☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Cayman Islands |
N/A |
|
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
|
955 Fifth Avenue New York, New York |
10075 |
|
(Address of principal executive offices) |
(Zip Code) |
Title of Each Class: |
Trading Symbol(s) |
Name of Each Exchange on Which Registered: |
||
Units, each consisting of one Class A ordinary share, $0.0001 par value, and one-third of one redeemable warrant |
SCRMU |
The Nasdaq Stock Market LLC |
||
Class A ordinary shares, $0.0001 par value |
SCRM |
The Nasdaq Stock Market LLC |
||
Warrants, each whole warrant exercisable for one Class A ordinary share at an exercise price of $11.50 per share |
SCRMW |
The Nasdaq Stock Market LLC |
Large accelerated filer | ☒ | Accelerated filer | ☐ | |||
Non-accelerated filer |
☐ | Smaller reporting company | ☐ | |||
Emerging growth company | ☐ |
SCREAMING EAGLE ACQUISITION CORP.
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2023
TABLE OF CONTENTS
ITEM 1. |
INTERIM FINANCIAL STATEMENTS |
UNAUDITED |
||||||||
September 30, 2023 |
December 31, 2022 |
|||||||
ASSETS: |
|
|||||||
Current assets: |
||||||||
Cash |
$ | 808,103 | $ | 117,696 | ||||
Prepaid expenses |
172,037 | 581,784 | ||||||
|
|
|
|
|||||
Total current assets |
980,140 | 699,480 | ||||||
Cash and investments held in Trust Account |
785,553,621 | 759,712,942 | ||||||
|
|
|
|
|||||
Total assets |
$ |
786,533,761 |
$ |
760,412,422 |
||||
|
|
|
|
|||||
LIABILITIES AND SHAREHOLDERS’ DEFICIT: |
|
|||||||
Current liabilities: |
||||||||
Accounts payable and accrued expenses |
$ | 729,950 | $ | 338,004 | ||||
|
|
|
|
|||||
Total current liabilities |
729,950 | 338,004 | ||||||
Warrant liability |
1,994,667 | 3,285,333 | ||||||
Deferred underwriting compensation |
26,250,000 | 26,250,000 | ||||||
|
|
|
|
|||||
Total liabilities |
28,974,617 |
29,873,337 |
||||||
|
|
|
|
|||||
Commitments and contingencies |
||||||||
Class A ordinary shares subject to possible redemption; 75,000,000 and 75,000,000 shares at $10.46 and $10.09 redemption value at September 30, 2023 and December 31, 2022 , respectively
|
784,203,621 | 756,862,942 | ||||||
Shareholders’ deficit: |
||||||||
Preference shares, $0.0001 par value; 1,000,000 shares authorized; none issued or outstanding |
— | — | ||||||
Class A ordinary shares, $0.0001 par value; 400,000,000 shares authorized; none issued or outstanding (excluding 75,000,000 shares subject to possible redemption) |
— | — | ||||||
Class B ordinary shares, $0.0001 par value; 80,000,000 shares authorized; 18,750,000 shares issued and outstanding at September 30, 2023 and December 31, 2022 |
1,875 | 1,875 | ||||||
Additional paid-in capital |
— | — | ||||||
Accumulated deficit |
(26,646,352 | ) | (26,325,732 | ) | ||||
|
|
|
|
|||||
Total shareholders’ deficit |
(26,644,477 |
) |
(26,323,857 |
) | ||||
|
|
|
|
|||||
Total liabilities and shareholders’ deficit |
$ |
786,533,761 |
$ |
760,412,422 |
||||
|
|
|
|
For the three months ended September 30, |
For the nine months ended September 30, |
|||||||||||||||
2023 |
2022 |
2023 |
2022 |
|||||||||||||
General and administrative costs |
$ | 602,985 | $ | 411,769 | $ | 1,611,287 | $ | 1,204,953 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Loss from operations |
(602,985 | ) | (411,769 | ) | (1,611,287 | ) | (1,204,953 | ) | ||||||||
Other income (expense): |
||||||||||||||||
Interest from investments held in Trust Account |
10,111,278 | 3,235,822 | 27,340,680 | 3,540,845 | ||||||||||||
Allocation of offering costs to warrant liability |
— | — | — | (20,182 | ) | |||||||||||
Change in fair value of warrant liability |
(352,000 | ) | 2,464,000 | 1,290,666 | 14,901,333 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income |
$ |
9,156,293 |
$ |
5,288,053 |
$ |
27,020,059 |
$ |
17,217,043 |
||||||||
|
|
|
|
|
|
|
|
|||||||||
Weighted average number of Class A ordinary shares subject to possible redemption outstanding |
75,000,000 | 75,000,000 | 75,000,000 | 72,500,000 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Basic and diluted net income per share, Class A ordinary shares subject to redemption |
$ |
0.10 |
$ |
0.06 |
$ |
0.29 |
$ |
0.19 |
||||||||
|
|
|
|
|
|
|
|
|||||||||
Weighted average number of Class B ordinary shares outstanding (1)
|
18,750,000 | 18,750,000 | 18,750,000 | 18,750,000 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Basic and diluted net income per share, Class B ordinary shares |
$ |
0.10 |
$ |
0.06 |
$ |
0.29 |
$ |
0.19 |
||||||||
|
|
|
|
|
|
|
|
(1) | Retroactively adjusted to reflect the surrender of 2,812,500 Class B ordinary shares for no consideration on February 19, 2022 (Note 5). |
Class A Ordinary Shares |
Class B Ordinary Shares |
Additional Paid-in
Capital |
Accumulated Deficit |
Total Shareholders’ Deficit |
||||||||||||||||||||||||
Shares |
Amount |
Shares |
Amount |
|||||||||||||||||||||||||
Balance at December 31, 2022 |
— |
$ |
— |
18,750,000 |
$ |
1,875 |
$ |
— |
$ |
(26,325,732 |
) |
$ |
(26,323,857 |
)
|
||||||||||||||
Accretion of Class A ordinary shares subject to possible redemption |
— | — | — | — | — | (8,079,826 | ) | (8,079,826 | ) | |||||||||||||||||||
Net income |
— | — | — | — | — | 8,008,646 | 8,008,646 | |||||||||||||||||||||
Balance at March 31, 2023 |
— |
— |
18,750,000 |
1,875 |
— |
(26,396,912 |
) |
(26,395,037 |
) |
|||||||||||||||||||
Accretion of Class A ordinary shares subject to possible redemption |
— |
— |
— |
— |
— |
(9,149,576 |
) |
(9,149,576 |
) |
|||||||||||||||||||
Net income |
— |
— |
— |
— |
— |
9,855,120 |
9,855,120 |
|||||||||||||||||||||
Balance at June 30, 2023 |
— |
— |
18,750,000 |
1,875 |
— |
(25,691,368 |
) |
(25,689,493 |
)
|
|||||||||||||||||||
Accretion of Class A ordinary shares subject to possible redemption |
— | — | — | — | — | (10,111,277 | ) | (10,111,277 | ) | |||||||||||||||||||
Net income |
— | — | — | — | — | 9,156,293 | 9,156,293 | |||||||||||||||||||||
Balance at September 30, 2023 |
— |
$ |
— |
18,750,000 |
$ |
1,875 |
$ |
— |
$ |
(26,646,352 |
) |
$ |
(26,644,477 |
) |
||||||||||||||
Class A Ordinary Shares |
Class B Ordinary Shares |
Additional Paid-in
Capital |
Accumulated Deficit |
Total Shareholders’ Equity (Deficit) |
||||||||||||||||||||||||
Shares |
Amount |
Shares |
Amount |
|||||||||||||||||||||||||
Balance at December 31, 2021 |
— |
$
|
— |
21,562,500 |
$
|
2,156 |
$
|
22,844 |
$
|
(5,000 |
) |
$
|
20,000 |
|||||||||||||||
Forfeiture of Class B shares (
1 ) |
— | — | (2,812,500 | ) | (281 | ) | 281 | — | — | |||||||||||||||||||
Cash received in excess of fair value of private warrants |
— | — | — | — | 117,334 | — | 117,334 | |||||||||||||||||||||
Fair value of public warrants at issuance |
— | — | — | — | 36,750,000 | — | 36,750,000 | |||||||||||||||||||||
Accretion of Class A ordinary shares subject to possible redemption |
— | — | — | — | (36,890,459 | ) | (41,969,575 | ) | (78,860,034 | ) | ||||||||||||||||||
Net income |
— | — | — | — | — | 9,876,745 | 9,876,745 | |||||||||||||||||||||
Balance at March 31, 2022 |
— |
— |
18,750,000 |
1,875 |
— |
(32,097,830 |
) |
(32,095,955 |
) |
|||||||||||||||||||
Accretion of Class A ordinary shares subject to possible redemption |
— |
— |
— |
— |
— |
(305,023 |
) |
(305,023 |
) |
|||||||||||||||||||
Net income |
— |
— |
— |
— |
— |
2,052,245 |
2,052,245 |
|||||||||||||||||||||
Balance at June 30, 2022 |
— |
— |
18,750,000 |
1,875 |
— |
(30,350,608 |
) |
(30,348,733 |
) |
|||||||||||||||||||
Accretion of Class A ordinary shares subject to possible redemption |
— | — | — | — | — | (3,026,995 | ) | (3,026,995 | ) | |||||||||||||||||||
Net income |
— | — | — | — |
5,288,053 | 5,288,053 | ||||||||||||||||||||||
Balance at September 30, 2022 |
— |
$ |
— |
18,750,000 |
$ |
1,875 |
$ |
— |
$ |
(28,089,550 |
) |
$ |
(28,087,675 |
) |
||||||||||||||
(1) |
Reflects the surrender o f 2,812,500 Class B ordinary shares for no consideration on February 19, 2022 (Note 5).
|
For the nine months ended September 30, 2023 |
For the nine months ended September 30, 2022 |
|||||||
Cash flows from operating activities: |
||||||||
Net income |
$ | 27,020,059 | $ | 17,217,043 | ||||
Adjustments to reconcile net income to net cash used in operating activities: |
||||||||
Interest income from investments held in Trust Account |
(27,340,680 | ) | (3,540,845 | ) | ||||
Change in fair value of warrant liability |
(1,290,666 | ) | (14,901,333 | ) | ||||
Warrant issuance transaction costs |
— | 20,182 | ||||||
Changes in operating assets and liabilities: |
||||||||
Prepaid expenses |
409,748 | (752,116 | ) | |||||
Accounts payable and accrued expenses |
391,946 | 296,338 | ||||||
Net cash used in operating activities |
(809,593 | ) | (1,660,731 | ) | ||||
Cash flows from investing activities: |
||||||||
Principal deposited in Trust Account |
— | (750,000,000 | ) | |||||
Cash withdrawn from Trust Account for working capital |
1,500,000 | — | ||||||
Net cash provided by (used in) investing activities |
1,500,000 | (750,000,000 | ) | |||||
Cash flows from financing activities: |
||||||||
Proceeds from private placement of warrants |
— | 17,600,000 | ||||||
Proceeds from sale of units in initial public offering |
— | 750,000,000 | ||||||
Payment of underwriters’ discount |
— | (15,000,000 | ) | |||||
Payment of offering costs |
— | (545,679 | ) | |||||
Repayment of advances from Sponsor |
— | (14,537 | ) | |||||
Repayment of promissory note - related party |
— | (300,000 | ) | |||||
Net cash provided by financing activities |
— | 751,739,784 | ||||||
Net change in cash |
690,407 | 79,053 | ||||||
Cash at beginning of period |
117,696 | — | ||||||
Cash at end of period |
$ |
808,103 |
$ |
79,053 |
||||
Supplemental disclosure of non-cash investing and financing activities: |
||||||||
Deferred underwriting fee payable |
$ | — | $ | 26,250,000 | ||||
Forfeiture of Class B shares for no consideration |
$ | — | $ | 281 | ||||
Gross proceeds |
$ | 750,000,000 | ||
Less: |
||||
Fair value of Public Warrants at issuance |
(36,750,000 | ) | ||
Class A ordinary share issuance costs |
(42,110,034 | ) | ||
Plus: |
||||
Accretion of carrying value to redemption value |
85,722,976 | |||
|
|
|||
Class A ordinary shares subject to possible redemption, December 31, 2022 |
756,862,942 | |||
Plus:
|
|
|
|
|
Accretion of carrying value to redemption value |
27,340,679 | |||
|
|
|||
Class A ordinary shares subject to possible redemption, September 30, 2023 |
$ |
784,203,621 |
||
|
|
For the Three Months Ended |
For the Nine Months Ended |
|||||||||||||||
September 30, 2023 |
September 30, 2023 |
|||||||||||||||
Class A |
Class B |
Class A |
Class B |
|||||||||||||
Basic and diluted net income per ordinary share |
||||||||||||||||
Numerator: |
||||||||||||||||
Allocation of net income |
$ | 7,325,035 | $ | 1,831,259 | $ | 21,616,047 | $ | 5,404,012 | ||||||||
Denominator: |
||||||||||||||||
Basic and diluted weighted average shares outstanding |
75,000,000 | 18,750,000 | 75,000,000 | 18,750,000 | ||||||||||||
Basic and diluted net income per ordinary share |
$ | 0.10 | $ | 0.10 | $ | 0.29 | $ | 0.29 |
For the Three Months Ended |
For the Nine Months Ended |
|||||||||||||||
September 30, 2022 |
September 30, 2022 |
|||||||||||||||
Class A |
Class B |
Class A |
Class B |
|||||||||||||
Basic and diluted net income per ordinary share |
||||||||||||||||
Numerator: |
||||||||||||||||
Allocation of net income |
$ | 4,230,442 | $ | 1,057,611 | $ | 13,679,294 | $ | 3,537,749 | ||||||||
Denominator: |
||||||||||||||||
Basic and diluted weighted average shares outstanding |
75,000,000 | 18,750,000 | 72,500,000 | 18,750,000 | ||||||||||||
Basic and diluted net income per ordinary share |
$ | 0.06 | $ | 0.06 | $ | 0.19 | $ | 0.19 |
• | Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; |
• | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
• | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
Quoted Prices
in
Active Markets
(Level 1)
|
||||
Money market fund as of December 31, 2022 |
$ | 441,037 | ||
Money market fund as of September 30, 2023 |
$ | 785,553,621 |
Amortized Cost |
Gross Holding Gain |
Fair Value |
||||||||||
U.S. Government Treasury Securities as of December 31, 2022 |
$ |
759,271,905 |
$ |
161,421 |
$ |
759,433,326 |
(1) | in whole and not in part; |
(2) | at a price of $0.01 per Public Warrant; |
(3) | upon not less than 30 days’ prior written notice of redemption to each warrant holder; and |
(4) | if, and only if, the reported closing price of the ordinary shares equals or exceeds $18.00 per share (as adjusted for share sub-divisions, share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending three business days before the Company send to the notice of redemption to the warrant holders. |
(Level 1) | (Level 2) | (Level 3) | ||||||||||
Private placement warrants as of September 30, 2023 |
$ | — | $ | — | $ | 1,994,667 | ||||||
Private placement warrants as of December 31, 2022 |
$ | — | $ | — | $ | 3,285,333 |
September 30 ,2023 |
December 31, 2022 |
|||||||
Ordinary share price |
$ | 10.46 | $ | 9.94 | ||||
Exercise price |
$ | 11.50 | $ | 11.50 | ||||
Volatility |
3.5 | % | 31.0 | % | ||||
Term |
5.53 | 5.75 | ||||||
Risk-free rate |
4.6 | % | 3.98 | % | ||||
Dividend yield |
0 | % | 0 | % | ||||
Probability of completing Business Combination (1)
|
11 | % | 9 | % |
(1) | Estimates of 11% and 9% based on public trading of rights for special purpose acquisition companies and their implied business combination probabilities as of September 30, 2023 and December 31, 2022, respectively. |
Level 3 Derivative warrant liability at December 31, 2022 |
$ | 3,285,333 | ||
Change in fair value of derivative warrant liability |
(1,290,666 | ) | ||
|
|
|||
Level 3 Derivative warrant liability at September 30, 2023 |
$ | 1,994,667 | ||
|
|
|
|
|
|
|
|
|
|
Level 3 Derivative warrant liability at December 31, 2021 |
$ | — | ||
Issuance of Private Warrants on January 10, 2022 |
17,482,666 | |||
Change in fair value of derivative warrant liability |
(14,901,333 | ) | ||
|
|
|
|
|
Level 3 Derivative warrant liability at September 30, 2022 |
$ | 2,581,333 | ||
|
|
|
|
|
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to Screaming Eagle Acquisition Corp. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to Eagle Equity Partners V, LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Quarterly Report including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward- looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward- looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward- looking statements, please refer to the Risk Factors section of the Company’s Annual Report on Form 10-K filed with the SEC on March 1, 2023. The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Overview
We are a blank check company incorporated on November 3, 2021 as a Cayman Islands exempted company for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses. Our efforts to identify a prospective initial business combination target will not be limited to a particular industry, sector or geographic region. While we may pursue an initial business combination opportunity in any industry or sector, we intend to capitalize on the ability of our management team to identify and combine with a business or businesses that can benefit from our management team’s established global relationships and operating experience.
We intend to effectuate our initial business combination using cash from the proceeds of the Initial Public Offering and the private placement of the private placement warrants, the proceeds of the sale of our shares in connection with our initial business combination (pursuant to forward purchase agreements or backstop agreements we may enter into following the consummation of the Initial Public Offering or otherwise), shares issued to the owners of the target, debt issued to bank or other lenders or the owners of the target, other securities issuances, or a combination of the foregoing.
The issuance of additional shares in connection with a business combination to the owners of the target or other investors:
• | may significantly dilute the equity interest of investors in the Initial Public Offering, which dilution would increase if the anti-dilution provisions in the founder shares resulted in the issuance of Class A ordinary shares on a greater than one-to-one basis upon conversion of the founder shares; |
• | may subordinate the rights of holders of Class A ordinary shares if preferred shares are issued with rights senior to those afforded our Class A ordinary shares; |
• | could cause a change in control if a substantial number of our Class A ordinary shares are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors; |
• | may have the effect of delaying or preventing a change of control of us by diluting the share ownership or voting rights of a person seeking to obtain control of us; and |
• | may adversely affect prevailing market prices for our Class A ordinary shares and/or warrants. |
17
Similarly, if we issue debt securities or otherwise incur significant debt to bank or other lenders or the owners of a target, it could result in:
• | default and foreclosure on our assets if our operating revenues after an initial business combination are insufficient to repay our debt obligations; |
• | acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant; |
• | our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand; |
• | our inability to obtain necessary additional financing if the debt security contains covenants restricting our ability to obtain such financing while the debt security is outstanding; |
• | our inability to pay dividends on our Class A ordinary shares; |
• | using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our Class A ordinary shares if declared, expenses, capital expenditures, acquisitions and other general corporate purposes; |
• | limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate; |
• | increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; and |
• | limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, execution of our strategy and other purposes and other disadvantages compared to our competitors who have less debt. |
As indicated in the accompanying financial statements, at September 30, 2023, we had an unrestricted cash balance of $808,103 as well as cash and investments held in the Trust Account of $785,533,621. Further, we expect to incur significant costs in the pursuit of our initial business combination. We cannot assure you that our plans to complete our initial business combination will be successful.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities since inception have been organizational activities and those necessary to prepare for the Initial Public Offering. We will not generate any operating revenues until after completion of our initial business combination. We have generated non-operating income in the form of interest income on cash and cash equivalents after the Initial Public Offering. There has been no significant change in our financial or trading position and no material adverse change has occurred since the date of our audited financial statements. We expect to incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.
For the three months ended September 30, 2023, we had a net income of $9,156,293, a loss from operations of $602,985, comprised of general and administrative expenses, and non-operating income of $9,759,278, comprised of interest earned in the Trust Account of $10,111,278 offset by a loss from change in fair value of warrant liability of $352,000. For the nine months ended September 30, 2023, we had a net income of $27,020,059, a loss from operations of $1,611,287, comprised of general and administrative expenses, and non-operating income of $28,631,346, comprised of a gain from a change in fair value of warrant liability of $1,290,666 and interest earned in the Trust Account of $27,340,680.
For the three months ended September 30, 2022, we had a net income of $5,288,053, a loss from operations of $411,769, comprised of general and administrative expenses, and non-operating income of $5,699,822, comprised of a gain from a change in fair value of warrant liability of $2,464,000 and interest earned in the Trust Account of $3,235,822. For the nine months ended September 30, 2022, we had a net income of $17,217,043, a loss from operations of $1,204,953, comprised of general and administrative expenses, and non-operating income of $18,421,996, comprised of a gain from a change in fair value of warrant liability of $14,901,333 and interest earned in the Trust Account of $3,540,845, offset by warrant issuance costs of $20,182.
Through September 30, 2023, our efforts have been limited to organizational activities, activities relating to the Public Offering, activities relating to identifying and evaluating prospective acquisition candidates and activities relating to general corporate matters. We have not generated any revenue, other than interest income earned on the proceeds held in the Trust Account.
18
Liquidity and Capital Resources
As of September 30, 2023, we had an unrestricted cash balance of $808,103 as well as cash and investments held in the Trust Account of $785,553,621. Our liquidity needs had been satisfied prior to the completion of the Initial Public Offering through receipt of a $25,000 capital contribution from our Sponsor in exchange for the issuance of the founder shares and $300,000 loan from our Sponsor, which was paid in full on January 11, 2022, and borrowings under the Promissory Note are no longer available.
On January 10, 2022, the Company consummated the Initial Public Offering of 75,000,000 units at $10.00 per unit and a private sale of 11,733,333 private placement warrants at a purchase price of $1.50 per warrant. A total of $750,000,000 comprised of $735,000,000 of the proceeds from the Initial Public Offering (which amount includes $26,250,000 of the underwriters’ deferred discount) and $15,000,000 of the proceeds of the sale of the private placement warrants was placed in the trust account. The proceeds are invested only in U.S. government treasury obligations with a maturity of 185 days of less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act which invest only in direct U.S. government treasury obligations.
We intend to use substantially all of the funds held in the trust account, including any amounts representing interest earned on the trust account (excluding deferred underwriting commissions) to complete our initial business combination. We may withdraw interest to pay our taxes, if any. Our annual income tax obligations will depend on the amount of interest and other income earned on the amounts held in the trust account. We expect the interest earned on the amount in the trust account will be sufficient to pay our income taxes. To the extent that our equity or debt is used, in whole or in part, as consideration to complete our initial business combination, the remaining proceeds held in the trust account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
We will use the funds held outside the trust account to primarily identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete a business combination.
The Company’s liquidity needs had been satisfied prior to the completion of the initial public offering through receipt of a $25,000 capital contribution from our Sponsor in exchange for the issuance of the Founder Shares and a $300,000 loan from the Sponsor, which was paid in full on January 11, 2022. The Company’s working capital needs will be satisfied through the funds held outside of the Trust Account, from the Public Offering. In addition, the Company is permitted to withdraw interest earned on the Trust Account to fund the Company’s working capital requirements (subject to an aggregate maximum release of $3,000,000). As of September 30, 2023, the Company had $1,250,000 in remaining interest available to be withdrawn for working capital requirements. In order to fund working capital deficiencies or finance transaction costs in connection with an intended initial business combination, our Sponsor or an affiliate of our Sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete our initial business combination, we would repay such loaned amounts. In the event that our initial business combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts but no proceeds from our trust account would be used for such repayment. Such loans may be convertible into private placement warrants of the post business combination entity at a price of $1.50 per warrant at the option of the lender. Such warrants would be identical to the private placement warrants. The terms of such loans, if any, have not been determined and no written agreements exist with respect to such loans. Prior to the completion of our initial business combination, we do not expect to seek loans from parties other than our Sponsor or an affiliate of our Sponsor as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our trust account.
Moreover, we may need to obtain additional financing to complete our initial business combination, either because the transaction requires more cash than is available from the proceeds held in our trust account or because we become obligated to redeem a significant number of our public shares upon completion of the business combination, in which case we may issue additional securities or incur debt in connection with such business combination. In addition, we intend to target businesses with enterprise values that are greater than we could acquire with the net proceeds of the Initial Public Offering and the sale of the private placement units, and, as a result, if the cash portion of the purchase price exceeds the amount available from the trust account, net of amounts needed to satisfy any redemptions by public shareholders, we may be required to seek additional financing to complete such proposed initial business combination. We may also obtain financing prior to the closing of our initial business combination to fund our working capital needs and transaction costs in connection with our search for and completion of our initial business combination. There is no limitation on our ability to raise funds through the issuance of equity or equity-linked securities or through loans, advances or other indebtedness in connection with our initial business combination, including pursuant to forward purchase agreements or backstop agreements we may enter into following consummation of the Initial Public Offering. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of our initial business combination. If we are unable to complete our initial business combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the trust account. In addition, following our initial business combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.
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Going Concern
The Company is a Special Purpose Acquisition Corporation with a scheduled liquidation date of January 10, 2024, unless a definitive agreement has been executed, in which case the scheduled liquidation date is April 10, 2024. Although the Company plans to complete the transaction before the scheduled liquidation date, there can be no assurance that the Company will be able to consummate a business combination by January 10, 2024 or April 10, 2024. In connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standard Board’s Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that since the mandatory liquidation deadline is less than 12 months away, there is substantial doubt that the Company will operate as a going concern.
No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after January 10, 2024 or April 10, 2024. Management plans to consummate a business combination prior to January 10, 2024 or April 10, 2024, however there can be no assurance that one will be completed.
Commitments and Contractual Obligations; Quarterly Results
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities. No unaudited quarterly operating data is included in this Quarterly Report as we have not conducted any operations to date.
Administrative Services and Indemnification Fee
On January 5, 2022, the Company entered into an Administrative Services and Indemnification Agreement. We agreed to pay an affiliate of our Sponsor $15,000 per month for office space, utilities, secretarial and administrative support services and to provide indemnification to the Sponsor from any claims arising out of or relating to the Initial Public Offering or the Company’s operations or conduct of the Company’s business (including its initial business combination) or any claim against the Sponsor alleging any expressed or implied management or endorsement by the Sponsor of any of the Company’s activities or any express or implied association between the Sponsor and the Company or any of its affiliates. Upon completion of a business combination or the Company’s liquidation, we will cease paying these monthly fees. For the three months ended September 30, 2023 and September 30, 2022, the Company incurred $45,000 and $45,000, respectively, in administrative services expenses under the arrangement. For the nine months ended September 30, 2023 and September 30, 2022, the Company incurred $135,000 and $135,000, respectively, in administrative services expenses under the arrangement. As of September 30, 2023 and December 31, 2022, $45,000 and $45,000 is included in accounts payable and accrued expenses in the accompanying condensed balance sheets.
Underwriting Agreement
On January 5, 2022, the Company entered into an Underwriting Agreement. The underwriters were paid a cash underwriting discount of two percent (2.0%) of the gross proceeds of the Initial Public Offering, or $15,000,000. Additionally, the underwriters will be entitled to a deferred underwriting commission of 3.5% or $26,250,000 of the gross proceeds of the Initial Public Offering held in the Trust Account upon the completion of the Company’s initial business combination subject to the terms of the underwriting agreement.
The deferred underwriting commissions will become payable to the underwriters from the amounts held in the trust account solely in the event that the Company completes an initial business combination, subject to the terms of the underwriting agreement.
Registration Rights Agreement
The holders of the founder shares, private placement warrants, warrants that may be issued upon conversion of working capital loans (and any Class A ordinary shares issuable upon the exercise of the private placement warrants and warrants that may be issued upon conversion of working capital loans and upon conversion of the founder shares) will be entitled to registration rights pursuant to a registration rights agreement signed on the effective date of the initial public offering, requiring us to register such securities and any of our other securities they hold or acquire prior to the consummation of our initial business combination for resale. The holders of these securities are entitled to make up to three demands, excluding short form demands, that we register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to our completion of our initial business combination. We will bear the expenses incurred in connection with the filing of any such registration statements.
20
Critical Accounting Estimates
The preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and expenses during the period reported. We have identified the following critical accounting policies that require us to use judgments, often as a result of the need to make estimates and assumptions regarding matters that are inherently uncertain, and actual results could differ from these estimates.
Warrant liability
The Company accounts for the private placement warrants as liabilities at fair value on the balance sheets. The private placement warrants are subject to remeasurement at each balance sheet date and any change in fair value is recognized as a component of other income (expense), net on the statements of operations. The Company will continue to adjust the liability for changes in fair value until the earlier of the exercise or expiration of the private placement warrants. At that time, the portion of the warrant liability related to the private placement warrants will be reclassified to additional paid-in capital.
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Not applicable.
ITEM 4. | CONTROLS AND PROCEDURES |
Evaluation of Disclosure Controls and Procedures
Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this Quarterly Report, is recorded, processed, summarized, and reported within the time period specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. Our management evaluated, with the participation of our current chief executive officer and vice president of finance (our “Certifying Officers”), the effectiveness of our disclosure controls and procedures as of September 30, 2023, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our Certifying Officers concluded that, as of September 30, 2023, our disclosure controls and procedures were effective.
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
21
PART II—OTHER INFORMATION
ITEM 1. | LEGAL PROCEEDINGS. |
We are not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us or any of our officers or directors in their corporate capacity.
ITEM 1A. | RISK FACTORS. |
Factors that could cause our actual results to differ materially from those in this Quarterly Report are any of the risks described in our Annual Report on Form 10-K filed with the SEC on March 1, 2023. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations.
As of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in Annual Report on Form 10-K filed with the SEC on March 1, 2023.
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. |
None.
ITEM 3. | DEFAULTS UPON SENIOR SECURITIES |
None.
ITEM 4. | MINE SAFETY DISCLOSURES. |
Not applicable.
ITEM 5. | OTHER INFORMATION. |
None.
22
ITEM 6. | EXHIBITS |
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q
* | Filed herewith. |
23
PART III
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: November 9, 2023
SCREAMING EAGLE ACQUISITION CORP. | ||
/s/ Eli Baker |
||
Name: | Eli Baker | |
Title: | Chief Executive Officer | |
(Principal Executive Officer) | ||
/s/ Ryan O’Connor |
||
Name: | Ryan O’Connor | |
Title: | Vice President of Finance | |
(Principal Financial and Accounting Officer) |
24
Exhibit 31.1
CERTIFICATIONS
I, Eli Baker, certify that:
1. | I have reviewed this Quarterly Report on Form 10-Q of Screaming Eagle Acquisition Corp.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: November 9, 2023
By: | /s/ Eli Baker |
|
Name: | Eli Baker | |
Title: | Chief Executive Officer | |
(Principal Executive Officer) |
Exhibit 31.2
CERTIFICATIONS
I, Ryan O’Connor, certify that:
1. | I have reviewed this Quarterly Report on Form 10-Q of Screaming Eagle Acquisition Corp.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: November 9, 2023
By: | /s/ Ryan O’Connor |
|
Name: | Ryan O’Connor | |
Title: | Vice President of Finance | |
(Principal Financial and Accounting Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADDED BY
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Screaming Eagle Acquisition Corp. (the “Company”) for the quarterly period ended September 30, 2023, as filed with the Securities and Exchange Commission (the “Report”), I, Eli Baker, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted by §906 of the Sarbanes-Oxley Act of 2002, that:
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | To my knowledge, the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period covered by the Report. |
Date: November 9, 2023
By: | /s/ Eli Baker |
|
Name: | Eli Baker | |
Title: | Chief Executive Officer | |
(Principal Executive Officer) |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADDED BY
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Screaming Eagle Acquisition Corp. (the “Company”) for the quarterly period ended September 30, 2023, as filed with the Securities and Exchange Commission (the “Report”), I, Ryan O’Connor, Vice President of Finance of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted by §906 of the Sarbanes-Oxley Act of 2002, that:
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | To my knowledge, the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period covered by the Report. |
Date: November 9, 2023
By: | /s/ Ryan O’Connor |
|
Name: | Ryan O’Connor | |
Title: | Vice President of Finance | |
(Principal Financial and Accounting Officer) |