Investcorp Acquisition (IVCA) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the company's unaudited condensed financial statements, management's discussion and analysis, market risk disclosures, and an evaluation of internal controls Item 1. Financial Statements This section presents the unaudited condensed financial statements for Investcorp AI Acquisition Corp., including the balance sheets, statements of operations, changes in shareholders' deficit, and cash flows, along with detailed notes explaining the company's accounting policies, operations, and financial instruments. Key financial highlights include a significant decrease in total assets and investments held in the Trust Account, a shift from net income to net loss, and a substantial increase in the working capital loan from the Sponsor, reflecting ongoing redemptions and the company's efforts to extend its business combination period Condensed Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and shareholders' deficit at specific reporting dates Condensed Balance Sheet Highlights ($) | Metric | June 30, 2025 (Unaudited) ($) | December 31, 2024 ($) | | :-------------------------------- | :-------------------------- | :------------------ | | Total Assets | $1,549,213 | $18,551,591 | | Investments held in Trust Account | $473,146 | $17,518,993 | | Total Current Liabilities | $5,964,712 | $5,125,973 | | Working Capital Loan-Sponsor | $2,836,172 | $1,790,000 | | Convertible Promissory Note-Sponsor | $1,650,000 | $1,450,000 | | Total Liabilities | $6,835,463 | $5,706,474 | | Total Shareholders' Deficit | $(5,759,396) | $(4,673,876) | Condensed Statements of Operations This section outlines the company's financial performance over specific periods, detailing revenues, expenses, and the resulting net income or loss Condensed Statements of Operations Highlights ($) | Metric | Three Months Ended June 30, 2025 ($) | Three Months Ended June 30, 2024 ($) | Six Months Ended June 30, 2025 ($) | Six Months Ended June 30, 2024 ($) | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Formation costs and operating expenses | $313,131 | $319,152 | $595,270 | $513,267 | | Interest earned on investments held in Trust Account | $91,623 | $1,419,899 | $275,203 | $2,819,293 | | Change in FV of warrant liability | $(290,250) | $580,500 | $(290,250) | $(290,250) | | Net (loss) income | $(511,758) | $1,681,247 | $(610,317) | $2,015,776 | | Basic and diluted net (loss) income per ordinary share, Class A ordinary shares redeemable shares | $(0.07) | $0.10 | $(0.08) | $0.12 | | Basic and diluted net (loss) income per ordinary share, Class A and Class B ordinary shares non-redeemable shares | $(0.07) | $0.10 | $(0.08) | $0.12 | - The company experienced a significant shift from net income in Q2 2024 ($1,681,247) to a net loss in Q2 2025 ($(511,758)), primarily due to a decrease in interest earned on Trust Account investments and a negative change in the fair value of warrant liability[13] Condensed Statements of Changes in Shareholders' Deficit This section tracks the changes in the company's shareholders' deficit over time, reflecting the impact of net losses and other equity adjustments Changes in Shareholders' Deficit ($) | Metric | December 31, 2024 ($) | June 30, 2025 ($) | | :------------------------------------------ | :------------------ | :-------------- | | Accumulated Deficit | $(4,674,523) | $(5,760,043) | | Total Shareholders' Deficit | $(4,673,876) | $(5,759,396) | - The accumulated deficit increased from $(4,674,523) at December 31, 2024, to $(5,760,043) at June 30, 2025, driven by net losses and accretion of Class A ordinary shares to redemption value[15] Condensed Statements of Cash Flows This section details the cash inflows and outflows from operating, investing, and financing activities, illustrating the company's liquidity and cash management Condensed Statements of Cash Flows Highlights (Six Months Ended June 30) ($) | Cash Flow Activity | 2025 ($) | 2024 ($) | | :------------------------------------------ | :----------- | :----------- | | Net Income (loss) | $(610,317) | $2,015,776 | | Net cash used in operating activities | $(1,101,543) | $(483,951) | | Net cash provided by (used in) investing activities | $17,321,050 | $(600,000) | | Net cash (used in) provided by financing activities | $(16,274,878) | $1,080,000 | | Net Change in Cash | $(55,371) | $(3,951) | | Cash - End of period | $977,227 | $272,826 | - In the first six months of 2025, cash provided by investing activities significantly increased due to withdrawals from the Trust Account for redeeming shareholders, while cash used in financing activities also increased due to payments to redeeming shareholders[20] Notes to Condensed Financial Statements (Unaudited) This section provides detailed explanations and additional information supporting the condensed financial statements, covering accounting policies, operations, and financial instruments NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS This note describes the company's formation as a blank check entity, its IPO, subsequent business combination period extensions, and recent delisting from Nasdaq - Investcorp AI Acquisition Corp. is a blank check company formed on February 19, 2021, for the purpose of a business combination, and has not yet commenced operations[23][24] - The company completed its Initial Public Offering (IPO) on May 12, 2022, raising $225,000,000 from 22,500,000 units, plus an additional $33,750,000 from the over-allotment option[25] - The company extended its business combination period multiple times, most recently to May 12, 2027, following shareholder approval at the 2025 Extraordinary General Meeting[33][35][36] Share Redemptions and Trust Account Impact | Event | Shares Redeemed | Redemption Price Per Share (Approx.) ($) | Aggregate Redemption Amount (Approx.) ($) | Class A Shares Outstanding Post-Redemption | | :-------------------------------- | :---------------- | :----------------------------------- | :------------------------------------ | :----------------------------------------- | | August 2023 Extraordinary Meeting | 16,085,554 | $10.74 | $172,774,717 | 9,789,446 | | August 2024 Extraordinary Meeting | 8,314,066 | $11.40 | $95,447,584 | 1,475,380 | | May 2025 Extraordinary Meeting | 1,449,359 | $12.09 | $17,521,050 | Not specified, but significantly reduced | | Total Class A shares outstanding as of August 14, 2025 | 6,494,771 | N/A | N/A | N/A | - The company's securities were delisted from Nasdaq and began trading on the OTC Markets under tickers 'IVCAF,' 'IVCAUF,' and 'IVCAWF' as of May 6, 2025, due to non-compliance with Nasdaq listing rules, including the 36-month business combination completion requirement[41][127] - The company had a working capital deficit of $4,888,645 as of June 30, 2025, and management has determined that its liquidity conditions raise substantial doubt about its ability to continue as a going concern[43][46] NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note outlines the company's accounting principles, including GAAP compliance, emerging growth company status, and specific treatments for cash, investments, and warrants - The financial statements are prepared in accordance with GAAP and SEC rules, with interim results not necessarily indicative of full-year results[52] - The company is an 'emerging growth company' and has elected not to opt out of the extended transition period for complying with new or revised financial accounting standards, which may affect comparability with other public companies[53][54] Cash and Investments in Trust Account ($) | Asset Category | June 30, 2025 ($) | December 31, 2024 ($) | | :-------------------------------- | :------------ | :---------------- | | Cash and cash equivalents | $977,227 | $1,032,598 | | Investments held in Trust Account | $473,146 | $17,518,993 | - The company accounts for Class A ordinary shares subject to possible redemption as temporary equity and recognizes changes in redemption value immediately[71][72] - Warrants are classified as liability instruments and re-measured at fair value each balance sheet date, with changes recognized in the statements of operations[74][75] - The company operates as a single operating segment, with the Chief Executive Officer (CODM) evaluating overall financial information and resources[77][124][125] - Management expects the adoption of ASU No. 2023-09, 'Income Taxes (Topic 740): Improvements to Income Tax Disclosures,' effective for fiscal 2025, to result in disclosure changes only[78] NOTE 3. INITIAL PUBLIC OFFERING This note details the terms and proceeds of the company's Initial Public Offering, including the number of units sold and their composition - The company sold 25,875,000 units at $10.00 per unit in its IPO, each unit consisting of one Class A ordinary share and one-half of one redeemable warrant[80] NOTE 4. PRIVATE PLACEMENT This note describes the private placement of warrants to the Sponsor, outlining the proceeds generated and the characteristics of these warrants - The Sponsor purchased 16,087,500 Private Placement Warrants at $1.00 per warrant, generating $16,087,500 in gross proceeds[82] - Private Placement Warrants are identical to Public Warrants but lack redemption rights or liquidating distributions from the trust account and will expire worthless if a business combination is not consummated[83] NOTE 5. RELATED PARTY TRANSACTIONS This note details financial transactions and balances with the Sponsor, including founder shares, working capital loans, and administrative service agreements - The Sponsor initially held 7,187,500 Class B ordinary shares (Founder Shares) for $25,000, which were later adjusted to 6,468,750 shares[84] - On August 12, 2024, the Sponsor converted 6,468,749 Founder Shares into Class A ordinary shares[85] Related Party Balances ($) | Item | June 30, 2025 ($) | December 31, 2024 ($) | | :-------------------------------- | :------------ | :---------------- | | Working Capital Loan-Sponsor | $2,836,172 | $1,790,000 | | Convertible Promissory Note-Sponsor | $1,650,000 | $1,450,000 | | Due to Sponsor | $161,324 | $301,557 | | Accrued expenses (Administrative Services Agreement) | $270,000 | $210,000 | - The Working Capital Loan from the Sponsor, up to $3,000,000, is non-interest bearing and convertible into Private Placement Warrants at $1.00 per warrant[87][88] - The Convertible Promissory Note from the Sponsor, totaling $1,650,000 as of June 30, 2025, is non-interest bearing and convertible into non-transferable, non-redeemable ordinary shares upon business combination[91] - The company pays a monthly fee of $10,000 to the Sponsor for administrative services[92] NOTE 6. COMMITMENTS AND CONTINGENCIES This note outlines the company's commitments, specifically the registration rights granted to holders of founder shares and private placement warrants - Holders of Founder Shares, Private Placement Warrants, and warrants from Working Capital Loan conversion are entitled to registration rights, requiring the company to register such securities for resale[93] NOTE 7. WARRANT LIABILITY This note explains the accounting treatment for warrants as liability instruments, their fair value measurement, and the conditions for their exercise or redemption - The company accounts for 29,025,000 warrants (16,087,500 Private Warrants and 12,937,500 Public Warrants) as liability instruments, re-measured at fair value with changes recognized in the statements of operations[94] - Public Warrants become exercisable 30 days after a business combination and expire five years from consummation or earlier upon redemption/liquidation[97] - The company may redeem Public Warrants if the Class A ordinary share price equals or exceeds $18.00 or $10.00 under specific conditions, including an effective registration statement for the underlying shares[100][101] - If a business combination is not completed, warrants may expire worthless, as holders will not receive funds from the Trust Account[104] NOTE 8. SHAREHOLDERS' DEFICIT This note details the company's authorized and outstanding ordinary shares, distinguishing between redeemable and non-redeemable classes Ordinary Shares Issued and Outstanding | Share Class | June 30, 2025 | December 31, 2024 | | :------------------------------------------------ | :------------ | :---------------- | | Class A ordinary shares (total) | 6,494,770 | 7,944,129 | | Class A ordinary shares (redeemable) | 26,021 | 1,475,380 | | Class A ordinary shares (non-redeemable) | 6,468,749 | 6,468,749 | | Class B ordinary shares | 1 | 1 | - The company is authorized to issue up to 1,000,000 preference shares, 479,000,000 Class A ordinary shares, and 20,000,000 Class B ordinary shares[108][109][110] NOTE 9. FAIR VALUE MEASUREMENTS This note describes the company's approach to fair value measurements, including the hierarchy used and the valuation methods for investments and warrants - The company uses a fair value hierarchy (Level 1, 2, 3) to classify assets and liabilities based on observable and unobservable inputs[113][114][115] Fair Value Measurements of Assets and Liabilities ($) | Item | Fair Value Hierarchy Level | June 30, 2025 ($) | December 31, 2024 ($) | | :------------------------------------------ | :------------------------- | :------------ | :---------------- | | Investments held in Trust Account – U.S. Treasury Securities | 1 | $473,146 | $17,518,993 | | Public Warrants | 1 (Dec 2024), 3 (June 2025) | $388,126 | $258,750 | | Private Warrants | 3 | $482,625 | $321,750 | - Public Warrants were transferred from Level 1 to Level 2 in Q1 2025 due to limited trading, and then to Level 3 in Q2 2025 due to no trading activities, indicating reduced market observability[117] - Both Public and Private Warrants are valued using a Modified Binomial Option Pricing model, with Private Placement Warrants consistently classified as Level 3 due to reliance on unobservable inputs like expected volatility[119][120] NOTE 10. SEGMENT INFORMATION This note clarifies that the company operates as a single segment, with the CEO overseeing overall financial performance and resource allocation - The company operates as a single operating segment, with the Chief Executive Officer (CODM) reviewing overall operating results to allocate resources and assess performance[124][125] NOTE 11. SUBSEQUENT EVENTS This note reports significant events occurring after the balance sheet date, specifically the official delisting of the company's securities from Nasdaq - On July 14, 2025, Nasdaq officially removed the company's securities from listing and registration by filing a Form 25 with the SEC[127] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and operational results, highlighting its status as a blank check company focused on a business combination in the Indian market. It details the impact of significant shareholder redemptions, the extension of the business combination period, and the recent delisting from Nasdaq. The discussion also covers the shift to a net loss, the company's liquidity challenges, and its reliance on sponsor funding, emphasizing the substantial doubt about its ability to continue as a going concern Overview This section provides a high-level summary of the company's status as a blank check entity, its business combination efforts, and recent market changes - Investcorp AI Acquisition Corp. is a blank check company aiming for a business combination in the Indian market, having completed its IPO on May 12, 2022[129][130] - Shareholders approved an extension of the business combination period to May 12, 2027, following significant redemptions totaling approximately $17,521,050 in May 2025[135] - The company's securities were delisted from Nasdaq on May 6, 2025, and now trade on the OTC Markets due to non-compliance with Nasdaq listing rules[136] Results of Operations This section analyzes the company's financial performance, detailing the lack of operating revenues and the key factors influencing net income or loss - The company has not generated operating revenues and its activities have been limited to organizational efforts and identifying business combination targets[137][138] Net Income (Loss) and Key Drivers ($) | Period | Net (Loss) Income ($) | Operating Costs ($) | Interest Earned on Trust Account ($) | Change in FV of Warrant Liability ($) | | :------------------------------- | :---------------- | :-------------- | :------------------------------- | :-------------------------------- | | Three Months Ended June 30, 2025 | $(511,758) | $313,131 | $91,623 | $(290,250) | | Three Months Ended June 30, 2024 | $1,681,247 | $319,152 | $1,419,899 | $580,500 | | Six Months Ended June 30, 2025 | $(610,317) | $595,270 | $275,203 | $(290,250) | | Six Months Ended June 30, 2024 | $2,015,776 | $513,267 | $2,819,294 | $(290,250) | - The shift from net income in 2024 to net loss in 2025 is primarily attributed to significantly lower interest income from the Trust Account and a negative change in the fair value of warrant liability[139][140] Liquidity, Capital Resources, and Going Concern Consideration This section discusses the company's financial liquidity, its reliance on sponsor funding, and the substantial doubt regarding its ability to continue as a going concern Liquidity and Cash Flow Summary (Six Months Ended June 30) ($) | Metric | 2025 ($) | 2024 ($) | | :------------------------------------------ | :----------- | :----------- | | Cash at June 30 | $977,227 | $272,826 | | Working Capital Deficit | $(4,888,645) | N/A | | Net cash used in operating activities | $(1,101,543) | $(483,951) | | Net cash provided by (used in) investing activities | $17,321,050 | $(600,000) | | Net cash (used in) provided by financing activities | $(16,274,878) | $1,080,000 | - The company had a working capital deficit of $4,888,645 as of June 30, 2025, and its liquidity condition raises substantial doubt about its ability to continue as a going concern[141][149] - The company relies on funds from the Sponsor, including a Working Capital Loan ($2,836,172 outstanding as of June 30, 2025) and a Convertible Promissory Note, to finance transaction costs and operations[148][153][154] - As of June 30, 2025, $473,146 remained in the Trust Account, intended for the business combination, with $977,227 held outside for general working capital[145][146][147] Off-Balance Sheet Arrangements This section confirms the absence of any off-balance sheet arrangements as of the reporting dates - As of June 30, 2025, and December 31, 2024, the company did not have any off-balance sheet arrangements[150] Registration Rights This section outlines the company's obligation to register certain securities for resale, granted to specific holders - Holders of Founder Shares, Private Placement Warrants, and warrants from Working Capital Loan conversion have registration rights, requiring the company to register their securities for resale[151] Working Capital Loan This section details the non-interest bearing working capital loan from the Sponsor, including its terms and outstanding balance - The Sponsor provides a non-interest bearing Working Capital Loan, up to $3,000,000, which can be repaid upon business combination or converted into warrants[152][153] Working Capital Loan Outstanding ($) | Date | Amount Outstanding ($) | | :---------------- | :----------------- | | June 30, 2025 | $2,836,172 | | December 31, 2024 | $1,790,000 | Convertible Promissory Note—Sponsor This section describes the non-interest bearing convertible promissory note from the Sponsor, outlining its purpose and principal balance - The Sponsor loaned the company up to $1,650,000 via a non-interest bearing convertible promissory note to cover Extension Contributions, payable upon business combination or May 12, 2027[154] Convertible Promissory Note Outstanding ($) | Date | Principal Balance Outstanding ($) | | :---------------- | :---------------------------- | | June 30, 2025 | $1,650,000 | | December 31, 2024 | $1,450,000 | Administrative Services Agreement This section details the monthly fee paid to the Sponsor for administrative services and the associated accrued expenses - The company pays a monthly fee of $10,000 to the Sponsor for office space, utilities, and administrative services[156] Accrued Expenses for Administrative Services ($) | Date | Accrued Expenses ($) | | :---------------- | :--------------- | | June 30, 2025 | $240,000 | | December 31, 2024 | $210,000 | Critical Accounting Estimates This section highlights the critical accounting estimate related to the fair value measurement of warrants and the assumptions involved in their valuation - The company's critical accounting estimate relates to the fair value measurement of warrants, which are recorded as liabilities and re-measured at each balance sheet date[159] - Fair value determination for Private Placement Warrants involves assumptions for expected share-price volatility, expected life, and risk-free interest rate[160] Recently Issued Accounting Standards This section discusses the expected impact of recently issued accounting standards, specifically ASU No. 2023-09, on the company's financial disclosures - Management expects the adoption of ASU No. 2023-09, effective for fiscal 2025, to result in disclosure changes only, with no material effect on financial statements[161][162] JOBS Act This section explains the company's status as an emerging growth company under the JOBS Act and its election to delay adoption of new accounting standards - As an 'emerging growth company' under the JOBS Act, the company has elected to delay the adoption of new or revised accounting standards, which may impact comparability with non-emerging growth companies[163] - The company is evaluating other reduced reporting requirements provided by the JOBS Act, such as exemptions from auditor's attestation reports on internal controls and certain executive compensation disclosures[164] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Investcorp AI Acquisition Corp. 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 market risk disclosures[165] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were not effective as of June 30, 2025, due to an identified material weakness related to ineffective review controls. Remediation efforts are underway, but no material changes in internal control over financial reporting occurred during the quarter Evaluation of Disclosure Controls and Procedures This section reports the ineffectiveness of disclosure controls and procedures due to a material weakness in internal control over financial reporting - As of June 30, 2025, the company's disclosure controls and procedures were deemed not effective due to a material weakness in internal control over financial reporting[168] - The material weakness stemmed from an ineffective review control that led to a material adjustment to accrued expenses and an over accrual of legal fees in prior periods[168] - The company is actively undertaking remediation efforts with Audit Committee oversight to address the identified material weakness[169] Changes in Internal Control over Financial Reporting This section confirms that no material changes in internal control over financial reporting occurred during the most recent fiscal quarter - There were no changes in internal control over financial reporting during the most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[171] PART II. OTHER INFORMATION This section provides additional information including legal proceedings, risk factors, equity sales, defaults, mine safety disclosures, other relevant details, and exhibits Item 1. Legal Proceedings The company reported no legal proceedings as of the filing date - There are no legal proceedings to report[173] Item 1A. Risk Factors The company stated that there have been no material changes to the risk factors previously disclosed in its IPO prospectus and annual report on Form 10-K - No material changes to risk factors disclosed in the final IPO prospectus (May 10, 2022) or annual report on Form 10-K (April 16, 2025)[174] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities This section details the issuance of Founder Shares and Private Placement Warrants, along with the use of proceeds from the IPO. It also highlights the significant redemptions of Class A ordinary shares that occurred in May 2025 - The Sponsor purchased 7,187,500 Class B ordinary shares (Founder Shares) for $25,000, later adjusted to 6,468,750 shares[175] - The IPO generated gross proceeds of $225,000,000 from 22,500,000 units, plus an additional $33,750,000 from the over-allotment option[176] - 16,087,500 Private Placement Warrants were sold to the Sponsor for $1.00 each, generating $16,087,500 in gross proceeds[177] - After deducting offering costs of $6,037,027, $266,512,500 of net proceeds from the IPO and private placement was placed in the Trust Account[179] - On May 12, 2025, holders of 1,449,359 Class A ordinary shares exercised redemption rights at approximately $12.09 per share, totaling $17,521,050[181] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities - There are no defaults upon senior securities[182] Item 4. Mine Safety Disclosures Mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable[183] Item 5. Other Information The company reported no other information - There is no other information to report[184] Item 6. Exhibits This section lists all exhibits filed as part of, or incorporated by reference into, the Quarterly Report on Form 10-Q, including amendments to the Articles of Association, officer certifications, and XBRL-related documents - Exhibits include the Amendment to the Amended and Restated Memorandum and Articles of Association, certifications of Principal Executive and Financial Officers (31.1*, 31.2*, 32.1**, 32.2**), and various Inline XBRL documents[186][187] SIGNATURES The report is duly signed on behalf of Investcorp AI Acquisition Corp. by its Principal Executive Officer, Nikhil Kalghatgi, and Principal Financial Officer and Principal Accounting Officer, Dean Clinton, on August 14, 2025 - The report was signed by Nikhil Kalghatgi, Principal Executive Officer, and Dean Clinton, Principal Financial Officer and Principal Accounting Officer, on August 14, 2025[190]