Investcorp AI Acquisition Corp(IVCAU) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements Presents Investcorp AI Acquisition Corp.'s unaudited condensed financial statements and notes for Q2 2025 and FY 2024 Condensed Balance Sheets Condensed Balance Sheet Highlights | Metric | June 30, 2025 (Unaudited) | December 31, 2024 | | :-------------------------------- | :------------------------ | :------------------ | | Cash and cash equivalents | $977,227 | $1,032,598 | | Investments held in Trust Account | $473,146 | $17,518,993 | | Total Assets | $1,549,213 | $18,551,591 | | Total Current Liabilities | $5,964,712 | $5,125,973 | | Warrant liability | $870,751 | $580,501 | | Total Liabilities | $6,835,463 | $5,706,474 | | Shareholders' Deficit | $(5,759,396) | $(4,673,876) | - Total Assets decreased significantly from $18,551,591 at December 31, 2024, to $1,549,213 at June 30, 2025, primarily due to a substantial reduction in investments held in the Trust Account[11] - Total Liabilities increased from $5,706,474 at December 31, 2024, to $6,835,463 at June 30, 2025, driven by increases in Working Capital Loan-Sponsor and Convertible Promissory Note-Sponsor[11] Condensed Statements of Operations 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 (redeemable) | $(0.07) | $0.10 | $(0.08) | $0.12 | - The Company reported a net loss of $(511,758) for the three months ended June 30, 2025, and $(610,317) for the six months ended June 30, 2025, a significant decline from net income in the prior year periods[13] - Interest earned on investments held in the Trust Account decreased substantially, from $1,419,899 to $91,623 for the three-month period and from $2,819,293 to $275,203 for the six-month period, reflecting reduced trust account balances due to redemptions[13] Condensed Statements of Changes in Shareholders' Deficit Changes in Shareholders' Deficit (Six Months Ended June 30, 2025) | Metric | Amount (June 30, 2025) | | :---------------------------------------------- | :--------------------- | | Balance – December 31, 2024 | $(4,673,876) | | Accretion of Class A ordinary shares to redemption value | $(475,203) | | Net loss | $(610,317) | | Balance – June 30, 2025 | $(5,759,396) | - The accumulated deficit increased from $(4,674,523) at December 31, 2024, to $(5,760,043) at June 30, 2025, primarily due to net losses and accretion of Class A ordinary shares to redemption value[15] Condensed Statements of Cash Flows Condensed Statements of Cash Flows Highlights (Six Months Ended June 30) | Cash Flow Activity | 2025 | 2024 | | :--------------------------------- | :------------ | :------------ | | 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 | - Net cash provided by investing activities significantly increased in 2025 to $17,321,050, primarily due to investments withdrawn from the Trust Account for payments to redeeming shareholders[20] - Net cash used in financing activities was $(16,274,878) in 2025, mainly driven by payments to redeeming shareholders, contrasting with cash provided by financing activities in 2024 from a convertible promissory note[20] Notes to Condensed Financial Statements Detailed explanations of the Company's organization, accounting policies, financial instruments, and related party transactions NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS - Investcorp AI Acquisition Corp. is a blank check company incorporated on February 19, 2021, for the purpose of effectuating a business combination, and has not yet commenced operations as of June 30, 2025[23][24] - The Company completed its Initial Public Offering on May 12, 2022, raising $225,000,000 from 22,500,000 units, plus an additional $33,750,000 from the underwriter's over-allotment option[25] - Shareholders approved extensions for the business combination period multiple times, most recently to May 12, 2027, with significant Class A ordinary share redemptions occurring in August 2023 ($172.8M), August 2024 ($95.4M), and May 2025 ($17.5M)[33][35][36] - The Company's securities were delisted from Nasdaq on May 6, 2025, due to non-compliance with listing rules and are now trading on the OTC Markets[41] - The Company has a working capital deficit of $4,888,645 as of June 30, 2025, and management has determined that liquidity conditions raise substantial doubt about its ability to continue as a going concern[43][46] NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - The Company is an 'emerging growth company' under the JOBS Act and has elected to delay the adoption of new or revised financial accounting standards, potentially affecting comparability with other public companies[53][54] - Cash balances exceeded the FDIC limit of $250,000, with $977,227 as of June 30, 2025, and $1,032,598 as of December 31, 2024, exposing the Company to credit risk[55] - Investments held in the Trust Account, primarily U.S. Treasury Securities, amounted to $473,146 as of June 30, 2025, a significant decrease from $17,518,993 at December 31, 2024[59] - The Company accounts for Class A ordinary shares subject to possible redemption as temporary equity and warrants as liability-classified instruments, re-measuring them at fair value each reporting period[71][74] - The Company operates as a single operating segment, with the Chief Executive Officer (CODM) evaluating overall financial information and resources[77] NOTE 3. INITIAL PUBLIC OFFERING - The Company sold 25,875,000 units in its Initial Public Offering at $10.00 per unit, each consisting of one Class A ordinary share and one-half of one redeemable warrant[80] NOTE 4. PRIVATE PLACEMENT - The Sponsor purchased 16,087,500 Private Placement Warrants at $1.00 per warrant, generating gross proceeds of $16,087,500, simultaneously with the IPO closing[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 - The Sponsor initially received 7,187,500 Class B ordinary shares (Founder Shares) for $25,000, later adjusted to 6,468,750 shares, and converted 6,468,749 Founder Shares into Class A ordinary shares on August 12, 2024[84][85] - The Company has a non-interest bearing convertible Working Capital Loan from the Sponsor, with $2,836,172 outstanding as of June 30, 2025, up from $1,790,000 at December 31, 2024[88] - A non-interest bearing Convertible Promissory Note from the Sponsor had an outstanding principal balance of $1,650,000 as of June 30, 2025, up from $1,450,000 at December 31, 2024, to cover Extension Contributions[91] - The Company pays a monthly fee of $10,000 to the Sponsor for administrative services, with $270,000 recorded in accrued expenses as of June 30, 2025[92] NOTE 6. COMMITMENTS AND CONTINGENCIES - Holders of Founder Shares, Private Placement Warrants, and warrants from Working Capital Loans are entitled to registration rights, requiring the Company to register such securities for resale[93] NOTE 7. WARRANT LIABILITY - The Company classifies 29,025,000 warrants (16,087,500 Private Warrants and 12,937,500 Public Warrants) as liabilities, subject to re-measurement at fair value each balance sheet date[94] - Public Warrants become exercisable 30 days after a Business Combination and expire five years from consummation or earlier upon redemption or liquidation[97] - The Company may redeem warrants under certain conditions, including when the Class A ordinary share price equals or exceeds $18.00 or $10.00 per share, with specific notice and cashless exercise provisions[100][101] NOTE 8. SHAREHOLDERS' DEFICIT - As of June 30, 2025, there were 6,494,770 Class A ordinary shares issued and outstanding (26,021 redeemable; 6,468,749 non-redeemable), and one Class B ordinary share issued and outstanding[109][110] - The Sponsor converted 6,468,749 Founder Shares (Class B) into Class A ordinary shares on a one-to-one basis on August 12, 2024[110] NOTE 9. FAIR VALUE MEASUREMENTS Fair Value Measurements of Assets and Liabilities | Item | 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 | $— | $258,750 | | Public Warrants | 3 | $388,126 | $— | | Private Warrants | 3 | $482,625 | $321,750 | - Public Warrants were transferred from Level 1 to Level 2 during Q1 2025 due to limited trading, and subsequently to Level 3 during Q2 2025 due to no trading activities[117] - The fair value of Private Placement Warrants and Public Warrants (as of June 30, 2025) is estimated using a Modified Binomial Option Pricing model, categorized as a Level 3 fair value measurement[119] NOTE 10. SEGMENT INFORMATION - The Company operates as a single operating segment, with the Chief Executive Officer (CODM) reviewing formation costs, operating expenses, and interest earned on Trust Account investments to manage resources and assess performance[125] NOTE 11. SUBSEQUENT EVENTS - On July 14, 2025, Nasdaq filed a Form 25 with the SEC, officially removing the Company's securities from listing and registration on Nasdaq[127] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's perspective on financial condition, operational results, SPAC activities, liquidity, and going concern Overview - The Company is a blank check company formed on February 19, 2021, aiming for a business combination, with an initial focus on the Indian market[129] - Multiple shareholder meetings resulted in extensions for the business combination period, with the latest extension to May 12, 2027, following significant Class A ordinary share redemptions totaling approximately $17.5 million in May 2025[135] - The Company's securities were delisted from Nasdaq on May 6, 2025, due to non-compliance with listing rules and are now eligible to trade on the OTC Markets[136] Results of Operations - The Company has not generated any operating revenues to date, with activities focused on organizational efforts and identifying a business combination target[137][138] Net Income (Loss) and Key Components | 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 | | :----------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net (loss) income | $(511,758) | $1,681,247 | $(610,317) | $2,015,776 | | Operating costs | $313,131 | $319,152 | $595,270 | $513,267 | | Interest earned on Trust Account | $91,623 | $1,419,899 | $275,203 | $2,819,294 | | Change in fair value of warrant liability | $(290,250) | $580,500 | $(290,250) | $(290,250) | - The Company experienced a net loss for both the three and six months ended June 30, 2025, contrasting with net income in the corresponding periods of 2024, primarily due to a significant decrease in interest earned from the Trust Account and negative changes in the fair value of warrant liability[139][140] Liquidity, Capital Resources, and Going Concern Consideration - As of June 30, 2025, the Company had $977,227 in cash and a working capital deficit of $4,888,645[141] Cash Flow Summary (Six Months Ended June 30) | Cash Flow Activity | 2025 | 2024 | | :--------------------------------- | :------------ | :------------ | | 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 financing activities | $(16,274,878) | $1,080,000 | - The Company's liquidity condition raises substantial doubt about its ability to continue as a going concern, as it lacks sufficient financial resources to sustain operations for a reasonable period[149] - Funds held outside the Trust Account are intended for identifying and evaluating target businesses, due diligence, and other Business Combination-related expenses[147] Off-Balance Sheet Arrangements - As of June 30, 2025, and December 31, 2024, the Company did not have any off-balance sheet arrangements[150] Critical Accounting Estimates - The Company's critical accounting estimate involves the fair value measurement of warrants, which are recorded as liabilities and re-measured at each balance sheet date, with changes recognized in the statements of operations[159] - 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[163] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, no quantitative and qualitative disclosures about market risk are required - The Company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[165] Item 4. Controls and Procedures Disclosure controls and procedures were ineffective as of June 30, 2025, due to a material weakness in internal control - Disclosure controls and procedures were not effective as of June 30, 2025, due to a material weakness in internal control over financial reporting[168] - The material weakness identified relates to an ineffective review control that failed to prevent or detect a material misstatement, leading to a material adjustment to accrued expenses and an over accrual of legal fees[168] - The Company, with Audit Committee oversight, is actively implementing remediation efforts to address the material weakness and establish effective controls[169] PART II. OTHER INFORMATION Item 1. Legal Proceedings There are no legal proceedings to report for the Company - The Company has no legal proceedings to report[173] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the Company's final prospectus for its Initial Public Offering and its annual report on Form 10-K - No material changes to the risk factors disclosed in the Company's final prospectus for its Initial Public Offering (May 10, 2022) or its annual report on Form 10-K (April 16, 2025)[174] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities Details Founder Shares, IPO, private placement warrants, use of proceeds, and Class A share redemptions - The Sponsor initially purchased 7,187,500 Class B ordinary shares (Founder Shares) for $25,000, later adjusted to 6,468,750 shares[175] - The Initial Public Offering on May 12, 2022, involved the sale of 22,500,000 units at $10.00 per unit, generating $225,000,000, with an additional $33,750,000 from the over-allotment option[176] - A private sale of 16,087,500 warrants to the Sponsor at $1.00 per warrant generated gross proceeds of $16,087,500[177] - After deducting offering costs, $266,512,500 of net proceeds from the IPO and private placement were placed in the Trust Account[179] - On May 12, 2025, holders of 1,449,359 Class A ordinary shares exercised redemption rights for approximately $17,521,050[181] Item 3. Defaults Upon Senior Securities The Company reports no defaults upon senior securities - The Company has no defaults upon senior securities[182] Item 4. Mine Safety Disclosures This item is not applicable to the Company - This item is not applicable to the Company[183] Item 5. Other Information There is no other information to report under this item - No other information is reported under this item[184] Item 6. Exhibits Lists exhibits filed with Form 10-Q, including Articles of Association amendments and executive officer certifications Key Exhibits Filed | Exhibit No. | Description | | :--- | :--- | | 3.1 | Amendment to the Amended and Restated Memorandum and Articles of Association | | 31.1* | Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a) | | 31.2* | Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a) | | 32.1** | Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350 | | 32.2** | Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350 | | 101.INS | Inline XBRL Instance Document | | 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | | 101.SCH | Inline XBRL Taxonomy Extension Schema Document | | 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | | 101.LAB | Inline XBRL Taxonomy Extension Labels Linkbase Document | | 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | | 104 | Cover Page Interactive Data File |