redeemable Class A Ordinary Shares[47] Basic and Diluted Net Income Per Ordinary Share | Share Class | Period | Numerator: Allocation of net income, as adjusted ($) | Denominator: Basic and diluted weighted average shares outstanding | Basic and diluted net income per share ($) | | :-------------------------- | :----------------------- | :--------------------------------------------- | :--------------------------------------------------------------- | :------------------------------------- | | Class A Redeemable ordinary shares | Six months ended June 30, 2025 | $551,034 | 10,000,000 | $0.06 | | Class A Redeemable ordinary shares | Six months ended June 30, 2024 | $999,399 | 10,000,000 | $0.10 | | Class B Non-redeemable ordinary shares | Six months ended June 30, 2025 | $353,878 | 6,422,078 | $0.06 | | Class B Non-redeemable ordinary shares | Six months ended June 30, 2024 | $641,822 | 6,422,078 | $0.10 | | Class A Redeemable ordinary shares | Three months ended June 30, 2025 | $220,790 | 10,000,000 | $0.02 | | Class A Redeemable ordinary shares | Three months ended June 30, 2024 | $530,288 | 10,000,000 | $0.05 | | Class B Non-redeemable ordinary shares | Three months ended June 30, 2025 | $141,793 | 6,422,078 | $0.02 | | Class B Non-redeemable ordinary shares | Three months ended June 30, 2024 | $340,555 | 6,422,078 | $0.05 | - The Company is not subject to income taxation by the Government of the Cayman Islands, and therefore, income taxes are not reflected in its financial statements[52] - Investments held in the Trust Account are primarily in U.S. government securities or money market funds meeting Rule 2a-7 conditions, with fair value approximating carrying amounts[55][56] - The Company accounts for Public and Private Placement Warrants as equity, provided they meet ASC 815-40 criteria; otherwise, they would be recorded as liabilities and re-measured[60] - The Company is assessing the impact of recently issued accounting standards ASU 2023-09 (Income Tax Disclosures) and ASU 2024-03 (Disaggregation of Income Statement Expenses), effective for annual periods ending December 31, 2025, and December 15, 2026, respectively[62][63] NOTE 3 — INITIAL PUBLIC OFFERING Details the terms and proceeds of the company's initial public offering - The Company sold 10,000,000 Units at $10.00 per Unit in its Initial Public Offering, with each Unit consisting of one Class A ordinary share and one-half of one redeemable Public Warrant[64] NOTE 4 — PRIVATE PLACEMENTS Describes the private placement of warrants to the Sponsor and related terms - The Sponsor purchased 8,490,535 Private Placement Warrants at $1.00 each, generating $8,490,535, with proceeds added to the Trust Account[65][66] - Private Placement Warrants are not transferable until 30 days after a Business Combination and will expire worthless if a Business Combination is not completed within the Combination Period[67] NOTE 5 — RELATED PARTIES Discloses transactions and agreements with the company's Sponsor and other related entities - The Sponsor received 6,870,130 Founder Shares (Class B ordinary shares) for $25,000 in offering costs on December 8, 2021[68] - On October 10, 2023, the Sponsor forfeited 448,052 Class B ordinary shares due to the underwriter not exercising the over-allotment option[70] - The Sponsor has agreed to a lock-up period for Founder Shares, generally one year after a Business Combination, with certain exceptions[72] - The Company agreed to pay the Sponsor $300,000 for administrative support, prepaid in 2021, with $0 remaining at June 30, 2025[73] - The Sponsor or affiliates may provide Working Capital Loans, which can be repaid without interest upon Business Combination or converted into warrants[74] - On January 28, 2025, the Company issued an unsecured convertible promissory note to the Sponsor for up to $1,900,000, with $1,540,000 outstanding as of June 30, 2025, which can be converted into warrants upon a Business Combination[76] - On June 25, 2025, the Company issued a second unsecured promissory note to the Sponsor for up to $2,500,000, with $1,000,000 borrowed as of June 30, 2025[77] NOTE 6 — COMMITMENTS AND CONTINGENCIES Identifies the company's contractual obligations, potential liabilities, and forward purchase agreements - Holders of Founder Shares, Private Placement Warrants, and Working Capital Loan warrants are entitled to registration rights[79] - The Company paid underwriters a $2,000,000 cash discount and owes a deferred underwriting fee of $3,500,000, payable upon completion of a Business Combination[81][82] - A forward purchase agreement with SparkLabs Group Management, LLC provides for the purchase of at least $115,000,000 in forward purchase units, but the forward purchaser can terminate its commitment[83] NOTE 7 — SHAREHOLDERS' DEFICIT Details the authorized and outstanding share capital, including Class A and Class B ordinary shares - The Company is authorized to issue 5,000,000 preference shares and 500,000,000 Class A ordinary shares; none were issued or outstanding as of June 30, 2025, excluding shares subject to redemption[85][86] - As of June 30, 2025, there were 6,422,078 Class B ordinary shares issued and outstanding, with up to 3,435,065 subject to forfeiture[88] - Founder Shares (Class B ordinary shares) automatically convert into Class A ordinary shares upon a business combination, or earlier at the holder's option[89] - Subsequent to the balance sheet date, on July 9, 2025, the Sponsor converted 4,000,000 Class B ordinary shares into Class A ordinary shares[87] NOTE 8 — WARRANTS Provides information on outstanding public and private warrants, including exercise and redemption terms - As of June 30, 2025, there were 13,490,535 warrants outstanding, comprising 8,490,535 private and 5,000,000 public warrants[91] - Public Warrants become exercisable on the later of 30 days after a Business Combination or 12 months from the IPO closing, expiring five years after a Business Combination[92] - The Company may redeem outstanding Public Warrants if the Class A ordinary share price equals or exceeds $18.00 for 10 trading days within a 20-trading day period[95][98] NOTE 9 — FAIR VALUE MEASUREMENTS Explains the valuation methodologies for financial instruments, particularly investments held in the Trust Account Fair Value Measurements (Level 1 Assets) | Description | Level | June 30, 2025 ($) | Level | December 31, 2024 ($) | | :-------------------------- | :---- | :-------------- | :---- | :------------------ | | Investments held in Trust Account | 1 | $109,172,314 | 1 | $106,926,172 | - Investments held in the Trust Account are classified as Level 1 measurements, reflecting their valuation based on quoted prices for identical instruments in active markets[100] NOTE 10 — SEGMENT INFORMATION States the company operates as a single segment and presents key performance metrics reviewed by management - The Company operates as a single operating segment, with the Chief Executive Officer reviewing overall operating results to allocate resources and assess performance[103][104] Key Performance Metrics Reviewed by CODM | Metric | Six Months Ended June 30, 2025 ($) | Six Months Ended June 30, 2024 ($) | Three Months Ended June 30, 2025 ($) | Three Months Ended June 30, 2024 ($) | | :------------------ | :----------------------------- | :----------------------------- | :------------------------------- | :------------------------------- | | Loss from operations | $(1,341,232) | $(1,026,123) | $(763,867) | $(470,191) | | Total other income | $2,246,144 | $2,667,344 | $1,126,450 | $1,341,034 | | Net income | $904,912 | $1,641,221 | $362,583 | $870,843 | NOTE 11 — SUBSEQUENT EVENTS Reports significant events occurring after the balance sheet date, including extension approvals and redemptions - On July 8, 2025, shareholders approved an extension for the business combination deadline from July 11, 2025, to September 29, 2026[108] - In connection with the extension, the Sponsor agreed to convert 4,000,000 Class B ordinary shares into Class A ordinary shares[109] - Holders of 7,763,287 Class A Ordinary Shares exercised redemption rights for approximately $84.8 million, leaving about $24.4 million in the Trust Account[110] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition, operational results, business combination search, and liquidity challenges, including the going concern assessment - The Company is a blank check company formed on July 12, 2021, focused on effecting a business combination, and has not generated operating revenues to date[114] - The Company announced a non-binding LOI for a business combination with Kneron, a full-stack edge AI solutions provider, and is actively negotiating a binding agreement[115] - Net income for the three months ended June 30, 2025, was $362,583, compared to $870,843 for the same period in 2024, primarily due to changes in operating expenses and unrealized gains on trust account investments[120][121] - For the six months ended June 30, 2025, net income was $904,912, down from $1,641,221 in the prior year, driven by increased operating expenses and lower unrealized gains[122][123] - As of June 30, 2025, the Company had $1,101,828 in its operating bank account and a working capital deficit of $2,210,134, raises substantial doubt about its ability to continue as a going concern[129][132] - The Company has no off-balance sheet arrangements and its contractual obligations include monthly management fees and a deferred underwriting commission of $3,500,000 payable upon a business combination[133][134][136] Item 3. Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, Spark I Acquisition Corporation is not required to provide quantitative and qualitative disclosures about market risk - The Company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[142] Item 4. Controls and Procedures Management concluded the company's disclosure controls were effective as of June 30, 2025, with no material changes in internal control over financial reporting during Q2 2025 - As of June 30, 2025, the Company's disclosure controls and procedures were evaluated and deemed effective at a reasonable assurance level[144] - There were no material changes in the Company's internal control over financial reporting during the second quarter of 2025[145] PART II - OTHER INFORMATION Covers legal proceedings, risk factors, equity sales, and other disclosures for the reporting period Item 1. Legal Proceedings Spark I Acquisition Corporation reported no legal proceedings as of the filing date - The Company has no legal proceedings[148] Item 1A. Risk Factors The Company refers to the risk factors detailed in its Annual Report on Form 10-K for the year ended December 31, 2024, and states there have been no material changes to these factors as of the date of this Quarterly Report - The Company refers to the risk factors detailed in its Annual Report on Form 10-K for the year ended December 31, 2024[149] - As of the date of this Quarterly Report, there have been no material changes to the previously disclosed risk factors[149] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The Company confirmed the consummation of its Initial Public Offering on October 11, 2023, and stated there has been no material change in the planned use of proceeds from the IPO - The Initial Public Offering was consummated on October 11, 2023[150] - There has been no material change in the planned use of proceeds from the Initial Public Offering[150] Item 3. Defaults upon Senior Securities Spark I Acquisition Corporation reported no defaults upon senior securities - The Company has no defaults upon senior securities[151] Item 4. Mine Safety Disclosures Spark I Acquisition Corporation reported no mine safety disclosures - The Company has no mine safety disclosures[152] Item 5. Other Information No directors or executive officers adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the last fiscal quarter - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the last fiscal quarter[153] Item 6. Exhibits This section lists all exhibits filed or incorporated by reference into the Quarterly Report on Form 10-Q, including key agreements and certifications - The exhibits include the Underwriting Agreement, Amended and Restated Memorandum and Articles of Association, Warrant Agreement, and various other agreements and certifications[156] SIGNATURES Certifies the accuracy and submission of the report by the principal executive and financial officers SIGNATURES The report is signed by James Rhee, Chairman and Chief Executive Officer, and Ho Min (Jimmy) Kim, Chief Financial Officer, on August 12, 2025, certifying its submission in accordance with Exchange Act requirements[162]